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Barrett  v Barrett [2008] EWHC 1061 (Ch)  High Court

Thomas Barrett purchased 137 Bilton road in 1977. He was the sole beneficial and legal owner. He lived in the property with his two brothers, John and Patrick. In 1993 Thomas was declared bankrupt and the property vested in the trustee in bankruptcy. John offered to purchase the property by discharging the sums owing on the mortgage of £32,000 and to pay £15,000 to the trustee in bankruptcy who accepted the offer. The property was registered in John’s name on the understanding that he held the legal title on trust for Thomas absolutely. Thomas would make the mortgage payments and be responsible for other expenses involved in running the property.  The purpose of the sale was to defeat the possession order which would be a fraud on Thomas’s creditors. Thomas continued to live in the property until 2005 when John sold the property for £235,000.

Held:

There was no constructive trust. The purpose of the agreement was to evade the rules of bankruptcy and was therefore for an unlawful purpose. Thomas could not establish an interest without having to rely on the unlawful purpose to establish the common intention.  

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