Abbey National v Moss [1993]
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In Abbey National Plc v Moss [1993] 26 HLR 249, the court considered the issue of whether the collateral purpose of a trust for sale could continue to subsist even when one beneficiary loses their beneficial interest.
The defendant and her husband jointly purchased a house. After the husband's death, the defendant made her daughter a joint tenant. The daughter, without the defendant's knowledge, forged her mother's signature to borrow £30,000 from the bank using the house as security. When the daughter defaulted on the loan, the bank sought an order of sale.
The Court of Appeal rejected the order of sale. Peter Gibson LJ, delivering the judgment, emphasised that the collateral purpose for which the property was held—that the defendant should continue living in the house—was still subsisting. The court drew on the principle established in Jones v Challenger [1961], which holds that a trust for sale will not defeat a collateral purpose if that purpose is still subsisting, even when an original party to the purpose assigns their share.
Peter Gibson LJ distinguished the case from Re Citro [1991], pointing out that Re Citro only establishes that a collateral purpose to provide a matrimonial home will not subsist when one of the parties loses their share. In contrast, Abbey National Plc v Moss dealt with a situation where a different collateral purpose continued to subsist even when one of the parties lost their share.
The collateral purpose of a trust for sale can still subsist even when one beneficiary loses their beneficial interest. The principle from Jones v Challenger is applicable, emphasising that if the collateral purpose is still subsisting, the trust for sale may not defeat that purpose. The decision in Re Citro is distinguished, as it pertains to a specific collateral purpose (providing a matrimonial home) and does not necessarily apply when a different collateral purpose continues to exist despite the loss of a party's share.
This case highlights the importance of examining the specific collateral purpose of a trust for sale and whether that purpose continues to exist in determining the outcome of an order of sale.
The defendant and her husband jointly purchased a house. After the husband's death, the defendant made her daughter a joint tenant. The daughter, without the defendant's knowledge, forged her mother's signature to borrow £30,000 from the bank using the house as security. When the daughter defaulted on the loan, the bank sought an order of sale.
The Court of Appeal rejected the order of sale. Peter Gibson LJ, delivering the judgment, emphasised that the collateral purpose for which the property was held—that the defendant should continue living in the house—was still subsisting. The court drew on the principle established in Jones v Challenger [1961], which holds that a trust for sale will not defeat a collateral purpose if that purpose is still subsisting, even when an original party to the purpose assigns their share.
Peter Gibson LJ distinguished the case from Re Citro [1991], pointing out that Re Citro only establishes that a collateral purpose to provide a matrimonial home will not subsist when one of the parties loses their share. In contrast, Abbey National Plc v Moss dealt with a situation where a different collateral purpose continued to subsist even when one of the parties lost their share.
The collateral purpose of a trust for sale can still subsist even when one beneficiary loses their beneficial interest. The principle from Jones v Challenger is applicable, emphasising that if the collateral purpose is still subsisting, the trust for sale may not defeat that purpose. The decision in Re Citro is distinguished, as it pertains to a specific collateral purpose (providing a matrimonial home) and does not necessarily apply when a different collateral purpose continues to exist despite the loss of a party's share.
This case highlights the importance of examining the specific collateral purpose of a trust for sale and whether that purpose continues to exist in determining the outcome of an order of sale.
