Williams v Nilsson – Establishing Common Intention

Frances Coulson

Partner, Head Of Insolvency & Restructuring, Wedlake Bell

The recent decision in Williams v Nilsson illustrates two points. The first is that establishing interests in a trust of property is an exercise in establishing common intention. The second is the importance of all evidence being put to the court so as to enable the correct decision to be made and for any judgment not to be vulnerable to an appeal.

The bankrupt and his wife separated in 2011. She said that they decided at that time that the matrimonial home would be 100% hers because she was to be solely responsible for the mortgage and outgoings of the property from then on.

In 2016, the bankrupt applied for bankruptcy. The information provided by him included in the details of his assets a 50% share in the former matrimonial home. Later than year, divorce and financial proceedings were started.

The trustees applied for possession and sale. The bankrupt did not take part in or provide evidence in the proceedings although he did attend as an observer.

The District Judge concluded that there was no contemporaneous supporting evidence of the Respondent’s position that she and the bankrupt had reached the agreement she submitted had been made. There was evidence of what she intended but that was unilateral and not sufficient for a finding of their common intention which was the requirement to establish a constructive trust in her favour. Upon this basis, an order for possession and sale was made with a declaration that the equity be shared on a 50/50 basis.

The Respondent appealed on many grounds but principally that the District Judge had erred in the finding that there was no constructive trust in 2011.

Of great importance was a transcript of the family court financial relief hearing in which it had been said that the bankrupt has accepted that he would have no interest in the increase in value of the property from 2011 onwards because of the fact that his wife would be solely responsible for the mortgage and outgoings. This, of course, was contrary to his statement in his bankruptcy application that he retained a 50% interest in the property. The reason for this discrepancy was never explained although that is not necessarily the purpose of an appeal which is to consider whether the initial finding can stand.

The initial judgment had made findings of fact and the appeal acknowledged that there is a high burden of proof before such a finding can be overturned.

There was much discussion in the judgment as to whether or not the transcript should be admitted in evidence on the appeal when its importance would have been apparent on the initial application. The Respondent was a litigant in person and an examination of the Bench Guide for dealing with such litigants was examined in detail. There was also an issue in that the court office had advised the Respondent that she needed permission of the judge to use the transcript. When the importance of the transcript was known, she was offered the opportunity to adjourn the application for possession and sale to obtain a copy but she declined.

The appeal court decided that it was clear in the possession proceedings that the transcript was going to be vital evidence and the court should have rendered greater assistance in ensuring that this document was available to it. In order to achieve fairness to this litigant in person, the transcript would be admitted in evidence on the appeal.

Once that decision had been made and the transcript admitted, it was clear that the bankrupt had indeed confirmed in the course of the financial proceedings that they had reached an agreement in 2011. If such an agreement had indeed been reached, it followed that the parties did have the requisite common intention to establish a constructive trust and so the finding of fact to the contrary could and should be overturned. The appeal was, therefore, allowed.

Commentary

The judgment highlights again that the exercise in establishing the interests in property is one of establishing the actual common intention of the parties. When faced with oral evidence only, that can be a difficult burden of proof for any party to rebut presumptions of a property being held on a 50/50 basis.  The judgment does not indicate whether this property was held under a specific declaration of trust although that would not prevent a change of common intention on separation as per Kernott v Jones.

The appeal judge emphasised that no criticism could be made of the trustees in bankruptcy. That must be correct of course as they would have had no better right to obtain a copy of the transcript and, in any event, it is likely that the trustees would have needed to make an application for disclosure within the context of the possession proceedings which would undoubtedly have added to costs. If the party who had a greater right to the transcript did not agree to adjourn the trial to enable that transcript to be obtained, it is proper that the trustees could not be expected to do so. If there is any perceived criticism, it can only be against the initial trial judge for failing to be proactive in ensuring that the transcript was available.

It also highlights the difficulties faced by litigants in person. It is arguable that, had the Respondent been represented, the transcript would have been obtained for the initial hearing and the bankrupt possibly forced to give evidence to explain the discrepancy. There could be an innocent misunderstanding of course in that the transcript showed that the bankrupt considered that it was the increase in equity which would be solely for the benefit of his wife but he retained his 50% value as at 2011. One slightly puzzling aspect is that the discrepancy between the wife’s evidence on the agreement and the bankrupt’s evidence did not prevent the court from finding that there was a common intention constructive trust. Are we to conclude that a common intention which is broadly the same suffices? That seems a step too far into uncertain territory.