Ali v Khan
Court of Appeal
Citations:  EWCA Civ 974.
A father bought the freehold in a property to use as a family home. He lived there with his wife and their six children (four daughters and two sons). A decade later, the father transfered the freehold to two of his four daughters: Shazia and Haleya. In return, Shazia and Haleya paid him £25000 using a mortgage from a bank. This was a third of the value of the property. The family continued living at the property, and the father continued paying the household outgoings.
When the children each married, their husbands and wives began living at the property. However, it eventually proved impossible for everyone to keep living there, so Haleya and her husband left. Haleya then transferred her interest to Shazia in exchange for a release from the mortgage. This left Shazia as the sole registered owner.
A year later, several of the children left the property, including Shazia. Shortly after, Shazia gave all the remaining family members at the property notice evicting them. They refused.
The High Court’s Decision
At trial, the parties disputed why the father had sold the property at an undervalue:
- The father argued that he had transferred the property to Shazia and Haleya to raise money for their weddings. He alleged that the daughters agreed that one of the sons would ultimately buy the property from them for an unspecified sum at an unspecified time. The father had apparently spent £9700 on renovating the property in reliance on this arrangement. Accordingly, he argued that he retained part of the beneficial interest in the property. That entitled him to stay with the remainder of his family.
- Shazia denied that this was the deal. She claimed she and Haleya bought the property at an undervalue in exchange for them agreeing to arranged marriages. On this basis, they were to obtain the whole of the father’s interest. She also denied that the father had any right to occupy the property save with her permission.
The High Court judge largely preferred the father’s account of events. However, this did not mean that the property was held on trust. The court would need to see evidence of a common intention to hold the property on constructive trust for the father. The judge thought that any agreement was too uncertain to amount to a common intention. For the same reason, there was no valid representation for the purposes of proprietary estoppel.
The judge also noted that if he were wrong, the counter-presumption of advancement would have defeated any trust. The father could not rebut this counter-presumption, since he would need to admit deceiving the bank as to the true ownership of the home. The defence of illegality would therefore prevent him from challenging that the transfer was a gift.
Issue(s) on Appeal
The father appealed. He now argued that he was the sole owner of the equitable title under a trust.
- Did the father own the equitable title?
- Alternatively, did the father have any other right to continue occupying the property by virtue of proprietary estoppel?
- Did the counter-presumption of advancement arise, and could the father rebut it?
The Court of Appeal’s Decision
The Court of Appeal held that on a correct interpretation of the facts, the parties did have a common intention. The parties agreed that the father would retain a right to direct Shazia (and formerly Haleya) on how to dispose of the legal title. That led to the clear inference that they intended the father to retain the beneficial title (which would give him a legal right to make such directions).
The defence of illegality was inapplicable here. Shazia and Haleya’s ability to grant the bank a legal charge was not dependent on their ownership of the beneficial title. The bank would only be deceived if the father successfully attempted to assert his equitable interest as having priority over the legal charge. Not only did the father not intend to do so, any attempt would likely fail. This was because the father gave Shazia and Haleya his consent to create the charge, so his interests would not take priority. Therefore, the father did not need to admit to deceiving the bank to establish that he did not intend to make a gift.
Accordingly, the father held the whole of the equitable title on trust. This was subject to him indemnifying Shazia for her past and present liabilities to the bank. There was no need to consider proprietary estoppel.