Preedy & Anor v Dunne & Ors [2016] EWCA Civ 805

[2016] EWCA Civ 805Case No A3/2015/3458
IN THE COURT OF APPEAL (CIVIL DIVISION)
Case No HC-2015-000274
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MASTER MATTHEWS
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 21/07/2016
Before
LORD JUSTICE LONGMORELORD JUSTICE VOSLADY JUSTICE KING
Between
(1) Raymond William PreedyClaimants/Respondents(2) Philip Thomas BakerRespondent(1) Jonathan Anthony DunneDefendants/Appellants(2) Blue Mango Investment Holdings LimitedAppellant(3) A3 Trading Limited (trading as Albert Arms Pub)Appellant
Mr David Halpern QC (instructed by Jirehouse) for Appellants/DefendantsMr Fenner Moeran QC and Mr Andrew Child (instructed by Charles Russell Speechlys LLP) for Respondents/Claimant TrusteesHearing Hearing date: 20 th July 2016
Judgment Approved

Introduction

[1]This is an appeal made directly to the Court of Appeal under CPR PD52A from the judgment dated 2nd October 2015 delivered by Master Matthews (the “judge”) sitting in the Chancery Division after a 3-day trial in a CPR Part 7 multi-track claim.[2]It is a slightly unusual case of an alleged estoppel. At first instance, the appellants/defendants alleged, but failed to establish, a proprietary estoppel. On appeal, they seek to construe out of the judge’s findings of fact, which they do not for the most part challenge, a new case based on estoppel by convention. The respondent/claimant trustees, of course, complain that the new case is not open to the appellants, because the trial would have been conducted quite differently if they had known that to have been the appellants’ case. In any event, the respondent trustees say that the facts found by the judge do not support the newly alleged estoppel by convention. It will be clear from this introduction that it will be necessary to look in some detail at the facts the judge found and the pleadings on which he based those findings.[3]Before turning to those facts, it is perhaps worth recording the basic issues that the parties agreed arose on this appeal. First, whether the new case of estoppel by convention was open to the appellants? Secondly, if such a case was open to the appellants, was it made out on the application of the relevant law to the facts the judge found? If the common assumptions alleged were established, the third question arose as to whether one of the trustees had the authority to bind the other in the circumstances of this case. The way in which these issues arise will become clear once the facts have been considered.

The essential factual background

[4]I intend to refer to some of the characters in the story by their first names. No disrespect is intended. It will, however, make the facts easier to understand. Mrs Jean Montgomery (“Jeannie”) died on 6th September 1977. She owned the freehold of a pub called the Albert Arms in High Street, Esher, Surrey (the “Property”), which she ran during her lifetime with her second husband, Mr Bruce Montgomery (“Bruce”), who died on 1st February 2013.[5]Jeannie had three children by her first marriage, Mrs Sarah Fenton (“Sarah”), Mr Peter Dunne (“Peter”), and Mr Jonathan Dunne, the first defendant/appellant (“Jonathan”).[6]When Jeannie died, she left the Property by her will dated 17th July 1977 (the “Will”), “including the contents thereof the stock-in-trade and the goodwill of the business of publicans” to her executors (to whom I shall return) to hold on trust to sell and to postpone doing so and to run the business for as long as they saw fit, and on trusts:(a) to pay the income of the Property to Bruce for life in the event that he did not want to run the business, but with liberty to the executors to allow Bruce to run the business and to retain the business income for as long as the executors deemed appropriate,(b) expressing Jeannie’s wish and hope that, for so long as Bruce ran the business, he would allow Jonathan to assist him “at reasonable remuneration”, and(c) subject to (a) and (b), absolutely to Sarah, Peter and Jonathan in equal shares. The precise terms of the Will are set out at paragraph 3 of the judge’s judgment and need not be repeated here.[7]It is common ground that, as the judge concluded, on Jeannie’s death, the partnership between Jeannie and Bruce was automatically dissolved, so that thereafter Bruce carried on the pub business as a sole trader. Bruce did, however, as the judge found, sell half the pub business to Jonathan in or about August 2001, probably for £50,000 or £60,000. The exact figure is not clear. Between August 2001 and 1st October 2010, Bruce and Jonathan ran the pub business as partners, though Bruce increasingly had less and less to do with it as his drinking and other health problems advanced. In October 2010, Bruce was apparently “sectioned” under the Mental Health Act 1983, and he died (as I have said) on 1st February 2013. It appears that Bruce lived in the first floor flat at the Property.[8]The events that are crucial to this case, however, occurred between 1999-2000 and in 2003, when Jonathan undertook certain renovation works to the Property. Between 1999 and 2000, he renovated the ground floor of the Property at a cost of some £201,479, and in early 2003, Jonathan renovated the 1st floor of the Property at a cost, on the judge’s findings, of over £100,000 (and perhaps as much as £141,000).[9]In broad outline, Jonathan’s central case at trial was that he had paid for both sets of renovations on the understanding that he had obtained from the trustees of Jeannie’s will that he would be entitled to occupy the Property for as long as he wished to so do. The judge rejected that case on the facts at trial.[10]On appeal, Jonathan alleges, again in the broadest outline, that the judge ought to have found an estoppel by convention between the trustees of the Will and the appellants whereby both parties assumed:(a) that the trustees were partners in the pub business with a 50% share,(b) that the trustees were therefore jointly and severally liable to repay any loans made by the appellants to the pub business, and(c) that, in practice, due to Bruce’s health problems, that liability would fall on the trustees. The appellants seek an inquiry as to the amounts loaned by them to the trustees for the renovations, and payment of half of that amount by the trustees to the appellants. They seek only half, of course, because they accept that Jonathan bought half the pub business from Bruce in 2001.

The parties

[11]I have thus far explained the basic parameters of the case without detailing the parties or the context of the litigation. The litigation was brought by the trustees of the Will, who are now a Mr Raymond William Preedy (“Mr Preedy”), an accountant, and Mr Philip (Charlie) Thomas Baker (“Mr Baker”), a farmer. Importantly, at the time of the renovations, Mr Baker was not a trustee, and the second original executor, Mr Anthony Shilson (“Mr Shilson”), who had been Jeannie’s solicitor, remained Mr Preedy’s co-trustee. I shall use the term “trustees” to refer to the trustees of the Will from time to time. When the three siblings proved unable to resolve the dispute over the Property, the trustees initiated these proceedings claiming simply possession of the Property, so that, no doubt, effect could be given to the trust for sale contained in the Will.[12]The defendants to the possession claim, and the appellants before us, are Jonathan and two of his companies, Blue Mango Investment Holdings Limited (the “2nd defendant”) and A3 Trading Limited (the “3rd defendant”). The details of the 2nd and 3rd defendants’ involvement in Jonathan’s occupation of the Property and funding of the renovations is of only peripheral relevance. Reference can be made to the judge’s judgment for the details. Essentially, Jonathan was the ultimate source of the funding of the renovations, and the 2nd and 3rd defendants appear only to have acted through him.[13]The dispute is, in essence, between Jonathan and the trustees. Before dealing with the parties’ arguments and the issues for our decision, I should summarise briefly the important elements of the pleadings and of the judge’s conclusions.

The pleadings

[14]The judge set out large tracts from the pleadings at paragraphs 10-13 and analysed their effect at paragraphs 14-21. I shall not replicate that process. I shall instead merely record the parts of the pleadings that may be relevant to the new case now alleged.[15]Paragraph 3.3 of the defence pleaded that Jonathan and the 2nd defendant had “advanced and/or expended monies and/or incurred liabilities and/or expense on the [Property and the pub business] and acted to their detriment with the knowledge and encouragement of the trustees”.[16]At paragraph 3.4 of the Defence, the appellants pleaded that “[w]hilst it is now accepted by all parties that the [t]rustees had no interest in the [pub business carried on at the Property], at all material times [Jonathan and the 2nd defendant] and the [t]rustees understood that the [t]rustees were 50% partners in the [pub business]”. Paragraph 10 of the defence repeated this allegation alleging also that Jonathan, the 2nd defendant, and the trustees “proceeded on the basis” that the trustees retained a 50% interest in the pub business. Paragraphs 13 and 14 of the Defence then alleged that Jonathan and the 2nd defendant undertook the renovation works with the knowledge of the trustees.[17]Paragraph 40 of the appellants’ counterclaim alleged that, in the further alternative, Jonathan and the 2nd defendant were “entitled to repayment of such sums as they have expended in connection with the renovations carried out in 2000 and 2003 …”. The prayer counterclaimed, also in the further alternative, for “payment of the sum of £351.922 …”[18]The thrust of the trustees’ reply was that Jonathan was carrying on a business “for or with Bruce”, and the renovations were carried out for the benefit of that business. The appellants had enjoyed the benefit of the renovations for 12-15 years, having traded at the Property without paying any rent for that period.[19]Most importantly perhaps, the appellants were asked for particulars of their allegation that they had expended the monies on renovations “with the knowledge and encouragement” of the trustees. They made the following responses:- “… (b) By 1999 … [t]he [Property] had also fallen into disrepair, and [Jonathan] drew it to the attention of Mr Shilson and Mr Preedy. (c) Matters came to a head when an electrical fire started on the [Property]. There were then discussions between [Jonathan], [Sarah] …, Peter …, Mr Shilson and Mr Preedy … and it was agreed that renovation of the ground and first floors of the Premises was needed. (d) Initially, [Jonathan, Sarah and Peter] attempted to obtain a loan from Allied Irish Bank to fund the refurbishments… (e) Due to the difficulties with borrowing the money from Allied Irish Bank, [Jonathan] offered to find the monies himself. Mr Shilson agreed that any money that [Jonathan] put into the business (which was thought at that time (wrongly) to be owned by the [trustees and Bruce] equally) and in … renovating the [Property] would be repaid out of the proceeds when the [Property was sold or refinanced] … (f) [Jonathan] assumes that Mr Shilson discussed the monies to be introduced with Mr Preedy his co-trustee, the terms on which they were to be repaid …, but did not have such a conversation with Mr Preedy at the time himself … [Whilst Mr Shilson and Mr Preedy might not have known the actual sums spent on the 2000 and 2003 renovations, they knew that the sums were substantial] … (j) Due to the difficulties with [Bruce’s] management of the business in 1999, Mr Shilson asked [Jonathan] to take over the running of the business from [Bruce] … (k) … The [t]rustees knew that [Jonathan] was devoting most of his time to the business…”[20]It will be observed that certain elements of the estoppel by convention now relied upon (or at least allegations akin thereto) were, in one way or another, pleaded by the appellants as follows:- i) Paragraphs 3.4 and 10 of the Defence pleaded that at all material times Jonathan and the 2nd defendant and the trustees understood and proceeded on the basis that the trustees were 50% partners in the pub business. ii) Paragraph (e) of the Particulars pleaded that Mr Shilson had agreed after the abortive loan in September 1999 that any money that Jonathan put into renovating the Property would be repaid out of the proceeds when the Property was sold or refinanced. iii) Paragraph (f) of the Particulars pleaded that Jonathan “assumes” that Mr Shilson discussed the monies to be introduced with Mr Preedy.[21]In evaluating the pleadings, the judge concluded that there were sufficient allegations made against Mr Shilson to found a proprietary estoppel, but not against Mr Preedy, so that he would need to consider how far both trustees could be bound by the actions of one. He also thought that he would need to consider how far it was possible for the beneficiaries to be bound by a proprietary estoppel created by their trustees. The judge considered that it was also open to the appellants to run what he termed their “wider case” to the effect that Mr Preedy and the beneficiaries of the Will trust had all agreed that Jonathan would be entitled to be repaid the cost of the renovations from the sale of the Property. He decided to try these issues without requiring an immediate amendment to the appellants’ pleadings so as to enable “substantive justice” to be done. In the event, as a result of his findings, he did not revisit the amendment question.[22]The judge then dealt with the law on proprietary estoppel, most if not all of which was not in dispute. In relation to the need for what the judge called “trustee unanimity”, the judge relied on Fielden v. Christie-Miller [2015] EWHC 87 (Ch) where Sir William Blackburne had held at paragraph 26 that it was not sufficient for one trustee to have the appearance of authority to bind another trustee. Instead, the one trustee must have the authority of the other in order to bind him. The existence of that authority depended on the usual principles of agency. The question the judge thought he had to answer was whether Mr Shilson had authority to bind Mr Preedy whether by actual, implied or ostensible authority.[23]The second legal point that the judge considered was whether the trustees could create a proprietary estoppel binding on the beneficiaries without their consent or acquiescence. The judge concluded that neither the trustees’ powers under section 6 of the Trusts of Land and Appointment of Trustees Act 1996 (the “1996 Act”), nor the beneficiaries’ rights under section 12 of the 1996 Act, authorised proprietary estoppel claims binding on beneficiaries who have not acquiesced in them, but that a contractual licence binding on the trust estate could be so created by the trustees.[24]The judge dealt in detail with the witnesses that he had heard. In essence, he accepted the evidence of Mr Baker, Mr Preedy, Sarah and Peter, but found Jonathan’s evidence less reliable unless corroborated, because he had convinced himself of the justice of his case. After refusing an adjournment sought on the basis that Mr Shilson was temporarily abroad, he admitted Mr Shilson’s statement into evidence, but noted that he had not been available to be cross-examined.[25]All but the last 2 paragraphs in the remainder of the judge’s judgment (paragraphs 68-127) concerned his findings of fact. Having found that Bruce carried on the pub business as a sole trader after Jeannie’s death, he remarked that this was consistent with Peter’s evidence that Mr Shilson had told him at that time that the business was “none of his business” and that neither the trustees nor the beneficiaries were involved with it. The appellants place heavy reliance on paragraph 71 of the judgment as follows:- “But Mr Preedy gave evidence that at the time he thought differently, and that [Bruce’s] share of the business had passed to the trustees ... He still held that view in July 2002 when he wrote to Sarah about it. It is also clear that Mr Schaverien [Jonathan’s accountant] took the same view as Mr Preedy in his letter of 4 January 2002 to Mr Shilson, when he said that half the business formed part of the estate of [Jeannie]. The change of mind by Mr Shilson is described by him in his letter to Mr Schaverien (copied to Jonathan) of 19 February 2003, where he contrasted his view at the date of the death with what he now thought:
“On reflection, I agree with you that as Jeannie and Bruce were in partnership Jeannie’s share did not pass to Bruce by survivorship but came into the estate as you suggest.”…”
[26]The judge then made findings about the circumstances in which Jonathan took over the running of the pub business, determining that, in March 1999, Sarah, Peter and Jonathan requested the trustees to remove Bruce from the day to day management of the pub, and on 13th May 1999 Jonathan wrote to the trustees threatening to leave if Bruce was not made to retire. Thereafter Mr Shilson, after discussing the matter with Mr Preedy, asked Jonathan to take over the day to day running of the pub from Bruce in 1999. It appears that the judge found that Jonathan did indeed then become more involved with the pub business, but the problems with Bruce continued culminating in a fire that Bruce caused, which led to Sarah, Peter and Jonathan writing to the trustees on 14th April 2000 proposing that Bruce retire immediately on certain financial terms.[27]In relation to the 1999-2000 works, the judge found that they were funded by Jonathan or one of his companies “after the siblings had unsuccessfully attempted themselves to obtain a loan for them”. He noted in paragraph 76 in connection with Jonathan’s evidence about repayment that Mr Shilson had written to Mr Schaverien, Jonathan’s accountant, on 4th December 2000 referring to an injection of monies by Jonathan into the pub business “which is of course still run by [Bruce] under the terms of [the Will]”. He found that Mr Shilson, Sarah and Peter knew of the works and Jonathan’s funding of them beforehand, and none of them had any objection (including Mr Preedy once he became aware of them after the event). Mr Preedy and Sarah considered the costs to be a loan to the pub business, but Peter had no fixed view.[28]The judge construed paragraph 9 of Mr Shilson’s statement (upon which he had not been cross-examined) where he had said that “[Mr Preedy and I] were aware that the funding of the works was by way of a loan from Jonathan or his company. We expected such loan to the trust to be repaid either on a sale or refinancing and that Jonathan would be able to continue to run the pub until repayment”. He found that he had not said clearly that the loan was to the trustees of the Property. His use of the word “the trust” was at best ambiguous, and his letter had said the loan was to the “business”.[29]The judge said that some correspondence in December 2002 had a bearing on what everyone had thought. He described these letters as follows in paragraph 85:- “On 13 December [2002] Mr Schaverien wrote to Mr Shilson, asking him to draw up a loan agreement “between The Albert Arms and [the 2nd defendant] for the sum of £296314 being the amount owed by The Albert Arms to [the 2nd defendant]”. Mr Shilson replied on 19 December 2002 asking precisely who Mr Schaverien meant by “The Albert Arms”. He came back to Mr Shilson the next day, saying “when I state AA this relates to the trading division of the Albert Arms rather than the freehold property which you are holding in trust for the three children”. All three letters were copied to Jonathan. So it is clear that Mr Schaverien considered in December 2002 that the loan made to The Albert Arms had been made to the business and not to the trustees of the will trust of the freehold. The implication is that Jonathan too so considered. I record here that he was taken to these letters in cross-examination, and, although he was not specifically asked about the meaning of The Albert Arms in them, he did not disagree with what his accountant had said on his behalf”.[30]The judge then recorded that the trustees, as trustees of the Property, would have had to be formally involved if they were to be made liable as such for the loan, but they were not so involved. It was, he thought inconceivable that Mr Shilson as a solicitor and Mr Preedy as an accountant, acting together as trustees in this close family trust, “would have agreed to something as important as that without(i) [it] being formally agreed and recorded, and(ii) contemporary discussion by them with the beneficiaries, of which in the evidence there is no trace”.[31]On the basis of this reasoning, the judge concluded at paragraph 87 of his judgment that Jonathan was wrong when he said that the funds provided for the 1999/2000 refurbishments were a loan to the Will trustrather than to the pub business. The loan was to the pub business.[32]The judge then considered the promises that Jonathan had alleged were made to him. His conclusions on the evidence are contained in paragraph 94 as follows:- “I have no difficulty in accepting Jonathan’s evidence that he funded the renovations in 2000 and that everyone agreed that he should be repaid. Mr Preedy, Sarah and Peter all agree on this. But I have great difficulty in accepting his evidence that there was an agreement with Mr Shilson(a) that the [Will] trustees would be liable to repay the costs of the renovations (other than as 50% partners in the business, if the loan could not be paid out of cashflow: see Mr Preedy, day 1, page 155, lines 1-4),(b) that Jonathan would be repaid out of the proceeds of a sale or refinancing of the building, and(c) that Jonathan could occupy the premises for his life or at least until he was repaid. I do not think that he was deliberately lying to me about this. But I do think he has convinced himself that this was what happened, when the weight of the evidence and the balance of probabilities are against it”.[33]The judge then accepted the evidence of Mr Preedy and Sarah so as to find there was no promise made by Mr Shilson to Jonathan, and no agreement between them, to the effect that Jonathan could continue to occupy the building and run the business for as long as he wanted, or at least until he was repaid. None of Mr Preedy, Sarah and Peter acquiesced in or made or consented to any such promise or agreement. Accordingly, the question of reliance did not arise. The judge then held that Jonathan had not established, in any event, that Mr Shilson had ostensible or any authority to bind Mr Preedy at the time of Mr Shilson’s alleged promises. Later in paragraph 117, the judge extended these findings to the 2003 renovations.[34]Broadly the judge made the same findings generally in relation to the 2003 renovations concluding in paragraph 115 that the costs of the 2003 renovations was also a loan to the pub business.[35]Having dealt with some other points, the judge concluded with the following:- “The fundamental problem for Jonathan in this case has been that he paid for the refurbishments without securing a clear commitment from the trustees or his siblings as to whether any of them and if so who should repay him for them. I have found that there were in effect loans to the business, in the sense that it was the business that was to repay. But the business at the beginning was just Bruce, and then Bruce and Jonathan, and finally just Jonathan. His attempts to found a claim on proprietary estoppel and latterly on contractual licence have foundered on the need for promises or at least expectations created or acquiesced in by the persons whom he seeks to make liable. He himself may have believed in those promises or expectations, but I have found that the claimants and Jonathan's siblings were not responsible for them. I have found that Mr Shilson did not make the promises alleged by Jonathan and that Mr Shilson had no authority to bind Mr Preedy if he did. Further, I have found that Sarah and Peter did not make any such promises, and nor (if I am wrong and Mr Shilson in fact made them) did they acquiesce in any of Mr Shilson’s. In my judgment these findings, applied to the propositions of law I have set out above, mean that the defence of the Defendants, whether as strictly pleaded, or on the wider, informal basis indicated earlier, must fail. There is no need for me to consider the question of permission to amend”.[36]It will be observed from this summary of the judgment that the judge’s focus was on whether or not it had been agreed or understood either that Jonathan could stay in the Property as long as he liked or that the costs of the renovations would be paid out of the proceeds of sale of the Property. Those were certainly the appellants’ primary cases. In fact, the judge did not even record in his judgment paragraphs 3.4 and 10 of the Defence that alleged that Jonathan and the trustees understood and proceeded on the basis that the trustees were 50% partners in the business. The judge’s first and primary finding was that the pub business was carried on by Bruce and later sold as to 50% to Jonathan. In paragraph 108, the judge addressed obliquely what the 50% actually was, finding, in essence, that it did not matter. But the judge did place reliance in paragraphs 76 and 84 on Mr Shilson’s 4th December 2000 letter saying that he thought that Bruce ran the business after Jeannie died. Moreover in paragraph 71, on which the appellants rely, the judge seems to have formed the clear view that, whilst Mr Preedy always thought that Jeannie’s share of the business had passed on her death to the trustees. Mr Shilson only came round to that way of thinking by 19th February 2003. I will return to these issues.

The appellants’ argument

[37]The appellants’ arguments are most clearly expressed in their revised grounds of appeal. In paragraph 1, the appellants accept the judge’s findings that the pub business passed to Bruce on Jeannie’s death, that Mr Preedy wrongly thought that Jeannie’s share had vested in the trustees, and that from 19th February 2003 at the latest, Mr Shilson had made the same assumption. They contend that the judge proceeded on the basis that Jonathan had also made the same wrong assumption, and that he should anyway have made a finding to that effect. The appellants then contend that:- 3. The [judge] erred in failing to conclude that, at all material times (or alternatively at all material times from 19th February 2003) there was an estoppel by convention as between the Appellants and the Trustees whereby the parties both assumed: 3.1. That the Trustees were partners in the Business with a 50% share; 3.2. That the Trustees were therefore jointly and severally liable to repay any loans made by the Appellants to the Business; and 3.3. That in practice, due to [Bruce’s] heavy drinking, failing health and lack of business skills, that liability would fall on the Trustees.”[38]The revised grounds continue by alleging that the judge ought to have concluded that the parties made no distinction between the pub business and the Property, and that he ought to have accepted Mr Shilson’s statement at face value when he said that “we expected such loan to the trust to be repaid either on a sale or refinancing” (emphasis added). The appellants then say that the judge was wrong to conclude that Mr Preedy did not confer ostensible authority on Mr Shilson to act on behalf of both trustees. The revised grounds conclude by alleging that the judge “erred in failing to conclude that [the trustees] were estopped from denying that they were liable to repay the sums advanced by the appellants” as to 50%.[39]In the appellants’ skeleton, paragraph 10 seeks to explain away the difficulties in their case as follows:- “The Master had understandable difficulty with the concept that an obligation to repay a loan falling on the owner of a business could give rise to an estoppel binding on the owner of a property. However, that dichotomy vanishes if the position is considered through the eyes of the parties at the time. The Appellants and the Trustees both proceeded on the mistaken assumption that the Trustees were(i) the sole owners of the Property and(ii) partners in the Business with joint and several liability to repay the loan that was being used to improve the Property, and in circumstances where in practice the liability would be met by the Trustees and not [Bruce]”.[40]In oral argument, Mr David Halpern QC, counsel for the appellants, made clear that he did not suggest that Mr Shilson’s letter of 19th February 2003 could not be interpreted as meaning that, up to that date, he had not thought that the trustees had a share in the pub business, but rather he submitted that the judge ought to have accepted paragraph 9 of Mr Shilson’s statement at face value. Mr Shilson was, as the judge accepted in his ruling at the start of the trial refusing an adjournment, a retired solicitor whose evidence he had “no doubt that [he] would be prepared to accept”. In effect, the statement was to be taken as more reliable than the letter he wrote at the time.

The trustees’ arguments

[41]The trustees object to the appellants arguing for the first time on appeal that a partnership between the trustees and Bruce existed by estoppel. They say that counsel for the appellants had expressly disavowed at trial any debt being owed by the trustees to the appellants, arguing only that they were entitled to stay in the Property until repaid. The trustees submit that at trial, no loan was alleged to the trustees, no claim to an estoppel by convention was made and no claim to recover a debt was made. Most importantly, Mr Fenner Moeran QC, counsel for the trustees, submits that the trustees would have approached the trial quite differently if they had known of the new case. It was one thing to face an argument that Jonathan was to be permitted to stay in the Property for life; it was very much more threatening to their position to face a substantial monetary claim that might have to be paid by the trustees or one of them personally. The new basis of claim should not be permitted.[42]Even if it were allowed, the claim must fail, submit the trustees, because the necessary common assumption was not expressly shared between the trustees and the appellants, and in any event the common assumption did not exist until Mr Shilson changed his mind on 19th February 2003, by which time the works had been undertaken or were in progress and £296,314 had been expended. As the judge found, the remaining correspondence shows that Mr Shilson thought correctly (as did Jonathan and his accountant) that Bruce ran the pub business (until he sold half to Jonathan in 2001). Mr Shilson had no ostensible or other authority from Mr Preedy to bind him to repay a loan entered into other than in the normal course of business. Finally, if the claim were to succeed, Jonathan and the 2nd defendant would have to account to the trustees for 50% of the profits they had made in the business for the last 15 years.

Can the appellants run their new estoppel by convention argument on appeal?

[43]I agree with the trustees that the case now being advanced by the appellants is not what was alleged before the trial nor what was advanced at the trial. It could be said, uncharitably, to be a somewhat opportunistic attempt, to spell an arguable case out of the facts found by way of background by the judge. That said, the important elements of the case were pleaded by the appellants, albeit not fully. As I have already said, paragraphs 3.4 and 10 of the appellants’ Defence did contend that at all material times Jonathan and the 2nd defendant and the trustees understood and proceeded on the basis that the trustees were 50% partners in the pub business, and paragraph (e) of the Particulars pleaded that Mr Shilson had agreed that any money that Jonathan put into renovating the Property would be repaid out of the proceeds when the Property was sold or refinanced. The Particulars also pleaded that Jonathan assumed that Mr Shilson discussed the monies to be introduced with Mr Preedy. There was a prayer in the counterclaim for payment of £351,922, even if that sum was not said to be a straight debt owed by the trustees as partners in the business to the appellants.[44]As it seems to me that the basic allegation of a mutual understanding was before the court at first instance even if the appellants sought no determination based upon it. Since the appellants are not suggesting that this court should decide additional facts, save to accept rather than construe Mr Shilson’s statement, I do not see why we should not fairly be able to decide the issues now raised by the newly devised case. I do not think that the concession made by counsel for the appellants excluding a variant of the new case is conclusive, because it was made in closing argument, and therefore, after the appellants had decided what evidence it needed to call to meet the trustees’ pleaded case.[45]Moreover, Briggs LJ expressly gave the appellants permission to advance their new case on appeal when he granted permission to appeal. Whilst it was open to the trustees to ask us to reconsider his decision, I do not think it is necessary to do so. Still further, the “wider case” that the judge did consider was to the effect that the beneficiaries had all agreed that Jonathan should be paid back for the costs of the renovations – probably out of the proceeds of sale of the Property – that is not, of course the same as the allegation of a straight loan from the appellants to the trustees as partners in the pub business, but is not as far away as the trustees now suggest.[46]I would, therefore for all these reasons, grant the appellants permission to amend their grounds of appeal, and allow them to argue their new case on estoppel by convention.

Can the appellants succeed in establishing an estoppel by convention?

[47]The elements of an estoppel by convention are not much disputed between the parties. They are reflected in paragraph 10.01 of Wilken and Ghaly on The Law of Waiver, Variation and Estoppel, 3rd edition, as follows:- “(i) It is not enough that the common assumption upon which the estoppel is based is merely understood by the parties in the same way. It must be expressly shared between them. (ii) The expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the other party to rely upon it. (iii) The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter. (iv) That reliance must have occurred in connection with some subsequent mutual dealing between the parties. (v) Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position.”[48]Mr Halpern drew our attention to Carnwath LJ’s judgment in ING Bank NV v. Ros Roca SA [2012] 1 WLR 472 at paragraphs 55-65, which made clear that the understanding in question might relate to a matter of fact or law. There was, Mr Halpern submitted, nothing to prevent a party basing his assertion of an estoppel by convention on an unsound or even nonsensical understanding as to the law, if it could be shown that the parties had both assumed it to be the foundation of their dealings. This was in response to the point made in argument that it may not have made much legal sense to grant a life interest in a business. Whilst I see the force of these submissions, for reasons that will shortly appear, I do not think we need to reach a final conclusion on the point. For our purposes, it suffices to rely on the summary contained in Wilken and Ghaly.[49]It is important first to set out the correspondence on which the judge relied in his judgment so that the existence of the alleged common assumption or understanding can be properly evaluated. It will be recalled that the main elements of the alleged common assumption are that the trustees were partners in the pub business with a 50% share, and that they were therefore jointly and severally liable to repay any loans made by the appellants to the pub business.[50]I realise that this, in part, repeats what I have cited above from paragraph 85 of the judgment, but I have included here some more extensive references:- i) On 4th December 2000, Mr Shilson wrote to Mr Allan Schaverien, Jonathan’s accountant, saying that he would be happy to attend a meeting to discuss the “monies injected by Jonathan via the [2nd defendant] into the Albert Arms which is of course still run by [Bruce] under the terms of [the Will]”. ii) On 7th January 2002 Mr Schaverien wrote to Mr Shilson (though the judge seems to have referred to this letter in paragraph 71 of his judgment as being dated 4th January 2002). The letter started by saying that there was “some confusion and ambiguity regarding The Albert Arms”. It continued by saying that “as far as the trading part of the Albert Arms we believe this was always [a] partnership half of which was always owned by Bruce and remains his absolute 50%. However, the other half we believe under clause 6 of the [Will] is held by the executors of and on behalf of Jonathan, Peter and Sarah with a lifetime interest of Bruce”. Mr Schaverien concluded by saying that it was important to know as he had “recently dealt with the disposal of 50% of this trading which we are treating as Bruce’s absolute interest which has passed to [the 2nd defendant]”. Though not absolutely unambiguous, it seems that Mr Schaverien was saying that that Bruce’s 50% absolute interest in the pub business had been sold to Jonathan, leaving his 50% life interest in his own hands. It was accepted in argument that it was not entirely clear how a life interest in 50% of a trading partnership business would operate in practice. iii) On 30th July 2002, Mr Preedy wrote to Sarah saying that, as he understood the terms of the Will, the pub business had been left in trust for Bruce for life or until he no longer wanted to run the pub, so that 50% of the pub business would pass to the 3 siblings and Bruce’s 50% would be left “in accordance with the terms of his will”. In relation to the renovations, he said that Jonathan had loaned “the Albert” a considerable amount of money and “we are at present waiting to hear from him [Jonathan] how this is to be treated”. iv) On 13th December 2002, Mr Schaverien wrote to Mr Shilson saying he had recently met Jonathan and asking him (Mr Shilson) to draw up a loan agreement between the “Albert Arms” and the 2nd defendant for the sum of £296,314 being the amount owed by the “Albert Arms” to the 2nd defendant. v) On 19th December 2002, Mr Shilson wrote to Mr Schaverien asking who precisely he meant by “the Albert Arms” and commenting that “to draw a meaningful Agreement I will need a little more information and in particular details of the term of the loan, repayment provisions, and …” vi) On 20th December 2002, Mr Schaverien replied to Mr Shilson saying that the “Albert Arms” related to “the trading division of Albert Arms rather than the freehold property which you are holding in trust for the three children. The Albert Arms, as far as we understand, as a trading entity was owned solely for his lifetime use by [Bruce]. However, in August 2001 he decided to dispose of 50% of the trading division to [Jonathan] for the sum of £60,000 such sum having passed between them and it is this entity which we refer to as The Albert Arms”. vii) On 19th February 2003, Mr Shilson replied to Mr Schaverien’s letter of 7th January 2003 (which is not in the court’s bundles) saying that “… at the time of Jeannie’s death I did consider that the trade furnishings fixtures and fittings effects and goodwill of the business were jointly owned by Jeannie and Bruce as Joint Tenants and thus passed to Bruce entirely … On reflection I agree with you that as Jeannie and Bruce were in partnership Jeannie’s share did not pass to Bruce by survivorship but came into the Estate as you suggest”.[51]There is no further relevant and contemporaneous correspondence in the court’s bundles to which the trial judge referred. Mr Moeran, however, drew our attention to one more letter that was before the judge dated 24th October 2000 from Mr Schaverien to Mr Shilson, where he had said that Jonathan had asked him to speak to Mr Shilson about the “loan he has made to The Albert Arms for refurbishment”, continuing:
“I understand that there is a partnership agreement intended although not formalised between Jonathan and Bruce in the pub …”
. That letter seems to have been written in anticipation of the sale of a 50% share in the pub business by Bruce to Jonathan.[52]It is to be recalled also that the judge found at paragraph 70 of his judgment that Bruce carrying on the pub business after Jeannie’s death was consistent with Peter’s oral evidence to the effect that “when he asked Mr Shilson questions about the business soon after [Bruce’s] death, he was told it was none of his business because the business was separate from the will trust of the building, and the trustees and beneficiaries were not involved”.[53]On the basis of these contemporaneous documents and the judge’s findings, it seems to me that, even if it were reasonable to conclude that Jonathan and/or the 2nd defendant had made a loan to the pub business in respect of the costs of the 1999/2000 and even the 2003 renovations, it is impossible to conclude that Jonathan and Messrs Shilson and Preedy had a common understanding or made a common assumption that this loan or those loans were made to the trustees as partners in the pub business either as to 50% or any percentage. First, it seems to me that the judge’s findings were inconsistent with such a conclusion and secondly, I cannot see such an understanding evidenced in any of the contemporaneous correspondence.[54]As regards the contemporary correspondence:- i) Mr Schaverien’s 24th October 2000 letter seems to indicate that Jonathan wanted his accountant to talk to Mr Shilson about the loan he had made to the pub business, which he expressed to be or to be intended to be a partnership between Jonathan and Bruce. It is unlikely that Jonathan would have had a different understanding from the accountant who seems to have handled his affairs. ii) Mr Shilson’s 4th December 2000 letter to Mr Schavarien makes it clear that he thought at that time that the pub business was run by Bruce. This is inconsistent with the idea that a loan to the pub business was understood to be a loan to a business in which the trustees were partners. I do not think, as Mr Halpern submitted, that Mr Shilson’s use of the word “business” was ambiguous. iii) Mr Schavarien’s letter of 7th January 2002 inferred that Bruce’s 50% absolute interest in the pub business had been sold to Jonathan, leaving Bruce’s 50% life interest in his own hands. This too is inconsistent with the idea that the pub business was owned as to 50% by the trustees. Mr Halpern suggested that, since Mr Schaverien was talking about only the life interest in 50% of the pub business, that left the reversion (in effect) in the hands of the trustees. Whilst I suppose such a reversion could relate to the net value of a half share in the business, one would expect that to pass under Bruce’s will (as Mr Preedy suggested to Sarah in his letter dated 30th July 2002). A business has staff, debts and outstandings. Once the partner in such a business dies, the partnership is dissolved and the business is sold or wound up. I do not really understand how the debts in a partnership can revert to the trustees in this situation without an express agreement to that effect. That is a long way from what Mr Schaverein’s letter seems to me to mean. Even Mr Preedy’s letter to Sarah dated 30th July 2002, to which I have just referred, suggests that he thought that 50% of the pub business was held in trust for Bruce, who was running that business. A loan to the pub business would, therefore, be as likely to be a loan to Bruce as to the trustees. iv) When Jonathan’s accountant asked Mr Shilson to draw up a loan agreement between the 2nd defendant and “the Albert Arms”, Mr Schaverien explained to Mr Shilson on 20th December 2002 that 50% of the trading entity that “was owned solely for his lifetime use by Bruce” had been sold to Jonathan and “it is this entity [i.e. the business then run by Bruce and Jonathan] which we refer to as the Albert Arms”. This is inconsistent with the trustees being partners in the pub business before or after the mid-2001 sale of 50% by Bruce to Jonathan. v) Mr Shilson’s 19th February 2003 letter makes it clear that he had up to that time thought that the pub business had passed entirely to Bruce on Jeannie’s death, so that he had not thought at the time the monies were expended or committed that the trustees had any interest in the pub business. I say this, not because of the first sentence quoted above that recites that Jeannie and Bruce originally owned the trade furnishings, fixtures and fittings and goodwill of the pub business (reflecting the Will). That sentence does not indicate what Mr Shilson thought about who owned the pub business after Jeannie’s death, since only the “trade furnishings, fixtures and fittings and goodwill” are mentioned, not the pub business itself. But the second sentence cited above does make it clear that Mr Shilson thought (then on 19th February 2003) that Jeannie’s partnership share did not pass to Bruce by survivorship but came into the estate. That shows that, before changing his mind, he had thought that the Bruce acquired the entire pub business on Jeannie’s death by survivorship. That may not be the correct legal analysis, but it is inconsistent with any understanding that the trustees retained half the pub business after Jeannie’s death.[55]Mr Halpern placed, as I have said, great emphasis on paragraph 9 of Mr Shilson’s statement. It said simply that he and Mr Preedy “expected such loan [from Jonathan or his company] to the trust to be repaid either on a sale or refinancing”. The judge said this was ambiguous because Mr Shilson did not say clearly that the loan was to the trustees of the Property, and was anyway inconsistent with his letter of 4th December 2000 saying that the loan was to the business. I think he was entitled to reach these conclusions, not least because, even if paragraph 9 is taken at face value, it is flatly inconsistent with the contemporaneous correspondence as I have already explained. He was also entirely justified in finding as a fact that the loans made by the appellants in respect of the renovations were actually made to the business, not to the trustees.[56]The argument that the trustees had asked Jonathan to take over the business goes, I think, nowhere. They were responsible both for the Property and for administering the Will trust. They plainly wanted to protect the value of the Property. The request gives no indication that the trustees were partners themselves in the pub business; quite the reverse. The fact that they asked Jonathan to run the business with Bruce points the other way. There was no indication that they asked Jonathan to run the business for them, nor that they, as trustees, intended to pay him for his services. Rather, he was asked to run the business on the basis that profits would be retained and liabilities would be satisfied by the proprietors of the business – originally Bruce, but then Bruce and Jonathan. The Will itself expressed the wish that he should assist Bruce in running the business for reasonable remuneration – from Bruce – not from the trustees.[57]I have already alluded to the judge’s findings. Whilst he did not say expressly that Mr Shilson did not proceed on the basis that the trustees were partners in the pub business, that was the clear implication from what he did say, namely that Mr Shilson’s 4th December 2000 letter said that that he thought that Bruce ran the business after Jeannie died, and that, whilst Mr Preedy always thought that Jeannie’s share of the business had passed on her death to the trustees, Mr Shilson only came round to that way of thinking by the time of his 19th February 2003 letter.[58]I endorse the judge’s point at paragraph 86 of his judgment that it was inconceivable that Mr Shilson as a solicitor and Mr Preedy as an accountant, would have agreed to taking a substantial loan as trustees without a formal agreement and discussion with the beneficiaries, of which there is no trace.[59]Before leaving this issue, I should deal with the overall justice of Jonathan’s case, which is really based on what was described at the trial as his “wider case”. That is that the beneficiaries of the Will all agreed that Jonathan ought not to have to pay personally for the renovations that benefitted the Property. Those renovations maintained the Property and it is simply unfair that Jonathan should have had to finance them alone. All the beneficiaries tried to obtain a loan from the bank, and only when that failed did Jonathan do the decent thing and pay for them himself. This argument has much to recommend it in terms of common-sense, but it is problematic, I think, because what actually happened was that the parties never did agree anything. Not only that, there never was a shared understanding of how the monies that Jonathan had spent were to be treated. The correspondence makes this abundantly clear. Estoppels are indeed intended to meet the justice of the case. But they must be based on legal principle, not a vague idea that somehow someone will be able to obtain repayment of monies expended for a worthy purpose.[60]I would, therefore, associate myself with the judge’s conclusion at paragraph 127 to the effect that Jonathan’s problem has been that he paid for the renovations without securing any clear commitment from anyone as to who should repay the monies he was expending. The business to which Jonathan was lending the money was, as the judge said, first Bruce, then Bruce and himself, and finally just himself. I can rephrase the judge’s perceptive remark: Jonathan’s attempts to found a claim for proprietary estoppel, for a contractual licence and latterly an estoppel by convention, have foundered on the need for promises or at least expectations created or acquiesced in by the persons he sought to make liable. No such promises were made, and in my judgment, no such expectations were, in any event, legitimately created.[61]In these circumstances, in my judgment, the appellants’ new case falls at the first hurdle. There was, in my judgment, no common understanding that the that the trustees were partners in the pub business with a 50% share, or that they were jointly and severally liable to repay any loans made by the appellants to the pub business. Mr Shilson may have had an understanding that the trustees acquired 50% of the pub business on Jeannie’s death – but that was not until February 2003, after the costs of all the renovations had been committed. There is no evidence that Jonathan relied on any such common understanding in commissioning or undertaking either the 1999/2000 or the 2003 renovations. In these circumstances, the fact that Mr Preedy may have had some misapprehension is irrelevant, since it was a misapprehension that was shared with neither Jonathan, his accountant nor Mr Shilson.[62]There is in these circumstances no need for us to deal with the interesting questions of authority that the parties have put before us. It is not suggested that Mr Preedy had ostensible authority to bind Mr Shilson – only the other way round. There is, as I have said, no basis for the contention that Mr Shilson shared any relevant misunderstanding with Jonathan at the relevant times, so the question of whether Mr Shilson had authority to bind Mr Preedy cannot affect the outcome of this appeal.

Disposal

[63]In these circumstances and for the reasons I sought shortly to express, I would dismiss this appeal.[64]I agree.[65]I also agree.

Cited in 13 later judgments

and 4 more of the most senior