Dibble v Urs Bernhard Pfluger

On 16th July 2009 Mr Recorder Hockman Q.C., sitting at the Central London County Court, found that the defendant had no interest in or entitlement to a property in Poland and that a property in Alinora Crescent, Worthing should be sold forthwith and that the net proceeds of sale be paid to the claimant and the defendant in equal shares. The defendant appeals with the permission of Lord Justice Mummery who stayed the order for sale pending the hearing of this appeal.

The claimant is a widow. The defendant, seven (or perhaps even thirteen) years her senior, was separated from his wife when he met the claimant and they began to live together in 1992. At that time the claimant was living in a substantial property, Longlands, in Worthing which was her former matrimonial home. It was free of mortgage. She was self-supporting and comfortably placed. The defendant had a home in Arundel which was subject to a mortgage. They decided to live together at Longlands.

In 1993 the defendant was divorced. In 1994 the parties became engaged but they never married.

By 1998 Longlands was in need of some renovation and the parties, with independent legal advice, agreed that Longlands should be transferred into their joint names but charged with payment to Barclays Bank of a loan of some £25,000. They executed a Deed of Trust to hold the beneficial interest in the property as to two thirds of the gross value to the claimant and as to one third of the gross value less the outstanding mortgage to the defendant. At or about the same time the defendant sold his Arundel property.

More importantly, on 6th January 1998 the parties, again with independent legal advice, entered into a written agreement which provided that the mortgage repayments would be made by the defendant but common household expenditure would be paid in equal shares. As for contents, they agreed that all items of personal use or adornment should belong to the party who had acquired those items but all furniture and household effects were to be considered to be owned jointly regardless of when or by whom they were acquired. Any bank or building society accounts or any investment or capital asset in the sole name of either party was to remain the property of that party. The agreement was expressed to terminate when the parties agreed mutually to cease to live together in which event the agreement set out detailed provisions for the disposition of the home in which they were living, in effect, giving each an opportunity to buy out the other but if neither wished to remain in the home or was unable to complete the purchase, then the home should be sold and the proceeds divided in accordance with their beneficial interest therein. The contents were to be divided equally.

The claimant is Polish and her parents lived in Poland. Having made some provision for her brother, the claimant’s parents on 14 March 2002 acquired a plot of land on which to build a retirement home for her in Poland. In August 2002 they purchased the adjoining plot. This is the Polish land which is the subject of the Recorder’s order. After planning permission was obtained in July 2003 a house was built upon the land.

Meanwhile Longlands was sold in June 2002 and a property at Beeches Avenue in Worthing acquired, again to be held as to two thirds to the claimant and one third to the defendant. The result of the sale was that some £45,000 was released to the claimant but only £2,511 was paid to the defendant after discharging the mortgage. These monies were paid into a joint Lloyds TSB account. Beeches Avenue was sold in August 2005 and the parties acquired Alinora Crescent (to which I will refer as Alinora) but this time the parties held the property on trust for themselves as tenants in common in equal shares.

In June 2006 the parties moved into the new house in Poland. The relationship between the parties became unhappy and they separated at the end of December 2006. Although there was a short reconciliation the relationship appears to be at an end. The defendant moved back to occupy Alinora. The claimant returned to England in July 2007 and after a short stay with her daughter she too moved back to Alinora. They continue to occupy this small flat. It cannot be easy for them.

Attempts by either to buy out the interest of the other in Alinora having failed, the claimant brought her claim seeking an order for the sale of Alinora and the equal division of the proceeds of sale. The defendant did not oppose the sale of Alinora once his beneficial interest in the Polish property had been determined and an order for its sale been made. By his counterclaim the defendant sought declarations that the Polish property was held by the parties in equal shares or in such shares as the Court should determine; he sought an order for the immediate sale of the Polish property, alternatively for payment by the claimant of the defendant’s contributions towards the purchase of and costs of building of that property. He pleaded that there was an express agreement to hold the Polish property in equal shares. Alternatively he said that it was the common intention to do so, that common intention being evidenced by the payments he made totalling £58,500 towards the purchase and/or building costs of the Polish property. He gave particulars of those payments as follows:

25th March 2004 £6,000

1st July 2004 £15,000

10th August 2005 £15,000

23rd June 2006 £12,000

14th August 2006 £7,000

11th September 2006 £3,500

In the alternative he sought the repayment of these sums. In her defence to this counterclaim the claimant alleged that the defendant agreed to lend her father £15,000 to put a roof on the property.

After a four day trial which ended on 12th March 2009, the Recorder gave judgment on 14th July 2009.

He directed himself to approach the defendant’s claim for an equitable interest in the Polish property in the light of the guidance given by the House of Lords in Stack v Dowden [2007] UKHL 17, [2007] 2 A.C. 432 from which he extracted the succinct proposition that:

“… it appears that it is necessary to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it.”

He then explained his approach to his judgment:

“4.

I propose to set out my factual findings (in so far as it is necessary to make such findings for the purposes of resolving issues in the case). I shall then set out my general conclusions, explaining as concisely as possible why I have arrived at those conclusions and (where it is necessary to do so) why I found certain parts of the evidence more acceptable than others.”

I note the words in parenthesis.

When it came to the money transferred from England to Poland he began with several payments made between 9th July 2002 and 5th August 2002 totalling £14,500 and he said this:

“10.

… Each party claims to have been the source of these deposits but there is no documentary evidence either way. Nor is it clear what use was made of the funds transferred to Poland. The statement of [the claimant’s mother] asserts that the land was “purchased by me and my husband”. I am unpersuaded by the defendant’s contention that he was the source of these monies, let alone that there was a shared intention that these payments were to go to the purchase of the land.”

These payments are not among those pleaded to establish the common intention. Moreover they were paid some four months after the property was acquired. A further difficulty, which may be insuperable, is that the payments were made to the claimant’s parents, then the owners of the land, not to the claimant herself. If – and I do not know the answer – a resulting trust could arise in respect of land situated abroad by reason of payments to the foreign owner of the land, it would be the claimant’s parents, not the claimant herself, who would hold the land on trust for the defendant. Since these matters are not part of the pleaded case, they can be ignored.

The first pleaded payment is the £6,000 paid on 25th March 2004. The Recorder found that it was paid by the defendant from his Barclays Bank account into the joint Lloyds TSB account and then to Poland. But he said:

“12.

… The intention lying behind this payment is unclear. It cannot have been for the purchase of the Polish property since this had occurred some two years previously. It may have been contemplated by the defendant that it would help towards the building works but I am unable to find that there was any shared intention to this effect.”

A shared intention may be demonstrated by proving the actual agreement between the parties but the Recorder does not seem to be approaching the matter in that way. If the money was in fact paid towards the cost of the building works and was in fact so applied, then it behoved the Recorder to explain why he could not find an inferred or imputed common intention to create an interest in the land.

There is a further difficulty about this finding. Everyone in the case overlooked the fact that the parties became engaged to each other in 1994 and that it must be inferred that the agreement to marry was terminated when their relationship broke down and they separated. Section 2 of the Law Reform (Miscellaneous Provisions) Act 1970 did not cross the radar until I drew it to their attention. Section 2 provides as follows:

“2.

Property of engaged couples

(1)

Where an agreement to marry is terminated, any rule of law relating to the rights of husbands and wives in relation to property in which either or both has or have a beneficial interest, including any such rule as explained by section 37 of the Matrimonial Proceedings and Property Act 1970, shall apply, in relation to any property in which either or both of the parties to the agreement had a beneficial interest while the agreement was in force, as it applies in relation to property in which a husband or wife has a beneficial interest.”

Section 37 of the Matrimonial Proceedings and Property Act 1970 states:

“37.

Contributions by spouse in money or money's worth to the improvement of property

It is hereby declared that where a husband or wife contributes in money or money’s worth to the improvement of real or personal property in which or in the proceeds of sale of which either or both of them has or have a beneficial interest, the husband or wife so contributing shall, if the contribution is of a substantial nature and subject to any agreement between them to the contrary express or implied, be treated as having then acquired by virtue of his or her contribution a share or an enlarged share, as the case may be, in that beneficial interest of such an extent as may have been then agreed or, in default of such agreement, as may seem in all the circumstances just to any court before which the question of the existence or extent of the beneficial interest of the husband or wife arises (whether in proceedings between them or in any other proceedings).”

Thus the court did not consider, but ought to have considered, whether this was a contribution to the improvement of the Polish property, whether it was a contribution of a substantial nature and whether subject to any contrary agreement, a beneficial interest in the property was acquired.

The Recorder then turned to the payment of £15,000 made on 1st July 2004. He found that it was made from the defendant’s Barclays Bank account, there being an indication from the note on the bank statement that it was paid to a “Mr Alfred” who was taken to the claimant’s father. The Recorder said:

“13.

… It may have been a loan to him. Whatever the status of this payment in terms of the issues which I have to decide, it seems to be common ground that it was intended to be used, and was in fact used, to facilitate the erection of a roof to the Polish building which it was necessary to complete during the summer months.”

I regret to say I find this unsatisfactory. Once again it behoved the Recorder to make a decision about this dispute. The defendant said he lent the money to the claimant. She pleaded that it was a loan to her father. One has to bear in mind that this payment was made two and a half months after the land had been given by the claimant’s parents to the claimant. We do not have a transcript of the evidence but I see that in paragraph 15 of the claimant’s witness statement dated 13th February 2009 she said:

“15.

… Sadly my father became ill and started to run out of money regarding the finishing of the property and approached me to see if I could assist further, in particular with regard to the cost of the roof. I was not in a position to assist further but (the defendant) said he could loan me £15,000 which he did. This money was paid from [the defendant] directly into my father’s account and was always intended to be a loan. I agreed with [the defendant] that I would in fact repay him the money when I could.”

The Recorder ought to have decided, but failed to decide, whether or not this advance was a loan because if it was a loan then the fact of lending would defeat any inference or imputation of a common intention to acquire an interest through the payment of that money. If it was a loan, to whom was the money lent and was it repaid? Moreover, since it seemed to have been “common ground that it was intended to be used, and was in fact used, to facilitate the erection of a roof to the Polish building which it was necessary to complete during the summer months” then questions could arise as to the application of section 37 set out above.

The next payment was made on 10th August 2005 out of the joint Lloyds TSB account in the sum of £15,000. The Recorder found:

“16.

… It is common ground that this sum was sent to Poland although it is unclear precisely how it was used. … I find that in any event the payment of £15,000 to Poland on 10th August 2005 came from the claimant’s share of the proceeds of sale of Beeches.”

On the basis of that finding, the defendant can claim no benefit from that payment.

The next payment was made in June 2006 in the sum of £12,000. As to this the Recorder found:

“18.

… Again it is unclear precisely how this money was used although the claimant says that it was used for items such as furnishings.”

Once again the Recorder failed to reach a decision.

The Recorder accepted that on 8th August 2006 the defendant paid £10,000 into the joint Lloyds TSB account and following that, on 14th August 2006 a further sum of £7,000 was paid to Poland. He said of this:

“20.

… Although the defendant contends that this was a payment towards the building works I am unable to accept that this was the purpose of the payment since as I find these works were by this date substantially complete and it seems to me more likely that the payment was intended to facilitate the parties’ living arrangements in Poland.”

This finding is adverse to the defendant’s case.

Finally, the Recorder dealt with the £3,500 which he found was paid from the joint Barclays Bank account and, according to the defendant, given to the claimant for the purpose of contributing to the cost of the building works. But the Recorder found:

“21.

… once again given the works had been substantially complete for some time, I find it more likely that this was a further payment in respect of living expenses.”

Again the finding is inimicable to the defendant’s case.

The Recorder expressed his conclusions in this way:

“23.

In arriving at my ultimate conclusions with regard to the Polish property, it seems to me that I have to bear in mind that an unusual feature of this case is that the property was not purchased by either of the parties but was given to the claimant by her father. As Mr Dew submitted, this has two consequences: first, it is inherently less likely that there was a shared intention that the property be jointly owned, because unmarried couples do not normally intend to share jointly property given to one of them. Secondly, the defendant is unable to show a contribution to the purchase because neither of the parties purchased the property. What he is left with therefore is reliance on alleged contributions to the costs of building the property, on which I have however already made specific findings. A further unusual feature of the case is that there are clear examples of situations in which the parties unquestionably did form a shared intention to own property jointly and in those situations, they have written down and defined their respective interests.

24.

It was the defendant’s evidence that he was told that the Polish property would held by the parties in equal shares and that the claimant said she would put his name on the deeds. Given my findings as set out above, I find this improbable and cannot in the circumstances attach weight to such evidence, nor to the supporting evidence (not adduced orally) of Jean-Paul [Pfluger] or of Ester Park. As to the evidence of the defendant’s former wife, Coral, once again, I cannot construe this as demonstrating a shared intention that the Polish property was to be jointly owned (as opposed to being a shared home). As to Wendy Davis, I found her evidence (in which she suggested that the parties stated in conversation that the Polish land was being bought in joint names) inconsistent with the known facts and therefore I was unable to accept it. In general, therefore, and notwithstanding Mr Darton’s persuasive comments, I prefer the evidence of the claimant and of her witnesses.

26.

Against this background and in the light of my factual findings as set out above, I am unable to accept that it was the parties’ shared intention at any time that the Polish property would be jointly owned.”

He dismissed the claim based on proprietary estoppel. He also rejected the claim to be entitled to the return of the monies which the defendant had contributed on the basis that, whatever the precise purpose of the payments, there was no reason to suppose they were not used for that purpose at the time.

In my view, the judgment is seriously flawed. The Recorder failed to make any adequate finding as to the use made of the payment of £6,000 in March 2004. That payment was capable of supporting an inference of common intention and the Recorder gives no reason why that conclusion should not have been drawn. Whether or not the £15,000 paid in July 2004 was a loan, it was in fact used to facilitate the erection of the roof, yet the Recorder failed to draw any conclusion as to whether that was enough, whether on ordinary equitable principles or by virtue of the operation of section 37 of the Matrimonial Proceedings and Property Act 1970, to give an interest in the land. He made no finding as to the use to which the £12,000 was put. It was a sum which was capable of supporting the defendant’s case.

For those reasons I would allow the appeal. A vast sum of money seems to have been spent already on this litigation and it is therefore with great regret that I have to conclude that the only proper way to dispose of this appeal is to remit the matter to the County Court, to a different judge, for re-hearing. Since the Recorder has made some findings of fact which, taken by themselves, withstand attack, and which therefore, cannot give rise to any inference of common intention nor amount to a contribution towards the improvement of the property, then in the interest of saving costs, I would confine the reconsideration of this case to the impact, if any, of the payments of £6,000, £15,000 and £12,000, made on 25 March 2004, 1 July 2004 and 23 June 2006 respectively, have on the claim for a beneficial interest in the Polish property. I would not allow the case based on proprietary estoppel or restitution to be re-opened. I appreciate that limiting the case to the three payments mentioned may be unsatisfactory inasmuch as it appears to tie the hands of the judge who has to re-hear the matter and there is the danger that he may come to different conclusions about the credibility and reliability of the parties and their witnesses and that a different view would be taken of the other payments. Nevertheless this litigation must be kept within manageable bounds and I would limit the reconsideration accordingly.

I would grant a stay of execution of the order for the sale of Alinora pending the outcome of the counterclaim in respect of the Polish property. In order for justice to be truly done between these parties, their affairs should be resolved as a whole so that if the defendant does have an interest in the Polish property, then he must be bought out at the same time as Alinora is sold.

This case cries out for a realistic assessment, I emphasise by each party, of the likely outcome. It is, therefore, a paradigm case for mediation. It would be foolish indeed to spend another four days in the County Court.

I would allow the appeal accordingly, remit the case to the County Court for a re-trial on the limited issues identified above, before a different judge, and stay execution of the order for sale of Alinora in the meantime.

I agree.

The combined effect of section 2 of the Law Reform (Miscellaneous Provisions) Act 1970 and section 37 of the Matrimonial Proceedings and Property Act 1970 did not feature in the case, as Ward LJ has observed, either in the pleadings or in the Appellant’s Notice. The recorder is therefore not to be criticised for not dealing with this point. Had there been no other deficiency in the recorder’s judgment, I would not have regarded this point by itself as sufficient to justify allowing the appeal. However, given that his reasoning on aspects of the case to which this point is relevant is such as to require remission for a limited re-trial, because of his failure to make findings of fact as to the relevant intentions or as to the use of the money, it seems to me right that the court on that re-trial should be able to address that issue. For that purpose, assuming that the defendant wishes to rely on the point, he should formulate his case by way of an amendment to his Defence and Counterclaim. If he does so, the claimant will need to set out her response to that case by amendment of her Reply and Defence to Counterclaim.

I also agree.