Man and woman contract jointly to buy house, and conveyance taken in joint names–‘Necessary to show building society enough income’–Parties also jointly liable on mortgage–Man puts up deposit of £550 and keeps up mortgage payments on basis that woman would pay out of her earnings for food etc–Man unable to show that he provided whole of purchase-price–No resulting trust for him–Nearly half beneficial interest held to belong to woman
This was an
appeal by Mrs Joyce Violet Crisp from a judgment of Megarry J holding in favour
of the respondent, Mr William George Mullings, that he was solely entitled
beneficially to the proceeds of sale of the parties’ former home.
Mr P J Millett
QC and Mr A H Tibber (instructed by David Housard & Co) appeared for the
appellant, and Mr D Gidley Scott (instructed by Lethbridges) represented the
respondent.
Giving the
judgment of the court, RUSSELL LJ said: In this case the plaintiff and the
defendant were living together as man and wife, together with a small daughter
of the defendant. The defendant was a widower and the plaintiff was separated
from her husband. In 1970 they were living in a flat. Their landlord was
anxious to get possession of the flat, of which the defendant was the tenant,
and was prepared to pay the defendant £200 and lend the defendant a further
£350 to obtain such possession. A house was found which would suit as their new
home, a long leasehold. To find the purchase-price, it was necessary to get a
building society instalment mortgage for £5,700. Both the plaintiff and the
defendant were earning, but in order to obtain the building society loan of
that amount it was necessary, in order to show enough income to satisfy the
building society, that both the plaintiff and the defendant should join as
principals in the mortgage and (of course) its covenants. Both the plaintiff
and the defendant contracted to buy the house; on completion, the leasehold
interest was transferred to them jointly and registered in their joint names,
and they both executed the mortgage in favour of the building society. In the
documentation, the plaintiff figured as Mrs Mullings, the wife of the
defendant. The defendant in addition paid the £550 from the previous landlord
towards the purchase-price and costs, the total being thus (with sufficient
accuracy) £6,250. They moved into the house and lived together there with the
small girl until November 1972, when, after a row, the plaintiff left and did
not return. The house is now by agreement being sold. In proceedings by
originating summons, the plaintiff claimed a sale and a beneficial interest in
half the net proceeds of sale. The defendant claimed to be solely beneficially
entitled under a resulting trust. The judge, after considering the affidavit
and oral evidence of the parties, concluded in favour of the defendant, and the
plaintiff appeals to this Court.
We may say at
once that the affidavit and oral evidence on both sides is on the face of it
unsatisfactory, and the court must do the best it can. We start with this, that
it must be for the defendant to demonstrate that the beneficial entitlement
does not coincide with the legal entitlement, and the legal entitlement is (as
stated) in the plaintiff and the defendant jointly; this he must do either by
showing that the circumstances are such that he provided the whole of the
purchase-price, so that there is, as he claims, a resulting trust of the whole
for him, or by evidence showing that the plaintiff was to be a mere nominee.
Now it seems to us that the defendant cannot establish that he provided the
whole of the purchase-price. He certainly provided £550, but the rest, £5,700,
was procured by both the plaintiff and the defendant undertaking similar and
equal liabilities to the building society. Without the participation of the
plaintiff, neither the £5,700 nor, of course, the house would have been
forthcoming. It is true that after the purchase the defendant has paid the
mortgage instalments out of his earnings, but the plaintiff says that this was
as a result of a man-and-wife discussion by which she was to pay out of her
earnings for matters such as food and he was to bear out of his matters such as
mortgage instalments, rates and ground rent; as the plaintiff remarked, the
defendant had a bank account and she had not. The defendant’s earnings were
considerably more than the plaintiff’s, though, as we have said, not enough to
induce a building society to produce the sum required. This seems to us to be a
highly probable arrangement between the parties in their situation, and these
mortgage payments by the defendant do not in our view point in the direction of
the plaintiff’s participation in the transaction being that of a mere nominee.
The crucial
point in the judgment appealed from is that the judge, having quite correctly
said that the plaintiff started, so to speak, with the advantage of being a
joint tenant in law, concluded that this was entirely explained–and explained
away–by the fact that her participation was necessary in order to persuade the
building society to advance the £5,700. The judge said:
The plaintiff
was accordingly made a party to the contract, the mortgage and the transfer in
order to enable a sufficient loan to be obtained, and not with the object of
making a gift to the plaintiff of any share of the beneficial interest.
With all
respect, we do not think that that demonstrates that the plaintiff was to be a
mere nominee. It is, we think, a non sequitur. On the contrary, the fact
that the house for the ‘family’ could not be bought without the plaintiff
incurring liability, or potential liability, would be some ground for inferring
that the plaintiff was to be beneficially interested. The situation, in our
view, is that the defendant does not establish that he alone provided the
purchase-price, any more than he would have, had the whole price been provided
by a joint mortgage; and the resulting trust of the whole is therefore not
established. Nor does the rest of the evidence establish to our satisfaction
that it was understood between the parties that the plaintiff was to be a mere
nominee. There was a somewhat remarkable piece of evidence given orally by the
defendant to the effect that the plaintiff forced him
the little girl, and that he agreed under that pressure, not intending the
plaintiff to have as a result any beneficial interest, because he considered
(without of course telling her) that if she participated as Mrs Mullings
instead of Mrs Crisp, she would be in effect merely his alter ego. The judge
mentioned this evidence without expressing any opinion upon it, save to say
this:
Whatever may
have been the truth about this, and whatever strange attempts at cunning the
defendant had in his mind, it seems plain that the defendant at least had no animus
donandi.
But this was a
conclusion at which the judge had already arrived in what we have referred to
as a non sequitur. We would observe that if this story of the defendant
were true, which we do not think, it would amount to this: that he knew the
plaintiff was insisting on being beneficially interested, and that he was
allowing her to undertake obligations under the contract for purchase and
mortgage on that assumption by her, concealing from her what he considered and
intended to be her delusion: a chancy foundation for a claim in equity by the
defendant that he is solely beneficially entitled.
There remains
to be considered what was the beneficial interest of the plaintiff. The
originating summons asks for an inquiry, but we think that this court can deal
with the matter without further litigation. Prima facie, joint tenancy
at law would be reflected in joint tenancy in equity. But where the
purchase-price is provided not in equal shares, equity will find a
proportionate beneficial tenancy in common. Here they both contributed equally
to procuring the £5,700, but the defendant additionally provided £550. From the
outset, therefore, they have been beneficial tenants in common in the
proportions defendant 3400/6250 and plaintiff 2850/6250, and the net proceeds
of sale of the house will be divisible in those proportions. There is no ground
for giving credit to the defendant for any part of the mortgage payments while
they were living together at the house, but the defendant should, in the division
of the proceeds of sale, receive credit for the same plaintiff’s fraction, that
is to say 2850/6250 of the mortgage payments made by him after they parted in
November 1972. Accordingly we allow the appeal and declare that the plaintiff
will be entitled as tenant in common in equity to 2850/6250 of the net proceeds
of sale of the house, minus the same fraction of mortgage instalments paid by
the defendant after the date in November 1972 when the plaintiff left the
house. There should be no difficulty in agreeing the amount, but our order
should reserve liberty to apply to the master to certify the resulting amount
in case of dispute.
An order was
made accordingly, amended to deal with certain improvements for which an
adjustment was required. The appellant was awarded costs in both courts.
