England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CANTERBURY COUNTY COURT
(MR RECORDER GEORGE QC)
(LOWER COURT NO. 4AS01273)

		Royal Courts of Justice Strand London, WC2
		28th February 2006

1. MR JUSTICE LAWRENCE COLLINS: This is an appeal from a judgment of Mr Recorder George QC in the Canterbury County Court on 15 August 2005. The recorder gave permission to appeal. Mrs Vinaver, the respondent here and the claimant in the court below, sought a declaration under section 14(2)(b) of the Trusts of Land and Appointment of Trustees Act 1996 as to her beneficial interest in two properties: 122 Northdown Road, Cliftonville, Margate ("the Margate property"), and 28 High Street, Herne Bay ("the Herne Bay property").
2. Both properties were purchased in 2002 and the legal title for both is in Milton Ashbury Limited ("MAL"), the appellant in this court and the defendant below. The Margate property is a mid-terrace building arranged as retail offices on the ground floor, with a basement partly used for storage purposes and partly as a basement flat. There are also two self-contained residential flats on the upper floors. The purchase price was £75,000. The Herne Bay property is a three-storey mid-terrace building arranged as three flats. The purchase price was £135,000. The recorder decided that Mrs Vinaver was entitled to the entire beneficial interest in the Margate property, but she was to account to MAL in the sum of £11,000 for expenses incurred by MAL in refurbishing the three flats and MAL was entitled to a 17 year lease of the entire ground floor flat and the connected storage part of the basement at a peppercorn rent. He decided that Mrs Vinaver was entitled to a 95 per cent beneficial interest in the Herne Bay property, and MAL to the remaining 5 per cent.
3. Mrs Vinaver is an 87 year old widow. The recorder found her an admirably clear witness whose memory only failed her only very occasionally. Her son, Adam Vinaver, is dyslexic and his ability to write is limited. The recorder accepted his evidence that he has an aversion to paperwork and frequently does not open correspondence. He was in a depressed state in the relevant period, his second marriage having broken up and his wife having retained control of their five year old son. The recorder found that Adam was rather an unreliable witness but said that he accepted his version of events on some of the main issues.
4. Mrs Vinaver had a house in Whitstable which she sold in October 2001 for £137,500. MAL acted as her agent in selling the property. MAL is a company which acts as an estate agent and also lets and manages residential and commercial properties. One of its directors is a Mr Graham Kinnear. The recorder noted that Mr Kinnear has numerous professional qualifications in property management and estate agency as well as in life insurance and mortgage advice, but his witness statement says that he is primarily an estate agent. He and his co-director, Mr Parry, were engaged in building up their new company, MAL. The recorder found that Mr Kinnear was a rather confused witness but had no reason to regard him as deliberately dishonest.
5. After the sale of her house in Whitstable, Mrs Vinaver then went to live with her son Adam, who also lived in Whitstable. Apart from savings of about £22,000 and a pension of £1,500 a year, Mrs Vinaver needed the security of the newly-released capital both to provide additional income and against the possibility of nursing home fees should she need them. She welcomed the possibility, which she discussed with Adam, of an investment in one or more residential properties which would bring a rental income and capital growth. Though she had some experience with her late husband of property investment, she was dependent on others for advice and for the refurbishment and management of property. Adam has skills as a builder and decorator. In about 2001 he had begun to do various small conversion jobs for MAL. He formed a close friendship with Mr Kinnear, who became a regular weekend visitor to his house and who thus began to see quite a lot of Mrs Vinaver also when she moved in with Adam.
6. The recorder found that Mr Kinnear achieved a position of influence with Mrs Vinaver and Adam, to both of whom he seemed a man of the world with just the skills they needed to make a return on investment in residential property, which he would manage on their behalf on a commission. When Mrs Vinaver and Adam embarked on acquiring properties in 2002 they relied entirely on Mr Kinnear, and though he had obvious talent in spotting investment opportunities, the recorder found that they were unwise not to seek independent legal advice and he was unwise not to suggest it.
7. On 18 February 2002 Mrs Vinaver purchased 16 Garden Road, Folkestone for a purchase price of £40,000. It was purchased outright in the name of Adam, with the assistance of MAL, and with the full purchase price of £40,000 being provided by Mrs Vinaver. Mr Kinnear knew that Mrs Vinaver was the source of the finance. Following completion Adam undertook various repair works, and then Mr Kinnear found a suitable tenant and began collecting rent and deducting his commission payments on behalf of MAL from the rental income which he paid to Mrs Vinaver.
8. Following the purchase of the Folkestone property, Adam and Mr Kinnear continued to look for other suitable properties for acquisition, the idea being this time to borrow by way of mortgage. They identified the Margate property for acquisition. It had the potential to be converted into three, or possibly four, flats, together with additional shop front premises. Mr Kinnear's particular interest in the Margate property was that the ground floor shop had potential as offices for MAL. Mrs Vinaver was in a position to pay a 25 per cent deposit, which was normal at that time for a buy-to-let arrangement. So far as the remaining 75per cent was concerned, Mr Kinnear told Mrs Vinaver that at the age of 85 she was too old to obtain a mortgage, but Mr Kinnear said that he would do what he could to arrange the necessary finance on behalf of Mrs Vinaver and Adam. This he did.
9. The recorder found that Mrs Vinaver accepted that she had no real idea at the time what form the mortgage would take or into whose name the Margate property would be transferred, but that she always assumed that the Margate property would be as much her property as was the Folkestone property, irrespective of the name into which the legal title was transferred; not least because she was going to receive all the rental income from the Margate property and she was going to pay the entire mortgage payments, matters which usually go with property ownership. The plan was that in the longer term the Margate rents would more than pay for the Margate mortgage, but in the short term the Folkestone rents were available for that purpose. Mr Kinnear knew that Mrs Vinaver was funding the Margate deposit. He must have known, according to the recorder, that she saw the Margate transaction as simply a variant of the Folkestone one with repeat roles for Adam in renovation and Mr Kinnear in management. The only differences were that this time a mortgage was involved, and MAL would be occupying the shop on the ground floor.
10. Late in the evening of 1 May 2002, Adam Vinaver delivered to Mr Kinnear's home the deposit for the purchase of the Margate property, and asked for a written receipt and an explanation of the arrangements for purchase. He was invited by Mr Kinnear into the back bedroom where Mr Kinnear produced a typed document which provided under the heading "Agreement between Adam Vinaver and Graham W Kinnear on 1 May 2002":

"Re: 122 Northdown Road, Cliftonville, Kent.

It is today agreed between both parties that the above property will be purchased, subject to contract, in the name of Milton Ashbury Limited. The deposit of £18,750 is to be paid by Adam Vinaver and this stake in the property is formally recognised.

The mortgage repayment for the above property will be paid for by Mr Vinaver and the conversion and refurbishment costs will also be met by Mr Vinaver.

Mr Vinaver has an option to buy the property from Milton Ashbury Limited on completion of the conversion and refurbishment works at a price to be agreed by both parties.

Until the option to purchase has been exercised it is agreed that any rental income will be paid to Mr Vinaver, Milton Ashbury Limited having first deducted the mortgage payments pertaining to the building and their reasonable management fees.

Until the option is exercised, in the event of death of Mr Vinaver and in the absence of any more recent dated agreement it is understood that Milton Ashbury Limited will pay to his estate the sum of £18,750 plus any refurbishment costs incurred and a contribution uplift should the open market value of the property at time of death be in excess of the purchase price.

Should Mr Kinnear die before the option is exercised then Mr Vinaver agrees to indemnify Milton Ashbury Limited against costs relating to the property until such time as it is transferred into his name at a price to reflect the £18,750 initial investment and any refurbishment costs and payments incurred."

11. It was signed by Adam and by Mr Kinnear, and witnessed by a girlfriend of Mr Kinnear who was in the house at the time. Mr Kinnear's evidence was that he discussed the terms with Adam as he typed the agreement, but the recorder did not accept that evidence. The recorder said that if Mr Kinnear did try to discuss the terms, Adam had no understanding of what was being said. The recorder said – and this part of his judgment is not criticised – that the option was probably unenforceable, for two reasons. First, it failed to incorporate all the terms which, according to Mr Kinnear, had been expressly agreed, pursuant to section 2(1) of the Law of Property Miscellaneous Provisions Act 1989 and second, the provision for agreeing the price pursuant to the option was so uncertain as to constitute no more than an unenforceable agreement to agree.
12. Adam stored the agreement without re-reading it and told his mother only that he had got a receipt from Mr Kinnear, which in fact he had not got. The recorder accepted Mrs Vinaver's evidence that she did not see the document at that stage, nor indeed until autumn 2003, by which time the dispute had already arisen. He found also that Adam's understanding of the planned arrangements was so limited that he would have been incapable of describing them to his mother, and there is no suggestion that Mr Kinnear ever explained the details of the arrangements to her. The recorder found that if Mrs Vinaver had seen the document at the time, she would have been surprised at its contents, and she would not have allowed the transaction to proceed without getting legal advice.
13. On 10 May 2002, contracts were exchanged for the Margate property with a purchase price of £75,000, being made up as to 25 per cent by the £18,750 deposit paid by Mrs Vinaver, and the balance of £56,250 being met by a mortgage taken out by MAL in its own name with the Kent Reliance Building Society. Completion took place on 5 June 2002 and the property was registered in the name of MAL. The legal fees were paid by Mrs Vinaver. Everything was handled by Mr Kinnear and no documentation whatsoever, the recorder found, was made available then or over the following months to Mrs Vinaver or Adam, neither of whom knew in whose name the property had been registered. Neither of them knew who had provided the mortgage.
14. Mrs Vinaver, however, knew that there was a mortgage, because regularly between July 2002 and January 2003 she made out cheques to Mr Kinnear to pay the mortgage on the Margate property, having first received from him cheques accounting for the rents from the Folkestone property less commission. In late December 2002 planning permission was granted for the conversion of the Margate property to form three self-contained flats with ground floor retail shops, but because of the breakdown in relations between the parties Mrs Vinaver never received any rent from the Margate property.
15. In February 2002 the Herne Bay property was identified as another investment for Mrs Vinaver. On 9 May 2002, Mr Kinnear agreed, subject to contract, to purchase the Herne Bay property for £135,000. Contracts were not exchanged until 13 November 2002. The purchase price, as I have said, was £135,000, made up of a deposit of £33,750, which was 25 per cent, paid by Mrs Vinaver and the balance through a mortgage obtained by MAL in its name, again from the Kent Reliance Building Society. Once again, the legal fees were paid by Mrs Vinaver.
16. The recorder found that Mr Kinnear must have known he was handling another of Mrs Vinaver's investments. Completion took place on 22 November 2002 and the property was registered in the name of MAL. In the case of the Herne Bay property there was no written agreement. Mr Kinnear's evidence was that he intended that the Margate prototype would be followed, with Adam having an option to purchase following completion of refurbishment. The evidence of Adam and Mrs Vinaver was that they both assumed that Mr Kinnear would have security for the mortgage, but that the Herne Bay property would be theirs just as were the Folkestone and Margate properties.
17. Adam then worked in late November and December 2002 at renovating two of the Herne Bay flats, the first of which was let by Mr Kinnear in early January 2003 and the second in early February 2003. The rent, less MAL's management fee, was accounted for by MAL to Adam. At some time in late December 2002 or early in January 2003, in conversation with Adam Mr Kinnear mentioned that at least the Margate property was MAL's property and not that of Adam and Mrs Vinaver. This culminated in Adam changing the locks on the Margate property on 11 January 2003, and later that month Mr Parry and Mr Kinnear wrote to Adam stating that MAL was the owner of the Margate property and that: "You have no interest in the company and you have no right to interfere with the property".
18. I turn now to the recorder's conclusions. The judge held that the payments by Mrs Vinaver were not gifts to Adam and that the presumption of advancement was rebutted. She acquired a 25 per cent beneficial interest in the Margate property and the Herne Bay property on a resulting trust basis. There is no appeal on this aspect, but on that basis her interest was only 25 per cent and not increased by her mortgage payments. But in the case of the Herne Bay property, in view of Adam's work on it, 30 per cent was the right percentage. As I have said, there is no appeal from this part of the judgment, and the appeal is concerned with the recorder's conclusions in relation to constructive trust. The recorder directed himself that five questions arose in relation to the claim that the properties were held on constructive trust.
19. These were as follows: first, were there express discussions between the parties, or at least a communicated intention that the properties should be shared beneficially between Mrs Vinaver on the one hand and Mr Kinnear and/or MAL on the other? Secondly, if not, could the court infer a common intention of Mrs Vinaver and Mr Kinnear and/or MAL to share the property beneficially from the conduct of the parties and particularly from the direct contributions of Mrs Vinaver to the purchase price for both properties? Third, had Mrs Vinaver acted to her detriment in reliance upon the parties' express or inferred common intention, in the reasonable expectation that she would acquire an interest in the properties? Fourth, if so, did it matter that by the time contracts were exchanged, Adam had entered into the 1 May 2002 agreement with Mr Kinnear, something of which Adam ought to have notified, but did not notify, Mrs Vinaver? Fifth, if it did not matter, then what was the proper quantification of Mrs Vinaver's interest under a constructive trust?
20. On the first question, express common intention, the recorder decided as follows:

"82. … There plainly were discussions between Adam and Mr Kinnear, some of them in the presence of the claimant, from which Mr Kinnear knew that the claimant was intending to invest monies in the Margate and other properties. I accept the evidence of Adam that after the Margate property had been identified, Mr Kinnear spoke to both of them about mortgages in general and over the course of discussions between the three of them, it was suggested that the claimant used the Folkestone property rent to pay the mortgage costs in respect of the Margate property during the initial stages before the property was converted and let out. I have no doubt that it was Mr Kinnear who came up with the suggestion of a 25 per cent deposit and a 75 per cent mortgage and that he undertook to sort out the mortgage for them as well as calculating for them the amount they could afford to pay in mortgage payments from the rent they would expect to receive.

83. I am also clear that all three intended that for some undefined period Mr Kinnear's company would occupy some or all of the ground floor as an office at a peppercorn rent. I should make it clear that it seems to me that part of the basement, being physically joined to the ground floor, was part of that single unit. Insofar as the Vinavers turned their mind to the length of this occupation, I find they had in mind something short term because as Adam said when giving evidence, MAL was a new company and it might well fail. On the other hand, I consider that Mr Kinnear had in mind something considerably longer.

84. More significantly, I find it was Mr Kinnear's intention that Adam acting on his mother's behalf should acquire a deferred option in the property and not a straightforward beneficial share, much less 100 per cent ownership. Whether he intended that she should from the outset have a 25 per cent or any percentage share is unclear but unlikely. Mr Dovar argues that an option was plainly not a beneficial interest although it is an interest in land. Different as are the beneficial interests intended by the claimant and the deferred option intended by Mr Kinnear, are they so different that they fail the test that 'the consensus ad idem must be a demonstrable reality'? [quoting from Gray, Elements of Land Law, paragraph 10.116]

Not without hesitation, I consider that this mishmash of intentions does meet the minimum standard for an 'express bargain' of constructive trust though I am unaware of any case where the concept has been stretched this far.

Further, and even more hesitantly, I consider that the same applies to the later Herne Bay property as well. In that case, there was less by way of discussions but nevertheless, there was a shared understanding that the procedure and substance would be the same as before even though the parties' understanding on the basis on which the Margate transaction was proceeding differed markedly."

21. On the second question, that is inferred common intention, he found, at paragraph 87 of the judgment:

"If this conclusion be wrong, I then turn to consider question 2. I consider that the claimant could achieve the same goal of a constructive trust by means of an 'inferred intention' constructive trust. Though the mortgage payments on the Margate property may more properly be referable to the 1 May 2002 agreement than to any constructive trust, the deposit was a 'direct contribution to the purchase price which is not explicable save on the basis that the parties must have intended that the property would be beneficially shared'." [quoting from McKenzie v McKenzie per Mr Robert Hildyard QC sitting as a deputy judge, at paragraph 72]

22. The recorder went on:

"Again, I do not think it matters that one party was contemplating a deferred option. In the case of the Herne Bay property where there was no express agreement similar to the 1 May 2002 agreement, both the deposit and the mortgage payments would give rise to a 'change of position' of constructive trust."

23. In relation to the third question, detrimental reliance, the deposit payments and payments of legal fees for the purchase, on their own and individually, were sufficient in each case.
24. I need not deal with the fourth question for present purposes, but on the fifth question, quantification, the recorder said it was plainly not a case, quoting from Gray, Elements of Land Law, paragraph 10.126, "where the parties have demonstrably formed some express agreement in respect of the beneficial quantum". Therefore the court had to use the yardstick of what was fair and just in all the circumstances, having regard to the whole course of dealing between them in relation to the property. Applying that approach, from which there is no appeal, he decided that Mrs Vinaver was entitled to the entire beneficial interest of the Margate property, subject to an allowance of £11,000 to MAL and to the 17 year lease of the ground floor flat on the basis of a peppercorn rent, and that she was entitled to 95 per cent beneficial interest in the Herne Bay property.
25. There are three grounds of appeal which are live today. First, that the finding of an express common intention in relation to both properties was perverse in view of (a) the finding that MAL had intended that it would be the owner and that Adam would have a conditional option and (b) this intention was reflected in the option agreement. Secondly, that the finding of an inferred intention in relation to both properties was perverse for the same reasons. Thirdly, the conclusion that the whole of Margate and 95 per cent of Herne Bay was vested in Mrs Vinaver was wrong in that it was perverse for the recorder to have decided that it did not matter that one party was contemplating a deferred option and the other was contemplating an immediate and direct beneficial interest, in that Mrs Vinaver, on her own case, intended the properties to be held in trust for her for her life, and the two interests were not sufficiently similar to provide the basis for an express or inferred common intention.
26. Mr Dovar for MAL, in a concise and lucid argument contended that the recorder erred in finding that a common intention of constructive trust arose where Mrs Vinaver intended that she would get the full beneficial ownership of the property and MAL intended that it would get the full beneficial ownership of the property, but subject to a deferred option to purchase in favour of Adam. The basis of a common intention of constructive trust is that there must be a common intention between the parties as to their respective shares. If the parties are at odds as to the type of interest, then no constructive trust can arise. Although an option to purchase can be an equitable interest or an equitable estate, this is different from a beneficial share in the property under the generally recognised concept of constructive trust in this area of the law. Interest in property other than a share in the beneficial interest can be inconsistent with the creation of a constructive trust, and Mr Dovar relied on a passage in Oxley v Hiscock [2004] 3 WLR 715 at 751, where it was decided that the securing of a charge over the property for the amount contributed was found to be inconsistent with an intention that the property should be owned jointly or in equal shares. Mr Dovar relied on the fact that the recorder recognised that the interests contemplated by the parties were different.
27. In this case, the absence of a common intention means that it was not unconscionable for MAL to deny Mrs Vinaver a beneficial interest. Her uncommunicated belief alone that she would have the full beneficial interest is not sufficient to give rise to a constructive trust, particularly where MAL's belief was that Adam would have an option to purchase. The finding of MAL's actual intention precludes, according to Mr Dovar, a constructive trust arising out of an inferred intention. Having found that MAL intended to have the full beneficial interest itself with an option to purchase, it was not open to the recorder to find that the parties must have intended that the property would be beneficially shared.
28. Mr Campbell for Mrs Vinaver, in an equally lucid and concise argument, contended that in considering whether a constructive trust arises, the court should first consider the primary or threshold question: was there a common intention that each party should have a beneficial interest in the property? That was distinct from the secondary or consequential question: what was the common intention of the parties as to the extent of their respective beneficial interests?
29. Questions one and two posed by the recorder sought to address the threshold question – not the consequential question of whether there was agreement between the parties as to the extent of Mrs Vinaver's interest, which was a matter of quantification. According to Mr Campbell, the recorder was right to conclude from his primary findings of fact that there was a common intention that Mrs Vinaver should have a beneficial interest in the property, and therefore right to answer the threshold question in the affirmative. In particular, he relied on a number of findings to justify that conclusion. First, that Mr Kinnear knew that the deposits for both properties were being paid by Mrs Vinaver, and were investments by her, and not gifts to her son. Secondly, Mr Kinnear knew that Mrs Vinaver and not her son would be funding the refurbishment works to the Margate property and would be paying the mortgage. Third, Mr Kinnear agreed to account for any surplus rental income from the properties to Mrs Vinaver. Fourth, Mr Kinnear thought that as a result of the transaction MAL was obtaining the right to occupy the ground floor of the Margate property at a peppercorn rent. Mr Kinnear's understanding that MAL would have to pay rent to Mrs Vinaver to occupy part of the property, albeit at a nominal rent, was consistent only with him believing that Mrs Vinaver would be obtaining an interest in the property. Therefore, Mr Kinnear clearly did intend that Mrs Vinaver would have a beneficial interest in the properties, albeit that there was no agreement as to the precise extent or nature of that interest. Although the parties may have had differing intentions as to the extent of the interest, the differences between them were, in practical terms, relatively limited.
30. My conclusions are as follows. First, there is little or no dispute as to the relevant principles which can be derived from many authorities, of which the most important are Gissin v Gissin [1971] AC 886, Grant v Edwards [1986] Ch 638, Lloyds Bank v Rosset [1991] 1 AC 107 and Oxley v Hiscock [2004] EWCA Civ 546, [2004] 3 WLR 715. The principles can be stated, at the risk of oversimplification, as follows. A constructive trust arises in connection with the acquisition by one party of a legal entitlement to property whenever that party has so conducted himself that it would be inequitable to allow him to deny to the other party a beneficial interest in the property acquired. This will be so where (1) there was a common intention that both parties should have a beneficial interest, and (2) the claimant has acted to his or her detriment in a belief that by so acting he or she was acquiring a beneficial interest. The relevant intention of each party is the intention reasonably understood by the other party to be manifested by that party's words or conduct, notwithstanding that he did not consciously formulate that intention or even acted with some different intention which he did not communicate.
31. Lord Bridge in Lloyds Bank v Rosset [1991] 1 AC 107, at 132 said:

"The first and fundamental question which must always be resolved is whether, independent of any inference to be drawn from the conduct of the parties … there has at any time prior to the acquisition or exceptionally at some later date been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The finding of an agreement or arrangement to share in this sense can only be based on evidence of express discussions between the parties however imperfectly remembered and however imprecise their terms may have been."

Where the evidence is that the matter was not discussed at all, an affirmative answer may be inferred from the making of a financial contribution which is only attributable to the fact that the parties must have intended that the property would be beneficially shared. Once an express common intention has been established, it will only be necessary for the claimant to show that he or she acted to his or her detriment or significantly altered his or her position in reliance on the agreement so that he or she would thereby acquire an interest. So far as the extent of the prospective beneficial interests is concerned, prima facie the interest of the claimant will be that which the parties intended, but if there is no evidence each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property.

32. In my judgment, the recorder's conclusion on the first question was right in the light of the following matters:

(1) Mr Kinnear knew that Mrs Vinaver was the source of finance and that the properties were investments for her and that she was not making gifts to Adam.

(2) Mr Kinnear's interest in the Margate property was that MAL would get, as he said in his witness statement "a free office refurbished at Adam's cost"; and his co-director Mr Parry's understanding in paragraph 7 of his witness statement was that MAL was effectively to receive a long lease at a peppercorn or full ownership of a newly refurbished office at no expense. Although these statements were made in the context of a discussion of the option agreement, it seems to me that they reflect the commercial position. MAL was only contributing to the project (a) its ability to raise the finance under the mortgages and (b) its ability to let and manage the properties. There was little risk in the mortgages because the interest would be covered by the rents and the principal was, in effect, secured on the properties.

(3) The properties were in MAL's name because, possibly among other reasons, Mrs Vinaver at the age of 85 could not obtain a mortgage in her own name.

(4) Mrs Vinaver always assumed that the Margate property would be as much her property as was the Folkestone property, irrespective of the name into which the legal title was transferred, not least because she was going to receive all the rental income from the Margate property and she was going to pay the entire mortgage payments, matters which usually go with property ownership.

(5) Mr Kinnear knew that Mrs Vinaver was funding the Margate deposit. He must have known that she saw the Margate transaction as simply a variant of the Folkestone one, with repeat roles for Adam in renovation and Mr Kinnear in management.

(6) Mr Kinnear's evidence was that the property would be registered in MAL's name, but the question of whose name the Margate property should be registered in was never discussed in Mrs Vinaver's presence at any time and Adam did not appreciate that this was what Mr Kinnear planned until much later in January 2003.

(7) Mr Kinnear's evidence was that it was intended that MAL would initially have full ownership of the property, but this was not understood by Mrs Vinaver of Adam.

(8) Mrs Vinaver knew nothing about any option proposal and, although Adam was told about it on 1 May 2002 and possibly before, he did not understand what was involved. It was extraordinary that Mr Kinnear drafted an option in that form. Initially the recorder thought that Mr Kinnear might have been seeking to take advantage of Mrs Vinaver and Adam, but on reflection he was satisfied that this was merely sloppy drafting.

(9) Mr Kinnear must have known that it would be Mrs Vinaver herself who would be funding the mortgage payments and for their part, Mrs Vinaver and Adam knew that these would be their obligations.

(10) Mr Kinnear also knew that MAL would repay the mortgage and recover the amounts from any rental income derived from the property, with any shortfall funded by Mrs Vinaver and any surplus payable to Mrs Vinaver.

33. I am satisfied that it was agreed that Mrs Vinaver should have some beneficial interest in the property, and that that agreement is evidenced by (a) Mrs Vinaver's evidence as to her intentions; (b) the evidence of Mr Kinnear and Mr Parry as to their intentions with regard to the Margate property; (c) the reference in the 1 May 2002 agreement to Adam's stake in the property; (d) the fact that Mrs Vinaver was expected to make the mortgage payments and pay the legal fees on the acquisition of the properties; (e) MAL was accounting to Mrs Vinaver for the surplus rents; (f) MAL was charging management fees for collecting rents on what, on its own case, was its own property; (g) the fact that it was understood that Mrs Vinaver and her son would refurbish the properties.
34. In sum, the recorder was entitled to find that the only reason the properties were in MAL's name was that it was taking out the mortgage. It put no money into the venture. It was always intended that the borrowing should in reality be by Mrs Vinaver. There was no discussion or agreement that the property should be in MAL's name. Adam would do the work and meet the cost. Mr Kinnear knew that it would be Mrs Vinaver herself who would be funding the works and the mortgage payments, and for their part Mrs Vinaver and Adam knew that they would be their responsibilities. MAL would pay the mortgage and recover the amounts from any rental income derived from the property, with any shortfall funded by Mrs Vinaver and any surplus payable to Mrs Vinaver. The mere fact that Mr Kinnear's evidence was that he intended that the property should be owned by MAL does not alter this, and the recorder was fully entitled to reject his evidence that he arranged for the Margate and Herne Bay properties to be bought as an investment for MAL as a joint venture with Adam, whom he thought was being funded by Mrs Vinaver.
35. The reality was that the objectively manifested common intention was that the whole arrangement was a means whereby Mrs Vinaver would purchase the properties for her old age. I would accept that substantially the same facts are relevant both as to express common intention and inferred common intention, but I prefer to rest my reasoning on the basis that there was an express common intention which was not negated by what Mr Kinnear may or may not have thought was the effect of the transactions.
36. For those reasons I would dismiss the appeal.
37. LORD JUSTICE WILSON: I agree. In considering whether the company held the properties under a constructive trust, the recorder first asked himself whether there were express discussions between the parties or at least a communicated intention that the properties should be shared beneficially between Mrs Vinaver and her son, Adam, (who can for the purpose of the issue raised in the appeal be treated interchangeably), on the one hand, and the company, on the other. The recorder held that such was what was needed for what he described as "an express bargain constructive trust". It is agreed that, in that regard, there summarising the effect of the exposition by Lord Bridge in Lloyds Bank v Rosset [1991] AC 107 at 132(E-G) which my Lord has quoted, the recorder asked himself the right question. He answered the question affirmatively, but "not without hesitation". It is the burden of today's appeal that he should have hesitated more profoundly and have declined to give the affirmative answer.
38. The peg upon which the appeal is in effect hung is the following passage in the recorder's judgment:

"More significantly, I find it was Mr Kinnear's intention that Adam acting on his mother's behalf should acquire a deferred option in the property and not a straightforward beneficial share, much less 100 per cent ownership. Whether he intended that she should from the outset have a 25 percentage or any percentage share is unclear, but unlikely."

Then, however, the recorder proceeded as follows:

"Different as are the beneficial interests intended by the claimant and the deferred option intended by Mr Kinnear, are they so different that they fail the test that 'the consensus ad idem must be a demonstrable reality'? Not without hesitation I consider that this mish-mash of intentions does meet the minimum standard for an 'express bargain' constructive trust, though I am unaware of any case where the concept has been stretched this far."

39. It was thus the recorder's analysis of Mr Kinnear's intentions on behalf of the company at the time of the purchases which led to his hesitation and which precipitates this appeal.
40. The only reservation which I have about the recorder's careful and erudite judgment is not a reservation which favours the company. On the contrary, it favours Mrs Vinaver. Why should Mr Kinnear's intention that Mrs Vinaver should have an option to purchase the full legal interest in the properties preclude his acceptance that she had an existing beneficial share of them? And in the light of her contribution of the entire deposits, namely in each case 25 per cent of the prices paid for the properties, how could Mr Kinnear – who had not been accused of having had any fraudulent intention –have intended otherwise than that she had an existing beneficial interest?
41. In this regard I consider that the written agreement relating to the Margate property dated 1 May 2002 and signed by Adam and by Mr Kinnear is illuminating. Although no doubt unenforceable, because it stated the option to purchase the property only to be "at a price to be agreed by both parties", it is nevertheless illuminating as to Mr Kinnear's communicated intention. Mr Dovar concedes and asserts that in that regard it is illuminating, although I do not share his interpretation of what it illumines. Indeed, although the agreement relates only to the Margate property, Mr Kinnear accepted – and the recorder found – that his intentions relating to the Herne Bay property were analogous to those relating to the Margate property.
42. By the first paragraph of the agreement it was provided that:

"The deposit of £18,750 is to be paid by Adam Vinaver and this stake in the property is formally recognised."

To my mind Mr Kinnear was communicating an intention which was logical and indeed inevitable, namely that the payment of the deposit gave Adam an immediate "stake in the property", being in my view a particularly good lay description of a beneficial interest; and that his stake was quite distinct from the wider interest which would pass in the event of his exercise of the option to purchase.

43. By the fourth paragraph of the agreement it was provided that, even prior to exercise of the option to purchase, "rental income" would, following deduction in respect of mortgage instalments and management fees, be paid to Adam. That provision was, in my view, inconsistent with his having anything other than an interest in the property.
44. By the fifth paragraph of the agreement, the hypothesis that Adam would die prior to the exercise of the option was addressed. In that event, so the agreement provided, the company would pay to Adam's estate the amount of the deposit plus any refurbishment costs incurred by him:

"… and a contribution uplift should the market value of the property at time of death be in excess of the purchase price."

In other words the agreement recognised that, even if the option were not to be exercised, a payment would fall to be made by the company, calculated by reference not only to the expenditure incurred by Mrs Vinaver upon the property but also to the need for a pro rata increase commensurate with any increase in the value of the property above its purchase price. Such was, in my view, a payment agreed to be made in order to satisfy the existing equitable interest of Mrs Vinaver in the property in the event of Adam's death prior to exercise of the option.

45. I consider, therefore, that it would be mistaken to focus upon Mr Kinnear's intention that Mrs Vinaver should have an option to purchase without having regard to the other features of his intended arrangement; that proper regard for them shows, almost inevitably, that his communicated intention was that, as the only contributor to the equity in the properties, Mrs Vinaver should have a beneficial interest in them; and that, when combined with Mrs Vinaver's own analogous intentions communicated to Mr Kinnear by Adam, it engages such part of the doctrine of constructive trust as is founded upon express common intention.
46. Such a conclusion also accords better with the commercial reality behind the transactions into which, as was accepted, both sides had entered bona fide. For surely the reality was that, in return for only minimal exposure under the mortgages, the company was to receive not exclusive ownership of two properties but rather what Mr Kinnear described as a "free office", together, of course, with management fees referable to the lettings.
47. So this appeal stands dismissed.

Order: Appeal dismissed.