Residential property in disrepair — Agreement to carry out work — Builder to renovate property at own expense — Proceeds of sale to be divided — No purchaser found — Conveyance of freehold to builder in return for lease and option to purchase alternative property — Lease not granted — Action to set aside conveyance — High Court refusing relief sought — Court of Appeal allowing appeal against that decision — Judgment for appellant
The appellant owned Libra, Causewell Bay, Swansea. It was a former boathouse, the upper floor of which had been converted into living accommodation. She had entered into a restrictive covenant whereby she was precluded from altering the property without the consent of her vendor. The property was subject to a mortgage to secure an overdraft in the sum of £3,200. By 1979 the property had fallen into disrepair but the appellant could not afford to do the repairs. The respondent was a builder. By clause 2 of a written agreement of December 7 1979, the respondent agreed to renovate the property at his own expense. By clause 3 he undertook to discharge the existing mortgage on the property of £3,200. By clause 4 the appellant agreed that upon completion of the works of renovation the property should be sold and the proceeds of sale divided: (a) the first £29,000 of the gross proceeds of sale for the appellant; (b) the repayment to the respondent of the costs of renovation and discharging the existing mortgage, the cost of so doing being no less than £12,000 and not more than £15,000; and (c) the balance to be divided after payment of costs between the owner and the contractor in equal shares.
The work was completed and in June 1980 it was placed on the market. No buyer was found and in December 1981 the respondent agreed to grant to the appellant a lease of another property owned by him known as Craig Villa, at a nominal rent for a term of about two years, together with an option to purchase the freehold of the villa upon expiry of the lease, for a nominal sum if she conveyed the freehold title of Libra to him. This was subsequently confirmed in writing. In reliance on that agreement the appellant conveyed the freehold of Libra to the respondent, but no lease was ever granted to her. The appellant brought an action seeking a declaration that the conveyance of the freehold of Libra to the respondent was void and should be set aside. The first instance court refused relief.
Held The appeal was allowed.
1. The Court of Appeal was reluctant to interfere with a judge’s findings on question of fact and could only do so where those findings were such that no reasonable tribunal would reach. However, in the present case the evidence was overwhelmingly in favour of the appellant.
2. The 1979 agreement was to be construed as a legal document and the parties were to be bound by its terms as so construed. Their legal relationships with one another were to be analysed against the background of the contract as so construed.
3. On the evidence from the date of the 1981 agreement the respondent held the legal title to the property known as Craig Villa on trust for the appellant.
4. The respondent was in breach of his duty and could not rely on the 1981 agreement against the appellant who was entitled to rescind that agreement and to set aside the conveyance of Libra to the respondent.
Teresa Peacocke (instructed by Bates & Partners, of Southend-on-Sea) appeared for the appellant; Ieuan Rees (instructed by J Michael Glass & Co of Swansea) appeared for the respondent.
