Day v Day [2005] EWHC 1455 (Ch)

Case No HC 04C00445[2005] EWHC 1455 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London WC2A 2LLDate 23 June 2005
Before
MR L HENDERSON QC
Between
LILIAN DAYClaimantPHILIP JOHN DAYDefendant
Mr Adrian Davies (instructed by Fenwick & Co, Caroline House, 55 High Holborn, London WCIV 6DX) for claimantMr Daniel Margolin (instructed by Turner & Debenhams, Ivy House, 107 St Peter’s Street, St Albans, Hertfordshire ALl 3EW) for defendant
Hearing HEARING DATES: 9 AND 10 MAY 2005
JUDGMENTINTRODUCTION AND BACKGROUND
[1]This is a sad family dispute about the beneficial ownership of the proceeds of sale of 1 Hubbards Road, Chorleywood, Hertfordshire (“the property”), which was sold in September 2001 following the death of the registered proprietor, Elsie Winifred Day (“Elsie”), on 10 April 2001. The net proceeds of sale of the property amounted to £193,875.37.[2]The claimant, Mrs Lilian Day, is a widow now aged 72. She was Elsie’s daughter-in-law, having married Elsie’s son John Samuel Day (“John”) in 1952. John was the eldest of Elsie’s five children. He was born on 16 March 1930 and died on 8 June 1992, nearly nine years before his mother. One of his sisters, Mrs Mary Adams (“Mrs Adams”), was the executrix of Elsie’s last will dated 22 September 1989. In that capacity, she sold the property after Elsie’s death.[3]The claimant and John had seven children, four sons and three daughters. Their eldest son, Philip Day (“Philip”), is the defendant. He was born in 1953. He is unmarried and has for many years lived with his partner, William Coombes (“Mr Coombes”), at Elstree in Hertfordshire. By her last will Elsie left the property to Philip, and it was accordingly to him that Mrs Adams paid the net proceeds of sale of the property after it was sold.[4]The remaining six children of the marriage are Maureen Folkes (“Maureen”, born in 1956), Kevin Day (“Kevin”, born in 1957), Jacqueline Grozny (“Jacqueline”, born in 1958), Garry Day (“Garry”, born in 1962), Jeanette Croft (“Jeanette”, born in 1959) and Stephen Day (“Stephen”, born in 1964).[5]Maureen and her husband Malcolm Folkes were in fact the purchasers of the property from Mrs Adams. There is no suggestion that the sale to them was at anything other than a full market price.[6]The basic background facts which give rise to the present dispute are not controversial, and I will now set them out.[7]Elsie was born in 1909, née Smith. Her husband William Day, like her sons and most of her grandsons (but not Philip), worked in the painting and decorating trade. According to Kevin, the Day family had been in this line of business “for many years and generations”. The property was a Council house built shortly after the end of the Second World War. William Day and Elsie were the original tenants. They lived there from 1947 onwards and brought up their family there. As I have said, there were five children, the eldest of whom was John.[8]William Day died in 1978, leaving Elsie as the sole tenant of the property. The Council landlord was by now Three Rivers District Council. She lived there alone, as the children had all left home. However, John and Mrs Adams remained in the Chorleywood area. They both had a close relationship with their mother and visited her regularly.[9]John and the claimant lived in a council house in Edinburgh Avenue in Mill End, which they had originally rented in 1955 and where they had brought up their seven children. In about 1978, before the introduction of the right to buy legislation in the Housing Act 1980, they were able to buy their house from the council.[10]In 1985, John thought that it would be a good idea if Elsie exercised her right to buy the property under the right to buy scheme. As she had been living at the property for some 38 years, she would be entitled to buy it at the maximum discount of 60 per cent from its market value. However, she had no money of her own as she lived on a pension and had no other income. John discussed the matter with her, and it was agreed between them that he would put up the money to buy the property. What else, if anything, was agreed or understood between them is in issue, and is the crucial question in this action to which I will return in due course.[11]On 29 April 1985 the property was sold to Elsie by Three Rivers District Council for £14,900. The market value of the property for the purposes of the right to buy legislation is agreed to have been £37,250, and the 60 per cent discount to which she was entitled was therefore £22,350. The property was transferred into Elsie’s sole name, and was subject to the usual restrictive covenants under which a proportion of the discount would be repayable to the Council if the property was sold or otherwise disposed of by her within a period of three years. (The period was originally five years, but it was reduced to three years by virtue of subsections 2(3) and (4) of the Housing and Planning Act 1986.)[12]It is common ground that the £14,900 was in one way or another provided by John. It seems likely, although direct evidence of this is lacking, that he borrowed most if not all of this sum (and perhaps some additional money as well) from his bank, National Westminster Bank plc. The office copy Land Registry entries in the bundle reveal that the bank took a registered charge over the property on the same day as the purchase was completed. Plainly Elsie would have been in no position to take out a loan by herself, and even if (which I doubt) she was a joint borrower with John, it must have been his covenant on which the bank relied and he who made the repayments. The more likely scenario, in my view, is that John was the sole borrower, and Elsie agreed to charge the property to the bank as security for the loan.[13]It is unfortunately not clear whether Elsie had the benefit of any legal advice when the property was purchased. However, there is no doubt that at or about the same time as the purchase she made a will leaving the property to John. This will has not survived, but Mrs Adams remembers witnessing her mother’s signature on it, and in her oral evidence she said that she was the executrix, just as she was to be under the later (and last) will made by Elsie in 1989. There is no suggestion that the earlier will was a home-made document, and I see no reason to doubt the claimant’s evidence (based on what John told her) that it was drawn up by a solicitor whom he and Mrs Adams had instructed on their mother’s behalf.[14]In the early to mid 1980s John set up business on his own account as J S Day & Sons, having previously carried on business in partnership with his brothers. Kevin and Stephen joined their father in the new enterprise, but as employees not as partners. Kevin had previously had a good job working for British Gas, where he was responsible for all their head office decorating. He took redundancy from this job in order to join his father. To begin with J S Day & Sons had plenty of work, but according to Kevin his father was not a good manager and after a couple of years the business ran into debt. Some time in 1985 John told Kevin and Stephen that he wanted to leave the decorating business and move with the claimant to Wales to start up a new business. As the claimant puts it, “my husband and I wanted to do something different”. After discussions, Kevin and Stephen agreed to take over the business of J S Day & Sons including the bank overdraft which then stood at about £20,000. Kevin also injected £20,000 of his own into the business, which he raised by mortgaging his home.[15]The move to Wales took place in 1986, when John and the claimant sold their house on Edinburgh Avenue. The claimant had been brought up in Tredegar in Wales, and she had several relations in the area. With the proceeds of sale of the Edinburgh Avenue property, John and the claimant bought a bungalow, and soon afterwards a larger house, in Tredegar. John also purchased a fish and chip shop in a shopping mall, where he began to carry on business. To begin with the business was a success. No doubt encouraged by this, Jeanette soon moved to Tredegar with her young family, and lived with John and the claimant.[16]Although direct evidence is again lacking, it seems probable that it was at the time of the move to Wales that John repaid the loan from the bank which was secured on the property.[17]As the fish and chip business was prospering, John decided to expand his business operations by starting a snooker hall. He was able to rent premises above the fish and chip shop which he fitted out with six snooker tables and a bar. The snooker tables were leased, and because the amount involved was substantial John needed to find a guarantor of his liabilities to the leasing company. He asked Kevin, who agreed to assist his father and gave a guarantee for around £20,000 to the leasing company. As the business expanded, various members of the Day family and relations of the claimant worked for John in different capacities. The business was never incorporated, and John carried it on at all times as a sole trader.[18]Unfortunately, however, the business started to run into financial difficulties, and by 1989 (if not earlier) John was becoming seriously concerned about its viability and the prospect that he might be made bankrupt. While living in Wales John would often make visits back to Chorleywood, for example to see his bank manager. It was during one such visit, in September 1989, that he made an appointment for Elsie to see a solicitor with a view to changing her will. He had no doubt discussed the matter with her beforehand, and an unpaid invoice in the bundle from the solicitor (Mr Richard D Wilson of 66A Lower Road, Chorleywood), made out to the claimant and dated 15 April 1989, indicates that a draft will had already been prepared for her by that date. However, nothing was actually done until September, when John asked Philip to accompany him and Elsie on the visit to the solicitor.[19]The result of the visit was the execution of Elsie’s last will, which as I have already said was dated 22 September 1989. By clause 1 she revoked all former wills and testamentary dispositions. By clause 2 she appointed Mrs Adams to be her executor and trustee. By clause 3 she left the property to Philip, in the following terms:
“I BEQUEATH 1 Hubbards Road, Chorleywood to PHILIP JOHN DAY.”
By clause 4 she left the residue of her estate to her four children other than John in equal shares absolutely. Clause 5is a professional trustee’s charging clause. The will was witnessed by the solicitor, Mr Wilson, and by one Jill Rees, who I assume was Mr Wilson’s secretary.[20]Apart from the bare facts which I have recited above, the circumstances surrounding the execution of the 1989 will, and the reasons why Elsie then gave (or purported to give) the property to Philip instead of John, are in issue, and I will return to them later. It is, however, convenient to record at this stage that, although Mr Wilson is still alive, he has not been called as a witness and his file is apparently no longer available. In a handwritten letter to Philip’s solicitors dated 4 January 2005, which is exhibited to Philip’s witness statement, he confirms that the 1989 will was drawn up by him, and says:
“On reviewing the paperwork I do not know why Elsie Day left the legacies in the will and left [the property] to Philip Day. I only carried out Elsie Winifred Day’s instructions. As you appreciate the events took place 16 years ago.”
[21]Later in 1989 the business ran into severe financial difficulties, and in 1990 the house in Wales and the business were sold up. In June 1990 John and the claimant returned from Wales to Chorleywood, and as they had nowhere to go Philip allowed them to live in a mobile home on 14 acres of land leased by him in Elstree and used as a pet hotel. Meanwhile, on 5June 1990 Bass Brewers Limited served a statutory demand on John claiming payment of a debt of about £31,500. A bankruptcy petition founded on the demand followed on 3 August 1990, and on 21 September 1990 John was adjudicated bankrupt. On 9 October 1990 the Official Receiver was appointed as his trustee in bankruptcy.[22]In a report to the court in the bankruptcy proceedings dated 29 November 1990, the Official Receiver stated that John had failed to surrender to the bankruptcy proceedings and the Official Receiver was not aware of any assets. The known unsecured liabilities totalled £32,000, there were no fully secured creditors, and there appeared to be no prospect of a distribution to creditors.[23]John’s health collapsed under the strain of the loss of his business and the bankruptcy proceedings, and on 5 September 1990 he underwent major abdominal surgery at Barnet General Hospital, after being admitted as an emergency. He recovered from the operation, but it was a very difficult time for him and the claimant. Eventually, after a year or so in the mobile home, they moved in with Jacqueline in Mill End and lived with her for about six months. They were then allocated a council flat in sheltered accommodation, where the claimant still lives today. John died on 8 June 1992, aged 62 and still an undischarged bankrupt.[24]The collapse of John’s business also brought financial ruin on Kevin. He was called on to honour the guarantee he had given, and he and his wife were forced to sell their house. In addition, the business which he and Stephen had taken over from their father failed, and he lost all of the money which he had put into it.[25]The rest of the story can be briefly told. I have already summarised the main stages in it at the beginning of this judgment. Elsie died on 10 April 2001, and on 2 August 2001 probate of her will was granted to Mrs Adams. On 4 September 2001 the sale of the property to Maureen and Malcolm Folkes was completed. The agreed purchase price was £195,000.There was no outstanding mortgage on the property, although the National Westminster Bank still held the title deeds. The assets in Elsie’s estate, apart from her interest in the property, amounted to barely £2,000, and were insufficient to cover the liabilities and expenses of administration. Accordingly Philip had to introduce funds of £1,400 in order to enable the administration to be completed. The net proceeds of sale of the property, at Philip’s insistence and with the agreement of the executrix, Mrs Adams, were paid to Philip directly by the solicitors handling the sale. They amounted to £193,875.37. At the conclusion of the administration there remained a positive balance of £31.51 which was repaid to Philip.[26]Later in September 2001 Philip made various payments to members of the family out of the proceeds of sale of the property. He paid £4,500 to Jeanette, £5,250 to Garry, £5,250 to Kevin and £5,000 to Jacqueline. The explanation for the differing amounts is that he intended in principle to provide each of them with £5,000, but he took it upon himself to reduce the amount paid to Jacqueline by two sums of £250 which he believed she owed to Kevin and to Garry’s wife Caroline, and to increase the amounts paid to Kevin and Garry accordingly. He paid nothing to Maureen, because in his view she had failed to honour a promise to give £5,000 to the claimant. The only lump sum which he gave to the claimant was a sum of £2,000 for her to open a bank account. Apart from that, he confined himself to making 10 monthly payments to her of £100 between June 2002 and March 2003.

THE RIVAL CONTENTIONS

[27]Against this background, the rival contentions advanced on behalf of the claimant and Philip may be summarised as follows.[28]The claimant’s primary contention is that it was the common intention of Elsie and John when the property was bought from the council in 1985 that it should be a home for Elsie for the rest of her life, and thereafter should belong to John. It is therefore alleged in paragraph 9 of the particulars of claim that Elsie held the property “on a common intention constructive trust for herself for life, with remainder to [John]”. An alternative contention in paragraph 10 of the particulars of claim that she held the property on resulting trust for John absolutely is no longer pursued, and the claimant’s fallback position is that Elsie held the property on a resulting trust for herself and John in the ratio of 60:40, treating the value of her right to buy discount for this purpose as a contribution to the purchase price.[29]Philip’s primary contention, by contrast, is that the sum of £14,900 which John contributed towards the purchase of the property was intended by him and Elsie to be a gift, and took effect as such. The result on this analysis is that Elsie was the sole beneficial owner of the property, and was entitled to dispose of it by her will as she thought fit. Her initial intention, given effect in her 1985 will, was to leave the property to John; but in 1989, in the light of John’s financial difficulties and the risk that he might be made bankrupt, she made her second will leaving the property to Philip.[30]Philip’s fallback position is the same as the claimant’s, namely that Elsie held the property on resulting trust as to 60 per cent for herself and as to 40 per cent for John.[31]It is convenient at this point to record certain matters that appear to be common ground.(1) First, it is not in dispute that, if and insofar as John had any beneficial interest in the property, the claimant is now entitled to claim it in this action. This follows from a series of assignments of claims and/or causes of action by John’s trustee in bankruptcy (appointed in substitution for the Official Receiver in March 2002), by individual creditors, and by Mrs Adams in her capacity as Elsie’s executrix. Since there is no dispute about any of this, it is unnecessary for me to say any more about the assignments.(2) Secondly, it is agreed for the purposes of each side’s fallback position that I should treat the value of Elsie’s right to buy discount as if it were a contribution by her to the purchase of the property, even though the discount is strictly speaking not part of the purchase price and (as the Court of Appeal made clear in Ashe v Mumford [2001] BPIR 1) there is no absolute rule that the discount is to be given a monetary value and treated as if it were a contribution to the purchase price.(3) Thirdly, there is no discernible difference between the parties about the principles upon which a common intention constructive trust may be found to exist, derived from the line of authorities beginning with Gissing v Gissing [1971] AC 886. I was reminded by counsel for the defendant that any common intention must be one that is communicated between the parties to the transaction, and that as Steyn LJ said in Springette v Defoe [1992] 2 FLR 388 at 394H: “Our trust law does not allow property rights to be affected by telepathy”. (I would add, however, that the actual decision in Springette v Defoe must now be read subject to the illuminating judgment of the Court of Appeal in Oxley v Hiscock [2004] 3 WLR 715).(4) Finally, if the true position is that Philip is not the only person beneficially interested in the proceeds of sale of the property, and they were paid to him by Mrs Adams under an operative mistake of law, it is common ground that he has changed his position and in principle has a good defence to the extent of: (a) the payments which he made to other members of the family as detailed in paragraph 26 above; and (b) the £1,400 which he introduced into the estate, less the £31.51 which was returned to him on completion of the administration, ie £1,368 49. However, on this point see further paragraph 49 below.

THE WITNESSES

[32]I heard oral evidence from, on the claimant’s side, the claimant herself, Mrs Adams, Kevin, Maureen and Malcolm Folkes; and on the defendant’s side from Philip and Mr Coombes. Subject to what I say in the following paragraphs, I am satisfied that the witnesses gave honest evidence and did their best to assist the court, although given the nature of the case and the death of the two protagonists (Elsie and John) the assistance that they were able to give me on the crucial issue was in fact, and through no fault of their own, very limited.[33]The claimant impressed me as a patently sincere witness, but she was prone at times to confusion and her recollections were often hazy. I have no doubt that Kevin is the driving force behind this litigation. Indeed, he admitted as much in cross-examination. The claimant comes from a generation accustomed to leave business and financial matters to the men in the family, and I do not believe that this action would ever have been brought without Kevin’s impetus. However, that is not to say that the claimant is a mere puppet in his hands. She is largely dependent on others for the way in which her case has been presented, but I found her evidence on matters of fact to be generally reliable in its essentials, if not in points of detail. Two matters in particular struck me forcibly. First, the fact that John often told her when they talked about the property that it was his and Elsie’s intention that they would be able to move into it after Elsie’s death and use it as a retirement home, or else they would be able to have it as a retirement nest egg. I am satisfied that conversations along these lines took place, but only before John’s financial troubles and the change to Elsie’s will in 1989. Secondly, I was struck by the strong sense of disappointment that the claimant feels about Philip’s behaviour after he received the net proceeds of sale of the property. She feels that in some way, which was not clearly or consistently articulated either by her or by any of the other witnesses, Philip should have used the money to benefit the family as a whole, and should not have kept the bulk of it for himself. Indicative of Philip’s attitude was her evidence (which was not disputed) that the £5,000 gifts to Kevin, Jacqueline, Garry and Jeanette were made by cheques which Philip enclosed in an envelope addressed to “Mrs Day” and left at her flat without even coming in to see her. There was no covering letter, and only a type-written note with brief details headed “Breakdown of cheques enclosed”. It is not difficult to imagine how hurtful this behaviour must have been to the claimant. The hurt was redoubled when she telephoned to ask Philip what he was doing, and he refused to talk to her.[34]I regret to say that Kevin made a most unfavourable impression on me in the witness box. He came across as an aggressive, self-satisfied bully, ready to tell lies whenever it suited him. He is clearly driven by resentment at his own financial ruin in the wake of his father’s bankruptcy, and sees this litigation as an opportunity to recover something for himself, his mother and other members of the family at the expense of Philip. He was so upset by what he saw as Philip’s failure to do the right thing with the proceeds of sale of the property that he went round to his house to confront him on 20 September 2001. By his own admission, he threatened to turn the house inside out, with Philip and Mr Coombes in it, if Philip did not immediately give him a cheque made out to the claimant for the whole of the proceeds of sale. Having heard the evidence, I find that his threats on this occasion went even further than this and included an explicit threat to break their kneecaps. Not surprisingly, the Police were called and Kevin was asked to leave the house. Before leaving, however, and again on his own admission, Kevin referred to a debt of £1,500 which Philip owed him for decorating work and told Philip (untruthfully) that he had sold the debt to a moneylender, and that “they are the type of people who will use a baseball bat to get their money”. Having seen Kevin in the witness box, I have no doubt that these threats were meant seriously and were intended to frighten Philip.[35]In my judgment it is impossible to rely on Kevin’s evidence in matters where he is self-interested. To give one striking example from his cross-examination, he began by admitting (correctly in my view) that he knew nothing about Elsie’s 1989 will, in common with all the other members of the family apart from Philip, until after her death in 2001. However, he quickly sought to go back on this answer, and claimed with increasing implausibility that he and other family members knew all about the will, that he must have been told about it by Garry or Stephen (neither of whom, conveniently enough, was giving evidence), and that the only people who did not know about it were the claimant and Mrs Adams (who had already given evidence to that effect).[36]I now turn to Philip. I find that his treatment of his mother was in general distant and cold-hearted, and that he did not enjoy a close relationship with her, or indeed with any of his younger brothers and sisters. I also see some force in the suggestions which were put to him in cross-examination that money is his main concern, and he despises the rest of his family for what he sees as their profligacy. Philip denied these suggestions, but I think there is more than a grain of truth in them. A small, but telling, indicator of his character is the fact that when the property was to be sold to Maureen and her husband the price was initially agreed at £190,000, which was itself £10,000 more than the average of the two probate valuations; but two weeks later Philip said he wanted an extra £10,000, and threatened to put the property on the market if this was not agreed. Maureen and her husband were very upset but reluctantly agreed to pay an extra £5,000, and also (according to Philip) to pay £5,000 to the claimant. Since the house in which they were then living had to be vacated within two weeks, they asked Mrs Adams as the executrix if they could move into the property early. She agreed readily, as it had been empty for four months and had suffered minor damage from vandalism. Maureen and her husband accordingly moved in, but four days later a letter arrived through the post from Philip requesting payment of rent until completion of the purchase. Philip only withdrew this request when it was explained to him that the decision to charge rent was a matter for the executrix, and that Mrs Adams refused to countenance the suggestion.[37]Despite these reservations about Philip’s character, I consider that he was in general a truthful witness, although always concerned to try and put everything in the best possible light from his point of view.

DISCUSSION

[38]I can now return to the original acquisition of the property in 1985. It was accepted by counsel on both sides (Mr Adrian Davies for the claimant and Mr Daniel Margolin for the defendant) that their fallback position was logically the starting point, and that it should prevail unless I was positively satisfied on the evidence either that there was a common understanding in the terms contended for by the claimant, or else that John made a gift of his contribution to his mother.[39]Having heard the oral evidence, and carefully considered the submissions on each side, I have come to the clear conclusion that there is no solid evidence to displace the resulting trust analysis, and accordingly that the property was held by Elsie when she acquired it upon trust for herself and John in undivided shares of 60 per cent and 40 per cent respectively.[40]I take first the common intention constructive trust contended for by the claimant. The fatal obstacle to this contention is the lack of any firm evidence that there was indeed an agreement or understanding between Elsie and John at the time when the property was acquired, to the effect that the property was to be hers for the remainder of her life, and that it should then belong to John absolutely. If made out on the facts, the effect of an agreement or understanding in these terms would have been to give rise to a constructive trust under which Elsie was tenant for life of the property under the Settled Land Act 1925, and to leave her with no beneficial interest in the property which she could dispose of by her will. Yet one of the few things which is clear is that she made a will at or about the time when she acquired the property leaving it to John. This presupposes that she had at least some beneficial interest in the property beyond a mere life interest. Furthermore, it seems to me improbable in the extreme that a solicitor would have drawn a will for her in these terms without first making some enquiries about the acquisition of the property, and satisfying himself either that she owned it herself beneficially or that she at least had a beneficial interest commensurate with her contribution to the purchase price which she could dispose of by will together with the legal estate. Had there been clear evidence of an arrangement of the type now contended for, it would have been the solicitor’s duty to advise the claimant of the implications, and to advise that the terms of the trust should be recorded in a declaration of trust or other formal document.[41]I have already said that I was struck by, and accept, the claimant’s evidence, based on what her husband told her, that the property was initially intended to provide them with a retirement home, or a retirement nest egg, after Elsie’s death. However, this evidence does not go nearly far enough to establish the desired constructive trust, because it is equally compatible with a scenario where Elsie had a beneficial share in the property which she then left by will to John. In either case, John would have been the sole beneficial owner of the property after her death; and that is of course what would have happened had it not been for his financial difficulties and the change to the will made in 1989.[42]None of the claimant’s other witnesses was able to add anything of any substance which might support the inference of an agreement or understanding in the terms alleged. This is hardly surprising, since both Elsie and John are dead, and the claimant is better placed than anybody else to say what John’s intentions were. I also find some confirmation of my rejection of the claimant’s primary case in a passage in her cross-examination where she readily accepted that both John and Elsie had contributed to the purchase, that Elsie was to leave the property to John by will, and that it was to be her home until she died. The solution which fits best with an understanding of this nature is in my judgment the resulting trust analysis.[43]I would add, for completeness, that the only basis on which a constructive (as opposed to a resulting) trust was alleged to arise was a common intention of the nature pleaded in paragraph 8 of the Particulars of Claim. I was therefore not asked to approach the question in two stages, as explained by the Court of Appeal in Oxley v Hiscock(which was not cited to me by either side), and to supply or impute a common intention as to the respective shares of John and Elsie if I was first satisfied that it was their common intention that each should have a beneficial interest in the property. In the circumstances it is enough to say that nothing which I heard leads me to think that adoption of that approach would have led me to a different conclusion, and if it were a question of imputing a common intention in the light of all the material circumstances, including the acts and conduct of the parties after the acquisition, I would have held that the right answer was still to treat their shares as being commensurate with their contributions to the purchase price.[44]I must now give my reasons for rejecting Philip’s primary case that John made a gift of his contribution to his mother. My main reason is that it seems to me inherently most improbable that John would have been content to provide the whole of the cash needed to purchase the property without acquiring any stake in it. The suggestion that Elsie should exercise her right to buy came from him, and it was not an easy matter for him to raise the necessary money. Kevin says (and I accept his evidence on this point) that John initially suggested that he and Kevin should each contribute half of the necessary money. Kevin said he would consider the proposal, but let the matter drop and heard no more about it until after the purchase had been completed. In the event, it seems likely (as I have already said, and as I find to be the case on the balance of probabilities) that John found the necessary money by borrowing from the bank, which took a charge over the property. To my mind, the fact that he had to borrow in order to fund the purchase greatly strengthens the inference that he never intended to make a gift of the £14,900 to his mother. I am further encouraged in drawing this inference by Philip’s frank admission in cross-examination that his evidence that the money was a gift was no more than a guess, and his acceptance that John was not such a wealthy man that he could contemplate making a gift of £15,000 to his mother for nothing in return.[45]The main factors relied on by Philip as supporting the alleged gift are:(a) the fact that Elsie left the property by will to Philip (and before that to John);(b) the fact that John, who was present when Elsie visited the solicitor who drew the 1989 will, never contended then or at any subsequent date that Elsie was not absolutely entitled to the property and able to dispose of it as she pleased; and(c) the fact that John never disclosed any interest in the property to his trustee in his bankruptcy. However, these factors largely relate to the position as it was in and after 1989. The only point which is of any relevance to the initial acquisition of the property in 1985 is the fact that Elsie made the first will leaving it to John. I accept that this is a pointer towards absolute entitlement on Elsie’s part, but in my judgment it is decisively outweighed by the pointers in the other direction, and is anyway not a factor to which much weight can be attached if (as I think) the resulting trust analysis is the correct one, because in that case Elsie did indeed own a 60 per cent beneficial interest in the property which she was entitled to dispose of by her will.[46]It remains to consider what difference, if any, is made to the above analysis by the events of 1989. Both common sense, and the evidence of the witnesses, suggest that the obvious purpose of the second will was, as far as possible, to place the property beyond the reach of John’s creditors. To the extent that Elsie had a beneficial interest in the property, this could be safely and properly achieved by changing her will so that the beneficiary of the devise of the property was no longer John but some other member of the family. Elsie was by then an old lady of 79, and it could not be known that she would in fact live for another 12 years. Thus the change in her will removed the risk of her interest in the property falling into John’s estate, either before or during the bankruptcy which was by then looming over him as a very real prospect. John may well also have had it in mind that he could (fraudulently) hope to conceal from a future trustee in bankruptcy that he had an interest of his own in the property, because the legal estate was vested in his mother and he was no longer the named beneficiary under her will. However, if this was indeed John’s intention (and I prefer to make no finding on the point), it does not in my judgment impinge on or in any way invalidate the change in the will. Any impropriety arose from John’s subsequent failure to disclose his existing interest in the property to the trustee, not from the change in the will which could only operate on Elsie’s beneficial interest.[47]In the circumstances, it seems to me that nothing now turns on the precise reasons which prompted Elsie to choose Philip as the beneficiary of her share of the property in place of John. All that matters is that the change was made, and that there has been no challenge to the validity of the 1989 will. The only witness able to give direct evidence of what transpired at the solicitor’s office in September 1989 was Philip himself. His evidence (which I see no reason to doubt) is that it was explained to him:
“that the reason why my grandmother had decided to leave the property to me was because I was the only financially sound person within our family and because I was the only one of my parents’ seven children who had supported my parents, and in particular my father, financially during their financial difficulties.”
I would only add that Philip’s evidence of the financial support which he provided to his parents is very generalised and lacks any documentary support. However, I am prepared to accept that Philip had helped his father by paying at least some of his bills for him.[48]Counsel for Philip advanced an alternative argument to the effect that even if the original intention was that John should have a beneficial interest in the property on the basis of a resulting trust, this was replaced in 1989 by a fresh common intention, in the light of John’s precarious financial position, that Elsie should thenceforth be absolutely entitled to the property and the £14,900 should be treated as a gift, even though it was not one originally. In my judgment this is an impossible contention, both on the facts and as a matter of law. On the facts, I am unable to find any support for such a radical change in the nature of the understanding between John and his mother. As a matter of law, any disposition by John of his existing beneficial interest in the property would have had to be in writing and signed by him in order to satisfy the requirements of section 53(1)(c) of the Law of property Act 1925, unless a fresh constructive trust could be found to have come into existence. But that is impossible in the absence of any evidence that Elsie altered her position to her detriment on the strength of the alleged new understanding, in such a way that it would then have been unconscionable for John to assert against her that he was still entitled to his original 40 per cent share.[49]These are the reasons which have led me to conclude that the resulting trust analysis is the correct one, and that it is not displaced by anything which happened in 1989. Accordingly the claimant is in my judgment entitled to 40 per cent of the net proceeds of sale of the property, subject to the defendant being allowed credit for the payments which he made in the belief that he was solely entitled to the proceeds of sale. In his closing submissions counsel for the claimant suggested for the first time that it might be more logical to restrict the credit in these circumstances to a corresponding proportion of the payments made by Philip, ie to 40 per cent of them. However, counsel for Philip was in my opinion right to resist this suggestion. Quite apart from the fact that the right to a full credit is admitted without qualification in the claimant’s Reply, the essence of a defence of change of position is that a person has altered his position to his detriment in the mistaken belief that a particular state of affairs existed. The state of affairs which Philip mistakenly believed to exist was that he was the only person beneficially entitled to the proceeds of sale. It was on the strength of that mistaken belief that he made the payments, and he parted with the money irrevocably. There is no evidence to suggest that he would have made smaller, or indeed any, payments if he had known that his beneficial entitlement was only to 60 per cent of the proceeds, and that the remaining 40 per cent fell into John’s estate.[50]In conclusion, there are two further matters which I should mention before parting with this case.[51]The first matter again arose for the first time in the claimant’s closing submissions. Counsel sought to suggest that a new case could arguably be made out on the evidence, to the general effect that Philip was never intended to take the property beneficially and it was always understood within the family that he would hold it as a trustee for the benefit of the claimant, or possibly, if the terms of the trust could not be spelt out with sufficient clarity, on a resulting trust for Elsie’s estate. I was invited to consider allowing an amendment to the particulars of claim to enable this to be pleaded, or at least to make specific findings of fact which would be relevant to the contention. I declined the invitation and ruled that it was now much too late for any such radical restructuring of the claimant’s case. By way of amplification of that ruling, I would make the following additional points:(1) The nature of the case that the claimant wishes to advance had already been through a number of transformations before the particulars of claim were served on 17 November 2003. At least one of the earlier, rejected, versions bears some considerable similarity to the sort of case that is now suggested. In my judgment fairness to the defendant requires that he should only have to meet the case which has been actually pleaded against him, after consideration and rejection by the claimant and her legal advisers of possible alternative causes of action.(2) The case that is now suggested would presumably depend on some form of secret trust which was accepted by Philip when the second will was executed in 1989, or at any rate before Elsie’s death in 2001. No surviving members of the family would be able to give direct evidence of the circumstances in which any such trust might have arisen, and again I think it would be unfair to Philip to require him at this stage to meet a case that could only be based on surmise and hearsay.(3) It would also be unfair to Philip to allow a new case to be based on answers which were given by witnesses in cross-examination to questions directed to the issues as they are, and not to the issues as they might be in a differently pleaded case.(4) In any event, none of the evidence which Iheard came anywhere near persuading me that a claim of this nature would have any realistic chance of success. There is undoubtedly a widespread feeling in the family that Philip has not done the right thing by his mother, and that in one way or another she was meant to benefit from the property, or at least to be able to decide for herself what should be done with the proceeds of sale. But generalised statements of dissatisfaction of this nature, which are easy to make and difficult to rebut in an unhappy family atmosphere, are very far removed from the clear and cogent evidence that would be needed to establish the existence of a secret trust.[52]The second matter concerns an application which was made by the claimant a few days before the start of the trial, by application notice dated 29 April 2005, for an order that the defendant be restrained from relying at the trial on some sixteen items in his list of documents. The evidence in support of the application, contained in witness statements by the claimant and Kevin, alleged that these documents were originally contained in a file which the claimant took with her to a family meeting arranged by Jeanette at her home in about April 2002, to which Philip and Mr Coombes had also been invited, and that Philip took them and copied them without her knowledge or permission. The documents are all, or virtually all, prima facie covered by legal professional privilege, and consist of correspondence between the claimant’s present solicitors and Kevin, notes of evidence, draft witness statements, and so forth. This material was placed in a separate bundle, Bundle B, which was not disclosed to me before the start of the trial. I was reluctant to deal with the question as a preliminary issue, because it seemed likely that it would involve making findings of fact and assessments of credibility about this one episode in isolation, before I had heard the full story and had had the opportunity to place it in context. It was therefore agreed that I should if necessary rule on the point later in the trial, after I had heard the evidence of the witnesses, and that they could then be recalled if need be in order to deal with the new material if I decided to admit it.[53]In the event it proved unnecessary to rule on the point, because it soon became clear from the claimant’s own evidence that she had in fact been perfectly happy for Philip to read and look at the material, although she does not now recollect having given him permission to take copies of it. I should say that the evidence filed on behalf of Philip contends that he also had his mother’s permission to copy the documents. In these circumstances it seems clear that privilege was waived by the claimant, with the result that the documents would in any event have been liable to disclosure in the action even if Philip did not already have copies of them. Towards the end of the first day of the trial, after the claimant, Mrs Adams and Kevin had given evidence, the claimant’s counsel wisely decided to abandon any objection to the admissibility of Bundle B, subject to the question of costs. The bundle was then handed in, and the claimant and Kevin were recalled to answer questions about the new documents. This further evidence was in fact fairly short, and only a few of the documents were put to the witnesses. The only points of any importance to emerge were, first, further confirmation that Kevin was the driving force behind the litigation and, secondly, the extent of the inconsistencies between the claimant’s case as it is now pleaded and some of the contentions advanced on her behalf at an earlier date, notably in an undated witness statement signed by Kevin.

CONCLUSION

[54]For the reasons I have given this action succeeds, but only on the basis of the claimant’s secondary contention. I would be grateful if counsel would consider the appropriate form of order in the circumstances.

Cited in 1 later judgment