IN THE SUPREME COURT OF JUDICATURE
CHANCERY DIVISION
ROBERT HILDYARD QC SITTING AS A DEPUTY JUDGE OF THE HIGH COURT
Wednesday, 12 February 2003
-v-
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Anthony Tanney (instructed by Thorpes
Solicitors) for the claimant.
Arthur J Moore (instructed by Jim McKenzie) for the defendant.
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1. This is a sad case which has divided a previously close family. It concerns the competing claims of a father and his son as to the extent of their respective beneficial shares in the family home, a house at 122 Church Lane, East Finchley, London N2 OTB (which I shall call '122 Church Lane'). Father and son are both registered as owners of 122 Church Lane with title absolute. There is no declaration of trust or other document recording how the property was to be beneficially owned. It is that beneficial ownership which is now in dispute.
2. In summary, the father, who is the Claimant (and whom I shall refer to as 'Mr McKenzie'), claims that he is the only person now beneficially interested in 122 Church. Lane and that his son has no such beneficial interest. He claims that he and his late wife (the son’s mother) together were the only persons who actually contributed money or money’s worth for the acquisition of 122 Church Lane and that though their son agreed to lend his name to enable them to get the mortgage that they needed to fund the acquisition they were all agreed that the son was not thereby to have any equity. Mr McKenzie’s case is that though later, after a sizeable increase in the mortgage, his son did make financial contributions none was referable to the initial acquisition. Mr McKenzie thus claims to be sole beneficial owner under either a constructive trust or an implied resulting trust, his wife’s interest having devolved to him either by survivorship (if they were joint tenants) or (if they were tenants in common, as seems to me must be the case pursuant to a notice dated 30 March 2000 expressly severing the joint tenancy) under her Will.
3. His son, who is the Defendant (and whom with no disrespect and simply to distinguish him from his father, I shall call 'Jim'), on the other hand, claims that he is entitled, again under either a constructive trust or a presumed resulting trust, to a one-third beneficial interest in 122 Church Lane as a tenant in common. Indeed, when first the dispute with his father and mother arose (in 1998) he claimed that he had been promised a half (rather than a third) share. Jim’s case is that he did contribute to repayments of the mortgage from the beginning, and that it was always intended that he should have a beneficial interest in 122 Church Lane. Jim claims that it was because he thought he had such an interest that he ceased to look for a house of his own.
4. A further claim by Jim for a declaration that his father holds his two-thirds share on trust for him on his father’s death was made in the pleadings; but that claim has been withdrawn. So also has Jim’s claim to an account in respect of a further alleged entitlement in respect of rents paid in respect of the house by one of his half-brothers, Mr Michael Allen. In correspondence, Jim threatened to apply for an order for sale: but no such order is now sought, and Jim told me that his real intention in making the threat was to 'put the frighteners' on his parents 'to make them see sense'.
5. Counsel for each party clarified that neither was seeking to mount any alternative claim on the basis of proprietary estoppel. Each accepted that his client had to establish either an agreement sufficient to give rise to a constructive trust or the application of presumptions to give rise to a resulting trust in his favour. These concepts, which are much excavated in the case law but which retain their complexities, are further addressed later in this Judgment.
6. The events giving rise to these proceedings largely took place between 1987 and 1996. Time has been no healer in this case; and the inevitable emotion of the dispute, the natural erosion of memory and the destruction or loss of documents have all contributed to the difficulty in establishing what really went on. That said, the salient background facts are (and where in dispute I find them to be) as follows.
7. Until mid-January 1988, Mr McKenzie and his late wife Elizabeth Selina McKenzie (who died on 9th June 2000, and whom I shall refer to as 'Mrs McKenzie'), were the secure tenants of 122 Church Lane. Their landlord was the Mayor and Burgesses of the London Borough of Barnet, the freehold owners.
8. In occupation of 122 Church Lane with them were Jim, and also his half-brother Michael Allen (who lived there during the week though he had acquired for himself on mortgage a week-end cottage in Hertfordshire). Michael Allen is Mrs McKenzie’s son by a previous marriage. Jim has another half-brother called Terry Allen (Michael’s twin) and a half-sister called Diane Elizabeth Selina Cannas ('Diane'). Michael and Diane (but not Terry) have given evidence for their step-father and both were cross-examined.
9. Until the events that have caused this litigation it is plain that this was a close family, with Jim being particularly close to his mother. I formed the impression, especially from Mr McKenzie when cross-examined, that they valued and encouraged family discussions and the opportunity at meal-times to meet together.
10. I record this now for two main reasons. First, because, as it seems to me, it was their perception that Jim’s wife Louise, whom he married in 1996, did not share these values and was taking Jim away from his family, that was a major factor behind the family disagreement that first escalated into a rift and then into bitter litigation. Secondly, because this also has had a bearing on my assessment as to whether the sort of arrangements contended for by Jim (that the beneficial interests in the family home were agreed to be divided between his mother and father and himself even during their lifetime) would fit with the way the family operated at the time of the acquisition of 122 Church Lane.
11. Returning to the background facts, an opportunity for Mr and Mrs McKenzie, as secure tenants, to purchase 122 Church Lane arose under the 'Right to Buy' legislation in Part V of the Housing Act 1985. The opportunity was a considerable one: not only a right to buy, but also a right to buy at a substantially discounted price.
12. There is some dispute as to which member of the family first suggested that advantage be taken of this opportunity. Jim says that he raised it first, in 1986, but at that time his father was not keen, and nothing was done. It is common ground that the matter arose again in 1987, in the course of family discussion. Mr McKenzie is adamant that both the idea and the eventual decision were the product of family discussion in which Jim was not at the forefront. Jim maintained that it was he who planted the germ of the idea, which has in the event resulted in ownership of a house now worth (according to an agreed valuation) some £300,000.
13. Matters have come to a point where neither father nor son is able to give the other much credit for anything and I find it difficult to place much weight on the evidence of either in this regard. It is not suggested by Jim that the interest he claims was a reward for having the idea; and it does not seem to me to be a substantial factor to take into account in deciding the main issues. But overall my impression is that it was Jim who provided both the idea and the major impetus for it, encouraged particularly by his mother. It seems to me that much of the credit for acquiring 122 Church Lane must go to Jim.
14. In any event, when raised, whoever by, the idea was enthusiastically adopted by Mrs McKenzie, and though he was more cautious (being wary of debt) Mr McKenzie this time went along with it. He may have been partly influenced by an anticipated rise in the rent that they would otherwise have to pay.
15. There was then no doubt work to be done in realising the opportunity, including corresponding with the Council, initiating searches, instructing solicitors and the like. Although the hurt he feels (which was palpable when he was giving evidence) may have caused Mr McKenzie to be grudging in his acknowledgement of the help given by Jim, it was not strenuously disputed, and is evident, that it was Jim who got the ball rolling. This is not surprising, given his legal training (Jim was and is a qualified solicitor), the fact that his father worked as a train driver and can have had little time or relevant experience, and his mother was fairly immobile. Jim’s efforts are confirmed by the fact that the Council appears to have addressed its correspondence on the matter to him.
16. It was also Jim who selected Cohen & Naicker as solicitors to act in the matter. They were not his initial selection. The solicitors whom he first instructed were Cox & Clitheroe. He went with Cohen & Naicker instead because he was working there at the time, and appears to have considered himself entitled as a member of staff to the services of the firm without charge. This led later to a dispute between himself and the firm when they rendered an invoice for their conveyancing work. This dispute, which generated some heated correspondence and eventually a County Court action that was ultimately settled, is not otherwise related to the matters in issue here, as indeed Jim was anxious to stress. But some parts of the correspondence do shed some light on this case, both on the issue of Jim’s expectations and on the issue of credibility, as I describe later.
17. Very much more important than the dispute as to whose idea the purchase was is what, if anything, was agreed or understood (in the relevant sense of a shared understanding) by (in particular) Jim and his parents as to how the purchase was to be funded and for whose benefit. Indeed that is an issue, and the first question, at the centre of the case. Before identifying more precisely the legal issues which seem to me to require to be addressed and applied in that context it is necessary to describe the arrangements actually made, so far as that can be ascertained on the available evidence (which is far less than complete).
18. The purchase price stipulated by the Council for the sale of 122 Church Lane was £27,000. The true value of 122 Church Lane at that time was assessed to be £60,000. Accordingly the discount was £33.000. This discount accrued to Mr and Mrs McKenzie in right of their secure tenancy (see sections 118 and 129(1) of the Housing Act 1985) though they were entitled to share the right to buy with another member of the family resident at the property (see section 122). Mr and Mrs McKenzie needed to borrow to raise the sum of £27,000. For this purpose they required a mortgage.
19. It was not suggested to me that Mr and Mrs McKenzie could not afford the instalments prospectively due under the mortgage. But, on the other hand, I is not disputed that they could not themselves have obtained such a mortgage, given their ages and the fact that since Mr McKenzie habitually paid for things in cash out of his pay packet (which was in cash) they could show no 'track record' or credit history.
20. Jim, by contrast, was by then a qualified solicitor earning some £14,000 or so per year, a young professional with good prospects and no borrowings or other substantial financial commitments. Whether this was proposed by Jim, or in the course of a meeting that took place with the branch manager of Abbey National in Ballard’s Lane, Finchley (arranged by Diane who worked there) is unclear. But at all events the solution that emerged was that Jim should also be a party to the transfer and, as one of joint legal owners, to the requisite mortgage.
21. It seems that Abbey National originally considered the applicants for the mortgage to be father and son (and not Mrs McKenzie). Thus, when by letter to Cohen & Naicker dated 11th January 1987 (which in fact is the only surviving documentation in respect of this mortgage) Abbey National indicated that it was indeed prepared to advance the required sum of £27,000 they referred in the first paragraph only to Mr McKenzie and Jim. Although in the body of that letter Mrs McKenzie’s name appears also as an applicant, it does seem that it may be in slightly different type. Mr McKenzie was prepared to accept this, and that indeed her name may have been added later. No explanation was offered as to this, nor was there any further investigation in cross-examination as to whether Mrs McKenzie’s name was added later and (if so) why. It is not suggested that there was anything untoward. Jim simply relied on it in support of his contention that initially his mother had not been intended to be a party to the mortgage at all.
22. I accept that it is likely that Mrs McKenzie only became a party to the mortgage because that was necessary in light of it always being intended that she should be a legal and beneficial owner of the property. The impression I have generally is that what Mr and Mrs McKenzie did, they did together and what they had, they shared. Mr McKenzie told me 'we never had any disputes about money'. It strikes me that just as it would never have occurred to either of them that each should not have the same interest in 122 Church Lane as the other, so it would not have occurred to either that Mrs McKenzie should have (as between the two of them) any separate liability on the mortgage. Mrs McKenzie was in that sense a nominal, though necessary, party to the mortgage.
23. With an offer of mortgage in place, and after the usual inquiries and requisitions, Mr and Mrs McKenzie signed a transfer in escrow on 23rd December 1987. The mortgage monies were advanced and sent to Cohen & Naicker on 7th January 1988; and the transaction completed on 18th January 1988. The registered Transfer, which recorded the right to buy discount in the sum of £33,000, was into the names of Mr and Mrs McKenzie and Jim.
24. The Transfer is in a statutorily prescribed form. It does not declare the beneficial shares. There is no document that does. Cohen & Naicker’s conveyancing file has been disclosed. There is no suggestion in the documents so disclosed of any agreement or declaration as to beneficial shares. It is a great pity that this was not dealt with by document at the time. There would then have been no room or occasion for dispute.
25. It may however be relevant that in none of the available documentation, and more especially in none of the correspondence between Jim and Cohen & Naicker, is there any hint that Jim considered that he was entitled to a share during the lifetimes of his parents. I shall return to this later.
26. To complete this brief description of the arrangements relating to the mortgage loan of approximately £27,000 obtained from Abbey National, it appears that as further security for the loan Mr McKenzie and Jim took out (with Scottish Widows’ Fund and Life Assurance Society) a Life Assurance Policy on the lives of Mr McKenzie and Jim for a sum assured of £27,000, which was deposited with Abbey National in April 1988. Mrs McKenzie was by then aged 65 and (so I understand) not considered to be a suitable life for these purposes. Premiums payable were paid by Mr McKenzie, and never by Jim.
27. It would appear that between January 1988 and November 1988 the amounts due on the mortgage (which for reasons that will soon emerge I shall call the 'first Abbey Mortgage') were duly paid. The method of payment appears to have been for Mr McKenzie to hand cash in a brown envelope to Diane, who worked at Abbey National, and for her to forward the envelope onwards within Abbey National as appropriate. This gave rise to a veiled suggestion by Jim that Diane may have extracted money from these envelopes; but that suggestion was not pursued or put to Diane and there is nothing to suggest that there was any truth in it.
28. Jim’s evidence is that the cash so deposited was only part of the amount due; and that he paid each month a proportion by cheque. This is denied by Mr McKenzie. No documentary evidence (whether by way of bank statements or otherwise) has been put forward to support Jim’s assertion. It is, of course, now more than 12 years since the events in question; and bank records and statements which would have been useful have apparently been lost or destroyed.
29. Diane told me that the brown envelope she would typically receive may also have contained a cheque; but in this she may have been mistaken, since that is not the mechanism that Jim states he adopted. Jim’s case was that he sent his contribution by cheque direct to Abbey National. Diane was at pains generally to stress that her memory was imperfect, and more particularly that she could not say when she thought she might have received envelopes that contained a cheque as well as cash. Beyond Jim’s say-so, I do not consider there to be any reliable evidence that he made any payments towards the first Abbey mortgage. But that was his evidence, and the question whether Jim did make any payments towards the first Abbey mortgage is an important one, to which I shall have to return.
30. Continuing the sequence of events, and to explain my designation of the £27,000 loan as having been made under the first Abbey mortgage, the first Abbey mortgage did not stay in place for long. In October 1988 the first Abbey mortgage was redeemed with part of the sum of £51,000 loaned by a new mortgagee, namely Leeds & Holbeck Building Society. This new loan was secured by a mortgage (which I shall call 'the Leeds & Holbeck mortgage’) on 122 Church Lane.
31. This new loan under the Leeds & Holbeck mortgage was considerably larger than that obtained under the first Abbey mortgage. In effect, a surplus of £24,000 over and above the amount borrowed to cover the purchase price of 122 Church Lane was made available after redemption of the first Abbey mortgage. The Leeds & Holbeck mortgage was also secured on a policy on the lives of father and son issued by Commercial Union Life with a sum assured of £51,000. This was assigned to the Leeds & Holbeck by way of security. As in the case of the Scottish Widows policy (which appears to have been cancelled), all premiums were paid by Mr McKenzie, and not by Jim.
32. There was a dispute between the parties as to why the move from Abbey National to Leeds & Holbeck was made; as to whose idea this increased loan was; and as to what became of the surplus of £24,000.
33. As to the move to the Leeds & Holbeck and the substantial increase in the mortgage loan, Mr McKenzie’s evidence in his witness statement was that it was Jim’s idea. He accepts that the genesis of the idea of a small increase in the mortgage to allow some improvements to 122 Church Lane was his own: he wanted to raise about £5,000. His evidence was that Jim agreed and he trusted Jim to make the necessary arrangements, so he left it all totally to him.
34. Mr McKenzie told me that he had not himself envisaged raising more than £5,000. His evidence was that the idea of borrowing considerably more than that was principally Jim’s; that Jim had wanted money and that later he regarded Jim as having got them into a debt which he (Mr McKenzie) was in difficulties in servicing when interest rates rose, as they did in that period.
35. Mr McKenzie told me that the surplus of £24,000 was paid to Jim, who then paid on £12,000 to his father. Mr McKenzie accepted that in the event he did spend more than the £5,000 on improvements that he had apparently anticipated; but this was simply because 'we had the money'. He was adamant (and remained so under cross-examination) that Jim had personally received £12,000 and used it for purposes that he had not really questioned. In his witness statement, Mr McKenzie said that he thought Jim had wanted and used the money to assist his then girlfriend, Anita, through Bar exams and the purchase of a new car. In fact, Anita did not start at Bar school until 1992: so Mr McKenzie was mistaken in that part of his supposition; but Jim did acquire a car, on hire purchase, from Terry Allen (his half-brother) at that time
36. Jim’s version, on the other hand, was that it was his father who had wanted to raise, not £5,000, but £12,000 for home improvements; that his father was encouraged in this by Terry Allen, and that the intention was that whilst they were at it a further £12,000 might be raised to be split between father and son equally. Jim maintained that the idea for the re-mortgage definitely did not come from him.
37. More generally, Jim seemed anxious to downplay his involvement in the re-mortgage arrangements. In his initial pleading it was stated that he had not even any recollection of it, which given the amount of the increase and the fact that at least part of the moneys released went to him personally, is surprising. In his witness statement, he accepted that he had arranged for the conveyancing to be carried out by a friend of his at the solicitors’ firm of Cox Clitheroe; but he maintained the line that beyond that he had little involvement.
38. As to what was done with the money released, Jim accepted that he had personally received £6,000; but he said that that was all. In that context, he relied on his Abbey National Deposit account book, showing an entry into that account of £6,000, which it was accepted was derived from the surplus of £24,000. His evidence was that the remaining money was paid into an account at Abbey National in the joint names of himself and his father, which his father set up at this time (for which there are no extant statements).
39. Mr McKenzie’s case is that it was because it was Jim’s idea to raise more than the £5,000 originally envisaged for repairs and because Jim benefited to the tune of £12,000 that from then on until May 1996 Jim made the payments he did in respect of the Leeds & Holbeck mortgage, whereas previously he had made no payments on the first Abbey mortgage.
40. Jim’s case, on the other hand, is that the re-mortgage was not an event of any particular importance and that his benefit from it was relatively small. Jim’s case is that he simply continued to pay part of the instalments on the Leeds & Holbeck mortgage just as he had on the (lower) first Abbey mortgage.
41. In the absence of documentary evidence it is necessary to resolve these factual issues which are of some importance since they go to the question whether the payments made by Jim were referable to the acquisition cost or some agreement made at the time of acquisition. So far as I feel able to make any findings in this context, they are as follows.
42. I do not accept that Jim had the limited role in and benefit from the re-mortgage transaction that he now asserts. As to why the mortgage was moved to Leeds & Holbeck when further monies were raised, it seems to me unlikely that this was Mr McKenzie’s own idea. Mr McKenzie is not financially aware, or I think much interested in the mortgage market. He had previously been, and I suspect remained, wary of debt. I doubt he would have been involved actively in such a decision. Indeed, I formed the impression that, left to himself, he would rather have stayed at Abbey National where Diane worked, and he subsequently tended to blame Jim for the move to Leeds & Holbeck as well as the increase in borrowings.
43. Although Jim claims in his witness statement to have had little involvement in the obtaining of the re-mortgage, I find that difficult to accept. It is clear from the correspondence that it was Jim who handled the matter with the solicitors, and there is no sign of any personal involvement on the part of Mr McKenzie. Mr McKenzie’s evidence was that between March 1988 and November 1988 he really left the matter to Jim, and it was only in November, when Jim brought back documents to sign, that he saw that Jim had arranged to borrow not an extra £5,000, but an extra £24,000. Strictly, the re-mortgage arrangements were in fact completed in October (not November); but subject to that, I accept Mr McKenzie’s evidence in this regard.
44. The available evidence and the inherent probabilities both seem to me to point to the conclusion that it was Jim who pushed forward the re-mortgage, and that it was Jim who persuaded his father, rather than vice-versa, to raise the larger sum.
45. There was a fierce dispute between father and son as to what became of the money. Jim’s case was initially that his father kept all but £6,000. Subsequently, Jim seems to have accepted that he himself received more than that, about £8,000, with (on Jim’s case) his father receiving also £8,000 and the rest being spent on improvements. Mr McKenzie’s case throughout was that Jim received £12,000 as did he, and that he used his part on improvements. He did not really question Jim what he used his share for.
46. In Jim’s Defence it was pleaded that the surplus money (the £24,000) was paid into a new Joint Account in the names of Jim and his father. However, that account was opened a little later and Jim was disposed to accept under cross-examination that the surplus money (the £24,000) was paid by Leeds & Holbeck into an account in Jim’s name at National Westminster Bank plc; and Cox Clitheroe’s file indicates that this was the case, there being a completion statement recording payment to such account (Chancery Lane branch). Jim told me he did not regard the money as his own though, and it was not suggested that he retained more than £12,000 of it.
47. In this regard, Jim’s Abbey National Savings Account pass book shows the receipt of £6,000 on 7 October 1988, the same date as the re-mortgage was completed. Jim accepted that this did represent money from the re-mortgage. He also accepted that he used part of what he received to buy a car on hire-purchase and made an initial capital payment for it of about £3,000, and another (unspecified amount) to repay an outstanding student loan. There were, however, no corresponding withdrawals from his Savings Account; and it was put to him that those amounts must have been in addition to the £6,000. Jim did not accept that; but he could provide no substantial rebuttal.
48. I find on the balance of probabilities that Jim did indeed receive £12,000 of the surplus amount of £24,000 borrowed from the Leeds & Holbeck, and that it was Jim’s desire to buy a car and to pay off his student loan that principally prompted Jim to arrange the increased loan from Leeds & Holbeck.
49. The Leeds & Holbeck mortgage was even more short-lived than the first Abbey mortgage. A file note by Cox Clitheroe dated 1st November 1988 discloses that even before the deeds had been sent off Jim had informed then that 'he’s going to re-re-mortgage'.
50. The re-re-mortgage was to Abbey National, pursuant to an offer letter dated 27th January 1989 ('the second Abbey mortgage'). The loan was for £52,900. The redemption statement from Leeds & Holbeck stated the amount required to redeem their mortgage was £53,628.76. It is not clear who paid the difference.
51. After some delays the Leeds & Holbeck mortgage was redeemed and the second Abbey National mortgage replaced it in March 1989. The life policy issued by Commercial Union was re-assigned to Abbey National as further security.
52. Little further need be said about the second Abbey mortgage. No more money was raised. The effect was Abbey National simply replaced Leeds & Holbeck as mortgagee. There was no increase in the mortgage amount. Both offices offered comparable rates. Neither party was able to remember exactly why the replacement was made. Both agreed, however, that it was probably because Leeds & Holbeck appears to have made an administrative error causing the loss of MIRAS relief. The correspondence appears to bear this out. Jim seemed to think it might also have been to gain Diane some commission (she was still working at Abbey National at that time). But I do not think it is necessary to determine why the replacement was made: it has not the relevance to the story that in my view the Leeds & Holbeck re-mortgage has.
53. Mr McKenzie accepts that following the Leeds & Holbeck mortgage, and continuing after the second Abbey mortgage, Jim paid part of the instalments of interest under the relevant mortgage. The amounts varied in amount and proportion from time to time. Initially, Mr McKenzie would send his monthly contribution in cash, whilst Jim would pay his part by cheque. This procedure subsequently changed and became for Jim to pay by cheque to Abbey National the full amount of the monthly instalments due and then for Jim to recoup from his father, who would leave an envelope with cash for that purpose. In his Defence Jim asserted that he regularly paid more than half of the instalments. However, before me, Counsel were agreed that I should proceed (as I have done) on the basis that in aggregate father and son contributed approximately half each of the mortgage payments from the date of the second Abbey mortgage up to June 1996.
54. Jim continued these contributions even though from about 1992 onwards he was not living full time at home. He spent much of his time with his then girlfriend, Anita, at her flat at 30b Sutherland Square, London SE 1 in which, indeed, he acquired a half-share financed on mortgage, he and Anita being both on the title. However, he continued to keep his room at 122 Church Lane and visited regularly, largely (he told me and I accept) to keep his mother company in the absence of Mr McKenzie who was often out on shift work. Anita too would visit with him at the week-ends. The impression I formed is that Mr and Mrs . McKenzie were fond of Anita and much valued these visits. At any rate, between 1992 and 1995 family relations between father, mother and son were cordial and close.
55. In late 1995, however, Jim introduced his parents to another girl friend, namely Louise. At first, Jim continued to live with Anita. But it appears that that relationship petered out and in December 1995, Jim asked his parents whether he and Louise could live at 122 Church Lane whilst they looked for a house together. His parents agreed and Jim and Louise (who is now Jim’s wife) moved into Jim’s room there, which was the largest in the house.
56. Mr and Mrs McKenzie do not appear to have got on with Louise. It is unnecessary to explore why. Suffice it to say that their previously close relationship with Jim thereafter markedly deteriorated, particularly when (in early 1996) Jim and Louise announced their intention to marry and then largely froze his parents out of the arrangements. In the way of things both sides felt hurt; and in the case of Mr and Mrs McKenzie the feeling was exacerbated by what Mr McKenzie described as a 'lavish' wedding reception at which (Mr McKenzie’s evidence made apparent) they felt they were side-lined, slighted and snubbed.
57. Although after their honeymoon Jim and Louise did return to 122 Church Lane, relations continued strained and it was not long before they became impossible. Evidence was given about this and the eventual collapse of Jim’s relationship with his parents, which culminated in him and Louise precipitately leaving 122 Church Lane in June 1996, at a time when Louise was pregnant, and before they had found their own home.
58. Jim’s evidence was to the effect that he had made plain to his parents that he was a joint owner of the house and they had no right to kick him out, but that he felt he had no choice but to leave because his parents had been rude to his wife and had refused to apologise. Mr McKenzie’s evidence was to the effect that matters had certainly become difficult~ but there was no attempt to throw Jim and Louise out. Mr McKenzie seemed to suggest that there could have been a rapprochement, and Jim had appeared anxious to rebuild family ties but that Louise had made this impossible.
59. It was submitted on behalf of Jim that Mr McKenzie’s feeling that he and his wife had been snubbed that 'lies at the bottom of this case' It may well be that it deepened a fracture that eventually impelled a close family to contemplate and then pursue this litigation. But I do not consider that the question as to which party was more responsible for the breakdown in family relations that preceded these proceedings is relevant to the issue that I have to decide. Nor do I consider it sufficiently relevant on any issue as to credit to warrant my seeking to supply an answer. In such circumstances I do not consider it either necessary or appropriate for me to say anything more about this, beyond observing with regret that there is no doubt how deep is the sense of hurt and resentment on both sides, and that this has led to each making accusations against the other that both will probably in due time come to regret.
60. Despite their mutual hurt and resentment the parties’ slide into litigation was slow. After an initial exchange of correspondence in the summer of 1998, in which Jim did immediately make his claim to an interest based on agreed contributions, and threatened himself to go to Court for an order for sale, the matter seems to have remained in abeyance for some time, perhaps with each party unwilling to force the issue. It seems to have reawakened only after the death of Mrs McKenzie in June 2000. The uncompromising terms of her Will, in which by clause 6 she declared her 'omission of benefit for, or other mention of, [Jim] his wife and issue' to be deliberate, may have been a precipitating factor in the ultimate issue of proceedings, in the event by Mr McKenzie, in December 2001.
61. In the meantime, Mr McKenzie retired, shortly after the death of his wife, in November 2000. With a lump sum he was paid on his retirement Mr McKenzie redeemed the second Abbey mortgage and 122 Church Lane is now unencumbered. Mr McKenzie retains the benefit of the Commercial Union policy (to which Jim makes no claim). Mr McKenzie continues to live in the property. So too does his step-son Michael Allen (except at week-ends, when he goes to his house in Herefordshire).
62. Having thus set out the factual context in which this dispute has arisen I turn next to the applicable legal principles.
63. As noted above, the Transfer of 122 Church Lane (which is in statutory form) states the transferees to be Mr and Mrs McKenzie and Jim and the property was registered in their joint names as proprietors with absolute title. But the Transfer does not expressly state what their beneficial interests were to be. There is no document that does.
64. It was common ground between Counsel for the parties that the fact that the statutory right to buy 122 Church Lane was exercised in the name of Jim as well as his parents pursuant to section 123 of the Housing Act 1985 (which enables a secure tenant to give notice of an intention to share the right to buy with not more than 3 members of the family) does not of itself rise to an inference or presumption as to beneficial ownership. This appears to be consistent with the decisions of the Court of Appeal in Springette v. Defoe [1992] 2 FLR 388 and Evans v. Hayward [1995] 2 FLR 511.
65. Obviously the fact that Jim, became a joint owner in law raises the question why that was; and to my mind it places the onus upon Mr McKenzie to explain this, and why all 3 (Mr and Mrs McKenzie and Jim) are not to be treated as having become beneficially entitled in equal shares. But a purchase in joint names is what gives rise to the question as to their beneficial entitlements: it does not conclude it, and the answer will depend upon either evidence as to their intentions or presumptions to be drawn from their conduct. Put another way (and indeed as Counsel for Mr McKenzie put it and Counsel for Jim accepted), where property is conveyed to joint owners at law, and there is silence in the documents as to beneficial ownership, the maxim that equity follows the law may be a starting point but it is easily displaced; and see Goodman v. Gallant [1986] 2 MR 236 at 246.
66. In such circumstances, where the parties have not documented their intentions and neither the statutory form nor the statute itself stipulates a rule or provides guide, the task is to determine the parties’ intentions, either express, or that can be inferred or presumed from the evidence; whereupon the intention as so determined may be given effect by the remedy of an implied trust.
67. As was stated by Slade LJ in Goodman v. Gallant [1986] Fam 106 at 110 'In a case where the legal estate in property is conveyed to two or more persons as joint tenants, but neither the conveyance nor any other written document contains any express declaration of trust concerning the beneficial interests in the property (as would be required for an express declaration of this nature by virtue of s 53(1)(b) of the Law of Property Act 1925), the way is open for persons claiming a beneficial interest in it or its proceeds to rely on the doctrine of 'resulting, implied or constructive trusts': see s 53(2) of the Law of Property Act 1925.'
68. Both 'constructive trusts' and 'resulting trusts' are forms of implied trusts and both are exceptions to the statutory rule that requires trusts to be in writing. Both constitute responses of equity where the parties have failed properly to document their intentions and no express provision has been made. In both cases the Court’s decision whether such a trust has arisen involves an examination of the parties’ intentions, based on statements, on conversations and on payments they have made. However, they are doctrinally distinct.
69. Dealing first with a constructive trust, as Lord Millett has put it, writing extra-judicially (in [1998] 114 LQR 399 at 400): 'A constructive trust arises when the circumstances are such that it would be unconscionable for the owner of the legal title [or one of two or more legal owners] to assert his own beneficial interest and deny the beneficial interest Of another. It arises from circumstances which are, ex hypothesi, known to the legal owner, for if they were not his conscience would not be affected. [Words in parenthesis added.]
70. Thus, a constructive trust arises out of, and is equity’s way of giving effect to, the common intentions of the parties. Where a common intention can be proven or imputed to the parties by reference to some express agreement or arrangement between them the technique of equity is to impose a constructive trust to fulfil it. As Lord Bridge of Harwich said in Lloyds Bank Plc v. Rosset [1991] 1 AC 107 at 132
The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties ... there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding between them that the properly is to be shared beneficially.
71. The finding of an agreement, arrangement or understanding must ordinarily be based on evidence of express discussions between the parties, however imperfectly remembered and however imprecise their terms may have been: ibid. at 135. In that regard (per Dillon LJ in Springette v. Defoe [1992] 2 FLR 388 at 393):
It is not enough to establish that each party had, been thinking on the same lines in his or her uncommunicated thoughts, while neither had any knowledge of the thinking of the other.
72. Where there is no evidence of express discussions or at least communicated intention, it may yet be possible for the Court to infer a common intention to share a property beneficially from the conduct of the parties. But in such a case the Court is unlikely to consider the inference justified unless there is proof that the claimant made direct contributions to the purchase price which are not explicable except on the basis that the parties must have intended that the property would be beneficially shared: 'it is at least extremely doubtful whether anything less will do': see per Lord Bridge in Lloyds Bank Plc v. Rosset [1991] 1 AC 107 at 133.
73. Once a common intention has been established (whether by reference to express discussion or inference) the claimant must also show that he or she acted to his or her detriment in reliance upon the parties’ common intention in the reasonable expectation that an interest would be acquired in the property. Consensus (whether express or inferred) will not suffice to give rise to a constructive trust without proof of detrimental reliance: and see per Mustill LJ in Grant v. Edwards [1986] Ch 638 at 656. There is little guidance in the authorities as quite what is necessary to prove this, as indeed Mustill LJ noted in that same case. But, for example, as there stated (at p. 656):
... where the claimant has made payments which, directly or indirectly, have been used to discharge the mortgage instalments, this is sufficient link between the detriment suffered by the claimant and the common intention. The court can infer that she would not have made such payments were it not for her belief that she had an interest in the house.
Put briefly, the coincidence of outlay and common intention sufficient in principle to give rise to a constructive trust will ordinarily also suffice for the purpose of showing detrimental reliance.
74. So far I have confined my attention to the case where a common intention can be shown or inferred. Where no common intention can be shown or inferred from the facts, equity may nevertheless intervene to assist a party who has contributed to the acquisition of a property in circumstances where that party did not thereby intend gratuitously to benefit the other party. The instrument of equity in those circumstances is a resulting trust.
75. As the Law Commission has noted in its report Sharing Homes: a Discussion Paper in July 2002:
The true doctrinal basis of resulting trust is currently a matter of some dispute. One view is that it is based on the presumed intention of the parties. It has been claimed, however, that it is the absence of intention (to pass the beneficial interest in the property to the transferee) which is material. Whichever view is adopted the presumption of resulting trust is rebuttable by any evidence of contrary intention. Evidence of any intention inconsistent with an intention that the contributor of money was to take a beneficial interest will suffice.
76. Ward LJ has struck a note of caution about attempting to determine which of the theories is correct in Carlton v. Goodman [2002] EWCA Civ 545; and I do not think it is strictly necessary in this case for me to do so. However, there does seem to me to be much in the view that in the case of a resulting trust the basis for equity’s intervention is not proof of a common intention; but a presumption (which may be rebutted either by evidence or contrary presumption) that a person is unlikely to have paid for property altruistically without some expectation of return by way of a beneficial interest in it A constructive trust is equity’s method of enforcing conscience; a resulting trust is equity’s response to the failure of a gift or proof of lack of intention to make one.
77. In any event, as it seems to me, conduct on the part of the contributor that is explicable on a basis other than an expectation of a return by way of beneficial interest will not suffice to give rise to the presumption that is the basis of such a resulting trust. For the same reason, and as in the case of a constructive trust based on inferred common intention, it is unlikely that anything but a contribution of cash (or its equivalent in the eyes of equity) channelled directly towards the initial purchase of the property in question will suffice.
78. The requirement that the contribution(s) relied upon should be direct gives rise to two further issues relevant in this case. The first is whether the exposure to risk that becoming party to a mortgage entails qualifies as a relevant contribution, and if not, whether payment of instalments so qualifies. The second is whether the advantage of a discount on the purchase price conferred by the right to buy legislation itself qualifies as a relevant contribution. Agreeing to become party to a mortgage and the contribution of the worth of the 'right to buy' discount may also be prayed in aid as evidence of an agreement, arrangement or understanding as to beneficial interests.
79. As to becoming party to a mortgage, the liability so contracted as a joint mortgagor on the covenants in the mortgage may, but does not necessarily, constitute a qualifying contribution. Nor does it, of itself, constitute evidence of an agreement or understanding that the contributing party should have a beneficial interest referable to the liability or risk thus undertaken: see Carlton v. Goodman [2002] EWCA Civ 545 [Court of Appeal]. A party does not acquire an interest in the trust property simply as a result of covenanting to make or even actually making mortgage repayments: ibid. (at para. 22(vii)). The question is whether, as between that party and the other joint owners in law who have undertaken the same liability or risk, it was intended that such party should be responsible for paying, and actually pay, part of the mortgage instalments.
80. The ordinary prima facie presumption will be that as between joint legal owners who have both undertaken joint and several liability under a mortgage taken out to fund an initial purchase each has provided a relevant contribution resulting in an equal share: see Carlton v. Goodman [supra, at para. 38]; Springette v. Defoe [1992] 2 FLR 388; and also Re Gorman (A Bankrupt) [1990] 2 FLR 284. However, that presumption may be dislodged either by contrary agreement (Springette v. Defoe) or by evidence that it was not intended, as between the claimant and the other mortgagor(s) at the time of the initial acquisition and the mortgage to fund it, that the claimant should actually pay instalments.
81. In other words, if the parties have agreed to the contrary, or if it is shown that the claimant has simply lent his or her name in order to secure the mortgage advance but without any intention of being liable as between himself or herself and the other mortgagor(s) for repaying instalments, the claimant will not be considered to have made a relevant contribution. This is notwithstanding having become potentially liable under the mortgage to the lender (mortgagee): Carlton v. Goodman. Indeed, even payment made upon subsequent enforcement of that liability would not constitute a relevant contribution: it would not be a contribution to the purchase price but rather a contribution to the discharge of the mortgage liabilities: ibid. at para. 27(vii).
82. Similarly, payments made towards mortgage instalments on an occasional basis, or commenced some time after the original acquisition, would not have the requisite direct nexus with the purchase to be treated as a contribution to the purchase price such as to result in the contributor acquiring a commensurate beneficial interest: ibid.
83. I turn to the second issue identified in paragraph 78 above, concerning whether the person entitled to a discount on the real value of a property when exercising a statutory right to buy ('a right to buy discount') should be treated as having contributed an amount equal to the discount to the purchase of the property in question.
84. Looking at the matter apart from authority, my instinctive reaction would be that the benefit thus conferred should be equated to a financial contribution towards the purchase price, resulting in a commensurate beneficial share for the contributor in the absence of some contrary agreement or presumption; and that is indeed the effect of the authorities, at least as I read them.
85. Thus, in Springette v. Defoe, all the members of the Court of Appeal (Dillon, Steyn and Slade LJJ.) accepted that the right to buy discount should be treated as a direct contribution to the purchase price (see, for example, per Steyn LJ at p.395) such as to result in a beneficial share in the absence (as was found) of any contrary agreement or understanding.
86. In Evans v. Hayward [1995] 2 FLR 511, and subsequently (and with greater certainty) in Ashe v. Mumford and Others 33 HLR 756, the Court of Appeal emphasised that the presumption of a resulting trust could be rebutted or displaced by contrary common intention. In other words, there is no absolute rule that the value of a right to buy discount must be taken into account as a contribution towards the purchase of a property giving rise to a beneficial interest: and (per Parker LJ, with whom Waller and Kennedy LJJ. agreed) in Ashe v. Mumford at p. 769):
where the facts are such as to rebut any presumption of resulting trust, that is to say, where it is possible to infer an agreement or arrangement as to the beneficial ownership, a different result may follow.
87. But, subject to that, in neither case was the general principle as expressed in paragraph 85 above doubted. It follows that I do not accept the argument advanced for Jim that, in the absence of any evidence of an agreement or understanding that the right to buy discount is to form part of the contribution, it cannot be treated as such. On the contrary, in my judgment, in circumstances where there is no consensus such as to give rise to a constructive trust and the circumstances give rise to no contrary presumption, the contribution of the benefit of a right to buy discount will give rise to a presumed resulting trust of a beneficial interest proportionate to the value of the discount in comparison to the purchase price.
88. That leads on to the last issue that I think I should address in this summary of the applicable legal principles, and that is the issue as to the quantification of any beneficial interest under a constructive trust or a resulting trust. In light of my overall conclusions in this case, I can do so briefly, though it is a matter which has given rise to considerable difficulty.
89. In my view, part of the difficulty that has been encountered is the result of a failure to distinguish between the two different forms of implied trust, the resulting trust and the constructive trust. In the case of a presumed resulting trust, the claimant should obtain a share commensurate to the value of the contribution which he or she has made and which has given rise to the presumption.
90. In the case of a constructive trust based upon express agreement or understanding, logically quantification should be according to what the parties intended, so far as discernible. The difficulty arises when though their common intention to share the property beneficially is clear or can be inferred, it is not possible to ascertain what their respective shares were intended to be. In such circumstances, the courts have sometimes (indeed usually) favoured a contribution-based assessment: see for example, Springette v. Defoe and Huntingford v. Hobbs [1993] 1 FLR 736. But it is possible (and see the Law Commission’s perception to that effect in its Discussion Paper on Sharing Homes at para 2.82) that the court has also on occasion adopted a broader test of what is 'fair and just' in all the circumstances: see, for example, Midland Bank plc v. Cooke [1995] 4 All ER 562 especially at 574e. The latter case was a decision of the Court of Appeal (Stuart-Smith, Waite and Schiemann LJJ).
91. Fortunately, I do not have in this case to decide between these two possibly conflicting approaches. All I need say is that it seems to me that it may very well be that all the Court of Appeal meant in Midland Bank plc v. Cooke is that in determining what was the common intention of the parties with respect to their respective shares the court is not confined to considering only the direct contributions made and may be able to discern such intentions from other evidence. I doubt that the Court of Appeal truly intended that quantification should be on any more arbitrary a basis.
92. Having sought to set out both the background facts and the applicable legal principles it remains finally for me to apply those legal principles to the particular facts as I find them in the present case.
93. As indicated above, the first question is whether there is in this case evidence of express discussions between the parties from which it is possible to discern their actual intention.
94. Both parties contend that there were indeed such discussions; but there is a stark conflict between the parties’ evidence as to their nature and content.
95. Jim’s evidence is that the 'agreement was that we would all own it jointly. My parents could not buy the house without my involvement, and I was happy to be involved, as I saw it as an investment. We were all putting the same in, by jointly taking out the mortgage. There was never any suggestion that the money was effectively being borrowed by my parents alone, or that they alone were responsible for the repayments. 'He also states that ‘It was never suggested that the discount on the right-to-buy would be part of my parent’s contribution to the price, or that their share would be bigger than mine. ' He explains that his parents told him 'specifically that they wanted to help me as their only son, especially since my half-brothers and half-sister already had homes of their own. My parents said it was only right that I should get an interest in the property.'
96. Jim says that from the beginning he discussed with his parents how the mortgage repayments were to be made, and that as 'a joint owner of the property, it was agreed that I should make a contribution to the mortgage repayments each month.' That commitment, however, was not, according to Jim, open-ended: it would cease if he got married, or acquired another property, in which case his father would become solely responsible for making repayments, though Jim says he envisaged that even then he envisaged he would go on paying nevertheless, if he was earning enough.
97. Further, Jim’s evidence is that his interest was eventually to be in the entirety. He says this in his witness statement: 'I can specifically remember my mother saying that the house, not just a share in the house, would be mine after my parents died. This was not a demand that I ever made. It was volunteered by my parents. They wanted to purchase the property to give themselves some security during their lives, and then to have an asset to pass on to me. I simply saw the purchase as a joint venture. I was happy if my parents wanted the whole house to come to me in the end.'
98. Mr McKenzie’s evidence, on the other hand, is that, at least at the time of the first Abbey mortgage and the original acquisition, 'There was never any discussion about Jim having an interest in the house nor any suggestion that he should pay the mortgage. This was always going to be the responsibility of Mrs McKenzie and me.'
99. According to Mr McKenzie, it was only when they took out a considerably larger mortgage with the Leeds & Holbeck that there arose the question of Jim paying a contribution. At that point, Mr McKenzie says that he did say to Jim that he would not be able to manage all the repayments on his own and that Jim thereupon did agree to make unspecified contributions to be 'based more or less on paying for the £12,000 which he had taken out, plus a little extra to help me and because he had a large room in the house'. But Mr McKenzie was adamant that it never crossed his mind that Jim, might think he was thereby acquiring an interest in the house and 'certainly that was never discussed nor agreed.'
100. Under cross-examination Mr McKenzie accepted that he had not actually expressed to Jim, his own assumption that Jim would not as between them be liable to make repayments of the first Abbey mortgage. But Mr McKenzie was in no doubt that this was, taking their discussions as a whole, well understood between them. Mr McKenzie was adamant that all Jim had ever been asked to do was to assist his family to get the requisite mortgage by lending his name, connoting that he would not be required actually to pay, and that this would have been quite clear to Jim. As to contributions, Mr McKenzie, though firmly tested, stuck equally firmly to his evidence that Jim had made none to the first Abbey mortgage.
101. For his part, Jim, accepted under cross-examination that his father was able to afford the instalments under the first Abbey mortgage and that it was not until the considerable increase in borrowing when that mortgage was redeemed and replaced by the Leeds & Holbeck mortgage (and subsequently the second Abbey mortgage) that his father turned to him to help out in cash terms.
102. As I have noted previously, Mr McKenzie was prone to exaggerate the faults of his son as he now, in the aggravated context of family litigation, perceives them to be. That, and his anger and disappointment about the souring of a previously close father-son relationship, together also with a not altogether unusual tendency to give an answer without always listening carefully to the question actually asked, made him seem more strident than the real substance of his replies. But he struck me as an honest witness, who was straightforward about what had and had not been discussed.
103. Jim struck me as engaging, intelligent and fundamentally honest. But, having watched his evidence under cross-examination, I was left with the firm impression that he had convinced himself of discussions which, if they had occurred would obviously be supportive of his legal case, but which had little real basis in fact. I think that this confusion between his theoretical case and what truly happened was exacerbated by the fact that he has, since the dispute arose in 1998, acted as his own lawyer. It may also have been fuelled by a feeling that his understandable expectation of inheriting 122 Church Lane, having done so much to help his father acquire it, and being his father’s only natural son, was unfairly being denied him.
104. In short, I do not accept Jim’s evidence that it was agreed that he should have an interest in 122 Church Lane. I prefer and accept Mr McKenzie’s evidence that it never occurred to him, and he certainly never gave Jim any impression, that Jim would be entitled to a beneficial share in the house during the lifetime of Jim’s parents, even if it is very likely that both expected that after their lifetimes Jim would indeed inherit the property. I accept that their common intention was, and their discussions were to the effect, that Jim would simply lend his name to assist his parents acquire a property that would eventually become a valuable family asset, and it was never intended by any of them at the time that Jim should be either entitled to any beneficial interest by so doing or, as between them, obliged to make payments under the first Abbey mortgage.
105. I have felt confirmed both in my approach to the parties’ own evidence and the conclusions I have expressed above by the available circumstantial evidence, both general and specific.
106. As to the general, I do not consider that the sort of discussions and arrangements contended for by Jim (that the beneficial interests in the family home were agreed to be divided between his mother and father and himself even during their lifetimes) would fit in with the way the family appears to me to have operated. The impression I formed from the evidence of both parties in this regard was that both Mr and Mrs McKenzie were fairly traditional parents, and would have regarded the family home as a matter for themselves to fund, with any contributions from their children being regarded as helpful and loving but gratuitous, rather than as having proprietary results. They would I think have regarded their home as their own, which they made available for use by their children.
107. A further factor which has influenced me is the disparity between Jim’s claim to a half share in his correspondence with his parents’ solicitor in 1998 and his claim to a one-third share now. For example, his Defence does not mention a half-share; whereas in correspondence Jim insisted that he and his father had agreed that he would have a half share. I appreciate in this context, and I have taken into account, the explanation given of this by Jim’s Counsel to the effect that this is by way of a cap on a claim that he feels would otherwise be justified; but the explanation does not to my mind fully explain or satisfactorily remove the inconsistency.
108. A more particular matter arises from the correspondence between Cohen & Naicker and Jim after completion of the acquisition and in relation to a dispute over their fees. The dispute arose because Jim considered that they had agreed to waive any fee in view of his being a member of their staff, whereas Cohen & Naicker contended that they had not so agreed and that the staff concession was applicable only to full time members of staff who were purchasing (or selling) property for themselves personally. In a letter dated 8th April 1988 Pat Naicker of that firm wrote to Jim making 'one or two points which seem to escape you completely'. One point she made was that (so far as she was concerned) Jim was not a permanent member of staff (though a witness for Jim, Karen Phillips, who worked at Cohen & Naicker at the time, appears to have thought otherwise). But, more importantly, the first point made in the letter was this:
The purchase of the ... property was for your parents. As I understand it further, it was only because they were not able to obtain a mortgage themselves that they had to include your name as a joint purchaser.
This is of itself revealing; but even more so is that in Jim’s reply by letter dated 10th May 1988, stating that it seemed to him that they were reneging on their agreement and that he intended to refer the matter to the Solicitors Complaints Bureau for them to resolve, there is no suggestion that he was indeed personally beneficially interested in the property. This would have at least in part addressed and answered Pat Naicker’s first point. Counsel for Mr McKenzie stressed in his reply the importance of this exchange as undermining Jim’s later claims, whereas Counsel for Jim cautioned against reading too much into this, especially given that neither side had called Pat Naicker as a witness. I accept the need for caution; but the correspondence does appear to me to be on its face supportive of the conclusion that Jim recognised that his parents were truly the beneficial purchasers, and the decision (for whatever reason) made by both parties not to call Pat Naicker leaves me free to rely on the position as it seems to me to emerge from the documentary evidence.
109. Against this I have taken into account the evidence of Karen Phillips, who was the only person to make a witness statement on Jim’s behalf apart from Jim himself. Her evidence supported Jim’s claim to the extent that she refers to the closeness of his relationship with his parents and states that she 'always felt that he was very comfortable living with his parents so it was agreed that all three of them would purchase the property jointly and the mortgage would be paid jointly by the Defendant and his father until such time as the Defendant settled down or wanted independence from his parents.
110. Unfortunately, however, this evidence could not be clarified or tested in cross-examination, since (so I understand) Miss Phillips felt unable (after an assault on her which has apparently left her with a form of agoraphobia) to attend to be cross-examined. Without the benefit of that clarification and testing I do not feel able to place great reliance on that brief statement, and the more so since the rest of her witness statement, taken as a whole, appears to me to suggest that her understanding was more to the effect that Jim would stand to inherit on the deaths of his parents than that he was to become immediately entitled to a beneficial share. Thus, for example, the statement I have quoted follows on immediately after her saying that 'his parents had agreed to leave the house to him on their deaths'; and again later in her witness statement she recounts Mrs McKenzie as having said that 'they were doing this for Jimmy too and ... that they would be leaving the house to him on their death. 'Her concluding statement of her own impression of the transaction, that 'it would be a joint venture for all parties and would hopefully prove to be beneficial to everyone' is also of some interest. I have little doubt that the acquisition was so regarded in a general sense, and that it was indeed his parents’ intention then that Jim should inherit; but that is a long way from it having been agreed that Jim should acquire a beneficial interest in 122 Church Lane during the lifetimes of his parents (as recognised for instance in Lloyds Bank Plc v. Rosset per Lord Bridge at p. 130D).
111. Counsel for Jim submitted that the fact that initially it was just himself and his father that were taken by Abbey National to be the applicants for the required mortgage supported his case. I do not accept that it does. Not only is the evidence unclear, but given that neither party suggested that it was ever intended that Mrs McKenzie would not be a legal owner and thus required to be a party to the mortgage, and the fact that in the event she plainly did become both legal owner and a mortgagor, I do not consider it materially assists Jim.
112. Similarly, it was suggested on behalf of Jim that the fact that he was, and his mother was not, one of the named lives assured in the life assurance policies with Scottish Widows and subsequently Commercial Life supported his case. Again I do not consider that it does. I accept the explanation that it was simply because Mrs McKenzie, who was some years older than her husband, and infirm, was not a 'good life' for these purposes.
113. In summary on this first question, I accept the submission made on behalf of Mr McKenzie that Jim was only ever asked to lend his name to enable his parents to get a mortgage which they would actually pay for and that that was the only reason that he became a legal owner of 122 Church Lane. The nature of what he was asked to do, the tenor of the discussions between them and Jim’s understanding of the purpose of his involvement, all connote an agreement that he was not thereby to have any beneficial interest in 122 Church Lane, though his expectation plainly (and to my mind understandably) was that ultimately he would benefit from the purchase by inheritance. The true common intention or understanding was that Mr and Mrs McKenzie should be the only beneficial owners of 122 Church Lane during their lifetimes. It follows, of course, that I do not accept Jim’s case that there was an actual agreement or arrangement between Jim and his parents to share 122 Church Lane beneficially.
114. To the extent that it is necessary for Mr McKenzie to show detrimental reliance I consider that he has done so: not only did Mr McKenzie pay mortgage instalments, but in addition he paid all the premiums payable under the Endowment Contract and incurred substantial expense in improving 122 Church Lane.
115. These conclusions preclude any inference of a constructive trust in favour of Jim by reference to the conduct of the parties and also any presumption of a resulting trust in favour of Jim. It is therefore in strictness probably unnecessary for me to go on to consider whether Jim did in fact make any payments directly towards the instalments due under the first Abbey mortgage, which was the conduct relied on by Jim as giving rise either to that inference or to that presumption in his favour. However, both to test my conclusions, and for comprehensiveness, I think it as well to address the issue.
116. Put shortly, I do not accept that in fact Jim ever did make any contributions to instalments due under the first Abbey mortgage. There is no evidence that he did; and Mr McKenzie, Michael Allen and Diane Cannas all deny that he did, and they maintained this position persuasively through their respective cross-examinations
117. Jim made the point that there was no written record of payment by anyone, and when tested in cross-examination maintained that he was 'of course' sure that he had made some payments. But his first point as to the lack of written evidence on all sides carries less weight given that there has never been any doubt or contest that Mr McKenzie did make payments under the first Abbey mortgage; whereas it has always been contested in the case of Jim. As it seems to me, the onus was on him to provide proof of his own payments. His failure to do so weighs against him, and the more so given that he identified the importance of such written evidence in his correspondence with Mr and Mrs McKenzie’s solicitor (Mr James Limmer) when the dispute first surfaced in April 1998. As to his insistence in his own evidence that he had made payments, I have to say that I found him less than convincing, and he was not assisted by his inability to state with any consistency how he says the payments were made.
118. Jim’s Counsel understandably pressed the point that, given the complete absence of documentary evidence for payments under the first Abbey mortgage, particular weight should be attached to the fact that Jim undoubtedly made contributions towards instalments due under the Leeds & Holbeck mortgage and then the second Abbey mortgage which soon replaced it. He submitted that there should be extrapolated from the fact of these undoubted later payments the likelihood of payments having been made also under the first Abbey mortgage, and indeed the likelihood that the parties were agreed that such payments should be made.
119. However, this submission passed over the fairly fundamental change in circumstances when comparing the first Abbey mortgage with the subsequent arrangements. Two distinguishing features seem to me to illustrate this.
120. First, whereas it was common ground that the first Abbey mortgage was well affordable by Mr McKenzie, the Leeds & Holbeck mortgage and the second Abbey mortgage were for much greater amounts, which Mr McKenzie felt put him under real financial strain, especially given the high rates of interest then prevalent and which applied to both loans, unless Jim also contributed.
121. Secondly, I have found that the major part of the increase in borrowings was Jim’s idea and was prompted by Jim’s desire to buy a car and pay off his student loan. Although he and his father shared equally the surplus amount borrowed (£12,000 each) the fact remains that Jim received a personal loan at better rates than unsecured borrowing rates for his personal benefit, and it is not unnatural that it should have been felt right that he should make contributions towards its cost. It was not part of the 'joint venture' of purchasing 122 Church Lane and improving it.
122. I should add in this context that both Jim’s anxiety to distance himself from the Leeds & Holbeck mortgage (which initially he claimed to have forgotten) and his lack of candour (as I have found) as regards how much he received personally from the surplus over the original borrowing has also weighed with me.
123. I formed the impression that Jim, who is plainly intelligent and was inclined to anticipate where a line of questioning was going, was acutely aware that it would be suggested that the Leeds & Holbeck mortgage marked a watershed, and it was only when and because the £12,000 was raised for his personal benefit that he began to contribute towards the mortgage payments. As his case has always been and remained that he had also contributed to the first Abbey National mortgage and that there was no substantive change at the time of the re-mortgage, he was obviously keen to dispel any suggestion that the re-mortgage was a watershed and to prevent any inference from being drawn from this. I have concluded that Jim was evasive because he knew that this was indeed a weakness in his case, and that the inference he sought to dispel is the truth.
124. Jim’s efforts to cast doubt on his receipt of £12,000, and the inconsistencies in his evidence in this context, did him no credit. His claim at trial to have received only £6,000 was inconsistent with his earlier acceptance in correspondence with Mr Limmer to have received £8,000, and neither figure can be reconciled with the evidence that he spent £3,000 on a car (which he paid by extant cheque) and that such amount appears not to have come out of the £6,000 undoubtedly paid into his account. Again, I consider that Jim was keen to minimise the figure once he recognised the importance of downplaying the difference between the circumstances of the first Abbey loan and the Leeds & Holbeck loan. I found his evidence both unreliable and revealing in this regard.
125. In summary, I do not accept that Jim contributed to instalments due under the first Abbey mortgage; I consider the available evidence confirms my view that he did not.
126. On that basis the contributions he made in respect of instalments due under the Leeds & Holbeck mortgage and the second Abbey mortgage (which were accepted to amount to approximately half of those due for the period up to July 1996) cannot, in my judgment, be relied upon by Jim as conferring any beneficial interest. Those later payments have not the requisite direct nexus with the original purchase
127. It follows that even if I had not concluded that there was an agreement or understanding between the parties which was sufficiently communicated between them in the course of their discussions to the effect that Jim should be a legal owner only to enable his parents to obtain a mortgage and that he should not thereby acquire any beneficial interest in 122 Church Lane, I would have rejected any claim based on the fact of contributions by Jim. In my judgment, no resulting trust should be presumed in favour of Jim.
128. My conclusions mean that no issue of quantification arises. Jim has no beneficial interest in 122 Church Lane. Mr McKenzie is its beneficial owner.
129. In such circumstances I propose to say nothing further about the principles of quantification.
130. In conclusion, in my judgment Mr McKenzie is entitled to the declaration he seeks as regards the property at 122 Church Lane.
131. He also seeks a declaration that the Endowment Policy is held by the parties on trust for him absolutely. I do not think there is or could be any dispute about that.
132. I would ask Counsel to agree a draft form of Order for consideration when this Judgment is delivered. The question of costs can be decided at the same time.
133. Finally, I would only add this. Mr McKenzie has established his legal right; and his entitlement to deal with 122 Church Lane as its sole beneficial owner and as he wishes. But once the acrimony of legal proceedings fades, he may care to reflect that it was largely through Jim’s assistance that he is in the position of owning a now valuable property. I have little doubt that when the property was purchased all three, Mr and Mrs McKenzie and Jim, expected Jim to inherit it or its value in due course. The fact that their expectation does not give rise to a legal right does not mean that it was not shared. It is a matter for Mr McKenzie; but it would seem a sad thing if no reconciliation can be achieved and if the somewhat unforgiving direction in Mrs McKenzie’s Will were replicated in Mr McKenzie’s Will and led to their shared family expectations being so entirely negated.