Compensation under TLATA, post Rowland v Blades [2021] EWHC 426(Ch)
Like all good things in life, law can sometimes be just a little boring. Even the more interesting areas of law have their dull sides. Criminal lawyers have shoplifters; matrimonial lawyers have chattels disputes, and commercial lawyers have delightful second homes in Provence.
The most boring aspect of TLATA, which I appreciate is quite a statement in itself, relates to something which is so uninspiring lawyers can’t agree on what to call it: ‘equitable accounting’, ‘occupation rent’, or ‘compensation’. For the purposes of this opinion, I’m going with the word compensation, to cover the court’s power to order payments separate to a declaration of beneficial ownership.
These claims have all the hallmarks of an evening spent in the company of an especially stultifying bookkeeper. They involve a lot of detail. They often don’t involve very much money. The law is opaque, and they have a tendency of going on and on. In some cases, where the parties’ beneficial shares are fixed at the time of purchase, the only thing left to argue about is compensation, which has the effect of thickening the (witch’s) brew. That isn’t to say claims for compensation are not important or valid. But they often involve a huge amount of detail in the pursuit of a relatively minor issue.
In the circumstances, this blog is going to be short: If you can’t make it interesting, at least make it short, as Dorothy Parker might have said. For a recent case which considered the law in relation to compensation, which isn’t in any way boring, see Rowland v Blades [2021] EWHC 426 (Ch)
Here are six short points about compensation:
- This is a discretionary remedy
A co-owner who has been unreasonably excluded from property can seek compensation (TLATA s.14(2), s.13(6)) but there is no right to any award. The court exercises a discretion which will be fact sensitive: see Wilcox v Tait [2006] EWCA Civ 1867 per Jonathan Parker LJ at [64]:
“…it is in any event risky, in my judgment, to attempt to formulate general principles to be applied in carrying out an equitable accounting exercise in any given case, if for no other reason than that, as the judge put it in the instant case, equitable accounting, is ‘fact sensitive’. What can at least be said is that an exercise of equitable accounting is not to be confused with an enquiry as to the extent of the parties’ respective beneficial interests in the property in question. Questions of equitable accounting only arise once the extent of the parties’ beneficial interests has been determined, since the requirement to account (where it exists) is a reflection of and derives from those beneficial interests.”
2. As between cohabitants, the law is contained in the statute (TLATA)
Any issue of compensation that might arise between cohabitees should be resolved by reference to ss.12 to 15 of TLATA, which include the right of a trustee of land to occupy the land if that was the the trusts’ purpose (s.12(1)), the power of a trustee to exclude that entitlement, which must be exercised reasonably (s.13(1), (2)), and the power of a trustee to impose obligations to include compensation to a person whose right has been excluded (s.13(6)). Finally there is the checklist of factors at s.15 which must be taken into account where the court exercises a power under s.14. In Stack v Dowden [2007] UKHL 17 at [94] Baroness Hale explained that this supplanted the earlier case law on equitable accounting:
“These statutory powers replaced the old doctrines of equitable accounting under which a beneficiary who remained in occupation might be required to pay an occupation rent to a beneficiary who was excluded from the property. The criteria laid down in the statute should be applied, rather than in the cases decided under the old law, although the results may often be the same”
In Murphy v Gooch [2007] EWCA Civ 603, Lightman J confirmed at [14] that:
“The wider ambit of relevant considerations means that the task of the court must now be, not merely to do justice between the parties, but to do justice between the parties with due regard to the relevant statutory considerations”.
3. In cases of bankruptcy cases, apply earlier case law
The provisions of ss. 12-15 apply between trustees of land. They do not apply in a claim brought, eg, by a trustee in bankruptcy, where the court may apply earlier corpus of case law in relation to the court’s equitable jurisdiction: re Basham (A Bankrupt) [2008] EWHC 1505 (Ch). In Rowland v Blades the court concluded that Basham was ‘very much directed to bankruptcy cases’
4. Compensation can be ordered without proof of ouster
There is no need for actual ouster (i.e. physical exclusion). Compensation can be awarded hwere there was constructive exclusion from a property: see Murphy v Gooch [2007] EWCA Civ 603 at [18], which reflects the position under the earlier authorities on equitable accounting
‘…it was open to the judge and it is open to this court to order credit for an occupation rent if it was or is just to do so, whether or not there was proof of any ouster.’
5. The normal inference is compensation post-dates separation
Unless there is evidence that the parties intended to account to each other for, e.g. costs of improvements during the relationship, the court’s normal inference (which is of course rebuttable) is that issues of compensation arise after cohabitation comes to an end: see Wilcox v Tait
“[65] That said, I agree with His Honour Judge Behrens in Clarke v Harlowe that in the ordinary cohabitation case it is open to the court to infer from the fact of cohabitation that during the period of cohabitation it was the common intention of the parties that neither should thereafter have to account to the other in respect of expenditure incurred by the other on the property during that period for their joint benefit. Whether the court draws that inference in the given case will, of course, depend on the facts of that case.” Jonathan Parker LJ, Wilcox v Tait, at [65], [66]
6. Where the exercise is disproportionate, the court may refuse to deal with compensation (eg. See Laskar v Laskar [2008] EWCA Civ 347)
Rowland v Blades [2021]
As a worked example, in Rowland v Blades, the court accepted that there should be an occupation rent holiday home over nine years, presented with figures £83 per day or £650 per day, £288,800 or £36,000: concluded around £60,000. The conclusion of Deputy Master Hansen is at [156]:
I remind myself that having found that Ms Blades should pay an occupation rent to Dr Rowland, my task in ascertaining the amount of such rent is to do justice between the parties with due regard to the relevant statutory considerations and having regard to my findings of fact above. It seems to me that the fairest way to arrive at the appropriate figure in the particular circumstances of this case, dealing as we are with a holiday home (albeit a very grand one) and an exclusion at weekends (including a Monday or a Friday) only, and having regard to the principles on which mesne profits are calculated by way of analogy, is to ascertain a daily rate for such weekend usage that reflects the open market value of such usage.
Alexander Chandler
18 March 2021
Family Brief 