Friday, 10th March 1995
LORD JUSTICE NOURSE: Ever since the decision of the House of Lords in Pettitt v. Pettitt [1970] AC 777 it has been my understanding that, in its application to houses acquired for joint occupation, the equitable presumption of advancement has been reclassified as a judicial instrument of last resort, its subordinate status comparable to that of the contra proferentem rule in the construction of deeds and contracts; see per Lords Reid, Hodson and Diplock at pages 793, 811 and 824 respectively; see also Gissing v. Gissing [1971] AC 886, per Lord Diplock at page 907, and Falconer v. Falconer [1970] 1 WLR 1333, per Lord Denning MR and Megaw LJ at pages 1336A and 1337G respectively. For myself, I have been unable to recollect any subsequent case of this kind in which the presumption has proved to be decisive, even where one of the parties has since died. But here, in a contest between a son and the estate of his deceased father, the decision below has been squarely based on a presumed intention of the father to make a gift of the house to the son.
The father was Haydn Wallis, who was born in 1923 and whose wife died in 1985. They had two children, the plaintiff, Margaret Ann McGrath, who was born in 1952 and was married to Martin Gerard McGrath in 1974, and the defendant, Brian George Wallis, who was born in 1959. In September of that year the father acquired in his sole name a three-bedroomed terraced house, No. 237 Hitchin Road, Luton, which remained the family home for many years. The plaintiff lived there until six months after her marriage in 1974 and the defendant was still living there when his mother died in 1985. In 1984 the father, then 61, was made redundant and he was never afterwards employed. In 1986, 237 Hitchin Road being too large for the needs of himself and the defendant and expensive to maintain, the father decided to sell it and move elsewhere. By that time it was free of mortgage, save for a trivial amount of some £14.
In September 1986 the father entered into agreements, subject to contract, to sell 237 Hitchin Road for £34,500 and to purchase a bungalow, No. 10 Talbot Road, Luton, for £42,995. The agents acting for him in both transactions, which were to be completed simultaneously, introduced him to the firm of Stephens & Price, solicitors of Luton, who agreed to act for him accordingly, the partner responsible being Mr. A.L. Wheeler. Because 10 Talbot Road, although smaller, was more expensive than 237 Hitchin Road, the additional amount necessary to acquire it had to be raised on mortgage. On 25th September 1986 a mortgage offer was made to the defendant by the Gateway Building Society in the sum of £13,000 on terms that he assigned to the society an endowment policy as collateral security. From that date onwards Mr. Wheeler regarded himself as acting for the defendant as well as the father in relation to the purchase of 10 Talbot Road, which was in due course conveyed into the sole name of the defendant.
None of the facts so far stated is in dispute. I now proceed to recount further uncontroversial facts, mainly by reference to some of the documents taken from Mr. Wheeler's files relating to the sale and purchase respectively.
On the file copy of a routine letter written by Mr. Wheeler to the solicitors acting for the purchaser of 237 Hitchin Road on 10th November 1986 there is noted in his handwriting "D of T", being shorthand for "declaration of trust". There is a further such note on a standard form letter written to the firm by the Legal & General Assurance Society Limited, I think bearing the date 11th November 1986, the Legal & General then being in course of processing the defendant's application for an endowment policy. This note appears to be in two parts. On the left is:
"on exchange
copy Bicknell
Trust Deed
80% father
20% son"
To the right of that, in brackets, is "£34,500" and some reference to price. Mr. Wheeler explained in evidence that that was a note to his secretary to get out a trust deed by copying the precedent adopted in the previous case of Bicknell but with shares of the amounts stated. The second part of the note appears on the right. It starts with the figure "£34,500", on the right of which there is the figure "43". Those figures are underlined twice. Underneath we find:
"D of T 80%
& 20%."
£34,500 was the gross sale price of 237 Hitchin Road. It is also 80.24% of £42,995, the net acquisition cost of 10 Talbot Road.
On some date before 1st December 1986, very probably on 25th November, both the father and the defendant attended a meeting with Mr. Wheeler at his office. There is no attendance note or other written record of that meeting, but the defendant gave important evidence of it, to which reference will be made in due course. On 1st December Mr. Wheeler wrote to the defendant at 237 Hitchin Road as follows:
"re:- Your Sale and Purchase
I write to confirm that Contracts have now been exchanged providing for your Sale and Purchase to be completed on the 12th December 1986 as agreed.
Please find enclosed your Deed of Legal Charge together with Deed of Assignment of Life Policy for your signature ..."
Mr. Wheeler asked the defendant to have the deeds executed and returned to him as soon as possible. That letter was correctly addressed to the defendant alone because 10 Talbot Road was to be conveyed into his sole name and mortgaged by him accordingly.
We now come to the puzzle which is central to the outcome of the case. On 3rd December Mr. Wheeler signed a letter addressed to both the defendant and the father in the following terms:
"re:- Declaration of Trust
Further to exchange of Contracts providing for your purchase of 10 Talbot Road to be completed on the 12th December, I now enclose the Declaration of Trust providing that this property shall be held as to 80% shares for your Father and as to the remaining 20% shares for your goodself."
Neither that letter nor the engrossment of the declaration of trust ever left Mr. Wheeler's office. They were found, together with an addressed but unstamped envelope, in his purchase file when the two files were handed over to the solicitors acting for the defendant in these proceedings.
By clause 1 of the declaration of trust the defendant was expressed to declare that he held 10 Talbot Road in trust for himself and the father in fee simple and by clause 2 both parties were expressed to declare that the income and the proceeds of sale of the property should be held in trust for them as tenants in common as to 80% for the father and as to 20% for the defendant. It is also material to point out that the second recital in the declaration stated that the consideration of £42,995 had been provided as to £34,500 by the father and as to the balance by the son. That is as near as anything consistent with an 80%/20% division. It is clear that the declaration of trust was never executed. The sale and purchase were both completed on 19th December. No intervening documents have come to light.
On 19th December Mr. Wheeler wrote to the father alone as follows:
"Re: Your Sale and Purchase
Further to completion of your sale and purchase I am pleased to enclose herewith my Firm's charges invoices together with your Completion Statement and cheque payable in your favour in the sum of £2,864.16 representing the net proceeds from the sale of 237 Hitchin Road after completion of the purchase of 10 Talbot Road."
Enclosed with that letter were three fee notes, all dated 19th December and all made out to the father alone, the first two for £241.50 and £766.90 including VAT for professional charges in connection with the sale of 237 Hitchin Road and the purchase of 10 Talbot Road respectively and the third, headed "Re: Declaration of Trust", for £23 including VAT "To Professional Charges in connection with the preparation of Declaration of Trust".
Also enclosed with the letter of 19th December was a completion statement showing the net proceeds of sale of 237 Hitchin Road to be £33,649.06 and the gross acquisition cost of 10 Talbot Road, including the £23 for the declaration of trust, to be £43,784.90, of which £13,000 had come from the building society. That left £30,784.90 as the amount required to complete the purchase, being £2,864.16 less than the net proceeds of 237 Hitchin Road, which explains why the letter also enclosed a cheque drawn in favour of the father for that amount.
If those figures are examined it will be seen that, whereas the gross sale price of 237 Hitchin Road represented about 80% of the net purchase price of 10 Talbot Road, the amount actually put up by the father for the acquisition of 10 Talbot Road represented a lesser proportion of the gross cost of the acquisition (£43,784.90). He put up the net proceeds of 237 Hitchin Road, £33,649.06, less the £2,864.16 returned to him, leaving a balance of £30,784.90, which is 70.3% of £43,784.90.
The rest of the story can be briefly told. The father died intestate on 6th March 1990, at which stage the defendant was still living with him at 10 Talbot Road. At about that time the defendant's girl friend became pregnant and, after the birth of their first child in December, she moved into 10 Talbot Road, where they have lived together ever since. Their elder child is now aged four and they have another aged three. In June 1990 the defendant paid off the original mortgage on the house and remortgaged it for £21,000.
In October 1990 the plaintiff first made a claim to be entitled to a share of 10 Talbot Road. The defendant denied that she had any such entitlement, but paid her £2,000, he says as a gift, which she accepted as part of her entitlement. He refused to give her any more and, after an abortive attempt to submit the dispute to the advice or decision of two aunts, the parties sought the advice of solicitors. Since the plaintiff's entitlement, if any, to a share of the house arises only via the intestacy of the father, it was necessary for her to obtain a grant of letters of administration to his estate, which she duly did on 12th December 1991. These proceedings were commenced by an originating summons issued in the Chancery Division on 23rd March 1992. They were later transferred to the Luton County Court, where they came for trial before His Honour Judge Simmons on 8th and 9th December 1993.
The original claim made by the plaintiff was for a declaration that the father's estate was entitled to a 75% share in 10 Talbot Road. But when, in the course of the proceedings, the declaration of trust came to light the claim was amended so as to increase that share to 80%. The written evidence before the judge consisted of two affidavits sworn by the plaintiff, one by her husband and one by the defendant. There was also a witness statement by Mr. Wheeler and three letters from him to the defendant's present solicitors, two written before the statement was made and one afterwards.
Although there were clear conflicts between the affidavit evidence of the plaintiff and her husband on one side and the defendant on the other, they were hardly explored at all before the judge. That was because counsel for the defendant, Mr. Dencer, took the view, no doubt correctly, that the defendant's case would not be assisted by putting his version of events to the plaintiff and her husband. In the result, the judge could not and did not make any findings as to those matters and no reference to them need now be made.
The plaintiff and her husband were each cross-examined on one peripheral point only. The defendant, on the other hand, was cross-examined at some length. On two matters, to which reference will be made in due course, his evidence was important. First, I must deal with the evidence of Mr. Wheeler who, although called on behalf of the defendant, gave his evidence before the plaintiff and her husband.
Shortly stated, the position was that in two letters written in August and September 1992 Mr. Wheeler had said that he had little recollection of the matter after five years, but that the original of the declaration of trust and the accompanying letter of 3rd December 1986 would not have been retained on the file without good reason. However, neither the father nor the defendant had contacted him after completion about the declaration of trust. In the second letter he said that "by implication" he was of the opinion that instructions had been received to cancel the preparation of the declaration of trust, but he said that he had no memory of any such instructions being received. In his witness statement Mr. Wheeler really took the matter no further, except to say that he would not have left the declaration of trust on the file without the instructions of the father.
On 1st December 1993, a week before the start of the trial, Mr. Wheeler wrote his third letter to the defendant's solicitors acknowledging receipt of a further copy of his witness statement. He continued:
"On further consideration of this matter I will be able to confirm on Oath that Mr. Hayden Wallis telephoned me to advise that the Declaration of Trust was no longer required. I am unable to recall the exact words used but they were to the effect that his son would receive all his property in any event and for this reason there was no point in proceeding with the deed. I attempted to stop my secretary wasting her time typing out the deed."
Mr. Wheeler sought to keep to that version of events at the trial, but, not surprisingly, he was closely cross-examined on it and in the result the judge rejected that part of his evidence. The judge said:
"That aspect of Mr. Wheeler's evidence is unsatisfactory, and I would not place any reliance on his assertion that he actually had a telephone call from Hayden Wallis withdrawing the instructions in that way. I do not believe that he has any real recollection of it. It may be that his memory is playing him tricks in an effort to rack his recollections about what is clearly an important matter. That is not to say that the retention on the file and the fact that the document was not sent for signature is not important. It is, in my judgment, extremely important."
The judge then proceeded to look at some of the other evidence in the case, but it seems clear that he did not attach significant weight to any of it. Having then referred to the presumption of advancement, to passages in Snell's Equity, 29th Edition, at pages 178, 180 and 181, and to the rival contentions made on each side, he continued:
"I have to decide between those two contentions. In my judgment, it is very significant in this case that the deed was not completed but remained on the solicitor's file, notwithstanding the fact that a bill was rendered to the deceased for its preparation. In my judgment, Mr. Dencer is right when he says that, in all probability, that reflects the reality of the situation, which here was the son, living in the house together with his father, the son being responsible for the mortgage. He had lived with both his parents whilst his mother was alive, and no doubt rendered them some assistance.
He says in an affidavit that he paid for his board and lodging up until 1984, and that this was intended to be a home for each of them. Although the father may have toyed with the idea of advancing 80% of the purchase price of the new house and putting the whole thing in trust for himself and his son, and seeing to it that the son did that, it never was done. Whereas I do view the evidence of Mr. Wheeler about the actual conversations with sufficient suspicion to disregard them, I do not believe that any solicitor could have simply retained that document in his file in the way that it was retained, rendered a bill and simply not had the deed executed or even posted to the parties if there had not been some instructions not to proceed with it.
I accept Mr. Wheeler in so far as he says that had those instructions come from the son, he simply would not have accepted them without reference to the father. What really follows from that in this case is that the plaintiff fails to discharge the burden of proof which is on her to rebut the presumption of advancement. In those circumstances the claim must fail."
The plaintiff now appeals to this court.
At this point it is necessary to refer to the two important matters which were established in the cross-examination of the defendant, who seems to have been a very candid witness. First, having heard Mr. Wheeler's evidence and contrary to what he had said in his affidavit, the defendant recalled the tripartite meeting on 25th November and that it had then been proposed, presumably by Mr. Wheeler, and accepted by the father and himself that there should be a deed of trust in the shares 80% to the father and 20% to himself. It is enough to quote one passage towards the end of his cross-examination:
"Q.You go along to Mr. Wheeler with your father, discussing all the sale of the house and the purchase of the house, and all the other things that are involved, and the mortgage of course, and included in that discussion was who was to actually own the Talbot Road property, and someone, and I suggest it was either you or your father, said that it was to be 80 per cent father, 20 per cent son.
A.Having said that, it could well have been the solicitor. Being a good solicitor, I would have thought he would have said, 'Look, your father has put money in it, you have put money into it, it is general practice that we have a Deed of Trust', which I would have thought was quite general.
Q.Whoever said it, you accepted it.
A.At that time, yes.
Q.You do not accept it now?
A.No.
Q.You do not accept it simply and solely because the document, the Declaration of Trust, was not signed?
A.Yes, exactly."
Earlier the defendant had accepted that the father had not said anything to cause him to think that because the declaration of trust had not been signed he was to be the 100% owner of the house. It is clear that that was an assumption of his own making.
Secondly, it was established that of the two of them, the father and the defendant, it was only the latter who would have been accepted as a mortgagor of 10 Talbot Road. Having said that the father's age did not come into it, the defendant said in cross-examination:
"It was just that he did not have the money. We needed, basically speaking -- the house, the place that we wanted was more money so I took out a mortgage on it. My father did not have the money. He did not have a job. It did not come into it how old he was."
He added that it was obvious that the father would not have been able to get a mortgage because he was not working, whereas the defendant was. Mr. Wheeler had already confirmed in evidence that a person fitting the father's description would not have been a realistic candidate for a mortgage.
The essential basis of Judge Simmons' decision in favour of the defendant was an inference that the father had instructed Mr. Wheeler not to proceed with the declaration of trust, with the result that the presumption of advancement had not been rebutted. In this court Mr. Jaques, for the plaintiff, while accepting that the purchase in the defendant's sole name sufficed to raise the presumption as against the father, complains with some justification that the judge, having rejected Mr. Wheeler's evidence that he had recovered a recollection of being instructed not to proceed, then based his decision on an inference to precisely that effect. However, that complaint is not enough to get the plaintiff home. We must look at all the circumstances of the case in order to see whether they do or do not support an inference that the actual intention of the father was that he should retain an interest in 10 Talbot Road and, if so, to what extent.
In adopting the approach of the judge, Mr. Dencer has relied, first, on the fact that the declaration of trust never left Mr. Wheeler's office; secondly, on the fact that a bill for preparing it was rendered; and, thirdly, on what he contends was the reality of the situation. As to the first of these, I quite accept that the retention of the declaration of trust on Mr Wheeler's file remains an unsolved puzzle. It could certainly be explained, as the judge explained it, by instructions from the plaintiff not to proceed. But it can also be explained, I accept in itself less probably, as Mr. Jaques would explain it, that is to say by mere inadvertence on Mr. Wheeler's part, especially since there is no reference to the father's revised instructions in Mr. Wheeler's letter to him of 19th December. The rendering of a bill I regard as being rather in favour of the plaintiff. On the defendant's side, it can be said that since the document had been prepared Mr. Wheeler was entitled to charge for it. But against that it can be said, I think with more force, that if it was no longer intended to proceed, it was very strange that Mr. Wheeler did not proffer some explanation or justification of the charge either in his letter or in the fee note itself.
Where I really part company with the judge and Mr. Dencer is on their assessment of the reality of the situation. Here three features of the case are in my view decisive. In the first place, it was only the defendant who would have been accepted as a mortgagor of 10 Talbot Road. Although it was not expressly established in evidence that it was for that reason that the house was acquired in the defendant's sole name, it is an irresistible inference from the unacceptability of the father, coupled with the proposal, at least until 3rd December, that the beneficial interest should be shared 80/20, that that was in truth the reason. This crucial feature of the case was not mentioned by the judge, perhaps because, as Mr. Jaques has told us, it was not in the forefront of his argument in the court below. In my judgment it is probably in itself sufficient to rebut the presumption of advancement.
Secondly, the father never told the defendant that he had instructed Mr. Wheeler not to proceed with the declaration of trust. In my judgment it is almost, if not actually, inconceivable that the father would have taken that course without telling the defendant.
Thirdly, no real reason has been suggested for the father's wishing to divest himself of all interest in 10 Talbot Road. Although not a young man in 1986, he had owned the house he had lived in for more than 35 years. Although he had a bout of pneumonia shortly before he moved to 10 Talbot Road, it is not suggested that he was in general in ill health. At age 63 he could look forward to a number of years ahead of him. No special reason has been shown for his wishing to benefit the defendant at that time.
In all the circumstances I am in no doubt that the only proper inference that can be drawn from the circumstances of the case as a whole is that the father intended to retain an interest in 10 Talbot Road. The retention of the declaration of trust on Mr. Wheeler's file was in all probability caused by inadvertence on his part.
In Pettitt v. Pettitt Lord Upjohn, more loyal to the presumption of advancement than the others of their Lordships, while maintaining that that presumption and the presumption of a resulting trust, when properly understood and properly applied to the circumstances of today, remained as useful as ever in solving questions of title (see page 813H), nevertheless accepted that they were readily rebutted by comparatively slight evidence (see page 814H). Although that was a case between husband and wife, the observations of all their Lordships can be taken to apply equally to a case between father and child. Even assuming that the approach of Lord Upjohn is correct, I regard the evidence here as being markedly more than slight. There can be no doubt that the presumption of advancement is rebutted.
There remains the question of the extent of the father's interest. Here Mr. Jaques submits that the declaration of trust provides the best evidence of the parties' intentions in that regard, and that they therefore intended that the father should take 80%. I agree with the first part of that submission. I do not agree that the second part follows from it.
As has been demonstrated, the 80/20 division was based on a comparison of the gross sale price of 237 Hitchin Road and the net acquisition cost of 10 Talbot Road. If the declaration of trust had been executed without amendment, then, unless it could be set aside on some ground, I would agree that the 80/20 division would have prevailed. But I think that the better view of the parties' intentions is that the beneficial interest was to be divided in proportion to their respective contributions towards the acquisition. That is what Mr. Wheeler must be taken to have had in mind on their behalf in November 1986 and at that stage he was working on an 80/20 division. But when you get to the completion statement it is clear, as has been demonstrated, that an 80/20 division would not have been in accordance with the respective contributions, which were in fact in shares of 70/30. Moreover, it would have been unfair, and cannot therefore be taken to have been in accordance with the common intention, for the father to take both an 80% share and the balance of £2,864 odd from the proceeds of sale of 237 Hitchin Road.
For these reasons I am of the opinion that the plaintiff, as the administratrix of the estate of the father, is entitled to a declaration that the defendant holds 10 Talbot Road on trust for herself and the estate of the father as tenants in common in the shares 30% for himself and 70% for the plaintiff. Mr. Jaques accepts that the plaintiff must bring into account against her ultimate share the £2,000 paid to her by the defendant in October 1990. I would allow the appeal accordingly.
LORD JUSTICE HIRST: I agree that the appeal should be allowed for the reasons given by Lord Justice Nourse. Although we are differing from the learned judge, there is nothing I can usefully add.
SIR RALPH GIBSON: I also agree.
Order:appeal allowed with costs here and below, not to be enforced without the leave of the court; legal aid taxation for both parties.
© Crown Copyright
