PROPERTY CHAMBER
FIRST-TIER TRIBUNAL
LAND REGISTRATION DIVISION
IN the matter of a reference from hm land
registry
LAND REGISTRATION
ACT 2002
REF No 2015/0211
BETWEEN
JOHN HOGGINS
Applicant
and
GRETA
CERNIAUSKAITE
Respondent
Property Address: 2 Stepped Gable Mews, High Wych Lane, Sawbridgeworth
Title Number: HD491875
Before Judge
McAllister
Alfred Place,
London
26, 27 and 28
October 2015
Representation: Mr Isaac Jacob instructed by Hughmans
appeared for the Applicant; Mr Lloyd Sefton Smith instructed by Murray
Hay appeared for the Respondent.
DECISION
Introduction
- The issue in this case relates to
the beneficial ownership of a property, 2 Stepped Gable Mews, High
Wych Lane, Sawbridgeworth (‘the Property’). The Property is, and at all
relevant times has been, registered in the name of the Respondent. For
ease of reference I will refer to her as ‘Greta’ and to the Applicant as
‘John’. John, her former partner, claims sole ownership of the Property on
the basis that she holds the Property on constructive trust for him by
virtue of a Pallant v Morgan [1953] Ch 43 equity. This equity
arises where an agreement is reached whereby one party purchases property
with the intention that he other will acquire an interest in the property,
and the effect is that the acquiring party becomes bound by a constructive
trust to prevent him from benefiting from his unconscionable breach of the
agreement. In the familial or domestic context it is more usual to frame
the trust in terms of the recent decisions in Stack v Dowden [2007] 2 AC 432 and Kernott v Jones [2012] 1 AC 776, but, in either case,
the court’s task is to ascertain the true nature of the arrangement
reached by the parties either by agreement or, if appropriate, by course
of conduct from which a common intention can be inferred.
- On 19 November 2014 John applied
to the Land Registry to enter a restriction against the title to the
Property. In the application form, he stated that he had paid the deposit
on the Property, and the mortgage, and funded all the costs. Greta
objected, stating that the Property had been put in her name as a gift.
The matter was referred to the Tribunal on 19 March 2015.
- The Property was purchased on 3
April 2009. The purchase price was £450,000. The deposit of £100,000 was,
as explained below, paid in kind by one of the companies owned and
controlled by John. The balance was obtained by a mortgage with Alliance and Leicester. The stamp duty on the purchase and the repayments on the mortgage
between the date of purchase and August 2013 were made by Greta through
money which she received from the companies as salary, although she
accepts that she did not in fact work for any of the companies. From
August 2013 onwards, she has paid the mortgage and all other outgoings on
the Property. John and Greta lived in another property owned by John,
until February 2013, when the relationship between the parties broke down,
and Greta moved into the Property, where she still lives.
- For the reasons set out below I
have no hesitation in finding that the monies paid by John (directly or
through his companies) towards the purchase of the Property were a gift by
him to Greta, and accordingly I will order the Chief Land Registrar to
cancel the application to enter a restriction.
Background and evidence.
2004-2009
- John and Greta met in 2004 when
his then marriage, to Ania, was virtually over. John and Ania had two
children: Christian, then 6, and Francis, then 2. At that time Greta was
living in London and working as a part time cleaner at the National
Portrait Gallery, and John was living at Highland Road, Nazeing, in Essex. Greta had been married twice before, in Lithuania, and had a daughter, who was then
16. John was the sole shareowner in a number of successful plumbing and
heating businesses, variously incorporated as Adustus Services (UK)
Limited, Adustus Services LLP and Adustus Services and Developments Ltd.
At one time, the companies employed some 54 people. Services UK
and Services LLP went into voluntary creditors liquidation in September
2014 and April 2015 respectively. As I understand it, the third company is
still active. I will refer to the various companies as ‘Adustus’, save
where the context otherwise requires. The position in relation to the three
companies is not entirely clear, although John’s evidence before me is
that, in any event, he does not now have a company which is trading.
- In April 2005 John and Greta
moved into the ground floor of the building in which were the offices of
Adustus. and converted this, with the requisite consents, into a flat. Shortly
afterwards, Greta sold a flat in Lithuania, realising a sum of money,
variously put, in the documents, at about £30,000 or about £22,000. In
evidence Greta accepted that the correct amount was £22,000. In March
2006 John bought a property at 34 Ellis Close, Hoddesdon, Hertfordshire
(‘Ellis Close’). Ellis Close was bought in his sole name, with the
assistance of a mortgage. There is an issue as to whether Greta
contributed the proceeds of sale from the Lithunian flat towards the
purchase, and a further issue as to whether the parties intended that she
should have a beneficial interest in Ellis Close.
- The divorce proceedings between
John and Ania were acrimonious and protracted. The final order was made on
26 November 2008. In his Form E application dated 25 April 2007, John
stated that he held Ellis Close on trust for himself and Greta in equal
shares, and he stated that she had contributed £30,000 towards the
deposit. He gave his income from Adustus as £144,000 odd. Ania had
applied for a freezing injunction a year or so earlier, and in his
Affidavit in response, John again referred to Ellis Close, stating that
this was bought for £440,000 (with a mortgage of £418,000), and that Greta
had contributed £30,000 and had a beneficial interest in this property.
- John’s Form E was prepared by a
Michael Avetoom, who held himself out as a solicitor (but was, it seems,
not qualified as such). John’s evidence is that the reference to Greta
paying the deposit of £30,000 on Ellis Close is wrong (and indeed , there
is no reference to this payment in a draft form): Mr Avertoom put this in
without instructions, as he did in the freezing order affidavit. John was also
critical of letters written by Mr Avetoom on his behalf in May 2013 and
July 2013, when the relationship had broken down, both because Greta was
not asked to vacate the Property (but was asked not to return to Ellis
Close), when she should have been (on his case) and because there is a
reference to a payment of £20,000 by Greta towards the deposit on the
Property, and to the division of the proceeds of sale in proportion to the
parties’ contributions. This, of course, is not his case now. All these
matters are not of any great importance in themselves, except that they
all demonstrate, to my mind, a tendency on John’s part to attempt to
explain inconvenient documents by saying that others acted without
instructions, made a mistake or (as in the case of Mr Browne below) bore a
grudge against him.
- During the course of the
proceedings a document was produced by Michael Lane of Grisby Harrison
which appears to confirm that £30,000 deposit on Ellis Close came from the
sale of other land owned by John. In view of the amount of money clearly
available to John from 2005 onwards, it would be perhaps surprising if he
used Greta’s money for the deposit, although it may have been convenient,
and not entirely surprising, if he tried to minimise his assets in his
divorce proceedings. This does not mean that Greta did not give or lend
him the money, however: indeed, John accepts that she gave him £20,000 in
2005.
- In 2007/2008 a local developer, Danny
Smith, was in the course of developing a plot of land, known as Bakers
Farm, in High Wych, Sawbridgeworth through his company, Steps Construction
Limited. The development consisted of four converted barns, and a
converted farmhouse. Adustus was carrying out the heating, plumbing and
electrical work on site. Mr Smith found himself in some financial
difficulty (the discovery of bats on site delayed the development between
November 2007 and the spring of 2008) and an agreement was reached with
John whereby John would buy the Property at a price of £450,000, and would
offset against the price £100,000 in respect of work carried out by
Adustus to the site.
- There is an issue as to exactly
how much work was done to the Property, and how much to the remainder of
the site, and a further issue as to whether this work was done in 2007 or
2008, and whether the agreement to purchase the Property was made in 2007
and not in 2008, but in my judgment these matters are not central to the
decision I have to make. What is clear is that the price for the Property
was reduced by £100,000 to take account of work done by Adustus. John provided
his solicitor, Mr Browne of Gisby Harrison, with a schedule of work
carried out by Adustus, totalling £104,000 odd, in early December 2008.
The balance was to be paid by a mortgage.
- It is clear from the documents
that Greta was on the payroll of Adustus from, at least, 2008. It is now
accepted on Greta’s behalf that she did not do any work for any of the Adustus
companies. In any event, her P60 to 5 April 2008 shows a gross pay of
£27,000. Her salary was increased with effect from 1 July 2008 to just
under £93,000. The reason for this increase was to enable Greta to make an
application for a mortgage to allow the purchase of the Property. It is
John’s case that he was advised by Chris Roberts, his financial advisor,
that, as he already had two mortgages, he could not obtain a third.
- I heard evidence from Mr Roberts,
who attended court following the service of a witness summons. He did not
have any written record of any advice given to John and Greta, but
recalled that a meeting took place at Ellis Close in which he advised that
the mortgage could proceed on the strength of Greta’s salary, as John was
already heavily indebted. It appears from John’s diary for 2008 that this
meeting took place on 24 July.
- Mr Roberts was not able to say
whether John would have been able to borrow more in his own name if his
salary had been increased, and further accepted that, in any event, there
is no automatic bar on having more than two mortgages. Asked in terms
whether he recalled any discussion to the effect that Greta would hold the
Property as nominee only, he stated that he could not recall any such
discussion. All that he could say was that he had been told that Greta was
an employee of the company and that she earned enough. He had no knowledge
as to who would be the beneficial owner. Mr Roberts also added that he
would have remembered if, during the conversation, he had been told that
the Property was to have been John’s alone.
- Mr Roberts concluded his
evidence by stating that he had been offered £10,000 by John to come to
court. John dealt with this evidence by saying that he had offered up to
£10,000 to cover his costs, and never suggested to him what evidence he
should give. I accept Mr Roberts’ evidence that he offered the full
£10,000 to Mr Roberts. Mr Roberts did not, of course, accept the money.
- On 29 October 2009 Alliance and Leicester made an offer of a loan of £350,000 to Greta. Shortly afterwards,
Gisby Harrison were instructed to act in the purchase. The client care
letter was addressed to Greta at Ellis Close. Mr Browne was clearly
concerned about the way in which the deposit was to be paid. He wrote to
Greta on 28 November 2008 stating that, as he had previously discussed
with John, the lender would need to be satisfied, given the fact that not
all the money was going through the client account.
- The consent order in John’s
divorce proceedings was also made on 26 November 2008. Ania undertook to
use her best endeavours to release John from his liability in respect of
the mortgage on Highland Road by 9 January 2009, whereupon the property
would be transferred to her (subject to the mortgage). In addition, John
agreed to pay £66,000 to Ania until Christian finished school, and then
£54,000 per annum until Francis finished school. The mortgage was in fact
only transferred to Ania in March 2014.
- On 10 December 2008 Mr Browne
wrote to Alliance and Leicester. The letter set out in some detail the
nature of the agreement made between John and Danny Smith. Importantly,
the letter also stated: ‘ One other matter which you may find of
assistance in considering the enclosed is that Mr V J Hoggins is the
partner of the borrower and has been in a relationship with her for some
years. The money paid by Mr Hoggins as detailed in this letter is
effectively a gift from him to the borrower. There is to be no arrangement
between the borrower and Mr Hoggins for any part of this money to be
repaid to him and further more Mr Hoggins will have no legal or beneficial
interest in the property. As advised, it is considered an outright gift
from Mr Hoggins to the borrower’.
- There is no evidence that a copy
of this letter was sent to either Greta or John, and John’s response, having
seen it for the first time in the course of this litigation, was that Mr
Browne had never spoken to him about its content and that he had never
given these instructions to Mr Browne, nor would he have done. By this
time, on his account, his relationship with Greta was not good, and there
was no reason whatsoever for him to make a gift of the Property to her. In
evidence, John stated that he had told Mr Browne that he had initially
wanted to buy the Property in his name, but explained the difficulties
with obtaining a mortgage in his name. In his words, he could not
understand how a solicitor could give away a house without instructions.
- I heard evidence from Mr Browne.
He was aware that a witness summons might be issued, and attended in any
event. I found him to be an entirely honest witness, doing his best to
recall matters which occurred some 7 years ago. He has been a partner in
Gisby Harrison since the 1980s, specialising in property and conveyancing.
He brought to court such papers as he had, all of which related to contact
with John from 2015 onwards, when John raised the question whether the
December 2008 letter had been written without instructions with the firm’s
managing partner, Michael Lane.
- In the course of a conversation
with Martin Lane, (documented in an attendance note) John referred to the
fact that he, John, had, some years before 2008, bought a piece of land in
Highland Road (which he referred to as North land) for £100,000 and that
Mr Browne had asked him to sell it to him. John had refused. This evidence
was advanced by John as providing justification for the possibility that Mr
Browne might have been harbouring a grudge against him. In evidence, Mr
Browne denied ever having bought or sold land, or having acted in this
purchase, or ever wanting to buy this land. Mr Browne described this
allegation, in my view correctly, as ‘bizarre’.
- Mr Browne never met Greta,
except on exchange and completion (which took place on same day, 3 April
2009) but had met John a number of times. It was clear from his evidence
that Mr Browne was not in the habit of making attendance notes, but relied
on his memory. He recalls having had a long telephone call with John
before writing the letter referred to above to the lender, and wrote the
letter on instructions. The transaction was unusual, because of the way in
which the deposit had been paid. When asked whether it would have made any
difference if he had been told that John was to be the beneficial owner,
he replied that a deed of trust would have been necessary.
- Mr Browne remained clear in his
evidence during cross examination. He believed the purchaser to be Greta,
even though he knew the money was coming from John (at least the deposit).
He had no recollection of being told that John could not obtain a mortgage
because he already had two mortgages. He repeated that it was his
recollection that the Property was to be a gift from John to Greta. It may
be fair to criticise Mr Browne for not having kept better records, or any
records, of conversations, but I have no reason to doubt his honesty in
his recollection of events. Moreover it is inherently improbable that he
would, of his own accord, have provided information to the lenders which
he had not received from John. No satisfactory explanation as to why he
might have done this was put forward.
- On receipt of the letter of 10
December 2008, Alliance and Leicester withdrew their offer. In order for
the sale to proceed, it was necessary to find a way of satisfying the
lenders. This was done as follows. John and Greta entered into a loan
agreement with a Stephen Lamb for £100,000, to be repaid on completion
(through Danny Smith’s account). The money was repaid to Mr Lamb on 6
April 2009. John also paid the fixed interest, or fee, of £6,000, and
provided 4 boxes of cigars.
- At the heart of this case is the
alleged agreement between John and Greta that she would be merely a
nominee for him, and Greta’s case that the Property was given to her, by
John, as a gift. John’s evidence as to the agreement made between him and
Greta regarding the ownership of the Property was vague and uncertain. In
his written evidence he stated that it was ‘understood and agreed’ between
them that the Property would be purchased in her name but paid for by him
or the companies, and accordingly Greta understood and agreed that she
would hold the Property for him. No details were given as to when or where
this agreement was made. Moreover, he also stated that the Property would
be transferred back into his name when Ellis Close was sold (although, so
far as I am aware, no attempt was made to sell this) and, again, when the
two existing mortgages were paid off. In oral evidence (in answer to a
question by me) John stated that he recalled the meeting with Mr Roberts
in July 2008 very clearly: it was during this meeting that the agreement
was reached that the mortgage would be in her name, but that the Property
would be his. Greta was apparently very happy with the plan. He stated
that there was only ever one conversation between them on this subject. At
no time, he said, did Greta ask for the Property to be in her name. This
evidence is at odds with the general tenor of his evidence, which is that
Greta was constantly nagging him to buy her a property (as well, as he put
it, as ‘the contents of most of the shops in Bond Street’).
- Greta’s evidence was that she had
suffered at the hands of two abusive husbands, and was always concerned
about her long term security. John repeatedly told her that he wanted to
look after her and provide for her, and that he wanted her to have a
property in her own name. John told her that the £100,000 deposit on the
Property would be a gift, and the balance would need to be raised by a
mortgage in her name, which he would pay. She understood that she would
be taking on the legal responsibility for repaying the mortgage, however;
as she put it, this responsibility rested on her shoulders. John did not
consider £100,000 to be a great deal of money; at the time, his business
was doing extremely well. There is no doubt, as I explain further below,
that John was extremely generous in these years, and that considerable
sums of money passed through his hands.
2009 to date
- On 10 June 2010 Adustus Services
LLP was incorporated. The company went into voluntary liquidation on 22
April 2015. Greta continued to be paid by Adustus: her P60 for the year
ending 5 April 2011 shows an income of just over £70,000. The following
year her pay slip showed her earning £75,000, and £72,000 in 2013.
- Neither John nor Greta moved into
the Property. All the bills relating to the Property have always been in
Greta’s name, although the insurance was in joint names until 2014. Until
2013 John paid all the bills. John’s explanation as to why they did not
move in was that Greta refused to do so, even though large amounts of
money were spent on furnishing and decorating. The house was ready in the
summer of 2009, but her complaint, it seems, was that there was
insufficient wardrobe space. Greta’s version of events was that they only
ever planned to use the Property for weekends or as spare accommodation.
She was adamant in her evidence that there was never any plan to sell
Ellis Close. As stated above, she moved into the Property in February
2013, and resides there to this day, and is responsible for the mortgage
and all the outgoings. In August 2013, Greta ceased to be longer employed
by Adustus. John has since re-married.
- It is clear from all the evidence
I have heard and read that John now feels very bitter towards Greta, and
has convinced himself that, from the outset, her intentions were to get
what she could out of the relationship financially. John’s evidence is
that the relationship had begun to deteriorate badly from 2007 onwards,
and that he only stayed with Greta because his youngest son, Francis,
adored her. But there is no dispute but that Greta was trying to become pregnant
in the years 2005 to 2011, and had sought specialist advice from a
consultant gynaecologist in 2008 and 2011. What is also clear, and is
amply demonstrated by the paper work I have seen, is that he was a
remarkably generous, some might say, impulsive man, whose own life was
complex and not always easy.
- By way of example, John purchased
a special edition Bentley for Greta (or at least for her use) which had the
registration number G2 ETA. The cost of the car was £160,000. He also
owned another 4 door Bentley. Greta sold the Bentley and kept the
proceeds. He had a property in Spain, and property interests in Dubai,
and a house was bought, it seems, in Florida. Between 2005 and 2013 Greta
spent over £100,000 on items of clothing, and jewellery for herself, all
paid for by John. Other expensive items were purchased: in April 2008, by
way of example, Greta ordered 11,000 euros worth of monogrammed sheets and
towels from Frette in Milan. They travelled, either together or Greta
alone, to Thailand, Alaska, Mauritious, Florida, Dubai, Cuba,
as well as to Capri, Milan, and Amsterdam. It was, by any reckoning, and
for those years, a life of ease and wealth.
The
parties’ submissions
- Mr Sefton Smith submitted that,
on a proper analysis of the documentation relating to the work done by
Adustus on the Bakers Farm site and in particular on the Property, and
having regard to the fact that Greta drew a salary from Adustus, John
cannot be heard to say that he paid the deposit or any of the mortgage
repayments: the money came from Adustus, and not from him. In effect, as I
understand it, his argument is that John has no standing to make the
application he makes.
- Mr Sefton Smith also raised the
issue of illegality, arguing that John’s conduct in relation to the obtaining
of the mortgage, the use of company money, and possibly in relation to his
divorce proceedings, were tainted with illegality. Mr Jacob, on behalf of
John, submitted that there was no intention by John of defrauding any of
the companies, the building society or his ex wife. If there is an issue
as to putting money back into loan account, it is irrelevant to the
question of ownership of the Property. The salary Greta received, he
submitted, was not hers, but impressed with a trust.
- In view of my finding that the
true arrangement between the parties was that Greta was to own the
Property beneficially and legally, I do not need to consider these points further.
That said, on the evidence before me, I would not be satisfied that John
set out to defraud Audustus or the building society, or, indeed his ex
wife.
- It seems to me that, whatever the
position may be between John and the liquidator or any creditor of his
companies, the reality, in this case, is the parties acted as if the money
for the purchase of the Property came from John: she was not concerned
with the provenance of the money. The only question for me is whether the
Property was indeed a gift to her, or was intended to be owned entirely by
John (whether by use of company money or not). As Mr Jacob argued from the
outset, this is an all or nothing case: the Property either belongs to
Greta or it does not.
- The starting point, of course, is
that the beneficial interest follows the legal title. This presumption can
be displaced if it is shown that the parties intended otherwise. This is
the factual issue at the core of this case. Mr Sefton Smith points to a
number of factors, which he says, give credence to her case. The first is
this. Greta’s concern to secure a property for herself is to be seen in
the context of her previous marriages. There was every reason why she
should want the Property in her name. Secondly, having regard to all the
evidence (including the IFV treatment, the travels paid for by John, and
the amount spent on her) it is wrong to characterise the relationship as
being in great difficulty before 2009: to the contrary everything points
to a loving relationship until some point very much later. Thirdly, it may
also be the case that John was anxious to put assets beyond the reach of
his former wife: he would be comforted in the knowledge that the Property
would be safe (albeit that the Property was in fact purchased some six
months after the final consent order in the divorce proceedings). Fourthly,
the accounts of the Adustus companies, and John’s own evidence, make it
clear that he could have repaid the entire mortgage in 2009 but chose not
to do so. Fifthly, John spent a great deal of money on Greta over the
years; if he could spend £100,000 on what might be described as fripperies,
there is no reason to think that a further £100,000 by way of a deposit
(and further money to pay the mortgage) should be put in a different
category.
- Sixthly, he points to the
evidence of Mr Roberts and Mr Browne. Mr Roberts had no recollection of
any discussion to the effect that Greta would only be a nominee. John’s
case, it will be recalled, is that the agreement between himself and Greta
was made during this meeting. Further Mr Roberts made the obvious point
that there is no bar to having three mortgages in principle, and that he
could see no reason why John’s salary should not have been increased
sufficiently to satisfy the lenders. In relation to Mr Browne, Mr Sefton
Smith pointed out that the letter of December 2008 only came to light
after she had put in her evidence. More significantly, the suggestion that
he wrote the letter without instructions, or on the basis of some
misunderstanding, is simply fanciful. Finally, Mr Sefton Smith submitted
that John was only too willing to blame others for documentation which did
not sit comfortably with his case; this was a recurring pattern throughout
the case.
- Mr Jacob submitted that the case
is about unconscionability: either on the part of John who made an
outright gift of the Property to Greta, or on Greta’s part in seeking to
keep what she knows was never intended to be hers. On his case, the latter
is the true position. If, as he argues, the parties reached an agreement
that the Property was to be John’s alone, then it becomes easier to
understand how a misunderstanding may have arisen in the course of the
conversations between John and Mr Browne. The agreement that the Property
was to be John’s makes perfect sense: he could not obtain a third
mortgage, and he trusted Greta. He dealt with the solicitor and paid for
all the outgoings on the Property until 2013, when the relationship had
broken down. There is no satisfactory explanation as to why Greta did not
move in. Greta’s evidence, he submitted, was evasive and dissembling: she
did not readily accept that she had never worked for Adustus (and indeed
she maintained that she had worked for the companies in her written
evidence), and she was less than straightforward in relation to the
£30,000/£20,000 sum given by her to John.
My
findings
- I accept Greta’s evidence and in
particular that John reassured her that, whatever happened, she would have
the Property. Although she did not work for Adustus, I accept that she did
a great deal to make his life easier, and to help with his children. I do
not doubt, too, that, whatever the causes of the breakdown of the
relationship, the relationship, which lasted 9 years, was not as unhappy
as John is now at pains to portray it. There is some force in the
criticisms made of her evidence by Mr Jacob (in particular the fact that
she did not readily accept that she did not work for Adustus) but I have
no hesitation in accepting her evidence on the core issue, namely the
nature of the agreement relating to the Property.
- I also agree with Mr Sefton
Smith’s submissions. In my judgment it is clear from all the evidence that
John intended that Greta should own the Property legally and beneficially.
The explanation put forward by him (that he could not have a third
mortgage in his name) is, on analysis, a weak one, and it is in any event
undermined by the evidence of Mr Roberts. It also seems to me relevant
that no attempt was ever made to sell Ellis Close: the fact that John and
Greta did not move into the Property strengthens, rather than weakens, her
case. The Property was intended for her, as security, to do as she wished.
- Ultimately the most compelling
evidence is the letter written by Mr Browne in December 2008, and his
evidence. This letter was written at the time, and is the best
contemporaneous record of the parties’ intentions. It could not be
clearer: the Property was to be a gift from John to Greta. Such a letter
could only have been written on John’s clear instructions. It does no
credit to John’s case to put forward the suggestion that Mr Browne may
have borne a grudge against him (in relation to the acquisition of another
piece of land by John) and acted, as it were, on a frolic of his own, in
some way to cause harm to John many years later.
Costs
- The usual rule is that costs
follow the event. As the successful party, Greta is, in principle entitled
to her costs, which will either be assessed summarily by me or be the
subject of a detailed assessment if either party so wishes. In the first
instance, a schedule of costs is to be filed and served by 8 January 2016.
Any objections or representations John may wish to make are to be filed
and served by 22 January 2016.
BY ORDER OF THE TRIBUNAL
Dated this 17th day of December 2015.
