IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
(His Honour Judge Levy QC)
Royal Courts of
Justice
Strand
London WC2
Monday, 11th October 1999
B e f o r e :
MISS K. BUNDELL (instructed by
Messrs Barlow Dellow Hawker, Newmarket) appeared on behalf of the Appellant/Plaintiff.
MR. T. SEYMOUR (instructed by Messrs Bailey Strickland & Bryant, St Leanords
on Sea, Sussex) appeared on behalf of the Respondent/Defendant.
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This is an appeal by the defendant in the action, Mr Peter Ralph Mallender, for whom Miss Bundell of counsel appears, against an order made by His Honour Judge Levy QC in the Central London County Court on 8th July 1998, giving judgment for the claimant in the action, Mr. Matthew Charles Firth, suing as the personal representative of the estate of his late mother, Gillian Firth, in the sum of £12,370 plus interest. Mr. Firth appears on this appeal by Mr. Thomas Seymour of counsel. Before the judge he was in person.
The factual background, as found by the judge, is shortly as follows. In relating it I propose to refer to Mr Matthew Firth as "Matthew"; to the defendant, Mr Mallender, as "Peter"; and to the late Mrs Firth as "Gillian".
Matthew was born in 1972. In 1987, when he was about 15, his mother, Gillian, met Peter. In 1988 they began a relationship together. Gillian was then living at a property in Sudbury, known as 64 Waldingfield Road. Peter was also living in Sudbury, at a property known as 31 Acton Lane, with his daughter, who was about the same age as Matthew. In 1989 Gillian sold 64 Waldingfield Road and moved to 6 Acton Lane, with Matthew. In July 1989 Peter's house at 31 Acton Lane was remortgaged. It was valued at that date at £85,000. A mortgage was granted of £61,500. Early in 1990 Gillian and Peter agreed to sell their respective houses and buy a house in which to live together. Both properties were put on the market. In April 1990 Gillian's house at 6 Acton Lane was sold, leaving her with a cash balance of some £25,000. Following the sale of her house, Gillian and Matthew moved into Peter's house at 31 Acton Lane. Further consideration was given to the sale of 31 Acton Lane, but as no buyers could be found, Peter and Gillian agreed that they would carry on living there, and that Gillian would use some of her savings in paying for alterations and improvements to the property. In the autumn of 1990 that was done. The judge found that Gillian expended £12,370 in improvements to 31 Acton Lane.
By about Christmas of 1990, at the latest, it was apparent to both Peter and Gillian that, due to a fall in the property market, the value of 31 Acton Lane was less than the amount required to redeem the mortgage; in other words, there was negative equity. Peter and Gillian, together with Matthew, continued to live at 31 Acton Lane. In February 1992 a sad event occurred when Gillian was diagnosed as having a brain tumour. Thereafter, relations between Peter and Gillian became less happy than they had been. This led in July 1992 to Peter leaving the property. For a short time thereafter, Gillian continued living there with Matthew. In August 1992 Gillian and Matthew left 31 Acton Lane, Gillian moving to Hastings and living with a friend who cared for her. On 10 September 1992 Gillian wrote to Peter, saying that 31 Acton Lane could never be a home for Matthew and claiming in effect an equitable interest in 31 Acton Lane commensurate with her expenditure on alterations and improvements, which she put at some £25,000. On 17 September 1992 Gillian wrote Peter a further letter, which was dictated due to her failing health, referring to the time that they had spent together in the following terms:
I want to say we had a few happy years together. I know we were very happy. I'm sorry things had to end that way, please don't blame yourself. I'd like you to look back and remember times when we were happy.
On 26 January 1993 Gillian died, and on 15 February 1993 probate of her estate was granted to Matthew. On 29 September 1994 the present action was commenced. The Statement of Claim, which was annexed to the writ, pleads the claim on the basis of a constructive trust giving Gillian an equitable interest in 31 Acton Lane. However, in early 1998, before the trial of the action, 31 Acton Lane was sold for £50,000, which was substantially less than the balance owing on the mortgage. In consequence, the entirety of the proceeds of sale were paid to the mortgagee, leaving a shortfall of some £25,000 on the mortgage account. On 8 July 1998 Judge Levy QC gave judgment in favour of Matthew as executor of Gillian's estate in the sum of £12,370 plus interest. On 5 November 1998 permission to appeal was granted by Mantell LJ; hence this appeal before the court today.
As I noted earlier, the claim was pleaded on behalf of Matthew as being based on a constructive trust, giving rise to a beneficial interest in the property in favour of Gillian. Peter has not denied that Gillian was entitled to have a beneficial share in 31 Acton Lane. Although a Defence was served containing such a denial, the evidence makes it clear that that was not his true state of mind. But the difficulty about approaching the matter on the basis of a constructive trust is that, for reasons which are evident from the fact that the property was sold for less than the mortgage debt, there is no property as such to which such a trust could attach. In this connection it is right to record that Peter has not sought any contribution from Gillian's estate towards the discharge of the outstanding balance of the mortgage debt. Hence, at the time when the matter came before the judge, a claim based upon constructive trust would have been to no advantage to Gillian's estate. Nor would a claim based upon proprietary estoppel have served any useful purpose. For those reasons, no doubt, the claim as it was put before the judge at trial by Matthew appearing in person was based not on constructive trust or on proprietary estoppel, but on unjust enrichment. The judge in his judgment upheld the claim on that basis.
In his judgment, the judge set out the factual background. In this connection it is material, for the record at least, to note that he did not apportion blame for the breakdown in the relationship between Peter and Gillian. He dealt with that aspect of the matter in this way:
All would, perhaps, have gone happily for the family but for the very unfortunate events which have led to this action. In January 1992 the deceased suffered a fit. In February 1992 the deceased was diagnosed as having a terminal brain tumour. That came as a shock, and a very horrible shock, to all members of the family. How people react to such shock is obviously a matter of difference for all individuals. Unhappily the deceased did not get from the defendant the support which she might have expected and indeed hoped for. That is not a reflection on the defendant.
The judge went on to describe the breakdown in the relationship between them. Mr. Seymour, appearing for Matthew, does not seek to assert that the breakdown in the relationship was the fault of Peter, nor does he base his submissions upon such a proposition.
As to the law, the judge quoted a passage from Goff & Jones, The Law of Restitution, relating to unjust enrichment. He continued:
In my judgment it does not help to go through other passages in the book because, it seems to me, that on the facts as I have found them it would be unconscionable to allow the defendant to retain the benefit of the monies which were expended by the deceased improving the house in which he lived, in the circumstances of this case.
It was expected that the house would form a home for the four independently for as long as all four required it. Unhappily that could not be carried out because of the unexpected sickness of the deceased. The deceased felt forced to leave the house because she could not get the comforts there which she needed in her dying days, and because of the antagonism which developed between the defendant and Matthew after her illness was diagnosed. It seems to me that the deceased had little option other than to do what she did and, in the circumstances, it seems to me that applying the principle which I have just read out in the passages from Goff & Jones, the plaintiff is entitled to seek the return of the money which the deceased had expended.
Miss Bundell submits in her written skeleton, as she submitted to the judge, that on the facts as found, most of which were undisputed, there is no basis for the grant of a restitutionary remedy in favour of Gillian's estate. Miss Bundell points out that the money spent by Gillian in improving 31 Acton Lane was not a loan, nor has Matthew claimed that it was a loan. Indeed, such a contention would be inconsistent with his pleaded claim based on constructive trust. Nor for that matter was it a simple gift by Gillian to Peter. The money was spent by Gillian in improving their home for the joint benefit of both herself and Peter, with a view to living there together for, as they hoped, many years to come. In the event, their hopes in that respect were not realised, although they spent a further two years or so living together in the property. Miss Bundell accepts that the consequence may well have been that, by making such payments, Gillian acquired an equitable interest in the property on the basis of constructive trust, but she points out that Peter does not deny that that may be the position. Such an equitable interest would have given Gillian a right to live in the property plus, in all probability, a right to a share in the net proceeds of sale of the property. Those rights are, however, of no avail to Gillian's estate in the light of her tragic and untimely death and the fact that the property has been sold for less than the sum required to redeem the mortgage.
As to unconscionability, Miss Bundell submits that there is no finding in the judgment that it was Peter's fault that the relationship came to an end. In any event, she submits, even if it had been his fault, that could not serve to convert Gillian's equitable interest in the property, assuming she had such an interest, into a right to the return of the money that she had spent on it. In short, Miss Bundell submits that Gillian's remedies in relation to the property were proprietary remedies and that no question of unjust enrichment or restitution arises.
On behalf of Matthew, Mr Seymour does not urge that the arrangement between Peter and Gillian could be interpreted as involving the making of a loan by Gillian in respect of the improvements. Similarly, Mr. Seymour accepts, and in my judgment rightly, that the reasons for the breakdown in the relationship between Gillian and Peter are of no materiality for today's purposes. Further, he accepts, again in my judgment rightly, that the precise date at which Gillian may have known that the property was worth less than the mortgage debt is of no materiality for present purposes. He submits that the arrangement between Peter and Gillian in relation to the improvements to 31 Acton Lane ought to be analysed in contractual terms, such as could give rise to the grant of a restitutionary remedy. He submits that, in the circumstances, there is to be implied an agreement between Peter and Gillian that, in return for the expenditure which Gillian was to incur, she would have either a beneficial share in the property or the right to be recompensed in respect of her expenditure, in the form of repayment of the sum expended, on the sale of the house or on the earlier termination of the relationship, whichever should be to her greater advantage. In the event, the property having been sold for less than the mortgage debt, the appropriate remedy is the repayment of the sums which she expended.
I can see no basis for implying an agreement of that kind on the facts of this case. Indeed, it seems to me, with respect to Mr. Seymour, that it would be verging on the unreal to do so. As I see it, this was simply a case where Gillian was willing to spend her own money in paying for improvements to a property in which she and Peter were going to live together for many years, as they hoped.
Mr. Seymour seeks to rely on passages in Goff & Jones dealing with cases where expenditure on improvements has been incurred under a mistake; for example, in the mistaken belief, encouraged by the owner of the property, that the person incurring the expenditure would be granted an interest in the property. However, that is not in line with the facts of this case as found by the judge. Mr. Seymour submits that it is not right in the circumstances to limit the remedies of the estate to proprietary remedies. He submits that the contractual remedies are appropriate. For the reasons indicated, I find myself unable to accept this submission. It seems to me that there is an overwhelming probability that, had the issue been raised as to whether Gillian was entitled to a beneficial share in the property by reason of the improvements, that issue would have been decided in her favour. In support of his contention in favour of a contractual analysis, Mr Seymour seeks to rely on the decision of the Court of Appeal in Hussey v Palmer [1972] 1 WLR 1288, as subsequently explained by Browne-Wilkinson J (as he then was), [1980] 1 WLR 219. In Hussey v Palmer the monies expended on improvements were expressed to be a loan. The Court of Appeal held nevertheless, by a majority, Lord Denning MR and Phillimore L.J., that the claimant was entitled to a remedy based upon constructive trust in order to compensate her for the expenditure which had been incurred. Hussey v Palmer was explained by Browne-Wilkinson J in In re Sharpe in the following terms:
Mr Vallat, who appeared for Mrs Johnson, on this aspect of the case relied on Hussey v Palmer... where the Court of Appeal by a majority held that, even though the plaintiff in that case described moneys used to improve a property as having been paid by way of loan to the owner of the property, she was entitled to an equitable interest in the property. However, her equitable interest was not apparently a share of the proceeds of sale, but something akin to a lien for the moneys advanced. The facts in that case were very special and I think the clue to the decision may be that the court reached the view that, although described in evidence as a loan, the parties did not in fact intend a loan since there was never any discussion of repayment.
In my judgment, Hussey v Palmer, as explained in In re Sharpe, is of no assistance to Mr Seymour in the context of the instant case. There is no question of any loan here. Furthermore, the facts of Hussey v Palmer were, as Browne-Wilkinson J said, very special. In the circumstances, I derive no assistance from Hussey v Palmer.
Mr. Seymour submits that there is in this case no sufficiently unequivocal evidence of a common intention on the part of Peter and Gillian that Gillian should have a beneficial share in the property. On that basis he submits it is appropriate to analyse the facts in a contractual context. I must confess that I suspect that, had the property been sold for a price which produced a substantial fund of net proceeds of sale after payment of the mortgage debt, the estate would have been contending that this was a clear case where Gillian became entitled in the circumstances to a beneficial share in the property. As I see it, such a contention would be well-nigh unanswerable.
I accept the submissions of Miss Bundell. Gillian's expenditure on improvements to the property was expenditure for the joint benefit of herself and Peter, who were living together in the property as their home and intended to remain there for the foreseeable future. Sadly, relations broke down when Peter left the property but that is not a factor which can be relevant for present purposes. As I see it, far from it being unconscionable for Peter not to repay Gillian's estate the amount spent by Gillian in improving the property, it would be unconscionable for Peter, in addition to discharging the balance of the mortgage debt without contribution from Gillian's estate, to be required to repay that sum to Gillian's estate. In my judgment, there is no room in the instant case for the application of the principle of unjust enrichment, however widely that principle is expressed. As the learned editors state in the passage from Goff & Jones which the judge quoted:
It cannot be too strongly emphasised that this recognition does not and should not give judges carte blanche to adjudicate disputes in accordance with their own conception of justice.
In my judgment, the judge in this case was in error in granting a restitutionary remedy, and I would accordingly allow this appeal.
I agree.
Order: Appeal allowed with costs here and below, not to be enforced without the leave of the court from any date prior to the discharge of the legal aid certificate; application for permission to appeal to House of Lords refused.