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Cohabitation Law Quarterly Update: Winter 2010

John Wilson of One Hare Court’s review of law and procedure in Cohabitation Claims: winter 2010.













John Wilson, barrister, One Hare Court

In Dibble –v- Pfluger [2010] EWCA Civ 1005 the Court of Appeal reminded practitioners of the potential significance of the fact that cohabiting partners had become engaged.   The parties had begun living together in 1992 and became engaged in 1994.  However, they never married and they separated finally at the end of December 2006.  The case concerned the beneficial ownership of a property in Poland.  The Claimant was Polish and her parents had, in 2002, purchased a plot of land on which to build a retirement home for the Claimant.  They also purchased the adjoining plot of land.  In July 2003 a house was built on the land.   The Defendant sought declarations by way of a counterclaim that the Polish property was to be held by the parties in equal shares or in such shares as the Court should determine.  He sought an order for the immediate sale of the Polish property, alternatively for payment by the Claimant of the Defendant's contributions towards the purchase and the costs of building the property.   It was his case that there was an express agreement to hold the Polish property in equal shares, alternatively it was the common intention to do so, that common intention being evidenced by the payments he made totalling £58,500 towards the purchase and / or building costs of the Polish property.  He gave particulars of 6 different payments between 25th March 2004 and 11th September 2006 totalling £58,500.   In the alternative, he sought the repayment of those sums.  In her reply the Claimant alleged that the Defendant had agreed to lend her father £15,000 to put a roof on the property.   The Recorder found for the Claimant in relation to three of the payments relied upon by the Defendant.  However, the Court of Appeal was unhappy with how he dealt with the other three in that:

(i) In relation to a payment of £6,000 he failed to deal with the fact that, per Rosset II, a capital contribution towards the acquisition of a property represented conduct from which inferences could be drawn as to the existence or otherwise of a common intention.  The Recorder failed to explain why he could not find an "inferred or imputed" common intention to create an interest in the land – note the comments by Rimer J in Kernott –v- Jones [2010] EWCA Civ 578 as to the validity (or lack of it) as to imputation;

(ii) He failed to make a finding as to whether or not an advance of £15,000 by the Defendant was a loan or not because, if it was a loan then the fact of lending would defeat "any inference or imputation" of a common intention to acquire an interest through the payment of that money;

(iii) He failed to make a finding in relation as to what a payment of £12,000 by the Defendant was used for.

As a result of these deficiencies in the judgment, the Court of Appeal reluctantly sent the matter back to the County Court for a limited rehearing, whilst stressing that this was a paradigm case for mediation.    The more important part of their judgment, however, was to remind practitioners of the effect of section 2(1) of the Law Reform (Miscellaneous Provisions) Act 1970.  This reads as follows:

"Property of engaged couples
Where an agreement to marry is terminated, any rule of law relating to the rights of husbands and wives in relation to property in which either or both of them has or have a beneficial interest, including any such rule as explained by section 37 of the Matrimonial Proceedings and Property Act 1970 ("MPPA"), shall apply, in relation to any property in which either or both of the parties to the agreement had a beneficial interest while the agreement was in force, as it applies in relation to property in which a husband or wife has a beneficial interest."

Section 37 of the MPPA states:

"Contributions by spouse in money or money's worth to the improvement of property
It is hereby declared that where a husband or wife contributes in money or money's worth to the improvement of real or personal property in which or in the proceeds of sale of which either or both of them has or have a beneficial interest, the husband or wife so contributing shall, if the contribution is of a substantial nature and subject to any agreement between them to the contrary express or implied, be treated as having then acquired by virtue of his or her contribution a share or an enlarged share, as the case may be, in that beneficial interest of such an extent as may have been then agreed or, in default of such agreement, as may seem in all the circumstances just to any court before the question of the existence or extent of the beneficial interest of the husband or wife arises (whether in proceedings between them or in any other proceedings)."

Unfortunately, neither party's counsel had identified to the trial judge the significance of these provisions.    As a result, when dealing, inadequately, with the three payments referred to above:

"...the court did not consider, but ought to have considered, whether this was a contribution to the improvement of the Polish property, whether it was a contribution of a substantial nature and whether subject to any contrary agreement, a beneficial interest in the property was acquired."

This additional omission by the trial judge was another reason why the Court of Appeal felt that the matter had to be remitted for a re-hearing.   Practitioners should therefore think carefully, when dealing with parties who had at one stage been engaged, whether section 2(1) of the 1970 Act and section 37 of the MPPA are engaged.   For a discussion of these provisions see the helpful article by Nicholas Carden "Rules of Engagement" (2003) 153 New Law Journal page 590.

In Clarke –v- Meadus [2010] EWHC 3117 (Ch)  the Chancery Master struck out the Claimant's claim based on constructive trust and gave summary judgment for the Defendant in relation to the Claimant's claims based on proprietary estoppel.  The Claimant appealed those decisions and sought to re-amend her pleadings ("The APoC") to deal with the deficiencies in her case perceived by the Master.   Warren J allowed the Claimant's appeal on both points.  This is, therefore, not a decision on the facts but it deals with whether or not, should the Claimant be able to prove her pleaded case (as amended) she would / could succeed in her claims.    As is often the case, the facts are convoluted.    In summary, Mrs Clarke sought to establish against Mrs Meadus, her mother, that the property, Bonavista, in Turner's Hill, West Sussex, was owned entirely by Mrs Clarke subject only to Mrs Meadus' right to live there as long as she wished.   In the late 1950s Mr Meadus had bought the land upon which Bonavista was subsequently built and he and Mrs Meadus and their two daughters all lived there.  In 1970 Mrs Clarke married and left Bonavista.  In 1972 her sister also married and left the home. 

In 1989 Mr Meadus transferred the 6 acres of land, including Bonavista into the joint names of himself and his wife.  They raised a "roll up" mortgage of £30,000 and advanced £15,000 to Mr and Mrs Clarke in connection with the purchase of their property in Kent, £10,000 as a gift and £5,000 as a loan which was repaid within 3 months.   The purchase price of the house in Kent was £172,500 and there was an interest only mortgage on this for £78,000.    Warren J set out Mrs Clarke's case as pleaded in the following way:

"In 1995 Mr Meadus began to suffer increasingly serious health problems and knew he did not have long to live.  Mrs Clarke said that he expressed to her that it was his and his wife's wish that Bonavista remain in the family after they were dead and, in the expectation that he would be the first to die, they both wanted Mrs Clarke to come and live with Mrs Meadus during the remainder of her life, and then take on the house when Mrs Meadus died.  On his death on 3rd March 1995 Bonavista (the house, garden and woodland) passed to Mrs Meadus by survivorship.  Immediately after his death Mrs Meadus went to live with Mrs Clarke and her husband for a few months.    She then returned to Bonavista because she wanted to see out her days there and to keep that property in the family.   She did not want to live there alone and asked Mrs Clarke to move to Bonavista with her family and run her family business from Bonavista until Mrs Meadus died.  If she did so, Mrs Meadus said that she would leave Bonavista to Mrs Clarke in her will.  This proposal or promise was repeated on a number of occasions.   Mrs Clarke ultimately agreed to the proposal and she and her family moved, with their business, to Bonavista in September 1995.

Mrs Meadus was in the process of administering her husband's estate and received Inheritance Tax planning advice in that regard.   One option was for the property to be transferred to Mrs Clarke at that stage whilst allowing Mrs Meadus the right to continue to live with her there for the rest of her life.   The tax adviser counselled, correctly, against this as from a tax perspective, in the light of the "reservation of benefit" rules, such an arrangement would not achieve the intended benefits.  In the end Mrs Meadus was advised to equalise her own estate and Mr Meadus' estate for this purpose and to implement arrangements which would have, for inheritance tax purposes at least, the same effect as if the joint tenancy had been severed prior to Mr Meadus' death thus allowing his share to pass pursuant to a variation of the dispositions otherwise taking effect on his death.   As part of that variation Mrs Clarke was to receive his notional half share in the house, garden and woodland thus making her and her mother owners in equal half shares.   Mrs Clarke says that there were continued assurances during this tax planning exercise that she would leave her half share to Mrs Clarke on her death.  

The tax planning advice led to the execution of four deeds all on the same day.  Under a Deed of Variation dated 3rd September 1996 Mrs Clarke thus received Mr Meadus' half share in the house absolutely.  By a Deed of Appointment and Declaration of Trust, made between Mrs Clarke and Mrs Meadus, Mrs Clarke was appointed a trustee in respect of the property in place of Mr Meadus and the Deed also provided for the parties to contribute equally to all payments due on the mortgage together with other terms dealing with any potential sale of the property.  By a conveyance Mrs Meadus conveyed the one half of the property to Mrs Clarke and Mrs Clarke covenanted to "henceforth pay and indemnify [Mrs Meadus] against" one half of the mortgage.

In January 1997, before selling her house in Kent and thus irrevocably committing herself and her family to life at Bonavista she sought and obtained a further reassurance from Mrs Meadus that the whole of Bonavista would become hers on Mrs Meadus' death.   She claimed that without this assurance she would not have sold her house in Kent but would have returned to live there with her family and to run her business from it.  They sold their home at a loss of £57,000.  In 2002 Mrs Clarke discussed with Mrs Meadus the desirability of re-acquiring a field to the west of the existing garden.   Mrs Meadus did not however want to contribute to the cost of acquisition and so Mrs Clarke and her family bought the field and met the increased mortgage commitment that this created.  She said she would not have done so if she had not been promised that one day Bonavista would be hers.  

In her pleaded case Mrs Clarke relied on Mrs Meadus' assurances and set out nine specific acts of detriment (see paragraph 26 of the Judgment).

In finding for Mrs Meadus the learned Master stated the law to be that:

"where there is an express declaration of trust, that is an end of the matter with respect of the court determining the parties' respective interests, unless one party applied for rectification or rescission of the deed"

Therefore, by reason of the deeds executed in September 1996 there could be no prospect that a claim in constructive trust could succeed.   The learned Master referred to Stack –v- Dowden [2007] 2 AC 432 and Goodman –v- Gallant [1986] 1 FLR 513 in support of this proposition.  He did not, however, give any consideration to whether a constructive trust might have arisen as a result of matters which took place after an express declaration of trust which could have displaced the express trusts declared.   According to Warren J:

"Nothing in Stack –v- Dowden or Goodman –v- Gallant can be read as suggesting that this is not possible: it all depends on the facts."

As to the claim in proprietary estoppel, the Master concluded that the pleaded case claiming "an immediate right given by proprietary estoppel to an order that Bonavista is held by the Claimant and Defendant upon trust, subject only to a right to Mrs Meadus to occupy the property for so long as she may wish" would go further than would be permissible to give effect to any proprietary estoppel.   He also rejected the contentions that the detriments claimed were indeed detriments, rather that they were benefits.  Alternatively, the detrimental acts complained of were provided for as obligations under the various deeds.   Thus he found that Mrs Clarke had not made out a sufficient case on detriment to allow the matter to go forward to trial.  Finally, he found that any promises made had been satisfied, in any event, by the terms of the September 1996 deeds.

Warren J, in allowing the appeal made a number of useful statements of principle:

(i) The extent of the declaration sought in the pleadings
It was wrong to strike out a claim if the relief sought went beyond what was achievable:

"There are two reasons for this.  The first reason is that the APoC are designed to assert equitable claims based on the facts pleaded.  The relief sought may go too far but the court is in a position, once the facts are known, to mould the appropriate remedy.  Every property lawyer knows the uncertainties involved in a proprietary estoppel claim and the fact that more is sought than could reasonably be expected to be obtained does not mean that the pleading is defective.    Indeed, there may be cases where justice could not be done only by advancing the time at which the claimant would otherwise be entitled to claim an interest.  In any event, the claim in paragraph 70 was not simply a claim to 100%: it was to 100% "alternatively in such shares as the court may decide" and, of course, subject to a right for Mrs Meadus to reside.  The second reason is that the prayer for relief includes a claim for further or other relief.  Accordingly, even if the claim in paragraph 70 goes too far, Mrs Clarke can seek lesser relief pursuant to the claim for further or other relief." – paragraph [53]

(ii) Testing reliance for the purposes of proprietary estoppel

"In testing whether reliance has been placed on a representation in this context, one question to ask is not what Mrs Clarke would have done if the representation had never been made but what she would have done had she been told that the promise would not be kept: see Hoffman LJ in Walton –v- Walton 14 April 1994 CA Transcript No 479 citing Wayling –v- Jones (1995) 69 P&CR 170.  If she had been told in 1997 that the house would not be left to her, in other words if previous promises had been withdrawn, her case is that she would have moved back to the Kent house and would not have sold it." – paragraph [54]

(iii) Could the express trusts in the declaration of trust be overridden by a proprietary estoppel?

"In my judgment, it is clear that the express trusts declared in the DADT are capable of being overridden by a proprietary estoppel in favour of Mrs Clarke as a result of promises and representations made after September 1996 ... It cannot, in my judgment, be sensibly argued that once beneficial interests have been declared in a formal document, those interests become immutable and incapable of being affected by a proprietary estoppel." – paragraph [56

(iv) Mrs Clarke's case on detriment

"As (Leading Counsel for Mrs Clarke) says, the facts of this case (assuming as always that what Mrs Clarke alleges is established) are as clear and unequivocal an example of what has been termed a "bargain case" as one could find.  Mrs Clarke's expectations were based on an express promise by Mrs Meadus, repeated on several occasions.  The closeness of the facts to a "bargain" are a factor in the ultimate resolution of the case: see Robert Walker LJ in Jennings –v- Rice [2003] 1 P&CR 8 at [41] especially at [45]. " – paragraph [64]  

(v) Summary judgment on proprietary estoppel claims

"... the task of evaluating and assessing the detriment incurred by Mrs Clarke (and the balancing of any benefit) and the resulting equity to be awarded to her is not an exercise which should be undertaken or is capable of being fairly undertaken on a summary judgment application (save perhaps in an exceptional case of which the present case is not one)." – paragraph [68] (see also paragraph [87]).

(vi) A claim based on a remedial constructive trust
Warren J observed (paragraph [82]) that English case law has set its face against remedial constructive trusts although, it may be that, in the light of Thorner –v- Major (see previous quarterly update) it may be that the attitude of the courts is changing.  In particular, Lord Scott's speech in Thorner lends support to the view that such a remedy should be available in cases such as Clarke –v- Meadus:

"Just as the express declaration of trust in the DADT does not preclude a claim based on proprietary estoppel ... so too the authorities, in particular Stack –v- Dowden, do not in my view preclude a remedial constructive trust once Mrs Clarke has jumped the hurdle of establishing the availability of such a remedy as a matter of English law.  It would be wrong, in my judgment, to strike out that claim if, as I hold, the claim based on proprietary estoppel should be allowed to proceed."

Although Clarke –v- Meadus was dealing only with issues of principle on strike out and summary judgment applications there is much, therefore, which is of assistance to the practitioner, particularly when dealing with cases where there has been a change of will executed by the promisor.  It is also useful on issues of pleading which can be something of a bugbear for the family practitioner.

In Wright –v- Wright [2010] EWHC 1808 (Ch) the husband sold the family business but continued as a director.   Some years later it emerged that he was running a competitor company, in breach of the sale agreement and the new owner sought £12 million in damages from him.  The husband took steps to conceal and dissipate his assets and instituted divorce proceedings and, by way of ancillary relief order, a settlement of the matrimonial assets that was very much in favour of the wife was agreed.   Under the settlement the wife received the matrimonial home.  Although the husband plainly saw the divorce proceedings as a device to bamboozle his potential creditors the wife appears to have seen it as an opportunity to get out of the marriage with most of the assets and go off with someone else.   In the course of the proceedings against him the husband swore an affidavit in which he identified another property registered in his sole name as being held on trust for his son as the sole beneficial owner.  The son sought a transfer of this property to him. The husband defended this claim and counterclaimed for repayment of various sums of money that he had paid to the son.  He relied in part on agreement between him and his wife that he (the husband) would retain his interest in the proceeds of sale of the former matrimonial home and that the children held their interests on trust for him.   He argued that any intention to transfer the property in question to his son had not been evidenced n writing as required by s.53(1) of the Law of Property Act 1925.

HHJ David Cooke found for the son and ordered a transfer of the property to the son.   The argument that there had been no compliance with s.53(1) was met by the fact that the intention to create a trust of the property was evidenced by the husband's affidavit sworn in the commercial proceedings.    Even on the assumption that the wife had agreed prior to the ancillary relief consent order that she would hold assets for the husband until disposal of the damages claim, the husband would not have retained any beneficial interest in the assets transferred by the consent order.  The parties could not agree inter partes that a court order would not produce the legal effect which it would ordinarily produce.   The consent order vested the entire beneficial interest in the wife.    As to the property claimed by the son, in the absence of evidence to the contrary, a transfer by a parent to a child was, according to the presumption of advancement, taken to be a gift to the child.  There was no sufficient evidence to rebut the presumption of advancement.  However, the transfer would still have been open to challenge by creditors under s.423 of the Insolvency Act 1986.

Per HHJ David Cooke at paragraph [34]:

"It cannot be open to the parties to litigation to agree in advance with each other that they will procure an order from the court, but that the order will not in fact produce the legal effect it would ordinarily do.  It must follow that even if (contrary to my finding), (the husband and wife) had in fact agreed before the consent order that he would retain a beneficial interest in (the former matrimonial home), when the order took effect the entire beneficial interest was nevertheless at that moment vested in (the wife)."

And at paragraph [36]

"Nor in my judgment could the parties have made an enforceable contract prior to the making of the court order that they would subsequently enter into a further transaction to undo its effect.   I have not of course found that (the husband and wife) purported to make any such agreement, but even if they had, in my view it would have been unenforceable as contrary to public policy, since it would necessarily have involved an agreement to abuse the process of the court to present a false picture of their affairs."

See also paragraph [38]:

"This is not a conclusion I come to with any reluctance; a husband who makes such an arrangement with a view to defrauding his creditors should have no expectation that the courts will come to his aid to recover the assets he wished to give the impression he had disposed of.  He places himself entirely in the hands of his former wife and takes the risk that she may decide, for whatever reason, or even may all along have intended, not to do what he wants."

The statements to the effect that the property that was held in his sole name was in fact held on trust for his son (who sided with his mother / the wife in this litigation) brought into play the presumption of advancement.    The husband could not get round the presumption by relying on his own dishonest intentions (see generally Tribe –v- Tribe [1995] 2 FLR 966, Tinker –v- Tinker [1970] P 136, Gascoigne –v- Gascoigne [1918] 1 KB 223 and Tinsley –v- Milligan [1994] 1 AC 340).  Professor Rebecca Bailey-Harris has pointed out, in her commentary on this case that the court in this case was not referred to the dicta of Lord Neuberger in Laskar –v- Laskar [2008] 2 FLR 589 in which the learned judge observed that the presumption of advancement is a very weak one.    That notwithstanding, it is plain that the courts will have little sympathy for those who seek to deceive in order to defraud their creditors.   This is another illustration of the problems that face a litigant who seeks to look, Janus-like, in different directions in two separate sets of proceedings – see also Ashby –v- Killduff examined in the last quarterly update.

In Smith –v- Cooper [2010] EWCA Civ 772  the defendant purchased a bungalow using monies that she received in her divorce settlement.  She and Mr Smith, who had also received a divorce settlement, began to live together in the bungalow.  In mid 2004 Ms Cooper transferred the bungalow into their joint names to be held as beneficial joint tenants.  At the same time the purchase of an adjacent plot of land in joint names was funded by Mr Smith.  In 2006 the parties purchased a cottage for £115,000of which £15,000 was provided by Mr Smith.  The remainder was raised by mortgage in joint names for which the bungalow provided security.  The cottage was held in their joint names as beneficial joint tenants.   Less than a year later the bungalow was sold and the proceeds were used to redeem the mortgage on the cottage.  Shortly after the couple moved into the bungalow their relationship ended and Mr Smith moved out.  He claimed to be entitled to half the proceeds of sale of the bungalow and half the value of the cottage.  

Ms Cooper contended that she had lacked the mental capacity to enter into the transactions and also pleaded undue influence to set aside her gift to Mr Smith of a half share in the bungalow and the declaration of a joint tenancy in respect of the cottage.  She accepted that Mr Smith had a share in the cottage as he had provided some of the purchase price but argued that his share was modest.   She acted in the litigation through a litigation friend as she lacked capacity.   The trial judge rejected her argument that she lacked capacity and held that the presumption of undue influence applied because of Mr Smith's position of ascendancy over Ms Cooper in the circumstances of her mental condition of which Mr Smith was aware.   Therefore the property transactions required an explanation.   However, the trial judge found that the presumption of undue influence had been rebutted on the facts as there was a satisfactory explanation for them in that Ms Cooper received a benefit from Mr Smith's purchase of the adjoining plot, his assumption of liability for the mortgage on the cottage and providing the deposit.

The Court of Appeal allowed Ms Cooper's appeal and remitted the case to the county court to determine valuation issues:

(1) The judge had been right to hold that the presumption of undue influence applied but wrong to find that it had been rebutted.  He had failed to address the question whether Ms Cooper had entered into the property transactions of her own free will, independent of Mr Smith's influence.   The evidence could not support a finding favourable to Mr Smith on that question.  The judge should have held that the transfer of the bungalow had been procured by undue influence, was voidable and had to be set aside.  The declaration of trust in respect of the cottage was also vitiated by undue influence.  Mr Smith's contribution to the cottage had been substantially less than Ms Cooper's and so the declaration of the beneficial joint tenancy represented a significant gift to him.

(2) Cheese –v- Thomas [1995] 1 FCR 162 established that the court had to consider what adjustments had to be made when a transaction was set aside for undue influence.  The court would exercise its discretion to achieve practical justice for both parties.   Unravelling a series of property transactions between cohabiting parties was inevitably difficult.  The purchase of the block adjacent to the bungalow had to be seen as part of the same transaction as transfer of the equity because if the transfer of equity had not taken place the plot would not have been put in joint names.  Mr Smith had to be given credit therefore for the full value of the adjacent plot.  So far as the bungalow was concerned, Ms Cooper had to be regarded as contributing what she had owned originally and therefore as being owner of the corresponding proportion of the proceeds of sale.   Mr Smith had to be regarded as contributing the adjoining plot and the owner of such proportion of the proceeds of sale of the bungalow as was attributable to that contribution.  As to the cottage the parties had to be credited with the proportions of its value which were attributable to their respective contributions.

The leading case on undue influence remains Royal Bank of Scotland –v- Etridge No 2 [2001] 2 FLR 1364 and this should be the practitioner's first port of call when faced with issues of undue influence.   Nevertheless the Court of Appeal also drew attention to the important case of Cheese –v- Thomas [1995] 1 FCR 162, a somewhat neglected case, in which the Court of Appeal set out the principles underlying the exercise of the restitutionary jurisdiction once a finding of undue influence has been made.   Three passages from that decision, all from Sir Donald Nicholls, were cited and approved by the Court of Appeal.  In substance these were:

"If the transaction is set aside the plaintiff must also return what he received.  Each party must hand back what he obtained under the contract.  There has to be a giving back and a taking back on both sides."

And:

"It is axiomatic that, when reversing this transaction the court is concerned to achieve practical justice for both parties, not the plaintiff alone.   The plaintiff is seeking the assistance of a court of equity, and he who seeks equity must do equity."

Finally:

"The basic objective of the court is to restore the parties to their original positions, as nearly as may be, consequent upon cancelling a transaction which the law will not permit to stand.  That is the basic objective.  Achieving a practically just outcome in that regard requires the court to look at all the circumstances, while keeping the basic objective firmly in mind.  In carrying out this exercise the court is, of necessity, exercising a measure of discretion in the sense that it is determining what are the requirements of practical justice in the particular case."

Hopton –v- Miller [2010] EWHC B20 (Ch) was a partnership dispute.    In the context of that dispute there was an issue as to works of improvement done to the Old Rectory, a property in the sole name of the Defendant.  On this issue HHJ Behrens referred to the principles established in Lloyds Bank plc –v- Rosset and to the judgment of Griffiths LJ in Bernard –v- Joseph [1982] EWCA Civ 2  where he said:

"It might in exceptional circumstances be inferred that the parties agreed to alter their beneficial interests after the house was bought; an example would be if the man bought the house in the first place and the woman years later used a legacy to build an extra floor to make more room for the children.  In such circumstances the obvious inference would be that the parties agreed that the woman should acquire a share in the greatly increased value of the house produced by her money.  But this depends on the court being able to infer an intention to alter the share in which the beneficial interest was previously held; the mere fact that one party has spent time and money on improving the property will not normally be sufficient to draw such an inference."

HHJ Behrens then went on to consider the decisions in James –v- Thomas and Morris –v- Morris (both considered in the last quarterly update).  He also reminded himself of the comments of Sir John Chadwick in James –v- Thomas to the effect that:

"In the absence of an express post-acquisition agreement, a court will be slow to infer from conduct alone that parties intended to vary existing beneficial interests established at the time of acquisition."

In all the circumstances the Court (see paragraph [75] rejected Mrs Hopton's claims for an interest in the property arising out of the improvements:

• There was no suggestion of an express agreement that Mrs Hopton should have any beneficial interest in the Old Rectory;
• All of the improvements / repairs were paid for by Mr Miller.

In Kaur –v- Matharu [2010] EWCA Civ 930 there was an issue in ancillary relief proceedings as to the beneficial ownership of a property registered in the husband's name.  He claimed that he held the property on bare trust for his brother who had allegedly financed the purchase and renovations.  The brother intervened in the ancillary relief proceedings and also made an application under TLATA.  The District Judge who heard the TLATA application was aware of the ancillary relief proceedings, but instead of transferring the TLATA application to be joined with the ancillary relief proceedings he simply dismissed it as being otiose.  In the ancillary relief proceedings there was considerable documentary evidence that the mortgage on the property had been discharged by the husband's sister, although she was not called to give evidence.   The District Judge rejected the husband's case as to the beneficial ownership of the property and ordered its transfer outright (and free of mortgage) to the wife.  

The husband appealed and was allowed to adduce fresh evidence from his sister.   The Circuit Judge heard oral evidence from the sister.  The appeal was allowed.  The wife then appealed to the Court of Appeal who allowed her appeal.

The Court of Appeal held that the Circuit Judge had been plainly wrong in the exercise of his discretion to admit fresh evidence.  Although the Family Courts were not strictly bound by Ladd –v- Marshall (see Cordle –v- Cordle [2002] 1 FLR 207) the discretion to admit fresh evidence should be exercised only in exceptional circumstances and there were no exceptional circumstances in this case.   Whilst there may be latitude of relaxation of the rule in Ladd –v- Marshall in ancillary relief appeals, there is none in relation to TLATA claims which this, effectively, was.   Black LJ observed that it was particularly important in ancillary relief proceedings involving third parties that an approach to the admission of fresh evidence be adopted which was not "markedly different from the approach taken in other civil proceedings."

Updates on the last quarterly review
Two cases dealt with in the last quarterly review have been the subject of further judgments.  In Walsh –v- Singh (Costs) [2010] EWHC 1167 Civ the issue of costs arose.  The actual judgment is reported at http://www.familylawweek.co.uk/site.aspx?i=ed56197.  As set out in the last review Ms Walsh comprehensively lost her claims against Mr Singh.  He now sought costs.  Prior to the trial he had made an offer under Part 36 of the CPR to pay her a sum of £85,000 with costs up to the date of acceptance, taking into account the loans and his counterclaims.  At the costs hearing HHJ Purle QC made no order as to costs even though Mr Singh had done better at trial than his Part 36 Offer.   The fact that he had beaten his Part 36 Offer meant that the case fell within CPR r.36.14(1)(a).  However, it would be unjust to make Miss Walsh pay his costs and interest from the date of expiry of the offer.  Although Mr Singh had succeeded in relation to the property, his counterclaims had failed.

Probably more importantly, Mr Singh's conduct of the trial had merited censure.  He had been untruthful in his evidence, the cross-examination of Miss Walsh had been hurtful and Mr Singh had lost no opportunity to discredit Miss Walsh, even suggesting that she was mentally unstable.  Mr Singh had unsuccessfully attempted to issue a witness summons against Miss Walsh's new partner when that was irrelevant to the issues, and he had also used spyware which the Judge regarded as disgraceful conduct.  Miss Walsh had brought a claim in good faith that had failed.  In all the circumstances of the case justice would be done by making no order as to costs.

In ordinary circumstances, Mr Singh should have been entitled to his costs.  HHJ Purle QC was clearly strongly influenced by the provisions of CPR 44.3(2) which requires the court to have regard to all the circumstances of the case including "the conduct of the parties".   At paragraph [16] of his judgment he says:

"Paragraph (5) [of CPR 44] then develops the reference to the conduct of the parties, which makes it plain that the court has a very wide discretion in relation to issues raised and the manner in which the claim has been pursued, an d the extent to which a claim is exaggerated."

He then concluded, at paragraph [25]:

"A well-judged Part 36 Offer does not give the offeror licence to conduct the trial thereafter in whatever way the offeror thinks fit without fear of costs reprisals where appropriate."

This should be a salutary lesson to practitioners.  Obviously, getting the Part 36 offer right is extremely important.  However, there remains the need to keep one's client in check and to avoid the temptation to bitter recrimination and cruelty that are nothing to the point, even if one's client holds the winning hand.

In Herbert –v- Doyle [2010] EWCA Civ 1095 the Claimant sought to appeal the order of Mr Mark Herbert QC (see last update).  The dispute concerned three freehold car parking spaces which the Claimant wanted to have conveyed to him.    The Court of Appeal summarised the remaining dispute in this case as follows:

"...whether the judge's constructive trust holding was, following the decision of the House of Lords in Yeoman's Row Management Limited  –v- Cobbe[2008] UKHL 55 ... "Cobbe compliant", that is, in accordance with the law of constructive trust as explained in that decision.   (The defendants) had to show that there was a constructive trust for the purposes of s.2(5) of the Law Reform (Miscellaneous Provisions) Act 1989 ("the 1989 Act") because otherwise the agreement of April 2003 would have fallen foul of the requirement imposed by section 2(1) of the 1989 Act that dispositions of interest in land be in writing."

This is perhaps the first case in which a court has been asked to decide whether there has been "Cobbe compliance" – see Arden LJ at paragraph [13]
Arden LJ said, of section 2(1) of the 1989 Act at paragraph [10]:

"All this could have been saved if the parties had made their arrangements subject to contract.  As I said in Kinane –v- Mackie-Conteh [2005] WTLR 345 the policy of section 2(1) of the 1989 Act is "to protect the public by preventing parties from being bound by a contract for the disposition of an interest in land unless it has been fully documented in writing."  It needs to be repeated loud and clear that that is the rule which Parliament has laid down in section 2 of the 1989 Act, and that that is a rule admitting of few exceptions under section 2."

Arden LJ also conducted an analysis of the decision in Yeomans Row –v- Cobbe and the growing judicial acceptance of the distinctions between proprietary estoppel and constructive trusts.  She then said at paragraph [57]:

"In my judgment, there is a common thread running through the speeches of Lord Scott and Lord Walker.  Applying what Lord Walker said in relation to proprietary estoppel also to constructive trust, that common thread is that, if the parties intend to make a formal agreement setting out the terms on which one or more of the parties is to acquire an interest in property, or, if further terms for that acquisition remain to be agreed between them so that the interest in property is not clearly identified, or if the parties did not expect their agreement to be immediately binding, neither party can rely on constructive trust as a means of enforcing their original agreement.  In other words, at least in those situations, if their agreement (which does not comply with section 2(1)) is incomplete, they cannot utilise the doctrine of proprietary estoppels or the doctrine of constructive trust to make their agreement binding on the other party by virtue of section 2(5) of the 1989 Act."

It needs to be stressed that this is, essentially, a case involved with the use of constructive trusts and proprietary estoppel in what are commercial situations and so is not directly applicable to the position of cohabitees.  The practitioner needs to be aware of the distinction drawn by the House of Lords in Cobbe between domestic and commercial agreements and the explanation of Cobbe provided in Thorner –v- Major.  Nevertheless, it is important for the practitioner to have an understanding of these parallel developments.

As is now typically the case, there has been a significant number of cases on cohabitation issues over the last quarter.  None of these alters significantly the underlying jurisprudence.  However, they do throw the spotlight onto a number of issues that must occur comparatively frequently and provide some guidance on questions upon which judicial guidance has, until recently, been limited.  Equally importantly they throw light on issues of procedure in relation to pleadings and appeals.