England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE.
COURT OF APPEAL.
Appeal by plaintiff from judgment of
His Honour Judge Duveen on 4th August, 1971,
at Reading County Court.

		Royal Courts of Justice.
		22nd June 1972

THE MASTER OF THE ROLLS: This case is of very considerable interest. Hussey v Palmer is getting on in years. She is well over 70 and an old age pensioner. In 1967 she had a little house which was in a very dilapidated condition. It was condemned. She sold it for the sum of £l,100. She had a daughter who was married to a Mr. Palmer. Mr. and Mrs. Palmer had two children, and lived at No. 9 Stanley Road, Wokingham. It belonged to Mr. Palmer. When the mother sold her little house, the young couple invited her to go and live with them. That often happens. But there was not much room for them all. So they built on a bedroom as an extension for the old lady. She paid for it. She paid £607 for it in June and September, 1967. She paid it direct to the builder, Mr. May. Nobody said anything about repayment. No doubt they all thought that the old lady would go and live there, using the bedroom, for the rest of her days. For a few months all went well. The old lady used to make payments to the daughter if she was short of money. But then differences arose. I am afraid that mothers and daughters do not always get on when they are living in the same house. After about fifteen months they could not live in harmony any more in the house. So in March 1968, Mrs. Hussey went and lived elsewhere, leaving the Palmers there in their house. After a year or so, Mrs. Hussey wrote to her son-in-law and said she was very hard up. She asked if he could manage £1 or 30/- a week to help her out. He did not do it. He did not even reply. So she asked for the money back, the £607 which she had paid for the extension. They did not pay. She got legal aid. In April 1970, she took out a default summons in the County Court against Mr. Palmer. She claimed £607 for money lent. Mr. Palmer wrote a Defence in his own hand. He said:

"The payments, made to a builder, were not a loan, but were paid by the plaintiff for her own benefit and at the time the question of repayment was not raised. I assumed that the payments were in effect a gift".

Later on, Mr. Palmer got legal aid too, and, with the help of legal advisers, he put in an amended defence in which he denied liability. He said that "the moneys were only to be repaid in the event of the defendants' house, 9 Stanley Road, Wokingham, being sold within a short period of building works having been completed by the said Mr. May. The said building works were mainly in respect of an extension to the said house, which extension was for occupation by the plaintiff". He also said that "the said agreement was merely a family arrangement and was not intended to have legal consequences".

On 10th February 1971, the case came before the County Court. The Judge was fully occupied with another case. So it went before the Registrar by consent. The Registrar heard the evidence of Mrs. Hussey, and also Mr. Palmer. He intimated a strong view that this was not a loan at all: but that it was a family arrangement. Mrs. Hussey's advisers were so impressed that they submitted to a non-suit, and started a fresh action. This time they issued a plaint claming £607 on a resulting trust. They said that, as she had contributed this £607 towards the extension of the building, at all events Mr. Palmer held the house on trust to repay it at some time or other to her: and that she would have an interest in the house to that extent in proportion to the amount she had contributed.

In July 1971, the fresh action came on for hearing before the County Court Judge himself. Mrs. Hussey went into the witness box and gave her story again. She said of Mr. Palmer: "He said he would build a bedroom for me. He asked me if I would lend him the money. I agreed to lend it to him". In cross-examination she said: "They would give me a home for life, if I wanted it".

The defendant, Mr. Palmer, elected to call no evidence. The Judge felt that, on Mrs. Hussey's own evidence, there was a loan, and not a resulting trust. After some discussion, Mrs. Hussey's counsel sought leave to amend the claim by adding an alternative claim for money lent. The defendant opposed the amendment. So the Judge did not grant it. He made a note, saying: "The plaintiff's advisers decided to drop the claim for loan before the Registrar and have in this action elected not to claim on a loan". So the claim remained on a resulting trust only.

On 4th April 1971, the Judge decided in favour of the defendant. He said in his note for this Court: "I thought that the plaintiff was an honest witness, and at the end of her evidence I was satisfied that I ought to find that the money had been lent by the plaintiff and that there was no ease for a resulting trust......I reserved judgment to see if I could find for the plaintiff on the case pleaded. I could not"

So Mrs. Hussey went away a second time taking nothing. Now she appeals to this Court.

Mr. Owen, on her behalf, rests her case on a resulting trust. He says that, despite Mrs. Hussey's own evidence, there was no loan. I agree that Mrs. Hussey did not lend the £607 to Mr. Palmer. Test it this way: Suppose that, a week or two later, Mrs. Hussey had demanded from Mr. Palmer repayment of the £607, and he had refused. Could she recover it as money lent? and have the house sold up to regain it? Clearly not. The Courts would undoubtedly have said - as the Registrar said here - that it was a family arrangement. There was no intention that it should be repaid on demand. Again, if she had stayed on in the house, making use of the bedroom, could she have sued Mr. Palmer for money lent? Clearly not. There was no intention that it should be repaid whilst she had the benefit of the bedroom. Suppose that she had stayed there until she died, could her executors have sued Mr. Palmer for money lent? Clearly not. There was no intention that it should be repaid after her death.

If there was no loan, was there a resulting trust? and, if so, what were the terms of the trust?

Although the plaintiff alleged that there was resulting trust, I should have thought that the trust in this case, if there was one, was more in the nature of a constructive trust: but this is more a pattern of words than anything else. The two run together. By whatever name it is described, it is a trust imposed by law whenever justice and good conscience require it. It is a liberal process, founded upon large principles of equity, to be applied in eases where the defendant cannot conscientiously keep the property for himself alone, but ought to allow another to have the property or a share in it. The trust may arise at the outset when the property is acquired, or later on, as the circumstances may require. It is an equitable remedy by which the Court can enable an aggrieved party to obtain restitution. It is comparable to the legal remedy of money had and received which, as Lord Mansfield said, is very beneficial and, therefore, much encouraged. Thus we have repeatedly held that, when one person contributes towards the purchase price of a house, the owner holds it on a constructive trust for him, proportionate to his contribution, even though there is no agreement between them, and no declaration of trust to be found, and no evidence of any intention to create a trust. Instances are numerous where a wife has contributed money to the initial purchase of a house or property; or later on to the payment of mortgage instalments; or has helped in a business - see Falconer v. Falconer (1970) 1 W.L.R. 1333; Heseltine v. Heseltine (1971) 1 W.L.R. 343; and In re Cummins (1971) 3 W.L.R. 560. Similarly, when a mistress has contributed money, or money's worth, to the building of a house, Cooke v. Head (1972) 1 W.L.R. 518. Very recently a purchaser has been held to hold on trust for an occupier - Binions v. Evans (1972) 2 WLR 729. In all those cases it would have been quite inequitable for the legal owner to take the property for himself and exclude the other from it. So the law imputed or imposed a trust for his or her benefit.

The present case is well within the principles of those cases. Just as a person, who pays part of the purchase price, acquires an equitable interest in the house, so also he does when he pays for an extension to he added to it. Mr. Owen has done a lot of research and has found a case in 1858 to that very effect. It is The Unity Joint stock Mutual Banking Association v. King (1858) 25 Beavan 72. A father had land on which he built a granary. His two sons built two ether granaries on it at a cost of £1,200. Sir John Romilly, Master of the Rolls, held that the two sons had a lien or charge on the property as against the father, and any person claiming through him. The father had never promised a pay the sons the £1,200. He was not indebted to them la that sum. He had never engaged or promised to make over the land to them or to give them a charge on it. Yet they had a lien or charge on the land. That case wag approved by the Privy Council in Chalmers v Pardoe(1963) 1 W.L.R. 677, where it was said to be based on the "general equitable principle that it would be against conscience" for the owner to take the land without repaying the sums expended on the buildings. To this I would add Inwards v. Baker (1965) 2 QB 29, when a son built a bungalow on his father's land in the expectation that he would be allowed to stay there as his home, though there was no promise to that effect. After the father's death, his trustees sought to turn the son out. It was held that he had an equitable interest which was good against the trustees. In those eases it was emphasised that the Court mast look at the circumstances of each ease to decide in what way the equity can be satisfied. In some by an equitable lien. In others by a constructive trust. But in either ease it is because justice and good conscience so require.

In the present case Mrs. Hussey paid £607 to a builder for the erection of this extension. It may well be, as the defendant says, that there was no contract to repay it at all. It was not a loan to the son-in-law. She could not sue him for repayment. If she had stayed there until she died, the extension would undoubtedly have belonged beneficially to the son-in-law. If, during her lifetime, he had sold the house, together with the extension, she would be entitled to be repaid the £607 out of the proceeds. He admits this himself. But he has not sold the house. She has left, and the son-in-law has the extension for his own benefit and could sell the whole if he so desired. It seems to me to be entirely against conscience that he should retain the whole house and not allow Mrs. Hussey any interest in it, or any charge upon it. The Court should, and will, impose or impute a trust by which Mr. Palmer is to hold the property on terms under which, in the circumstances that have happened, she has an interest in the property proportionate to the £607 which she put into it. She is quite content if he repays her the £607. If he does not repay the £607, she can apply for an Order for sale, so that the sum can be paid to her. But, the simplest way for him would be to raise the £607 on mortgage and pay it to her. But, on the legal point raised, I have no doubt there was a resulting trust, or, more accurately, a constructive trust, for her, and I would so declare. I would allow the appeal, accordingly.

LORD JUSTICE PHILLIMORE: I agree. It is common ground that Mrs. Hussey paid £607 to enable her son-in-law to have an extension made to his house in which she was going to live. It is quite clear that she did not intend to make him a gift of the money. She herself said she regarded it as a loan. It is true that the son-in-law in his defence said that he assumed the money was paid by her as a gift to him; but in a later amended defence he said that she was to be repaid if the house was sold at an early date. That clearly does not fit with a gift: it goes a long way to confirm her case that it was not a gift. Here is an example if what so often happens. This mother-in-law advanced money to improve the property of her son-in-law. She did not intend to make a gift of the money. She could not afford to do that. No terms of repayment were agreed except perhaps in the event of the house being sold at an early date. She has described it as a loan, and that might be true. I do not for myself think that it would be inconsistent with the transaction also being or involving a resulting trust. In all the circumstances here, in the absence of clear arrangements for repayment and in circumstances where repayment on demand might be very difficult for the son-in-law, I should have thought it was more appropriate to regard it as an example of a resulting trust; and I would accordingly entirely agree with my Lord that she has an interest in this house proportionate to the £607 which she paid. It follows that this appeal should be allowed.

LORD JUSTICE CAIRNS: I am afraid I differ from my Lords in this case; and, but for the fact that they have both taken the view that the plaintiff was entitled to succeed, I should have regarded this as a plain case where she had failed to establish the cause of action which she set up. Having in an earlier action alleged that this money was lent by her to the defendant, having elected to be non-suited in that action, she then starts this fresh action in which her case is based solely upon the claim of a resulting trust. She then gives her evidence and in the course of it she says this:

"When I sold my house my son-in-law suggested that I should live with him as long as I liked to stay there. My daughter agreed. I went to see him one night and he said he would build a bedroom on for me. He asked me if I would lend him the money. I agreed to lend it to him".

Later she referred to going to the bank manager with her son-in-law, and said:

"My son-in-law told the bank manager that he would like me to lend him the money. As I lent the money, I expected to receive it back. As it was a loan I expected it back.....While living with my son-in-law he said he was going to Cornwall and would sell his Wokingham house, and try and buy a house and repay me what he owed me".

And in cross-examination:

"I did not give my son-in-law the money - I lent it to him".

In my view it is going a very long way to say that, all that evidence having been given by this lady, there was some misunderstanding by her of the legal position and that she was describing as a loan something which was not a loan at all. It is to my mind nothing to the point that in all probability no express terms as to repayment were ever agreed. It must be a common thing indeed for a parent or a parent-in-law to make a loan of money to a son or daughter or a son-in-law which both of them know is a loan, as to which it is obvious that there is no immediate prospect of repayment, but which in law is a loan repayable on demand.

In my view that is the position here. As it was a loan, I think it is quite inconsistent with that to say that it could create a resulting trust at the same time. I accept as a correct statement of law the short passage in Underhill on Trusts in the 12th edition, page 210, in these words;

"Where the purchase money is provided by a third party at the request of and by way of loan to the person to whom the property is conveyed, there is no resulting trust in favour of the third party, for the lender did not advance the purchase money as purchaser but merely as lender".

And it seems to me that that proposition is equally applicable where it is not a matter of the property being purchased, but a matter of a builder being paid for an extension to a property which already belongs to the borrower of the money. For these reasons I consider that the plaintiff was certainly not entitled to succeed on the evidence which she had given. As the particulars of claim stood, the only doubt that I could have had about the matter, if my judgment had been decisive, would be as to whether she should simply have the appeal dismissed or whether at this late stage she should have been given an opportunity of amending her Particulars of claim and having a re-trial. I should have been anxious that she should have that opportunity, because I think the strong probability is that one way or another she ought to have get this money back. So far as concerns the inconvenience of having a third hearing? I do not think that is owing to anything done or omitted on the defendant's side. However, in the circumstances it is unnecessary for me to arrive at any final opinion as to which would have been the right course.

Appeal allowed: declaration that there is a resulting trust in respect of the house in favour of Mrs. Hussey - with interest - £600. Legal aid taxation of both parties' costs.