Lowson v Coombes [1998] EWCA Civ 1849 (26 November 1998)

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Cite as: [1999] Fam Law 91, [1998] EWCA Civ 1849, [1999] Ch 373, [1999] 1 FLR 799, [1999] 2 WLR 720, [1999] 2 FCR 731

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JISCBAILII_CASE_TRUSTS

IN THE SUPREME COURT OF JUDICATURE CCRTF 98/0112/2
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE DARTFORD COUNTY COURT
(His Honour Judge Russell Vick)
Royal Courts of Justice
Strand, London WC2

Thursday, 26th November 1998


B e f o r e :

LORD JUSTICE NOURSE
LORD JUSTICE HENRY and
LORD JUSTICE ROBERT WALKER

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DOUGLAS HUNTER LOWSON Plaintiff/Appellant

-v-

REBECCA CAROLINE COOMBES Defendant/Respondent

--------------------


Computer Aided Transcript of the Palantype Notes of
Smith Bernal Reporting Limited
180 Fleet Street London EC4A 2HG
Tel: 0171 421 4040 Fax: 0171 831 8838
(Official Shorthand Writers to the Court)

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MR D READE (instructed by Messrs Watts & Leeding, London SE9) appeared on behalf of the Appellant Plaintiff.
MR A SHORT (instructed by Messrs Howarth Scott, Bexleyheath, Kent) appeared on behalf of the Respondent Defendant.

--------------------


J U D G M E N T
(As Approved by the Court)

Crown Copyright
Thursday, 26th November 1998


LORD JUSTICE NOURSE: This is a dispute between an unmarried couple as to the beneficial ownership of a house in which they formerly lived together. The appeal has made it necessary for us to review the decisions of this court in Tinker v. Tinker [1970] P. 136 and of Sir Anthony Plowman V-C in Cantor v. Cox (1975) 239 EG 121 in the light of the decision of the House of Lords in Tinsley v. Milligan [1994] 1 AC 340.

The man, the plaintiff in the action, is Douglas Hunter Lowson, who was born on 22nd August 1916 and is now aged 82. The woman, the defendant in the action, is Rebecca Caroline Coombes, who was born on 9th January 1919 and will be 80 in the new year. They met in 1973 and began a relationship together. Each of them was married and living in rented accommodation. The defendant had separated from her husband some five years before and was living in a one-roomed bed-sit in Blackheath. The plaintiff lived in Peckham. His wife suffered from a psychiatric condition and was from time to time in hospital, often for extended periods.

In 1980, the plaintiff being then about 64 and the defendant 61, they purchased a flat at 126 Burnt Ash Hill, Lee, London SE12 for £5,500, which was provided as to £3,000 by the plaintiff and as to £2,500 by the defendant. It was conveyed into the sole name of the defendant. The parties did not intend to live together at that time, but as events turned out the plaintiff would visit the defendant, who occupied the flat, and stay over from time to time. In 1981 the flat was sold and late that year or early in 1982 the parties travelled to Spain and agreed to purchase a villa which had yet to be built. It was after the move to Spain that they started to live together. However, the Spanish venture proved a disaster and the parties pulled out of the purchase at a loss. By the autumn of 1982 they had both returned to England. In June 1983 they purchased 29 Heron Way, Lower Stoke, Rochester, which was again conveyed into the sole name of the defendant. That property was sold in 1989. In its place was purchased 1 Queenswood Road, Blackfen, Sidcup, which once again was conveyed into the sole name of the defendant. It is with that property that this action is concerned.

In December 1991 the parties separated and the plaintiff left 1 Queenswood Road and went to live with one of his grown up sons. The defendant has stayed on at 1 Queenswood Road, which at the time of the trial had a net value of £60/61,000. At some time after the separation the defendant instructed solicitors to prepare a will for her leaving half her net estate to the plaintiff on her death. However, it was never executed and the draft was later destroyed. The defendant's husband died in about 1994. The plaintiff's wife died at some time towards the end of 1993.

Before that, on 23rd July 1993, the plaintiff had started this action by a writ issued in the Chancery Division claiming a declaration that 1 Queenswood Road was held by the defendant upon trust for sale for the plaintiff and defendant in equal shares, together with consequential relief, including an order for the sale of the property. The action was later transferred to the Dartford County Court. It came on for trial at Medway County Court before his Honour Judge Russell Vick QC who, on 4th December 1997, dismissed it.

In his careful reserved judgment the judge made the following important findings. First:
"It is ... common ground that on the purchase of 126 it was conveyed into the sole name of the Defendant at her suggestion. This was because she pointed out that if it were in joint names and the Plaintiff should die, his wife would have a claim on the property and the Defendant could be homeless."

Later he said:

"The evidence discloses a common intention to purchase the original property (126) in, as I find, more or less equal shares and because of a potential claim by the Plaintiff's wife in the event that the Plaintiff died it was conveyed into the sole name of the Defendant and all subsequent conveyancing followed that decision. But for that fact I am satisfied that the properties would have been in joint names throughout and this litigation would not have been necessary save perhaps for the division of proceeds of sale."

Later in the same paragraph the judge said:

"The purpose of the several conveyances to the Defendant was to protect the Plaintiff against any claim by his wife in her own life time or, in the event of his death, the Defendant against any claim by the wife against his estate."

At the end of his judgment the judge said that, if his decision was wrong in law:
"... I would hold, taking into account the criteria in s. 15 of the [Trusts of Land and Appointment of Trustees Act 1996], that the property 1 Queenswood Road is held on trust for sale by the Defendant in equal shares with the Plaintiff and order a sale."



Having referred to Tinker v. Tinker and Cantor v. Cox , the judge expressed his decision thus:
"I find in this case, following Tinker, that although there was the eventual intention to cohabit and the initial purchase was seen by the parties as a joint venture, the Plaintiff, who is a shrewd and honest person, realised that the Defendant's advice was sound and that a conveyance in the Defendant's sole name would protect them both. I see no distinction between the present case and the facts in Tinker save that in this case there was no intention to put the property out of the reach of creditors only the Plaintiff's wife. It follows therefore that the claim fails and must be dismissed."

Mr Reade, for the plaintiff, submits that the judge's decision was wrong in law.

Before turning to the authorities, I think it necessary to determine exactly what the judge found. Mr Short, for the defendant, submits that he found that, because it was the common intention that each property should be put out of the reach of the plaintiff's wife and because the plaintiff was shrewd and honest, he must have intended that each property should belong beneficially to the defendant alone since that was the only honest intention he could have had. While that was the construction which the judge felt obliged by the authorities to put upon the intention of the parties, it was not his finding as to their actual intention. What he found was that the evidence disclosed a common intention to purchase the original property (and therefore the subsequent properties) in more or less equal shares and that, had it not been for the potential claim by the plaintiff's wife, the properties would have been in joint names throughout. In other words, the judge found that the parties' actual intention was that they should be joint beneficial owners of the properties.

I should add this. The case was not pleaded as one of illegality and, no doubt for that reason, Tinsley v. Milligan was not cited to the judge. Moreover, Mr Short has satisfied me that the judge did not treat it as a case of illegality. However, his finding as to the purpose of putting the properties into the sole name of the defendant has made it one of illegality by reason of section 37 of the Matrimonial Causes Act 1973. Shortly stated, subsection (2)(b) of that section provides that if the court is satisfied that one party to a marriage has, with the intention of defeating the other's claim to financial relief, made a reviewable disposition, then, subject to exceptions, it may make an order setting aside the disposition. That power can be exercised however many years beforehand the disposition was made. The disposition is therefore different from one made to protect the property disposed of against the disponor's creditors generally. Notwithstanding Mr Short's submissions to the contrary, I am satisfied that a disposition, such as the conveyances in the present case, whose purpose is to prevent the other party to the marriage from being able to look to the asset disposed of in any future financial proceedings and, in the process, from seeking an order under section 37(2)(b) of the 1973 Act is one made with an illegal purpose.

In Tinker v. Tinker a husband bought a garage business in Cornwall and found a house nearby for his family. He decided to buy the house in his wife's name so that, if his garage business was not a success, his creditors would not be able to take it. Shortly after the purchase the marriage broke up and the husband sought to recover the house from the wife. This court held that he was unable to do so. The factual basis on which the registrar had dismissed the wife's claim was stated by Lord Denning MR [1970] P. 136, 140F:
"He found that the husband was an honest business man intending and able to honour his financial commitments; that he intended this house to belong to him beneficially; and accordingly that the wife held the house in trust for her husband absolutely."

At p. 140H, the Master of the Rolls read from the notes of the husband's evidence:
"I was advised that should the business fail the house would be taken as part of the assets of the business. Recommended therefore house should be put in wife's name. This was explained to my wife by Mr Chisholm [the solicitor] in his office."



Lord Denning expressed his decision at p. 141F:
"Accepting that in the present case the defendant was honest - he acted, he said, on the advice of his solicitor - nevertheless I do not think he can claim that the house belongs to him. The solicitor did not give evidence. But the only proper advice that he could give was:

´in order to avoid the house being taken by your creditors, you can put it into your wife's name: but remember that, if you do, it is your wife's and you cannot go back on it.'

But whether the solicitor gave that advice or not, I am quite clear that the husband cannot have it both ways. So he is on the horns of a dilemma. He cannot say that the house is his own and, at one and the same time, say that it is his wife's. As against his wife, he wants to say that it belongs to him. As against his creditors, that it belongs to her. That simply will not do. Either it was conveyed to her for her own use absolutely: or it was conveyed to her as trustee for her husband. It must be one or the other. The presumption is that it was conveyed to her for her own use: and he does not rebut that presumption by saying that he only did it to defeat his creditors. I think it belongs to her."



Salmon LJ said, at p. 142B-C:

"The burden of displacing the presumption of advancement is therefore on the husband. This burden can in many cases be displaced without much effort. It seems to me, however, that in this case the husband's evidence, far from displacing the presumption, has done much to reinforce it."

Having referred to the husband's evidence as to the advice given by the solicitor and having pointed out that there would have been nothing wrong in the husband's putting the property into his wife's name in order to protect it from his creditors, Salmon LJ continued:
"It seems to me to follow from the registrar's finding that he was an honest man that the husband must have intended that the house should belong to his wife. That is why I say that his evidence strengthens the presumption of advancement. As far as I can see, the only possible alternative to what I have just described would be the husband dishonestly putting the house in his wife's name with the intention of himself having the beneficial interest in it, and also with the intention, when he failed in business, to go to his creditors and say quite untruthfully and dishonestly:

´I have no interest in this house. You can look at the documents, and they are plain enough to show that I have none.'

The registrar negatived that dishonest frame of mind, and certainly this court would not interfere with that finding."

Cross LJ agreed with both judgments.



Cantor v. Cox was, like the present case, a dispute about the beneficial ownership of a house in which an unmarried couple had formerly lived together. It had been purchased in the sole name of the woman. The executrix of the will of the woman claimed possession of the house, in which the man was still living. He counterclaimed for a declaration that he was beneficially entitled to it. The brief report (1975) 239 EG 121, 122-3, records Sir Anthony Plowman V-C's judgment thus:
"Here the legal estate was in the testatrix, and the defendant came to the court seeking equitable relief. The equitable presumption of a resulting trust which arose where the purchase-money was provided by someone other than the person taking the legal estate was always rebuttable by evidence of actual intention. The evidence in this case was perfectly plain. The defendant put the house into the name of the testatrix in order to be out of reach of his creditors."

Having referred to the defendant's evidence that he did not intend to give the testatrix the house, the report continues:
"In his (Plowman V-C's) judgment, that evidence was enough to rebut the presumption of a resulting trust which might otherwise have arisen in the defendant's favour, assuming, as he (his Lordship) did for the moment, that he provided the whole of the purchase-money. To apply what Lord Denning said in the analogous case of Tinker v. Tinker ..., the only way consistent with honesty that the defendant could have ensured that the house would not be available for his creditors was to give it - and that meant give it beneficially - to the testatrix. He could not be heard in court to allege a dishonest motive, for it was axiomatic that he who came to equity must come with clean hands. And, in circumstances such as the present, Lord Eldon once said: ´Let the estate lie where it falls.' ... It followed that the plaintiff was entitled to succeed in this action on the strength of the legal estate."

The reference to Lord Eldon's dictum was to what he said in Muckleston v. Brown (1801) 6 Ves. 52, 68-9.

In Tinsley v. Milligan [1994] 1 AC 340 it was held by a majority of the House of Lords that where, in order to achieve an illegal purpose, property is transferred by one person into the name of another, being persons between whom the presumption of advancement does not apply, the transferor can recover the property, on the ground that he is not forced to rely on the illegality but only on the resulting trust that arose in his favour on the transfer. In all material respects the present case is on all fours with that decision. In order to achieve the illegal purpose of putting the properties out of the reach of the plaintiff's wife, they were conveyed into the sole name of the defendant. The plaintiff and the defendant, being an unmarried couple, were persons between whom the presumption of advancement did not apply. Accordingly, if the judge's finding as to the parties' actual intention is put on one side, the defendant held each property on trust to give effect to beneficial interests therein corresponding to the parties' respective contributions to its purchase price, which the judge found were made in equal shares. In other words, the defendant held one half of the beneficial interest in each property on a resulting trust for the plaintiff.

In Tinsley v Milligan the leading speech for the majority was given by Lord Browne-Wilkinson. At p. 372F, in considering the authorities dealing with the position in equity where A transferred property to B for an illegal purpose, his Lordship read from Lord Eldon's judgment in Muckleston v. Brown ("Let the estate lie where it falls"), the principle being that equity will not aid a plaintiff who has transferred property to another for an illegal purpose. He then considered later decisions and said, at p. 374E:
"It is against this background that one has to assess the more recent law. Although in the cases decided during the last 100 years there are frequent references to Lord Eldon's wide principle, with one exception ( Cantor v. Cox ...) none of the English decisions are decided by simply applying that principle. They are all cases where the unsuccessful party was held to be precluded from leading evidence of an illegal situation in order to rebut the presumption of advancement. Lord Eldon's rule would have provided a complete answer whether the transfer was made to a wife or child (where the presumption of advancement would apply) or to a stranger. Yet with one exception none of the cases in this century has been decided on that simple basis.

The majority of cases have been those in which the presumption of advancement applied: in those authorities the rule has been stated as being that a plaintiff cannot rely on evidence of his own illegality to rebut the presumption applicable in such cases that the plaintiff intended to make a gift of the property to the transferee."

Lord Browne-Wilkinson then referred to a number of cases in which the presumption of advancement had applied, including Tinker v. Tinker . He said that in each case the rule was stated to be that the plaintiff could not recover because he had to rely on the illegality to rebut the presumption.

In my view the effect of the authorities, as they now stand, on the present case is as follows. Tinker v. Tinker was recognised by both Lord Denning and Salmon LJ as being a case where the presumption of advancement applied. The husband was seeking to rebut the presumption. The essential ground on which it was held that he was unable to do so was that his evidence, so far from rebutting it, reinforced the presumption. However, the facts were very special, in that the house had been put into the wife's name because that course had been recommended by the solicitor as the means of achieving the legal purpose of putting it out of the reach of the husband's creditors. The husband must therefore have intended that the house should belong to the wife. That was not the position here. The parties did not act under legal advice and the purpose was illegal. The judge did not find, and it cannot reasonably be inferred, that the parties knew the purpose was illegal. They must be taken to have intended that they should take joint beneficial interests but that they thought it would be safer if the properties were put into the defendant's sole name. That is not inconsistent either with shrewdness or with honesty. On those grounds Tinker v. Tinker is distinguishable.

The judge's finding as to the actual intention of the parties is of assistance to the plaintiff only in so far as it serves further to distinguish the present case from Tinker v. Tinker . It does not go beyond that because the plaintiff cannot rely on the illegality in order to establish his beneficial interest in the properties. That, however, does not matter because Tinsley v. Milligan enables him to rely on the resulting trust.

In Cantor v. Cox , it appears that Sir Anthony Plowman V-C, relying on Tinker v. Tinker , may have attributed an artificial intention to the defendant in order to rebut the presumption of a resulting trust. Insofar as the basis of the decision was the principle that he who comes to equity must come with clean hands, I agree with Mr Reade that the decision cannot stand with Tinsley v. Milligan . Indeed, I am satisfied that Lord Browne-Wilkinson, in the passage I have read, intended to disapprove it on that basis. However, although the vice-chancellor's findings appear to have been unduly influenced by those made in Tinker v. Tinker , it may be possible to justify the decision on its own facts.

In the result, the case being one of illegality, I am of the opinion that the defendant holds one half of the beneficial interest in 1 Queenswood Road on a resulting trust for the plaintiff. Had there been no illegality, the judge's finding as to the actual intention of the parties would have led to the same result. Either way, the plaintiff would be entitled to the declaration he seeks and I would allow the appeal accordingly.
LORD JUSTICE HENRY: I agree.

LORD JUSTICE ROBERT WALKER: I agree that this appeal should be allowed for the reasons stated by Lord Justice Nourse. I add a few remarks of my own.

The older authorities in this area of the law must now be read in the light of the decision of the House of Lords in Tinsley v. Milligan [1994] 1 AC 340 and the decision of this court in Tribe v. Tribe [1996] Ch 107. Neither decision was cited to the judge, who referred to Tinker v. Tinker [1970] P. 136 (a case in which the presumption of advancement did apply) and to Cantor v. Cox (1975) 239 EG 121 (in which the Vice-Chancellor followed Tinker v. Tinker in a case between unmarried partners where that presumption did not apply).

It is important to see how the judge came to refer to Tinker v. Tinker and Cantor v. Cox . No issue as to illegality was raised on the pleadings in this case. There was a hotly contested issue as to whether Mr Lowson had made any contribution to the purchase of the original property, 126 Burnt Ash Hill, Lee. The judge resolved that issue in favour of Mr Lowson, whom he found to have contributed £3,000 to Mrs Coombes' £2,500. He said, at the beginning of paragraph 7 of his judgment, that the evidence disclosed a common intention to purchase the original property in more or less equal shares, but that because of a potential claim by Mr Lowson's wife the property was transferred into the sole name of Mrs Coombes. The judge referred to Tinker v. Tinker and Cantor v. Cox and then, in paragraph 8, referred to Mr Lowson as a "shrewd and honest person", so echoing the finding in Tinker v. Tinker that Mr Tinker was an honest man who took and followed the advice of a reputable solicitor. But there is no evidence that in this case Mr Lowson received any legal advice about what he and Mrs Coombes decided to do. Nor did the judge go back on the finding which he had already made of a common intention to purchase in more or less equal shares.

I think the judge was wrong to treat this case as indistinguishable from Tinker v. Tinker on the facts. As I read his findings, they were that Mr Lowson intended beneficial ownership in equal shares, but that he also wished to defeat a possible claim by his wife. He was an honest man but he did not, it seems, receive professional advice about the difference between legal and beneficial ownership or whether his dual purpose could indeed be achieved honestly. His purpose must be regarded as illegal, at any rate so far as it kept open the possibility of some measure of deception at some future time. There was no finding as to how far Mr Lowson thought through that purpose in any detail.

Tinsley v. Milligan is not an easy case to summarise because the House of Lords had to consider over two centuries of diverse case law, much of it difficult to reconcile. For present purposes I find it helpful to note three points of distinction which were raised in the course of argument and commented on (although in different ways) in their Lordships' speeches.

The first and clearest distinction is that between the court refusing to enforce a contract entered into for an illegal purpose and the court recognising that property may pass under a contract or other transaction even though it was entered into for an illegal purpose. That latter principle (which Lord Browne-Wilkinson referred to as the Bowmakers rule: see Bowmakers v. Barnet Instruments [1945] KB 65) was recognised by all their Lordships: see Lord Goff at p. 355, Lord Jauncey at p. 366 and Lord Browne-Wilkinson at pp. 369-70 (Lord Keith concurred in the whole of Lord Goff's speech and Lord Lowry agreed with Lord Jauncey and Lord Browne-Wilkinson on this point).

The second distinction is as to the significance of the plaintiff's claim being a claim to assert an equitable title against a defendant who is sole legal owner. Does that by itself bring the "clean hands" doctrine into operation, or is that doctrine now limited to those claiming an equitable remedy of a discretionary nature, such as specific performance? Lord Goff took the former view; he said (at p. 362):
"This equitable maxim is more broadly based than the Bowmakers rule. It is founded on the principle that he who has committed iniquity shall not have equity ..."

However, the majority of their Lordships preferred the narrower view. Lord Jauncey stated the point (in my respectful view, with great precision) at p. 366:
"The ultimate question in this appeal is, in my view, whether the respondent in claiming the existence of a resulting trust in her favour is seeking to enforce unperformed provisions of an unlawful transaction or whether she is simply relying on an equitable proprietary interest that she has already acquired under such a transaction."

Lord Lowry took a similar view (at p. 368). Lord Browne-Wilkinson (at p. 371) referred to the significance of the fusion of law and equity. He did so again at p. 375, saying that the principle stated in absolute terms by Lord Eldon in Muckleston v. Brown (1801) 6 Ves. 52, 68-9 had been departed from because:
"... the fusion of law and equity has led the courts to adopt a single rule (applicable both at law and in equity) as to the circumstances in which the court will enforce property interests acquired in pursuance of an illegal transaction, viz, the Bowmakers rule ..."

Lord Browne-Wilkinson cannot, I am sure, have intended to suggest that there are not still special principles applicable to the grant of equitable remedies of a discretionary nature, and the answer to the question posed by Lord Browne-Wilkinson at p. 370G may be that, on the facts of Ferret v. Hill (1854) 15 C.B. 207 occurring today, it would make a difference if there had been only an agreement for a lease, since the doctrine in Walsh v. Lonsdale (1882) 21 ChD 9 depends on the equitable remedy of specific performance being available. The enforcement of a resulting trust does not however in any way depend on the availability of specific performance.

The third point of distinction considered by the House of Lords was the significance of the presumption of advancement in those cases (especially between husband and wife or father and child) where it excludes the presumption of a resulting trust. On the view which Lord Goff took, nothing turns on that distinction (see at pp. 357-8). Lord Jauncey (at p. 366), Lord Lowry (at p. 367) and Lord Browne-Wilkinson (at p. 375) all recognised that the presumption of advancement would make a crucial difference. Lord Browne-Wilkinson said:
"A party to an illegality can recover by virtue of a legal or equitable property interest if, but only if, he can establish his title without relying on his own illegality. In cases where the presumption of advancement applies, the plaintiff is faced with the presumption of gift and therefore cannot claim under a resulting trust unless and until he has rebutted that presumption of gift: for those purposes the plaintiff does have to rely on the underlying illegality and therefore fails."

I agree with my Lord that Lord Browne-Wilkinson must have intended in his speech to disapprove Cantor v. Cox .

The importance attached by the majority to the presumption of advancement does to my mind create difficulties, because the presumption has been cogently criticised both as out of date in modern social and economic conditions (see especially the remarks of Lord Diplock in Pettitt v Pettitt [1970] AC 777, 824) and as being uncertain in its scope (especially in relation to transfers by wives and mothers). In Tribe v. Tribe Nourse LJ (at p. 118) commented that: "... there seems to be some perversity in its elevation to a decisive status in the context of illegality."

Millett LJ also questioned the sharp distinction between the significance of the presumption of advancement and the presumption of a resulting trust, although he came at the point from the other side, that is by expressing some doubt as to whether the presumption of a resulting trust would always rescue a plaintiff who had made a transfer for an illegal purpose and had then indulged in deception in carrying out that purpose: see especially the example given by Millett LJ at pp. 128-9. In Tribe v. Tribe both Nourse LJ and Millett LJ explored in depth the problems attaching to the locus poenitentiae (or interval for repentance) which had hardly been touched on in Tinsley v. Milligan because of the way the case was decided in the Court of Appeal and argued in the House of Lords.

I am very much alive to the difficulties which were debated in Tribe v. Tribe . But this is not a case where the presumption of advancement was applicable, nor did the case have any of the special features of the example mentioned by Millett LJ. Ultimately I think that this case turns on the judge's true findings of fact once they have been disentangled by his references to authority (which to my mind tended to obscure those findings). So far as this case turns on illegality Tinsley v. Milligan covers the case and is binding on this court. I would allow the appeal.

Order: appeal allowed with costs here and below, not to be enforced without leave of the court; interest declared accordingly (counsel to lodge an agreed form of declaration) and sale ordered.


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