TOLATA - An Introduction

When a solicitor asks about your areas of practice and you mention cohabitation claims the reaction is like when someone saysthey like Marmite.

Why is it such a split reaction? It seems for many family practitioners the negative reaction stems from the fact that a cohabitation claim is a civil action that requires practitioners to use the White Book. This article intends to be a quick introduction to a cohabitation claims setting out what the court can do in respect of a cohabitation claim and the main parts of the CPR you’ll need to know.

Firstly, it is important to consider when an application under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) could be of assistance.  The Act is designed to allow those who jointly own a property, or someone who claims to have a beneficial interest (ie a financial stake) in a property even though they are not listed as a legal owner, to apply to the court for a remedy, which in the context of family money cases, is usually when there has been a relationship breakdown between an unmarried, cohabiting couple.

Pursuant to sections 14 and 15 of TOLATA the types of application that can be made to the court include:

• to decide the nature and extent of the ownership of a property;
• to decide who is entitled to occupy a property; and
• to decide whether there should be a sale of a property.

The court can also, at its discretion, undertake an equitable account to correct financial imbalances brought about by unequal contribution to mortgage payments or repairs, or if one party has received rent payments or has used the property through occupation while the other has not - in this regard (and only in this regard) the court is trying to find a fair balance between the parties.

A side-note as to fairness; it is only in considering equitable accounting that the court will have an eye on fairness, in all other aspects the claim is determined under property and trust law. Thus, in the context of a relationship breakdown where the parties have children it is important to consider whether a claim under schedule 1 of the Children Act 1989 may be required.

When determining a claim under TOLATA the court will consider:

• the intentions of the person or persons who created the trust;
• the purposes for which the property subject to the trust is held;
• the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home; and
• the interests of any secured creditor of any beneficiary.

If your client wishes to pursue a claim, what steps should be taken and what will happen next?

Firstly, it will be necessary to consider the general Practice Direction on Pre-action Conduct and Protocols, this sets the tone for what the court will expect the parties to have done prior to the issue of proceedings in order that both parties have sufficient information to understand each other’s positions and hopefully be able to try to settle the issue without proceedings, or at the very least narrow the issues thereby reducing the complexity/costs of resolving the dispute. 

Compliance with the Protocol is important as not only will potentially valuable information and disclosure be obtained, a failure to do so may be taken into account in costs; adverse costs orders being more common in civil cases.

Before drafting your letter of claim it will be important to obtain the conveyancing file, this should include both the transfer documents as well as the correspondence if fraud, undue influence or mistake is alleged.  The transfer documents are key as the court have confirmed that an express declaration of trust is conclusive, unless varied by subsequent agreement or affected by proprietary estoppel (Stack v Dowden [2007] UKHL 17 and recently reaffirmed by the court in Nilsson v Anor v Cunberg [2024] EWHC 2164 (Ch)) by way of a formal agreement under the Law of Property Act 1925 or a common intention constructive trust, the latter of which can include informal (unwritten) agreements.  Thus, the conveyancing file could be determinative of the issues, but if a later common intention trust is alleged it will also be necessary to gather all information from the time of the informal agreement together with any evidence in support of any form (eg email, What’s App messages and so forth).

Finally, key to the Protocol is that litigation should be considered a last resort. A form of ADR should be considered and in the context of TOLATA claims it certainly would be wise to as proceedings can be lengthy and the parties will likely incur significant costs if the case proceeds to trial.

The next step would be to issue the claim, but the question is by what mechanism, as proceedings can be started under CPR Part 7 or Part 8. Whilst either can be used, which procedure is best depends on the facts of the case.

Part 8 is most appropriate for those cases where there is no substantial dispute of fact and so is appropriate if the claim is for an order for sale, an issue over the timing of the sale or a straightforward accounting issue for example. The Part 8 procedure is more akin to financial remedy cases with only a brief claim form being required and the main details of the claim and response to the claim being contained in witness statements.

Thus, whilst Part 8 claims are more streamlined and can (if appropriate) be disposed of at the first hearing, it should not be chosen for this reason; there may be cost consequences associated with having to transfer to part 7 if the defendant raises a substantial dispute in their response.

Part 7 is more appropriate when there is a substantial dispute of fact, for example when there is a dispute over the existence or extent of a beneficial interest. In Part 7 formal pleadings are required - Particulars of Claim and Defence, and the matter will be allocated to a track.

Allocation will most likely be to the multi track given the likely value in dispute together with the non-monetary issues often pleaded in TOLATA claims. Allocation to the multi track will mean cost budgets have to be filed (see CPR 3.12-3.18) and a CCMC attended to consider the directions required (disclosure, expert evidence and witness evidence) together with a timetable for the effective running of the case and the amount of costs that should be approved or allowed in respect of the budgets. This will limit the costs that may be recovered for each stage of the process, unless an application is made to later vary it.

Whilst the procedures differ greatly, a strict court timetable will be set in both cases, so it is important to ensure you are ready before you issue or additional costs may be incurred in seeking to vary the timetable if the parties cannot agree, or have already used the 28 day extension period open to the parties to them (see CPR 3.8(4).

A final consideration during the running of the case is as regards to offers to settle proceedings and implications on costs. In civil proceedings costs usually follow the event, i.e. the losing party pays the winning party’s costs and so a party needs to carefully review their position at each stage.  Part 36 offers can be a valuable tool in this regard, they are made on a without prejudice basis but, if made can provide costs protection in the even the other side fails to beat the offer at trial and thus could shift the overall costs liability for the period post expiry of the offer being made.

Finally, however, a word of caution on costs - a costs order can only be enforced if there are assets to enforce it against.  TOLATA claims can be prohibitively expensive and if the only (potential) assets are tied up in the property the losing party may not have sufficient assets to satisfy a costs order if they lose their claim. Whilst enforcement action can be taken, seizing goods for sale, or seeking an attachment of earnings order is a slow process.

Whilst on first reading, the above may seem overwhelming, once the claim is in progress the CPR will no doubt become more manageable as the similarities with the FPR become obvious and once you have stepped away from the realms of fairness and into the rules of property and trust law, often it is easier to advise your client.