Sandhu v Sandhu

LORD JUSTICE FLOYD: This is an appeal against the decision of Her Honour Judge May QC dated 25 September 2014 sitting in the Central London County Court. The appeal concerns the correct apportionment of beneficial interest in a family property, 491 Great Western Road, which I shall call “the property”.

The protagonists are the respondent and claimant in the action, Kirpal Singh Sandhu, who I shall call Mr Sandhu, and his two sons, who have been referred to as Bill Sandhu and Gus Sandhu. Without intending any disrespect, I will also refer to them as Bill and Gus for the sake of clarity. Bill was the defendant in the action and is the appellant before us. Gus is the elder of the two sons and was not a party to the action, but supported his father's position in it. Since the judge gave her judgment on 11 August 2016, Mr Sandhu has sadly died. Gus applied before us for an order that he be added as a party or appointed to represent the estate of Mr Sandhu pursuant to CPR Rule 19.8, no personal representatives having thus far been appointed. Bill does not oppose that application. Accordingly, we appointed him to represent the estate of Mr Sandhu for the purposes of these proceedings.

The judge held that the property was held by Bill in trust for Mr Sandhu and himself in the proportions 70 per cent in favour of Mr Sandhu and 30 per cent in favour of Bill. There is no longer any dispute that Mr Sandhu has a beneficial interest in the property.

Permission to appeal was granted by Henderson J sitting as an additional judge of this court, but limited to a ground concerned only with the quantification of the parties' respective interests.

From 1991 until November 2009 the property was the Mr Sandhu’s home, living there at first with both of his sons. The property at all times has been registered in the sole name of Bill. In order to raise funds for the purchase of the property, Mr Sandhu transferred the former family home, 63 Starfield Road, into the name of Gus so that he could take out a mortgage on it. The funds raised on 63 Starfield Road, according to the Mr Sandhu, represented his contribution towards the purchase of the property and therefore indicated the scale of his beneficial interest.

The dispute arose in 2009 when Mr Sandhu left to spend some time in India. Whilst he was there, his belongings were removed from the house. He had a stroke whilst in India and could not return for some time. When he did so, he found he was homeless. The present proceedings were therefore commenced in order to seek a declaration that he had a beneficial interest in the property.

The purchase of the property had been arranged in the following way. The family had been living at 63 Starfield Road, but family events led to the desire for a larger home. Starfield Road was solely and beneficially owned by Mr Sandhu. In order to raise funds for the purchase of the property, Mr Sandhu transferred Starfield Road into the name of Gus so that he take out a mortgage on it, Mr Sandhu being too old to do this.

The sum of £100,000 was thereby released, whilst Starfield Road could be let out to generate rental income. Mr Sandhu also owned another property at 18 Alfred Road, which was also let out and generating rental income. Another property, 60 West Avenue, had been bought by Mr Sandhu and put into Bill's name. It was also let out.

This all took place in 1991, some 23 years before the trial. There was very little by way of contemporary documentation. However, the documents did include a mortgage application which led to the mortgage offer in relation to Starfield Road. The mortgage offer was made to Gus. The judge accepted the evidence of Mr Sandhu and Gus that 63 Starfield Road was intended to remain Mr Sandhu's property beneficially and the transfer into Gus' name was solely for the purposes of raising funds.

So far as the new house (that is the property) was concerned, the judge rejected Bill's case that it was intended that he be given the property outright. She accepted Mr Sandhu's case that he was to have a beneficial interest. Mr Sandhu's case had been that the sum raised on Starfield Road was his contribution to the purchase price of the property, which was £139,000.

The only other document relating to the purchase was a completion statement prepared by the solicitors acting for Bill on the purchase of the property. This required him to produce funds of £53,329 odd, the balance of the purchase price being accounted for by the deposit paid on exchange of contracts of £7,800 and a mortgage advance of £80,000. This document suggested to the judge that the solicitors had applied £87,800 of the funds raised on Starfield Road towards the purchase. It is this assessment of that document which is the subject of challenge on this appeal.

The judge directed herself by reference to the decision of the Supreme Court in Jones v Kernott [2011] UKSC 53. She said that since the evidence did not show what particular shares were intended, she had to consider all the evidence as to the whole course of dealing between Bill and his father in relation to the property, including the financial contributions, in arriving at a fair result. No criticism is made by either side of the judge's legal approach on this appeal. I would add that the exercise is not a rigidly arithmetical one: see, for example, per Baroness Hale of Richmond in Stack v Dowden [2007] 2 AC 432 at 467.

The judge looked at the proportion of the original purchase price, which she thought had been raised by the mortgage on Starfield Road, and concluded that Mr Sandhu’s contribution was between £87,800 and £100,000. The judge concluded that Mr Sandhu's contribution was approximately 70 per cent and there was nothing in the further dealings which might lead her substantially to review that percentage. She thought, if anything, it might have been higher by virtue of the fact that up to the year 2000 the mortgage on the property, together with many of the household expenses, were paid from the rental proceeds of properties belonging to Mr Sandhu.

At paragraph 15 of the judgment, the judge said:

It seems that from 1991 to 2000, therefore, the £80,000 advance was paid for exclusively by Mr Sandhu. Thereafter, from 2000 to 2009 the mortgage was paid by Bill. From 2009 to date we were told that the mortgage was paid out of rent made by letting the property itself.

The judge was not greatly assisted by the oral evidence of the parties. She recognised that Mr Sandhu was not in good health and had not been so since 1991. He was 84, elderly and infirm. Although well able to give oral evidence, it was not as nuanced or comprehensive as his witness statement, which she felt had been prepared with the assistance of others. There were also discrepancies between what he said in his oral evidence and what was in his pleadings and his witness statement.

Gus, on the other hand, was guarded and careful in his evidence, but keen to close down particular lines of inquiry, leaving the judge with the impression that there were at the very least important omissions in the account of events that he was giving.

As for Bill, she found that she could place very little reliance on anything that he told her, save where it is corroborated by matters of record or the evidence given by his father or Gus. The judge found that Bill had a worrying relaxed and flexible attitude to the truth.

Henderson J identified the two issues on which he gave permission to appeal as follows: (1) whether the judge misinterpreted the completion document and (2) what difference, if any, that would have made to her assessment of the Mr Sandhu’s beneficial share as 70 per cent.

Mr Megha who appeared on behalf of Bill submitted that the judge had mistaken the advance on the property raised by the mortgage which Bill took out on the property for the father's contribution. The only items attributable to Mr Sandhu were the £53,800 which had come out of the money raised on Starfield Road and the deposit of £7,800, which had come from the same source. Thus at most, Mr Sandhu had contributed some £61,000 and not the £87,800 to £100,000 figures which the judge had worked on. A figure of £61,000 represents only 44 per cent of the purchase price.

There is also before the court an application to adduce further evidence. This is a bank statement obtained by Bill which apparently shows that around this time in October 1991 a sum of £34,343 was credited to a mortgage account. Bill relies on this in an attempt to reinforce the point that an error was made by the judge. If one adds the £34,000 odd to the £61,800 contribution, one arrives at a figure fairly close to £100,000 and therefore accounts for the vast majority of the sums released from Starfield Road.

I did not detect in the submissions of Miss Macro on behalf of the estate much enthusiasm to defend the judge's analysis of the completion statement as correct. Instead, she submits that there was ample basis for a finding of 70 per cent interest in favour of Mr Sandhu even if only £61,000 was contributed directly. She submits that the judge did not treat the difference between £87,800, which the completion statement showed, and the £100,000, which Mr Sandhu had said he had contributed, as significant.

Moreover, Mr Sandhu continued to finance the mortgage payments on the property through the rental income on his own properties for many years. The judge had said that Mr Sandhu's share might have been higher. She also submits that if the further evidence is admitted, it assists her clients. On her analysis, Bill only contributed £80,000 less the sum of £34,000 he received to pay off his other mortgage on West Avenue.

I have the greatest sympathy for the judge, deciding this case as she was in the absence of a proper documentary record, many years after the event and without the assistance of much by way of reliable oral evidence. However, I have come to the conclusion that the judge did make an error in interpreting the completion statement.

It is clear that there were two mortgages taken out at around the same time which need to be kept separate and distinct. The first was the mortgage on Starfield Road intended to release equity, at least in part, for the purchase of a property. The second mortgage was taken out by Bill on the property itself. The judge mistook the £80,000 of this later mortgage as a sum taken from the funds raised by Starfield Road. Had she not done so, she could not have arrived at the figure of £87,800, let alone any higher figure. The starting point should probably have been £61,000.

I arrive at this conclusion without reference to the further evidence on which Bill seeks to rely. As to that, I see no reason why that document should be allowed in evidence at this stage. It is Bill's own bank statement. We have had no explanation of why he could not with reasonable diligence have found that document for use at the trial beyond the fact that he found it when searching for documents for the inquiry stage of these proceedings. That does not explain why a proper search was not carried out at the time.

Moreover, whilst the document might have assisted Bill in showing that an error was made in interpreting the completion statement, it raises more questions than it answers on the second issue which we have to decide, and would not necessarily have assisted his case.

That second issue is whether any, and if so what, adjustment should be made to the judge's assessment of 70 per cent. The exercise on which the judge was engaged was one of overall assessment of the parties' assumed intentions as to the beneficial ownership of the property. The exercise was not a mathematical one founded only on the financial contributions to capital at the outset, but on all the circumstances surrounding the dealings between Mr Sandhu and Bill.

In my judgment, whilst the judge was wrong to elevate Mr Sandhu's financial contribution in terms of capital to the level she did, there were other factors present which clearly supported her overall assessment of 70 per cent. The principal one of those is that it would be quite wrong to regard the £80,000 mortgage raised on the property as if it were a contribution exclusively by Bill. It is true that he arranged the mortgage and was liable on it, but from 1991 to 2000 it cost him nothing at all and from 2009 onwards the mortgage payments have come out of income to which Mr Sandhu is at least in part beneficially entitled.

The overall picture is plainly one in which Bill would be hard to pressed to say that he had contributed more than half of the mortgage. If that is correct, which I believe it to be, a figure of at least £40,000 should be added to the corrected figure of £61,000 actually contributed before arriving at a conclusion as to a capital contribution. If that is done, then the judge's quantification of the interest at 70 per cent remains, in my view, an eminently reasonable one.

The judge's overall evaluation was not founded on this precise approach. She clearly recognised that Mr Sandhu's contribution to the mortgage payments was a substantial factor which would have justified an even higher percentage. She was persuaded nevertheless that 70 per cent was about the right figure on the available material. Despite the error, I am not persuaded that her evaluation overall can be said to be wrong.

I would, therefore, refuse the application to adduce further evidence and dismiss the appeal.

LORD JUSTICE DAVID RICHARDS: I agree.