Court of Appeal confirms that Stack v Dowden does not apply where there is an express declaration of trust

The case of Pankhania v Chandegra [2012] EWCA Civ 1438 has recently been before the Court of Appeal on a point that I thought was well understood law. I am surprised therefore that the High Court could get such a point wrong.

In 1989, C and P purchased a property. The transfer to them contained an express declaration that C and P held the beneficial interest in the property as tenants in common in equal shares.

The High Court applied the principles set out in Stack v Dowden [2007] UKHL 17 as to whether a contrary intention to joint beneficial ownership could be inferred and held that the entire beneficial interest in the property was vested in C. P then appealed.

The Court of Appeal allowed P’s appeal. C and P had executed an express declaration of trust in favour of themselves as tenants in common in equal shares. An express declaration of trust is conclusive unless it is set aside, varied or rectified (see Goodman v Gallant [1986] 1 FLR 513). There were no valid legal grounds for going behind the express declaration in this case. The High Court had misunderstood the significance of the express declaration of trust. It was not open to the court to impose a resulting, implied or constructive trust of the kind discussed in Stack v Dowden. If the transfer to C and P had not contained a declaration as to the beneficial ownership, then the High Court’s approach would have been correct.

The court ordered a sale of the property and declared that C and P were entitled to the sale proceeds in equal shares.

This case is a useful reminder that the rules relating to implied, resulting or constructive trusts do not apply where an express declaration of trust has been made unless the express declaration is set aside, rectified or varied. It is clear that parties need to give careful consideration to how they want to own a property when they are purchasing it so as not to run into problems should things go wrong. It is important for conveyancers to also give clear advice on the point to avoid negligence claims.

Gareth Jones g.jones@abacus-law.co.uk