Bagum v Hafiz [2015] EWCA Civ 80

Facts

• The case involved three siblings who jointly owned a property.
• Two of the siblings wished to sell the property, while the third wanted to retain it and purchase the others’ shares.
• The case was brought under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA), with disputes centering on whether the property should be sold or one party permitted to buy the others’ shares.

Issues

1. Whether the court had the authority under Section 14 of TOLATA to order a sale, or alternatively, facilitate the purchase of shares by one co-owner.
2. How courts should balance the factors listed in Section 15 of TOLATA—including original trust objectives, current purposes, needs of resident children, and interests of lenders—when making decisions about jointly owned property.
3. The extent to which the original purpose of the trust or the current circumstances of the parties should influence the court’s decision.

Decision

• The Court of Appeal confirmed that courts possess wide discretion under Section 14 of TOLATA to order a sale, permit a co-owner to purchase others’ shares, or set specific terms for use of the property.
• It was held that the factors in Section 15 are significant but not exclusive; judges must also consider all relevant evidence and current realities.
• The court found that there is no automatic preference for ordering a sale, even where the property was acquired as an investment.
• The decision emphasized the importance of weighing the trust’s original purpose and intended use but cautioned against overreliance on these factors if circumstances have changed.
• Welfare of children and interests of lenders remain important, with courts balancing these factors to avoid undue hardship.

Legal Principles

• Section 14 of TOLATA gives courts broad discretionary powers regarding the sale or retention of trust property.
• Section 15 of TOLATA sets out factors for courts to consider, including the trust’s objectives, property purpose, needs of children residing or likely to reside in the property, and the rights of secured lenders.
• The original trust objectives and property purposes are important but should not automatically prevail if the circumstances of the parties have materially changed.
• The welfare of children is a primary consideration and may lead to orders postponing sales or enabling transfers to maintain stability.
• Courts must balance lenders’ rights with other factors, potentially refusing a sale if it would cause substantial hardship.
• There are no rigid rules; courts must consider all relevant evidence to ensure a fair, case-specific outcome.

Conclusion

The Court of Appeal in Bagum v Hafiz clarified the flexible, context-sensitive approach courts must adopt under TOLATA 1996 when resolving disputes between co-owners, ensuring that all statutory factors and relevant circumstances are carefully weighed to produce just outcomes in property disputes.