Court of Appeal

Published January 22, 2008

Nelson v Greening and Sykes (Builders) Ltd

Before Lord Justice Ward, Lord Justice Wall and Lord Justice Lawrence Collins

Judgment December 18, 2007

Although the practical effect of a beneficial owner of property making a declaration of trust in favour of a third party would be to get rid of the trust of an equitable interest then subsisting, as a matter of law, the beneficial owner would not drop out of the picture but would hold the beneficial interest on trust for the third party.

The Court of Appeal so stated when dismissing the appeal of the claimant, Mr David Nelson, and an interested party, Ms Shirene Hanley, from, inter alia, the refusal by Judge Langan, QC, in the Leeds District Registry of the Chancery Division, on June 9, 2006, to discharge a charging order as to costs made on June 13, 2003 by Mr Justice Peter Smith against the claimant in the course of litigation arising out of the sale of a building plot by the defendant, Greening and Sykes (Builders) Ltd.

The claimant paid the price of the plot, provided by Ms Hanley, and required the land to be transferred to her. The defendant refused. Proceedings brought by the claimant were dismissed and an order for costs was made against him.

Mr Justice Peter Smith made a charging order on the property as to the orders pursuant to section 2(1)(b)(i) of the Charging Orders Act 1979, and Judge Langan dismissed an application by Ms Hanley to discharge the order.

On appeal it was said, inter alia, that the judge had no power to make the charging order since the underlying costs order was not against the claimant as trustee under section 2(1) of the 1979 Act, which provides: “... a charge may be imposed by a charging order only on ... (b) any interest held by a person as trustee of a trust ... if the interest is in such an asset or is an asset under another trust and - (i) the judgment or order in respect of which a charge is to be imposed was made against that person as trustee of the trust...”

Mr Nelson in person; Mr Geraint Jones, QC, by direct access, for Ms Hanley; Miss Sarah Richardson for Greening and Sykes.

LORD JUSTICE LAWRENCE COLLINS said that to state, as had Lord Evershed, Master of the Rolls in Grey v Inland Revenue Commissioners ([1958] Ch 690, 715), that where a person who was the owner beneficially of property, and the legal estate was vested in another as trustee for him, made a declaration of trust, the practical effect would seem to amount to, or be capable of amounting to getting rid of the trust of the equitable interest then subsisting, was not the same as saying that as a matter of law it did get rid of the intermediate trust.

What was being said was that in the case of a trust and sub-trust of personal property the trustees might decide that as a matter of practicality it was more convenient to deal directly with the beneficiary of the sub-trust.

Further, the authorities had no application to a case where the trust property was the purchaser’s interest in land created by the existence of an executory contract for sale and purchase. The court was not bound to hold that in such a case an intermediate trustee ceased to be a trustee. The claimant had the interest required.

Lord Justice Wall gave a concurring judgment and Lord Justice Ward agreed.

Solicitors: Chadwick Lawrence, Huddersfield.

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