Summary

There was nothing wrong with the judge's finding that the first defendant was the beneficial owner of a property. Therefore the claimant was entitled to set off rent payments in respect of that property against a debt owed to him by the first defendant; and the bare trustees of the property, who in their role as estate administrators had disputed the first defendant's beneficial entitlement, could not recoup their litigation expenses against money that they held on his behalf.

Facts

The second and third defendants (B) appealed against a decision ((2005) EWHC 488 (Ch)) that the first defendant (E) was the beneficial owner of property. The claimant (L) cross-appealed against a decision ordering rent to be paid to B. E was L's business manager. E's wife had purchased a property with the entire purchase price provided by E. E's wife later transferred the property to another person (K). B were the administrators of K's estate. Pursuant to a promotion agreement, E furnished L with accommodation in the form of the property for a greatly reduced rent. L and E's relationship ended acrimoniously and L, in an attempt to enforce a judgment that he had obtained in New York against E, registered a caution against the title of the property. L sought and obtained a declaration that E was the beneficial owner of the property and that B held the property on trust for E. B contended that the judge had erred in holding that E was the beneficial owner, and argued that the property had been owned by K and was now owned by them as administrators of his estate. L contended that the sum owed by way of rent should be set off against his judgment against E as a mutual debt. B contended that their costs obligation to L should be set off against the rent owed.

Held

(1) B's appeal against the judge's factual findings was completely unpersuasive and there was no proper basis for saying that the judge was wrong in his decision. E was the beneficial owner of the property and the legal estate was vested in B as bare trustees. (2) B were trustees under two separate trusts: firstly, as administrators of K's estate and, secondly, as bare trustees of the property. B defended the proceedings in their capacity as administrators and incurred costs liabilities as K's trustees. They could not therefore recoup expenses incurred in their capacity as K's trustees from money that they held in their capacity as E's trustees. It followed that the rent payable to B would have to be paid in full to E and L would then be entitled to set off the debt owed to him by E against the rent.

Appeal dismissed, cross-appeal allowed.