Some TLATA cases are, to paraphrase Bing Crosby, straight down the middle: establish the beneficial interest, sort out whether the solution is occupation or sale, job done. Others (to mix metaphors) turn out to be a junction where many trust law points meet, and Begum v Issa & Ors  EW Misc B51 (CC) [HHJ Behrens] is a very good example of just such a case. Although the focus of the case was whether or not the Claimant had a beneficial interest in the property and in what way TLATA should resolve the dispute between not just the former cohabitants, but two other third parties, it takes in quite a few other issues on the way. One of these is the question of overriding interests, which I wrote about in the Southern Pacific Mortgage case here. There are also evidential points about the presumption of due execution; the Judge examines in some detail the nature and effect of TR1s in general and the specific TR1 in this case; he makes some further observations about other potential arguments within this factual matrix; and there is also a short but bracing excursion into the question of subrogation of mortgages. The specific TLATA issues were related to the Claimant’s right of occupation, payment of an occupation rent, and “equitable accounting” generally: in short, section 13/15 points. All that, and a cautionary note never to discuss property matters at family parties.
The Claimant was Narghis Begum. She had been in a relationship with the First Defendant, Nadeem Issa. The pair had participated in a Muslim marriage ceremony but they were not recognised as married under English law. In 2005 they were registered as the joint proprietors of a property called 107 Chalford Oaks. The TR1 of course contained an express declaration of trust, which in this case recorded that the parties owned as beneficial joint tenants. For our purposes it is sufficient to know that Narghis Begum did not contribute any part of the purchase price , but of course the declaration of trust provided her with a secure beneficial interest in the property.
The relationship seems to have been difficult from the first, and in 2007 a further TR1 was executed. This TR1 purported to transfer the title into the sole name of Mr Issa for a nil consideration and apparently bore the signature of Ms Begum as well as Mr Issa. By this time, Mr Issa had repaid about £50,000 of the original mortgage advance and at the same time he remortgaged the property for £45,000. The transfer was handled by a firm of solicitors. Ms Begum denied that she had executed the 2007 TR1 and her case was that she knew nothing about it until five years later in 2012. There was an issue of construction between all of the parties about what this TR1 had actually transferred – was it merely Ms Begum’s legal interest in the property, or her beneficial interest as well? This point obviously became relevant only if Ms Begum failed in her contention that she had not executed the TR1 at all.
The relationship finally fell apart in 2011. At that point Mr Issa decided to sell the property to his brother Shameem. Mr Issa’s case was that there had been a conversation between himself, Shameem and Ms Begum in September 2011 at the family’s Eid celebrations during which the sale was discussed and Ms Begum agreed to the sale. Ms Begum’s case was that she had not been present at this party at all. This episode at a family party was the slender basis of Shameem’s case that he had “made inquiry” of Ms Begum in Land Registration Act terms, and that she had not disclosed her overriding interest (that is, a beneficial share protected by occupation) to him. We will see in due course what the Judge made of it.
On 8 November 2011 Shameem paid his brother the sum of £89,885 for the property. It had been valued at £120,000 by this stage, and Mr Issa had paid off a further £12,000 approximately between 2007 and 2011. Both Mr Issa, Ms Begum and their two children were all still living at the property at the time of transfer. Shameem was in fact living next door to them throughout. Shameem obtained a mortgage for £90,000 and that charge was registered over the property at the time of transfer, the previous mortgage being discharged at the same time.
This new Mortgagee was in fact Mortgagee 4. The initial Mortgagee in 2005 had passed the charge on to Mortgagee 2 very shortly after the parties acquired the Property. Mr Issa had then remortgaged with Mortgagee 3 in 2007. Mortgagee 4 was joined to these proceedings as a party, but took no active part in the proceedings. Its only claim was that it should be subrogated to the rights of any earlier mortgage which was binding on Narghis Begum — of which claim, more anon.Ms Begum’s case was that she knew nothing about the proposed or actual sale. Mr Issa quitted the property in May 2012 and also in that month Ms Begum left the property with the children for a short time to visit her parents in Leeds. When she returned, Shameem Issa had changed the locks at the Property and was making arrangements to move in a tenant. I am happy to report that Ms Begum was able to regain access to the Property by agreement on 14 June, though she seems to have been obliged to take court proceedings to do so.
The position now was that Ms Begum and the children were living in a property which Shameem Issa claimed belonged entirely to him, and for which he had paid (and borrowed) £90,000. If Ms Begum did in fact have a beneficial interest under a trust of land, and that interest overrode Shameem’s, the mechanics of the Act would be engaged in working out whether Ms Begum and the children should be allowed to remain at the property, and how the various sums of money which had been spent (including the very large capital sums repaid on the mortgages by Mr Issa) were to be dealt with.
Was the 2007 TR1 Valid?
The first question was whether or not the 2007 TR1 had in fact transferred Ms Begum’s beneficial interest to Mr Issa. As we have seen, Ms Begum’s case was that not only had she not signed the TR1, but that she knew nothing about it whatever. On the other hand, Mr Issa pointed to the involvement of solicitors in the transaction and the fact that those solicitors had a copy of Ms Begum’s passport. There were no file or attendance notes to help, and the handwriting expert could not give any definitive evidence. The solicitor who claimed to have witnessed Ms Begum’s signature was not called to give evidence by either party.
Mr Issa seems, although it is not absolutely clear from the judgment, to have relied on the presumption of due execution. Certainly his case was that the burden of proof rested on Ms Begum and that she had not done enough to discharge it. The Judge disagreed, finding that “where, as here, there is a dispute as to whether the TR1 is validly executed the burden is on the Defendants to establish the validity of the TR1”; a timely reminder that a TR1 is a deed and the rules as to execution of deeds apply to it, including the provision under s.1(3)(a)(i) of the LP(MP)A 1989 that valid execution of a deed requires the individual party to sign the deed in the presence of a witness who attests her signature.
Teasing this out a little, the presumption of due execution can of course be displaced by evidence demonstrating faulty or invalid execution. The Judge’s view appears to have been that Ms Begum led that evidence by setting out her version of events, although that amounted in effect to a simple statement that she knew nothing about it. If the Judge accepted that evidence as credible, which he clearly did, the burden of proof would then shift back to Mr Issa to establish valid execution, which he did not do. The Judge seems to have been particularly concerned by Mr Issa’s failure to call the solicitor witness, although he also noted that the solicitors’ file made no mention of Ms Begum at all and that Mr Issa’s recollection of events was patchy. He found as a fact that Ms Begum had not executed the 2007 TR1 and that it followed that her beneficial interest had survived the registration of title in Nadeem’s sole name. From this point onwards I am going to describe Ms Begum’s interest as a half share, although when precisely the joint tenancy was severed is not clear.
Was Ms Begum’s Interest Overriding?
Given that Ms Begum had a half share in the property in 2011, the next question was whether her interest had survived the transfer to Shameem Issa in November of that year. She was still in occupation of the property, so her interest was protected by actual occupation under para 2(b) of Schedule 3 of the LRA 2002 unless “inquiry was made [of her] before the disposition and [she] failed to disclose the right when [she] could reasonably have been expected to do so” or her interest “would not have been obvious on a reasonably careful inspection of the land at the time of [the transfer]”. Bear in mind that the question was not whether Shameem knew that Ms Begum was actually occupying the property – he clearly did know that, because he lived with his wife and children next door – the question was whether he knew, in either of the circumstances I have set out, that Ms Begum did have or might have a half share in the property.
This was where the Eid family party came to prominence. Shameem claimed that the alleged discussion at the family party was an “inquiry” and that Ms Begum had not disclosed her beneficial interest, so she could not avail herself of the exception. Interestingly, the Judge made no finding of fact on whether Ms Begum had been at the party or not, but he assumed for the purposes of argument that she had been, and furthermore that there had been some general discussion at the party about the sale of the property. Were these discussions “inquiry” within the meaning of para 2(b) of Schedule 3? They were certainly not inquiries within the formal conveyancing sense; indeed it is hard to imagine how the inquiry could have been any less formal.
HHJ Behrens decided, rightly in my view, that they were not; and he further found that if would not have been reasonable for Ms Begum to have asserted her interest during such discussions. My own comment is that it is asking a lot of anyone to spoil a happy family social occasion by “asserting one’s rights”, or (as others in the family may well see it) “being awkward”, thereby assuming responsibility for a massive family row. There are indeed some contexts (such a relationship with a domineering partner and/or disapproval by the wider family) where it is almost asking the impossible. It is difficult to ask the court to draw a significant inference from the fact that it was not done.
The result was that at the time that Shameem acquired the property for a price of £90,000, he was fixed with Ms Begum’s ownership of a half share. This meant in practice that he had paid considerably over the odds for this property. I have already noted that just before he acquired his title, the property was worth £120,000 and subject to a mortgage which was now in round figures £33,000. Ms Begum’s share at that point was £43,400. Remember that this mortgage had started off at over £90,000 and it was Nadeem Issa who had reduced it by over £50,000 during the relationship; we’ll be coming back to that point in a moment.
Then Shameem Issa had redeemed the first mortgage and had replaced it with a new charge for £90,000. Ms Begum’s overriding interest was binding on Shameem’s mortgagee in exactly the same way that it was binding on Shameem, and Mortgagee 4 took its charge subject to her half share. If it had not been for the principle of subrogation (of which more later), Mortgagee 4 would not have been able to enforce against Ms Begum’s share of the property at all.
Sections 13 and 15 of TLATA
Ms Begum had a right to occupy the property under s.12 of TLATA. She wanted to remain there until her youngest child (who is very significantly visually impaired) finished her education. Shameem wanted to sell a property which he had purchased as an investment, which he could not rent out, and upon which he was paying a £90,000 debt which on any analysis was a figure far larger than the value of his share. The Court’s options included an order for sale, subject to an account, under section 15 of TLATA; or it could order that Ms Begum be entitled to remain in the property on terms under section 13.
HHJ Behrens concluded that the balancing exercise that he was required to conduct under sections 13 and 15 (in particular the circumstances and wishes of Ms Begum and Shameem as beneficiaries) resulted in an order for sale, but postponed for a period of 12 months. This looks at first glance to be a blow to Ms Begum, but further inspection suggests otherwise. In fact in my view it is the best outcome she could realistically have obtained.
The Judge took into account the vulnerable position of the parties’ children, particularly their daughter, Iqra, who was seriously visually impaired; but he also took into account Ms Begum’s evidence that she could raise a mortgage of £600,000 jointly with her brother. Taken together with the £43,500 that she had in the equity, this gave her a purchasing power of just over £100,000. However, she only had a half-share worth £43,500 because Mr Issa had paid off £60,000 from the original mortgage. Should she be accounting to Mr Issa, therefore, for one-half of that £60,000? HHJ Behrens considered his judgment on the same point in Clarke v Harlowe  WTLR 1473 and the principle he had summarised there:
“in the ordinary case of cohabitation the common purpose of the implied trust subsists while the relationship subsists. During that period whilst the ordinary arrangements for the discharge of the outgoings subsist there is no breach or failure by any one of the parties to honour any obligation owed to the other. Thus in the usual case there is no room or reason for equitable accounting.”
Both parties had agreed in Begum v Issa that the arrangement had been that Mr Issa looked after the money and Ms Begum looked after the home and the children. There was therefore no common intention before they separated that either of them would have to account to the other for money spent before the separation. As a result Ms Begum retained her £43,500 intact. However the Judge did order that Ms Begum should pay 36% of the mortgage instalments from May 2012 until the date that she finally left the property, if necessary by deduction from the amount due to her on sale. (I am not totally convinced about this percentage figure, I must say, but I will pass on without comment.)
The last point related to Mortgagee 4, who was now faced with a charge that was at least partially unenforceable. As I have noted, Mortgagee 4 had invoked the principle of subrogation, which at its simplest provides that if a party redeems a debt, that party is entitled to stand in the shoes of the original creditor. Mortgagee 4 had redeemed the £33,214 debt of Mortgagee 3, so it was entitled to stand in the shoes of Mortgagee 3. But Mortgagee 3 had obtained its charge during the 2007 transaction that had not been duly executed and it did not have any effect on Ms Begum. However, Mortgagee 3 had redeemed the debt of Mortgagee 2. Mortgagee 4 stood in the shoes of Mortgagee 3, who stood in the shoes of Mortgagee 2 (think of it as Mortgagee 4 wearing a pair of shoes (Mortgagee 3) under a pair of galoshes (Mortgagee 2)). Mortgagee 2’s debt had been £45,293 at the date that Mortgagee 3 had repaid it, but had been reduced to £33,214 by the time it was finally discharged by Mortgagee 4, so the amount that Mortgagee 4 could enforce against Ms Begum was a total of £33,214 (although her liability for that amount is shared with her co-owner).
The result is that Mortgagee 4 may well be unable to recover all of its money from this transaction, although one strongly suspects that it will try. Shameem’s share of the property, for which as I have noted he paid more than the value in any case, will be entirely swallowed up by repayment of the charge.
The Judge’s order that the property should be sold appears sensible – and, indeed, the only possible conclusion – given the stormy background. Although it was only sketched in, there were “incidents” referred to which made it clear that Mr Issa and Ms Begum had been at the very least on extremely bad terms, and Ms Begum made allegations of controlling and violent behaviour. HHJ Behrens remarked that if Ms Begum had signed the TR1, this would have been a classic case of undue influence. We know that Shameem Issa changed the locks to the property while Ms Begum and the children were away, and that agreement to allow her to return to the property was only reached at court. Given that history, it is very unlikely that future co-ownership between Ms Begum and Shameem Issa would be a happy and trouble-free affair and in practical terms it was probably better for herself and the children to start afresh in a new home. The clean break is just as good an idea in cohabitee cases as it is in matrimonial ones. What really mattered for her, in the circumstances of this case, was that the preservation of a share of £43,400 and the help of her brother gave her options.
Talking of matrimonial cases, my readers practising in ancillary relief (as I am now able to call it again, see here) will have noted the strong resemblance between the facts of this case and those of Chokhar v Chokhar  FLR 313 (CA). The big difference is that in a matrimonial case the Court is able under section 37 (2) (b) of the MCA 1973 to set aside transactions which have been undertaken with the intention of defeating a claim for financial relief. Comparatively speaking, cohabitees in Ms Begum’s position have to cope with heavier disadvantages.