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Van Laethem v Brooker and Caradoc Estates Ltd [2005] EWHC 1478 (Ch)

Acquisition of interest in land by common intention constructive trust and proprietary estoppel, where a claimant had made financial contributions towards purchase and undertaken physical work to restore property in reliance on the defendant’s assurances that she would have an interest in land.

Van Laethem v Brooker and Caradoc Estates Ltd [2005] EWHC 1478 (Ch)

Chancery Division: Collins J (12 July, 2005)

Summary
Acquisition of interest in land by common intention constructive trust and proprietary estoppel, where a claimant had made financial contributions towards purchase and undertaken physical work to restore property in reliance on the defendant's assurances that she would have an interest in land.

Background
In 1991, the claimant ('V') and her then partner the first defendant ('B') bought a fire-damaged mansion house and 18 acres of surrounding land (together referred to as 'Caradoc') for approximately £360,000. V contributed £100,000 towards the purchase from a loan secured against a property that she had acquired in the course of earlier divorce proceedings ('Basildon House'). B held Caradoc in his sole name, having persuaded V that this would enable her to avoid payment of capital gains tax on the eventual sale of Basildon House. V's contribution was registered as a legal charge on Caradoc.

In December 1993, two acres of the surrounding land ('the Development Land') were transferred into the name of what became the second defendant company, the whole share capital of which was owned by B and his father. B retained title to the mansion house and the remaining 16 acres of land (together referred to as 'Caradoc Court').

V believed (and communicated that belief to B) that Caradoc Court would be their joint home, and B did not disabuse her of that assumption. B assured V that her contribution to the purchase price gave her security for the future. In the ensuing years, V and B undertook a considerable amount of work together on clearing and planting the grounds and on renovating Caradoc Court.

In 1994 V and B embarked upon a joint venture whereby V was to fund the building of, and B to build, a house ('the Garden House') in the grounds of B's parents' home ('Sulgrave Court'), which was registered in B's sole name. The plot for the Garden House was registered in V's name in March 1996, and the house was built by B (through a company vehicle for his joinery/building business) and an external builder.

In 1994, V sold Basildon House for £205,000. The proceeds of sale were used to repay the loan that V had used to contribute to the purchase of Caradoc, and the remainder went towards funding the Garden House venture, the renovation of Caradoc Court and V and B's joint living expenses.

In 1997 the Garden House was sold for £250,000 (less a retention of £25,000). The bulk of the funds received on the sale, after repayment of a joint debt, was expended on Caradoc Court or on joint living expenses.

In 1999, B purchased a nearby property ('Oakleigh') for £225,000 out of the proceeds of sale of Sulgrave Court, as a further joint venture. It was registered in V's sole name.

V and B's relationship ended in 2003, and V received £280,000 from the sale of Oakleigh.

In March 2004, V made an application under Trusts of Land and Appointment of Trustees Act 1996, s 14, for a declaration of her interest in Caradoc Court and the Development Land. At the time of trial, Caradoc Court was valued at £1,150,000. The Development Land was valued at £550,000. The total value of Caradoc was therefore £1,700,000.

V argued that that she was entitled to an interest in Caradoc Court and the Development Land by virtue of a common intention constructive trust or by proprietary estoppel. B argued that it was never agreed that V should have any interest in the property, and that any claim that V might have had had been settled by the purchase of Oakleigh. By way of counterclaim, B argued that V had misled him as to the amount that B had owed her when he acquired Oakleigh, and that V had consequently been overpaid by between £86,000 and £140,000.

Judgment
Held, allowing V's claim and dismissing B's counterclaim, that V was entitled to an interest in land by virtue of having acted to her detriment and having relied on B's assurances that she would have an interest in the land.

V had acted to her detriment by relying on B's assurances, in particular by charging Basildon House and later by investing her share of the proceeds of Basildon House and of the Garden House in the restoration of Caradoc Court. In mortgaging Basildon House, V had placed herself at substantial and very real risk, since there was no obvious source of funds for B to service the loan.

V's sale of Basildon House and investment of the proceeds in the Garden House indicated that V thought she would ultimately have a home in which she would share an interest with B. V would not otherwise have rendered herself virtually homeless, trading in her home and all her capital.

V had devoted a huge amount of time by her physical contribution to the restoration of the grounds. That was not explicable solely by reference to her attachment to B. All the funds released from Basildon House went ultimately after the Garden House project towards Caradoc Court and their joint living expenses. The unconscionable behaviour of B required for proprietary estoppel was his denial of V's interest.

Notwithstanding that no written agreement to share the Development Land or the profits from the Development Land or the shares in the second defendant company had been entered into, V and B proceeded as if there had been an agreement, or B led V to believe that it had been agreed, and that was a factor in her contribution to the Caradoc Court project.

There was no substantial difference in the remedy as between constructive trust and proprietary estoppel. V was entitled to an interest by way of proprietary estoppel in relation to Caradoc Court and by way of constructive trust in relation to the Development Land. Alternatively, V was entitled to an interest by way of proprietary estoppel in relation to both properties. It made no difference as regards the remedy. Even on the basis of a common agreement constructive trust in relation to the Development Land, the agreement to share equally should only be a starting point in relation to the relief. Alternatively, even if the agreement to share equally were given full effect that would have the effect of reducing the equitable relief in relation to Caradoc Court.

An overall figure of £700,000 was the appropriate figure, whether or not it was properly described as the minimum equity required to do justice. As V had already received £280,000 from the sale of Oakleigh, and V's case was predicated on no longer having a loan or charge over Caradoc Court, the net result was that she was entitled to a further £420,000.

The court would hear argument on the form of relief.

Read the full text of the judgment here