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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Oates v Stimson & Anor [2006] EWCA Civ 548 (16 May 2006) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2006/548.html Cite as: [2006] EWCA Civ 548

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM SWINDON COUNTY COURT
MR RECORDER A. R. MALCOLM QC

		Royal Courts of Justice Strand, London, WC2A 2LL
		16/05/2006

Sir Christopher Staughton :

1. These two young men bought a house called 39 St Christopher's Road, Farnborough in Hampshire on 3^rd March 1995. The price was £54,250. They obtained a mortgage loan of £56,983 from the Royal Bank of Scotland. They both lived in the house, and it was registered in their names. Initially they paid the periodical amounts due to the Bank in equal shares. Then in 1996 or 1997 Mr Oates was made redundant. He is said to have failed to pay his share of the mortgage contribution on four occasions.
2. In September 1997 there is said to have been an agreement between them. Mr Stimson would take over full responsibility for the mortgage repayments; Mr Oates would move out of the house and leave Mr Stimson in occupation. In return for Mr Oates's share of the house, Mr Stimson would pay him £2500. He did not have the money immediately, and it was agreed that he would pay it when he was able to; but if Mr Oates needed the money immediately Mr Stimson would take out a loan to pay him. In return for the £2,500, Mr Oates agreed that when he received the money he would transfer the whole of his interest in the house to Mr Stimson.
3. That agreement was denied by Mr Oates. But at the trial Mr Recorder Malcolm QC found Mr Stimson to be an honest witness. There was another witness, a Mr Kirk, but his evidence may have been open to question. However, the Recorder accepted the evidence of Mr Stimson. It did not appear to be challenged before this court, and in any event I would not regard it as now open to challenge. And on any view Mr Oates did move out of the house, not to return.
4. There was, however, Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Subsection (1) provides:

(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.

That subsection superseded section 40 of the Law of Property Act 1925. But not everyone knows that, and evidently not Mr Stimson. However, he now relies on subsection (5):

…nothing in this section affects the creation or operation of resulting, implied or constructive trusts.

Counsel for Mr Stimson described his case as proprietary estoppel or constructive trust (see Yaxley v. Gotts (2000) Ch 162).

5. No action was taken about the payment of £2,500 or any other change between Mr Stimson and Mr Oates. Mr Oates moved out of the house in October 1997, and so did Mr Stimson. He let the premises to Lynda Jeanette Hobbs, who had a young child, for a period of 12 months. A tenancy agreement was drawn up, and it was signed by both Mr Stimson and Mr Oates. Then in April 1998 Mr Stimson moved back into the house. A relationship had developed between him and Miss Hobbs, and a second child was born.
6. From 1997 to 2003 Mr Stimson paid all the mortgage payments that were required, and all other outgoings on the premises. He or his father paid for repair of a boundary fence (£350), installed a gas-fired central heating system (£2,200), refurbished the bathroom and kitchen (£1,700), erected a timber garden shed (£250), carried out repair works to the utility room floor (£250), and redecorated the hallway, opened up the staircase area, and redecorated the whole of the premises internally.
7. Mr Stimson sold the premises, by agreement of the Court, at a price of £160,000. The net proceeds of sale were £100,530.94. Presumably the balance was the remainder of the money owed on the mortgage, or was otherwise costs incurred in selling the house. With that sum Mr Stimson bought a house at 7 Waymen Road, Farnborough, in the names of himself and Miss Lynda Jeanette Hobbs, at a price of £192,000.
8. Meanwhile Mr Stimson says that in the latter half of 2000 he was in a position to pay Mr Oates £2,500. In answer for the first time Mr Oates did not accept that they had an agreement; he instructed solicitors at that time, but then the matter dragged on with nothing having been achieved. Proceedings were started in August 2002. After some vicissitudes the action was decided by Mr Recorder Malcolm QC at Swindon County Court. He ordered that –

1. The declaration requested by Mr Stimson that "the parties entered into the agreement in the terms set out" granted,

2. The declaration that the Defendant's net proceeds of 39 Christopher Road, Farnborough, belonged to the Defendant (save for £2500), is granted.

3. There be no order as to costs.

4. The Part 20 claim is dismissed.

The counterclaim of Mr Oates was that he was entitled to a 26.18% share in 7 Wayman Road, with an approximate value of £52,360. That was dismissed.

9. The Recorder, as I have said, accepted that there was an oral agreement such as Mr Stimson maintained. Referring to Mr Oates' account in evidence, he said:

One significant matter is that in the course of his evidence he stated that at the time of the discussions his concern was that he should have in effect been relieved of his commitments so far as the mortgage was concerned and did not expect, or want, anything for himself.

And later –

Thereafter he never visited or returned to the property or appeared to take any interest in it whatsoever.

10. The Recorder observed that, although the valuation had risen to £18,000 (sc. by the time Mr Stimson offered Mr Oates £2,500), it would not be an unreal offer as the price which Mr Stimson would have to pay in order to buy out the share of Mr Oates. That was not challenged on the appeal.
11. The Recorder found that Mr Stimson acted to his detriment. "He took on payments of the endowment mortgage. He took on responsibilities for the outgoings. He paid the insurance payments which were required to cover the capital sum for the endowment mortgage. He also paid for numerous improvements and repairs to the house. It might be said that taking on the endowment mortgage at the time when the market may be rising is not to somebody's detriment, but by taking on responsibilities they are taking on a burden which if, with the vagaries of the housing market, the prices begin to fall, and if in due course an endowment mortgage does not meet the capital sum, it can indeed be a heavy burden for somebody who is taking on the responsibilities for the mortgage."
12. I agree with that assessment. Mr Stimson took on responsibilities, amongst other things his partner and two children. Mr Oates was more concerned with getting rid of the responsibility such as he had. That is not in any way a matter of reproach to him. He may have suffered from misfortunes which were not his fault. But it is not a reason for striving to support his claim, much later, to recover over £50,000 from Mr Stimson.
13. Mr Templeman for Mr Oates referred us to passages in Snell's Equity (31^st edition) for the proposition that –

"the relief granted by the court must be proportionate to the detriment suffered"

(Proprietary Estoppel, 10-16, 10-21, 10-22, 10-23). If there must be a search for the minimum equity to do justice, there is also an obligation to take into account all relevant circumstances including the conduct of the parties. I would agree that Mr Oates should have the £2500 that he bargained for, and otherwise should surrender what he agreed to leave to Mr Stimson.

Lord Justice Auld:

14. I agree, for the reasons given by the Recorder and endorsed by Sir Christopher Staughton, that Mr Stimson was entitled to the declarations granted by the Recorder.
15. In my view, it was clearly open to the Recorder, on the evidence before him, to conclude that Mr Oates's conduct, in reliance upon which Mr Stimson acted to his detriment and/or changed his position, gave rise to a constructive trust in favour of Mr Stimson rendering it unconscionable not to permit him to enforce the oral agreement for sale of 39 St Christopher Road, Farnborough. Such a finding of constructive trust and its consequence fell squarely within the principle established by the observations of Lord Bridge of Harwich, speaking for their Lordships, in Lloyds Bank Plc v Rosset [1991] 1 AC 107, at 132, and the ruling of this Court in Yaxley v Gotts & Anor [2000] Ch 163.
16. Accordingly, I too would dismiss the appeal.

Lord Justice Keene:

17. I agree. I have also had the advantage of reading the judgment of Auld LJ in draft and I agree too with the reasons he gives for dismissing this appeal.