England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NORTHAMPTON COUNTY COURT
His Hon. Judge Mayor Q.C.

		Royal Courts of Justice Strand, London, WC2A 2LL
		17th March 2004

Lord Justice Ward :

1. His Hon. Judge Mayor Q.C. began his judgment on 7^th May 2002 saying:-

"Unhappily this litigation arises from a dispute between members of the same family and it is therefore to be regretted since people who formerly lived in harmony have now got to the stage of airing their disputes, no doubt expensively, before a court of law. … The dispute is over the beneficial ownership of a property at 49 Navestock Crescent, Woodford Green, in London and the claimant and defendant are respectively the eldest and one of the younger sons of the last owners of that property, namely their parents."

2. I echo the judge's unhappiness. When I gave permission to appeal I urged alternative dispute resolution. The parties did go to the mediator but they could not settle their differences. So in the region of £65,000 has been spent in perpetuating a family feud over a property valued two years ago at only £85,000. What a sad waste of money. What a sorry family feud. What a frustrating use of four days in the County Court and one day in the Court of Appeal.
3. Common ground is hard to find. All we know for certain is that on 5^th March 1990 the London Borough of Redbridge granted a long lease of the property to the parties' parents in consideration of £20,400. As the lease was originally drafted the claimant was named as one of the lessees. The sparse conveyancing file reveals that the Council offered to sell the property, a council house, to the three parties for £42,500 but subject to a discount of 52%. The judge said that the names of parents and son appeared on the rent book at the time but we are told that he was in error in that regard. The son was not a tenant. His participation in the purchase was, however, vital to the exercise of the right to buy. Although it emerged late in the trial that the parents had monies in India in blocked accounts, they had no substantial capital in this country and were in receipt of income support and probably housing benefit at the time. The claimant may have been joined partly in the expectation that he could join in the borrowing of monies from the Building Society. That plan floundered partly because he had already borrowed money on a property he owned in the Midlands. Partly it may have been appreciated that the parents could continue to have mortgage interest paid from their state benefits. Whatever the reason, the deal was done on the basis that the price of £20,400 would be paid as to £10,900 in cash and as to £9,500 by way of a mortgage granted by the Building Society on an interest only basis. The Building Society's conditions are not in the mortgage file. We do not know to what extent, if any, their offer was dependent upon the son taking out a collateral policy of endowment assurance on his life to provide the sum of £9,000 ten years thence. The claimant said it was agreed that he would pay the insurance premiums. The judge found the parents were paying them.
4. The central controversy in the court below related to the payment of the cash element of £10,900. The claimant's pleaded case was that he agreed with his parents that he would provide that sum together with a further £268.80 for legal and other costs and that:-

"The property would be owned by the claimant's parents on trust for the claimant, and when the claimant's parents died, the property would go to the claimant absolutely."

He sought a declaration accordingly and it seems almost as an afterthought that he claimed in the alternative that the property should be held on a trust for sale in such shares as the court should determine.

5. The parents are no longer here to throw light on those arrangements. Father died on 23^rd June 1994 and mother on 31^st October 1997. By her last Will and Testament the mother revoked her earlier disposition of the property to her three sons and now she devised it to the defendant only.
6. The defendant's case was that the claimant advanced the monies not with the intention of acquiring an interest in the property but by way of loan to his parents. Moreover his case was that the monies were not the claimant's monies but rather family funds, it being averred that:-

"He had no money or savings at all at the time and he had not been in employment for any considerable period during the period 1983 and 1990. The defendant, claimant and their parents lived at that time as an extended family. Any funds that had been saved as a unit would be handed over to the claimant for safekeeping in his capacity as the eldest son of the family."

7. The judge held:-

"Although I am very far from rejecting as an invention the contention that these represented some sort of family fund, when I look in the fog of insubstantial evidence for reliable markers as to the way in which the court's judgment should go, I observe as the starting point the sure ground that the accounts were held in the claimant's own name, and necessarily arrive at the conclusion that there is no evidence which on a balance of probabilities enables me to reach with even the required degree of certainty in a civil court that he held those funds for anyone else."

8. Nevertheless his central conclusion was that:-

"… The contribution of £11,168.80 made by the claimant towards his parents' purchase of their home from the council in early 1990 was made as a loan to assist them with the purchase, and not with the intention on either his or his parents' part then or at any other time that he should acquire any beneficial interest in the property."

9. In the result he dismissed the claimant's claim that he had a beneficial interest in the property but, having found that the sum of £1,000 had been repaid, he ordered that the claimant do recover the sum of £10,168.80 from the defendant. The claimant appeals against that order with permission granted by me.
10. I start by recording my sympathy for the trial judge. Much of the evidence was given through an interpreter. None of the evidence to judge it from the transcript is a model of clarity. Both parties took entrenched positions: the claimant saying in effect that the parents had promised the house would be his; the defendant saying, inconsistently as it seems to me, not simply that the monies were lent by the claimant to the parents but that the monies were not even his to lend because he was merely a trustee for them and had not even contributed to the family fund. Judgment was given ex tempore under pressure of time at the end of the fourth day and I need no reminding that it is wrong for the appellate court to engage in "a narrow textual analysis" to claim that the judge had misdirected himself: see Piglovski v Piglovska [1999] 1 WLR 1360, 1372H per Lord Hoffmann. That said, I am bound to say there are features of the judgment which do surprise me.
11. I would have expected the starting point of the judgment to be an examination of the development of the purchase of the leasehold interest. It is clear on the face of the documents that the claimant was originally going to be a purchaser, and a purchaser who was making the only cash contribution to the price. It seems to me impossible to escape the conclusion that had that plan been implemented, the claimant would then have had a very strong case for asserting that he did indeed acquire some beneficial interest in the property. Neither reason given for the change of plan alters the character of the payment of money from a contribution to the purchase price to a mere loan. The conveyancing file is silent about the thinking of the family. According to it the point of contact with the Leicester solicitors was the defendant. He had the opportunity and the incentive to make the position clear yet nowhere is there a reference to a loan of monies either for Plan A or Plan B. Irrespective of the intentions which lay behind Plan A, I would have thought that the implementation of Plan B by itself gave rise to a classic case for a resulting trust. As held in Dyer v Dyer (1788) 2 Cox Eq. Case 92, at 93:-

"… The trust of a legal estate results to the man who advances the purchase money. … It is the established doctrine of a Court of Equity that this resulting trust may be rebutted by circumstances in evidence."

12. Because resulting trusts received but the fleeting attention of counsel whose minds were focused on the claimant's primary case for the whole beneficial interest being his, the judge did not concentrate on those principles to any observable extent. His approach was this:-

"The court is asked to look at the true intention of the parties, and in particular the true intention of the two parents, at the time of the purchase."

13. That was what was ultimately necessary and so in focusing on whether the money truly was a loan or not, he cannot be criticised. Proof that it was a loan would defeat any notion of trust contended for by the claimant be it a resulting trust of the classical kind, an implied trust depending on common intentions or a constructive trust dependent on the reneging on a promise, which had induced the payment of the monies, that the property would be his whether then or on the death of his parents.
14. In fact the judge held that the last wills of the parents were important. Their 1982 wills left their estates to the survivor and then in equal shares to their three sons. Because of the deteriorating family relations, mother eventually disinherited the claimant. For my part I am dubious whether the testamentary intentions formed in 1982 could throw any real light on the intention of the parents at the time they acquired the property. If by his contribution to the purchase price he "earned" his share in the property, then there was no unfair discrimination between the brothers if only that which was equitably the parents' share be equally divided on their death.
15. Worrying for me was the first reference the judge made to survivorship, and there are possibly another half dozen to be found in the judgment which indicates to me that it was a matter that featured quite large in his mind. He said:-

"At the time of the purchase of the council property it was plainly, upon the evidence presented to the court at all events, the single most important and valuable piece of property which the parents were to own. Thus if the eldest son was to become a one-third owner with them during their lifetimes of the family home which was being purchased and thereafter by survivorship it was to become his own sole property, that would have represented a very considerable change in attitude by these two parents, and no evidence is being given to the court to suggest in any way that their intention had by that date so changed."

16. I expressed my concern about this when granting permission to appeal. The possibility that there was a beneficial joint tenancy, which would result in the survivor taking all, seemed to me to be remote yet I was anxious that the judge had become infected with the unattractive idea that the claimant may have scooped the pool on the death of his mother to the exclusion of his brothers. I worried, indeed I still worry, that if the judge had instead concentrated more on the possibility that the claimant's interest was limited to the proportion his contribution bore to the price, about 27.5%, he might have been less troubled by a judgment which recognised only that limited interest. But that, I remind myself, was not the way the claimant chose so emphatically to run his case.
17. I cannot disguise my anxieties about the way the judge dealt with the question of the loan. The defendant's case, putting the family fund inconsistency in it aside, was that three repayments had been made. The first was the sum of £800 which the documents show to have been withdrawn from the parents' building society account on 15^th January 1990, only twelve days after the first £3,000 had been paid by the claimant. The claimant said that the building society's cheque for £800 was applied to purchase air tickets for the parents to visit India. A receipt issued by travel agents confirmed that a cheque for £800 had been received and a letter from the agents dated 8^th March 2002 confirmed that a building society draft had been tendered for the tickets which were being sold at less than their face value. The defendant said the building society cheque was handed to the claimant in the presence of his wife and a Mr Dalal who had sold the claimant a cash till. The judge did say of Mr Dalal's evidence that:-

"I feel it is safe to derive nothing of substance at all one way or the other."

18. I would have thought that the logic of that finding would have been to cast doubt upon the defendant's evidence. Given the strong corroborative evidence from the travel agency, I would have thought the finding on that issue ought to have been in favour of the claimant and against the defendant but the judge was of the mind that:-

"This is one aspect of the case upon which I do not intend to go into any detail at all."

19. The second alleged repayment of the loan was again by the parents this time in the sum of £1.400 paid on 22^nd January 1990. The claimant admitted that this payment was made to him but his version of the events was that the parents were not willing to carry that amount of cash to India, that the family arrangement was that their daughter, the parties' sister, who lived in India would provide them the equivalent monies in India and that the claimant would repay her when he went out there to marry shortly thereafter. At the eleventh hour the sister provided written evidence to that effect. Her evidence was not rejected but the judge's overall view was:-

"Suffice it to say that as to the payments made by or on behalf of the defendant to the claimant, or on his behalf in the month of January 1990, that is to say while the sale was proceeding but before it was completed, there I am not on balance of probability satisfied that those were repayments of any loan, for at that stage the claimant had already provided an initial contribution of £3,000 towards the balance of the purchase price over and above the loan secured by way of mortgage, and the two subsequent contributions he was to make of £7,000 and £1,168 later in the last days of January or early days of February 1990. It seems to me difficult to reconcile those transactions, the purpose of which can clearly be identified, with the proposition that there were part repayments in between."

20. The third payment was the sum of £1,000 received by the claimant from the defendant in the summer of 1990. Notably this was a payment made by the defendant, though not from his own funds but from a business account in the name of himself and his wife. The judge did not explore why he should have undertaken the burden of paying his parents' debt, more importantly why the defendant would conceivably wish to repay monies which on his adamant case came from the fund to which he was the major contributor, thereby doubling the claimant's indebtedness to him. The claimant's evidence about this was that there were business dealings between the brothers, that at that stage the defendant owed him £1,000 and he produced one document meant to support it. During the trial more documents were produced which demonstrated the "contra-accounting going on between the claimant's and defendant's businesses at that time" but which in fact showed that:-

"the true situation as far as the business is concerned is that the claimant was in fact due to pay the defendant at that stage. So those documents failed entirely to explain why the payment actually made should be going in the opposite direction to that which the business relations between the brothers at the time required."

21. That would be a good enough reason for not being satisfied with the claimant's explanation. But the second reason accepted by the judge was this:-

"Furthermore, the way in which the loan was expressed in the defendant's books of accounts by the same Mr Patel to whom I have already referred [the defendant's accountant] shows that that was a repayment of a loan. The word used in the book is simply "payment of loan" but it is quite plain when it is put into its context that it is a repayment of a loan for there is no provision for any balancing figure to come back."

22. There are two curious features about that reasoning. First and foremost the judge was wrong to say that the ledger showed "payment of loan". It did the opposite. It is an entry made by Mr Patel who was making a record at the time of payments made from the defendant's bank account. He described this transaction as "loan to brother". He surely must have had good reason so to describe it in 1990 yet twelve years later he gave what seems to me to be a wholly unconvincing explanation of why the words did not mean what they said. This is the exchange in cross-examination:-

"Q. O.K., that is what you are telling us, but why does it not say that?

A. It didn't say that because I might not have written it at that time, but I confirm that it is – there was nothing, no loan to brother for any other purpose, because from the brother's accounts there was no repayment back."

23. Speaking for myself, I see the force in Mr Iyer's submissions for the claimant that it seems improbable that the defendant should use his trading account, which is a joint account with his wife, to repay his parents' debts at a time when, according to him, the family were anticipating having to lend money to the claimant to help him set up in business. But the judge preferred the evidence of the defendant and Mr Patel.
24. It was some time later that the family dispute erupted. The claimant's explanation for it was that his mother took a violent dislike to his second wife and insisted he should divorce her. On his refusing to do so she indicated that she would no longer honour the promise that the property should be his. The defendant's explanation is that the claimant ran into financial difficulties in Leicestershire and returned to London to avoid his creditors. He insisted his parents vacate the property to enable him to occupy it. He demanded they go back to India. The judge preferred the latter explanation to the former.
25. The next significant event is the claimant's registering a caution in the Lands Registry against the title of the property. In a statutory declaration dated 23^rd April 1992 he stated that it had been agreed between him and his parents that after the purchase was completed with the aid of his contribution "both my parents would execute wills leaving their respective shares in the property for my absolute benefit".
26. We do not know the immediate response to that action. All we have is a letter from the conveyancing solicitors in Leicester dated 13^th May 1993 in which they wrote:-

"In reply to your letter of 12^th May 1993, we are instructed that the cautioner had not contributed the sum of £10,000 towards the purchase of the property. We are instructed that the balance of the purchase money were [sic] provided by the brother of the cautioner and therefore it is denied that the cautioner is entitled to a share in the proceeds of sale of the property. We are further instructed that the cautioner renounced his right to participate in purchase of the property since he did not wish to have an interest in the same."

27. The defendant gave evidence that he knew nothing about that letter at the time it was written and that his parents did not discuss it with him. He said it was not something he was involved in "because my parents they might have made some contact with the solicitor". If, therefore, the instructions were given by the parents, then the case they were advancing - and they were best placed to know exactly what arrangements they had made with their son only three years earlier - is quite at variance with the case now advanced by the defendant who was at best only an occasional spectator to the purchase.
28. The defendant's personal involvement came in January 2000 when the same solicitors by then acting on his behalf wrote to the claimant's solicitors stating:-

"We would inform you that our client is prepared to accept that your client in or about 3^rd January 1990 lent the sum of £3,000 to his parents to assist them in the purchase of the above property. Our client's repay [sic] the sum of £2,200 to your client shortly thereafter. Your client then lent a further sum of £7,000 to our client's parents on or about 14^th February 1990. …"

29. I am not at all sure that I can draw the inference Mr Iyer invites us to draw that a concession that the defendant was "prepared to accept" is a far cry from a positive assertion that he had been saying all along that the money was lent. What can properly be submitted, in my judgment, is that there is no assertion of the monies being advanced from family funds. We have to wait for the defendant's statutory declaration dated 19^th December 2000 for that case to be advanced.
30. Speaking only for myself, I am bound to say that were I the trial judge, I might well have given greater weight to the inconsistencies in the three responses to the claimant's statutory declaration. It is, however, important to stress that that view is neither here nor there: it was for His Hon. Judge Mayor to make up his mind. It cannot be argued that he overlooked the defects in the defendant's case. He said:-

"I bear in mind and have considered carefully all the criticisms of the defendant and his evidence which have been made by the claimant and on his behalf. I have considered the fact that for a long time he contended, or at least appeared to contend, that he had not let out the property at 49 Navestock Crescent after the death of the two parents pending this litigation, though subsequently he has agreed that he has let it out. … I have considered the criticism made of him that he has attacked the character of the claimant and the absent sister who is in India from whom a statement has been obtained, … I agree with the criticism of the evidence of one witness called on his behalf, one Bipin Dalah, [who gave the evidence about the £800] and I bear in mind that his evidence has not always been consistent about the dates of purchases of or persons resident in properties. But having borne all those criticisms in mind and weighed them carefully, I have nevertheless reached the conclusion that the defendant is an impressive witness, one upon whom the court can and indeed must rely, and one who has been doing his level best to tell the truth in this long, tangled and detailed tale lasting over so many years, and that his account, where it differs in material respects from that given by the claimant, is the account to be preferred. Part of the reason for reaching that conclusion is that in substantial respects his account is supported by the accounts given by two other witnesses, his wife Mrs Heera Kashwala and the accountant who at various times has acted for and advised various members of the family, Kandilal Patel, for they too, from their demeanour in the witness box, the careful way in which they have answered the questions put to them and the consistency of their accounts, have impressed me also as reliable witnesses."

31. The evidence of Mr Patel was important in rejecting one aspect of the claimant's case, namely that he had paid the endowment policy premiums at least until the family dispute erupted. The judge must also have relied on Mr Patel in coming to his finding about the nature of the payment of £1,000, though, as I have said, I find the reasoning a little unsatisfactory. The crucial question is whether the judge was wrong to find that the claimant simply lent money to parents.
32. The best that can be said for the claimant is:-

i) As already set out, the starting point seems to me to be that the initial plan envisaged the conferring of a beneficial interest in the property in favour of the claimant and the reasons for not implementing that original plan do not seem to lead to any inference that the character of the advance had changed from one intended to confer a beneficial interest to one of pure loan.

ii) The suggestion of a loan was not advanced to defeat a resulting trust until the defendant's assertions of it in 2000.

iii) There is an inherent inconsistency between a true out and out loan and the improper use of trust monies to the accumulation of which the claimant had made little if any contribution.

iv) The lodging of the caution was, as the judge held it to be, a point "of considerable importance and assistance to the court". I would have thought the inconsistencies in the three versions of the defendant's case were matters of significant importance. I confess I do not understand why the judge thought that the important point was that the claim did not begin until ten years after the caution was lodged. I would have thought that the claimant was entitled to rely on his caution and to wait until the defendant took steps to require him to vacate it.

v) I would have thought the next point of real importance, which again was accepted by the judge in the course of the argument, was the inherent improbability of the son lending his parents money which they could never really afford to repay. They were in receipt of income support. They had no capital, at least no capital in this country. Their Indian bonds were revealed late in the day and in any event there was never a suggestion that the bonds were the intended source of repayment. Asked for an explanation, Miss Lakin for the defendant had to accept that "there does seem to be some inconsistency in these explanations". Yet the judge having raised the question in argument, then did not advert to it in the judgment notwithstanding that he had rightly said it was "one of the features which does cause me great difficulty".

vi) Finally, one searches the witness statement and evidence of the defendant in vain for a confident, clear exposition of conversations at which he was present in which there was unequivocal agreement to the lending of money. His evidence is remarkably flimsy.

33. The anxious question for me is whether my doubts and reservations are sufficient to reverse the crucial finding of fact made by the judge. I am not afraid to do so if I am satisfied he is wrong. The test for deciding whether his findings of fact were against the weight of the evidence is to ask whether the findings by the trial judge exceeded the generous ambit within which reasonable disagreement about the conclusion to be drawn from the evidence is possible. It is not sufficient that I might have come to a different conclusion. I must remember what Lord Sumner said in SS Hontestroom v SS Sagaporak [1927] A.C. 37, 47:-

"Nonetheless not to have seen the witnesses puts appellate judges in a permanent position of disadvantage as against the trial judge and unless it can be shown that he has failed to use or has palpably misused his advantage, the higher court ought not to take the responsibility of reversing conclusions so arrived at merely on the result of their own comparisons and criticisms of the witnesses and of their own views of the probabilities of the case."

34. I have expressed my views about the inconsistencies and improbabilities but I cannot overlook the fact that for four days the judge saw and heard the witnesses and assessed their demeanour. He was infinitely better placed to judge the person than I am in judging only the written word of the transcript. I have to acknowledge the advantage he has over me and having made that acknowledgment I cannot conscientiously say he was wrong.
35. Perhaps the moral of this story is, "Do not pitch your case too high". I am left with the nagging fear that if the claimant had moderated his demand and sought only a share in the property which his contribution bore to the price, then Judge Mayor would instinctively have been more sympathetic and perhaps a more just and fair result would have been achieved. As it is this appeal must be dismissed.

Lord Justice Jonathan Parker :

36. I agree.

Lord Justice Keene :

37. I also agree.
Order: Appeal dismissed. (Order does not form part of the approved judgment) ADDENDUM

LORD JUSTICE WARD: Counsel have put in written arguments to the court. Lord Justice Jonathan Parker, Lord Justice Keene and I have discussed those submissions. I am authorised by them to pronounce this modest addendum judgment to the judgment in writing.

What has happened is that although there was a ground of appeal challenging the judge's order for costs made below, that particular ground was not the subject of any oral argument before the court and so we did not deal with it. It has been renewed on paper. The point is this: the claimant having failed to establish his equitable interest in the property, the court was satisfied that he had made a substantial contribution to the purchase of the property but by way of loan not by way of acquiring a beneficial interest. The judge entered judgment for the claimant against the defendant in the sum of £10,168.80 but he made no order giving the claimant any part of his costs in respect of that element for which he had, on one view of it, been successful.

The principal point submitted to us is that in the course of a long and complicated trial the judge found against the defendant in respect of two alleged repayments of that loan and the claimant's case is that a costs-based order should have been made so he recovered at least part of his costs. While we see the force of that argument, costs are always so much a matter for the judge's discretion that the Court of Appeal needs the plainest case to be satisfied that the judge has exceeded the ambit of his discretion. We are not satisfied that he was plainly wrong in this case, so the appeal against the order for costs in the court below is also dismissed.

The result will be that the appeal is dismissed, that judgment be entered for the appellant against the respondent for £10,168.80, payment thereof to be set off against the costs payable by the appellant to the respondent as hereinafter provided. That provision is that the appellant is to pay the respondent's costs here and below to be subject to a detailed assessment if not agreed.