England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MR JUSTICE RATTEE
(MR JUSTICE DOUGLAS BROWN)

		Royal Courts of Justice Strand London WC2 Tuesday 15th January 2002

Tuesday 15th January 2002

1. LORD JUSTICE BUXTON: The dispute from which this appeal arises takes place in the context of the bankruptcy (now some considerable years ago and since discharged) of Mr Arthur Oakes. Mr Simms, the respondent to the appeal, is Mr Oakes' trustee. The appellant in these particular proceedings, Mrs Brenda Oakes, is the wife of Mr Arthur Oakes.
2. The appeal has had an unfortunate history. It is brought from a decision of Mr Justice Rattee made as long ago as 25th July 1997. It reaches this Court only in the year 2002 because there was, to put it neutrally, uncertainty as to whether the notice of appeal originally entered by Mrs Oakes had in fact been filed with the court. That matter was considered by this Court in July 2001, and it was then determined that the fair course was to give permission for the appeal to proceed, albeit four years after the initial hearing.
3. The trustee brought two applications before Mr Justice Rattee in relation to a particular property, number 1 St Wilfrid's Road, Bessacarr ("the property"). They were set out in his amended application as follows. First, he sought a declaration that a transfer made by Mr Oakes to his wife on 28th March 1988 of the property had been a transaction at an undervalue within the meaning of section 339 of the Insolvency Act 1986. Secondly, and by amendment, made I think some fortnight before the hearing, the trustee sought a declaration that Mr Arthur Oakes was the sole beneficial owner of the property at the date of the transfer complained of in 1988. The judge granted the declaration sought in respect of section 339. In respect of the second declaration, he did not think it right, in proceedings to which Mr Arthur Oakes had not been a party, to grant a declaration that effectively bound him against the world, but he did make a declaration that Mrs Oakes, who had of course been a party to the proceedings before him, had no, and never had had any, beneficial interest in the property.
4. The burden on both of those applications was, of course, on the trustee, but, on the papers and on the face of the transactions, his case was a very strong one. The property, when it was purchased either in April or in May 1981, was, and always had been, registered in the sole name of Mr Arthur Oakes. There was no caution or other interest registered against the property. Mr Oakes had, on three occasions, granted charges over the property in his own name, and the mortgage account, which will feature subsequently in this judgment, was equally in his own sole name.
5. When the transfer was made to Mrs Oakes on 28th March 1988, the consideration was recited simply to be natural love and affection. There was no indication of any other interest on the part of Mrs Oakes. A transfer expressed to be solely for natural love and affection is evidently a transaction at an undervalue, unless there is some other particular explanation of it.
6. During the proceedings with which we are concerned, Mrs Oakes, and for that matter Mr Oakes, were not represented or advised by lawyers, or at least we will assume that that was not the case, and Mrs Oakes herself chose not to attend before Mr Justice Rattee, though there is no suggestion that she was not aware of the proceedings, and the judge proceeded on that basis. She did, however, put in evidence, from which it was clear what the nature of her case was that, despite the appearances on the face of the documents, it was she and not Mr Oakes who was the sole beneficial owner of the property. That, if it was the case, would of course have been an answer to both of the trustee's claims, however odd a form of dealing with the property that circumstance might have been though to reveal.
7. Mrs Oakes, as I have said, put in evidence. It is right that I should summarise what she said in her first and principal affidavit in the proceedings. She said, first, that there had been a contractual agreement between herself and her husband, it would seem at some time in 1980. A document purporting to set out that contract was at one stage produced, but it was undated. She then said this in paragraph 5 and following about the purchase of the property:

"The asking price for the Bessacarr property was £61,000. During the six month period of negotiations to the purchase being completed, I provided deposit funds totalling some £14,000."

8. She then attaches an exhibit, BO1, which again I will return to. I continue with her evidence:

"These funds come from an account with the Nation Wide Building Society and a joint account with my mother Mrs H Gascoyne and that £14,000 was withdrawn as noted in the attached exhibit."

9. She then speaks of payments to a bank or mortgage lender, TCB, under a mortgage of the property entered into by Mr Oakes, again in his own name, on 4th August 1981: that is to say, some three or four months after the purchase of the property, an aspect of the case to which I shall return briefly at the end of the judgment.
10. She says about that:

"Attached at exhibit BO1 are the TCB statements recording those mortgage payments. The TCB will be able to confirm that all these mortgage payments were made by me over the period in question, and further I believe that FA Simms has already initiated arrangements to confirm the position with TCB."

11. At paragraph 7 of her affidavit:

"In 1988 I agreed with my husband Arthur Oakes that I would take out a part of my share in the equity of 11 Tintern Close [that is another property] in the quantum of £45,000 to pay off the TCB mortgage and this was done.

Over the time, 1981-1988 I can confirm that I paid from my own resources together with the sale proceeds from the former property of my parents, some £130,000 round figures for the purchase of 1 St Wilfred's Road Bessacarr, that quantum being made up of £14,000 pound monies, some £10,000 for the cost and refurbishment work, about £60,000 of mortgage payments over the period, and £45,000 from a share from a part of my share in the equity of 11 Tintern Close.

I can further confirm that my husband Arthur Oakes made no money consideration to the purchase of the property in Bessacarr and that the transfer to property to my name in 1988 was pursuant to a contract in 1981 entered in with my husband for good and valuable consideration."

12. The judge considered that evidence and was not persuaded by it. It will be appreciated -- and again this is a matter to which I shall return -- that in view of the very strong prima facie case that the husband was the owner of the property, it was necessary for Mrs Oakes at least to displace that assumption on the balance of probabilities, if she was going to succeed in her contention, that she and not he was the owner. The judge said this at page 7H of his judgment, and it is right that I should read out a substantial part of what he said:

"The wife has produced in evidence documents which she says show that payments by her of the instalment on the mortgage amount to some £60,000, but the only thing such documents prove is that instalments were paid. There is no indication from the document that they were paid other than by the borrower, he being the person in whose name the mortgage account stood."

13. I interpose, in case it is not clear, the borrower was Mr Arthur Oakes. The judge continued:

"There is evidence of a considerable body of correspondence relating to this property, particularly surrounding the time of the purchase and subsequent period in which negotiations were carried out for the raising of the money by mortgage on the property, but there is no indication from any of that correspondence, or indeed any of the documents at all that are in evidence, that the wife ever had any beneficial interest at all in the property.

The burden of proving such beneficial interests clearly lies upon the wife. The transfer of the property from 1988 by the husband to the wife is itself in fact inconsistent with any such beneficial interest in the wife because it makes no reference whatsoever to it, and its purpose is said to be a transfer in consideration of the natural love and affection of husband for the wife. The only evidence to support the proposition of the wife having had beneficial interest is her assertions in her affidavits as to the provision of the money used to purchase and improve the property which I have mentioned. As I have explained she has produced no documentary or other evidence to corroborate those bald assertions. Having regard to the inconsistency of them in the form of the transfer which was made by the husband to her in 1988, and also having regard to the fact that the wife has not chosen, either being represented here today or otherwise, to support her case as it stands on her evidence, it seems to me that the only proper conclusion is that she has failed to discharge the burden of proving that she had any beneficial interest in the property prior to the transfer of it to her by the bankrupt. It follows in my judgment necessarily that that transfers a transaction at an undervalue within the meaning of section 339(3) of the Insolvency Act 1986, and it seems to me appropriate that I should make whatever orders are necessary under section 339(2) of the 1986 Act to restore the position to what it would have been if the transaction had not been entered into."

14. The judge then, as I have already indicated, went on to decline to make the declaration sought by the trustee, but did make the declaration that I have already set out; that Mrs Oakes had no interest herself in the property.
15. Before I turn to the issues of law that are contested on this appeal, it will be convenient to deal with a factual issue upon which we permitted the adduction of further evidence before this Court. It will have been seen that the judge in his judgment emphasises the lack of documentary support for Mrs Oakes' assertions, he being particularly concerned about that aspect of the matter in view of the very strong case that was made on the formal documents suggesting that Mr Oakes was the owner of this property. In particular, there was no documentary evidence to establish that it was Mrs Oakes' money that had been used in payment of the mortgage, or that it was she herself who had paid the mortgage, as opposed to it being demonstrated that the mortgage had indeed been paid.
16. Mrs Oakes says on this appeal that her bank accounts, if they had been before the court, would have demonstrated that; that it would have been possible to demonstrate, from her Barclays bank account, that she had made regular payments in respect of the mortgage; and that these could be cross referenced to the TCB account statement, which indeed was before the judge. She says that her accounts that establish that had been handed to the trustee in the course of the proceedings with which we are concerned, and that it was his duty, acting as trustee and in any event, to put those accounts before the court.
17. The contentions in this respect, as set out in the evidence, are principally these. On 10th January of this year Mr Oakes swore an affidavit in which he claimed as follows. In paragraph 3, having said that he was assisting his wife in the proceedings he says:

"I can confirm, that at the hearing [that is to say 18th March 1996] (or at a subsequent hearing on or about 3rd May 1996) I handed to Mr Registrar Pimm, an affidavit and exhibit prepare bid my wife in March 1996."

18. That, no doubt, is the matter that we have just looked at. I continue:

"I also handed to registrar a plastic interleaved folder containing statements from Barclays Bank, being the personal bank account of Brenda Oakes. This account was in the sole name of my wife who worked for Barclays Bank at the material time 1980-1988 and paid her earnings into this account. These bank statements were cross- referenced to the mortgage payments made to TCB Ltd, the mortgagee. The TCB statements form part of the exhibit "BO1". At the hearing I saw Mr Registrar Pimm hand the said affidavit and documents to Mr CJ Darby, the solicitor for Mr Simms."

19. The argument, therefore, was that by the time they got in front of Mr Justice Rattee, Mr Darby, on behalf of the trustee, had these accounts, and they should have been put before the judge, and if put before him would have demonstrated that Mrs Oakes had made the mortgage payments. That would have been a substantial, though, I point out, not complete, corroboration of the claims made in her affidavit.
20. That evidence has been replied to by Mr Darby, the solicitor, in an affidavit put before the court today, in which he says this:

"Mr Oakes refers at paragraph 3 of his affidavit to the documents handed in to Registrar Pimm but appears to be unclear as to when they were filed. That was either at or shortly before the directions appointment on 18th March 1996. I was present at both hearings on 18th March 1996 and 3rd May 1996 and confirm that no other documents were handed in by Mr Oakes or passed to me beyond those which are included in the trial bundle placed before Mr Justice Rattee for the trial of the application on 25th July 1997. In particular neither Mr nor Mrs Oakes has ever served any complete statement of Mrs Oakes' account at Barclays bank whether in the plaster interleaved folder or otherwise.

I believe that Mr Oakes may be confusing this issue with a separate application made in his bankruptcy which I handled on behalf of the Trustee concerning the beneficial entitlement to a policy which he held with Norwich Union Life Insurance Society. That was decided on 28th April 1997 by Mr Justice Carnwath."

21. I omit some passages. Mr Darby refers to an affidavit made by Mr Oakes in those proceedings and then continues:

"Exhibited to it were copies of statements of account from Mrs Oakes' account with Barclays Bank. All but the direct debit entries in favour of Norwich Union were deleted from the statements. That was the first and only occasion on which any statements of her account with Barclays Bank were served. Indeed it would be surprising that they should serve these semi-obliterated statements if they had already served complete copies."

22. In 1997 therefore redacted bank accounts in respect of Mrs Oakes' account had been handed over, they are exhibited by Mr Darby, and they show that indeed the documents handed over were redacted in respect of everything but the Norwich Union entries.
23. It is very difficult indeed to see, as Mr Darby ventured to comment, why the parties, Mr and Mrs Oakes, should go to such trouble to redact these accounts in 1997 if indeed it is case that they were identical to the accounts it is now said had been handed over in 1996.
24. Mr Ashton, who appears for Mrs Oakes, says that the bankruptcy proceedings were particularly heavily contested, and Mr Oakes continued to be reluctant to allow the trustee to see any more than was absolutely necessary: hence the labour of redaction in 1997.
25. There is, however, not merely that very surprising discrepancy, but also a further matter in this connection. On 12th March 1997 the trustee had occasion to write to Barclays Bank seeking information, as he thought, about the very account that we are concerned with. He believed that that account was in the name, or had been in the name, of Mr Oakes himself, and that the account name, at some stage, had been changed to the name of Mrs Oakes. He explained in his letter that he had been given that information by the Norwich Union, and he wrote this letter with a view to informing himself about the proceedings that I have already mentioned that came before Mr Justice Carnwath, and which had been the subject of the order to Mr Oakes to produce bank accounts. The trustee said this:

"The account number appears to have remained to same. In addition, it would also assist if you could let me have copy statements for the account for a period of approximately two years before the change of name."

26. Eventually, as we have seen, the trustee did, by order of the court, receive copy statements, albeit in a redacted form.
27. This letter is virtually imcomprehensible if it was already the case, as Mrs Oakes' claims, that the trustee had received full, rather than redacted, versions of this account only some one year previously. Unless it was an extraordinary oversight, the only other possible explanation would be that in some obscure way the trustee had deliberately written this letter in March 1997, in the context of other proceedings, in some way to conceal the fact that he already had the bank accounts. Since Mr Ashton, for Mrs Oakes, says, and properly says, that he makes no suggestion that the trustee has in any way acted deceitfully or with deception or improperly in that sense, that explanation falls to the ground.
28. I, for my part, find it impossible, in the context of the history, to conclude, even though we have to do this simply on documents and affidavits, that the trustee did indeed have in his possession and receive in 1996, or indeed at any time, full and unredacted statements of Mrs Oakes' account at Barclays Bank. In so far as is necessary to make findings in this jurisdiction, I so find. The trustee therefore did not have the Barclays Bank accounts that Mrs Oakes alleges that he did have.
29. How would all this be relevant to the appeal? Mr Ashton says it is the duty of the trustee in bankruptcy to be fair. If he had had the accounts, he should have handed them over. Mr Wilkins, who appears for trustee, properly accepts that that indeed is so. But since he did not, on the findings that I make, have the accounts, the point does not arise.
30. Mr Ashton, however, goes further, having seen the evidence of Mr Darby to which I have referred. He points out that the redacted accounts that the trustee agrees that he did have, and indeed exhibits, shows that Mrs Oakes at least had some bank account. She was not a person who had no resources. She was not a person who had no machinery through which she could have paid the mortgage if she had been minded to do, and he says that before Mr Justice Rattee the trustee should at least have produced the redacted accounts to show that Mrs Oakes had some resources.
31. I cannot agree with that argument. In her evidence, as we have seen, Mrs Oakes had never revealed, or asserted, as she could have done, where her alleged payments of the mortgage had come from, or by what machinery they had been made. So there was no reason, on the face of the case as it appeared before Mr Justice Rattee, for either the trustee or the court to think that the mere fact of the possession of a bank account on Mrs Oakes part was relevant to the dispute.
32. In any event, I am bound to say that if Mrs Oakes' case was that the full accounts had been handed over to the trustee, she nonetheless said absolutely nothing about it and made no reference to it at all in her evidence. If she chose to take that position, it was not for the trustee to urge that a redacted version of those accounts might have some relevance in support of her case.
33. I now turn to the arguments more properly of law that were disputed before us.
34. The first and central argument is that in the passages of his judgment which I have read the judge reversed the burden of proof, by putting a burden of proof upon Mrs Oakes, when the burden of establishing both the section 339 point and more particularly the declaration (both the declaration sought and the declaration eventually given) rested upon the trustee.
35. I deal first with section 339. This argument is misconceived. As I have already said, the trustee had a very strong prima facie case that Mr Oakes was the owner of this property. If that was so, the transfer, on its face, was plainly at an overvalue. In those circumstances it was for Mrs Oakes to displace that very strong case by at least producing evidence that was sufficiently cogent to cast doubt on the trustees case on the balance of probabilities. It was very well open to the judge, on the assertions before him, to conclude that she had not succeeded. When he said that she bore burden of proof, he was clearly saying that, in a context where the unchallenged objective evidence clearly supported the trustee and must prevail unless it could be displaced, Mrs Oakes did not succeed in displacing it.
36. As to the declaration, it was, in my view, open to the judge to proceed as he did, and on the same basis as he approached the section 339 issue.
37. The only case that was put before him by Mrs Oakes was that she was the beneficial owner of the property. She did not say that she merely had some equitable interest stemming from a provision of the part, or indeed all, of the funds for the purchase of that property. Since that was the only alternative explanation to there being a full beneficial interest held by Mr Oakes, and the judge rejected that explanation when he was determining the section 339 question, it logically followed that he had equally to be satisfied that Mrs Oakes had no interest in the property at all, and he was justified, in my judgement, in so declaring.
38. True it is that Mrs Oakes might, and I emphasise the word "might", have put a different case, asserting only a limited interest, but she did not do so; and if she had done so, and had she produced evidence to support it, which she did not, it by no means follows that that case would have prevailed on the section 339 application. Indeed, unless the interest could be shown to be one of considerable value, it probably would not have done.
39. Be that as it may, Mr Ashton said, more particularly in the context of the declaration, that the trustee's duty of fairness extended to suggesting, either to Mrs Oakes or to the judge, that such a claim might possibly be available to her. I cannot again agree. Whatever the limits of the trustee's duty of fairness, they do not extend to urging upon an adult of full capacity that they might wish to put a case in contested litigation against a trustee that, with full knowledge, the opponent has chosen not to put.
40. In my judgement therefore the appeal must fail in respect of both of the orders made by the learned judge.
41. I should mention one further thing for completeness. Even on the assumption, which it is not possible on the evidence to make, that Mrs Oakes had made the payments under the TCB mortgage, there were still serious difficulties in her way, which were set out by Mr Darby in his affidavit in the proceedings of 6th April 1996. Those centred on the fact that there was, first of all, an unexplained period when there had been no charge over the property and no explanation of where the funds had come from to purchase it, the assumption having to be, in the absence of other evidence, that they came from the person in whose name the property was registered. Secondly, that one of the charges that was taken out by Mr Oakes over the property, that with FJ Sloan on 19th June 1981, that is to say some two months after the purchase, was expressed to be in relation to, and in consideration for, certain steps in litigation that Mr Oakes' company was conducting, quite unconnected with the property. Thirdly, the mortgage upon which Mrs Oakes relies did not appear on the scene until August 1981, three months after the purchase of the property.
42. It is not necessary to go into any of those matters because, on the findings, they do not arise. I mention them for completeness only to record that had the judge been otherwise persuaded about Mrs Oakes' contention, he would then have had to turn his mind to those issues in respect of which, at the moment, there is no obvious explanation.
43. However, in view of the judge's findings, that issue does not arise, and the appeal fails in any event.
44. LORD JUSTICE THORPE: I agree.
45. LORD PHILLIPS, MR: I also agree.
ORDER: Appeal dismissed. Appellants to pay the respondent's costs which are not to exceed the amount reasonable for her to pay. No order for costs against the Legal Services Commission to be enforced without further proceedings before the costs judge. (Order not part of the approved judgment.)