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Clarke v Harlowe [2005] EWHC 3062 (Ch)

Equitable accounting not appropriate in respect of home improvements before date of separation of the parties.

Clarke v Harlowe [2005] EWHC 3062 (Ch)

Chancery Division: HHJ Behrens (12 August 2005)

Equitable accounting not appropriate in respect of home improvements before date of separation of the parties.

This was a preliminary ruling in an application under the Trusts of Land and Appointment of Trustees Act 1996. The claimant and the defendant had had a relationship which lasted for about 25 years and ended in early 2003. There were no children of the relationship. The claimant had a variety of jobs during the relationship; the defendant was a successful commercial solicitor, and it was never in dispute that he was the main breadwinner.

In 2001, the parties bought the last of their houses, and the transfer form in respect of the property stated that 'the transferees are to hold the property on trust for themselves as joint tenants'. The property needed substantial refurbishment work, costing in the region of £90,000, which was carried out between 2001 and 2002 and was paid for by the defendant. When the relationship broke down in early 2003, the property was placed on the market, and the sale was completed in August 2004.

The claimant contended that she was entitled to one half of the net proceeds of sale; the defendant, relying on the principle of equitable accounting, argued that the court, in making the distribution of the net proceeds of sale, should take account of the fact that he had spent £90,000 on improvements to the property and that he should be entitled to a credit of half that sum.

The judge considered the submissions on behalf of both parties and the case-law applicable to the issue of equitable accounting, in particular Bernard v Joseph [1982] 1 Ch 391 and Re Pavlou [1993] 3 All ER 955.

Before there could be a duty to account by one party to the other, there must be a breach of or failure to comply with some obligation owed by that party to the other. In this case, it had been envisaged at the time the property was bought that the defendant would pay for the work, and there was no evidence to suggest that the parties had agreed to alter their beneficial interests as a result of the work being carried out.

Furthermore, all the authorities supported the conclusion that, in the ordinary case, equitable accounting commences at the date of separation. In this case, all of the improvements to the property were carried out before the parties separated.
In all the circumstances, there should not be any equitable accounting in respect of the cost of improvements to the property.