Stocking v Montila

This matter before me has been the taking of an account in a partnership action. The claimant is Roy Stocking. He is the uncle of the defendant, Steven Montila. By his claim form dated 19 June 2001, Mr Stocking asserted that he and Mr Montila had formed a partnership business in about November 1996 for the purpose of developing and selling land and buildings at Cobhambury Barn, Cobhambury Road, Cobham, Gravesend, Kent (“the Barn”). He claimed that he and Mr Montila had contributed equally to the cost of the Barn and that the net proceeds of its sale were to be divided equally between them. He asserted that Mr Montila had done nothing towards developing the Barn, that there was no prospect of a sale and that the partnership had been dissolved by a notice dated 6 March 2001. He sought a winding up of its affairs.

By his amended defence Mr Montila denied that there had been any partnership agreement in relation to the Barn. His case was that in 1995 he wanted to buy the Barn for his own occupation and that he and Mr Stocking then agreed to contribute equally to the cost of its purchase and development into two dwellings for their respective occupation; they further agreed that if planning permission could not be obtained, he, Mr Montila, would repay Mr Stocking the money he had invested in the project and Mr Stocking would withdraw from it. His case was that it later became clear that planning permission for two dwellings would not be granted, so that Mr Stocking had become entitled to the repayment of the £60,000 he had contributed towards the price of the Barn, which was the limit of his rights in the matter.

The pleadings therefore raised an issue as to whether or not there was a partnership between the parties and that issue was the subject of a trial in May 2003 before Mr Peter Leaver QC, sitting as a Deputy High Court Judge of the Chancery Division. Mr Leaver delivered his judgment on 13 May 2003. He preferred Mr Stocking’s account of the events and found that at a dinner in April 1996, one attended by Mr and Mrs Stocking and Mr and Mrs Montila, the four of them agreed to buy the Barn in equal shares, with each agreeing to contribute equally to the purchase price and development costs and, eventually, to sharing equally in the profit on its re-sale. The judge rejected the different, and inconsistent, accounts that Mr Montila had advanced as to the nature of the arrangement. He heard evidence from Mr Roger Joyce, an architect, who had been instructed by both Mr Stocking and Mr Montila to see whether planning permission could be obtained and Mr Joyce had no recollection of any suggestion that two properties might be built on the site. Nor did Mr Joyce think it was originally Mr Montila’s intention to live at the Barn, although by early 1997 he did understand that this had become his intention. In the meantime, contracts for the purchase of the Barn had been exchanged on 10 October 1996 and completion took place on 7 November 1996. By then it was known that planning permission for two houses could not be obtained, yet Mr Stocking still contributed half the purchase price.

The outcome of that trial was that by his order of 13 May 2003 Mr Leaver declared that Mr Stocking and Mr Montila were partners in a partnership comprising the purchase, development and resale of the Barn. He further declared that the partnership had been dissolved on 6 March 2001 and ordered a winding up of its affairs, with the taking and making of all necessary accounts and inquiries.

The Barn was bought for £120,000, contributed in equal shares by Mr Stocking and Mr Montila. It was in a derelict state and planning permission for its conversion to a single dwelling was obtained on 3 October 1997. It has since been substantially developed. A chartered surveyor specialising in valuations, Mr John Graham (of Ashenden Graham), was jointly instructed to value it. He inspected it in March 2005 and his report is dated 5 April 2005. He explained that the conversion is a five-bedroom house on two floors, with a four-bay car port and stables, set in a site of about five acres. He described it as “a quality barn conversion”. He explained that the development is not yet complete: in particular, one bathroom is incomplete and a proposal to create a swimming pool had been halted. He valued the Barn at the date of his inspection at £795,000, which is an agreed figure. By way of supplementary questions, he was asked for his opinion as to the value of the Barn in April 2003, when the market was more active. He explained the difficulties involved in such a retrospective valuation, but suggested that (assuming it to have been in the same condition as now) the Barn would then have had a value of £925,000 to 950,000. He was asked what the value of the Barn would have been in March 2001 with the benefit of planning permission for its conversion but was unable to express a view on that. He was asked what the undeveloped value of the Barn would now be, with the benefit of the planning permission for its conversion. He assessed that value at between £225,000 and £250,000. Finally, he was asked the current rental value of the Barn. He disclaimed knowledge of the residential lettings market but relayed the view of a number of letting agents – to whom he had given a brief description of the accommodation and its rough location – that “a rental value in the region of £2,000 to £2,500 pcm would not be considered unreasonable in the current lettings market.” Mr Graham gave oral evidence and confirmed the opinion that he had expressed in his report and answers to the supplementary questions.

Since March 2003 the Barn has been occupied by Mr and Mrs Montila and their children as their home. Although Mr Stocking has sought an order for its sale, his counsel, Mr Russell, withdrew that claim at the hearing and so no sale will be ordered: Mr Russell made it clear that Mr Stocking is content to be bought out at whatever is the appropriate figure, but he also said that any such buy-out should be within a specified time, with a sale to be ordered in default. That means, I consider, that the court’s task is to treat the partnership asset – namely, the Barn – as having realised net proceeds equivalent to its value at whatever date is regarded as the appropriate valuation date; and then to determine the parties’ respective rights to those notional proceeds by reference to their respective contributions to the purchase and development of the Barn. There is an issue as to the appropriate valuation (Mr Stocking arguing for the higher 2003 valuation and Mr Montila for the lower 2005 valuation); and also as to whether Mr Montila should be accountable for a rent in respect of his occupation of the Barn during its conversion.

Mr Stocking’s evidence in the present proceedings was contained in three witness statements made on 23 April 2003, 28 April 2005 and 14 June 2005. The first statement was made for the purposes of the trial before Mr Leaver, the second is a long one largely devoted to challenging Mr Montila’s claimed expenditure on the Barn conversion but also lists his own claimed expenditure and the third is devoted to asserting a recent claim to an additional £15,000 head of expenditure that Mr Stocking had not previously mentioned.

Mr Stocking is 64 and has been involved during his working life in demolition and haulage work. He and his wife used to live at Wilmington, Kent, but they sold their house there in about 1996 and moved into rented accommodation in Sidcup whilst looking for a new home. In the same year Mr Montila introduced Mr Stocking to the Barn, which Mr Stocking said he and his wife wanted to buy. At the same time, however, they were also interested in another property at Hartley, Kent, which they preferred and which they decided to buy for their occupation, abandoning any idea of living at the Barn. The Hartley property required substantial refurbishment, which Mr Stocking carried out. It took some time but was eventually completed in September 1999, when he and Mrs Stocking moved into it.

In the meantime, as Mr Leaver had found, Mr Stocking and Mr Montila had agreed to purchase, redevelop and sell the Barn. They purchased it for £120,000, with each putting up £60,000 (Mr Stocking’s contribution was in fact provided by his son, Gary, but nothing turns on that). The Barn was bought in the sole name of Mr Montila, who on 7 November 1996 (the completion date) charged it to Gary to secure the repayment of £50,000 (this may have been an error, since Gary had in fact provided £60,000). Mr Stocking’s solicitors, Dzimitrowicz York, acted for the partners on the purchase. During his cross-examination, Mr Stocking disputed that Mr Montila had met the legal expenses of the purchase, but he makes no claim in respect of any such expenses (if any) that he may have paid himself. Following completion, the partners instructed Mr Joyce to pursue a planning application for the development of the Barn by way of its conversion to a single dwelling. Planning permission was obtained on 3 October 1997. The conversion work later commenced in about June 2000, by which time Mr Stocking and Mr Montila had fallen out in a major way.

Mr Stocking said this in his first witness statement:

“18.

In late 1996 (I believe before the purchase had actually been completed), my family and I left our rented accommodation as the Lease had expired. Our property at Hartley was at that stage not ready for occupation. We purchased a caravan and two portacabins and sited them at the Barn. One was for my wife and myself to live in, one was for storing our excess furniture and one for my son Gary in which I installed a toilet, shower, new kitchen and electrical units to give him some independence. Through [Mr Montila’s] companies we had purchased a large volume of timber, slates containers and other building materials which were being stored there in readiness for the development of the barn. These were extremely valuable and I estimate that the cost of the materials would have been in excess of £60,000.00. It was therefore decided that we could ‘kill two birds with one stone’. We could live there until our new house was ready to live in and it also meant that the Defendant and I would not have to go to the expense of employing a Security Company to be on site at the time when no-one was there to reduce the risk of theft and also vandalism. The property is fairly isolated and an intruder would not be easy to spot without someone being on site permanently. We were also looking after my wife’s father, that is [Mr Montila’s] grandfather. My father in law was unable to look after himself and we took on all of his day to day care. [Mr Montila] and his parents would occasionally come and visit him at the caravan. We had intended for him to come and live with us at the Hartley property once it was renovated but unfortunately he died before this was possible.”

Mr Stocking includes as part of his claimed expenditure in respect of the Barn project the purchase of the caravan at a cost of £11,250 and the purchase of two portacabins at a cost of £6,500, all three of which he claims Mr Montila has retained. The extent to which those items were purchased as part of the Barn project is in dispute. In his cross-examination, Mr Stocking explained that, when he moved on to the Barn site, his house refurbishment at Hartley (which is about four miles from the Barn) was in progress and he agreed that he lived in the caravan at the Barn until 1999 whilst the work was being done. As for the two portacabins, he said one was occupied by Gary and the other was used to store furniture. He said that it also housed office equipment, namely a desk, in readiness for when the partners refurbished the Barn, something he had not mentioned in his witness statement. He also departed from his witness statement in the following material respect: whereas he had asserted in paragraph 18 that he had left his rented accommodation because the lease had expired, in cross-examination he said that it had not expired, although he could have been given six months’ notice to quit at any time.

Mr Stocking was not a wholly convincing witness and I do not accept that either the primary or dominant purpose of his purchase of the caravan and portacabins or of his family’s occupation of the Barn between 1996 and 1999 was for security purposes in connection with the Barn project. I do not accept Mr Stocking’s oral evidence that he and his family chose to leave their rented accommodation even though the lease had not expired. I find that it had expired and that the primary reason for Mr Stocking’s occupation of the Barn was that it provided a convenient site from which to oversee the Hartley refurbishment and at which to house himself and his family until they could move into the Hartley house. I do not accept that either portacabin was used during Mr Stocking’s occupation for office purposes in relation to the Barn project, no mention of any such use having been volunteered in Mr Stocking’s witness statement. I do not, therefore, accept that the cost of the caravan and portacabins was a partnership expense or that they became partnership assets. (As I explain below, Mr Stocking abandoned a separate claim for remuneration in respect of his time devoted to providing security at the site whilst he was in residence there: this is because it is accepted on both sides that neither partner can claim an allowance or remuneration for his time expended in the partnership affairs prior to its dissolution: see section 24(6) of the Partnership Act 1890).

The next item of expense for which Mr Stocking claims credit is £510 paid in respect of “Hire of three containers from Ipswich to the Barn.” In his cross-examination, he explained that this was for the cost of the haulage of three containers from the Ipswich area to the Barn. He said he paid the £510 in cash, for which he had no written record, and that the name of the haulage company was something like “Quickmove”. Both Mr Stocking and Mr Montila specialise in cash transactions and so there is nothing unusual in Mr Stocking’s claim that he paid cash. There is, however, the problem that there is no supporting evidence for many of their claimed cash transactions. But I accept Mr Stocking’s evidence that he did make this particular payment as part of the Barn project.

The next head of expense claimed by Mr Stocking is £810, again paid in cash, for “haulage fees for building materials from the Barn to Roy Roles”. Mr Roles used to do business with Mr Stocking. The explanation underlying this is that some time before Mr Stocking’s move to Hartley in September 1999, some of the building materials which had been stored on the Barn site were relocated for storage to premises owned by Mr Roles. Mr Stocking’s evidence was that Mr Montila provided the haulage contractor for this purpose and that he paid in cash for the cost of the transport. Mr Roles gave evidence to Mr Leaver, confirming that he did agree to, and did, store materials on his site, and Mr Leaver accepted that evidence. I accept Mr Stocking’s evidence on this and that he did incur the £810 expenditure for which he claims.

Mr Stocking’s next item of expense is described as “haulage fees for building materials from suppliers to the Barn including the stacking and sheeting”, for which he says he paid £960 in cash. He said that Mr Montila arranged for the haulage but that he paid for it. I again accept that Mr Stocking made this payment.

The next item of expense for which Mr Stocking claims is £290 paid in cash for installing an electricity supply at the Barn. I find that this was put in by Mr Stocking to serve his and his family’s occupation of the caravan and portacabins at the Barn and was not a partnership expense.

Next Mr Stocking claims in respect of a £410 cash payment for “installation of water supply and waste.” He agreed in cross-examination that this was done for his benefit as an occupier of the Barn site and I find that this was not a partnership expense either.

The next item for which Mr Stocking claims is “Labourer and JCB hire for tarmac of road (finding of fact by Trial Judge)”. He claims to have paid £950 cash in respect of this, Mr Montila having asked him to do so. He agreed in cross-examination that this gave him and his family access for the purposes of their occupation of the Barn site, but his case is that it was also of benefit to the partnership project. I find that it was and that this item is properly regarded as a partnership expense incurred by Mr Stocking.

The next item for which Mr Stocking claims is an item of £430.63 in respect of building regulation fees paid by him to Gravesham Council. This item is agreed by Mr Montila and so I need say no more about it.

Mr Stocking next advanced a substantial claim to be allowed £124,080 in respect of his time spent “in consultation works and administration prior to building works and for security provided whilst living on site.” This was computed at a rate of £5 per hour from 1 December 1996 to 1 October 1999 on the basis of a 24-hour day. I need say no more about this claim either because, for reasons given, Mr Stocking abandoned it.

Next, Mr Stocking claims £8,650 in respect of storage fees paid to Mr Roles in respect of the building materials I have mentioned. It was put to Mr Stocking in cross-examination that Mr Roles was to be paid £25 a month, with which he disagreed. Mr Stocking said he paid Mr Roles in cash and was given a receipt, although I was not shown it. In his witness statement made in November 2002, Mr Roles said that he agreed with Mr Stocking to store the materials for him at “a ‘nuisance’ fee of £50 a week.” He said he did this as a favour, not for financial gain, that he estimated the value of the stored materials at about £75,000 and that he ultimately stored it for about four years rather than the few months to which he had originally agreed. Mr Stocking accepted in cross-examination that he agreed to pay Mr Roles £50 a week. Mr Roles’s evidence was that Mr Stocking paid him a total of about £4,500 by way of storage charges, which he had paid in two cash instalments. As at November 2002, he claimed that about £5,000 was still outstanding in respect of storage charges. Mr Roles gave oral evidence to Mr Leaver, but not to me, and Mr Leaver found him to be a witness of truth upon whose evidence he could place reliance. Mr Stocking’s evidence in his witness statement of April 2003 is that by June 2000 he had only paid Mr Roles £4,500, and that a further £3,500 was still due to him which he says Mr Montila agreed he would pay. He says Mr Montila did not in fact pay it (and Mr Montila does not suggest otherwise) and Mr Stocking provided no explanation as to when (if it be the case) he paid anything more to Mr Roles himself, although in his witness statement of April 2005 he asserted that he had paid Mr Roles £8,650.

I accept Mr Stocking’s evidence that this head of expense was a partnership expense. I accept that the agreed rate was £50 a week, which over a period of four years comes to some £10,400, so that the £8,650 figure which Mr Stocking claims is within a realistic bracket. I have, however, neither seen nor heard any evidence satisfying me that Mr Stocking paid more than £4,500, which is all that Mr Roles (Mr Stocking’s witness) admits to having received. As regards the balance, I accept that it is in the nature of a partnership liability, but as I am not satisfied that Mr Stocking has discharged it, I see no justification for giving him exclusive credit for such liability. I find that he is only entitled to credit for £4,500 under this head of claimed expenditure.

The final item of expense claimed by Mr Stocking is one he appears only to have remembered on the first day of the trial before me, a memory he explained in his witness statement of 14 June 2005. He there said that in 1996 and 1997 Mr Montila had purchased various goods through his companies Target and City Services, which were then taken to the Barn. Mr Stocking said he asked Mr Montila what they were worth, who replied that it was in excess of £60,000. Mr Stocking continued:

“I was very surprised but asked him how much I owed him. He told me that he would be prepared to accept £15,000. The reason for this was that he had bought the goods through the companies and could get trade discounts and also he would recoup the VAT. Therefore he reckoned that £15,000 was about right for £60,000 worth of goods.”

I do not understand the reasoning underlying those observations, but Mr Stocking went on to explain that some weeks later Mr Montila asked him for the £15,000 and told him he should put it through his letterbox. Mr Stocking said he did not fancy putting that amount of money through a letterbox, but Mr Montila assured him it would be okay. So Mr Stocking says he drew £15,000 from his bank in cash and posted it through Mr Montila’s letterbox in Bexley. He says he was very concerned about handling the matter in this way, but that he eventually made telephone contact with Mr Montila who told him he had received the money.

Unlike the other heads of claimed expenses to which I have referred, this head of expense was a brand new one, apparently remembered only on the first day of the trial. This late afterthought by Mr Stocking was not even put to Mr Montila when he gave evidence and there is no evidence corroborating it. Mr Stocking had previously had to search his memory to remember what he had put into the partnership in order to provide it to a jointly instructed accountant, Mr Potter. He had not included this item and nor did he make any reference to it in paragraph 18 of his April 2003 witness statement, where I would have expected him to mention it if it was a genuine payment. His explanation in cross-examination for not doing so was the absurd one that he had not thought it relevant at the time. I do not accept that Mr Stocking paid any such sum to Mr Montila. His account of the the transaction appears to me to be incredible, and if it had occurred I find it inconceivable that he would not have remembered it and included the £15,000 payment in his list of expenses provided to Mr Potter. I find against Mr Stocking on this head of expenditure.

The net result of my above findings is that I hold that Mr Stocking’s financial contributions towards the partnership project totalled £68,160.63.

Mr Stocking moved into the Hartley house in September 1999, although the removal of his effects from the Barn continued into 2000. He agreed in cross-examination that from the time he moved into the Hartley house he did nothing more in connection with the development of the Barn. Mr Montila began work on the conversion of the Barn in about June 2000. Mr Stocking knew he had embarked on the conversion work but says he did not know how much work was being done and claims (but Mr Montila denies) that from then on he was excluded from access to the Barn. Relations between Mr Stocking and Mr Montila were by then very poor. There were meetings between them at the Barn in June 2000. Mr Stocking says that at the first meeting Mr Montila threatened him and said that he was going to complete the Barn conversion on his own. Mr Stocking said that at another meeting a few days later Mr Montila offered him £225,000 for his interest in the project, to which he agreed, but Mr Stocking says Mr Montila then reneged on this. Mr Montila, for his part, denies that there was any such agreement. It is unnecessary for me to rule on this particular difference between the parties since it has not been any part of Mr Stocking’s case that he has disposed of his partnership interest in exchange for a promised payment of £225,000 by Mr Montila. Mr Stocking also says that it was at this meeting Mr Montila agreed to pay Mr Roles the balance of the money due to Mr Roles, Mr Stocking acknowledging that to date he had only paid him £4,500 and that a further £3,500 or so was still due.

Mr Stocking served a notice on 6 March 2001 dissolving the partnership. The present proceedings followed in June 2001 and in paragraph 2 of his Defence served in July 2001 Mr Montila asserted that he had borne all the “considerable cost of conversion.” Following the commencement of the proceedings, Mr Montila continued to work on the conversion of the Barn. I find that Mr Stocking knew perfectly well that he was doing so and he raised no objection to it until 9 September 2004, when his solicitors wrote to Mr Montila’s solicitors seeking Mr Montila’s undertaking that he would cease all work on the Barn, failing which an injunction would be sought. Mr Montila did not give the undertaking, he continued with the work and no injunction was sought. Mr Stocking said in cross-examination that he did not object to the fact that Mr Montila was completing the conversion but did object to the cost he was incurring in doing so although, somewhat inconsistently, he also said he would not have been happy for Mr Montila to get on with the job even if he had thought there was any profit to be made from its completion.

Turning now to Mr Montila’s contribution to the partnership, his witness statement for the purposes of this account was made on 17 March 2005. He explained he has had some 32 years of experience in the building industry, having worked on both commercial and domestic projects. His wife Josephine has worked alongside him on these projects during most of his working life. He had earlier produced a Scott Schedule identifying all his expenditure incurred in developing the Barn, by reference to invoices and other documents. The schedule and accompanying documentation run to four files. Mr Montila acknowledges that there are several items of claimed expenditure for which he does not have documentary evidence but says it is clear from an inspection of the Barn that the items were incurred, and gives various examples of this. He confirmed all his claimed expenditure in his evidence.

The Scott Schedule lists just over one thousand items of expense incurred by Mr Montila in respect of building materials, labour, plant hire and other building expenses from 1 June 2000 to 23 May 2003. The total is £589,278.86, of which probably the largest single item is No. 935, being £245,000 paid to Mr Jason Shave for work done and the provision of labour over the period 2000 to 2002. Mr Stocking has indicated in the Schedule his dispute of many of these items, including this one, giving brief reasons (he asserts that the Shave item is bogus), although the Schedule contains no response by Mr Montila to the stated grounds of dispute and so the Scott Schedule itself provides little help in focusing on which items are in fact in dispute. Further, with only one or two minor exceptions, no attempt was made by Mr Russell to investigate the grounds of dispute in his cross-examination of Mr Montila, whose evidence in support of all the items listed in the Scott Schedule therefore remained essentially unchallenged. In addition, in his witness statement Mr Montila also identified further heads of claimed expenditure, totalling £23,938.54, which he said should also have been in the Scott Schedule. Further, whilst Mr Montila accepts (like Mr Stocking) that he can make no claim to remuneration for acting in the partnership business down to the date of dissolution, he does claim (and I did not understand Mr Russell to dispute) that he is in principle entitled to reasonable remuneration for carrying on the partnership business following dissolution. Mr Montila claims that he should be allowed £229,200 for his post-dissolution labour, and that remuneration of £55,230 to Mrs Montila for her part in the development works is also reasonable. These three main heads of expense (Scott Schedule expenses, further expenses and remuneration) total £897,647.40. Yet further, Mr Montila claims of course to include by way of his contribution to the partnership venture his original £60,000 to the acquisition costs of the Barn, plus various other heads of expense which, with the £60,000, total £145,638. The total of all Mr Montila’s claims, whether by way of expenditure or remuneration, in respect of the carrying out of the Barn acquisition and conversion is, therefore, £1,043,285.40. He claims that the result of this expense and labour (or at any rate the bulk of it) has been to increase the undeveloped value of the Barn with planning permission (at most £250,000 as at March 2005) to a developed value of £795,000 at the same date. He claims that in taking the accounts he should be credited with that increase in value.

In cross-examination, it was put to Mr Montila that the partners’ original plan was to devote no more than £300,000 to developing the Barn. Mr Russell placed reliance on Mr Joyce’s letter of 14 September 1999 to Mr Stocking (in fact to Mr Roy Davis: this was an alias that Mr Stocking used in connection with the Barn project, because he had previously been made bankrupt and did not want those involved in the project to know they were dealing with a former bankrupt). Mr Montila replied that that figure related solely to the Barn conversion, not also to the stables, landscaping and car park and that in any event it was simply an estimated figure for the purposes of fixing the Building Regulation fee, adding in re-examination that he had estimated minimum development costs in order to keep the fee down. He agreed that he and his family moved into the Barn in March 2003, but disputed that it was by then in a habitable state. Even though over £589,000 worth of labour and materials had (he claimed) by then been invested in it, it still had no staircases (the family had to use ladders), and the Barn still had only limited lighting and heating. Mr Russell put item 664 of the Scott Schedule to Mr Montila, being £233.40 paid on 16 November 2002 to Chapter Boiler and Heating Services. The ground of dispute raised by Mr Stocking in relation to this particular expense is that it was for daily living by Mr Montila and his family, a point that Mr Russell repeated to Mr Montila. That item was not the best one with which to make such a point, the particular expense having been incurred some four months before the family moved in; and Mr Montila anyway explained that expense as being necessary in order to dry the new house out. Mr Russell also asked Mr Montila about a payment of £1,750 on 24 December 2000 to Haversham Group Limited for “sand/shingle/muck away”. Mr Stocking had disputed this payment on the basis that a search had revealed that no such company had ever existed. Mr Montila said he had paid the sum in cash to company representatives who had called in, explaining that better discounts are available for cash. He drew the money from the bank. Even if no such company as Haversham Group Limited ever existed, that does not disprove Mr Montila’s claim that he made this payment to individuals claiming to act for such a company, and Mr Russell did not suggest to Mr Montila that he knew that no such company existed. In fact, the payment is supported by an invoice from “The Haversham Group Ltd”, giving its address, VAT registration number and purported company number and apparently relating to a genuine corporate organisation.

Mrs Montila also gave evidence. Her witness statement was made on 17 March 2005. She explained that her fundamental role was to assist Mr Montila by way of supporting him in achieving the most productive work possible in relation to the development of the Barn. This was mainly in the area of administration, accounting support, property design and site maintenance. She explained that she was in particular responsible for the administration involved with raising money for the project, and she identifies the sources from which a total £828,367.65 was raised. She dealt with the daily administration of the project and was constantly sourcing products either for the immediate build or that would affect the end design: by way of an example, she said that whether to have electrically operated curtains needed to be considered at an early stage of the build. She provided physical help on working on site and says she spent a great deal of time preparing accounts. She recognises, however, that substantial payments were made in cash – in particular, to Mr Shave – and that no receipts were obtained.

In cross-examination, Mrs Montila acknowledged that some of the project invoices were made out to Target Contracts Limited, a Montila company, which has since been dissolved. She explained that she would have paid money into Target when the invoices came through. In re-examination, she said that no proceedings were brought against her or Mr Montila by the liquidator in respect of any such invoices, nor were any such proceedings brought by the liquidator of City Services Building & Roofing Bexleyheath Limited, another Montila company that has since also been dissolved.

Some fairly remarkable evidence was given by Mr Shave. He is a self-employed builder who has known Mr Montila since about 2000. At Mr Montila’s request, he says he agreed to work on the project and to arrange for labourers as and when required. He said in his witness statement that over the next two and a half years from June 2000 he arranged for labourers, plumbers, carpenters, painters, plasterers and bricklayers to work on the Barn, perhaps a total of about 16 personnel in all. He said that from June 2000 to about December 2002 there were at least 10 self-employed workers at the Barn at any one time. He said that Mr Montila would draw large amounts of cash each week, which he would pay to Mr Shave who would in turn pay the workmen. Mr Shave was not asked to give a receipt to Mr Montila, nor did he obtain receipts from the workmen. He concluded his witness statement by saying that “… I worked out who was there and how much was paid weekly as up to December 2002 the sum was £245,000.” That statement is purportedly supported by a note dated 20 December 2002 addressed by Mr Shave to Mr and Mrs Montila, confirming that “our company” (although Mr Shave is apparently a sole trader) had carried out labour-only construction work to the Barn from June 2000 to 20 December 2002 and had received a sum of £245,000.

In cross-examination, Mr Shave said he had never provided an invoice, been paid by cheque or provided a receipt. He has been registered for VAT since May 2004. He said Mr Montila did not provide him with building materials. None of the workmen he paid gave him a receipt either. He worked out from memory that he had received £245,000 by December 2002, an exercise involving working out how many men were on site at various times. He said that each week there could be from three to seven men on site. He said that the reason he wrote his letter of 20 December 2002 was because Mr Montila rang him and asked for it. He did not ask Mr Montila why. Whilst I do not question that Mr Montila engaged Mr Shave in the project and paid money to him, the £245,000 figure can, it seems to me, to be no more than in the nature of a guess.

The Montila evidence as to what was spent on the conversion was not, therefore, entirely satisfactory, and at the very least there is a major question over what was paid to Mr Shave. I did, however, also receive some helpful evidence from a chartered quantity surveyor and chartered building surveyor, Mr Philip Burkill, of Burkill Johnson. He inspected the site on 2 June 2005 and his report is dated 10 June 2005. He was summarily dismissive of the Scott Schedule, which he regarded as providing no useful purpose as such and said that he had instead approached an evaluation of the work done by splitting it down into recognisable elements and evaluating each such element. In his original report, he arrived at a provisional figure of £433,500 for the worth of Mr Montila’s works to the Barn, outbuildings, drains, bin store and decking which he adjusted to what he called a “sensible” figure of £437,500 to cover any items he may have missed, and to which he would add professional fees and local authority charges of just over £34,000, resulting in a total valuation of some £471,500.

Mr Montila was not satisfied with that conclusion, and made some representations about it, as a result of which Mr Burkill revisited the Barn and reconsidered his report. He found additional items of value worth £15,425 in relation to the structures at the Barn and £34,615 worth of value in relation to certain external works (a tarmac strip, sand school, car park, pond and fencing). Mr Graham’s evidence (he was the valuer) was that at least the sand school might be relevant to value, at any rate to a purchaser of an equestrian bent, whereas the pond would not. Mr Burkill’s evidence of the worth of the sand school work was £11,800. Taking a somewhat broad view, and proceeding from Mr Burkill’s starting figure of £433,500, I find that Mr Burkill found that Mr Montila had carried out approximately £500,000 worth of improvements to the Barn, including a figure for professional fees. His oral evidence was that if the Barn conversion had been put out to tender by the partners, the total cost (including professional fees) might be about £577,000.

One issue before me was the extent of Mr Stocking’s financial contribution to the partnership project and I have made my finding that it was £68,160.63. Another issue was as to what Mr Montila had spent on the Barn in converting it. I am not aware that there was or is any significant issue as to Mr Montila’s other expenses towards the partnership project – Mr Russell raised no challenge to them – and I will make my findings on them in due course.

In advancing his submissions, Mr Russell made the following preliminary point. He said that the basis of the partnership arrangement between the partners was that no more than £250,000 to £300,000 was to be devoted to the Barn conversion. He said, therefore, that Mr Montila had no authority to spend more than £300,000 on it. He accepted that Mr Montila could and should be allowed any expenditure up to £300,000 that he could prove he had applied in increasing the value of the Barn. But he was to be allowed no more than that.

I do not accept that argument, since the evidence did not satisfy me that there was any agreement or arrangement between the partners that no more than £300,000 was to be spent on the conversion. I do not, therefore, accept that there is any £300,000 cap on the amount for which Mr Montila can claim credit for his undisputed work in converting and improving the Barn.

That being so, I turn to consider what Mr Montila is to be allowed in respect of his expenditure and effort in converting and thereby improving the Barn. In this context, it was common ground that the value of the improvement he achieved, assessed as at March 2005 (the date of the agreed valuations), is the difference between (i) the then unimproved value of the Barn, with planning permission, which Mr Graham put at between £225,000 and £250,000, and (ii) the then improved value of the Barn, namely £795,000. Mr Cousins QC, for Mr Montila, suggested, and I agree, that in fixing the Barn’s unimproved value at March 2005 I should take the mean of £237,500 between Mr Graham’s two figures. I propose to do so, and I find that that was the then unimproved value. It follows that I find that the increase in value as at March 2005 was £557,500 (£795,000 less £237,500).

Mr Montila’s case is that he in fact spent substantially more than £557,500 in achieving that increase in value. I have listed how he claims to have spent in excess of £613,000 on converting the Barn, and claims that in addition he and Mrs Montila should also be allowed salary allowances of some £284,000 for their labour in achieving the conversion. As I have said, virtually no challenge was mounted at the trial to Mr Montila’s case that he had incurred expenditure of this nature or ought to be given salary allowances of this nature. One point that was made by way of challenge was that certain of the expenses were apparently paid by Montila companies rather than Mr Montila personally, but Mr Cousins submitted, and I accept, that this makes no difference to the position. Either the companies were reimbursed (which was Mrs Montila’s evidence) or they were able to claim reimbursement from Mr Montila, who had incurred a liability to them for such expenditure. The evidence was also to the effect that both companies went into liquidation and that no claims were brought against either Mr or Mrs Montila in respect of any such expenditure.

Mr Cousins disclaimed, however, any suggestion that the extent of Mr Montila’s claimed expenditure and labour could be said to have been authorised by, let alone agreed with, Mr Stocking in advance and he therefore equally disclaimed any case that I should simply make a finding as to the true extent of the claims and treat them as agreed payments of capital to the partnership. His case was the less ambitious one that these claims at least exceeded in value the £557,500 figure (the value of the improvement to the Barn), and therefore justice between the partners required that Mr Montila should be allowed that figure in the taking of the accounts. He submitted that the applicable principle is that which ordinarily applies between co-owners, namely that a trustee who has expended money on trust property is entitled to be recouped the amount, if any, by which the value of the property has been increased by that expenditure (though not exceeding the amount of the expenditure): see Rowley v. Ginnever [1897] 2 Ch 503; and Rowan v. Dann, unreported, 21 February 1991, Millett J. I understood Mr Russell to accept that that principle ought also to be applied in the present case: he advanced no different argument.

As to the facts, I have indicated that I have reservations about the reliability of Mr Montila’s evidence, in particular with regard to the Jason Shave payments. But I have come to the conclusion, and find, that the amount of Mr Montila’s expenditure and value of his labour at least exceeded the £557,500 by which he improved the value of the Barn, Mr Montila’s evidence on this being, as I have said, essentially unchallenged. In arriving at that conclusion I have also had regard to Mr Burkill’s evidence as to the value of the works that he identified as having been carried out in effecting the conversion, being evidence which I regard as providing general support for the probability that Mr Montila did incur expenditure and perform labour at least in excess of £557,500 in value. I propose, therefore, to apply the general principle to which I have just referred and find that, in taking the accounts, Mr Montila is entitled to an allowance in respect of that figure of £557,500.

I must, however, record that Mr Russell disputed that the relevant improvement value was £557,500. I have explained that Mr Stocking abandoned any claim for a sale of the Barn. Mr Russell’s argument was that, on the facts, a fairer figure to take as the value of the improvements was a 2003 value. The submission was prompted by Mr Graham’s evidence that, assuming that in 2003 the converted Barn was in the same condition as it was in March 2005, it was worth then between £925,000 and £950,000. The process of Mr Russell’s reasoning was, as I followed it, that it was in 2003 that Mr Stocking sought a sale, yet Mr Montila declined to sell, and so fairness demanded that, if a buy out of Mr Stocking is now to be by reference to values rather than sale proceeds, the time for making the relevant valuations was in 2003, when a sale was sought.

There is, first of all, a practical difficulty about that, namely the absence of any evidence as to the unimproved value of the Barn was in 2003, without which it is not possible to assess the value as at 2003 of the improvement achieved by the conversion; and I would not be prepared to assume that it was simply the same as the 2005 value. Accordingly, the evidence does not equip the court with the material necessary for dealing with the matter on the basis that Mr Russell invited. Furthermore, if I were to take the view that the 2003 improvement value is the applicable one, I would also have to revisit the factual question of the allowance that Mr Montila is to be entitled to in the light of the general principle to which I have referred. But I can in any event see no justification for determining the parties’ rights by reference to 2003 valuations. Mr Stocking’s basic right, which he sought to exercise, was to achieve a sale of the Barn. Had he pressed for that, and had I ordered it, the sale would have yielded net proceeds and the task of the court would have been to determine how those proceeds should be divided between the partners. He has, however, disclaimed a sale and it therefore seems to me that the closest equivalent one gets to a sale is to use the agreed 2005 valuations. If Mr Stocking had pressed for a sale, would he also be asking for the accounts to be taken on the basis of 2003 figures? It seems to me improbable that he would because, if so, what would be the point of seeking a sale? As it seems to me, therefore, the rationalisation of Mr Stocking’s case on this point is that, having applied in 2003 for a sale, he is entitled to have the accounts taken as if a sale had in fact been achieved in 2003, even though in the event Mr Montila has opposed a sale and Mr Stocking has not pressed for it. I am not satisfied that there is any sound basis for taking the accounts on the basis of 2003 figures. It appears to me that such a case, if it is to be made at all, must be based on the contention that, by failing to achieve a sale in 2003, Mr Montila breached some duty he owed Mr Stocking. That is not, however, how the case was put. I do not, therefore, accept Mr Russell’s submission that the account should be taken by reference to the 2003 values.

The next submission that Mr Stocking made was that Mr Montila should be accountable for an occupation rent in respect of the Barn. The history of the occupation of the Barn since its purchase is that Mr Stocking and his family occupied a caravan and portacabin at the Barn from late 1996 to October 1999, when they moved into the Hartley property. Mr Montila started work on the conversion in about June 2000, and then he and his family moved into a mobile home at the Barn in about December 2000, which they occupied until March 2003. In March 2003, the converted Barn was sufficiently habitable to enable the family to move into it, which they did, and they have lived there ever since. The first two periods of occupation (down to March 2003 and by Mr Stocking and Mr Montila respectively) were for approximately equal periods and can, in my judgment, broadly be said to cancel each other out. Moreover, I propose to presume that, down to March 2003, the converted Barn was not yet habitable and so the respective occupations by each partner were of land that was still unimproved, and I also accept that Mr Montila’s occupation during this period was, in a material respect, for the purpose of carrying out the conversion of the partnership asset. Even if it were in principle appropriate to order an occupation rent against either partner in respect of these two periods, there is no evidence as to what the proper rent should be, and I suspect that it would anyway be of a very modest order. In the circumstances I have outlined, I do not propose to order an occupation rent to be paid by Mr Montila during his period of occupation down to March 2003. (I should add that I did not understand Mr Montila to be suggesting that Mr Stocking should pay such a rent in respect of his period of occupation).

As for the period since March 2003, I find that the converted Barn was habitable as from March 2003, although much conversion work still remained to be done and I find that even now it is in certain respects incomplete: there are no handrails on the stairs, a bathroom and the swimming pool are incomplete and there has been no final certificate for building regulation purposes. The only evidence as to letting values is Mr Graham’s hearsay evidence from various unnamed valuers who had not even seen the Barn. I presume that their opinions assumed a property which was readily lettable, whereas I have mentioned features which indicate that the Barn, even in its present state, may not be. I therefore view Mr Graham’s figures as to the current rental value with reservation. Moreover, they are 2005 figures and there is no evidence as to what the rental value of the Barn would have been over the period since March 2003. The evidence is, therefore, in my judgment insufficient to enable me to fix a fair occupation rent in respect of the post March-2003 period.

On the other hand, I do consider that in principle the doing of equity between the partners requires Mr Montila to account to the partnership for a fair occupation rent since March 2003, because I take the view that the reality of the position is that since then he has been occupying the converted Barn, a partnership asset, as his family home. I propose, therefore, to order him to account to the partnership for an occupation rent in respect of the Barn from 1 March 2003 down to the date of this judgment. I shall give the parties an opportunity to agree such rent, and in default of agreement I shall refer the determination of its amount to the Master.

Accordingly, I conclude that, in taking the final accounts between the partners, Mr Montila is entitled to credit in respect of a figure equal to the improved value of the converted Barn, namely £557,500, but is accountable to the partnership for an occupation rent in respect of the period 1 March 2003 down to the date of this judgment, such rent to be determined as I have mentioned. As to the division of the unimproved value, £237,500, I have made my finding that Mr Stocking is entitled to credit for contributions of £68,160.63. Mr Montila claims, and Mr Russell did not challenge, that he is entitled to site acquisition costs of £61,455 and professional fees to planning permission stage of £11,386.40, these two items totalling £72,841.40. I find that he is entitled to allowances in this sum. Mr Cousins also submitted that, even though I am not ordering a sale, I should make an appropriate allowance for the notional costs of any sale that might have been ordered. I decline to do that. I prefer the view that the agreed valuation of £795,000 should be regarded as representing the notional net proceeds of sale. Subject to the various allowances to which I have found the parties to be respectively entitled, the remaining notional net proceeds are divisible between them in equal shares. I will hear counsel as to the form of the order.