England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
(HIS HONOUR JUDGE BRADBURY, Sitting as a Judge of the High Court)

		Royal Courts of Justice Strand London WC2 Thursday, 29th November 2001

Thursday, 29th November 2001

1. LORD JUSTICE CLARKE: This is an application for permission to appeal from a final order of His Honour Judge Bradbury, sitting as a Judge of the High Court, on 26th June 2001. By that order the judge dismissed the claim of the applicant whom (like the judge) I will call Mrs Tee, and ordered her to pay the respondents' ("Heppenstalls") costs to be assessed, with Mrs Tee to pay £25,000 on account.
2. Mrs Tee's appellant's notice was received on 31st August 2001 which was out time. I will if necessary return to that in a moment. Mrs Tee was represented at the trial by her husband, Mr Hillman, who is a retired solicitor and who has represented her today, having been given permission to do so by Schiemann LJ. He has addressed the court clearly and forcefully on her behalf. At the trial Heppenstalls were represented by leading and junior counsel.
3. This is the latest episode in what the judge described as:

"A mass of... proceedings to which Mrs Tee has been a party since 1994... described by Thorpe LJ... as 'furious adversarial litigation scarcely controlled by the court.'"

4. The first phase consisted of matrimonial litigation between Mr and Mrs Tee; and the current phase is a negligence claim against the Tees' former solicitors.
5. The facts may be shortly summarised as follows. Mrs Tee is a German lady. Mrs Tee married Mr Tee in 1974. She was his second wife. In 1972 when Mr Tee was still married to his first wife, the applicant Mrs Tee bought a house, Bison Lodge. Mr and Mrs Tee put it into Mrs Tee's sole name. There have been varying reasons given for that. One was to protect it from a claim from Mr Tee's first wife and another was for tax reasons. What the true reason was is not really relevant at this stage. Whatever the true position the courts in the later ancillary relief proceedings found that Mr and Mrs Tee intended to and did hold the beneficial interest in the house 50/50. In 1970 and 1982 Mr and Mrs Tee bought houses in Spain and France respectively both of which were placed in Mrs Tee's name. In 1986 Mr and Mrs Tee sold Bison Lodge and bought another house called Gorse Meadow. Of the purchase price of £215,000 about £134,000 came from the sale proceeds of Bison Lodge. The remaining £81,000 was drawn from a joint account, the funds in which came from Mr Tee commuting one of his pensions for a lump sum.
6. The contract to buy Gorse Meadow ("the contract") apparently showed Mrs Tee as the sole purchaser. However, the transfer was into the joint names of Mr and Mrs Tee. The transfer did not contain any declaration of trust, or any other declaration as to the beneficial interests of Mr and Mrs Tee. Heppenstalls acted as Mr and Mrs Tee's solicitors on the sale of Bison Lodge and the purchase of Gorse Meadow. Mrs Tee's evidence was that her marriage to Mr Tee began to break down between 1981 and 1983. Mrs Tee says that it had irretrievably broken down prior to 1985, although it appears that in the ancillary relief proceedings the district judge fixed it at some time in 1987.
7. Mrs Tee (I think I am right in saying) met Mr Hillman in about 1987 and they have been married since 1996. In 1994 Mr Tee started ancillary relief proceedings under the Matrimonial Causes Act 1973 for, among other things, a property adjustment order. Mrs Tee did not make an application of her own but did bring proceedings under the Trust of Land Act 1996. They were consolidated with the MCA proceedings. In her application Mrs Tee asserted, among other things, that by reason of her contribution to the purchase price (that is all the sale proceeds of Bison Lodge and half the pension computation) she was entitled to 81 per cent on Gorse Meadow.
8. Those applications were heard by the district judge in 1997 on appeal to a circuit judge, Judge Shortly, in 1998 and then on an application for permission to appeal to the Court of Appeal in 1999. The circuit judge held that Bison Lodge had been beneficially owned 50/50, so had the pension commutation. He further held that Gorse Meadow was owned 50/50. The circuit judge agreed and the Court of Appeal refused permission to appeal. In doing so Thorpe LJ considered each of the arguments advanced on behalf of Mrs Tee by Mr Hillman, then as now. It was submitted by Mr Hillman to the Court of Appeal that there was some value in the husband's pension rights. That argument was rejected by the Court of Appeal. Thorpe LJ concluded his consideration of that part of the argument in this way:

"If the husband so elected, there would be no real net effect on his economy, because the capital sum liberated would have then to be devoted to replacing the lost income. His income needs clearly do not permit him the luxury of converting any part of his pension income into capital."

9. I should have observed that that conclusion was in connection with the suggestion that the pension rights had a capital value which should be taken into account.
10. Thorpe LJ finally expressed his conclusions in this way:

"My conclusion on these submissions is as follows. This is, in the terms of an ancillary relief specialist, about as appalling a litigation history as it would be possible to discover. On any objective view, by 1994 there was only one material capital asset, Gorse Meadow. It was obviously joint property. Clearly, if the wife could not afford to buy the husband out, a sale was inevitable. Litigation seems hardly appropriate in those circumstances. Negotiation or mediation should have sufficed. If it had to be litigation, relevant evidence could easily be found and one day in court should have been ample."

11. I do not think it is necessary for me to refer to any more of that judgment.
12. In the course of the hearing before the district judge both sets of solicitors went to Heppenstalls' offices to obtain a copy of the conveyancing file for the purchase of Gorse Meadow. Both received what purported to be an identical copy. However, the file received by Mr Tee's solicitors contained a copy of the contract which showed Mrs Tee as the sole purchaser.
13. Mrs Tee and the solicitor then acting for her, Mr Sutton, say that their copy of the file did not contain the contract. The contract was not referred to by Mr Tee's solicitors or counsel in the continued ancillary relief proceedings. Mrs Tee says that she only saw the contract when it was produced on discovery in the present proceedings in February 2000.
14. Following the conclusion of the ancillary relief proceedings Mrs Tee brought these proceedings against Heppenstalls in August 1999. She claims that they had been negligent in (a) not realising that the Tees' contribution to the purchase of Gorse Meadow would be unequal, and advising Mrs Tee to be separately represented on the purchase; (b) not including in the transfer a declaration of the beneficial interest; and (c) giving advice in the divorce proceedings to Mr Tee when they had a conflict of interest. She further claims that she had suffered loss as a result. Had it not been for Heppenstalls' negligence she would have owned an 81 per cent interest in Gorse Meadow instead of the 50 per cent awarded by the courts.
15. Following sight of the contract in February 2000 Mrs Tee amended her claim. She pleaded that Heppenstalls were negligent or fraudulent in not drawing up the transfer in accordance with the contract and with Mr and Mrs Tees' intention as manifested in the contract, and that she should have earned and been awarded by the court one hundred per cent of the house.
16. The issue of liability, including issues relating to breach of duty and limitation, were tried by his Honour Judge Bradbury in June 2001. Mrs Tee gave detailed evidence before the judge but unfortunately for her he formed an unfavourable view of her credibility. He expressed his key conclusions in this way beginning at page 127 line 24:

"It is better, of course, that I assess the accuracy, or lack of accuracy of Mrs Tee's recollection in the light of all her evidence. She gave her evidence against a background of assertions that her English, which for her is a third language, was a handicap to her and that she lacked business experience and that she was dominated by Mr Tee in business and legal matters. My impression of her is that she is now, and probably was in 1986 an astute business woman. Her occasional interjections in this case, and the regular assistance she has given to Mr Hillman in the course of six past days of hearing suggest to me no lack of English speaking ability or of an understanding of English, and a considerable awareness of the flow of this case.

In her oral evidence she gave varying accounts in comparison with past affidavits and statements, and the evidence before the District Judge. She gave varying versions as to ownership, or entitlements and contributions in relation to the interest that she had in relation to Casa Brigite, Bison Lodge, and the French property. She said for the very first time it seems in the course of these proceedings - there is no record of it anywhere else - that Bison Lodge was acquired in her name for tax reasons.

As to Gorse Meadow she said that Mr Tee wanted that property to be vested in and owned by her alone, despite the contributions from the savings fund, and at a time some years after the marriage had commenced breaking down. That Mr Tee should want Gorse Meadow in her sole name in such circumstances seems improbable.

She said she had no idea that Gorse Meadow was not in her name, and that later she did not remember agreeing to being in joint names, and that when Mr Tee did tell her that it was in joint names she never asked him why. She said she did not see letters addressed by the defendants to both herself and Mr Tee, and yet she did act on request in those letters for matters to be done in relation to Bison Lodge.

She remembered, she said, the comment made by Mrs Stanley, but in the end was driven to say that she could not recollect when it might have been said. She denied receiving any explanations from Mr Robinson. She agreed she knew the survivor of herself and Mr Tee would normally have inherited the property. She did not know where she got that knowledge from. She knew when she signed the deed relating to exchange of land in 1987 that Mr Tee was a joint owner, and knew she (and he) had to sign the mortgage documents in 1989 and 1990.

She accepted that her counsel in the Trusts of Land Act case application before District Judge Ainsworth in 1997 had said that she had consented to Gorse Meadow being in joint names. She agreed there were discussions involving Mr Tee and draft sets of agreement in the early 1990s in which there were references made to her half share in Gorse Meadow. She agreed her own solicitor, Mr Sutton, had written to Mr Tee's solicitor on 7th November, 1996 saying:

'We obviously appreciate your client is a

half owner of the legal estate in Gorse

Meadow'.

She denied doing a volte-face in the last year as to her beliefs and knowledge, and denied trying to rebuild her case on the strength of the wording in the 1986 contract. It was put to her by Mr Cohen that her evidence was all over the place, because it was not based on a foundation of truth. Mrs Tee denied that. I am satisfied that the suggestion made by Mr Cohen is correct. There was no foundation of truth to some of Mrs Tee's more crucial assertions.

I have to go further. I make a finding that on financial and property aspects of her marriage to Mr Tee and her and his common intentions that she has been devious and deceitful. The finding of the copy contract has been a straw to clutch on to to try to regenerate previous failed claims. Mrs Tee, I am satisfied, is astute and business like, and well knew in 1986 that there was to be an intention that Gorse Meadow was to be purchased as a joint acquisition in all respects beneficial and legal, and that her entitlement with Mr Tee was to be on a 50:50 basis.

I agree she did not receive advice from the defendants - she did not need to. By the date of the completion she had given joint instructions with Mr Tee to the defendants. She knew and understood the instructions, the defendants complied with the instructions.

In consequence, while I consider the defendants' conveyancing records for this transaction to be flimsy, they did proceed appropriately and on the basis of joint instructions and they were not in breach of their duty. I also find as a fact that Mrs Stanley did not make the remark attributed to her, and the suggestion that she did has developed over a period of time as a figment of Mrs Tee's imagination."

17. Thus it is clear that the judge disbelieved Mrs Tee's assertion that she had no idea that the property was not in joint names. Those conclusions provide a formidable obstacle to the launching of an appeal by Mrs Tee.
18. The judge considered the effect of the contract. The contract in Mrs Tee's sole name gave her, on its face, the sole equitable interest in Gorse Meadow. Mrs Tee argued that for her to have transferred half of that interest on completion to Mr Tee there had to be a written consent by her to such an assignment. The judge described that issue as being whether the beneficial interest created by the contract merged into the legal title created by the transfer.
19. Mrs Tee relied upon section 53(1)(c) of the Law of Property Act 1925 which provides that no interest in land is to be created or disposed of except by a signed written document, and Lloyds Bank v Rosset [1991] 1 AC 107.
20. Mrs Tee's case is that the transfer itself was not sufficient for that purpose. The judge held that the present case is closer to Midland Bank v Cook [1995] 2 FLR 915 than to Rosset. He accepted the case cited by counsel for Heppenstalls as correctly setting out the law. The judge quoted a number of key passages from the decisions in Lloyds Bank Plc v Rosset. He also set out this basic proposition from the judgment of Sir George Jessel in Earl of Egmont v Smith [1877] 6 Ch 474:

"An ordinary contract of sale is not only to convey to the purchaser, but to convey as the purchaser shall direct."

21. He then set out some passages from the judgment of Sir Robert Megarry V-C in Tito v Waddell (No.2) [1977] Ch at 284-285, and from the judgment of Diplock LJ in Vandervell v Inland Revenue Commissioners [1966] 1 Ch 261 at 287, where he said:

"Prime facie a transfer of the legal estate carries with it the absolute beneficial interest in the property transferred. No separate transfer of the beneficial interest is necessary. The presumption may be rebutted by evidence to show the transfer of the beneficial interest to the transferee of the legal estate would constitute a breach of trust by the transferor.'"

22. He also referred to a passage in the judgment of James LJ in Leggott v Barrett [1880] 15 Ch 306 at 309, where James LJ said:

"... but I cannot help saying that I think it is very important, according to my view of the law of contracts, both at Common Law and in Equity, that if parties have made an executory contract which is to be carried out by a deed afterwards executed, the real completed contract between the parties is to be found in the deed, and that you have no right whatever to look at the contract, although it is recited in the deed, except for the purpose of construing the deed itself. You have no right to look at the contract either for the purpose of enlarging or diminishing or modifying the contract which is to be found in the deed itself."

23. The judge also referred to a passage in the speech of Lord Russell of Killowen in Night Sugar Co Ltd v Alberta Railway and Irrigation Co.
24. Mr Hillman has emphasised the part of the judgment of James LJ in Leggott v Barrett in which he says that in circumstances such as these, although there is in general no right to look at the contract, where a deed exists there is an express exception, namely "for the purpose of construing the deed itself." Thus the terms of the contract are an aid to the construction of the deed. They are, however, only an aid. The question is first, what is the position on the true construction of the deed? The judge held that on the true construction of the deed the legal and beneficial interest in the property was acquired by Mr and Mrs Tee.
25. Mr Hillman submits that the judge did not apply the principles stated by James LJ in Leggott v Barrett. However, he directed himself correctly in the following passages which appear in his judgment after the quotation from the authorities to which I have referred:

"I accept Mr Phipps' submissions as accurately representing the current state of law on this topic. The extracts from Halsbury to which Mr Hillman referred me represent the legal position on merger of estates, but the case law to which I have been referred accurately reflects how a contract dealing with equitable interests can be subsumed by a subsequent transfer. This is what happened with Gorse Meadow.

Of course this court must treat the contract as a serious part of the evidence to be weighed in the balance with all the other evidence. The defendants have not offered a precise explanation as to how the contract came to be in Mrs Tee's name alone. There are, of course, a number of alternative possibilities of which one is that because title to Bison Lodge was held in Mrs Tee's name, it may have been originally thought the same was to apply to Gorse Meadow. But then Bison Lodge and certainly the Spanish property were always regarded by Mr and Mrs Tee as joint assets.

I have no doubt at all that on the whole weight of the evidence, including statements and affidavits in previous proceedings, the oral evidence before the District Judge, all the evidence that I have heard in this case, that Mr & Mrs Tee had a clear intention that the legal and beneficial interest in Gorse Meadow should be held by them in equal shares, and that following that intention it was their joint wish to the equitable interest in the contract merged on completion of the purchase with the legal title vested in Mr & Mrs Tee in equal shares. In making that finding I reject and make it clear if I have not already done so any suggestion that Mrs Tee had at any material time forgotten that she had signed a contract or was unaware and did not support the implications of the later Transfer.

These findings are sufficient to enable me to dismiss this action, but I have been asked to make findings on other matters and will do so."

26. Thus the judge took account of the contract both (as I read his judgment) in the construction of the deed and in deciding what the true agreement between the parties was. In my judgment he was plainly right to hold that on the true construction of the deed it was intended that both the legal and beneficial interest in the property would pass to Mr and Mrs Tee and not just to Mrs Tee. That conclusion is not inconsistent with the terms of the contract, since, as Sir George Jessel put it:

"An ordinary contract of sale is not only to convey to the purchaser, but to convey as the purchaser shall direct."

27. The inference is that the purchaser did direct that the property should be transferred into the joint names of Mr and Mrs Tee.
28. Of course, if the evidence showed that Mr and Mrs Tee had agreed that the property was to be held in Mrs Tee's sole name the court, a court of equity, would give effect to that agreement, as Diplock LJ expressly recognised in the passage from Vandervell v Inland Revenue Commissioners, which I have already quoted. But the judge has set out some compelling reasons why no such agreement was made. Indeed the whole thrust of the evidence of Mrs Tee over a number of years was that it was agreed that the properties were to be held jointly, as the judge pointed out, whereas it is somewhat startling (to put it no higher) that she now says that it was expressly agreed between them that she was to be the sole beneficial owner of the property. In my judgment there is no realistic possibility of persuading the Court of Appeal, who has not had the benefit of hearing the evidence, to reach a different conclusion.
29. It follows that an appeal would be doomed to failure because none of the other points which the judge considered is relevant to assist Mrs Tee unless she can upset the crucial conclusions of fact that the judge was satisfied that she knew precisely what instructions were being given. She was an astute lady who did not need any separate legal advice from another firm of solicitors, she knew exactly what she was doing at the time. I am sorry if in the end the position did not work out because the valuation of the pensions proved to be different from what she, and perhaps Mr Tee, had originally hoped. But for all these reasons I have reached the conclusion that there is no prospect of an appeal succeeding. It follows that it is not necessary for me to consider whether to grant an extension of time separately since even on the assumption that an extension of time is granted the application must fail.
30. In those circumstances it is not necessary for me to say anything about any of the other findings of the judge save perhaps this. The judge held that it was not negligent not to include a declaration of trust in the transfer. Mr Hillman submits that it was negligent not to do so and that the absence of it puts the respondents in considerable difficulty. However, it appears to me that, on the judge's findings, if there had been a declaration of trust it would have been a declaration that the property be held beneficially 50/50. So even if the judge was wrong and that was held to be negligent (as to which I am not persuaded as at that time) it would not assist Mrs Tee.
31. I am obliged to Mr Hillman for his forceful arguments on her behalf. I regret this application must fail. None of the other applications arise.
(Applications dismissed; no order for costs).