Failure to Prove Trust Relationship Stymies Effort to Block Sale of Property

A surprising number of cases are brought to court each year in which allegations are made that the true ownership of an asset is something other than the ‘paper’ ownership, and these often involve properties. A recent case involving a divorced couple is not untypical.

The couple were married under Sharia law and an investment property was subsequently purchased which was in the wife’s sole name. They were later divorced. Some time after that, the husband was imprisoned after being convicted of conspiracy to defraud and his ex-wife sold the property to the brother of a family friend.

After he was released from prison, the ex-husband began legal proceedings against his ex-wife. He claimed that the property was held on trust for him and therefore she had no legal right to sell it. He asserted that the purchaser was aware of the relationship of trust and that the sale was in that respect dishonest.

His immediate action was to ask for an injunction to prevent any further sale of the property, which was granted on a temporary basis. However, the injunction was lifted as legislation exists to protect innocent buyers of property in such circumstances and because the allegation of dishonesty on the part of the buyer was ‘speculative’.

In any event, the ex-husband could have registered a ‘caution’ against the title at the Land Registry at any point prior to the property’s sale, which would have put a potential purchaser on notice that he claimed an interest in it.

The sale of the property could not therefore be prevented. However, the ex-husband can still bring legal action against his ex-wife for breach of trust if he so decides.

This case shows the great importance of making sure that where (as the ex-husband alleged) the legal ownership and the beneficial ownership of an asset are different, the appropriate legal documentation is created at the appropriate time.