Jersey Unreported Judgments

Licitation - reasons for refusing the plaintiff's application.

[2021]JRC197

Royal Court

(Samedi)

26 July 2021

Before     :

Advocate Matthew John Thompson, Master of the Royal Court.

 

Advocate D. S. Steenson for the Plaintiff.

The First Defendant and Second Defendants in Person

		Paras
1.	Introduction	1
2.	Background	2-14
3.	A Chronology	15-22
4.	Submissions	23-45
5.	Discussion and Decision	46-78

judgment

the master:

Introduction

1.        This judgment contains my written reasons for refusing the plaintiff's application for an order for licitation sought by way of an application for summary judgment. 

Background

2.        The background to the present proceedings is as follows.  In 2012 the plaintiff the first defendant and the first defendant's brother ("J") purchased a property as joint owners ("the Property").

3.        The purchase price was raised by £350,000 being provided by the second defendants and the remainder by way of a hypothec.  When the Property was acquired half of the hypothec was paid jointly by the plaintiff and the first defendant with the other half being paid by the first defendant's brother.  When the Property was acquired the ground floor was occupied by the second defendants, the first floor was occupied by the plaintiff and the first defendant, who were partners, and what has been described as a granny flat was occupied by the first defendant's brother. 

4.        This arrangement was set out in an agreement entered into between the plaintiff, the first defendant, the first defendant's brother and the second defendants in 2012 ("the Agreement").  The Agreement was drafted by Benest & Syvret who acted for all of the plaintiff and the defendants.  The relevant provisions of the Agreement for the purposes of this judgment are as follows: -

"Clause 1.1      sale notice a notice in writing served by [E], [F] and/or [J] upon the others of them requiring them to sell the property in accordance with the terms of clause 5 hereof;

Clause 2.1 the property would be held in the joint names of the plaintiff and the first defendant and the first defendant's brother;

Clause 2.2 provides that the plaintiff and the first defendant and the first defendant's brother would enter into the hypothec (described as mortgage);

Clause 3.1 provided that the plaintiff and the first defendant together would be responsible for the half of the hypothec costs and that the first defendant's brother would be responsible for the other half.  They were also responsible of equal shares for all costs incurred in relation to the maintenance and decorating and the repairing of the Property.

Clause 4 sets out how the sale proceeds were to be applied in the following order:

"a.       in discharge of all commissions, costs and expenses whatsoever relating to the sale of the Property;

b.        repaying monies secured by the hypothec;

c.        "in discharge of all sums paid by [E], [F] and [J] respectively, including payments in respect of the mortgage in accordance with paragraph 3.1 hereof;".  In other words, any interest payments, or repayments of capital where only the parties were repaid out of the proceeds of sale.

d.        £350,000 to the second defendants less one third of the sale costs;

e.        as to the surplus of funds under the value one third to the plaintiff and the first defendant for themselves absolutely; one third for the first defendant's brother and the remaining one third to the second defendants.

Clause 5 of the agreement provided as follows:

"5. RELEASE FROM MORTGAGE

5.1 To enable [E], [F] and [J] to secure release from their obligations to the Bank in respect of the Mortgage and to [G] and [H] in respect of their Advance the Parties agree that the Property shall be placed for sale on the open market at the instigation of either [E], [F] or [J] as soon as possible after the expiration of 28 days following the issuing of a Sale Notice.

5.2 Upon the expiration of the 28 days referred to in sub-clause 5.1 [E], [F] and [J] shall take and co-operate in taking all such steps and actions whatsoever as may be necessary to effect the expeditious sale of the Property for its full market value.

5.3 In recognition of the existence of the rule of Jersey Law that "promesse à heritage ne vaut" [E], [F] and [J] hereby acknowledge and undertake that if any of them wish to retain the Property notwithstanding the service upon them of a Sale Notice pursuant to sub-clause 5.1 hereof they shall before the expiration of the period of 28 days following receipt of such notice pay such sums as would otherwise be due to those of [E], [F] and [J] who do not wish to retain the Property upon the sale of the Property under the terms of clause 4 hereof and shall further before the expiration of the period of 28 days following receipt of such notice in addition do all such things and actions as may be necessary to obtain release by the Bank from the obligations in respect of the Mortgage. It being provided that the "sale proceeds" shall be determined by the then market value of the Property, as determined by three valuers of whom one shall be nominated by [E] and one by [F] and one by [J] and in the event of disagreement between such valuers as to the then market value of the Property, they shall appoint a fourth valuer whose decision shall be final and binding on all parties hereto.

5.4 If any of [E], [F] or [J] endeavour to retain the Property in accordance with the provisions of sub-clause 5.3 but fail either to repay those sums owing to the others according to the provisions of clause 4 or procure their release from all their obligations in respect of the Mortgage before the expiration of the period of 28 days following receipt of the Sale Notice they shall forthwith fully co-operate with the others in selling the Property on the open market for the full market value thereof, as expeditiously as possible and the retaining Party shall indemnify the other Party or Parties and save them harmless in respect of all sums due under the Mortgage from a date 28 days following receipt of the Sale Notice."

5.        It was clauses 5.3 and 5.4 of the Agreement that were at the centre of the arguments before me. 

6.        In 2016 the first defendant's brother decided he wanted to leave the Property.  The plaintiff alleges that the first defendant's brother agreed with the plaintiff and first defendant that he would relinquish his interest in the Property in exchange for the plaintiff and the first defendant assuming the first defendant's brother's liability in respect of the hypothec.  This led to the plaintiff and the first defendant entering into a new hypothec and the Property was conveyed into their joint names. 

7.        It was common ground that at the time the first defendant's brother ceased to have any interest in the Property there was no equity in the Property taking into account the moneys due under the hypothec taken out in 2012 and the moneys due to the second defendants of £350,000.  No payment was therefore made by the plaintiff and the first defendant to the first defendant's brother at the time he transferred his interest in the Property into their joint names. 

8.        However, the second defendants paid the first defendant's brother (their son) £8,000.  The second defendants argued that they had paid this sum to acquire their son's share of his interest under the Agreement. 

9.        By the time the first defendant's brother ceased to have any interest in the Property the relationship between the plaintiff and the first defendant had broken down.  It is material to record for the purposes of these reasons that they have a young child. 

10.      While the precise details are not clear and do not matter for the purposes of this decision, by 2017 the plaintiff had left the Property.  It also appears to be common that the plaintiff moved to another property which she had jointly inherited ("the plaintiff's property").  In 2017 the plaintiff purchased her siblings' inherited interests.  To enable her to do so the first defendant entered a hypothec with the plaintiff to enable the plaintiff to buy out her siblings and acquire the plaintiff's property.  The plaintiff's property was also held in her name and in the name of the first defendant.  The first defendant pleaded at paragraph 7G of his answer that these arrangements were on the basis that the first defendant would have no financial claim against the plaintiff's property given that he made no financial contribution towards it.  This was an oral understanding. 

11.      In October 2020, the plaintiff and the first defendant reached agreement that the first defendant would cease to have any interest in the plaintiff's property.  As part of this agreement the first defendant was also released from any obligation under the hyopothec taken out in respect of the plaintiff's property. 

12.      This led the first defendant to commence a discussion with the plaintiff about her interest in the Property.  It is right to record at this stage that there were other disputes between the plaintiff and the first defendant in relation to custody and access of their child.  It is also right to observe, as can occur all too frequently in the breakdown of a relationship, that there were extremely strong feelings on both sides, even though both parties now had other partners. 

13.      The other issue raised between the parties concerned income from the flat formerly occupied by the first defendant's brother.  After the latter ceased to have any interest in the Property, the flat was let.  There is a dispute between the parties about who should obtain the benefit of this income and how it was used including to what extent it was used to pay interest on the hypothec and expenses incurred to maintain the flat.  There is also a dispute about whether there is any surplus from the rental income and, if so, how the surplus should be divided. 

14.      The above summary is taken from a combination of the pleadings filed by the parties and the respective affidavits they filed.  At this stage it is only background to put the application before me in some form of context and my summary should not be taken as any findings of fact in favour of one party or the other. 

A chronology

15.      Based on documents exhibited to the various affidavits filed, the following events occurred leading up to the issue of proceedings: -

(i)        On 11^th January 2021 Advocate Steenson was instructed and made contact with Ms Helen Worthy a legal assistant at HJH Law seeking to have a conversation, which led to a call between them on 12^th January 2021. 

(ii)       On 13^th January 2021 Advocate Steenson emailed Ms Worthy summarising the contents of the conversation the previous day that his client wished to proceed with a sale of the Property.  This email contained the following: -

"Clause 5 is relevant, and you should deem this email as a Sale Notice requiring that the Property be placed for sale on the open market after the expiration of 28 days from today, namely, on 11th February 2021."

The email also invited suggestions as to how to market the Property and whether the first defendant wished to require the Property. 

(iii)      On 14^th January 2021 Ms Worthy replied to Advocate Steenson indicating that the first defendant did not accept the email as a valid Sale Notice.  She also made the observation that "your client's request has come at a time of particular hardship and has put my client's home (and that of his child) at risk."

(iv)      The same day Advocate Steenson replied accusing the first defendant of playing procedural games, including the following: -

"Finally, your client's financial situation is not relevant to the Sale Notice.  The Property will be put on the market as per the email which I sent to you and if any steps taken to obstruct sale, I shall obtain a mandatory injunction against your client, costs of which I shall seek from him."

(v)       On 17^th January 2021 Sale Notices were hand delivered to the first defendant and the second defendants. 

(vi)      Correspondence then ensued about obtaining valuations, with three different estate agents being instructed. 

(vii)     On 3^rd February 2021 Ms Worthy wrote to Advocate Steenson including the following: -

"I understand that our clients made enquiries with the resolution centre to undertake a mediation of the settlement sum.  My client is keen to pursue this route as a more collaborative resolution between them.  Could you please confirm if your client is also willing to continue down this route to reach a final resolution?"

(viii)    The email was sent at 11:22.  At 11:47 Advocate Steenson replied: -

"In relation to mediation this relates only to (the child) that does not, and will not, involve the sum owed to my client.  The mediator has been told this."

(ix)      By 4^th February 2021 three valuations had been obtained giving an average price in the region of £900,000. 

(x)       On 12^th February 2021 Advocate Steenson having not heard anything further on an open basis stated that his client intended to market the Property.  The email stated the following: -

"If your client seeks to obstruct the marketing process, I shall seek the necessary mandatory injunctions and seek the costs of doing so from him. 

There is no reason why the parties should not proceed in a sensible and amicable fashion but it is important that I put down a marker and my client will not be frustrated by tactical antics on the part of yours."

(xi)      There then appeared to be without prejudice correspondence between the parties.  In response to this correspondence on 21^st February 2021 Advocate Steenson replied including the following statement: -

"As previously indicated, your tactics, in waiting until the end one-month peri-od to contest what had previously was understood are reprehensible.  You may treat this email as a pre-action letter but in the circumstances, we expect a response within 48 hours failing which proceedings will be issued without further notice."

(xii)     On 24^th February 2021 Advocate Steenson wrote to Ms Worthy articulating the calculation of his client's claim.  The figures included in that email were incorrect.  However, the email contained the following statement: -

"In the absence of an offer from your client and our present understanding is that your client is not going to sale the Property we will issue appropriate proceedings this week, the costs of which shall be sought from your client."

16.      The revised quantification of the plaintiff's claim was set out in Advocate Steensons' email of 3^rd March 2021 and can be summarised as follows: -

(a)       The net sale price was assumed to be £900,000;

(b)       The outstanding balance due on the mortgage was £209,000;

(c)       The contributions paid to the mortgage were £87,420; and

(d)       £350,000 was due to the second defendants.

17.      After deduction of the sums listed at (b), (c) and (d) above, this left an approximate figure of £253,000 which he argued should be divided equally between the plaintiff, the first defendant and the second defendants with each receiving one third.  Advocate Steenson also claimed half the mortgage sums paid of some £43,000 and half the difference of any rent received and the mortgage payments.  In round terms this produced a figure of £135,000.  The plaintiff also made a further claim valued at £28,800.00 based on the first defendant having lived in the Property rent free since 2016. 

18.      This email repeated the threat to issue proceedings that week in the absence of any offer from the first defendant.

19.      The matter was not resolved and so the order of justice was issued on 11^th March 2021. 

20.      While the above chronology sets out correspondence between the legal advisers, it is also right to record that on 12^th January 2021 the plaintiff made contact with the Multi Agencies Safeguarding Hub ("MASH") making allegations against the first defendant about incidents within the Property under the headings "domestic violence and neglect".  A similar report was filed by the NSPCC.  It is not clear what led the NSPCC to file any report. 

21.      On 5^th February 2021 a detailed report was provided by Social Services which I have read.  Beyond noting that it is extremely detailed the covering letter stated: -

"At this stage there is no further intervention role identified for children social care and the recommendation is for no further action by the service, and for your family to continue to be supported through the school, CAMHS, mediation and legal services."

22.      The relevance of this report is that in this case underlying the dispute about the plaintiff's interest in the Property was a breakdown in a relationship between the plaintiff and the first defendant, leading to strong feelings on both sides.  I explore the relevance of this later in this judgment.

Submissions

23.      Advocate Steenson argued that his client was entitled to licitation because the first defendant would not comply with the terms of the Agreement pursuant to which the parties had agreed for their interest to be disentangled. 

24.      The plaintiff could not be compelled to remain in co-ownership which is why his client was entitled to an order for sale. 

25.      The agreement gave the first defendant 28 days to buy out the plaintiff and the first defendant had not done so.  Accordingly, licitation had to be ordered. 

26.      Advocate Steenson accepted that there was no mechanism under the agreement reached between the parties as to how the plaintiff's interest should be determined.  His position however was that the division of sale proceeds could occur after a sale. 

27.      Advocate Steenson also argued that there was no offer from the first defendant to release the plaintiff from the mortgage.  His client had now set out what she wanted which only led to what Advocate Steenson described as a derisory without prejudice offer. 

28.      In relation to the suggestion of mediation, his client refused mediation because she did not want questions of arrangements for their child to be confused with her interest in the Property. 

29.      He described the correspondence as putting down markers to explain to the first defendant what would occur if the first defendant did not co-operate with a sale of the Property.

30.      In relation to the applicable legal principles on licitation he argued these were clear from Ritson and Anor v Slous and Ors [1973] J.J. 2341.  The parties could not contract out of the remedy of licitation.  If he was wrong on that point, Clause 5.3 of the agreement was not clear enough in any event to amount to an agreement to do so. 

31.      The first defendant in response emphasised that the lack of a mechanism in in Clause 5.3 of the Agreement for determining what share the first plaintiff might receive meant that Clause 5.4 could not operate  In other words, the first defendant could not buy the plaintiff out until the first defendant knew what the plaintiff was entitled to. 

32.      He also emphasised that part of the Property where he resided was both his home and that of the plaintiff and the first defendant's child when the child was residing with the first defendant. 

33.      He was critical of the plaintiff for serving a sale notice under the Agreement without having any discussions and for refusing mediation. 

34.      He contrasted the plaintiff's approach with his approach in relation to the plaintiff's property where in September 2020 he agreed to transfer his interest as long as he was released from the mortgage. 

35.      He was also critical of the timing of the instruction of Advocate Steenson with the service of first contact taking place on the same day as complaints were made to MASH by the plaintiff.  He suggested this was an attempt by the plaintiff to put as much pressure as possible onto the first defendant. 

36.      The second defendants submitted that they were pensioners and therefore any immediate sale would cause them to lose their home.  They agreed with the first defendant what was first required was determination of the plaintiff's interest to allow her to be bought out.  If that did not occur, then a sale should take place. 

37.      The second defendants also claimed that because they paid their son the sum of £8,000 when he ceased to have any interest in the Property that they acquired his one third interest in the equity.  They therefore argued they were entitled to two thirds of the equity rather than it being split three ways between the plaintiff, the first defendant and the second defendants. 

38.      The first and second defendants both filed a written skeleton argument prepared by Advocate Bridgeford as a family member which partly addressed the relevant principles on a summary judgment application and also made submissions on the relevant principles of licitation.  

39.      The skeleton therefore raised the argument that the parties by their agreement had agreed to a sale taking place on the open market.  This was therefore an exclusion of the principles of licitation unless the agreement was unworkable.  Licitation was therefore a remedy of last resort.  Fallaize v Fallaize [1996] JLR 261 was cited in support of this argument. 

40.      The relevance of the remedy of licitation was that if a party refused to co-operate in transferring their interest in a property before court, licitation enabled a jointly owned Property to be sold by a court order.  This got around the difficulty of the maxim "promesse à heritage ne vaut".

41.      Advocate Bridgeford also referred to certain Scottish authorities which he contended also supported that parties could contract out of the Scottish equivalent of licitation.  In particular, he referred to an article from Gordon Junor a Scottish Advocate. 

42.      In reply Advocate Steenson contended that if Clause 5.3 was badly drafted that was not the fault of his client and therefore, she should not be denied the remedy of licitation. 

43.      He criticised the approach of the first defendant whose only offer on the pleadings was that the plaintiff was only entitled to the sum of £24,000 which did not reflect the current value of the Property. 

44.      His client was legally liable to pay the hypothec taken out in 2016 and wanted to be released from that obligation. 

45.      Licitation was necessary because the court could not order specific performance of the agreement. 

Discussion and Decision

46.      The starting point for the reasons for my decision are the applicable legal principles on licitation insofar they have been decided in this jurisdiction.

47.      In Ritson v Slous the general principle was stated by Le Masurier, Bailiff as follows about a property owned in a state of indivision: -

"Any one shareholder in land owned in equal shares can compel his co-owners to join in putting an end to the indivision, and failing agreement, the procedure of "licitation" is invoked and the land is put up for auction and knocked down to the highest bidder. By that means the highest market price is obtained, and each co-owner is free to bid and so has an opportunity of becoming the single owner."

48.      On the final page of the judgment Le Masurier, Bailiff stated: -

"We are satisfied that it is the incontestable right of the owner of an undivided share of any real estate to enforce the sale of such real estate, and we know of no rule of law which prevents this Court from divesting a person of his property when the justice of a case dictates that that be done."

49.      In Fallaize v Fallaize the head note states as follows: -

"Although the plaintiff had a right to force the sale of the jointly-owned property by means of a licitation, this had to be done by public auction to ensure that the proper market price was obtained. This rule had the effect of protecting the other co-owner from possible injustice if he took no steps to protect his own interests and allowed him to bid for the property himself. The contract would not therefore be passed."

50.      The application brought by the plaintiff in Fallaize was for an order that the Viscount should pass a contract of sale of property owned jointly with the first defendant because the first defendant had failed to appear in court on the appointed date to pass the contract.

51.      Having quoted the first quotation from Fallaize v Fallaize set out above Bailhache P., Bailiff then stated: -

"The question for the court is therefore whether the common law procedure of licitation should be extended to embrace the enforcement of a sale of immovable property by private treaty by one co-owner against the wishes or without the consent of another. In our judgment, it would not be right to accede to the submissions of counsel for the plaintiff. To do so would have at least two adverse consequences. First, it would deprive the recalcitrant co-owner of his right to bid for the property himself. Secondly, it would open the door to the possibility of injustice, particularly where the unco-operative co-owner took no steps to protect his own interest, whether as a matter of principle or even out of stubbornness. A properly conducted sale by public auction is the only sure means of achieving a sale at the market price. We accordingly dismiss the Order of Justice." (Emphasis added)

52.      In Ritson v Slous Le Masurier Bailiff in the first extract cited observed that the remedy of licitation was available "failing an agreement".  The decision did not however explore when and what type of agreement might lead to a refusal of the remedy of licitation. which leads to licitation being invoked does not just apply to a situation where a co-owner indicates a desire to be bought out.  Ritson only recognised that licitation would be ordered where there was no agreement.  I consider that there is no distinction in principle between co-owners at the outset of their relationship or at any time during the relationship reaching agreement about an alternative remedy to licitation from an agreement being reached about a sale once one co-owner wants their interest in a property realised.  Parties are free to reach agreement at any time about how to realise their interest. Where licitation applies is if agreement has not or cannot be reached or an agreement has been breached.  There is therefore nothing wrong in principle with the parties, as they did in this case, agreeing to a sale taking place on the open market, rather than by an auction and to reaching such an agreement when they acquire a property and where is no desire on the part of one party to realise their interest. 

53.      I next turn to the decision in Fallaize which is of relevance both to the general legal principle underpinning licitation but also about the justice of ordering a sale of immoveable property.  Sir Philip Bailhache recognised that compelling an individual to transfer an interest in immoveable property prevented them from bidding to acquire the entire property which could be unjust, whereas an auction did not.  Injustice can also work the other way where there is an uncooperative co-owner who was refusing to allow a property to be sold. In Ritson Le Masurier Bailiff noted that the remedy could be ordered "when the justice of a case dictates that that be done."  In deciding whether or not to grant the remedy of licitation applies, I therefore consider that the Court will have regard to the justice of a case in deciding whether or not to grant the remedy. 

54.      The problem in the present case is that Clause 5.3 of the agreement did not deal with how to identify the joint share due to the plaintiff and the first defendant.  Clause 5.4 could not therefore operate to allow the first defendant to buy out the plaintiff's interest as that interest had not been quantified.  The choice I faced was whether the interest of the plaintiff in the Property should be determined first with licitation following if a sale on the open market did not proceed in accordance with the terms of the agreement or whether licitation should take place first with the parties then deciding at a later date how the sale proceeds were to be divided. 

55.      The conclusion I reached on the facts of this case was that the Royal Court should determine first the respective interests of the plaintiff and the defendants as a cause de brievété.  Once their interests had been determined Clause 5.3 and 5.4 could then take effect.  If any party, then did not comply with Clause 5.4 the remedy of licitation still being available at that stage.

56.      I reached this conclusion for the following reasons.

57.      Licitation is a remedy of last resort as Advocate Steenson rightly accepted.   If any contractual agreement between the parties does not work, or one party refuses to abide by the terms of any agreement then licitation will be ordered. 

58.      This view I have reached in respect of the remedy of licitation under Jersey Law being the final remedy is supported by the approach taken in Scotland where there is a similar remedy.   Mr Junor's article "Division and sale - disposal inter se", Journal of the Law Society of Scotland, 16 July 2021 stated: -

"...qualifications to that absolute entitlement can, however, arise where there may be issues not only of supervening contract (see later), but also unjustified enrichment."

59.      The basis upon which the plaintiff is entitled to assert an interest in the Property is that of unjust enrichment applying Flynn v Reid [2012] (1) JLR 370.  The plaintiff appears in the Public Registry as one of the owners, has contributed to paying various borrowings secured over the property and has the benefit of an agreement entitling her to realise her interest.  Her argument is therefore that the defendants would be unjustly enriched if her interest was not recognised.  

60.      Mr Junor also recognises that whether a sale should be ordered may be affected by Human Rights issues and the obligation to have respect for privacy and family life.  The Jersey authorities of course pre-date the introduction of the European Convention on Human Rights into domestic law.  The Scottish Courts are also clear about exercising an equitable jurisdiction where there was everything to be said for a flexibility of approach.

61.      I consider that these observations are not inconsistent with the references by the Royal Court in both Ritson and Fallaize to notions of justice.  The Royal Court as is well-known has always described itself as a court of equité. 

62.      The present case is also not one about co-owners who have jointly inherited a property and one heir wants to realise their interest and the other heirs do not.  The facts here are very different. Part of the Property is a home for the child of the plaintiff and the first defendant for some days during the week.  The Social Security report indicates that it is important for the child to have stability.  An order for licitation immediately would create the very serious risk of undermining that important need of the child. 

63.      The Property is also the home of both the first defendant and his parents the second defendants.  To require parties to leave their own home is not an order that should be made lightly where there is a realistic alternative and where the parties themselves attempted to agree an alternative mechanism albeit one which was incomplete and does not work to determine the respective interests of the plaintiff and the defendants.  Nevertheless, the fact that the Property is a home both for the child of the plaintiff and the first defendant in particular and also for the second defendants tipped the balance in favour of determining the interests of the plaintiff first before a sale takes place, either by on the open market or failing that by licitation. 

64.      In addition, the evidence before me indicated that this is not a case where the plaintiff was saying that she needed the Property to be sold in order to provide a home for herself and her son.  She already has her own property where the first defendant released his interest in September 2020.  In her affidavit she also described her interest in the Property as an "investment".  She did not say that she needed immediate access to the funds.  Although Advocate Steenson, after submissions had concluded and before I gave my decision, sought to adduce such evidence I refused to permit him to do so and did not consider the evidence because it was filed too late.  There are timetables for the filing of evidence in reply in summary judgment applications.  It would not be right to allow the plaintiff to retract from the evidence she had already given about how she saw her interest in the Property. 

65.      This conclusion is not to say that the plaintiff is compelled for ever to remain in co-ownership with the first defendant.  That would be contrary to Ritson or Fallaize.  That was not the decision I reached.  Instead I referred to the Royal Court the discrete issue of determining the extent of the plaintiff's interest in the Property.  Once that has occurred if the terms of Clause 5.4 are not adhered to allowing the plaintiff to be bought out by agreement a sale by public auction would in all likelihood then have to occur.

66.      Before however the Royal Court is to determine the plaintiff's interest in the Property, I also stayed these proceedings because this dispute cried out for mediation for the following reasons. 

67.      The Property in relation to the plaintiff and the first defendant was acquired jointly between them.  While any party can make a claim on the basis of unjust enrichment applying Flynn v Reid, any such proceedings require the court to be persuaded that they should depart from the agreed joint ownership.  Prima facie it is not unjust to keep the plaintiff and the first defendant to the bargain they reached.  The starting point for any division that the proceeds of sale is therefore 50-50 and it is a high hurdle in most cases to persuade a property owned jointly by parties in a relationship to be split in a different percentage. 

68.      Secondly, the question of what happened to the income from the flat after 2016 should be capable of being explored in mediation.  As a starting point the plaintiff and the first defendant owned the Property jointly and therefore were both entitled to the income jointly.  If that income was used to pay interest on the hypothec, then such interest was being paid through a jointly owned asset i.e. the income from the flat and so any interest paid according to the terms of the Agreement would revert to the plaintiff and the first defendant equally.  The same logic suggests that any surplus once any relevant costs and expenses have been met should also be divided equally. 

69.      Thirdly, in relation to the unjust enrichment argument, the plaintiff has had the benefit of the first defendant guaranteeing the mortgage over the plaintiff's property as well as the defendant releasing any interest he might have claimed in the property in 2020.  The fact that the first defendant has given up any claim to any interest in the plaintiff's property is pertinent to the plaintiff's argument that the first defendant benefitted living rent free in the Property.  In relation to this argument, it might be said conversely that the plaintiff has benefitted from living rent free in a property in which the first defendant had until the Autumn of 2020 a one third interest.  Given these arrangements it may not be straightforward to persuade the Royal Court to find there is any unjust enrichment one way or the other to depart from the starting point of joint ownership.  This is why the parties should explore this case at mediation because both their respective positions in part face challenges. 

70.      I wish to stress these observations are directed to the first defendant as much due to the plaintiff because his pleaded case seeks to argue a much lower figure than a 50% split of their joint interest. 

71.      I also ordered a stay before determination of the issue referred to the Royal Court because underpinning these proceedings based on the correspondence, I saw were strong feelings between the plaintiff and the first defendant where there needed to be a cooling off period. 

72.      The correspondence from the plaintiff through Advocate Steenson did not help relations between the parties and escalated tensions. The timing of Advocate Steenson indicating that his instructions were to compel a sale of the Property coupled with a referral to MASH on the same day was at least unfortunate.  The first step taken by the plaintiff was to serve a Notice of Sale.  There was no pre-action correspondence letter or invitation to discuss a sale and what the plaintiff was claiming.  Rather the plaintiff immediately sought a sale.  In particular, there was no compliance at any stage of the correspondence with the pre-action protocol on proceedings which requires at least 14 days' notice to be given to a defendant before proceedings are commenced (see Practice Direction RC17/01).  While I cannot say whether the timing of these two events was deliberate or not, it will not have helped matters at all.  Nor did subsequent threats to start proceedings on a few days' notice.  Given we are dealing with parents, what was required is for matters to be approached calmly and for a breathing space to be created to enable the parties to talk to each other to seek to agree their respective interests in the Property.  This is still necessary because this case involves the division of assets following the break-up of a relationship. 

73.      Advocate Steenson also threatened mandatory injunctions seeking to compel a sale when he must have appreciated it was extremely doubtful that such an injunction would have been granted.  Such threats however would also have exacerbated tension between the parties. 

74.      The plaintiff did not help her own position by not articulating what she was claiming until the 28-day period following service of the Notice of Sale had expired.  As an estate agent she must have known approximately what the Property was worth and therefore could have articulated in pre-action correspondence what she was claiming and the reasons why. 

75.      I was also not impressed with the plaintiff's refusal to mediate.  While I understand the desire to keep any mediation about the welfare of the plaintiff and first defendant's child separate from the question of the value of the plaintiff's interest in the Property, the reply was a blank refusal to mediate.  It was also sent only twenty-five minutes after the request was made.  The plaintiff should have agreed to participate in some form of mediation about her interest in the Property.  

76.      Although Advocate Steenson argued that by not ordering licitation I was denying the plaintiff's legal rights, those rights still exist.  However, I am under an obligation to manage cases justly and proportionate cost applying the overriding objective.  In a case of this kind where there were strong feelings adherence to the pre-action protocol is extremely important to try to create an opportunity for the parties to attempt to resolve their differences by negotiation or mediation.  This case cried out for an attempt at conciliation and a measured approach which sadly did not occur. Although the plaintiff did invite the defendant to make offers, this was against the backdrop of threats to issue proceedings to force a sale while allowing only a few days to respond.  

77.      My observations however are not all one way.  The first defendant has never explained clearly what he considers the plaintiff's entitlement might be.  The second defendants' claim that they are entitled to a two third interest in the proceeds of sale after repayment of sums due under the hypothec, mortgage interest paid, and the £350,000 fixed sum is also not in their pleading.  I therefore required all parties prior to a stay taking effect to set out fully what interest they claimed in the Property the detailed calculations and their reasons why.  I made this order to give the parties at any mediation the best chance of finding a solution once their respective positions were made clear.

78.      Finally, I should make clear that I dismissed the plaintiff's application because licitation was premature until the plaintiff's interest in the Property has been determined and until it is clear that the terms of the agreement reached between the parties, in particular Clause 5.4 are not going to work.  If a price is agreed and the first defendant does not then buy out the plaintiff and does not cooperate in a sale (where an obligation of good faith arises) then at that stage the plaintiff can seek licitation and would have much stronger grounds for doing so. 

Authorities

Ritson and Anor v Slous and Ors [1973] JJ 2341

Fallaize v Fallaize [1996] JLR 261

Flynn v Reid [2012] (1) JLR 370

Practice Direction RC17/01