England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CHANF 97/1573/3

COURT OF APPEAL (CIVIL DIVISION )

Royal Courts of Justice

Strand

London WC2

Monday, 1st March 1999

B e f o r e :

LORD JUSTICE SWINTON THOMAS

LORD JUSTICE ALDOUS

LORD JUSTICE WARD

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SHEAGAN DERMOT FRAWLEY

Respondent

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ANNE MARIE BROUGH NEILL

Appellant

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(Computer Aided Transcript of the Stenograph Notes of Smith Bernal Reporting Limited

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MR. C. TAYLOR (instructed by Messrs Clifford Cowling & Co., Fleet, Hampshire) appeared on behalf of the Appellant/Defendant.

MR. T. HARRY (instructed by Messrs Nelsons, Notthingham) appeared on behalf of the Respondent/Plaintiff.

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J U D G M E N T

( As approved by the Court )

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Crown Copyright

LORD JUSTICE ALDOUS: This is an appeal against the judgment of His Honour Judge Raymond Jack QC sitting as a judge of the High Court, in which he made declarations that had the effect that the plaintiff, Mr. Frawley, was entitled to the net proceeds of a house once jointly owned by him and the defendant, Miss Anne Marie Lindley, as she was called at that time. She subsequently married but I will refer to her as Miss Lindley.

The house, 5, Rowley Close, Fleckney, Leicestershire, was purchased by Mr. Frawley and Miss Lindley in April 1974 for £9,050 with the help of a mortgage from the Halifax Building Society. It was conveyed into joint names but the agreement between them was that the beneficial interest should be shared, two-thirds to Mr. Frawley and one-third to Miss Lindley. However, it was accepted at the trial that the dispute between the parties had to be decided on the basis that the house was owned in equal shares. Mr. Frawley and Miss Lindley parted in 1975, and they agreed that Mr. Frawley would buy out Miss Lindley's share and that he would take over the mortgage. At the trial there was a dispute between them as to whether the agreement was ever finalized, in particular, whether Miss Lindley was paid the money that was agreed. However, the judge found, having heard the evidence, that it was.

I pause in the factual background to record a submission made by Mr. Taylor on behalf of Miss Lindley. He accepted that the judge had concluded that Miss Lindley had sold her share to Mr. Frawley, and that that could not be challenged. But he submitted that, if the action had been heard earlier, the judge could have come to a different conclusion, and that that had given Mr. Frawley an unfair advantage. Anything is possible in litigation but the judge came to clear findings of fact upon the evidence. The issue has been decided and it is res judicata between the parties. Thus, before us it could not be disputed that Mr. Frawley paid Miss Lindley for her share of the house, and from then on he paid the mortgage instalments.

In 1975 arrangements were made to transfer the house into Mr. Frawley's name but they were never completed. By 1982, probably in 1981, Mr. Frawley had moved out of the house and was living elsewhere. He put the house on the market. A purchaser was found but the purchase was never completed. On 21st February 1983 solicitors acting for him wrote to Miss Lindley, who was then living in Canada, enclosing a draft conveyance and asking her to sign it. On 8th April a Canadian lawyer, acting on behalf of Miss Lindley, replied, stating that Miss Lindley had only been paid for the furniture and not for her share of the house. On that basis she refused to sign the conveyance.

The matter rested until about 12th March 1986, when Mr. Frawley's solicitors wrote, asking whether Miss Lindley's solicitors would accept service of proceedings seeking relief under section 30 of the Law of Property Act 1925. The reply was that Miss Lindley was entitled to her share. No action was in fact taken to start the threatened proceedings.

In face of the difficulty of completing his legal title to the house Mr. Frawley, no doubt on advice, decided to stop paying the mortgage instalments. The result was that the Halifax took possession and sold the property. They paid the surplus into a bank account which, by the time of trial, amounted to about £84,000, pending resolution of this dispute between Mr. Frawley and Miss Lindley as to how it should be distributed.

The writ in these proceedings was issued on 18th July 1991. Mr. Frawley alleged that he had purchased Miss Lindley's share of the house. To overcome the requirements of section 40 of the Law of Property Act 1925, he alleged performance of the contract by payment of the agreed purchase price, payment of the mortgage instalments, use of the property and sole occupation, and taking steps to have the property transferred into his name. Miss Lindley disputed the purchase and that there had been part performance. She also contended that, if the purchase had taken place and there had been part performance, Mr. Frawley was not entitled to the whole of the proceeds because of delay or laches.

As I have already said, the judge held that there was an agreement that Mr. Frawley would purchase the house and that that agreement had been part performed by Mr. Frawley paying the agreed purchase money and the mortgage instalments. It followed that Mr. Frawley had an equity in the house and after the sale an equity in the net proceeds of sale. That conclusion was not in dispute before us, but it was contended that Miss Lindley was entitled to half of the money because Mr. Frawley was barred from asserting his equity in the whole of the sum because of delay or laches. Such delay and laches prevented Mr. Frawley from obtaining specific performance of the agreement which he relied on to claim title to the net proceeds of sale.

If that be the law, which I am glad to say it is not, then it would result in a miscarriage of justice. Miss Lindley sold her share in the house to Mr. Frawley and nobody could believe it right that she should become entitled to a half share of the net proceeds of sale of the house just because a written transfer was not completed in 1975.

In my view, the submission fails on two grounds. First, Mr. Frawley is not seeking, and has no need to seek, specific performance. The agreement between him and Miss Lindley had been performed. She became a bare trustee of the legal title. In any case her legal title ended when the Halifax sold the house. All that remained was a beneficial interest in the proceeds. That remained with Mr. Lindley. Secondly, delay and laches would not prevent specific performance being ordered in this case.

I turn to the second ground first as it was the one upon which Mr. Taylor concentrated and the one which the judge considered in depth. In coming to his conclusion the judge, having reviewed the authorities in depth, said this:

"How are the authorities which I have cited to be applied to the facts of this case? First, I have held that Mr. Frawley may rely on the oral agreement because there are sufficient acts of part performance by him. That establishes the agreement as an enforceable agreement, and it should become no different from a written agreement so far as specific performance is concerned. It follows that his conduct, in particular his possession, following Miss Lindley's vacation of the property is to be treated as conduct in performance of the agreement. The situation is comparable with those in Sharp v Milligan and Shepherd v Walker : it is to be contrasted with that in Mills v Haywood . Mr. Frawley's continuing possession of the property was possession under the agreement. In these circumstances, to quote from Denning LJ in Williams v Greatrex , 'As long as the purchaser remained in possession under a contract which entitled him to be there, he had an equity which the courts would protect. There was no need for him to claim specific performance in order to give him a right to be there.' There was acquiescence by Miss Lindley in his possession in performance of the agreement because she took no step to challenge his right. She took no step to assert any right in the property - mere assertion by itself is insufficient as is made clear by the judgments of Denning and Hodson LJJ in Williams v Greatrex . There was certainly no abandonment of his rights, which was the test adopted by Morris LJ in that case.

Mr Taylor submitted that in any event the sale of the property by the Halifax put an end to any right to specific performance because it made it impossible: the house had gone. The answer to this is that on the sale Mr Frawley's interest was transferred to the proceeds, namely the monies now held by the Halifax. The legal title is vested in the Halifax. The beneficial interest is vested in him. Although I heard no argument as to this, it may well be that as a result of the sale Miss Lindley now has no interest of any kind: for there is no need to interpose an intermediate equitable interest vested in herself and Mr Frawley between the Halifax's legal interest and his beneficial interest. Whether or not specific performance of the agreement is still the appropriate form of remedy, the remedies of equity remain available and have not been lost."

In my view, the learning derived from Williams v Greatrex [1956] 3 All ER 705 is decisive. In that case a purchaser agreed in writing to buy an area of land which was to be laid out in plots for the erection of houses. On payment of a deposit and giving notice, the purchaser was to be entitled to enter onto a particular plot in order to build on it. The arrangement met with difficulties, with the result that the purchaser was forced in 1956 to start proceedings for specific performance to require conveyance of plots 3 and 4. The defendant contended that the time for purchase of those plots had passed and that any case for specific performance was barred by delay or laches. Denning L.J. said this at page 708E:

"The second point is on delay or laches. Counsel for the vendor said that there had been too much delay to enable the purchaser to get specific performance. On this point it is necessary to remember that when the deposit was paid there was a binding contract - binding on the vendor - whereby he let the purchaser into the land for the purpose of erecting the buildings. It was binding even though the vendor kept the cheque in his pocket. It was a contractual licence which the vendor could not repudiate at will. It created an equity. The purported repudiation by the vendor in April, 1947, was entirely inoperative. He could not renounce a binding contract in that way. The purchaser did not accept the repudiation as a rescission of the contract. He stopped building, but he did not take down his fence. He still remained in possession of the land, and, being in possession under a contractual licence, he had an equity to remain there.

But then it is said: When the vendor repudiated this contract, surely the purchaser ought to have taken him to court; he ought to have brought an action for specific performance then and there to compel him to perform his contract. I confess that argument did appeal to me at one time in the course of the case. ... But I think the answer to it is this: once the purchaser went into possession of the land, having the contractual right to be there, he had not only an equity to be there. He had more. He had the benefit of a contract to sell him these two plots. That was not only an equity: it was an equitable interest in the land. He was in a sense the equitable owner of the land. So long as he was in possession of the land, he did not lose his rights simply by not proceeding at once for specific performance.

In Crofton v Ormsby ... Lord Redesdale, Lord Chancellor in Ireland, said:

'The whole laches here consists in the not clothing an equitable estate with a legal title, and that by a party in possession. Now I do not conceive that this is that species of laches, which will prevail against the equitable title; if I should hold it so, it would tend to overset a great deal of property in this country, where parties often continue to hold under an equitable contract for forty or fifty years, without clothing it with the legal title. I conceive, therefore, that possession having gone with the contract, there is no room for the objection. ... But, in the present case, there is nothing but a resting on the equitable estate by a person in possession, without clothing it with a legal title, which I think never was held to be that sort of laches that would prevent relief.'

Likewise we have here possession which is taken under a contract of purchase with an equitable right to be there. All that needs to be done is for the legal title to be perfected. In such a case, laches or delay is not a bar."

Hodson L.J.'s judgment was to similar effect. At page 711 he said:

"I myself attach great importance to the putting round these plots 3 and 4 of a fence. What more can a man do ordinarily, if he buys or agrees to buy a piece of freehold land, in order to show that it is his land and mark it off from the neighbouring land than put a fence round it in that way. This is not the case of a man who had taken a lease and had to pay rent. He has nothing further to do. Land is not capable in the ordinary way of being reduced into possession except in such manner by the inclusion of it in a boundary fence. That is the first thing one is likely to do in any event and perhaps in many cases it may be the only thing one does. In this case the purchaser did a bit more: he started some building; he put up some sheds and did some road works. But the fence, to my mind, was sufficient intimation that he was claiming possession of that land.

. . .

What is the position if the purchaser was in possession? In Fry LJ's book on SPECIFIC PERFORMANCE (6th Edn)... para. 1110 reads:

'Where the contract is substantially executed, and the plaintiff is in possession of the property, and has got the equitable estate, so that the object of his action is only to clothe himself with the legal estate, time either will not run at all as laches to debar the plaintiff from his right, or it will be looked at less narrowly by the court...'"

Hodson L.J. goes on to quote from Crofton v Ormsby , to which I have referred.

Mr. Taylor, who sought to distinguish Williams v Greatrex on the facts, submitted that Mr. Frawley had not obtained an equitable interest in the house by going into possession. Mr. Frawley was already in possession at the time of the contract and had a right to possession as a joint tenant. Miss Lindley did not object to Mr. Frawley remaining in possession and could not do so. The facts were, in his submission, similar to those in Mills v Haywood [1877] 6 Ch.D 196, and the same conclusion should be reached.

In Mills v Haywood Mr. Mills became the under tenant of the Radnor Tavern, 72, Chancery Lane, for a ten year term from 1861. The agreement between him and Mr. Austin, the holder of a long lease, contained an option to purchase the headlease. On 26th July 1867 Mr. Mills' solicitors wrote as follows:

"Mr. Mills is desirous of exercising his right to purchase the lease of the Radnor, and has instructed us to call upon you, as far as you are concerned, to complete the sale, which he is ready and willing to do. We have informed Mr. Gibbon and the National Bank of this, and if there be any other parties now representing you, be kind enough to hand them this letter."

A draft assignment was prepared but the details were never finalised. Mr. Mills continued to pay sums by way of rent up to and after the ten year period of the option had expired. In November 1872 Mr. Austin was adjudicated bankrupt and Mr. Haywood was appointed trustee. He decided to sell the Radnor Tavern and offered it first to Mr. Mills. Mr. Mills took advice and pursuant to that advice claimed specific performance of the option that he claimed to have been exercised. Vice-Chancellor Hall made a decree for specific performance. That was reversed on appeal. Cotton LJ at page 202 said this:

"If it were necessary to determine the point, there is considerable ground in the present case for holding that there had been a mutual abandonment of the contract, both sides treating the whole matter as at an end, and dealing with one another accordingly. But it is not necessary to give a decision on that point.

It is a well-established principle, as laid down by Lord Alvanley in Milward v Earl Thanet, that a party cannot call upon a Court of Equity for a specific performance unless he has shown himself ready, desirous, prompt and eager.

This rule is specially applicable where the subject-matter of the contract is of a somewhat speculative and fluctuating value, as the tavern, the subject of the present suit, must necessarily be; and the delay which has occurred in the present case from March, 1868, till May, 1873, unless satisfactorily explained, must be fatal to the plaintiff's title to a decree for specific performance. It was contended that the delay was solely attributable to the disputes between Gibbon and Austin; but even if this were so, it was the duty of the Plaintiff, if he desired to obtain specific performance, to insist upon, and if necessary file a bill to enforce, specific performance of his contract. Then it is said that the Plaintiff has been in possession, and that a purchaser in possession does not lose by delay his right to specific performance. But possession, in order to obviate the consequence to a purchaser of delay, must be possession under the contract sought to be enforced, that is (to use the words of Lord St. Leonards in Clarke v Moore) 'an enjoyment of the benefits given to him by the contract', and the vendor must have known, or have been bound to know, that the purchaser claimed to be in possession under the contract. In such a case, as, eg where the purchaser in possession has no right or title to such possession except as purchaser, his possession is an assertion on his part of his right under the contract of purchase, and acquiescence in his possession is a recognition by the vendor of this right. But where a tenant in possession contracts for the purchase of his landlord's interest the case is different. His right under the contract is to be no longer tenant of the vendor, and his possession as tenant is not an assertion of right under the contract of purchase. He may be in possession of the property, the house or land which is the subject of the contract of purchase, but, if he is, he is not in possession of, or asserting right to, the benefit or interest secured to him by the contract. ...

In my opinion, the result is that the plaintiff did not, from March, 1868, till May, 1873, claim to be in possession as purchaser, and there is nothing to show that the vendors recognised or were bound to recognise his possession as being that of purchaser under the contract for sale. In my opinion, therefore, his possession was not such as to prevent the delay which has occurred being fatal to his claim for specific performance."

Mr. Taylor submitted that in this case it could not be said that Mr. Frawley had shown himself ready, desirous, prompt and eager. There had been substantial delay. Mr. Frawley had a right as joint owner to remain in possession just as much as Mr. Mills had a right to remain in possession of the Radnor Tavern. Mr. Frawley's possession was no more, under the contract sought to be enforced, than was Mr. Mills' possession. Further, there was in this case no acquiescence in his possession which could be a recognition by Miss Lindley of Mr. Frawley's right. It follows, according to Mr. Taylor, that the delay was fatal to the claim for specific performance of the agreement between Mr. Frawley and Miss Lindley. I disagree. In Mills v Haywood Mr. Mills did not pay the purchase price and continued to pay rent. His occupation was as sub- tenant. In the present case Mr. Frawley paid the total purchase price, the mortgage instalments and the outgoings on the house. Thus, Mr. Mills remained as tenant, whereas Mr. Frawley's position changed. He became the sole occupant acting as the owner. His possession was as owner. It was possession under the contract and Miss Lindley accepted that position. She went to Canada. In my view, Mr. Frawley's possession, to use the words of Denning LJ in the Williams' case, gave him an equitable interest in the house to which a court would give effect. Further, this is not a case where it can be said that Mr. Frawley was not ready, desirous, prompt or eager to complete. Upon the evidence it appears that at all times he was ready to and no doubt desirous of completing, and he did try to do so. Unlike the situation in the Mills' case, all the contractual terms had been carried out, the money had been paid and Mr. Frawley then acted as owner. In essence, the contract had been performed. All that was necessary was that Miss Lindley should sign the conveyance, as was her duty to do so, having sold her share.

In my judgment, there are no circumstances which would act as a bar in this case to the court granting specific performance. To the contrary, it would be inequitable not to do so.

I come therefore to the second ground why this appeal should be dismissed. The contract between Mr. Frawley and Miss Lindley had in essence been performed. The money was paid. Mr. Frawley became the sole occupant. What more was needed? Nothing more was needed to perfect Mr. Frawley's beneficial interest but to perfect his legal title he needed Miss Lindley's signature on the conveyance. In my view, that did not require specific performance because she became a bare trustee of her share on behalf of Mr. Frawley. I can see no reason why a lapse of time or, to use the technical word, laches, should enable a bare trustee to avoid signing a conveyance to perfect a legal title. In any case, the Halifax had under the mortgage a right to possession and exercised that right, and upon sale conveyed the legal title to the purchaser. There remained the net proceeds of sale. They belonged beneficially to Mr. Frawley, and there can be no need, as is demonstrated by the order made in this case, for specific performance to be ordered to enable Mr. Frawley's right to them to become clear. Miss Lindley had no interest. Her legal interest in the property had become extinguished on sale, and all that remained was the beneficial interest in the net proceeds. That belonged to Mr. Frawley.

I draw comfort from the written reasons given by Millett LJ when he refused Miss Lindley leave to appeal against the judgment of Chadwick J refusing to strike out this action. He said this:

"Payment. Once the purchaser pays the whole of the purchase price, the vendor becomes a bare trustee of the land for the purchaser. The basis of the purchaser's beneficial interest changes; it is no longer dependent on the availability of a decree of specific performance: see Williams Vendor & Purchaser p.572-3l, Re Cumming (1869) 5 Ch.App. 72 and other cases to like effect; and Bridget v Mills (1957) Ch. 475, which seems to me to be on all fours with the present.

By the time the building society sold, the plaintiff did not need to enforce the agreement, which was fully executed. He was in possession and had paid the full purchase price (on his case); the vendor was his nominee and could not resist a vesting order, without the necessity for a decree of specific performance; and in any case her legal title was probably barred anyway."

Mr. Taylor also sought to rely by analogy on section 36 of the Limitation Act 1980. I can see no justification for such a submission. Mr. Frawley had had an equitable interest in the house since 1975 and in the proceeds of sale when the house was sold. Why he should be barred from claiming the money by a claim from Miss Lindley, who sold her interest in the house in 1975, I cannot understand.

The principles of law applied in Mills v Haywood and Williams v Greatrex are instances of a wider principle applied in the last 20 or so years to the doctrine of laches, estoppel and acquiescence, which were identified by Oliver J in such cases as Taylor Fashions v Liverpool Victoria Trustees Co Ltd [1981] 2 WLR and Habib Bank Ltd v Habib Bank A.G. [1981] 1 WLR 1265. That wider principle was enunciated by Sir Barnes Peacock in Lindsay Petroleum Company v Hurd 1874 L.R. 5 Privy Council 221 and 229, and cited with approval by Lord Blackburn in Erlanger v New Sombrero Phosphate Co (1878) 3 App.Cas. 1218,1279:

"The doctrine of laches in courts of equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct done that which might fairly be regarded as equivalent to a waiver of it, or where, by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases lapse of time and delay are most material. But in every case if any argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances always important in such cases are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy."

Lord Blackburn in Erlanger quoted that passage from the judgment of Sir Barnes Peacock and continued:

"I have looked in vain for any authority which gives a more distinct and definite rule than this; and I think, from the nature of the inquiry, it must always be a question of more or less, depending on the degree of diligence which might reasonably be required, and the degree of change which has occurred, whether the balance of justice or injustice is in favour of granting the remedy or withholding it. The determination of such a question must largely depend on the turn of mind of those who have to decide, and must therefore be subject to uncertainty; but that, I think, is inherent in the nature of the inquiry."

In my view, the more modern approach should not require an inquiry as to whether the circumstances can be fitted within the confines of a preconceived formula derived from earlier cases. The inquiry should require a broad approach, directed to ascertaining whether it would in all the circumstances be unconscionable for a party to be permitted to assert his beneficial right. No doubt the circumstances which gave rise to a particular result in decided cases are relevant to the question whether or not it would be conscionable or unconscionable for the relief to be asserted, but each case has to be decided on its facts applying the broad approach.

Applying those principles to the present case, there can be no doubt that Mr. Frawley should not be prevented from being paid that to which he is beneficially entitled. He bought out Miss Lindley. He paid the money. He continued to live in the house and, as owner, paid the mortgage instalments. It would not be unconscionable to prevent him obtaining the proceeds of sale. In fact, in my view, it would be unconscionable for Miss Lindley to assert any right to the money. She has accepted payment. She allowed Mr. Frawley to pay the mortgage instalments and should not be entitled to any of the proceeds. The judge came to the right conclusion, and I believe for the right reasons. I would dismiss this appeal.

LORD JUSTICE WARD: The defendant's earlier foray to this court ought to have persuaded her, once the facts had been founded against her, that this was always an utterly hopeless and unmeritorious appeal. I agree with my Lord that it should be dismissed for the reasons he has given.

LORD JUSTICE SWINTON THOMAS: I also agree.

Order: Appeal dismissed; order nisi against legal aid fund with nil contribution; legal aid taxation.