England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HASTINGS COUNTY COURT
HIS HONOUR JUDGE HOLLIS

		Royal Courts of Justice Strand, London, WC2A 2LL
		29th March 2012

Lord Justice Lewison:

1. Between 1990 and May 2009 Mrs Geary and Mr Rankine were in a relationship. When it began Mrs Geary was still married, and she was not divorced until 2002. At the beginning they lived in London. Mrs Geary and Mr Rankine had a son, Aran, who was born in 1992. When they first met Mr Rankine ran a removal business and subsequently opened a second-hand furniture shop as well. Mrs Geary did all the office work. Mr Rankine had been working in the print industry, and when he was made redundant some time before the relationship began he had received a redundancy payment.
2. In 1996 Mr Rankine acquired a guesthouse called Castle View at 7 Devonshire Road, Hastings. It was bought for £61,000. The purchase was a cash purchase with no mortgage and Mr Rankine provided all the cash out of his savings. At the time of the purchase it was not intended that they should live in the property. Nor at that time was it intended that either of them would run the guest house business. Rather, Mr Rankine purchased it as a commercial investment and the business was to be run by a manager. The judge accepted Mr Rankine's evidence that at the time the intention was that they would continue to live in London and that he would arrange for someone to manage the business in Hastings. However, there were difficulties with the manager which manifested themselves quite quickly and Mr Rankine himself moved down from London to try and run the business himself. Mrs Geary remained in London working as a receptionist. After a further short time Mr Rankine found that he could not cope either, so Mrs Geary moved down to Hastings, but they still retained their London home in case they decided to move back.
3. Once Mrs Geary was settled in Hastings she became involved in the business. The judge found that she helped with the clearing, she helped when there were students there, she prepared three meals a day and she dealt with some of the paper work and bank work, assisting Mr Rankine, who was not good either with documents or figures.
4. The judge did not consider that either Mrs Geary or Mr Rankine was a reliable witness, and he said they were both untruthful on occasions. Contrary to Mrs Geary's evidence, the judge found that the bank accounts were in Mr Rankine's name and there was no joint account. Also contrary to her evidence, he found that the initial purchase was, as I have described, an investment on Mr Rankine's behalf to be run by a manager. Contrary to Mr Rankine's evidence, he found that Mrs Geary played a rather greater role in the running of the guest house than he was prepared to accept.
5. In her witness statement dated 6 October 2009 Mrs Geary said, amongst other things:

"If I needed money he [i.e. Mr Rankine] would give it to me. He would only give me housekeeping or spending money if I asked for it. He was very controlling."

She also said:

"I have previously been married when I met him but I have never bothered to get a divorce. The Defendant told me that unless I formally divorced my former husband he would not recognise me, or leave me anything in his will."

6. Mr Rankine gave evidence on the latter point to much the same effect. He said in his witness statement dated 7 April 2010:

"Lastly, it should be noted that Barbara remained married to her husband until 2002 or later. That being so, there was no way that I would make her a partner in the business. If I had I would have assumed that that could have enabled her former husband to make a claim against my money and might result in provision for him and the children they had had rather than for Aran."

7. In her second witness statement Mrs Geary said:

"During the time that I lived and worked with the Respondent I was not paid a wage. If I needed money for shopping or cigarettes I asked the Respondent for it and he would give me money. Throughout our relationship the Respondent was mean with money and reluctant to allow me to spend […] If I asked the Respondent for money to spend on myself other than small amounts, there would always be an argument and he would become angry so I eventually did not ask."

8. She added in that witness statement:

"As the years went by, I kept asking him what security he was going to provide for me and my son should anything happen to him. He would say it was best that the business stayed in his name only because if it failed and he was made bankrupt then I could continue the business afresh in my sole name. In later years, he would give no answer or make a non committal response."

9. The material before the judge also included the accounts prepared for the business for each of the years between 2005 and 2009. These accounts were prepared in the name of A J Rankine trading as Castle View Guest House. Each of the balance sheets accompanying the profits and loss accounts showed drawings by Mr Rankine of between £4,000 and £20,000. The accounts showed no drawings by Mrs Geary. The profit and loss accounts also showed a deduction for wages which, according to Mr Rankine on his pleaded case, included payment of wages to Mrs Geary. Mrs Geary's evidence was that it was she who dealt with the accountants and attended meetings when "he discussed the business and taxation issues with the accountant".
10. Mrs Geary put her claim in two ways. First, she said that she had acquired a beneficial interest in Castle View. Second, she said that she and Mr Rankine had been partners in the guest house business. The statement of case in support of the partnership claim did not specifically allege that the freehold property was a partnership asset, but, as the judge observed, unless it was, any account would only produce a loss for her.
11. HHJ Hollis rejected both ways in which Mrs Geary put her claim. Mr Broatch, appearing on this appeal for Mrs Geary, concentrated most of his skeleton argument on the partnership claim. He rightly submitted that a family or quasi-family relationship was not necessarily incompatible with the relationship of business partners. He also correctly submitted that a partnership can be founded on an agreement inferred from conduct. Mr Broatch's principal criticism of the judge was that he was guilty of what Mr Broatch called "reverse order reasoning"; that is to say he reached a conclusion before articulating the reasons which led him to the conclusion that he had already arrived at. It is therefore necessary to look at some of the objective evidence before the judge.
12. Mrs Geary worked in the business to a greater extent than Mr Rankine was prepared to admit. She was not paid a wage and the judge found that she was not an employee. This is a pointer towards the conclusion that there was a partnership. However, there were many pointers towards the opposite conclusion. First, the accounts, in the preparation of which Mrs Geary participated, were drawn on the basis that Mr Rankine was a sole trader. A letter from the accountants confirms that since their appointment they had acted for Mr Rankine in his capacity as a sole trader. Second, the accounts showed no evidence of any sharing of profits. Mr Broatch said that Mrs Geary and Mr Rankine, as he put it, lived on the business, but in my judgment that does not begin to show a sharing of the profits. The drawings were all made by Mr Rankine. Indeed, during the course of Mr Rankine's cross-examination it was put to him by counsel then appearing for Mrs Geary that "the net profit for the year -- it would have gone to you, would it not?", to which Mr Rankine answered "Yes". Thus the case put to Mr Rankine positively asserted that there was no sharing of profits. Third, there was no evidence that Mrs Geary was held out as a partner to the outside world. Fourth, as the judge found, there was no joint bank account. Fifth, as the judge found, they separated for a period of many months and during that time the business carried on. If there had been a partnership it would have been a partnership of will, with the result that when Mrs Geary left the business that partnership would in any event have dissolved.
13. In addition, there is the evidence of Mrs Geary herself. I have quoted some of it. Her evidence was that Mr Rankine only gave her money when she asked for it but he was very controlling. If she asked for money to spend on herself, other than small amounts, there would be an argument and he would become angry. Those points to my mind contradict any conclusion that she had an entitlement to a share in profits of the business. In addition, her evidence that Mr Rankine's position was that the business should remain in his sole name. The reason he gave was that if he became bankrupt she would be able to start afresh. In other words, she would be shielded from the liabilities of the business that she would assume if she were to be a partner in it. That too contradicts the notion that she did in fact become a partner.
14. Mr Broatch says that conduct can override express intention. Perhaps in an extreme case it could, but in my judgment that is not this case. Mr Rankine's explanation for not entering into a business partnership with Mrs Geary was perfectly rational and, in my judgment, is a strong pointer against any finding that a partnership existed by inference.
15. In my judgment therefore there was ample evidence on which the judge was entitled to reach the conclusion that there was no business partnership. In addition, even if there was such a partnership it would not follow that the freehold property would have been a partnership asset. It is true that it is recorded in the balance sheets of the business, but that is because the business accounts were drawn on the basis that Mr Rankine was a sole trader. The mere fact that there is a partnership in profits produced by a particular asset does not indicate that the asset itself is partnership property. It is a common place that one partner may own the property in which a partnership business is carried on. If the asset is acquired with profits generated by the partnership, that is a different proposition, but in this case the asset was acquired with Mr Rankine's own money before any question of partnership in the guest house business could have arisen.
16. In those circumstances, even if the judge was wrong on the question of partnership, and I do not consider that he was, this way of putting the case does not give Mrs Geary an interest in the value of the freehold itself. I would therefore reject this ground of appeal.
17. The second way in which Mrs Geary put her case was that there was a "common intention" constructive trust. The judge's crucial finding was that Castle View was bought by Mr Rankine entirely with his own money and that at the time of the purchase it was intended to be an investment rather than a home. It was not even intended at that time that Mrs Geary should play any part in the running of the business. The judge accepted Mr Rankine's evidence that at the time of the purchase:

"…the intention was that we would continue to live in London and I would arrange for someone to manage the business in Hastings. There was never an intention that the property would be purchased jointly, nor was there any discussion to that effect. It was not even going to be our home."

18. The judge recorded that counsel then appearing for Mrs Geary accepted that the claim to a beneficial interest based on a common intention at the time of the purchase could not be sustained. Mr Broatch did not challenge that conclusion. Rather, he argued that there had been a subsequent change in the common intention such as to give Mrs Geary an interest in the property, even if she was not Mr Rankine's business partner. The applicable principles had been settled at the highest level in Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432 and Jones v Kernott [2011] UKSC 53 [2011] 3 WLR 1121. The starting point is the legal title. In this case legal title was in Mr Rankine alone. Thus Mrs Geary has the burden of establishing some sort of implied trust; normally what is now termed a "common intention" constructive trust. The burden is all the more difficult to discharge where, as here, the property was bought as an investment rather than as a home. The search is to ascertain the parties' actual shared intentions, whether express or to be inferred from their conduct. In Jones v Kernott it was pointed out that there are at least two exceptions. The first is where there is a presumption of a resulting trust. That presumption may arise where the partners are business partners as well as domestic partners. In the present case if it applies that exception would work in Mr Rankine's favour since he provided all the money.
19. The second is where it is clear that the beneficial interests are to be shared but it is impossible to divine a common intention as to the proportions in which they are to be shared. Whether the beneficial interests are to be shared at all is still a question of a party's actual shared intentions. An imputed intention only arises where the court is satisfied that the parties' actual common intention, express or inferred, was that the beneficial interest would be shared, but cannot make a finding about the proportions in which they were to be shared. The relevant principles are summarised in paragraphs 51 and 52 of Jones v Kernott:

"[51] In summary, therefore, the following are the principles applicable in a case such as this, where a family home is bought in the joint names of a cohabiting couple who are both responsible for any mortgage, but without any express declaration of their beneficial interests.

(1) The starting point is that equity follows the law and they are joint tenants both in law and in equity.

(2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change.

(3) Their common intention is to be deduced objectively from their conduct: "the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party's words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party" (Lord Diplock in Gissing v Gissing [1971] AC 886, 906). Examples of the sort of evidence which might be relevant to drawing such inferences are given in Stack v Dowden, at para 69.

(4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, "the answer is that 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": Chadwick LJ in Oxley v Hiscock [2005] Fam 211, para 69. In our judgment, "the whole course of dealing … in relation to the property" should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties' actual intentions.

(5) Each case will turn on its own facts. Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended (as in case (3)) or fair (as in case (4)).

[52] This case is not concerned with a family home which is put into the name of one party only. The starting point is different. The first issue is whether it was intended that the other party have any beneficial interest in the property at all. If he does, the second issue is what that interest is. There is no presumption of joint beneficial ownership. But their common intention has once again to be deduced objectively from their conduct. If the evidence shows a common intention to share beneficial ownership but does not show what shares were intended, the court will have to proceed as at para 51(4) and (5) above.

20. In a single name case of which this is one the first issue is whether it was intended that the claimant should have any beneficial interest in the property at all. If that issue is determined in the claimant's favour, the second issue is what that interest is. There is no presumption of joint beneficial ownership. But the common intention has to be deduced objectively from their conduct.
21. Having rejected the claim Mrs Geary and Mr Rankine had a common intention at the time of the purchase that Mrs Geary should have a beneficial interest in Castle View, the judge went on to consider whether that common interest subsequently changed. It is important to stress that the object of the search is a common intention; that is, an intention common to both parties. So Mrs Geary had to establish that despite the fact that the legal title to the property remained in Mr Rankine's sole name, he actually intended that she should have a beneficial interest in it. As I have said that actual intention may have been expressly manifested, or may be inferred from conduct; but actual intention it remains. The judge found that there was no change in Mr Rankine's intention. He also said that there was no evidence that Mrs Geary had taken any steps to change her own position in reliance on any assertion by Mr Rankine that she would have an interest in the property or in reliance on any steps taken by Mr Rankine from which she could have inferred that his intention had changed. Mr Broatch challenges that finding of fact. He points to a passage in Mrs Geary's evidence to the following effect:

"The manager called Tony (who the Defendant had put in to the property to run it) turned out to be a disaster. Events moved quickly. The Defendant required me to give up my job in London and move down to Hastings to manage 7 Devonshire Road. The timescale was immediate so that I did not have an opportunity to give proper notice to my employers. The Defendant moved our belongings from London to Hastings and within a short time we had both moved to Hastings and relinquished the London property. No matter that the business was purchased in the Defendant's sole name, the common intention was that the business would be our joint venture, which we would run together."

22. I do not consider that this passage in the evidence supports that claim. What Mrs Geary was saying was that the common intention was that she and Mr Rankine would run the business together, but in my judgment it is an impermissible leap to go from a common intention that the parties would run a business together to a conclusion that it was their common intention that the property in which the business was run, and which was bought entirely with money provided by one of them, would belong to both of them. In addition, Mrs Geary's own evidence makes it clear to my mind that Mr Rankine had no intention that she should have an interest in the property itself. First, as I have said, her evidence was, as was his, that he would refuse to recognise her unless she got divorced. She did not get divorced until 2002, some six years after the acquisition. That refusal to recognise her is in my judgment inconsistent with an intention on his part that she should have a beneficial interest in the property. I might add that his given reason, namely that he feared that her husband might make a claim on the property, is a perfectly rational reason even if it might not have been given effect. Second, Mrs Geary's evidence was that as the years went by she asked what security she had for her and her son and that Mr Rankine either said the business should remain in his sole name or was non-committal. Those passages are also, in my judgment, inconsistent with an intention on Mr Rankine's part that Mrs Geary should have a beneficial interest in the freehold of Castle View.
23. In addition, the passage in the evidence on which Mr Broatch relies seems to me to contradict the judge's finding on the partnership issue and in particular his statement in paragraph 8 of his judgment:

"I do not accept that she took on this role on the basis of or in reliance of some common intention that she was entitled to a half share of the property, nor that in doing so she became in some way Mr Rankine's business partner."

24. In my judgment, therefore, Mr Broatch has not demonstrated that the judge was wrong in his conclusion that Mr Rankine's intention never changed. I therefore would dismiss the appeal.

Lord Justice Etherton:

25. I agree.

Lord Justice Thorpe:

26. I also agree.

Order: Appeal dismissed