Powell & Anor v Benney (Representative of the Estate of the Late Ronald Hobday)

This is the renewed application for permission to appeal by Mr and Mrs Martin Powell against the judgment of HHJ Levy QC, given at the Central London County Court on 9 August 2006 following a three-day trial. The defendant to the Powells’ action was Mrs Betty Benney, the personal representative of the estate of the late Ronald Hobday, deceased. Mr Hobday had been, before his death in July 2003, a friend of the Powells. He owned two houses next door to one another at 43 and 45 Montem Road, London, SE23. The Powells owned a shop in the neighbourhood from which they gave music lessons to a great variety of musical students. As a result of their befriending of Mr Hobday, who was something of a recluse and plainly relied very much upon his friendship with the Powells, he gave the Powells a free hand in using his two properties (in one part of one of which he himself lived) for the purposes of the Powells conducting their music lesson business.

Over a number of years beginning in 1993 and ending only in his death, still at a relatively young age in his fifties, in 2003, Mr Hobday repeatedly told the Powells, and many others as well, of his intention to leave his two houses to the Powells after his death. He had told as much to Mrs Benney, as she acknowledged in her evidence. He had left a manuscript note to that effect amongst his possessions which he had written, I think, in November 2000, a few years before he died. That note was only found after his death. He had given the keys of his properties to the Powells at an early stage.

The Powells de-cluttered and, to some extent, redecorated the properties concerned. They spent money upon them. They worked upon them. They effectively transported their music lesson business to those houses, possibly at the expense of building up the goodwill of their shop, at which they also sold music instruments.

Mrs Powell accepted that to some extent, at any rate, what she or they did for Mr Hobday was done out of friendship rather than in reliance upon his promise to leave them his houses. The judge, in a careful judgment, went through the three leading cases in modern times dealing with this sort of situation and the argument that a constructive trust or a proprietary estoppel may be created out of circumstances such as these, where one party relies to his detriment or is disappointed in his expectation as a result of promises made by another party to reward the first party with property in the future.

Those three well-known cases in which Walker LJ, as he then was, played an important role are Yaxley v Gotts [2000] Ch 162, Gillett v Holt [2001] Ch 210 and Jennings v Rice [2002] EWCA 159. In the last of those three cases Walker LJ in his judgment, recognising the value of certain academic writings about which he had not known at the time of Gillett v Holt, although pre-dating that case, discusses the respective possibilities of the constructive trust or proprietary estoppel doctrines being dependent either on the basis of expectation value and/or on the basis of detriment reliance value. In effect (see in particular paragraphs 49, 50, 51 of Walker LJ’s judgment in that last case), he would seem to accept ultimately that both principles may enter into a disposition of the award of an equitable and proportionate amount to reflect the value in property created for the benefit of claimants by a constructive trust or proprietary estoppel where that can be found.

In the present case, the judge made detailed findings about elements of detriment which he did or did not accept. Ultimately, I fear the true basis of his judgment is somewhat obscure. At one point he says, at paragraph 60, that:

“The detriments which they claim to have suffered are, however, in my judgment, not such as to establish the pleaded estoppel.”

At the end of the day, however, he did award a sum of £20,000 to the Powells, wrongly apparently referred to as £10,000 in the final paragraph of his judgment. The figure of £20,000 is reflected in the final order. He seems to arrive at that figure on the basis of the sum of £8,830, which he identifies in paragraph 55 in respect of expenditure, and a sum of £5,000 to reflect work done by Mr Powell (see paragraph 59), rounded up to £20,000 to reflect the Powells’ disappointment (see paragraphs 62 and 63).

Certainly, if the judge was accepting a proprietary estoppel or constructive trust then the amount which he awarded, both by reference to expenditure of monies or work or detriment incurred and by reference to the disappointment of the clear expectation, seems to be a very modest amount compared to the established values of the two houses, which is at least £280,000, and even that has had to be discounted by £90,000 as a result of subsidence which only came to light as a result of the hot summer of 2003 following Mr Hobday’s death.

It is clear in this case, unlike for instance Jennings v Rice, that the representations and the expectation to which the representations gave rise were clearly expressed and clearly related to the properties in question. After Mr Hobday’s death Mrs Benney, as the personal representative, acknowledged to the Powells both Mr Hobday’s wishes and intentions, which she said in her evidence he had expressed personally to her as well, and the validity of their claim. It appears, however, that following advice from the solicitors to the estate, advice which naturally enough was not particularised in her evidence, she resolved to repudiate the Powells’ claim.

It does seem to me that because the judge is ultimately obscure in his reasons as to whether he is or is not finding a promissory estoppel or constructive trust, and because it is obscure whether the judge is giving sufficient weight to the expectation value of the applicants’ claim, and because the ultimate sum derived at £20,000 is only a small percentage of the total value of the two houses, even taking subsidence into account, that, in my judgment, for each and all of those reasons it seems to me that there is a reasonable prospect of success on appeal for the Powells.

To some extent I come to that conclusion with regret, because the sums at stake are not particularly large in themselves. A large part of the value of the estate is already in the course of being devoured in legal costs to no one’s benefit other than the lawyers concerned. Moreover, there is a danger to both the Powells on the one side and to the estate on the other of the further expense of an appeal. For all that, it seems to me that it is right to give permission to appeal. I nevertheless emphasise to the Powells, as I have done to Miss Bailey, who has made submissions on their behalf today, the danger of further liability in costs.

Although I understand from Miss Bailey that mediation had been attempted before the trial, it seems to me that both in the light of the judge’s judgment and in the light of my judgment today it may well be fruitful for there to be a further attempt at mediation. If the parties think that that would be useful, then of course the mediation scheme operated by this court may well be of assistance to the litigants. Its costs are comparatively moderate. Full details about the scheme can be obtained from the Civil Appeal Office and I will direct the Civil Appeal Office to write to the litigants in this case about the Court of Appeal mediation scheme.

With those warnings about the dangers of costs, and with that expression about the assistance which the Court of Appeal mediation scheme may be able to provide to the litigants, I conclude this judgment by saying that for the reasons given in it, permission to appeal is granted for the grounds set before the court. It seems to me that whatever the Powells’ success on appeal might be, there must be considerable scepticism that they would be able to obtain an order granting them full and complete possession of both houses (although that remains a possibility), but nevertheless there seems to me to be good reason to grant a stay upon execution of the judge’s order below to the extent that it provides for the immediate sale of both houses. Since that stay is granted without hearing the respondent, the respondent has, of course, an opportunity to make submissions on a future occasion as to why a stay should not be granted.

Subject to that opportunity, however, my disposition of this application is to grant permission to appeal and also a stay on the sale of the houses and also on the recovery of the costs awarded to Mrs Benney.