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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Scott v Bridge & Ors [2020] EWHC 3116 (Ch) (25 November 2020) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2020/3116.html Cite as: [2020] EWHC 3116 (Ch) |
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BUSINESS AND PROPERTY COURTS IN BRISTOL
PROPERTY TRUSTS AND PROBATE LIST (ChD)
2 Redcliff Street, Bristol, BS1 6GR |
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B e f o r e :
(sitting as a Judge of the High Court)
____________________
Lorina Scott |
Claimant |
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- and - |
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(1) Melvin Bridge (2) Anita Bridge (3) Melvin Jesus Casas-Bridge |
Defendants |
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And between : |
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Melvin Jesus Casas-Bridge |
Part 20 Claimant |
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-and- |
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David Scott |
Part 20 Defendant |
____________________
Rawdon Crozier (instructed by Nalders LLP) for the Defendants and Part 20 Claimant
The Part 20 Defendant appeared in person
Hearing dates: 21-24 July 2020
____________________
Crown Copyright ©
Covid-19 Protocol: This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to BAILII on the date shown at 10:00 am.
HHJ Paul Matthews :
INTRODUCTION
Background in summary
Procedural history
Trial
Post-trial
THE PLEADED CASES IN OUTLINE
Claimant
First part 1 Southgate
Second part 13 Lacy Street
Third part payments to third defendant
Generally
Defendants
1 Southgate
13 Lacy Street
Payments to third defendant
Part 20 claim
Claim
Defence
Counterclaim
Reply and defence to counterclaim
FACTFINDING AND EVIDENCE
How judges find facts
The burden of proof
The standard of proof
Party-led evidence
Oral evidence
Reasons for judgment
Overall
Witnesses
THE MAIN CLAIMS
General
1 Southgate
The claimant's evidence
The second defendant's evidence
Charlotte Bridge's evidence
The third defendant's evidence
David Scott's evidence
Decision
13 Lacy Street
"Transfer Deed for signing by [the claimant] and [Zeus] where indicated between the pencil cross marks. These should be witnessed by an independent witness should add their own name, address and occupation and return it to us as soon as possible".
The claimant's evidence
"it emerged that none of the legal steps to transfer Lacy Street to me had been undertaken".
In cross-examination, however, she said that Charlotte had "sorted that out" for her, so that the property was transferred from her father's name to her own. She thought that David Lewis was there to put the house in her name. She intended later to pass it to her son David in her will, but at this stage she was only seeing Mr Lewis in order to have the property put into her own name. There was no discussion with David, Charlotte or Zeus before (as she thought) this was done. It was her own business, and nothing to do with them.
The third defendant's evidence
Charlotte Bridge's evidence
The second defendant's evidence
David Scott's evidence
Trial bundle documents
Decision
Transfers to the third defendant
The claimant's evidence
Charlotte Bridge's evidence
The third defendant's evidence
"would have made my mum's and my lives hell".
Zeus says that David had also opened credit cards in Zeus's name for his business and also for personal use.
David Scott's evidence
Documents in the bundle
"to consolidate his and Charlotte Scott's debt's. The debt's are personal to both and also related to David's Business" [sic].
The second engagement is by David and agrees to repay the claimant, also saying that
"These debt's [sic] are mostly related to my business Bubble and Bling".
It appears that each of the claimant and David has signed her or his name in an appropriate space in the document. It is not witnessed.
"I might have set accounts up in Charlotte's name, having lost my business and had to do an IVA rather than go bankrupt I am honest I would rather pay the debts back to be honest with you. That is what I had to do so sometimes if I had a credit check I had let Charlotte apply for it, I would apply for it in her name, it's that's that's why".
He was also asked about invoices in the name of Zeus, and David answered:
"Once again I've given you the reasons for that Sometimes I can't get credit 'cause I'm in an IVA so that's the only reason I will set an account up or he will have it set up for me in his name, that is all."
Decision
The law
"It is a transaction consisting of two contemporaneous acts, which at once complete the transaction, so that there is nothing more to be done by either party. The act done by the one is that he gives; the act done by the other is that he accepts. These contemporaneous acts being done, neither party has anything more to do."
"In order to make a valid gift, there must be perfect knowledge in the mind of the person making the gift of the extent of the beneficial interest intended to be conferred, and of which it is intended to divest oneself in making it."
This deals with both the donor's intention to give the thing, and knowledge of what that thing consists of. But these are subjectively and not objectively ascertained. As Blake J said in Meisels v Lichtman [2008] EWHC 661 (QB) (a case about charitable gifts to which I was also referred):
"71. Where there is a dispute it seems to me that it is the intentions of the donor nor that will be crucial, rather than the more familiar exercise of ascertaining the intentions of both parties in construing the agreement".
"where a person intends to make a gift and the donee receives the thing given, knows that he has got it and takes it, the fact that he says: 'well, I will only accept it as a loan, and you can have it back when you want it' does not prevented from being an effective gift. Of course, it does not turn it into a loan unless the donor says: 'very well, let it be a loan.' He could not force the donor to take it back, but the donor, having transferred it to him effectively and completely, intending to make a gift, and he so far from repudiating it having kept it, it seems to me that that is an effective gift "
Conclusions
1 Southgate
"A beneficiary of a trust is entitled to a continuing beneficial interest not merely in the trust property but in its traceable proceeds also, and his interest binds everyone who takes the property or its traceable proceeds except a bona fide purchaser for value without notice. In the present case the plaintiffs' beneficial interest plainly bound Mr Murphy, a trustee who wrongfully mixed the trust money with his own and whose every dealing with the money (including the payment of the premiums) was in breach of trust. It similarly binds his successors, the trustees of the children's settlement, who claim no beneficial interest of their own, and Mr Murphy's children, who are volunteers. They gave no value for what they received and derive their interest from Mr Murphy by way of gift" [at page 127].
[ ]
"Accordingly, I would state the basic rule as follows. Where a trustee wrongfully uses trust money to provide part of the cost of acquiring an asset, the beneficiary is entitled at his option either to claim a proportionate share of the asset or to enforce a lien upon it to secure his personal claim against the trustee for the amount of the misapplied money. [ ] Two observations are necessary at this point. [ ] Secondly, the beneficiary's right to claim a lien is available only against a wrongdoer and those deriving title under him otherwise than for value. It is not available against competing contributors who are innocent of any wrongdoing. [ ] As against the wrongdoer and his successors, the beneficiary is entitled to locate his contribution in any part of the mixture and to subordinate their claims to share in the mixture until his own contribution has been satisfied. This has the effect of giving the beneficiary a lien for his contribution if the mixture is deficient. Innocent contributors, however, must be treated equally inter se. Where the
beneficiary's claim is in competition with the claims of other innocent contributors, there is no basis upon which any of the claims can be subordinated to any of the others. Where the fund is deficient, the beneficiary is not entitled to enforce a lien for his contributions; all must share rateably in the fund. The primary rule in regard to a mixed fund, therefore, is that gains and losses are borne by the contributors rateably. The beneficiary's
right to elect instead to enforce a lien to obtain repayment is an exception to the primary rule, exercisable where the fund is deficient and the claim is made against the wrongdoer and those claiming through him" [at pages 131-32].
"It is to be observed that neither Lord Parker nor Lord Haldane [in Sinclair v Brougham [1914] AC 398] suggests that the equitable remedy extends to cover all cases where A becomes possessed of money belonging to B, a view which Lord Dunedin [in the same case] seemed inclined to accept if he did not actually do so. Lord Parker and Lord Haldane both predicate the existence of a right of property recognized by equity which depends upon there having existed at some stage a fiduciary relationship of some kind (though not necessarily a positive duty of trusteeship) sufficient to give rise to the equitable right of property. Exactly what relationships are sufficient to bring such an equitable right into existence for the purposes of the rule which we are considering is a matter which has not been precisely laid down. Certain relationships are clearly included, eg, trustee (actual or constructive) and cestui que trust; and 'fiduciary' relationships such as that of principal and agent."
13 Lacy Street
"Introductory
1. In this Schedule, references to rectification, in relation to alteration of the register, are to alteration which
(a) involves the correction of a mistake, and
(b) prejudicially affects the title of a registered proprietor.
Alteration pursuant to a court order
2.(1) The court may make an order for alteration of the register for the purpose of
(a) correcting a mistake,
(b) bringing the register up to date, or
(c) giving effect to any estate, right or interest excepted from the effect of registration.
(2) An order under this paragraph has effect when served on the registrar to impose a duty on him to give effect to it.
3.(1) This paragraph applies to the power under paragraph 2, so far as relating to rectification.
(2) If alteration affects the title of the proprietor of a registered estate in land, no order may be made under paragraph 2 without the proprietor's consent in relation to land in his possession unless
(a) he has by fraud or lack of proper care caused or substantially contributed to the mistake, or
(b) it would for any other reason be unjust for the alteration not to be made.
(3) If in any proceedings the court has power to make an order under paragraph 2, it must do so, unless there are exceptional circumstances which justify its not doing so.
[ ]"
" 'Mistake' is not itself specifically defined in the 2002 Act, but it is suggested that there will be a mistake whenever the Registrar (i) makes an entry in the register that he would not have made; (ii) makes an entry in the register that he would not have made in the form in which it was made; (iii) fails to make an entry in the register which he would otherwise have made; or (iv) deletes an entry which he would not have deleted; had he known the true state of affairs at the time of the entry or deletion. The mistake may consist of a mistaken entry in the register or the mistaken omission of an entry which should have been made. Whether an entry in the register is mistaken depends upon its effect at the time of registration . "
Money transfers to Zeus
"The bank's submission in summary is that where money is paid either (i) pursuant to a contract which is void, or (ii) under a fundamental mistake of fact or law, the money is impressed in the hands of the payee with a trust in favour of the payer. The payee is then accountable to the payer not only for the principal but for the entire benefit which he has obtained from his possession of the principal in the intervening period" (see at page 737 of the report).
"For all of these reasons I conclude, in agreement with my noble and learned friend, that there is no basis for holding that a resulting trust arises in cases where money has been paid under a contract which is ultra vires and therefore void ab initio."
And (later on the same page):
"However, if no resulting trust arises, it also follows that the payer in a case such as the present cannot achieve priority over the payee's general creditors in the event of his insolvency a conclusion which appears to me to be just."
"the bank is not entitled to proceed by way of an equitable proprietary claim and that the recipient of a sum of money paid under an ultra vires contract should not be regarded as owing the duty of a trustee or a fiduciary to the payer of that sum".
"The argument for a resulting trust was said to be supported by the case of a thief who steals a bag of coins. At law those coins remain traceable only so long as they are kept separate: as soon as they are mixed with other coins or paid into a mixed bank account they cease to be traceable at law. Can it really be the case, it is asked, that in such circumstances the thief cannot be required to disgorge the property which, in equity, represents the stolen coins? Moneys can only be traced in equity if there has been at some stage a breach of fiduciary duty, ie if either before the theft there was an equitable proprietary interest (eg the coins were stolen trust moneys) or such interest arises under a resulting trust at the time of the theft or the mixing of the moneys. Therefore, it is said, a resulting trust must arise either at the time of the theft or when the moneys are subsequently mixed. Unless this is the law, there will be no right to recover the assets representing the stolen moneys once the moneys have become mixed. I agree that the stolen moneys are traceable in equity. But the proprietary interest which equity is enforcing in such circumstances arises under a constructive, not a resulting, trust. Although it is difficult to find clear authority for the proposition, when property is obtained by fraud equity imposes a constructive trust on the fraudulent recipient: the property is recoverable and traceable in equity. Thus, an infant who has obtained property by fraud is bound in equity to restore it: Stocks v Wilson [1913] 2 KB 235, 244; R Leslie Ltd v Sheill [1914] 3 KB 607. Moneys stolen from a bank account can be traced in equity: Bankers Trust Co v Shapira [1980] 1 WLR 1274, 1282C-E: see also McCormick v Grogan (1869) LR 4 HL 82, 97."
"110. I do not find that an easy passage. As to the first paragraph, a thief ordinarily acquires no property in what he steals and cannot give a title to it even to a good faith purchaser: both the thief and the purchaser are vulnerable to claims by the true owner to recover his property. If the thief has no title in the property, I cannot see how he can become a trustee of it for the true owner: the owner retains the legal and beneficial title. If the thief mixes stolen money with other money in a bank account, the common law cannot trace into it. Equity has traditionally been regarded as similarly incompetent unless it could first identify a relevant fiduciary relationship, but in many cases of theft there will be none. The fact that, traditionally, equity can only trace into a mixed bank account if that precondition is first satisfied provides an unsatisfactory justification for any conclusion that the stolen money must necessarily be trust money so as to enable the precondition to be satisfied. It is either trust money or it is not. If it is not, it is not legitimate artificially to change its character so as to bring it within the supposed limits of equity's powers to trace: the answer is to develop those powers so as to meet the special problems raised by stolen money.
111. As to Lord Browne-Wilkinson's more general proposition in the second paragraph that property obtained by fraud is automatically held by the recipient on a constructive trust for the person defrauded, I respectfully regard the authorities he cites as providing less than full support for it. At any rate, they do not in my view support the proposition that property transferred under a voidable contract induced by fraud will immediately (and prior to any rescission) be held on trust for the transferor." [The judge then continued to discuss the cases relied on in detail.]
(In passing, I note that the first part of paragraph 110 was cited with approval by Arden LJ (with whom Buxton and Clarke LJJ agreed) in Sinclair Investment Holdings SA v Versailles Trade Finance Ltd [2006] 1 BCLC 60, [43].)
"We speak of money at the bank, and of money passing into and out of a bank account. But of course the account holder has no money at the bank. Money paid into a bank account belongs legally and beneficially to the bank and not to the account holder. The bank gives value for it, and it is accordingly not usually possible to make the money itself the subject of an adverse claim. Instead a claimant normally sues the account holder rather than the bank and lays claim to the proceeds of the money in his hands. These consist of the debt or part of the debt due to him from the bank. We speak of tracing money into and out of the account, but there is no money in the account. There is merely a single debt of an amount equal to the final balance standing to the credit of the account holder. No money passes from paying bank to receiving bank or through the clearing system (where the money flows may be in the opposite direction). There is simply a series of debits and credits which are causally and transactionally linked."
"The transmission of a claimant's property rights from one asset to its traceable proceeds is part of our law of property, not of the law of unjust enrichment. There is no 'unjust factor' to justify restitution (unless 'want of title' be one, which makes the point). The claimant succeeds if at all by virtue of his own title, not to reverse unjust enrichment. Property rights are determined by fixed rules and settled principles. They are not discretionary. They do not depend upon ideas of what is 'fair, just and reasonable'. Such concepts, which in reality mask decisions of legal policy, have no place in the law of property".
Similarly, Lord Hoffmann, agreeing, said (at 116):
"This is not based upon unjust enrichment except in the most trivial sense of that expression. It is, as my noble and learned friend says, a vindication of proprietary right".
THE PART 20 CLAIM AND COUNTERCLAIM
The Part 20 claim
"42. To the extent that the Claimant is seeking repayment of monies paid to the Third Defendant, the Third Defendant is entitled to and claims an indemnity from you on the grounds that you have received certain of the monies paid by the claimant to the Third Defendant.
[ ]
50. If and to the extent the Third Defendant is found liable to the Claimant the Third Defendant is entitled to an indemnity in respect of all and any claims received and used by the Third Party."
The third defendant's evidence
Charlotte Bridge's evidence
David Scott's evidence
The claimant's evidence
Documents in the bundle
"Very sad about all that has happened, but you need to understand that once any doubt about honesty occurs I have to protect myself, there is too much at stake. Messages I have seen are too incriminating, postage costs going back to 2016 are too high and have Hermes deliveries to Hayley which I do not understand!"
Decision
Law
"(1) Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise)."
And section 6 relevantly provides:
"(1) A person is liable in respect of any damage for the purposes of this Act if the person who suffered it is entitled to recover compensation from him in respect of the damage (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise)."
Application of law to facts
David Scott's counterclaim to the Part 20 claim
CONCLUSION