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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Elithorn v Poulter & Ors [2008] EWCA Civ 1364 (11 December 2008) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2008/1364.html Cite as: [2009] 1 P & CR DG14, [2009] 1 P & CR 19, [2008] EWCA Civ 1364 |
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Royal Courts of Justice Strand, London, WC2A 2LL Date: 11/12/2008 |
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
His Honour Judge Levy QC
Case No: CHY06098
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE WILSON
and
LORD JUSTICE RIMER
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| DR ALICK CYRIL ELITHORN |
Appellant |
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| - and - |
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| ALAN GRAHAM POULTER ANTHONY CHRISTOPHER ETTLINGER MICHAEL DAVID SMITH |
Respondent |
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Miss Caroline Hutton (instructed by Manches LLP) appeared for the Respondents
Hearing date: 15 July 2008
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Crown Copyright ©
Lord Justice Rimer :
Introduction
"intended as at the time of the purchase that their respective shares in the beneficial interest in [Rose Hill] would be determined by their actual contributions to the cost of purchase and that it was the mutual expectation of [Madeline] and [Dr Elithorn] … that [he] would in fact make a contribution of up to half the cost within a very short time of completion of the purchase out of the proceeds of sale of [Constantine Road]."
The background by reference to the documents
"I believe [Constantine Road] will very shortly be sold, after which we can have a 'settling up' and calculate the proportionate shares of [Rose Hill]."
"If [Rose Hill] 50/50 [Dr Elithorn] owes Madeline £125,000 + 70,000 195,000.
[Dr Elithorn] needs Capital to finance Business and Run Rose Hill.
Madeline will pay maintenance costs of Rose Hill her Investment.
If [Dr Elithorn] has loan of £75,000 from Madeline [Dr Elithorn] would owe £120,000 against house value £125,000 if 150,000 is received.
[Dr Elithorn] to Make new will immediately to ensure that Madeline is secured this to be done in conjunction with Solicitors Keith to advise if required.
Any variation of house ownership will change the figures.
Discussion of residency of house to be agreed later."
That does not advance the issue very much, save that the "If" in the first line may be some indication that there was not yet any agreement as to the basis on which the beneficial interest in Rose Hill was to be shared. It can, therefore, also be said to be consistent with what Madeline had written in her letter of 7 April 1996.
"You have certainly 'taken' me for a great deal of money. I still don't have the promised document stating that I put up all the money for Rose Hill, nor that I lent you £70,000 to repay your mortgage. I shall ask my solicitor to prepare such a document and hope that you will sign it. You still have many of my possessions (list attached) which I should like returned as soon as is convenient. I should like you to remove from here by 20 July your remaining possessions ….
You have to decide yourself what to do with Constantine Road. My advice would be to sell it as soon as you can; I should like repayment soon of the loan I made you. But let me know what you decide. If you choose to return to No 1 and vacate [Rose Hill], I might help with the costs involved, provided you have professional removers."
"You know that I had bought (for £250,000) [Rose Hill], in which a friend (Dr Alick Elithorn) was residing. You established for me that [it] was in both our names as tenants in common, although I had actually put up the whole of the purchase price. I had also lent [Dr Elithorn] £70,000 in September (I think) to pay off the mortgage on [Constantine Road], pending its imminent sale. [Constantine Road] has not yet been sold; indeed [Dr Elithorn] may have been such a difficult vendor that the would-be buyer may have given up/lost interest. The proposal was that when [it] was sold (I believe the purchaser had offered £180,000 for it), [Dr Elithorn] would repay me the £70,000. He would also pay me something towards the value of [Rose Hill], but probably not as much as half, because he has virtually no income (he made a bad pension deal) and needs some capital behind him. But our respective proportional investments in [Rose Hill] would be set out in a document to be drawn up by his London solicitor. I suppose the delay in producing such a document is due to the fact that the London sale has fallen through, so no fractions of ownership can be even guessed at. He may decide to keep [Constantine Road] after all and turn it into a lodging house, or he may decide to put it on the open market again. Anyway, the matter is protracted.
The present position is that I pay for the house and contents insurance (I asked him today to arrange to cover himself for the contents which are all his own); I have agreed to pay for all essential repairs and maintenance; he pays all other outgoings; he pays me no rent (because he has no income).
Could you please advise me? I wondered if it might be [a] good idea if you could prepare some sort of document setting out the status quo I've described with regard to the money, which [Dr Elithorn] could sign, thus confirming that the present situation is correctly described, and promising to repay me the £70,000, and something else towards my outlay on [Rose Hill], the exact fractions to be agreed after the sale of [Constantine Road]. …"
"I, Alick Elithorn, confirm that Madeline Ettlinger currently resident in [Island Reach] has out of the kindness of her heart lent me [£195,000] and that this is to be the first charge on my estate when I die."
"I am trying a different tack with [Dr Elithorn]: I thought I might prevail better in sorting out the mess if I had a slightly more friendly association with him, and it has produced the attached paper. (Half of £250,000 = £125,000 + £70,000 = £195,000). It's not much, but since he hasn't finalised his Will, it might be better than nothing. He won't live for ever, but I hope to regularise the situation better than this before he dies. …
I asked him to register my £70K interest in Constantine Road at the Land Registry, but he refused, in case he needed to use the house as collateral to raise another mortgage/loan at any time. So perhaps you should hold off from registering a caution for the moment? ….
Meantime, I'm trying to sort out other problems at Rose Hill: [central heating], other plumbing, garden. [Dr Elithorn] has another tenant at Constantine Road, so further income."
"You will remember that we are tenants in common of [Rose Hill], which I believe gives him the right to will away his half, unless of course his latest Will (and I understand he remakes his Will regularly) admits his debt to me."
The first part of that expressly recognised that Dr Elithorn already had a beneficial half share in Rose Hill; the qualification then made a point that I do not understand. But whatever Madeline had in mind, she appears to have regarded Dr Elithorn's debt acknowledgment of March 1997 as a thing of value, which it could only be if the debt it recognised was a real one; and she asked for Mr Young's advice as to whether a copy should be sent to Dr Elithorn's solicitor, Mr Alexander. Madeline's recognition that Dr Elithorn had a half share is inconsistent with her stance expressed in her letters written in 1996 that what (if any) share he might have was to be dependent on his actual contribution to her out of the proceeds of sale of Constantine Road.
"In December 1995, I wrote a cheque … in favour of Messrs Cole & Cole … for £23,500, being the deposit for the purchase of [Rose Hill]. … My cheque … for £227,200 in favour of Messrs Cole & Cole, being the balance of the purchase price for [Rose Hill] was presented to my bank on 6.12.95. I paid the whole of the purchase price of £250,000, to which Dr Elithorn did not contribute. He has not since then repaid any part of this loan of £125,000. Although he and I are registered as tenants in common of the property, I have always paid the buildings insurance and the costs of maintenance and repair." (emphasis supplied).
"you would like your investment in me returned when I die, which we expect to be the sooner. … I suggest that you put the house fully in my name and that in return you get a watertight charge for the appropriate sum. At the moment, the ball-park figure would be £320,000, but it would seem fair to me to up this a little to take account of the fact that you have paid most of the maintenance and repair costs to date. I would be responsible for all repairs and developments."
"If you agree, and I'll call you tomorrow to ask, I propose to write to him [Dr Elithorn] repeating that my preference is (a) for him to vacate Rose Hill and move back to London, in return for which I'd remove the charge against Constantine Road (with a declaration from him that he no longer had an interest in Rose Hill, and similarly from me re Constantine Road); (b) for him to surrender 'his' share of Rose Hill to me, for which I'd allow him to live out his days there rent-free, paying usual outgoings (services, insurances, etc) and I'd pay all maintenance charges …."
"you stay at [Rose Hill] but sign a legal document relinquishing 'your' share of the house to me (which means that you would no longer owe me £125,000 or so) … I'd also like an assurance that I would recover from your estate the £70,000 I lent you for your mortgage at Constantine Road."
That letter is also consistent with a recognition by Madeline that Dr Elithorn had a beneficial interest in Rose Hill, which he could surrender to her, upon which his liability to pay her the "£125,000 or so" – half the purchase price – would be released. It recognised that Dr Elithorn had a beneficial half share but was under a liability in debt to repay Madeline for that half. The March 1997 debt acknowledgment was of a debt of £125,000 exactly, but the slight difference in the way Madeline here described the amount is immaterial. She was obviously referring to the same debt as the March 1997 document.
"Although [Dr Elithorn] does not dispute that [Madeline] paid for [Rose Hill], he does contend that it was put into joint names because [Madeline] gave him a half share as a gift. This is further evidenced by the fact that they are tenants in common …."
"You have told me that the property is worth approximately £350,000 and that the property was purchased by both you and [Madeline] in January 1996 as tenants in common.
As I explained there is a presumption that any property purchased by two people in joint names and particularly as tenants in common in equal shares is owned jointly and that means that the proceeds of sale are also owned jointly. The presumption goes on to suggest that if the money comes from one party alone or the majority of it comes from one party alone then there is still a presumption of gift which has to be refuted.
There is nothing you have told me which would, to my mind, negative the presumption of a gift. …"
"Since [Dr Elithorn] has rejected my generous offer of free accommodation for the rest of his life in return for a signed Declaration of Trust, my situation is now that I wish to sell the house. If the house remains in joint names at time of sale, as [Dr Elithorn] owes me 50 per cent of the value of the house, I would expect to realise the whole of the sale price."
"However, in the event [Constantine Road] had not been sold at the time when the purchase of [Rose Hill] was due to be completed and Madeline put up the whole of the purchase price. Elithorn never reimbursed her for her half share of the price and she recalls that this was £250,000."
"2. Our joint intention was that, when the purchase of [Rose Hill] was completed, Dr Elithorn would provide a proportion of the purchase price from the proceeds of [Constantine Road]. For this reason, the transfer of [Rose Hill] was made in our favour as tenants in common in unspecified shares.
3. The purchase price of [Rose Hill] was £235,000 plus a further sum of £15,700 for furniture, fixtures and fittings ….
5. … I personally provided the whole of the purchase price of [Rose Hill] and the [fixtures and fittings] and paid all the costs associated with the purchase. At no time since the purchase has Dr Elithorn paid to me any sum whatsoever towards the price of [Rose Hill] or [the fixtures and fittings] or the costs of the purchase nor has he provided any other consideration in respect thereof."
"We have reviewed the paperwork and there is no evidence that [Madeline] did not intend to give Dr Elithorn one half of the property. Indeed there is very compelling evidence, namely the letter to Cole & Cole from Willmett & Co which suggests that the matter had been considered and had been deliberately left so that the property was held on a 50/50 basis."
Whatever (if any) merit there may have been in that argument, it does not make the case that Madeline lent Dr Elithorn half the purchase price so that he can and should be regarded as a purchaser of a half share in Rose Hill.
"[Dr Elithorn] is the legal owner of at least one half [Rose Hill]. [He] bought his share … as part of a loan agreement with [Madeline]. The fact that his loan was interest free from the beginning made good business sense for both as it freed [him] from outgoings that [he] could not afford. … [Madeline] paid for my capital investment in the project out of an agreed shared capital and that she agreed that this need only be returned on my death."
Witness statements
"It is admitted by [Dr Elithorn] that that [sic] at all times he has regarded the monies advanced to be a loan and due to be secured against his beneficial rights in any property in which they might be invested.
The bottom line of [his] position is that he owns at least half the beneficial rights of [Rose Hill] and that his only indebtedness to the estate is the monies loaned and up to 5% of his earnings. …
It seems more inalienable that I had reached a binding agreement that could only be altered by agreement with Madeline that with her agreement and in the event of my virtual imprisonment in London by my Fundamentalist lodger that I would continue to use the whole of the loan that I had been given to develop the practice and the business that we had agreed. In the event I was force [sic] through the failure of trust rather than need to return the portion of the loan which represented the Mortgage repayment for [Constantine Road]."
The trial
"A. … The agreement between me and Madeline, until she came to want to reconsider it, was that we were going to share it [Rose Hill] equally and that I would contribute my share of the cost price and that, because I couldn't do that, she agreed to lend me the money appropriately, provided I paid it back by the time I was dead.
Q. That agreement was not made, if it was ever made, in November/December 1995, Dr Elithorn, was it?
A. That agreement was made right from the beginning when she – we discussed the fact that she didn't actually feel that she owed (sic) this money and it was that blood money."
Later (Day 3, page 56, lines 5 to 10) there was this exchange:
"Q. Therefore are you saying that when Rose Hill was purchased, you never made any agreement to make any contribution to the cost?
A. I agreed at all times, with [Madeline], that I would pay back the total loan not later than my death – not later and not necessarily earlier than my death. That was an absolute basic agreement between us, from which I never faltered and [Madeline] did ask me to pay earlier at times according to the mood and who she was consulting as a solicitor. But I don't think she ever asked me personally. In fact the last time she discussed it was at Browns, when she was perfectly happy with the agreement."
The judge's judgment
"Later, when she realised I had difficulties in getting rid of lodgers she agreed that the money could best be lent to me as a loan repayable without interest on my death or earlier."
"… it was intended that the loan would enable the mortgage [on Constantine Road] to be cleared and thus make it easier for [Dr Elithorn] to sell [Constantine Road] and thus to meet his half of the proposed contribution to the purchase price."
That was not an accurate description of the purpose of the £70,000 loan, which was to keep Abbey National at bay.
"… So far as [Madeline] is concerned, [Dr Elithorn] has a good point that I have not had the opportunity to hear from [Madeline] herself. I have to read her witness statement in that light. However, I am bound to say that in the context of the very large bundle of disclosed documents and [sic] many of which I have not referred as yet and to most of which I shall not refer, what is said in that statement is consistent with what is found there. …"
"71. In my judgment the oral evidence which I have heard from the Claimants is all of one piece. Similarly the documentary evidence, to some of which I have referred. The conclusions I form on the oral and documentary evidence are as follows. So far as the arrangements for the purchase of the property are concerned I am satisfied that an arrangement was made that [Madeline] and [Dr Elithorn] would buy the property with the object of it being perhaps a home for both of them, but certainly a home for the use of [Dr Elithorn]. The arrangement was that [Madeline] would provide all the money for the purchase, that the property would be put in joint names because [Madeline] understood that [Dr Elithorn] was shortly to sell the London property and from the proceeds of sale he would be able to pay her back. She did not know at that stage the extent of his finances or the mortgage on the London property.
72. I am satisfied that there was a conditional agreement to that effect, but in the course of time that no monies were ever paid at all by [Dr Elithorn] to [Madeline]. Prima facie, therefore, the property was held on a resulting trust, the primary claim made by the estate in this claim. If I am wrong on that, so far as there being constructive trust is concerned, it seems to me that that, in my judgment, looking at the judgment in Lloyds Bank v. Rossett and the passages from Lord Bridge to which I have referred, any terms of the constructive trust were that when the London property was sold [Madeline's] monies advanced for the purchase on behalf of [Dr Elithorn] were to be repaid. That, in fact, never happened. In fact [Madeline] made further loans to him which were eventually repaid without interest, but the conditional agreement was never met by [Dr Elithorn] at all and has not been met now."
Discussion and conclusion
"… [Madeline's] monies advanced for the purchase on behalf of [Dr Elithorn] were to be repaid. In fact that never happened. In fact [Madeline] made further loans to him which were eventually repaid without interest. …" (emphasis supplied)
The judge was in fact doubly wrong in saying that Madeline made further loans to Dr Elithorn. First, Madeline only made one other loan to Dr Elithorn. Secondly, that loan was made in August 1995, which preceded the purchase of Rose Hill. The judge had earlier misdescribed it as post-dating the purchase, and here he did so again: there is no dispute that it is this loan to which the judge was here inaccurately referring. The significance of what the judge said about it lies, however, in his "further", which underlines his acceptance that Madeline made Dr Elithorn a loan to enable him to contribute to the purchase of Rose Hill.
Lord Justice Wilson :
"33. [Dr Elithorn's] case is, as it appears, that there was some sort of an agreement between him and the deceased as to sharing the property. It is necessary for him to produce evidence to establish that."
Although his presentations to the judge, written and oral, were thoroughly discursive and although over the years he had made significantly inconsistent assertions, Dr Elithorn's case, by the date of the hearing, was far clearer than the judge's summary suggested: it was that, from the date of the purchase, he and Madeline had been joint and equal owners of the property in equity as well as jointly in law and that he had been subject to a contractual obligation to repay her £125,000 lent to him in order to enable him to purchase his share, the date of repayment having been subsequently extended by agreement to be no later than the date of his death. Such was the case which, in order to do justice to it, the judge should have ascribed to Dr Elithorn. Thereafter, at some point, the judge should have at any rate expressly considered the documentary evidence which most strongly favoured Dr Elithorn's version of the arrangement (as well, of course, as that which most strongly favoured the executors' version). But the judge referred only to one of the five documents which in my view most strongly indicate that the arrangement was indeed always one of equal beneficial ownership and loan. Such five documents are Mr Foster's note of the meeting on 4 April 1996, Dr Elithorn's handwritten acknowledgement of debt signed on 24 March 1997, Madeline's enclosure of it with her letter to Mr Young dated 8 February 1998, her letter to Mr Young dated 18 September 1998 and her letter to Dr Elithorn dated 13 August 1999 (this last being one of the seven letters which the judge read out in full, albeit without comment on it).
"The burden will therefore be on the person seeking to show that the parties did intend their beneficial interests to be different from their legal interests, and in what way."
Lord Justice Rix :
"71. In my judgment the oral evidence which I have heard from the Claimants is all of one piece. Similarly the documentary evidence, to some of which I have referred. The conclusions which I form on the oral and documentary evidence are as follows. So far as the arrangements for the purchase of the property are concerned I am satisfied that an arrangement was made that the deceased and the Defendant would buy the property with the object of it being perhaps a home for both of them, but certainly a home for the use of the Defendant. The arrangement was that the deceased would provide all the money for the purchase, that the property would be put in joint names because the deceased understood that the Defendant was shortly to sell the London property and from the proceeds of sale he would be able to pay her back. She did not know at that stage the extent of his finances or the mortgage on the London property.
72. I am satisfied that there was a conditional agreement to that effect, but in the course of time that no monies were ever paid at all by the Defendant to the deceased. Prima facie, therefore, the property was held on a resulting trust, the primary claim made by the estate in this claim…"
"9. It is the Claimants' case that both the deceased and the Defendant intended as at the time of purchase that their respective shares in the beneficial interest in the property would be determined by their actual contributions to the cost of purchase and it was a mutual expectation of the deceased and the Defendant at the material time that the Defendant would in fact make a contribution of up to half the cost within a very short time of completion of the purchase out of the proceeds of the sale of the London property."
"Our joint intention was that when the purchase of the property was completed the Defendant would provide a portion of the purchase money from the proceeds of another property then owned by him…For this reason the transfer of the property was made in our favour as tenants in common in unspecified shares…At no time since the purchase has the Defendant paid to me any sum whatsoever towards the price of the property or the furniture, nor has he provided any other consideration in respect thereof...I have since been advised that in the above circumstances a Declaration of Trust should have been obtained from the Defendant recording the fact that I was the sole owner of the property but I do not recall being advised of this at the time of the purchase…"
"58. Obviously I have to bear in mind that the deceased is not here to be cross-examined, but in the context of the many letters which I have seen dealing with their relationship after the property had been purchased, on the balance of probabilities, I accept that the facts stated in the statement are true. Where facts in that statement differ from evidence adduced by the Defendant, I do not accept his evidence."
"The defendant will argue that he and the late Madeline Ettlinger entered voluntarily into an agreement within which the couple would work together for the better understanding of the life work of the late Professor Ettlinger and the continued practice of the defendant's skills…
It is admitted that that at all times he has regarded the monies advanced to be a loan and due to be secured against his beneficial rights in any property in which they might be invested.
The bottom line of the defendants position is that he owns at least half the beneficial rights of 71 Rose Hill and that his only indebtedness to the estate is the monies loaned and up to 5% of his earnings…
It seems inalienable that the defendant owns at least half the beneficial rights in 71 Rose Hill and that in the light of the judgments sited in the bundle that Mrs Ettlinger abandoned all rights other than an interest in the defendant as an investment. For the purposes of negotiation it is accepted that the court might not go that far.
It seems more inalienable that I had reached a binding agreement that could only be altered by agreement with Madeline that with her agreement and in the in the event of my virtual imprisonment in London by my Fundamentalist lodger that I would continue to use the whole of the loan that I had been given to develop the practice and the business that we had agreed. In the event I was force[d] through the failure of trust rather than need to return the portion of the loan which represented the Mortgage repayment for 1 Constantine Rd."
The latter remarks appear to relate to the £70,000 lent in August 1995 to assist him to redeem his mortgage on Constantine Road.
"Namely that I had reached a binding agreement that could only be altered by agreement with Madeline and that with her agreement and in the event of my virtual imprisonment in London by my Fundamentalist lodger that I would continue to use the whole of the loan that I had been given to develop the practice and the business that we had agreed."
"It had, I should add at this point, been agreed for some time that…Madeleine would be the moneybags and that since Madeleine had no children and I had four and I would be abandoning my home in London, that half of our estate would, after Madeleine's death go to my children…It would seem, therefore, that up to and beyond the date we completed the transfer document Mrs Ettlinger intended to make us both beneficiaries in equal shares of the property and that at some later date she, for reasons known to herself, regretted that decision."
"…If I am wrong on that, so far as there being constructive trust is concerned, it seems to me that, in my judgment, looking at the judgment in Lloyds Bank v. Rossett and the passages from Lord Bridge to which I have referred, any terms of the constructive trust were that when the London property was sold the deceased's monies advanced for the purchase on behalf of the Defendant were to be repaid. That, in fact, never happened. In fact the deceased made further loans to him which were eventually repaid without interest, but the conditional agreement was never met by the Defendant at all and has not been met now."