Practice and procedure – Summary judgment – Injunctions – Father of appellant and first respondent incapacitated by stroke – Appellant obtaining transfer of freehold property into his sole name using purported power of attorney – Appellant selling that property and purchasing short residue of lease of flat – Flat in turn mortgaged to raise finance – First respondent obtaining summary judgment on claim for declarations as to beneficial interests in properties and proceeds – Injunctions also granted to restrain appellant’s dealings with them – Whether case suitable for summary judgment – Whether injunctions to be continued pending trial – Appeal allowed in part
The appellant and the first respondent were, respectively, the younger son and the daughter of the second respondent, an elderly former businessman who, after suffering a stroke in 2001, was confined to a wheelchair and required full-time professional care. Shortly after the stroke, the appellant arranged to have a freehold property, which the second respondent had purchased in 1987 as the family home, transferred into the joint names of himself and the second respondent; in doing so, he purported to act under a power of attorney from his father. The property had previously been held on a trust for the second respondent, his wife and the first respondent in the proportions 20%, 40% and 40% respectively. The appellant subsequently took out mortgage lending on the security of the property, which he used both to refinance existing borrowing on it and, in 2003, to purchase in his sole name the tail-end of a lease of a long ground-floor flat, due to expire in 2016, which was thereafter used as a London home for the second respondent. In 2004, the appellant procured the sale of the freehold property. In 2010, he took out a loan of £700,000 secured on the flat, of which 80% was repayable by June 2014 and the balance by June 2015.
In 2013, the first respondent brought proceedings, both in her own name and as self-appointed litigation friend of the second respondent, seeking declarations as to their beneficial ownership of the properties and comprehensive injunctions restraining the appellant’s dealings with the properties or their proceeds, in which regard she alleged that the appellant had acted dishonestly. The first respondent claimed a beneficial interest not only in her own right but also as sole beneficiary of her mother’s estate, the mother having died in 2005.
An injunction was obtained in respect of the flat on a without-notice application and the matter then went to a hearing, at which the deputy judge gave summary judgment for the respondents on their claim for declarations regarding the beneficial ownership of the properties and also continued the injunctions regulating the appellant’s dealings with the flat pending the submission to the court of proposals for its disposal on a future application: see [2014] EWHC 1787 (Ch); [2014] PLSCS 207.
The appellant appealed. He contended that the issues as to the beneficial ownership of the properties were unsuitable for summary judgment rather than a full trial and that the deputy judge’s decision to continue the injunctions was vitiated both by inappropriate findings of dishonesty against the appellant, which should not have been made without a full trial, and by the absence of any prior threat by the appellant to do the acts prohibited by the injunctions. He also contended that it was improper for the first respondent to act as litigation friend for her father owing to a conflict of interests.
Held: The appeal was allowed in part.
(1) The first respondent should be removed as litigation friend for the second respondent. There was a serious conflict between the first respondent’s own interests and those of her father in relation to the beneficial ownership in the properties, since the issue on the summary judgment application was whether there was a triable case that the second respondent owned both properties as to 100%, rather than merely a 20% interest under the trust as the first respondent alleged. The deputy judge had erred in undertaking the summary judgment hearing on that issue at a time when the first respondent was thus disabled by her conflict of interest from acting properly as her father’s litigation friend. The general scheme of CPR 21 was designed to ensure that, before any other than the initial steps were taken in contentious civil proceedings, a protected party had a litigation friend to conduct proceedings on his or her behalf, unaffected by any conflict of interest. It was no answer to the difficulties raised by the conflict of interest that no one had applied to have the first respondent replaced as litigation friend. Although CPR 21.7(2) required a party who sought the replacement of a litigation friend to make an application supported by evidence, nothing in the rules prohibited or discouraged the court from doing so of its own motion, in particular where it was satisfied that an existing litigation friend had become disabled by conflict. The judge’s order as to the beneficial interests should therefore be set aside and the dispute as to beneficial ownership should be determined at a trial, at which the second respondent should be represented by an un-conflicted litigation friend.
(2) Moreover, there were issues as to the beneficial interests in the properties that could not properly be determined without a trial. Any allegation that the beneficial interests were not governed by the trust deeds depended on the appellant establishing that those deeds were a sham. That allegation, once raised, was unsuitable for summary judgment. Evidence would need to be advanced at a trial to establish whether the deeds were a sham and whether the appellant was himself involved in any dishonest deception in that regard so as to disbar him from asserting the sham. The court should give permission to the appellant to amend his defence to deal with that issue.
(3) Further, the judge had erred in concluding, on the grounds of dishonest concealment by the appellant, that the first respondent was not barred by laches from asserting a beneficial interest. The judge’s findings that the appellant had dishonestly concealed misconduct by him as a trustee or fiduciary were inappropriate where the appellant was asserting that the first respondent had been kept fully informed of what he was doing throughout. While the court could reach findings of dishonesty on summary judgment applications, even where it was denied in witness statements, it should do so only if, on a careful analysis, the evidence denying dishonesty was manifestly incredible. The deputy judge had failed to deal with the appellant’s evidence on the matter.
(4) Despite the above findings, the balance of convenience favoured continuing the injunctions against the appellant in respect of most of the matters covered by them. His high-handed and bullying conduct towards the first respondent, and dishonest conduct so far as he had asserted that he was sole beneficial owner of the flat and his father merely a guest, was sufficient to justify a serious apprehension on the part of the first respondent that, if she commenced fresh litigation against her brother, the same or similar threats would be made or indeed implemented. The exception was the absolute prohibition on the appellant seeking to market the flat; the balance of convenience narrowly fell in favour of permitting the appellant to market the flat up to the stage of, but no further than, achieving a sale subject to contract. In circumstances where the parties’ experts were far apart as to the availability or best means of realising commercial value in a rapidly wasting asset, marketing seemed to represent the only sure way forward. Moreover, the second respondent would have to leave the flat soon in any event, since no method had been suggested by which an extension of the lease could be funded in a way that did not require its on-sale, and, in circumstances where the property was said not to be in good repair, compliance with the dilapidations obligation at the end of the lease was likely to require the second respondent’s relocation well before its actual expiry in 2016.
John Wardell QC and Elizabeth Weaver (instructed by Withers LLP) appeared for the appellant; Romie Tager QC and Richard Clegg (instructed by Hill Dickinson LLP) appeared for the respondents.
Sally Dobson, barrister
Practice and procedure – Summary judgment – Injunctions – Father of appellant and first respondent incapacitated by stroke – Appellant obtaining transfer of freehold property into his sole name using purported power of attorney – Appellant selling that property and purchasing short residue of lease of flat – Flat in turn mortgaged to raise finance – First respondent obtaining summary judgment on claim for declarations as to beneficial interests in properties and proceeds – Injunctions also granted to restrain appellant’s dealings with them – Whether case suitable for summary judgment – Whether injunctions to be continued pending trial – Appeal allowed in partThe appellant and the first respondent were, respectively, the younger son and the daughter of the second respondent, an elderly former businessman who, after suffering a stroke in 2001, was confined to a wheelchair and required full-time professional care. Shortly after the stroke, the appellant arranged to have a freehold property, which the second respondent had purchased in 1987 as the family home, transferred into the joint names of himself and the second respondent; in doing so, he purported to act under a power of attorney from his father. The property had previously been held on a trust for the second respondent, his wife and the first respondent in the proportions 20%, 40% and 40% respectively. The appellant subsequently took out mortgage lending on the security of the property, which he used both to refinance existing borrowing on it and, in 2003, to purchase in his sole name the tail-end of a lease of a long ground-floor flat, due to expire in 2016, which was thereafter used as a London home for the second respondent. In 2004, the appellant procured the sale of the freehold property. In 2010, he took out a loan of £700,000 secured on the flat, of which 80% was repayable by June 2014 and the balance by June 2015.In 2013, the first respondent brought proceedings, both in her own name and as self-appointed litigation friend of the second respondent, seeking declarations as to their beneficial ownership of the properties and comprehensive injunctions restraining the appellant’s dealings with the properties or their proceeds, in which regard she alleged that the appellant had acted dishonestly. The first respondent claimed a beneficial interest not only in her own right but also as sole beneficiary of her mother’s estate, the mother having died in 2005.An injunction was obtained in respect of the flat on a without-notice application and the matter then went to a hearing, at which the deputy judge gave summary judgment for the respondents on their claim for declarations regarding the beneficial ownership of the properties and also continued the injunctions regulating the appellant’s dealings with the flat pending the submission to the court of proposals for its disposal on a future application: see [2014] EWHC 1787 (Ch); [2014] PLSCS 207.The appellant appealed. He contended that the issues as to the beneficial ownership of the properties were unsuitable for summary judgment rather than a full trial and that the deputy judge’s decision to continue the injunctions was vitiated both by inappropriate findings of dishonesty against the appellant, which should not have been made without a full trial, and by the absence of any prior threat by the appellant to do the acts prohibited by the injunctions. He also contended that it was improper for the first respondent to act as litigation friend for her father owing to a conflict of interests.Held: The appeal was allowed in part. (1) The first respondent should be removed as litigation friend for the second respondent. There was a serious conflict between the first respondent’s own interests and those of her father in relation to the beneficial ownership in the properties, since the issue on the summary judgment application was whether there was a triable case that the second respondent owned both properties as to 100%, rather than merely a 20% interest under the trust as the first respondent alleged. The deputy judge had erred in undertaking the summary judgment hearing on that issue at a time when the first respondent was thus disabled by her conflict of interest from acting properly as her father’s litigation friend. The general scheme of CPR 21 was designed to ensure that, before any other than the initial steps were taken in contentious civil proceedings, a protected party had a litigation friend to conduct proceedings on his or her behalf, unaffected by any conflict of interest. It was no answer to the difficulties raised by the conflict of interest that no one had applied to have the first respondent replaced as litigation friend. Although CPR 21.7(2) required a party who sought the replacement of a litigation friend to make an application supported by evidence, nothing in the rules prohibited or discouraged the court from doing so of its own motion, in particular where it was satisfied that an existing litigation friend had become disabled by conflict. The judge’s order as to the beneficial interests should therefore be set aside and the dispute as to beneficial ownership should be determined at a trial, at which the second respondent should be represented by an un-conflicted litigation friend.(2) Moreover, there were issues as to the beneficial interests in the properties that could not properly be determined without a trial. Any allegation that the beneficial interests were not governed by the trust deeds depended on the appellant establishing that those deeds were a sham. That allegation, once raised, was unsuitable for summary judgment. Evidence would need to be advanced at a trial to establish whether the deeds were a sham and whether the appellant was himself involved in any dishonest deception in that regard so as to disbar him from asserting the sham. The court should give permission to the appellant to amend his defence to deal with that issue.(3) Further, the judge had erred in concluding, on the grounds of dishonest concealment by the appellant, that the first respondent was not barred by laches from asserting a beneficial interest. The judge’s findings that the appellant had dishonestly concealed misconduct by him as a trustee or fiduciary were inappropriate where the appellant was asserting that the first respondent had been kept fully informed of what he was doing throughout. While the court could reach findings of dishonesty on summary judgment applications, even where it was denied in witness statements, it should do so only if, on a careful analysis, the evidence denying dishonesty was manifestly incredible. The deputy judge had failed to deal with the appellant’s evidence on the matter.(4) Despite the above findings, the balance of convenience favoured continuing the injunctions against the appellant in respect of most of the matters covered by them. His high-handed and bullying conduct towards the first respondent, and dishonest conduct so far as he had asserted that he was sole beneficial owner of the flat and his father merely a guest, was sufficient to justify a serious apprehension on the part of the first respondent that, if she commenced fresh litigation against her brother, the same or similar threats would be made or indeed implemented. The exception was the absolute prohibition on the appellant seeking to market the flat; the balance of convenience narrowly fell in favour of permitting the appellant to market the flat up to the stage of, but no further than, achieving a sale subject to contract. In circumstances where the parties’ experts were far apart as to the availability or best means of realising commercial value in a rapidly wasting asset, marketing seemed to represent the only sure way forward. Moreover, the second respondent would have to leave the flat soon in any event, since no method had been suggested by which an extension of the lease could be funded in a way that did not require its on-sale, and, in circumstances where the property was said not to be in good repair, compliance with the dilapidations obligation at the end of the lease was likely to require the second respondent’s relocation well before its actual expiry in 2016.John Wardell QC and Elizabeth Weaver (instructed by Withers LLP) appeared for the appellant; Romie Tager QC and Richard Clegg (instructed by Hill Dickinson LLP) appeared for the respondents.Sally Dobson, barrister
