England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		23 June 2009

1. The Claimant, Mrs Odunsi, is the registered legal owner of 4 Heath Road, London SW8 3DL, which she purchased from the London Borough of Lambeth under the right-to-buy provisions of the Housing Act 1985 (as amended) on 16 February 2004 after many years of occupation as a tenant of the Council. Both she and the Defendant, Mr Daodu, were born in Nigeria. Mr Daodu was (until a recent divorce) married to the niece of the Claimant's ex-husband, and first became acquainted with the Claimant in about 1984, when he was nineteen and had come to London to study law. The niece, then the Defendant's girl-friend, had become pregnant, and though the Claimant was then living in a two bedroom flat with three young daughters - and was herself pregnant with a fourth - agreed that the niece could stay with her. That continued, sporadically, for about a year. Thereafter the Defendant and the niece married and had further children. The Defendant qualified and has since practised as a solicitor in south London. Over the years there was considerable contact between the two families. The Claimant also acted as something of a confidante and go-between when the marriage broke down. The Defendant continued to call Claimant (auntie(, and plainly retained a sense of obligation for the help and support which she gave him and his future wife twenty years earlier.
2. The initial application to buy, dated 8 October 2002, was apparently made jointly by the Claimant and the second of her four daughters, Temitope, by then about 25 years old and no longer living with her mother. The reply from the council, dated 26 November 2002, accepted the right of the claimant to buy the property and rejected that of Temitope on the ground that she did not appear on the tenancy agreement and the Council had no record of her living in the property as her principal residence for the previous twelve months. The Council valued the property at (225k and calculated that under the relevant regulations she was entitled to a discount of (38k. Such discounts were recoverable (on a sliding scale) if the purchasing tenant resold within three years, but subject to retention for this period could be regarded (subject to a stable market) as a gifted capital benefit.
3. On 14 February 2003 the Claimant served a Reply Notice accepting the Council's offer (subject to contract): she indicated on the form that she had engaged the Defendant to act as her solicitor on the purchase. On 3 April 2003 the solicitors acting for the Council sent the Defendant the draft documentation. Matters then came effectively to a halt for another six or seven months.
4. The reason for the delay was the Claimant's difficulty in finding finance for the purchase. At some stage she received a proposal from a company offering to pay the discounted purchase price to the Council on her behalf on the basis that she would transfer the property to it after three years against a payment of (50k. She told the Defendant that this was not an offer which she wished to accept. It is common ground that she then asked the Defendant for financial assistance. It is also not in dispute that he agreed to help and did so, making substantial payments to her and on her behalf.
5. In the first place, he provided her with the funds - of (1,380 - to pay (apparently in advance) a mortgage broker to seek finance on her behalf. The broker reported on 2 December 2003 that a mortgage offer had been approved for (187k, the full amount of the purchase price, at a rate discounted until 1 January 2006.
6. Secondly, the Defendant said that he would pay the transaction costs. Because he was now assisting financially, he told the Claimant that she must find another solicitor, and gave her the draft documentation which he had received in April from the Council's solicitors. On 14 November 2003 Hanne & Co recorded the receipt of her instructions to act and of the documentation, set out their fee and expenses, and asked for (300 on account of costs. In the event their bill amounted to (2,872. 58, which Defendant paid to the Claimant by cheque on 8 January 2004.
7. Thirdly, the Defendant said that he would meet part of the monthly instalments of (1,179. 15. On completion of the purchase in mid-February 2004 he paid her by cheque the sum of (8,400 (equal to 12 x (700) to cover the first twelve months, leaving the Claimant to find herself the balance of (479.15 per month. Towards the end of 2004 the Claimant informed the Defendant that she had already spent the (8,400 she had given him, and asked him for further assistance. She said in evidence that she had other debts and that she had not been able to work full-time because of illness. However that may be, from January 2005 the Defendant began to make a monthly payment by Chaps transfer of (1,000 to the Claimant's bank account. The payments ceased after May 2005 after an important altercation between the parties to which I will refer later.
8. Though the fact and nature of the financial assistance given by the Defendant to the Claimant is common ground, there is a profound dispute - which lies at the heart of this action - as to the basis on which that assistance was given and its implications for the beneficial ownership of the property.
9. According to the Defendant's evidence, as set out in his witness statement, the Claimant, after telling him of the offer which she had received from the company to which I referred in Paragraph 4 above, said that

"she preferred to enter into an arrangement with a family member rather than the company. She offered me a half share of the equity on expiration of three years from the date of purchase in consideration for me paying all the costs associated with the purchase including the balance of the purchase price required for completion and to contribute to the monthly mortgage repayments for a period of 3 years. She further agreed that after the 3 years my contributions would be deducted and repaid to me before the division of the equity...."

In his Defence he stated that

(The claimant orally agreed with the defendant to enter into an arrangement that in exchange for payment of all the costs of purchase and contributions to the mortgage she would after deduction of the Defendant's initial contribution share the equity in the property with him in equal share (sic) at the end of three years from the date of purchase....

In an amendment to his counterclaim (supported by a statement of truth), the Defendant also made clear that it was part of the agreement between the parties that (the property would be sold after 3 years....

He added in his witness statement that the claimant

(to assure me of her sincerity specifically asked me to put the agreement in writing but I advised her that it was unnecessary because I trusted her as a previous aunt in law whom I had known since I was very young. Also under our culture in Nigeria it is natural for a younger person to trust an older person when that older person makes you a promise. ... I went into the arrangement with her as an investment and also to assist her, as a family member, to own her own home, and ultimately have the benefit of a share of the equity....

10. In the spring of 2005 the Claimant, as is common ground, mentioned to the Defendant that she was intending to put a new kitchen into the house. According to the Defendant, he told the Claimant that this made no sense since the property was to be sold on the expiration of the three year period, in reply to which she indicated that she might not be willing to sell the house then. He then became angry, thinking that he had been, in effect, taken for a ride. He stopped the monthly contributions of (1,000, and asked for repayment of all the monies he had paid to or on her behalf so far, totalling - as is agreed - (18,467. 55. Some weeks later he asked her to sign a document agreeing or acknowledging he had a 50% interest but she refused to do so. On 13 September 2005 he caused a restriction to be entered in the land registry against dealings with the property claiming that he had a beneficial interest by virtue of his financial contributions to the purchase of the property and the mortgage repayments based on an oral agreement in November 2003.
11. The counter-position of the Claimant was and is that she never entered into any such agreement. She accepted, and continues to accept, that the Defendant was entitled to repayment of the (18,467. 55 and proposed that the restriction should be lifted to permit the remortgage of the property and the release of funds to facilitate that payment. The Defendant entered into negotiations along those lines, while continuing to insist that he was also entitled to a half-share of the equity. Eventually, the present action was commenced by the Claimant claiming that a compromise had been reached for the temporary lifting of the restriction and seeking an order accordingly. That claim was settled by a consent order, which has however never been put into effect because it has proved impossible to find a remortgage. In the meantime, the Defendant counterclaimed for a declaration that the Claimant holds the property on trust for herself and the Defendant in equal shares. It is that issue which now falls for determination.
12. The Defendant's argument is, put shortly, that the property was acquired by the Claimant pursuant to the oral agreement which he described in the extracts from his pleadings and evidence which I set out above, and with the help of the payments by him contemplated by that agreement and made both at the outset and subsequently. The agreement established or manifested a common intention of the parties that the Defendant should have a 50 % equity interest (in addition to, and after the return of, his contributions) which is to be reflected in the form of a constructive trust.
13. A fundamental problem about the Defendant's case is that the 50% equity share is said to have been agreed as the quid pro quo for the Defendant advancing (in addition to the initial transaction costs) the monthly mortgage contributions for three years. That did not, however, occur. After the quarrel triggered by the proposed new kitchen, the Defendant stopped the payments altogether - less than half way through the three year period. Even taking into account that during the last five months he had (overpaid... to the tune of (300 per month, his total contributions to the mortgage repayments of (13,400 were very much less than the (25,200 outlay which would have resulted from three years payments (at the initial rate of (700 per month). The Defendant cannot be entitled to a 50% participation which was predicated on a situation which was never realised.
14. The Defendant could of course have continued to make the payments and sought to hold the Defendant to the terms of the alleged agreement at the end of the three years. What he could not do, was to stop the payments and then recover what the agreement accorded only on the basis of payments for three years.
15. Whether the events should be analysed as the Defendant's acceptance of a repudiation by the Claimant, is not a matter which I have to consider. The Defendant did not seek in these proceedings to advance any claim for damages for breach of contract. The entitlement of the Defendant to repayment of the (18,467. 55 advanced by him is accepted by the Claimant, and I have not been asked to consider whether he has an equitable lien or similar interest on or in the property to the extent of these advances.
16. Counsel for the Defendant submitted that the Defendant's cesser of the mortgage contributions could not cancel a beneficial interest which was already in existence. She suggested that at worst it could only be reflected by an equitable adjustment, which would be nominal or minimal given that all amounts advanced by the Defendant were to be repaid before division of the net proceeds.
17. The starting-point for this submission is in my view misconceived. The natural analysis of the arrangement as pleaded by the Defendant and described in his evidence is that the Defendant was to have a 50% beneficial interest in the net proceeds of sale - after payment of the mortgage debt and repayment of his own advances. The Claimant's argument wrongly equates that with an immediate 50% beneficial interest in the property.
18. Even if the agreement could be interpreted as creating a 50% beneficial interest in the property from the date of its acquisition, I can see no reason why that interest should not have been subject to a condition defeasant that the Defendant would make the contemplated payments for the full three year period.
19. In summary, even on the Defendant's own case he would not have been entitled to the 50% interest in the property which he claims (or even in the potential net proceeds of sale).
20. It is therefore unnecessary for me to decide whether the parties in fact entered into the agreement alleged by the Defendant, and in the particular circumstances of the present case I do not intend to do so.

Conclusion

21. I will dismiss the counterclaim.
22. Finally, I wish to record that the claimant was represented on a pro bono basis by Nicholas Padfield Q.C. and Mr Arfan Khan of Counsel, instructed by Weil Gotschal & Manges, also acting pro bono. The court is grateful to all of them for their generous assistance.