Almost the first thing a budding lawyer learns is the difference between legal and beneficial ownership of property. As a family judge’s ruling in a big money divorce case showed, it is a distinction that could hardly be more important.
The case concerned a flat that was purchased for well in excess of £8 million and registered in a woman’s sole name, as legal owner, shortly before her husband began divorce proceedings. He contended that she was also the flat’s beneficial owner and that its value should therefore be taken into account when it came to dividing up the marital assets in financial relief proceedings.
In asserting that the flat was beneficially owned not by her but by her older brother, the wife pointed out that he had paid for it. The husband, however, responded with claims that the money was a gift to her from her brother in recognition of work she had done for their family business. Alternatively, he argued that the flat represented a transfer to the wife of family assets.
Ruling on the case, the Family Court noted that Land Registry documents made no mention of any beneficial interest in the flat and simply recorded that the wife was its owner. There was no documentary evidence to corroborate the wife’s and her brother’s accounts that they had agreed that he would be its beneficial owner.
In upholding the wife’s case, however, the Court could see no reason why the money to fund the purchase would have come out of her brother’s personal account if it was part of a family asset distribution or a reward for her business endeavours. She had sufficient funds to purchase the flat herself and there was no apparent need for her to rely on her brother’s largesse.
It was also unlikely that the brother would have made such a substantial gift to the wife at the very time that her marriage was ending and divorce proceedings were in prospect. The Court concluded that it was their common intention that the brother would be the flat’s sole beneficial owner. The wife, therefore, held legal title to the property on trust for him.