William East and Hugh Jeffery successful in constructive trust claim: Khan v Khan [2025] EWCA Civ 1436

The Court of Appeal has handed down judgment in Khan v Khan [2025] EWCA Civ 1436, an appeal raising significant issues as regards constructive trusts arising upon the acquisition of property and the operation of s.53(1)(b) of the Law of Property Act 1925 (“LPA”). William East and Hugh Jeffery represented the successful Respondents.

The Appellant (Muhammed) was the oldest of six siblings, his two brothers (Ahmed and Sarwar) and three sisters (Shalima, Farhana and Jennifer) together comprising the Respondents.

The claim concerned the beneficial ownership of four properties (the “Properties”). At trial, the Respondents (represented by William East) had succeeded in establishing that it had always been their father’s intention that the beneficial ownership of the Properties should be shared between the children, subject to his own entitlement to the income from the Properties during his lifetime. Their father had passed away in 2008.

By the time of the trial, freehold title to one of the Properties was registered in the name of Muhammed, and the three other Properties, which had each been divided into three leasehold flats, were registered such that Ahmed held legal title to the freehold interest and Muhammed held legal title to the valuable leaseholds.

One of the Properties, 7 Essex Grove, had been purchased in 1998 using money belonging to the parents and placed in the name of Farhana. Her evidence was that she had accepted legal title to 7 Essex Grove on the understanding that she held the property for herself and her two sisters in equal shares. In 2005, during their divorce, Farhana’s former husband intimated a claim against 7 Essex Grove and Farhana agreed to settle the financial remedy proceedings on the basis that she would not assert any claim to the marital home. Farhana (at her father’s direction) thereafter created leases of the three flats in the property in favour of Muhammed. The freehold interest was later transferred to Ahmed.

In 2013, Muhammed wrote an email to Shalima and other members of the family in which he stated: “I want Essex Grove out of my name by 2014. This belongs to three sisters as stated clearly.” The email ended with Muhammed’s name, and it the trial judge accepted the Respondents’ case that this sufficed to evidence an express trust of 7 Essex Grove in favour of Shalima, Farhana and Jennifer for the purposes of s.53(1)(b) LPA, and that the email constituted signed writing for the purposes of that section in light of the Court of Appeal’s decision in Hudson v Hathway [2023] KB 345.

On appeal, Muhammed accepted that the email constituted signed writing but argued that it did not suffice to evidence a prior declaration of trust. He contended that the email failed to evidence all terms of the trust since no reference was made to the father’s prior life interest, and that it did not satisfy the requirements of s.53(1)(b) LPA because it evidenced no particular prior declaration.

Miles LJ (with whom Nugee LJ and Asplin LJ agreed) dismissed Muhammed’s appeal on this point, holding that s.53(1)(b) “does not require the writing to set out the terms of the trust in full” but rather requires sufficient acknowledgement of the trust by the trustee.

As to the prior declaration, Miles LJ held that on proper analysis of the trial judge’s findings, Muhammed had declared a trust over his interests in 7 Essex Grove at the moment of acquisition. However, he in any event expressly rejected Muhammed’s case that it is necessary to be able to pinpoint exactly when an express trust arises for the purposes of s.53(1)(b) LPA. The question whether there has been an express declaration of trust requires a broad analysis of whether a reasonable observer would understand from a person’s words and conduct, possibly over an extended period of time, that they were manifesting an intention to hold property on trust for another.

At trial, the Respondents’ had established constructive trusts over the remaining Properties on the basis that they were conveyed into Muhammed’s name in accordance with a common understanding that they were to be held for the sons in equal shares, subject to the father’s entitlement to the income for the duration of his life. In accordance with a long line of cases, of which Rochefoucauld v Boustead [1897] 1 Ch 196 is usually seen as the progenitor, where property is transferred into the name of a person on the basis of an agreement to hold the property for another, that person cannot then deny that agreement and assert absolute ownership.

Muhammed contended on appeal that since such a trust has been expressed as arising to prevent an equitable fraud, the recipient of the property must have “procured” the transfer into his own name with fraudulent intent at the time of the conveyance. Miles LJ rejected that submission. The “equitable fraud” to which this constructive trust responds consists of the recipient’s assertion of an absolute interest in the property in contradiction to the understanding on which the property was transferred. In that respect it is “really a shorthand label for unconscionable conduct.”

A copy of the judgment can be found here.