Yorkshire Building Society v Churchill & Anor [2007] EWCA Civ 904

Case No B5/2007/0934[2007] EWCA Civ 904
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BOUNEMOUTH COUNTY COURT
(DISTRICT JUDGE MILDRED)
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Tuesday, 7 th August 2007
Before
LORD JUSTICE CHADWICK
Between
YORKSHIRE BUILDING SOCIETYRespondentCHURCHILL & ANRAppellant
(DAR Transcript ofWordWave International LimitedA Merrill Communications Company190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
THE APPELLANT APPEARED IN PERSON. for in person for THE RESPONDENT DID NOT APPEAR AND WAS NOT REPRESENTED.
Judgment
[1]This is a renewed application for permission to appeal from an order made on 19 April 2007 by District Judge Mildred, sitting at Bournemouth County Court, in CPR Pt 20 proceedings between Mrs Jeanette Churchill and her sister, Mrs Hazel James. The dispute between them is as to the beneficial ownership of a dwelling house known as 39 Abbott Road, Bournemouth, in which Mrs Churchill has lived as her home for the past sixteen years.[2]The property was transferred into the joint names of the sisters by a transfer dated 15 March 1991 from Chelsea Building Society. The purchase was funded as to £59,375 by an advance from Yorkshire Building Society; and as to the balance, £4,200, from their own resources. The claim in the main proceedings is a claim by the building society for possession of the property: and indeed it seems that an order for possession and sale has been made in those proceedings.[3]As I have said, the property was transferred into joint names by transfer dated 15 March 1991. On the same day – or, perhaps, within a few weeks but dated that day - the sisters executed a trust deed, expressed to be supplemental to the transfer of 15 March 1991. Recital 3 to that trust deed records that the difference between the purchase price and the mortgage advance, together with all costs and disbursements, were provided by Mrs James. The deed contains a declaration by Mrs Churchill that the property is held beneficially for her sister absolutely. At first sight, therefore, the trust deed is determinative of the beneficial ownership in this case.[4]Notwithstanding the terms of the trust deed, Mrs Churchill’s claim in the part 20 proceedings brought against her sister is that the property is held by them for her, Mrs Churchill, absolutely. She contends - and it is not in dispute - that the common intention when the property was purchased in 1991 was that it should be their home, and that they did indeed move in together in March 1991, but that in October 1991, if not a little earlier, Mrs James had moved out. There is a dispute as to the circumstances which gave rise to Mrs James’s decision to move out, but, as it seems to me, nothing turns on that.[5]Mrs Churchill’s claim, as put in the Particulars of Claim - which do not refer to the Trust Deed - is set out in paragraphs 6, 7 and 8:
“6. Between about October 1991 and December 1991 discussions took place between the Defendants about the future of the Property. The Mortgage was in arrears and the Claimant was threatening to repossess the Property, which was then worth less than the amount owing to the Claimant… …The First Defendant [that is Mrs James] told the Second Defendant [Mrs Churchill] that, rather than the Property being sold, the Second Defendant [Mrs Churchill] could take on full responsibility for the mortgage (including the payment of all arrears) and full responsibility for the Property and that she had no objection to the Property being transferred to the Second Defendant. 7. In reliance on the First Defendant’s statements the Second Defendant, to the First Defendant’s knowledge, assumed full responsibility for the Mortgage, and accordingly paid all the arrears, which, because of the cancellation of the Life Policy by the First Defendant, included arrears of capital, and has paid the instalments due under the Mortgage. Because the First Defendant had cancelled the Life Policy, the Mortgage was no longer an interest only Mortgage but had been converted to, and is, a capital repayment mortgage. 8. In further reliance on the First Defendant’s statements the Second Defendant and her husband, Reginald Churchill, to the First Defendant’s knowledge, have carried out improvements to the Property as well as carrying out works of repair, maintenance and decoration.”
And there then follows a list of the improvements. The pleading goes on to assert that, since October 1991, Mrs James has never returned to the property, has never paid anything towards the mortgage or made any payment of any kind in respect of the property.[6]By her defence and counterclaim to that part 20 claim, Mrs James denied that there were any discussions or agreements as alleged by her sister. Mrs James relied on the Trust Deed and sought a declaration that the property was held on the bare trust for her as sole beneficial owner, and an order for sale under Section 14 of the Trusts of Land and Appointment of Trustees Act 1996.[7]Mrs Churchill’s response to the claim founded on the Trust Deed was to assert that she was induced to enter into the Deed as a result of influence by Mrs James. In the alternative, she contends that the Trust Deed was superseded by the discussions and agreement late in 1991, to which she had referred in her Particulars of Claim.[8]The District Judge heard evidence from the two sisters - neither of whom he found satisfactory as witnesses - and from a number of friends of Mrs James, from her former partner Mr Jeans, and from some family members, including two of the sons of Mrs Churchill. He said that was impossible to ignore the evidence of those other witnesses; which, as he thought, broadly supported that of Mrs James. Where there was a material conflict between the evidence of the two protagonists, he preferred the evidence of Mrs James. He made the following material findings of fact: (1) He found that the trust deed was signed because the sisters were concerned at the time that the property might be at risk from the claims of Mrs Churchill’s creditors. He accepted that that Mrs Churchill may have agreed to sign the trust deed because she was concerned over her sister’s health and state of mind: that is to say she wanted to give Mrs James the peace of mind that would follow from knowing that the property was hers, and not at risk from the claims of Mrs Churchill’s creditors. But he went on to find that there was nothing to support a case that Mrs Churchill had been subjected to actual undue influence; and he recorded that a case based on presumed undue influence was not pursued. He said this at paragraph 24 of his judgment:
“In my judgment, her [that is Mrs Churchill’s] concern about her sister’s health could not in the circumstances amount to undue influence and indeed I have found that Mrs Churchill had her own good reason for signing, that is to keep a roof over her head.”
He noted that the question whether or not the trust deed would have withstood a challenge by creditors under the Bankruptcy Act was not relevant. The question was whether the sisters did intend, at the time, that the beneficial interest should belong to Mrs James. That must have been their intention if they wanted to protect the property from the claims of Mrs Churchill’s creditors. But be that as it may, there is no challenge on the appeal to the judge’s conclusion that the trust deed was not procured by undue influence. (2) The judge found that when Mrs James left the property in October 1991, she made it clear to her sister that she would no longer be in a position to contribute to the mortgage payments. Mrs James proposed that the property be sold. Mrs Churchill’s counter proposal was that she take on responsibility for the mortgage and that the property be transferred to her sole name. Mrs James was not opposed to that proposition in principle; but she required a payment in cash of £6,000 to reflect what she saw as her contribution to the original purchase. That sum was subsequently reduced to £2,000 in correspondence between solicitors. Negotiations between solicitors came to an end in or about May 1992; when the solicitors for Mrs James did not respond to a letter of 12 May 1992 in which, in effect, Mrs Churchill’s solicitors were asserting that the property should be transferred for no consideration. That was on the basis that, by that time, the amount owed to the building society was greater than the value of the property - a not-uncommon situation in the early 1990’s. The judge noted that, there being no reply to the letter of 12 May 1992, Mrs Churchill remained in the property, enjoyed whatever income there was from student lettings, and paid the mortgage with the assistance of the Department of Social Security. On the basis of those findings, the judge rejected a claim in constructive trust, based upon an agreement that Mrs Churchill should have a beneficial interest. He said this at paragraph 46 of his judgment:
“The correspondence amounts in my judgment to an inconclusive negotiation for the sale by Mrs James to Mrs Churchill of her interest in the property for a figure which was never agreed. There may have been a ‘common intention’ that Mrs Churchill should take a transfer of Mrs James’ interest in the property and that Mrs Churchill should take the entire responsibility for the mortgage but at no time did Mrs James give any indication that she was prepared to agree to a transfer without a payment to be made at that time; there was no such payment and nor any agreement as to such a payment.”
So, in substance, the judge accepted that the parties did intend to negotiate an arrangement, under which Mrs Churchill would take responsibility for the mortgage and would take a transfer of her sister’s interest in the property; but that that arrangement was always subject to agreement as to what price should be paid by Mrs Churchill to Mrs James; and agreement as to that price was never reached. So he rejected the constructive trust claim. (3) The judge went on to hold that in making the payments, as she did over the years from 1991, Mrs Churchill was not relying on a belief that there has been any assurance from Mrs James that she was to have the beneficial interest in the property. Mrs Churchill was making the payments that she did in order to keep a roof over her head; in circumstances where, if payments to the building society were not maintained, possession proceedings would be likely to follow. In reaching that conclusion, the judge placed reliance on a letter from Mrs Churchill to her sister, dated 4 August 1994. That letter had been written at a time when Mrs James was indicating an intention to move back into the property, or to have a meeting: both of which proposals had been rejected. The letter contained this paragraph:
“In view of this I would like to point out, that we drew up the deed of trust, and as you must also be aware, under provision of the deed of trust you are liable for all debts pertaining to the property of 39 Abbott Road. As you are also aware if there was any profit in the said property you solely would gain from this.”
As the judge noted - and the conclusion is I think inescapable - Mrs Churchill was asserting in 1994 that the property belonged solely to her sister Mrs James; and that Mrs James is responsible for the mortgage debt. In the face of that letter, it was difficult for her to make good either (i) her assertion that she believed that the property was hers because she was paying the mortgage instalments, or (ii) that Mrs James was led to believe that she, Mrs Churchill, was paying the mortgage instalments on the basis of a belief that the property was hers. The judge rejected the claim based on a proprietary estoppel: the estoppel arising, if it did, from a course of conduct by Mrs Churchill founded on a belief that she would have an interest in the property and acquiesced in by Mrs James, in the knowledge that Mrs Churchill did have that belief. The judge found that the real reason why Mrs Churchill paid the mortgage instalments was that, if the mortgage instalments were not paid, the building society would repossess the property. Mrs Churchill and her husband who were living in the property: they had the real interest in ensuring that it was not repossessed by the building society. Mrs James had no interest in preventing a sale by the building society: indeed she had been asking for a sale.[9]In her grounds of appeal - which were, I think, drafted with the existence of the solicitor who had appeared for her in the court below - Mrs Churchill seeks to challenge the findings of fact made by the judge. The flavour of those grounds appears from paragraph 1:
“The finding of the learned District Judge that there was no equity (whether by trust or proprietary estoppel) in the Appellant’s favour was wrong in that it was based on wrong findings of fact.”
There are then set out, carefully and fully, the challenges made to findings of fact which are made in the District Judge’s judgment. So far as material, there are five.[10]The first is that the judge was wrong to hold that there was no agreement as to beneficial ownership; but, as I have said, that was a finding which he could hardly have avoided making in the light of the inter-solicitor correspondence between October 1991 and May 1992. The second is that Mrs Churchill did not, herself, hold the belief that she would become sole beneficial owner, and, linked to that, (third) that the judge misunderstood the letter of 4 August 1994 which he thought, wrongly, it is said, reflected Mrs Churchill’s understanding of the position. To my mind it seems impossible to misunderstand that letter of 4 August 1994, so as to reach the conclusion that Mrs Churchill then thought that she was to become sole beneficial owner. The letter states in very clear terms that it is her belief, in 1994, that the ownership remains with her sister. Fourth, it is said that the judge was wrong to hold that Mrs James’s failure to assert her own rights did not amount to acquiescence: in that context Mrs Churchill relies on a mortgage application made by Mrs James in 1999, in which she, Mrs James, had told the building society that she had no other commitments. Fifth, that the judge was wrong to prefer the evidence of Mrs James to that of Mrs Churchill; and again it is said that the judge ought to have appreciated that Mrs James’s conduct in signing the mortgage application in 1999 cast serious doubts on her credibility. As I have said, there is no appeal from the judge’s rejection of the undue influence claim.[11]The application for permission to appeal came before Lawrence Collins LJ, for consideration on the papers on 4 July 2007. After setting out the facts, in substance - as I have recounted them,

the Lord Justice said this:

“The judge gave a very careful judgment on fact, and in particular decided that where a material conflict arose between the two parties in general he preferred the evidence of Mrs James. There is no real prospect that the Court of Appeal would interfere with those findings of fact.”
[12]Mrs James challenges that view of the position. She does so with the assistance of a statement which she prepared herself and read to the court. That statement was sent to the court in advance, under cover of a letter of 2 August 2007. After referring to Collins LJ’s observations, she wrote:
“The reason for the renewed application is that the judge, in assessing the relative credibility of the parties, failed to take account of Mrs James’ failure to disclose the mortgage on 39 Abbott Road when applying for another mortgage and therefore failed to take account of a material consideration. This significantly undermines the judgment which should accordingly be overturned.”
[13]In her statement, Mrs Churchill focuses on that issue: she asserts that her sister Mrs James made an application to the Britannia Building Society in 1999, which, as Mrs Churchill asserts, was materially misleading. But it is important to keep in mind the application to the Britannia has no relevance to the underlying facts in this case: at most it may throw some light on what Mrs James thought the position was at the time when she made the application in 1999, and, as Mrs Churchill would say, it may throw doubt on the judge’s assessment of Mrs James as a witness of truth.[14]The application to the Britannia Building Society was made on 8 March 1999 by Mrs James and her then partner, Mr Jeans. It is a standard form mortgage application. On the fourth page there is a section headed “Commitments”. Under “Secured Loans” in that section the applicants are required to state whether they are borrowers under any secured loans. Mrs James has recorded “no” against that question. It is said by Mrs Churchill is that that was plainly an incorrect statement in the circumstances that, on any view, Mrs James was liable as a joint borrower under the Yorkshire Building Society mortgage of 1991. Whatever the position between Mrs James and Mrs Churchill, the position in relation to the Yorkshire Building Society was, of course, that they both remained liable for this mortgage loan as borrowers.[15]The point had been raised in the course of the witness statements. It had been explored in evidence, before the judge Mrs Churchill had put in the Britannia Building Society application form. Mrs James had said this, at paragraph 72 of a witness statement made on 15 January 2007 :
“In 1999 Mr Jeans and I bought 7 Pine Road. Mr Jeans and I had a meeting with a lady called Georgina at the Britannia Building Society. We explained the situation about the Property to her. Checks were made by the Britannia Building Society and at the time of the purchase the Property was not in an arrears situation. On the grounds that Mr Jeans was providing a large down-payment following the sale of his flat, the mortgage request was fairly small in relation to the property value and the 3 years business accounts that Mr Jeans submitted proved that he could independently meet the mortgage repayments, the mortgage was agreed.”
[16]The judge did not refer to that evidence or to the building society application in the course of his judgment. Strictly, as it seems to me, the position is that Mrs James did make a statement on the application form which was not true; but it is understandable that, given that she thought that her sister Mrs Churchill was indeed shouldering the burden of the mortgage, she had persuaded herself that she was not liable for it. Be that as it may, if the evidence in paragraph 72 on Mrs James’s witness statement is accepted, the Britannia Building Society were not misled by the application form because, as Mrs James says, “we explained the situation about the property to her”. Mrs Churchill could not remember whether or not that statement was challenged or explored in cross examination. Nevertheless, there was clearly an issue to be resolved, if the District Judge had thought it necessary to resolve it.[17]Mrs Churchill’s complaint that the judge was wrong to prefer the evidence of Mrs James to her evidence is developed further in paragraph 33 of the skeleton argument filed on her behalf. She criticises the District Judge for giving undue weight to two apparent inconsistencies in her evidence: namely,(i) the extent to which a Mr Van Heizen had ever been appointed her financial adviser, and(ii) the fact that she had forgotten a letter, written by the solicitors acting in March 1991, which was in fact disclosed in the course her own discovery.[18]To my mind these matters are, at most, peripheral; although I accept that the District Judge’s judgment would have been more complete if the basis upon which he preferred the credibility of Mrs James to that of Mrs Churchill had been more rigorously analysed. The real problem for Mrs Churchill, as it seems to me, is that the outcome of this case does not, on a time analysis, turn on the relative credibility of Mrs James and Mrs Churchill; save, perhaps, in relation to the allegation of undue influence, as to which there is no appeal.[19]In relation to the constructive trust question, the outcome turns on whether or not there was an agreement, as asserted in Mrs Churchill’s Particulars of Claim, in or about October to December 1991. The facts on which the judge held that there was no such agreement were not derived from the testimony of Mrs James or Mrs Churchill, or based on an assessment of their relative credibility. The judge’s finding was based upon an analysis of the correspondence passing between their respective solicitors. That correspondence shows, plainly, that no concluded agreement was reached, because they could not agree as to the price, if any, which was to be paid by Mrs Churchill to Mrs James for the transfer that they then had in contemplation. So the judge’s view as to the relative credibility of the two principal protagonists could not be said to have affected his conclusion on that question.[20]In relation to the plea of estroppel, the principle questions were whether Mrs Churchill believed that she was making her mortgage payments on the basis of an assurance that the property would be transferred to her; and whether Mrs James knew that Mrs Churchill was relying on such an assurance in making the mortgage payments. Those questions, as it seems to me, turn on the letter of August 1994 - a letter written by Mrs Churchill - which spells out very clearly what she thought the position then was: in terms which are quite inconsistent with a belief that the property was really hers and not her sister’s. That was a letter sent by her to her sister. Even if Mrs Churchill were to persuade a court that she did not really mean what she wrote, there is no basis, as it seems to me, upon which she can say that her sister was not entitled to take that letter as an expression of Mrs Churchill’s understanding of the position.[21]For those reasons, although I accept that there are grounds on which the judge’s reasoning as to credibility may be criticised, there is, as it seems to me, no real prospect that Mrs Churchill would be able to persuade the Court of Appeal that she could overcome the two difficulties - based upon correspondence and not on an assessment of credibility - which I have identified. For that reason, although I can well understand why she feels intensely disappointed that the property has been sold by the building society in circumstances in which the lion’s share of the proceeds will go to her sister, I am bound to reach the conclusion that it would serve no proper purpose to give her permission for an appeal which she would lose.[22]I should add that I was concerned that Mrs Churchill should receive proper recompense for the capital element of the contributions towards the mortgage that she has made. In that context, I note that in the District Judge’s order, at paragraph 4, there is a direction that issues as to occupation rent and set-off are adjourned generally with liberty to restore. I am comforted, therefore, to know that the District Judge will have an opportunity, if the matter is restored to him, to take into account the fact that Mrs Churchill and her former husband have made contributions towards the capital under the mortgage; for which, as it seems to me, they should be given credit. But that is for another day, and not for this court. On the material before me, I refuse the application for permission to appeal.

Order

Application refused.