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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Mortgage Corporation v Shaire & Ors [2000] EWHC Ch 452 (25 February 2000) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2000/452.html Cite as: [2000] 3 EGLR 131, [2000] BPIR 483, [2001] Ch 743, [2000] Fam Law 402, [2000] 2 FCR 222, [2000] EG 35, [2000] EWHC Ch 452, (2000) 80 P & CR 280, [2001] 3 WLR 639, [2000] 1 FLR 973, [2001] 4 All ER 364, [2000] WTLR 357

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Chancery Division

		25 February 2000

1. Giving judgment, Neuberger J said:

Introduction

2. This case concerns the extent and nature of the interests enjoyed by Mrs Marsha Shaire and the Mortgage Corporation in 74 Winchmore Hill Road, London N14, and what order should be made in relation to that house. It raises issues as to the basis upon which unmarried parties own beneficial interests in their home, or former home, and also the way in which the court should exercise its powers under the provisions of section 15 of the Trusts of Land and Appointment of Trustees Act 1996.

Basic Facts

3. In 1976 Mrs Shaire married Mr Marvin Shaire and they acquired 74 Winchmore Hill Road (the house) as their matrimonial home. It cost £ 18,750, which was mostly provided with the assistance of a mortgage in their joint names, in the sum of £ 15,000, from Abbey National Building Society (the Abbey National mortgage), for which they were jointly responsible. The balance consisted of a gift of £ 2,000 to both of them from Mr Shaire's parents and £ 1,750 that came from sources that, due to the passing of time, have become unclear.
4. From the entries at HM Land Registry (the registry) it appears that Mr Shaire was initially the sole proprietor (and that he may even have initially taken out the Abbey National mortgage alone), but it is clear that, on 20 January 1977, both Mr and Mrs Shaire were entered at the registry as joint proprietors.
5. A son, Adam, was born in 1977, but, unfortunately, the marriage did not prosper, and Mr Shaire left the house in 1980. He continued to provide Mrs Shaire with the funds to make the Abbey National mortgage repayments, as well as the other bills in relation to the house. After Adam started school in 1985, Mrs Shaire began work in a local chemist's shop, where she still works most mornings, and one afternoon a week.
6. In early 1986 Mrs Shaire started a relationship with a Mr David Fox. In May 1986 she and Mr Fox told Mr Shaire that Mr Fox had moved132 into the house and was living with Mrs Shaire. Mr Fox and Mr Shaire then discussed matters in the absence of Mrs Shaire. Following that, on 6 March 1987, a transfer of the house was executed by Mr and Mrs Shaire to Mrs Shaire and Mr Fox. This transfer (the 1987 transfer) was said to be made "pursuant to an agreement made in divorce proceedings between the parties in the Divorce Registry… and in consideration of £ 15,000". Clause 4 of the 1987 transfer provided:

The transferees declare that the survivor of them can give a valid receipt for capital money arising on a disposition of the land.

7. The reference to the Divorce Registry arose from the fact that Mrs Shaire had begun divorce proceedings against Mr Shaire, and, by an order made by consent in the Divorce Registry on 16 March 1987, it was ordered:

The respondent [ie Mr Shaire] had transferred all of his interests in the [house] to the petitioner [that is Mrs Shaire] and Mr David Barry Fox.

8. It was stated to be in consideration for this transfer, according to the order, that Mrs Shaire and Mr Fox paid to Mr Shaire the lump sum of £ 15,000. In consideration for this, the order recited, all claims for periodical payments, lump sum payments or property adjustment orders would be dismissed.
9. Partly in order to pay Mr Shaire the £ 15,000, Mrs Shaire and Mr Fox raised a sum of £ 43,750 from Chase Manhattan Bank (Chase), secured by way of a mortgage (the Chase mortgage) over the house. The offer of the Chase mortgage, dated 24 November 1986, recorded that the house had a value at that time of £ 87,500. The Chase mortgage was duly completed on 15 January 1987. Of the £ 43,750, £ 15,000 went to Mr Shaire pursuant to the agreement to which I have referred, £ 15,000 went to redeem the Abbey National mortgage, and it is unclear what happened to the £ 13,750.
10. Thereafter, Mr Fox and Mrs Shaire lived in the house together with Adam. She continued to earn comparatively modestly through her work at the chemist shop. Mr Fox appeared to earn money from his clothing import business. According to Mrs Shaire's evidence, the payments due under the Chase mortgage were all provided by Mr Fox, as were the household expenses and other outgoings. Mr Fox died of a heart attack on 25 May 1992. At least according to Mrs Shaire's evidence, it then came to light for the first time that he had forged her signature on a number of documents of which she had previously had no knowledge. They included two relevant documents. First, a further charge over the house, dated 25 August 1988, in favour of First National Bank (the FNB mortgage), registered on 6 September 1988 at the registry, which was to secure the sum of £ 52,439. Second, a charge on the house, dated 17 January 1990, in favour of the Mortgage Corporation (TMC) and registered on 27 February 1990 at the registry, which was to secure the sum of £ 118,000. The £ 118,000 raised by the latter mortgage (the TMC mortgage) was used to pay off the Chase mortgage and the FNB mortgage, the balance of the money being retained by Mr Fox.
11. Although Mrs Shaire accepts that she signed and knew about the Chase mortgage at the time it was granted, she denies any liability under, or knowledge of, the FNB mortgage or the TMC mortgage.
12. On 22 November 1994 TMC began proceedings in Barnet County Court for possession of the house. Exactly one year later, TMC began proceedings in the High Court for damages against two firms of solicitors (the solicitors). First, against Lewis Silkin, on the grounds that it acted for TMC in connection with the TMC mortgage and had stated:

All appropriate documentation would be properly executed and will be produced on completion.

13. Second, against a Mr Michael Blaxill, the solicitor who had acted for Mr Fox and, purportedly, for Mrs Shaire in connection with the TMC mortgage, for breach of warranty of authority.
14. The two actions have now been consolidated and now come before me. Although the two firms of solicitors have taken part in the proceedings so far through their counsel, Mr Patrick Lawrence, it has been agreed between the parties that I should deal with the issues between TMC and Mrs Shaire, and that the issues between TMC and the solicitors will be adjourned on the basis that either they will be compromised or a further hearing will take place. This is because both firms of solicitors accept liability in the light of decisions of the Court of Appeal: Zwebner v Mortgage Corp plc [1998] PNLR 769, in the case of Lewis Silkin, and Penn v Bristol & West Building Society [1997] 1 WLR 1356, in the case of Mr Blaxill. It is right to add that each solicitor has reserved his position in connection with taking the matter to the House of Lords.

Issues

1. Is Mrs Shaire bound by the TMC mortgage on the grounds of agency or estoppel?

2. What is Mrs Shaire's share of the house?

3. What is the consequence in terms of the interests that TMC and Mrs Shaire have in the house?

4. Ought I to make an order for the sale of the house, and, if not, what order ought I to make?

15. Issue 1 turns solely on the facts. Issue 2 turns on the application of principles to be derived from the application of a number of authorities to the facts of this case. Issue 3 is effectively agreed. Issue 4 turns on the effect of section 5 of the Trusts of Land and Appointment of Trustees Act 1996 (the 1996 Act). This appears to be the first time a court of record has had to consider this new provision. I will deal with the issues in that order.

Issue 1

16. This issue is whether Mrs Shaire is bound by the TMC mortgage. It is accepted by TMC that what appears to be Mrs Shaire's signature on the TMC mortgage, and, indeed, on the FNB mortgage, is a forgery. The overwhelming likelihood is that it was forged by, or with the authority of, Mr Fox. Accordingly, on the face of it, Mrs Shaire cannot be bound by the TMC mortgage, or, indeed, by the FNB mortgage. However, it is contended by TMC, supported by the solicitors, that, on the evidence, it should be concluded either that she authorised Mr Fox to enter into the TMC mortgage on her behalf, or that, by her conduct, she is estopped from denying that she is bound by the TMC mortgage.
17. The matters relied upon by Mr Timothy Harry, who appears on behalf of TMC, are, in summary form, as follows. First, Mrs Shaire said that she left all financial matters and dealings to Mr Fox. Second, Mrs Shaire signed, and accepts that she signed, together with Mr Fox, an application to TMC for the grant of the TMC mortgage. Third, Mrs Shaire has given inconsistent explanations of the circumstances in which she signed the TMC mortgage. Fourth, it is likely that Mrs Shaire knew what was going on, in terms of a new mortgage being granted over the house, before it was granted. For instance, TMC relies upon the fact that a valuation surveyor must have visited the house, and a doctor gave a medical report on Mrs Shaire to support an insurance policy on her life as further security for the loan from TMC. Fifth, Mrs Shaire must have been put on inquiry when, as she accepts she did, she learned that the payments to Chase in respect of the Chase mortgage were not being paid after 1990. Sixth, TMC sent a large number of letters in connection with the TMC mortgage, both before and after it was granted. These letters were sent to the house and Mrs Shaire must have seen at least some of them, and appreciated their effect. A few of these letters sent to the house in connection with the TMC mortgage were addressed to Mrs Shaire as well as to Mr Fox. Seventh, there was a telephone conversation, recorded in TMC's records, with Mrs Shaire in connection with the TMC mortgage, and another telephone conversation with her son Adam. Eighth, after the death of Mr Fox, correspondence between Mrs Shaire's solicitors and TMC suggests that Mrs Shaire must have known of the TMC mortgage prior to his death, contrary to what she now says.
18. Although it would be wrong to pretend that these points, particularly when taken together, are not without force, I am firmly of the view that the case against Mrs Shaire on this issue, whether put in terms of authority or estoppel, has not been made out. The very fact that Mr Fox forged her signature, or had her signature forged, on the TMC mortgage speaks for itself. This is particularly so given that Mrs Shaire was plainly prepared to sign some documents, such as the Chase mortgage133 and the application for the TMC mortgage. The fact that Mr Fox had to forge her name on the TMC mortgage, and, indeed, on the FNB mortgage, suggests that he knew that she would not be prepared to execute the TMC mortgage or, indeed, the FNB mortgage.
19. Then there is Mrs Shaire's evidence relating to the circumstances in which she signed the application for the TMC mortgage. She said that Mr Carle-Tide, a mortgage broker, called on Mr Fox at the house, and, after they had been talking for some time, Mr Fox called her and asked her to sign a document that was mostly hidden. She says that she signed it and then asked what it was. On being told that it was an application for a substantial further mortgage on the house, she said that she stated that she wanted nothing more to do with it and would not be prepared to enter into such a mortgage. As far as she was concerned, that was the end of the matter.
20. Albeit not without hesitation, I accept this evidence. Mr Carle-Tide was called, but there are two problems about his evidence. First, I regret to say that I found him a thoroughly unreliable witness of fact even in so far as his evidence went. Second, his recollection of the meeting was, even on his own evidence, very slender indeed. I have to say that I am left with the impression that he may well remember more than he suggests. If that is wrong and he does not remember anything much about the meeting, then there is no specific evidence to contradict Mrs Shaire. If he does remember more than he says, then I suspect that the reason that he has not given the full version of what he recollects is that it is not to his advantage. The most obvious reason for that is that something along the lines of what Mrs Shaire suggests did indeed happen, and yet he none the less went along with the execution of the TMC mortgage. In this connection, it is right to mention that it appears that Mr Carl-Tide did purport to witness signatures of Mrs Shaire on other documents, which signatures appear to have been clearly forged.
21. It also seems to me that Mrs Shaire's evidence is consistent with what she says about the fact that she actually signed the application for the TMC mortgage, but did not sign the TMC mortgage itself. Mrs Shaire's evidence is not by any means wholly improbable, and, while she was not a particularly good witness, there are no grounds, in my judgment, for not accepting her evidence.
22. It is unfair to make too much of the inconsistencies in her explanations. In an early affidavit she gives a somewhat different explanation, but I am satisfied that that was due to casualness and hurry when she swore that affidavit. Now that privilege has been waived, she has produced a copy of notes taken in 1993 of discussions (before the affidavit) with her solicitor, in which what she said appears to have been consistent with what she says now. Additionally, there is a letter sent by her solicitor shortly after Mr Fox died; this appears somewhat inconsistent with what she now says, but, to my mind, bearing in mind the distress that she must have suffered at the time, and the uncertainties and surprises that she was encountering, it is not surprising that the letter was inaccurate.
23. As to the other points that I have mentioned, I do not want to deal with them in great detail. I am not satisfied that Mrs Shaire saw any of the letters sent to the house in connection with the mortgage. Almost all of them were addressed to Mr Fox alone. Given that, on her evidence, on most days she left the house before Mr Fox, the two letters that were addressed to both of them could easily have been opened by him. The fact that the documentation shows that there might have been opportunities for her to have discovered what was going on, for instance when the surveyor inspected the house for the purpose of advising TMC as to its value, or her doctor talking about the medical report he was asked to give, does not greatly impress me. Mr Fox was prepared, it would seem, to take risks, and no doubt would have tried to come up with a plausible explanation if she had met the surveyor in the house or had talked to the doctor about the medical report.
24. So far as the telephone calls are concerned, I am not satisfied that the note of the telephone call with Mrs Shaire shows that there was any discussion other than TMC seeking to talk to Mr Fox, who was its point of contact. It is by no means clear that anything else was, or would have been, said. I am wholly unsatisfied that any assistance can be derived from a conversation that apparently took place with Adam when he was 13 or 14.
25. Realistically, Mr Lawrence and, as I understand it, Mr Timothy Harry, accepted that if I thought that Mrs Shaire's version of what happened when she signed the mortgage application form was correct, then any case on authority was in difficulties. I do not think she can be criticised for not tearing up the mortgage application form that she had signed upon discovering what it was. At that time, and, indeed, until his death, from what I have heard, Mrs Shaire had no reason to believe Mr Fox was dishonest.

Issue 2

Principles

26. What is Mrs Shaire's share of the house? When determining the respective beneficial interests of two persons who are living in a house together, either as man and wife or in a close relationship, the law appears to be as follows:

1. Where parties have expressly agreed the shares in which they hold, that is normally conclusive: see Lloyds Bank plc v Rosset [1991] 1 AC 107 at p132F and Goodman v Gallant [1986] Fam 106.

2. Such an agreement can be in writing or oral: see Rosset at p132F.

3. Where the parties have reached such an agreement, it is open to the court to depart from that agreement only if there is very good reason for doing so; for instance, a subsequent renegotiation or subsequent actions that are so inconsistent with what was agreed as to lead to the conclusion that there must have been a variation or cancellation of the agreement.

4. Where there is no express agreement, the court must rely upon the contemporary and subsequent conduct of the parties: see Rosset at p132H and Midland Bank plc v Cooke [1995] 4 All ER 562.

5. In this connection, one is not confined to the conduct of the parties at the time of the acquisition or at the time of the alleged creation of the alleged interest. The court can look at subsequent actions: see Stokes v Anderson [1991] 1 FLR 391 at p399G.

6. The extent of the respective financial contributions can be, and normally is, a relevant factor, although it is by no means decisive: see for instance, in Cooke, where the wife's contribution was 7% and yet she was held to have a 50% interest.

7. Further, the extent of the financial contribution is perhaps not as important an aspect as it was once thought to be. It may well carry more weight in a case where the parties are unmarried than when they were married: see Cooke at p576B and the closing part of Stokes at p401.

8. None the less, subject to other factors, relevant payments of money should, or at least can, be "treated as illuminating the common intention as to the extent of the beneficial interest" per Nourse LJ in Stokes at p400B.

9. As the same case demonstrates at p400C, where there is no evidence of a specific agreement, "the court must supply the common intention by reference to that which all the material circumstances show to be fair".

10. Only at the last resort should the court resort to the maxim that equality is equity: see Cooke at p574E.

11. It may well be of significance whether the property is in joint names (as here) or in the name of one party, as in Rosset and Cooke, and as appears to have been in Stokes: see at p394D and E. In this connection, see the discussion in Rosset at pp128D and 133C-H, which is not directly in point but tends to support that view.

Mr and Mrs Shaire

27. The first issue that has to be determined is the shares in which Mr and Mrs Shaire held the beneficial interest in the house before the events of 1986/87. In my judgment, what appears to have been the common view of counsel in this case, namely that they shared the beneficial interest in equal proportions, is correct. First, the cost of £ 18,500 was funded, as to £ 17,000, equally, in the sense that £ 2,000 was, according to Mrs Shaire's uncontradicted evidence, a wedding present from Mr Shaire's parents to both of them (in this connection, see Cooke at p570F-G), and £ 15,000 was provided by a mortgage under134 which Mr and Mrs Shaire were both liable. The balance of £ 1,500 came from sources that are a matter of speculation.

Second, the house was held in joint names.

Third, until the marriage broke up, Mr and Mrs Shaire were a married couple who lived together in the house and, for most of the period they lived there, they did so with a young child of the marriage.

Fourth, Mrs Shaire seems to have been brought up in an environment that led her to believe and assume that, where a husband and wife owned a house jointly, they held it in equal shares, and there is no reason to think that Mr Shaire (who did not give evidence) thought differently.

Fifth, perhaps of slight value, in permitting Mrs Shaire to stay in the house after the marriage broke up in 1980, Mr Shaire tends to give some support to this conclusion.

Sixth, there is the fallback presumption that equality is equity.

28. It is true that there is evidence upon which one could mount an argument that Mr Shaire's proportion was more than 50%. In particular, there is the fact that he paid the instalments on the Abbey National mortgage and all the outgoings of the household. However, upon the facts of this case, it seems to me that that is not nearly enough to depart from the view that there was effectively a 50/50 split in the beneficial interest between Mr Shaire and Mrs Shaire, not least because I have virtually no evidence as to what was said and done between Mr and Mrs Shaire (save the matters to which I have referred) between their marriage and their divorce.
29. This conclusion is reinforced by a further point that Mr Jalil Asif, who appears on behalf of Mrs Shaire, makes. Had the ancillary relief proceedings not been compromised as I have described, Mr and Mrs Shaire's interests in the property would have been at large and the court would have had a wide power under section 24 of the Matrimonial Causes Act 1973 to adjust their respective interests in the house in any event. Mr Shaire had left the house; indeed, he had walked out on the marriage. There is no reason to think, in those circumstances, that Mrs Shaire would not have had at least a 50% interest in the house as a result.
30. On the basis that Mr and Mrs Shaire each had a 50% share in the house, what was the effect of the arrangements between Mr Shaire, Mr Fox and Mrs Shaire in 1986 and 1987? The main argument was directed to the issue of whether Mr Fox, in effect, took over Mr Shaire's 50%, so that he had 50% and Mrs Shaire had 50% (as Mr Harry, with the support of Mr Lawrence, contends) or whether (as Mr Asif contends) Mr Shaire's 50% was shared equally between Mrs Shaire and Mr Fox so that she had a 75% share. I describe this as the main argument, as it was accepted by all parties that the law was flexible, and that it would be possible for me to determine a figure between 50% and 75% or even, Mr Asif suggested, higher than 75%.

Mrs Shaire and Mr Fox: agreement

31. The first question is whether this is a case where there was an agreement between the parties as to how they would hold the beneficial interest. Two possible bases for such an agreement have been put forward. The first is the conversation between Mr Fox and Mr Shaire. I do not think I can make any finding about that conversation, although Mr Lawrence invited me to. Mrs Shaire was not present, Mr Fox has died and left no evidence of the conversation, and Mr Shaire was not called as a witness. Mr Lawrence very properly referred me to an observation of Lord Bridge of Harwich in Rosset at p132F:

The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been.

32. I have no evidence of the content of the conversation. The only evidence that throws light upon the conversation is the other matters that I will refer to, and they speak for themselves.
33. A second argument was raised by Mr Harry. He contended that clause 4 of the 1987 transfer is either an agreement, or a strong indication that Mr Fox and Mrs Shaire intended, to share the beneficial interest in the house equally. I do not accept that contention. It seems to me that clause 4 was included in the 1987 transfer in light of the provisions of section 58(3) of the Land Registration Act 1925. Section 58 is concerned with restrictions on the register, and section 58(3) provides as follows:

In the case of joint proprietors the restriction may be to the effect that when the number of proprietors is reduced below a certain specified number no disposition shall be registered except under an order of the court, or of the registrar after inquiry into title, subject to appeal to the court, and, subject to general rules, such an entry under this subsection as may be prescribed shall be obligatory unless it is shown to the registrar's satisfaction that the joint proprietors are entitled for their own benefit, or can give valid receipts for capital money, or that one of them is a trust corporation.

34. In my judgment, the purpose of including a provision such as clause 4 in a transfer, where the property is held by two individuals, is to avoid the need to register a restriction on the register where the parties have agreed among themselves that, upon the death of one of them, the survivor "can give valid receipts for capital money". In other words, it seems to me that a provision such as clause 4, while consistent with the view that the two owners (as it is in this case) were intending to share the beneficial interest equally, is equally consistent with the view that they were merely concerned to ensure that when one of them died the survivor could effectively sell the property to a third party without the problem of having to appoint another trustee or a trust corporation. Accordingly, I am of the view that clause 4 of the 1987 transfer is perfectly capable of being explained by the fact that it is included merely to assist the disposal of the property after one of the two co-owners has died.
35. I am supported in that view by a passage in Megarry & Wade on the Law of Real Property (6th ed) at para 9.026, on p486, which deals with the possible wording of a conveyance or transfer. There is no suggestion there that a provision such as clause 4 of the 1987 transfer operates to indicate how the beneficial interests in the property are owned.
36. Furthermore, I am here concerned with what two individuals, neither of whom are lawyers, intended. To hold that two non-lawyers, Mrs Shaire and Mr Fox, would have appreciated that a provision such as clause 4 of the 1987 transfer operated to indicate, at least in the absence of supporting evidence, that the beneficial interest in the property was held equally, in circumstances where there may be factors pointing the other way, seems to me to be unrealistic. It is one thing for the transfer, whose main function is to operate to transfer property to two parties, to contain a provision in clear terms that ordinary people would understand as dealing with their respective interests in the property. It is another thing for a provision such as clause 4 of the 1987 transfer to be invoked as a clear indication, by reference to the esoteric law relating to restrictions on transfers and the rights of one or more persons to give a valid receipt for payments, overreaching beneficiaries, as to how the beneficial interest is to be shared.
37. Accordingly, to my mind, this is not a case where there is any express agreement, or anything that can fairly be construed as an express agreement, between the parties as to how the beneficial interest is shared.

Mrs Shaire and Mr Fox: discussion

38. I turn, first, to consider the main question, namely whether Mrs Shaire has 50% of the beneficial interest in the house or 75%. To my mind, the arguments in favour of 75% are compelling. Mrs Shaire owned 50% of the house (if I can put it in those terms) at the time that Mr Shaire divested himself of his 50%. I think there are a number of reasons for thinking that she and Mr Fox, and, indeed, Mr Shaire, intended that Mr Shaire's share should be distributed between Mrs Shaire and Mr Fox equally.
39. First, Mrs Shaire and Mr Fox both took on liability under the Chase mortgage, in respect of which they both benefited from £ 30,000 –– £ 15,000 going to buy out Mr Shaire and £ 15,000 to buy out the Abbey National mortgage. In so far as the £ 13,750 is concerned, I suspect that some of it went to Mr Fox's benefit in connection with his business, and some of it went to the household expenses.
40. Second, Mr Shaire's interest in the house was worth about £ 36,000. I assess that by assuming that he owned half of the freehold interest in a house worth £ 87,500, and over which there was a £ 15,000 mortgage. He sold that interest, worth £ 36,000, for £ 15,000. Subject to the next point, there was thus a large element of gift. It seems to me that it is very unlikely that he intended all that gift to go to Mr Fox. It is far more likely that he intended at least part of that gift to go to his former wife, particularly in light of the fact that the evidence shows that, even now, (and possibly while Mr Fox was alive) Mr Shaire had behaved very generously to his former wife.
41. Third, it may be that Mr Shaire's apparent generosity in this connection can be explained by reference to the fact that Mrs Shaire, as part of the overall transaction under which Mr Shaire sold his interest in the house, gave up any money claims she might otherwise have had against Mr Shaire in the District Registry order. By giving up any such potential claim against Mr Shaire, it seems to me that, if anything, she contributed more than Mr Fox to buying out Mr Shaire because he made no such contribution.
42. Fourth, if he acquired a 25% interest in the house, Mr Fox roughly got what he paid for, in the sense that he took on a shared liability for £ 43,750 under the Chase mortgage, ie just under £ 22,000; in return, he acquired a 25% interest in the house, which was also worth just under £ 22,000. In fact, he probably did better, in that I suspect that he received a significant share of the £ 13,750 received from Chase (after deducting the payments of £ 15,000 to Abbey National and Mr Shaire).
43. Fifth, there are the actual terms upon which the divorce proceedings were settled. It seems to me that, reading them naturally, they tend to suggest that Mrs Shaire and Mr Fox were together buying out Mr Shaire's interest in the house, in return for a payment of £ 15,000 and taking on the Chase mortgage. This, to my mind, is the nearest thing there is to evidence of an agreement, and it suggests that Mrs Shaire and Mr Fox were each acquiring half of Mr Shaire's interest.
44. Last, I draw some comfort from the decision of the Court of Appeal in Stokes, which has features of similarity to the present case, in that the defendant in that case went to live with the claimant and helped buy out the claimant's former wife's half interest in the property. The Court of Appeal held, on those facts, that the fair result was that the claimant and the defendant each acquired half of the claimant's former wife's interest. However, each case in this field turns very much upon its own facts, and it can be dangerous to rely upon a not dissimilar case when arriving at one's particular conclusion on another case.
45. I must deal with the arguments in favour of the contention that Mrs Shaire only has a 50% interest in the house. First, it is said that the sensible conclusion is simply that, following the discussions between them, Mr Fox stepped into Mr Shaire's shoes. It seems to me, with respect, that that is merely another way of stating the proposition, and does not of itself take matters any further.
46. Second, there is Mrs Shaire's natural view to which I have referred, namely that, if a husband and wife live together and the house is jointly owned, they would each own half equally. To my mind, that is a perfectly natural and understandable view where a married couple, having no previous interest in the house, acquire a house in joint names. In this case, Mrs Shaire already had a 50% interest, and she and Mr Fox never got married. Therefore, the fact that I am departing from Mrs Shaire's normal assumption does not cause me concern.
47. Third, and perhaps most significantly, Mrs Shaire said in her witness statement: "I imagine that Mr Fox took over Mr Shaire's half of the house, and that Mr Fox and I each own 50% of the house". She seems also to have said to her solicitor, in the conversation to which I have referred (in respect of which privilege was waived) in 1993: "Effectively he owned half the house for no capital outlay". These observations are significant because they show what was in her mind. First, however, what is in someone's mind is not by any means necessarily determinative as to what the agreement or understanding, whether expressed or inferred from actions and statements, actually was. It is trite law that what is locked away in the mind of one party to a contract has no bearing upon the terms or effect of the contract. Second, what is said in her witness statement (and was said to her solicitor in 1993) is in the present tense, and appears only to be an indication of what she thought at the time she made the witness statement (or spoke to her solicitor). Third, as to the solicitor's note of the conversation in 1993, it could be either consistent with what she was told by her solicitor or even could be what the solicitor was noting for his own benefit. What neither observation establishes is that there was any agreement or understanding between Mrs Shaire and Mr Fox to indicate that the division of the beneficial interest was to be in equal shares.
48. Fourth, there is the point that Mr Fox paid the instalments on the Chase mortgage. I have already dealt with that.
49. Fifth, it is said that although Mr Fox and Mrs Shaire were not married, they were apparently contemplating marriage. I am not convinced that they did seriously contemplate marriage: they lived together for some five or six years and at no time does it seem that there were serious preparations for marriage.
50. Sixth, while it is true that Mr Fox was taking on primary liability, as between himself and Mrs Shaire, for repayments under the Chase mortgage, there are two points that should be made. First, there is Mrs Shaire's more substantial contribution towards buying out Mr Shaire's interest, namely by giving up her right to any repayments in the District Registry. Second, it is not as if Mr Fox has actually paid off the Chase mortgage; indeed, in the events that have happened, the idea that Mr Fox has shouldered the burden in respect of the mortgages on the house would understandably be greeted by Mrs Shaire with something of a hollow laugh.
51. Last, Mrs Shaire and Mr Fox were both registered as proprietors at the Land Registry. That is of some significance, but not of central significance.
52. Accordingly, subject to the second argument on this issue, I conclude that Mrs Shaire has a 75% interest in the house.
53. As I have mentioned, the notion that I could determine a figure other than 50% or 75% was canvassed. However, I do not think it is appropriate to treat the court's role, in deciding in what shares the beneficial interest in a property is held, as involving some sort of roving commission. In this case, it seems to me that, in reality, the first battle ground is the only real battle ground: is it 75% or is it 50%? For the reasons I have given, I think it is 75%.
54. Another way of reaching the same conclusion is that some of the factors I have mentioned that have weight could be said to point to a figure of lower than 75%, and others could be said to point to a figure of higher than 75%. I conclude that there is no reason to depart from the 75%.

Issue 3

55. As I have indicated, the parties are agreed on this aspect. TMC contends, and Mrs Shaire accepts, the following. First, the TMC mortgage is valid as against Mr Fox's share in the house and is therefore valid against his estate's interest in the house: see Fisher and Lightwood –– Law of Mortgage (10th ed) at p255; Thames Guaranty Ltd v Campbell [1985] QB 210 at p234G; and Ahmed v Kendrick (1988) 56 P & CR 120 at pp125-126. Second, given that Mr Fox's estate is effectively insolvent, TMC is, in practice, the owner of the 25% beneficial interest in the house previously owned by Mr Fox. Third, while the TMC mortgage is not binding upon Mrs Shaire, TMC is subrogated to the Chase mortgage in relation to Mrs Shaire's 75% share, in light of the fact that the moneys secured by the TMC mortgage were used to pay off the moneys secured by the Chase mortgage: see Snell's Equity (13th ed) at p513. Fourth, the extent of the subrogation is 75% of the Chase mortgage, as Mrs Shaire has 75% of the equity in the house. This is based upon the nature of subrogation, which is to be applied according to broad equitable principles. Fifth, the amount owing on the Chase mortgage is around £ 46,653, so the extent of TMC's share over Mrs Shaire's share of the house is £ 34,240-odd.

Issue 4

Introductory

56. The question here is, ought I to make an order for sale of the house, and, if not, what order ought I to make? Until the 1996 Act came into136 force on 1 January 1997, property owned by more than one person, not held upon a strict settlement, was held upon trust for sale, and section 30 of the Law of Property Act 1925 applied. In that connection, the law had developed in the following way. In Re Citro [1991] Ch 142 at p157A-D, Nourse LJ said:

Where a spouse who has a beneficial interest in the matrimonial home has become bankrupt under debts which cannot be paid without the realisation of that interest, the voice of the creditors will usually prevail over the voice of the other spouse and a sale of the property ordered within a short period. The voice of the other spouse will only prevail in exceptional circumstances. No distinction is to be made between a case where the property is still being joined as a matrimonial home and one where it is not.

What then are exceptional circumstances? As the cases show, it is not uncommon for a wife with young children to be faced with eviction in circumstances where the realisation of her beneficial interest will not produce enough to buy a comparable home in the same neighbourhood, or indeed elsewhere. And, if she has to move elsewhere, there may be problems over schooling and so forth. Such circumstances, while engendering a natural sympathy in all who hear of them, cannot be described as exceptional. They are the melancholy consequences of debt and improvidence with which every civilised society has been familiar.

57. In Lloyds Bank plc v Byrne & Byrne [1993] 1 FLR 369, the Court of Appeal had to consider a number of grounds advanced for distinguishing between a case (such as Citro), where the trustee in bankruptcy of one of the owners of a beneficial interest in the property wanted to sell, and a case (such as Byrne), where a mortgagee or chargee of the one of the parties' beneficial interests wished to sell. Those differences were recorded at p372C, including, last:

A trustee in bankruptcy is under a statutory duty to realise the assets of the bankrupt whereas there is no such duty upon a chargee under a charging order.

58. Parker LJ went on to say this at p372D-F:

I accept these are differences and as to the last I accept that the statutory duty of a trustee was stressed in Citro's case. None of the others appears to me to be significant. As to the last, I accept that the statutory duty of the trustee is a powerful factor to be borne in mind when considering the exercise of discretion, but I cannot accept that it justifies any change in approach. Moreover, the position of a chargee may well be more powerful. If the sale is postponed the chargee creditor will suffer a postponement of the full amount of what may be a very large and increasing debt, whereas on a bankruptcy each individual creditor may suffer very little. In addition it must be remembered that where the creditor is a company, the directors of that company owe a duty to its shareholders and it cannot be consistent with that duty to allow a debt, which already exceeds the security held, to continue to mount up save perhaps where to enforce the debt would, or might, damage any public goodwill.

59. Accordingly, there was, in relation to trusts for sale and before the 1996 Act came into force, no difference between the two types of case considered in Citro and Byrne. The normal rule in such cases was that, save in exceptional circumstances, the wish of the person wanting the sale, be it a trustee in bankruptcy or a chargee, would prevail, and that the interests of children and families in occupation would be unlikely to prevail. These conclusions were applied in a number of cases at first instance, including Barclays Bank plc v Hendricks [1996] 1 FLR 258 per Laddie J and Zandfarid v Bank of Credit & Commerce International SA (in liquidation) [1996] 1 WLR 1420 per Jonathan Parker J.
60. However, trusts for sale and section 30 have now been effectively replaced by the 1996 Act. Section 1 of the 1996 Act has the effect of rendering trusts for sale obsolete, including those in existence on 1 January 1997, and replacing them with the less arcane and simpler trusts of land. Sections 6 to 11 are concerned with the powers and duties of trustees. Sections 12 and 13 are concerned with the rights of beneficiaries to occupy the trust property. I must set out section 14(1) and (2) in full:

(1) Any person who is a trustee of land or has an interest in property subject to a trust of land may make an application to the court for an order under this section.

(2) On an application for an order under this section the court may make any such order ––

(a) relating to the exercise by the trustees of any of their functions (including an order relieving them of any obligation to obtain the consent of, or to consult, any person in connection with the exercise of any of their functions), or

(b) declaring the nature or extent of a person's interest in property subject to the trust,

as the court thinks fit.

61. I must also set out the whole of section 15:

(1) The matters to which the court is to have regard in determining an application for an order under section 14 include ––

(a) the intentions of the person or persons (if any) who created the trust,

(b) the purposes for which the property subject to the trust is held,

(c) the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and

(d) the interests of any secured creditor of any beneficiary.

(2) In the case of an application relating to the exercise in relation to any land of the powers conferred on the trustees by section 13, the matters to which the court is to have regard also include the circumstances and wishes of each of the beneficiaries who is (or apart from any previous exercise by the trustees of those powers would be) entitled to occupy the land under section 12.

(3) In the case of any other application, other than one relating to the exercise of the power mentioned in section 6(2), the matters to which the court is to have regard also include the circumstances and wishes of any beneficiaries of full age and entitled to an interest in possession in property subject to the trust or (in case of dispute) of the majority (according to the value of their combined interests).

(4) This section does not apply to an application if section 335A of the Insolvency Act 1986 (which is inserted by Schedule 3 and relates to applications by a trustee of a bankrupt) applies to it.

62. Two questions of principle have been canvassed. First, as a result of the 1996 Act, has the law, relating to the way in which the court will exercise its power to order a sale at the suit of a chargee of the interest of one of the owners of the beneficial interest in property, changed? In other words, does section 15 change the law from how it had been laid down in Citro and Byrne? Second, does section 15(3) apply in the present case?

Effect of the 1996 Act

63. To my mind, for a number of reasons, Mr Asif is correct in his submission, on behalf of Mrs Shaire, that section 15 has changed the law. First, there is the rather trite point that if there was no intention to change the law, it is hard to see why parliament has set out in section 15(2) and, indeed, on one view, section 15(3), the factors that have to be taken into account specifically, albeit not exclusively, when the court is asked to exercise its jurisdiction to order a sale.
64. Second, it is hard to reconcile the contention that parliament intended to confirm the law as laid down in Byrne with the fact that, while the interest of a chargee is one of the four specified factors to be taken into account in section 15(1)(d), there is no suggestion that it is to be given any more importance than the interests of the children residing in the house: see section 15(1)(c). As is clear from the passage I have quoted from the judgment of Nourse LJ in Citro, as applied to a case such as this in light of Byrne, that would appear to represent a change in the law.
65. Third, the very name "trust for sale" and the law as it has been developed by the courts suggests that under the old law, in the absence of a strong reason to the contrary, the court should order sale. Nothing in the language of the new code, as found in the 1996 Act, supports that approach.
66. Fourth, it is clear from the reasons in Byrne and, indeed, the later two first instance cases to which I have referred, that the law, as developed under section 30 of the Law of Property Act 1925, was that the court should adopt precisely the same approach in a case where one of the co-owners was bankrupt (Citro) and a case where one of the co-owners had charged his interest (Byrne). It is quite clear that parliament now considers that a different approach is appropriate in the two cases: compare section 15(2) and section 15(3) of the 1996 Act with section 15(4) and the new section 335A of the Insolvency Act 1986.

137

67. Fifth, an indication from the Court of Appeal that the 1996 Act was intended to change the law is to be found in (an albeit plainly obiter) sentence in the judgment of Peter Gibson LJ in Banker's Trust Co v Namdar unreported 17 February 1997. Having come to the conclusion that the wife's appeal against an order for sale had to be refused, in light of the reasoning in Citro and Byrne, the learned lord justice said this:

Unfortunately for Mrs Namdar, the Appointment of Trustees Act was not in force at the time [ie at the time of the hearing at first instance].

68. Of course, it would be dangerous to build too much upon that observation, but it is an indication from the Court of Appeal, and, indeed, from a former chairman of the Law Commission, as to the perceived effect of the 1996 Act.
69. Sixth, the leading textbooks support the view that I have reached. In Megarry & Wade, already referred to, one finds this at para 9-064 on p510:

Although the authorities on the law prior to 1997 will therefore continue to provide guidance, the outcome will not in all cases be the same as it would have been under the previous law. This is because the legislature was much more specific as to the matters which a court is required to take into account.

70. Emmet on Title loose-leaf (19th ed), January 1999 release, contains this at para 22-035:

Cases decided on pre-1997 law may be disregarded as of little, if any, assistance because their starting point was necessarily a trust for sale implied or expressed as a conveyancing device enabling the convenient co-ownership of property.

71. Seventh, the Law Commission report that gave rise to the 1996 Act, Transfer of Land, Trusts of Land (Law Com No 181, 1989) tends to support this view as well. It is fair to say that the Law Commission did not propose a new section in a new Act such as section 15 of the 1996 Act, but a new section 30 of the 1925 Act. It is also fair to say that the terms of the proposed new section 30 were slightly different from those of section 15. However, in my judgment, the way in which the terms of the 1996 Act, and, in particular, section 15, have been drafted suggests that the Law Commission's proposals were very much in the mind of, and were substantially adopted by, the legislature. In para 12.9 of the report, the Law Commission describes the aim as being to "consolidate and rationalise" (emphasis added) the current approach. When commenting upon the proposed equivalents of what are now section 15(2) and section 15(3), the Law Commission said in note 143:

Clearly, the terms of these guidelines may influence the exercise of the discretion in some way. For example, it may be that the courts' approach to creditors' interests will be altered by the framing of the guideline as to the welfare of children. If the welfare of children is seen as a factor to be considered independently of the beneficiaries' holdings, the court may be less ready to order the sale of the home than they are at present.

72. Finally, at para 13.6, the Law Commission said:

Within the new system, beneficiaries will be in a comparatively better position than beneficiaries of current trusts of land. For example, given that the terms governing applications under section 30 will be less restrictive than they are at present, beneficiaries will have greater scope to challenge the decisions of the trustees and generally influence the management of the trust land.

73. Eighth, to put it at its lowest, it does not seem to me unlikely that the legislature intended to relax the fetters on the way in which the court exercised its discretion in cases such as Citro and Byrne, so as to tip the balance somewhat more in favour of families and against banks and other chargees. Although the law under section 30 was clear following Citro and Byrne, there were indications of judicial dissatisfaction with the state of the law at that time. Although Bingham LJ agreed with Nourse LJ in Citro, he expressed unhappiness with the result at p161F, and Sir George Waller's dissatisfaction went so far as to lead him to dissent: see his judgment at pp161-163. Furthermore, there is a decision of the Court of Appeal in Abbey National plc v Moss [1994] 1 FLR 307 that suggests a desire for a new approach.
74. All these factors, to my mind, when taken together, point very strongly to the conclusion that section 15 has changed the law. As a result of section 15, the court has greater flexibility than heretofore as to how it exercises its jurisdiction, upon an application for an order for sale, upon facts such as those in Citro and Byrne. There are certain factors that must be taken into account –– see section 15(1) and, subject to the next point, section 15(3). There may be other factors in a particular case that the court can, indeed should, take into account. Once the relevant factors to be taken into account have been identified, it is a matter for the court as to what weight to give to each factor in a particular case.
75. The only indication the other way is a decision of Judge Wroath in Newport, Isle of Wight, County Court in TSB Bank plc v Marshall [1998] 3 EGLR 100, where he said at p102C, having referred to Byrne, Moss, and Hendricks:

Those three cases were all decided where the applications to the court were under section 30 of the Law of Property Act. However, it has been submitted that the principles established are applicable to an application under section 14, and I accept that submission.

76. It does not appear clear to what extent the matter was argued before him, or, indeed, whether it was argued before him. With all due respect to Judge Wroath, I disagree with his conclusion.
77. A difficult question, having arrived at this conclusion, is the extent to which the old authorities are of assistance, and it is no surprise to find differing views expressed in the two textbooks from which I have quoted. On the one hand, to throw over all the wealth of learning and thought given by so many eminent judges to the problem that is raised upon an application for sale of a house where competing interests exist seems somewhat arrogant, and possibly rash. On the other hand, where one has concluded that the law has changed in a significant respect, so that the court's discretion is significantly less fettered than it was, there are obvious dangers in relying upon authorities that proceeded on the basis that the court's discretion was more fettered than it now is. I think it would be wrong to throw over all the earlier cases without paying them any regard. However, they have to be treated with caution, in the light of the change in the law, and, in many cases, they are unlikely to be of great, let alone decisive, assistance.

Section 15(3)

78. The second question of principle can be dealt with more shortly. The question is whether section 15(3) applies in a case such as this. That turns upon the meaning of the words: "In the case of any other application". Mr Harry, for TMC, said that those words mean any application that does not fall within subsection (1) or subsection (2), and, as the present application falls within subsection (1), subsection (3) does not apply. Mr Asif, for Mrs Shaire, contended that the reference to "any other application" is to any application not falling within subsection (2), and, given that the present application falls within subsection (1), subsection (3) applies.
79. Looking at the matter as one of pure language, either construction seems to me to be acceptable, and, if anything, I would tend to favour that preferred by Mr Harry. However, once one looks at the matter more widely, in the context of the 1996 Act as a whole, it seems to me clear that Mr Asif is right and subsection (3) does apply to a case such as this. In my judgment, the essential clue is that section 14 is the only section specifically dealing with applications to the court for an order. Many of the other sections are, as I have mentioned, concerned with exercise of powers or duties by trustees, and certain other sections are concerned with the rights of beneficiaries. However, section 14 is the section that deals with the rights of the parties to make applications to the court. If one reads subsection (3) in the way for which Mr Harry contends, it seems to me very difficult to give it any meaning at all in those circumstances, because any application would seem to be governed by section 14 and therefore to fall within subsection (1).
80. In my judgment, therefore, the position is as follows. When considering any application under the Act, subsection (1) always applies. When considering any application made under the Act relating to section 13, subsection (2) applies. When considering any application other than one made under section 13 or one made under section 6(2),138 subsection (3) applies. It also seems to me that, bearing in mind the factors that the legislature has said should be taken into account, on any view, when considering an application for sale such as the present, namely the four matters specified in subsection (1), it would be surprising if the legislature intended the factor identified in subsection (3) to be ignored.

An order for sale?

81. Bearing in mind these conclusions as to the effect of the 1996 Act, ought I to make an order for sale? I consider, first, the matters to which I am specifically required to have regard in section 15(1) and section 15(3). So far as section 15(1)(a) is concerned, the house was acquired in 1987 as a home for Mr Fox, Mrs Shaire and Adam, and Mrs Shaire and Adam still live there and still want to live there. It is also true that Mrs Shaire had lived there since 1976, on her own since 1980. However, there is no evidence as to the intention of Mrs Shaire and Mr Fox as to what would happen to the house if Mr Fox died. Furthermore, Mr Fox changed the basis upon which he held his interest when, albeit unknown to Mrs Shaire, he charged that interest, first to FNB and then to TMC, for a large sum to assist his business.
82. In Namdar, at first instance, Evans-Lombe J is quoted in the judgment of Peter Gibson LJ at p12 as saying:

The subsistence of that purpose [to provide a matrimonial home for the family] depended on the continuation of their joint ownership of the property and was brought to an end by the alienation by Mr Namdar of his interest in it by charging that interest to the bank. It may also have been brought to an end by his leaving the property and his wife in circumstances in which it is plain that their marriage was at an end.

83. In Hendricks, Laddie J said this at p263D:

the only collateral purpose upon which Mrs Hendricks could rely, namely that the house was to be retained as the matrimonial home, had ceased to exist both because Mr Hendricks was no longer living there and, more importantly, because Mr Hendricks' interest as co–owner had been charged to the bank. He had therefore alienated his interest in the home.

Second, section 15(1)(b). It is difficult to say for what purposes the house is held. So far as Mrs Shaire is concerned, it is held for her to live in. So far as TMC is concerned, it is partly security for the loan for which Mrs Shaire is liable, and it is partly 25% beneficial interest, which it is naturally anxious to sell to realise as much as it can from the mess it has got into through Mr Fox's dishonesty.

Section 15(1)(c) does not apply. Section 15(1)(d), concerned, as it is, with the interests of any secured creditor of any beneficiary, requires one to have regard to TMC's interest, which I have already described.

As to section 15(3), the majority of the beneficial interest is held, I have concluded, by Mrs Shaire, and she obviously wishes to remain in occupation.

84. Having gone through the statutory required factors, I stand back to look at the position of the two parties. TMC does not want to be tied into a 25% equity in a property producing no income and with no certainty when it will be realised. Mrs Shaire is 48, and there is no reason to think that she will sell, let alone in the foreseeable future. TMC will also have no control over the state of the house or whether it is properly insured, save through the medium of the subrogated Chase mortgage that it currently has over Mrs Shaire's 75% interest. However, that mortgage could be redeemed at any time, for instance by Mrs Shaire remortgaging.
85. Third, TMC points out that Mrs Shaire does not appear to need a house with three bedrooms, as she lives there alone with her son. If the house is sold, she will have between £ 105,000 and £ 145,000. Those figures are based upon the value of the house; I currently have evidence of a value between £ 190,000 and £ 240,000.
86. Fourth, TMC also contends that if Mrs Shaire stayed in the house, she should have to pay not only the instalments on the Chase mortgage but also a fair sum to compensate TMC for being kept out of any benefit from its quarter share in the house, and that, in light of the evidence she has given as to her means, she could not pay.
87. So far as Mrs Shaire's son, Adam, is concerned, he is earning and of age, and his interest, argues TMC (to my mind quite rightly), is not something that I should take into account.
88. So far as Mrs Shaire is concerned, she says, perfectly reasonably, that she does not want to leave the house. It has been her home since 1976 with Mr Shaire, then on her own, then with Mr Fox and now again on her own. She has 75% of the equity in the house as against TMC's 25%, and therefore she says that her wishes should be given greater weight. She contends that she has perfectly satisfactorily, albeit with the assistance of the Department of Social Security, been meeting payments due under the subrogated Chase mortgage. She also has some earnings, and says she could earn more, from her job in the chemist's shop; that she has some money from a PEP; and that, consistent with my view that he is a generous man, Mr Shaire has been giving her assistance.
89. Mr Asif made three points, which do not impress me. First, that TMC is more to blame than Mrs Shaire for the present situation because it delayed in proceeding with this case. I think that Mrs Shaire and TMC are both victims of Mr Fox's deception. Second, delay. Although there are grounds for thinking that TMC did delay unreasonably, albeit that there may be an explanation, I would have thought that the disadvantage that that produced, in the sense of further interest accruing, has been very much more than offset by the fact that the house must have appreciated in value substantially over the past few years.
90. Third, it is said that I should take into account the fact that TMC's ultimate interest is financial, and that, if it is worse off as a result of any order I make, it will recover from the solicitors. I do not regard that as a good argument. It seems to me that, although not, as Mr Asif says, precisely the same, it is similar to the position if TMC had mortgage insurance. It is res inter alios acta and should not be, indeed cannot be, taken into account when considering what is the correct order to make as between Mrs Shaire and TMC.
91. Quite apart from this, although the solicitors in each case have been constrained by decisions of the Court of Appeal to accept liability, it may be that they will successfully avoid liability in the House of Lords. Neither decision of the Court of Appeal, upon which TMC relies against the solicitors, is without critics, and it is not inconceivable that either or both decisions will be disapproved in the House of Lords if and when they are considered there.
92. To my mind, for Mrs Shaire to have to leave her home of nearly a quarter of a century would be a real and significant hardship, but not an enormous one. She would have a substantial sum that she could put towards a smaller home. Even if Adam continued to live with her, she would only need a two-bedroom house. On the other hand, I have no evidence as to what properties might be available for the sort of money that she would be able to pay. For TMC to be locked into a quarter of the equity in a property would be a significant disadvantage, unless they had a proper return and a proper protection so far as insurance and repair is concerned.
93. It seems to me that if (a) TMC can be protected by sorting out the equitable interest, providing for a proper return and ensuring that the house is repaired and insured, and (b) Mrs Shaire can really pay a proper return, it would be right to refuse to make an order for possession and sale, primarily because Mrs Shaire has a valid interest in remaining in the house, and has a 75% interest in it, and because TMC is ultimately in the business of lending money on property in return for being paid interest.
94. What is suggested in relation to the 25% interest is that Mrs Shaire is ordered to pay either 3% pa on the value of that 25% interest, based upon the reasoning of the Court of Appeal in cases such as Roberts v Johnstone [1989] QB 878 at pp892-893, as suggested by Mr Asif, or a quarter of the rental value of the house, based upon the fair rent of the house, in line with the approach of the Court of Appeal in Dennis v McDonald [1982] Fam 63. I do not find either course entirely satisfactory. It seems to me that the first course would be quite unfair on TMC and that the suggested analogy with Roberts is not sound. Landlords of residential property would not regard themselves as having a satisfactory return if it were based upon the sort of approach in Roberts v Johnstone. In any event, whichever of the two options one139 takes, TMC is not in the business of owning shares in property; it is in the business of lending on property.
95. An idea that attracts me is that put forward by Mr Lawrence on behalf of the solicitors, and accepted by Mr Harry, if there is no order for sale. This idea is that the house is valued at a specific figure (rather than the range I have mentioned) and that TMC is effectively taken out by having its equity converted into loan, and Mrs Shaire then has to pay interest on that loan. In my judgment, unless Mrs Shaire is in a position to agree that course and to meet the payments that that course would involve, I would not be prepared to refuse the order for sale. If she is prepared to agree that course, and she is in a position to meet the repayments as and when they fall due, then I would be prepared to refuse an order for sale.
96. To go into a little more detail, what the course would involve would be as follows. One would have to value the house; TMC's share would be worth a quarter of that value. The beneficial interest would then be vested in Mrs Shaire alone and TMC's mortgage would be increased from the 75% of the subrogated Chase mortgage to take into account the additional 25% of the value of property. Mrs Shaire would then have to pay interest on the Chase mortgage by reference, I think, to Chase rates of interest. On the 25% converted loan, she would have to pay interest that, to my mind, should be 1.25% above an appropriate bank base rate. It seems to me it would be wrong for her to pay interest at base rate or lower. She clearly could not borrow at that level. On the other hand, because of the special facts of this case, I believe that she should not be paying at a rate that was TMC's normal market rate.
97. If, upon reflection, this would involve Mrs Shaire taking on a liability she could not meet, or if TMC satisfied me that this is a liability that Mrs Shaire cannot fairly meet, then I do not think it would be right to refuse an order for sale. It seems to me that the furthest I can go to help Mrs Shaire, if I can put it that way, is to make an order in the terms I have indicated. If TMC cannot enjoy such terms, then I think, bearing in mind that the hardship on Mrs Shaire would not be enormous, it would be wrong for me to refuse an order for sale. If I make an order along the lines I have indicated, and Mrs Shaire is currently in a position to pay interest, but subsequently fails to do so for any reason, then TMC would have the right to apply to me for an order seeking sale of the property in these proceedings, rather than having to start originating proceedings.
98. I appreciate that this leaves matters slightly up in the air, but I do not believe that I should make an order without a little more information. At the risk of adding further to the time and costs of this case, I would rather make the order upon the basis of the parties having an opportunity to consider my conclusions, work out their consequences and, if necessary, argue about their consequences.
99. One final point. If TMC decides, in the light of what I have said, and in light of what Mrs Shaire says, to press for an order for possession now, then it seems to me that both TMC and Mrs Shaire would be very well advised to file evidence as to the type of property that might be available to Mrs Shaire, and as to the money that would be realised on the sale of the house.
100. Neuberger J later continued: It seems to me that the question of costs in this case is quite difficult, because the arguments and issues I have had to decide have been significantly more wide-ranging than appear from the pleadings. The question of whether I should make an order for possession has yet to be fully determined. It seems to me, however, that it would be wrong to make any order that did not reflect the fact that Mrs Shaire had substantially won, for the following reasons.
101. First, the basis upon which possession was sought by TMC was that either Mrs Shaire's signature was not forged or she was bound by the TMC mortgage on the grounds of estoppel or authority, arguments upon which Mrs Shaire has succeeded.
102. Second, the other major issue of principle, which was not raised on the pleadings, concerned whether Mrs Shaire had a 75% or a 50% interest. All parties accepted Mrs Shaire won on that. I am not terribly impressed with the argument that her solicitors were taking a very unrealistic point on that issue, because it was not on the pleadings, and if it had been on the pleadings one suspects that they would have gone to counsel, and counsel would have adopted the line that counsel has indeed adopted and succeeded on here.
103. However, I think it would be wrong for me to ignore the fact that her solicitors were persistently taking a weak point, because that is very much the sort of thing the court should discourage.
104. Third, there is the point that the application of the 1996 Act was very much a question of debate, and, although the actual conclusion in relation to this case has been something of a damp squib so far, it did take up time, and Mrs Shaire's argument substantially prevailed.
105. So far as the Chase mortgage and the question of subrogation are concerned, in a sense it can be said against Mrs Shaire that she did not admit any subrogation. The terms of the non-admission on her pleading were such that anyone with experience reading the pleading would suspect that the point was conceded. The fact that it was not likely to be a serious issue is supported by the fact that, since 1993, instalments of interest have been paid by Mrs Shaire, albeit on her behalf by the DSS, on the Chase mortgage. There is also the fact that Mrs Shaire has succeeded on the relief she seeks on her counterclaim.
106. Further, if I make an order for possession, it will be upon a rather different basis from that upon which it was sought. I am reluctant to conclude that any order for costs that I make will be influenced by whether I make an order for possession or not, for the simple reason that that would make it more difficult for the parties to agree about the order for possession. If I came to the conclusion that I had to make an order for costs that had to depend upon the outcome of the possession proceedings, then that would be unfortunate, but I would have to do it.
107. I think I should grasp the nettle on costs now. First, it seems to me that, having heard from Mr Harry and Mr Asif, I have the ammunition. Second, I believe that if I do not do so, it will make a settlement more difficult. Therefore, if I can do so, I certainly should do so. My conclusion is that Mrs Shaire should have 80% of her costs.

Claim dismissed.

The electronic text of this judgment was provided by Estates Gazette, whose assistance is gratefully acknowledged.