Cole v Billington & Anor [2013] EWCA Civ 502

Case No B2/2012/0798[2013] EWCA Civ 502
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM GUIDFORD COUNTY COURT
(HIS HONOUR JUDGE REID QC)
Venue Royal Courts of JusticeDate Wednesday, 17 April 2013
Strand
London WC2A 2LL
B e f o r e:
LORD JUSTICE LLOYD
LORD JUSTICE FLOYD
Between
COLERespondentv
Between
BILLINGTON AND ANOTHERAppellant
(DAR Transcript ofWordWave International LimitedA Merrill Communications Company165 Fleet Street, London EC4A 2DYTel No: 020 7404 1400 Fax No: 020 7831 8838Official Shorthand Writers to the Court)Mr Daniel Dovar (instructed by Pro Bono Unit) appeared for Second AppellantMr Hugh Roberts (instructed by GHP Legal) appeared for Respondent
J U D G M E N T

Lord Justice Lloyd:

[1]This is an appeal from an order of HHJ Reid. The order is dated 5 January 2012, and it was made to give effect to a judgment which the judge had given on 3 January. By his order the judge provided that a property known as the Orchard, Rectory Lane, Gatcombe to Betchworth, Surrey in the name of the second defendant, Mrs Rosalee Billington, who is the appellant, should stand charged with an obligation to pay the claimant, Mr Anthony Cole, the sum of £429,033. He also made orders as to costs.[2]That sum of money was the amount then due in respect of a judgment debt awarded on 30 October 2009 in proceedings brought by Mr Cole against the first defendant, Mr Keith Billington, plus interest and costs. Mr Cole's claim was brought under section 423 of the Insolvency Act on the basis that Mr Billington had given at least the £429,000-odd to Mrs Billington, his wife, in connection with the purchase of the Orchard and had done so in order to put that money before the reach of Mr Cole as a creditor of his.[3]The Orchard was bought in the name of Mrs Billington in October 2008. The judgment debt was awarded on 30 October 2009. The proceedings were pending at the time of the purchase of the Orchard.[4]The appeal to this court against Judge Reid's order is by permission of Munby LJ and is limited to part of the overall sum which is the subject of the charge.[5]The Orchard was bought, as I say, in the name of Mrs Billington. The purchase price was £1,350,000, and there were costs and so on so that the total price was of the order of £1,416,000. Those sums were paid - the purchase price to the vendor and other costs to the Revenue for stamp duty, to the Land Registry, and of course to the solicitors themselves by solicitors who were acting for Mr and Mrs Billington on the sale of another house, the Red House at Reigate, which was held in their joint names. We have the completion statement of that sale which shows the amount required to purchase the Orchard, the stamp duty, land tax, the HM Land Registry fee and the solicitors' fees. It also shows a payment to the second defendant under her maiden name of Brown of £46,447.67, and at the bottom off the page, once everything has been paid out, we get to a balance said to be “due to you on completion”, "you" being Mr and Mrs Billington, "of £197,535.68". It is not, I think, in dispute that that payment was made to Mrs Billington.[6]The judge held that the element of gift on this transaction by Mr Billington to Mrs Billington was in fact £441,000-odd, but this exceeded the amount then due under the judgment, which is why he limited the charge pursuant to his order to the lower amount that I have mentioned. The £441,000 figure was reached in this way: he concluded, and this was in fact Mr Billington's case which Mrs Billington did not disagree with, that out of the net proceeds of sale £899,737 was due to Mrs Billington for her share of the Red House. That can be taken to have been spent towards the purchase of the Orchard, but it left more than £500,000 to be found. The case put to the judge had been that the balance, or not quite all of the balance but most of the balance, was truly paid by Mrs Billington out of her own funds, although funded to some extent by Mr Billington on a short-term basis. I should say that the hearing on 3 January 2012 was in effect the second stage of a split trial. It was the quantum hearing, the judge having decided issues of liability and some issues relevant to quantum in a judgment delivered on 28 October 2011 following a five-day trial stretching over May and August 2011.[7]Just for completeness I mentioned that below, and at that stage Mr Cole was also challenging the purchase of the Red House, but the judge rejected that and he limited his finding in favour of Mr Cole to the gift element from Mr Billington in relation to the purchase of the Orchard. Mr Billington said, and his wife agreed, that £350,000 of the £500,000-odd that I had mentioned was made up of two sums: one was a loan which he said he had made to his wife of £200,000, which had then been repaid, and the other was a purchase from her of shares in a company known as GES, which he said he had bought from her for £150,000.[8]At the first stage in his judgment on 28 October 2011, the judge held that both of these were false. There never had been a loan of £200,000 and there never had been the purchase of shares for £150,000. Both of those, he held, were fabrications intended to disguise gifts of those amounts by Mr Billington to his wife. Permission to appeal was refused in respect of those sums.[9]The second defendant, Mrs Billington, admitted that there was a sum of £16,869, which she could not claim any credit for out of the sums used for the purchase of the Orchard, and that she accepted to be a gift from Mr Billington, and that was therefore a sum as to which the judge did not have to decide any contested issue. That left a sum of £150,000, not to be confused with the £150,000 said to have been paid to her for the purchase of the GES shares. So the judge came to the end of his judgment in October, saying that he would hear submissions as to the value of the gift, but that he was minded to quantify it as being the value of the supposed loan of £200,000 plus £150,000 in respect of the shares, having said earlier that the extent of the charge would be limited to the lesser of the value of the gift and the value of Mr Cole's judgment. He also said he would make an order for a charge in a specified sum rather than for a percentage of the value of the property.[10]So he made his order on 28 October, and having handed down his judgment he directed that the claimant was entitled to charge, and he ordered that the extent of the charge and all other issues as to remedy and costs were adjourned to a date to be fixed. That was 3 January.[11]The matter came before him with the benefit of the evidence which had in fact already been put in, including two witness statements from each of Mr and Mrs Billington, the later of them both being made in July 2011, therefore before the first stage of the liability judgment. The battle lines for 3 January were drawn by way of written submissions as follows. Mr Roberts, who appeared for Mr Cole below as he does on this appeal, put in written submissions dated 28 December. Mr Henry Phillips, who then appeared for Mr and Mrs Billington, put in written submissions dated 30 December, and Mr Roberts put in short submissions in reply on 3 January.[12]It is I think helpful to see the positions adopted by the parties. Mr Roberts' opening position was that there was no contribution towards the purchase of the Orchard other than Mrs Billington's own half share of the net proceeds of Red House, £889,000-odd. He referred to the rejection of the £150,000 and £200,000 cases. He referred to the Billingtons having claimed that Mrs Billington had raised money towards the purchase in a number of ways, and commented that they were not sums that had been encashed in order to raise the purchase price of the Orchard. He said if Mrs Billington put all of her half share into the purchase of the Orchard, the gift would be £516,869, but in fact he said she did not in fact put all her half share in. She took £46,447 in cash and she received £197,535 in cash on completion. That, he said, was used to purchase another property, 39 St Asaph Avenue, Kinmel Bay in joint names. He submitted that if the £446,447 is taken into account and half of the £197,000, then her contribution towards the proceeds of sale falls to £743,970, and the gift element would be even more. On that basis, he argued that the claimant was entitled to a charge for the whole amount of the value of his judgment debt, which was then £429,000-odd as I have mentioned.[13]To that, Mr Phillips, as I say, then representing Mr and Mrs Billington, responded and the case was that the whole of the half share, £889,000-odd, was used and reference was made to the fact that Mr Roberts sought to argue that not all of that was put into the purchase of the Orchard. He then engaged with the question of the £46,447 and £197,535. He says the suggestion that those came from the second appellant's half of the proceeds of sale was not raised and was not put to Mrs Billington. There was no evidence on which the court could find that those came from the second defendant's as opposed to the first defendant's half of the proceeds of sale. So he confined the argument to the £166,869 and in effect to the £150,000.[14]At paragraph 9 of his submissions he listed six items, and it is convenient than I mention it here because they were referred to before the judge: the sale of a cherished number plate for £17,500; the pawning of jewellery for £28,000; the cashing in of a life policy for £10,500; dividend payments from GES in the sum of £48,000; funds from NatWest in the sum of £24,000; and savings in the sum of £22,000. Those six items were said to appear from the second appellant's second witness statement as being the way in which the balance was made up, leaving only the £16,869 unaccounted for. So on that basis the case was that that £150,000 was to be credited to the second defendant as being sums which made up most of the balance purchase price over and above her half share of the Red House. Her position therefore was the maximum gift was £369,869. So that is the best position that he was arguing for and, as I say, Mr Roberts put in further submissions and those really engaged with the question of whether the £46,447 and the £197,535 had been made out of Mr Billington's or Mrs Billington's share, and so far as the six items are concerned, Mr Roberts said:
"The judgment does not deal specifically with these items, but it must follow from the evidence that these were not encashed in order to raise the purchase price. The court is invited to reject the assertion that this was any part of the purchase money for the Orchard."
[15]So the matter came before the judge on 3 January and we have a transcript of that hearing. Mr Dovar, who now appears for Mrs Billington in support of the appeal, has amplified very clearly and aptly his recent skeleton argument on her behalf and has referred us to several passages in the transcript of the hearing.[16]A number of points had to be debated at that hearing. One was the question of whether the charge was to be a specific amount or a share of the property. That does not matter before us today, and of course there are arguments about costs and so on. But there was in the course of the submissions various submissions about the amount of the gift. Mr Roberts opened the submissions saying really very much along the lines of his written submissions to which I have referred. He was saying that the gift was the full £516,869, so that his client should be entitled to a charge for the full value of his judgment debt, £429,000-odd.[17]Then Mr Phillips made his submissions in answer and he came to the question of quantum at what is page 13 of the transcript on page 100 of the bundle before us. Mr Phillips opened this point by saying:
"…as to the amount of gift, my learned friend has taken you through the evidence and my skeleton argument. The position here is that no finding has been made by yourself as to this. JUDGE REID: What I’ve found is that this is how the money was disbursed. We know that the sums you set out in paragraph 9(1) to (6) of your skeleton were not used directly because we know perfectly well they never went to the solicitors. We’ve seen where the completion -- essentially the question is: can I make a finding that these were not used pro tanto for either reimbursing or keeping afloat the two of them. If that is the right way of looking at it ..."
[18]I am not quite sure, interposing, that the word "not" is apt there, but of course this is not a transcript that would have been checked by the judge. But at any rate he goes on:
"If that is the right way of looking at it, then I do not think it matters overmuch that the payments were made later because if what is being said is that we have got part of Mr Billington's share of the proceeds to the tune of £516,000-odd being – well, no, it’s 166-odd after the 350 -- being used to pay for the balance of the property, and he says that in fact he used most of that for living expenses... then, I think, so far as these sums were established, it is not unreasonable to say half at least of those were for keeping the Billingtons afloat."
[2]Mr Phillips says, "Your Honour, yes". I do not think that is necessarily acceptance, but he has heard what the judge says. The judge goes on:
"It has to be a pretty rough-and-ready measure. The problem that I have is that I was not terribly persuaded by many of the items."
[3]He then goes on to deal with some of them.[19]Then, on page 101, Mr Phillips had his opportunity to make submissions. He says:
"...the other side of these contributions is that Mr Billington has attempted to illustrate how he has used his proceeds of the purchase of The Orchard [I think that must be the purchase of The Red House] and he went to great lengths showing spreadsheets at a time when he did not have, on his evidence, an income. He had large overheads and liabilities which he was discharging from time to time. Our submission to this is that you are entitled to find that these funds, which clearly were raised by Mrs Billington -- we have receipts at least for the 17,500, at least for the pawning of the jewellery -- the evidence is that there was a life insurance policy of that value, £10,500, that there were funds with NatWest, that those were used by Mrs Billington as a contribution to Mr Billington's expenses and outgoings in return for a commensurate gift or commensurate part of the purchase price of The Orchard. Your Honour, in our submission, you would be entitled to find that and reduce Mr Billington's contribution accordingly."
[4]That is more or less the end of what he had to say on the question of quantum. So he was saying it is the £369,000 figure.[20]Then after some submissions on costs, they came back to Mr Roberts in reply.

The judge said to him, and this is at page 103:

"At the moment I am with Mr Phillips on the [350,000]... Can you push me higher than 369,869?"
[5]And elaborating on that, he says:
"In a sense it is a difficulty for you because you are unable to say how an awful lot of this money was spent. But it does seem to me that the onus is on you and given my reservations about quite how separate lives these people were leading, I suspect that a lot of this money which she realised from the sale of the number plate onwards was actually keeping the pair afloat. It is fair to say they were clearly living way beyond their means but I am not sure that is a material point."
[21]Mr Roberts then made the point that the funds for the purchase of The Orchard "came from the sale of The Red House” and “we can establish as a first base that the £516,000-odd was...out of his share". He then said:
"In my submission, the burden in fact shifts at that point for them to show there was a repayment to him."

The judge then says this:

"Well, I think actually I have been over-persuaded by Mr Phillips because he shows the very neat [£150,000] set out in paragraph 9. But, of course, if it’s keeping the joint boat afloat only half of that is to his benefit...which would take us to 44,863..."
[7]I am not quite sure the point of that, but at any rate that is more than the £369,000 figure.[22]So that was the end of that, and in his judgment which he then proceeded to give, he said that he was going to make an order for a fixed charge. He referred to the value of the judgment debt, which was a cap. He referred to the question of how much should be taken to have been provided by Mr Billington by way of gift. He referred to the two sums of £200,000 and £150,000, which he had dealt with in his previous judgment. He referred to the fact that it was accepted on behalf of the Billingtons that there was a further £16,869, which it is apparent came out of Mr Billington's share and accounted for. So that left the round sum of £150,000, and he referred to the six items that I have already listed as being what that was made up of.[23]At paragraph 8 of his judgment, he said this (page 108 of the appeal bundle): "The evidence in relation to some of those is, shall we say, a little on the skimpy side. So far as the other items are concerned, for example, £27,500-worth of pawn tickets, those post-date the sale, as does the cashing in of a life insurance policy some time after 5 January 2009. It does not however seek to mean that the later dating, ie post purchase dating, of some of these payments (and I am prepared to assume for present purposes that all of these payments were in fact made) is fatal, because in effect it seems to me that these sums were cashed and used for what, on the balance of probabilities, appears to have been their joint living expenses, albeit that they purported to have separated. 9. In those circumstances, it seems to me that it can properly be said that half of that sum, £75,000, should be credited, so to speak, to Mrs Billington. But the remaining £75,000, which one can say was spent on herself, should not be so credited. In those circumstances, it seems to me that the maximum amount of the charge would be £350,000, plus the £16,869 plus £75,000. Those figures together come out to a greater figure than the amount of the judgment debt as at today's date. It follows that, in my judgment, the appropriate order to make is that the property, The Orchard, should stand charged with the amount of the judgment debt rather than for the greater sum which I have indicated.” Then he went on to deal with other matters.[24]So that is his reasoning and how he got there, and the appeal is aimed at two points. One is that the judge was wrong for both of two reasons, firstly to disallow the credit of half of that £150,000. He should, it is said, have allowed the whole of the £150,000, thereby reducing the maximum amount of the charge and the actual amount of the charge to the £369,869 figure. The other argument is that the judge was wrong not to give credit to Mrs Billington for a sum of £140,016.08, which she paid towards the purchase of the property 35 St Asaph Avenue, Kinmel Bay, to which I will refer later.[25]So far as the first question, whether he was wrong not to give credit to Mrs Billington for the whole of the £150,000 made up of the six items to which I have mentioned, Mr Dovar submits that the judge was not only wrong on the evidence before him, but that he was also in breach of natural justice by halving the credit without giving proper notice to Mr Phillips, then appearing for the Billingtons, that that was in his mind. I have referred to the way in which the matter was put to the judge in the written submissions before the hearing and I have referred quite extensively to the passages in the transcript. The starting position, as it seems to me, was, as Mr Roberts submitted to the judge at that stage, that there was this gap of £516,000 unaccounted for out of the transaction on the completion of the sale of The Red House and the purchase of The Orchard, which was money over and above what Mrs Billington was entitled to out of the net proceeds of The Red House and which she therefore had to explain as being to her credit rather than to that of Mr Billington. She produced the evidence to which I have referred in her second witness statement that was summarised in Mr Phillips's skeleton argument, showing, well, here is £150,000 that I paid indirectly to Mr Billington, which cancels out to that extent any element of gift. So it seems to me Mr Roberts was entitled to say the evidential burden at any rate is for the Billingtons to show that the money was cashed and how it was spent.[26]There was not a great deal of detail in the evidence which we have been shown, and, as it seems to me, the judge made clear in the course of argument what was in his mind in the passage that I have cited from, page 13 of the transcript. He said if it was used for living expenses, then it is not unreasonable to say that half at least of those were used to keep him afloat: ie you may be able to claim credit for half of it but not necessarily for the whole. It is clear from the subsequent passages in the transcript that his mind slightly went to and fro on that, but I really do not think it can properly be said, or fairly be said, that he did not give Mr Phillips the opportunity to make submissions to him in support of the proposition that the whole sum should be taken as being credited to Mrs Billington because the whole sum was paid to the benefit of Mr Billington rather than to the benefit of the two jointly for living expenses.[27]So I would reject the first ground of appeal, that the judge failed to comply with the requirements of natural justice.[28]The other way that Mr Dovar puts this point on behalf of his client is that the judge failed to take into account other evidence that had been before him at the first stage of the proceedings as to substantial amounts paid by Mrs Billington for the benefit of her husband. He has shown us a schedule, at pages 202 and 203 of the bundle, of payments said to have been made by her for his benefit between October 2008 and March 2009, coming to £293,800-odd, and he has shown us by way of example, so to speak, a number of those payments can be made good in the evidence.[29]The difficulty about that is that that was no part of Mr Phillips' case before the judge on 3 January. His case was that these six items making up the £150,000 were cashed, were realised by Mrs Billington and were paid to the benefit of Mr Billington and he had the opportunity of proving that. But he failed to persuade the judge that it was paid to Mr Billington rather than to their joint benefit. If it was to be said that £293,000 was the amount that had been paid to Mr Billington's benefit, then it is hard to see, frankly, why it was conceded that the missing £16,869 was not to be wiped out as well.[30]It seems to me the judge came to a perfectly proper conclusion, on the limited evidence before him and in the light of the limited submissions before him, that he had given entirely fair notice of what was going through his mind in the course of argument, and that there is therefore no substance in this aspect of the appeal.[31]The other aspect, which is about the sum of £140,000-odd mentioned, arises in this way: in January 2009 the property that I have mentioned, 35 St Asaph Avenue, Kinmel Bay, Conwy, was purchased for the sum of £139,000 by a transfer from the vendor into the names of Mr and Mrs Billington, a property which, it is said, and this was not disputed, was actually to provide a house for the occupation of Mr Billington's ex-wife. The completion statement shows that the cost was £140,016.08 and the judge found, in his first judgment at paragraph 114, that the balance of the purchase price was paid, on the balance of probabilities, by Mrs Billington and he explains why. Mr Dovar has shown us that the deposit also went through her account. So he submits that that is another £140,000 which came from Mrs Billington and was paid for Mr Billington.[32]Leaving aside the fact that the property purchased was in joint names and with a declaration of trust as to a beneficial joint tenancy, so that Mrs Billington has half of the benefit anyway, the maximum credit would therefore be £70,008.04. Two things can be said about this. One is that, if one is looking for the source of those payments, it looks likely that it came straight out of the payments made to Mrs Billington herself out of the net proceeds of sale of The Red House, which, as I have mentioned, were, first, £46,447, and, second, the whole balance of the £197,535. Those were sums which do not on any basis form part of her share of the proceeds of sale of The Red House if, on the basis that the judge was proceeding, she is to be credited with the whole of the £889,000-odd which was her half of the share. If, therefore, what happened was that these sums of some £240,000-odd went to Mrs Billington and £140,000 came out in the purchase of 35 St Asaph Avenue, that was plainly Mr Billington's money.[33]Secondly, it will have been noted that there was no reference to this £140,000 in the written submissions to the judge which I have mentioned, nor in the transcript of the hearing of 3 January 2012. Accordingly, the judge was not being invited to give Mrs Billington credit for either £70,000 or £140,000 in this respect and he cannot, in my judgment, be criticised for not having done.[34]Accordingly, as it seems to me, there is nothing in that aspect of the appeal either, and despite therefore Mr Dovar's clear and helpful submissions, I would dismiss this appeal.

Mr Justice Floyd:

[35]I agree that the appeal should be dismissed.

Order

Appeal dismissed