Legal Principles Examined in Ponsford v Sali Case: Trust Creation, Partnership Assets, and Remuneration

Citation: [2023] EWHC 3360 (Ch)
Judgment on

Introduction

In the case of Douglas Stuart Ponsford & Anor v Mesud Habib Sali & Anor [2023] EWHC 3360 (Ch), several legal principles integral to the realms of property, trusts, and partnership law were scrutinized and applied. Central to the dispute were questions surrounding the creation and proof of a trust over a property, the validity and conditions of a declaration of trust, an agreed interest rate for a partnership debt, determination of partnership assets, and remuneration for acting as a court-appointed Receiver and Manager. This article will elucidate these principles and analyze their application within the context of the case.

Key Facts

The case involved Mr. Ponsford and Mr. Sali, who entered an informal partnership known as ‘Move on Now’ and subsequently a limited company. Disputes arose regarding property investments, leading to the trial to settle if one particular property, 2 Walsingham Road, was held in trust for Mr. Sali by Mr. Ponsford. Additionally, there was contention over whether a 20% interest rate was agreed upon for returning partnership funds reportedly taken by Mr. Sali, and what the appropriate remuneration for Mr. Ponsford’s role as Manager and Receiver should be.

Trusts and Declaration of Trusts

A key issue pertained to the creation and evidence of a trust. Section 53(1)(b) of the Law of Property Act 1925 mandates any declaration of trust respecting land to be in writing and signed by the person able to declare such a trust. The court differentiated between an express trust, potentially created in 2013 when Mr. Ponsford purchased the property, and the manifestation of this trust through a declaration of trust signed in 2021. Significantly, the court clarified that writing need not create the trust but must evidence it, which contributed to the decision that Mr. Ponsford held 2 Walsingham Road in trust for Mr. Sali.

Partnership Assets and Profit Sharing

The judgment considered the partnership assets, specifically whether 13 Mill Lane formed part of the ‘Move on Now’ partnership assets, and acknowledged that partnership agreements under the Partnership Act 1890 could be informal. Notably, the Court determined the property was not a partnership asset, despite Mr. Sali’s claims of an entitlement akin to profit-sharing in other properties obtained prior to the official partnership’s formation.

Interest Rates on Partnership Debts

The principle of contractual agreement was invoked concerning the purported agreement of a 20% interest rate on partnership debts. The court examined the elements of contractual formation, such as offer, acceptance, and the presence of consideration. Despite Mr. Ponsford’s claim, the court found no binding agreement on the interest rate due to lack of substantial evidence.

Remuneration of Court-Appointed Receiver and Manager

In assessing remuneration claims, the court applied CPR rule 69.7(4) and the accompanying Practice Direction 69, which set out the criteria for determining a reasonable and proportionate fee for a receiver based on time, complexity of the task, and the asset’s value. The court emphasized the necessity for detailed evidence to substantiate any claim for such remuneration, which was not satisfied in this case, leading to an adjournment for future assessment.

Outcomes

  • Trust and Declaration of Trust: The court found in favor of Mr. Sali, deciding that Mr. Ponsford’s signature on the 2021 Declaration of Trust manifested and proved the trust concerning 2 Walsingham Road. Thus, the property is held by Mr. Ponsford on trust for Mr. Sali.

  • Interest Rate: The court did not uphold Mr. Ponsford’s claim of a 20% agreed interest rate on the grounds that there was insufficient evidence of a binding agreement.

  • Partnership Asset: 13 Mill Lane was confirmed not to be a partnership asset of ‘Move on Now’.

  • Remuneration: Mr. Ponsford’s claim for remuneration was not determined; the court adjourned this matter until a later date.

Conclusion

In Ponsford & Anor v Sali & Anor, the English High Court provided clear judgments on several important legal principles, particularly in the context of trust law and partnership disputes. With the evidence scrutinized and principles applied, the court navigated through complex issues, ultimately upholding a trust arrangement, denying an unproven interest rate claim, and postponing the determination of remuneration for the Receiver and Manager. Thus, the case offers valuable precedent and guidance for legal practitioners on the nuances of establishing trusts, determining partnership assets, and evaluating claims for remuneration in similar legal contexts.