Analysis
By the underlying claim the appellant (the claimant at first instance) had sought a declaration as to the extent of his beneficial interest in a residential property (the property) which he and the respondent (the defendant at first instance) had purchased in joint names, having been at that time a cohabiting couple. Following a dispute, the claimant had moved out of the property only two years or so after it had initially been purchased. Prior to moving out, the claimant had contributed to the mortgage repayments in equal shares with the defendant, but had ceased to make any further contribution whatsoever from the time of his departure from the property.
At first instance, the judge concluded that, although the common intention had originally been that the parties would have equal beneficial shares in the property, that common intention had changed when the claimant had moved out. He went on to determine the parties’ respective beneficial shares by reference to their respective financial contributions over time, finding that, on the basis that the respondent had made all mortgage payments after 1992, there had been 600 mortgage repayments since the initial purchase, the claimant having made 48 of these. Forty eight is 8% of 600, and accordingly the judge at first instance found the claimant’s beneficial interest in the property to be 8% of the total, the remaining 92% belonging to the defendant.
The judge further refused the claimant’s application for an order for sale, and made a further order that the defendant pay the claimant an additional sum of £438.53 upon any eventual sale of the property, although the claimant, and seemingly the appeal judge, concluded that the basis of this order was not ‘adequately explained’.
The appellant appealed on the basis that:
- (1) there was no basis on which the judge could have found that the common intention had changed when the appellant had moved out of the property;
- (2) in the alternative, the common intention that the judge should have found was that the interests of the parties should crystallise in or around 1992, and that the appellant’s interest should be calculated by reference to his having, in 1992, an absolute (money) amount equivalent to a 50% share in the value of the property as at 1992; and
- (3) that the judge erred in declining to make an order for sale.
Held:
It was permissible for the first instance judge to conclude – based solely on the facts that the appellant had ceased to contribute to the mortgage repayments from the date of having moved out and that, from that date, the respondent had discharged the mortgage repayments on her own (which fact must have been apparent to the appellant in the circumstances) – the common intention had changed when the appellant had moved out. It would have been extraordinary if the common intention to hold equally had survived these changes. That would have entailed the respondent paying for the appellant’s interest which, given the acrimonious split, was simply not likely. Accordingly, ground (1) of the appeal failed.
As to the calculation of the parties’ respective interests, the first instance judge had erred by employing a forward-looking analysis of what the respondent paid after 1992, by way of mortgage contributions. This was a resulting trust analysis par excellence, and disregarded the focus on common intention that the law required. The analysis ought instead to have focused on the common intention between the appellant and respondent as at 1992, which is when the judge found the common intention changed.
The appellant’s interest had crystallised when his contributions ceased. Accordingly, the appellant’s 50% share crystallised at half of the value of the property at that time which, on the facts as the appeal judge found them was £74,000. Half that amount was £37,000, and accordingly this amount was the value of the appellant’s interest. By reason of the crystallisation, the declaration as to the appellant’s interest would not be structured as a percentage share, but rather simply as a flat amount of £37,000.
The first instance judge had further erred in refusing to make an order for sale. Absent such an order, the appellant would be kept out of his money for no good reason until the respondent chose to sell, which was unlikely to be soon. Furthermore, the value of the appellant’s entitlement would likely diminish over time, given that no interest was due on that sum, and that since his interest took the form of a flat sum rather than a proportion of the property, the appellant could not benefit from any increase in property prices.
An order for sale would be made therefore, but the respondent should be given three months in which to buy the appellant out, which she ought to be able to do without selling the property, given that the property was worth £600,000 and was unencumbered, so that funds could be raised by a loan secured against the property itself. Should the respondent not buy the appellant out within this period, the property would have to be sold with all expedition.
Although the order that the respondent should pay to the appellant the sum of £438.53 on the sale of the property was inadequately explained, it had been made and was not appealed. As such, and since an order for sale had been made, the sum should be added to the £37,000 required to be paid to the appellant on any purchase by the respondent of his share, or on any third-party sale.
It would be appropriate to revisit the matter of costs in light of the outcome of the various grounds of appeal, but a decision on this point would have to await the hearing of arguments as to costs from the parties.
JUDGMENT HHJ MARCUS SMITH: A. Introduction [1] By an order dated 13 March 2023 (the ‘Order’), Recorder Maguire (the ‘Judge’), sitting at the County Court at Central London, declared that the property known as at situate at Tyndale Villas, Sartar Road, Nunhead, London SE15 3BB (the ‘Property’) was held by the Appellant and Respondent upon …Continue reading "Allen v Webster [2024] WTLR 775"