Armitage Holdings Inc v Delahunty

Donald Garratt (“the Deceased”) was a property developer. He died on the 18 March 2006. He conducted his business through companies, one of which was the claimant, Armitage Holdings Incorporated, a company registered in Panama (“Armitage”). One of the properties of which Armitage is the registered proprietor is Flat 2, 12-14 Cotswold Street, London, SE27 (“ the Flat”). The Flat is occupied by the defendant Peter Delahunty, a builder. In form this is an action commenced in August 2005 by Armitage to recover possession of the Flat from Mr Delahunty as gratuitous licensee (and a further action commenced in February 2006 seeking in the alternative to recover possession from Mr Delahunty as a tenant whose tenancy had been terminated). In substance this is the trial of Part 20 claims brought by Mr Delahunty (originally in November 2005) arising out of an alleged business relationship between Mr Delahunty and the Deceased between 1991 and 2004.

In essence Mr Delahunty alleges that the Deceased's property development business was a form of joint venture. Mr Delahunty's case is (in brief) that the Deceased would identify and purchase properties for refurbishment or development, that Mr Delahunty would use his skills as a builder and contract manager to develop them, and then to maintain and manage such of them as were let. He acknowledges that in the course of this relationship he received money from the Deceased (both cash and cheques), but he asserts that this was (at best) only sufficient to defray the costs incurred in the development or management so that he received no proper payment for his own work in relation to the projects. Furthermore he says that he invested not only his skill and time but also his own resources. His statement of case in the final form signed on 29^th May 2007 acknowledges in (paragraph 13) that “Mr Delahunty cannot presently say what the state of the account was at any particular time”. But he says

Relying on these allegations of fact Mr Delahunty says that he is entitled to the following relief:-

No skeleton argument was lodged in relation to the Defendant’s claims: but Mr Steynor explained the position in a short opening of the Part 20 claims.

The claim relating to the Flat is based by Mr Steynor (Counsel for Mr Delahunty) upon an application of the principles relating to proprietary estoppel, even though in the instant case the estoppel is defensive. These are so familiar that it is sufficient to say that I have considered the evidence by reference to the formulation of them set out in Megarry and Wade “The Law of Real Property” (6^th edition) paragraph 13 – 001:-

“(a)

the owner of land (O) induces encourages or allows the claimant (C) to believe that he has or will enjoy some right or benefit over O’s property

(b)

in reliance on this belief C acts to his detriment to the knowledge of O;

(c)

O then seeks to take unconscionable advantage of C by denying him the right or benefit which he expected to receive.”

Mr Steynor drew my attention to the elaboration of these principles in Halsbury’s Laws England Volume 16(2) paragraphs 1089 to 1092.

The claim for “fair and reasonable remuneration” (para 3(b)(iii) above) is the factual foundation of the other financial claims and (said Mr Steynor in opening) subsists in the event that those other financial claims fail. He based this head of claim squarely upon a simple contract for each individual property where work was done, the contract providing for Mr Delahunty to do the work either for a fixed-price or alternatively for a reasonable sum, the claim arising because the Deceased (or one of the other defendants) did not pay the sum due. Save for one point, this head of claim raises purely factual questions as to the existence of any contract, the identity of the contracting parties, the terms of the contract, the work done under the contract and the extent to which the obligations of the employer towards the contractor have been fulfilled. The one legal point is how the estate of the Deceased can be made liable on any contract made by Armitage or one of the Deceased's other companies.

The claim against the Deceased's personal representatives for the value of a flat at Tooley St and compensation for the non- receipt of flats at Grange Rd was based by Mr Steynor in opening upon contract. The nature of the case is that, in lieu of the sums due under the contracts to which I have referred in paragraph 5, the Deceased and Mr Delahunty agreed that Mr Delahunty should receive £600,000; and then further agreed that in lieu of the payment of the £600,000 Mr Delahunty should receive the Tooley St and Grange Road flats (which did not then exist, but it was hoped would be developed). I think what is argued for is a contract of accord and satisfaction in relation to the original contracts for work. (I do not think that it is suggested that this new bargain was a compromise of potential claims for work done, where the compromise would not be dependent upon the validity of the original contracts, because it is asserted that the original contracts remain actionable). There are factual issues as to the identity of the contracting parties (for Mr Delahunty says that this promise was made by the Deceased personally and can be pursued against his estate, whoever was liable on the original contracts). The Deceased himself never acquired either the Tooley Street site or the Grange Road site. The Tooley Street site was never acquired at all (the purchase contract being terminated and the deposit forfeited). The Grange Road site was acquired by Blackfriars but not developed (being sold on as a development site). The case advanced on behalf of Mr Delahunty is that the failure to provide him with the promised flats is a breach of contract by the Deceased, and that he is entitled to damages for breach of contract assessed by reference to the value of the flats, or alternatively to payment of £600,000.

The claim against Blackfriars for the value of dishonoured cheques has a clear legal basis. The principles which direct my consideration of the evidence of the evidence are simply these:.

The legal basis for the claim against the estate of the Deceased for the value of dishonoured cheques drawn by two other of the Deceased's companies is less clear. In opening Mr Steynor submitted that he was entitled to pierce the corporate veil because the Deceased was the controller of the companies that had drawn cheque, and he himself had signed the cheque. I do not accept that submission in its bald form. The principles by reference to which I consider the evidence are these:-

The two persons between whom the transactions which found the claim took place where the Deceased and Mr Delahunty. This is my assessment of them.

The Deceased was married and had four children (his widow and one of his sons now being his personal representatives). He had throughout his life been a businessman resident in this country. In the early years he was involved in the rag trade (including imports) but in the years with which I am concerned he was a property developer. The original nature of his business was to acquire properties at auction, to convert or refurbish them, and then to sell on. In later years he retained some properties and let them. The vehicle he used for these transactions was Armitage, incorporated in Panama, with a company secretary and least one director being an employee of a firm of Guernsey solicitors. The Guernsey solicitors were instructed on purchases and on sales. The completions were offshore and the funds for completion appear to have been held offshore (the original source of them are not being apparent from the evidence). The Deceased did not resort to borrowing, but funded the acquisitions and (subject to what is found in this action) refurbishment works out of his own resources (either held offshore or representing the rents collected from let properties). He retained English accountants. From about 2000 he relied on Eric Diamond, an unqualified accountant who was consultant with Elliott Wolf Rose (“EWR”) and ran his own bookkeeping business. Mr Diamond prepared the books, completed VAT returns, prepared trial balances, and effectively instructed EWR in relation to the filing of accounts by Blackfriars and in relation to the preparation of the Deceased's tax returns. No accounts were prepared for Armitage. The Deceased maintained a handwritten record in a grey ledger of the payments made on behalf of Armitage and Blackfriars. But no comparable record showing monies received was disclosed. Where rents were collected by professional management agents on properties owned by Armitage they would apply a withholding tax and account to the Revenue accordingly before paying the rents to Armitage: but where rents were collected by Mr Delahunty as agent for the Deceased or his companies there were no such deductions, and Armitage appears to have paid no tax on its activities in this country as an overseas landlord. For large projects the Deceased was capable of assembling a professional team, but he did not always act on their advice (particularly where the critical issue was an assessment of the property market which the Deceased believed he knew better than they did).

The Deceased suffered a severe stroke in March 1992 which resulted in significant impairment of his speech and partial loss of sight. He was also diabetic and a heavy drinker. This did not prevent him from transacting property deals. During the course of 2002 there was a deterioration in his condition attributable to organic brain syndrome. By 2004 he was in serious decline. In January 2005 he was admitted to hospital, and from then until very shortly before his death on the 18th March 2006 his days were spent either in hospital or in a nursing home. He was considered capable of granting a general Power of Attorney in January 2005 and an Enduring Power of Attorney on the 21^st May 2005 (which was registered at the Court of Protection on the 22nd of July that year). He was accordingly incapable when these proceeding were commenced by Armitage in August 2005. Mr Delahunty challenged the authority of those instructing Mr Knight and those purporting to act for Armitage: but a clear and comprehensive board minute was produced. The Deceased was also incapable when Mr Delahunty made his formal claims in September 2005 about what the Deceased had promised.

As the sons began to act on the Deceased's behalf pursuant to the Powers of Attorney solicitors wrote on Mr Delahunty's behalf recording instructions

“ in relation to various promises made to Mr Delahunty that Mr Delahunty would have an interest in certain properties in return for Mr Delahunty carrying out services for Mr Garrett and for companies of which Mr Garratt appears to have been the only authorised signatory”.

They also wrote in respect of

“cheques drawn on various companies in which Mr Donald Garrett has a substantial interest and for whom he was acting as signatory and in respect of which cheques to the same were dishonoured on presentation”.

I was shown no response recording the Deceased's reaction to these claims. No witness statement was taken from the Deceased once the proceedings had started. Given his state of health and (from July 2005) his legal incapacity this is not surprising and I draw no inference that the Deceased would have acknowledged Mr Delahunty's claims. (Mr Delahunty told me of one incident after the commencement of proceedings in August 2005 when he had a chance meeting with the Deceased at hospital, and the Deceased told Mr Delahunty not to leave the Flat under any circumstances because “I Donald Garrett gave you the flat”. The Enduring Power of Attorney would already have been registered at this stage. The Deceased’s statement about the Flat can be given no weight in relation to Mr Delahunty's broad claims in this action, and is of only very limited assistance in relation to the claim concerning the Flat).

The general position in which I find myself in this action is, therefore, that I have the evidence of one only of the parties to the conversations and oral agreements alleged, the other party being dead and not having had the opportunity to address in detail the case now made. Whilst it remains the case that the survivor has only to satisfy the Court on the balance of probabilities that the alleged arrangements were made, the Court must in the circumstances subject the survivor's evidence to the closest scrutiny, given the difficulty of challenging it.

Mr Delahunty is a builder qualified by experience rather than by formal training. He built up significant business as a subcontractor for main contractors as such as Mansells and Lelliott using a limited company. But in 1987 his company was owed some £4.25 million by Lelliott for completed work when a cheque in part-payment was dishonoured, and Mr Delahunty’s company went into liquidation. After a break he commenced business as a jobbing builder, employing his son and a couple of labourers. He traded as a sole proprietor but used several trading names including “P J Delahunty”, “B& G Builders” , “ Omen Builders”, and “Lindsay & Son”. None of these enterprises was registered for VAT (and so produced returns). None produced any accounts (audited or otherwise) or tax returns. None maintained any ledgers or journals. There is thus no coherent documentary evidence demonstrating the turnover or profitability. Mr Delahunty produced one personal bank account (the statements beginning in 1999), but there was no disclosure of any bank account relating to any of the other trading names (although they appear to have been named as payees on cheques). There is thus little in the way of raw financial data against which the oral evidence as to individual transactions can be assessed. (With the rare exception of certain relatively early dealings) Mr Delahunty did not produce formal estimates or quotations nor did he in general produce interim statements or indeed final statements of account. Identifying the work done and the payments made in respect of it is therefore extremely difficult (and impossible from the documents produced by Mr Delahunty himself).

There is however a certain quantity of documentary material. First there are handwritten letters which appear to be in the hand of Mr Delahunty: the authenticity of these was not challenged in the disclosure process or at trial. Second there are handwritten letters which appear to be written on behalf of Mr Delahunty but which bear his apparent signature: the authenticity of these was not challenged in the disclosure process but at trial Mr Delahunty denied that they were “his” documents, (although in the least one case he said that he had dictated the document). No explanation was provided as to how any third-party could have such an intimate knowledge of Mr Delahunty's affairs to have written letters in the terms in which they appear, and I intend to treat these letters as accurately setting out Mr Delahunty's position (no matter who physically wrote them). Third, there are some typed up interim and final statements in various of the trading names used by Mr Delahunty. Mr Delahunty said that these had been prepared by or on behalf of the Deceased for the purpose of being given to the accountants, even though they bear Mr Delahunty ‘s apparent signature. I find that they were prepared by or on behalf of Mr Delahunty (probably using a secretarial service recommended to him by the Deceased) no doubt at the insistence of the Deceased for purpose of being shown to Mr Diamond, and that they may be taken as a reliable indicator of the financial event which they purport to record.

But the essential material which supports Mr Delahunty's case is his witness statement (568 paragraphs spread over 75 pages) and his evidence at trial. I do not consider that Mr Delahunty came to court to lie to me and tell me an entirely fabricated story. But his witness statement was based on pure recollection unassisted by the volume of documents disclosed by the Deceased’s family, and coloured by a deep sense of grievance (not least that he thinks that he ought to have half of the Deceased's business). That recollection was shown to be seriously at fault when compared with those documents. When that was exposed in relation to insignificant matters Mr Delahunty frankly admitted that his statement was wrong. But when it was exposed in relation to important matters I am satisfied that Mr Delahunty did tell me deliberate untruths - because he feels so hugely wronged by the Deceased's family. Whilst the very general outline of his evidence may be broadly accurate, I do not regard Mr Delahunty as a reliable witness on any matter of detail and I approach his evidence on any specific issue with extreme caution and a strong disinclination to accept it unless independently corroborated.

I propose to group my findings of fact and holdings of law under the various heads of claim rather than to record the competing evidence and to make findings in relation to the whole 12 years of dealings between Mr Delahunty and the Deceased and his companies in relation to sundry properties. (In doing so I shall for simplicity refer to “the Deceased” rather than “the Deceased and his companies”, though I have the distinction well in mind: and I shall equally refer to “the Deceased’s companies” even though he was not the only executive officer or shareholder). From the general review that was undertaken I make the following findings:-

I say at the outset that there no evidence in support of the case advanced in opening that there was an individual fixed-price contract for work done at each property. If there is work not paid for, then it was work done under an informal contract which implicitly provided for reasonable remuneration. I find that this was (in contrast to the way he dealt with other builders) the way that the Deceased dealt with Mr Delahunty.

For there to be a maintainable claim for unpaid work there must be satisfactory evidence of the work done, of what is a reasonable charge for that work (supported by expert evidence so far as necessary), and of what payment has already been made in respect of that work. In his statement of case Mr Delahunty very frankly acknowledges that he does not know the state of account between himself and the Deceased’s companies. The case seems to have been prepared on the basis that if Mr Delahunty put in enough evidence that he had done a lot of work then the Court would simply pluck a figure and award it to him. But the cause of action is contract, and Mr Delahunty is seeking payment due under the contract, not an award of general damages for some wrong done to him.

Mr Delahunty gave extensive general evidence of the sort of work he did on each property. But the evidence falls far short of anything that would enable the Court to decide on a rational basis exactly what he (or subcontractors paid by him) did. There is no point in ordering an inquiry because it is plain that the underlying evidence is not there. Save for the very early days (e.g in relation to Lowther Hill) there are no plans or specifications, no bill of quantities, no wages records, no schedule of subcontracted works, no journal recording expenditure on materials or the hire of machinery. There is no basic material with which to work. This is perhaps the penalty that builders who trade significantly in cash, do not make VAT returns or operate a PAYE system (or the construction industry equivalent) and do not prepare accounts or tax returns must suffer for securing the advantages they otherwise perceive in operating in the manner they do.

The question then is to what extent can I treated as reliable Mr Delahunty’s unassisted recollection of what he did, what it was worth and what he was paid. The short answer is that I cannot, the unreliability of the recollection being exposed in cross-examination.

Mr Delahunty’s evidence went back to the start of the business relationship with the Deceased. He said that there remained unpaid work even from those early days. This was the foundation of his claim that he had a stake or investment in the business in which the Deceased was involved, unspecified unpaid undelivered bills being rolled forward to constitute an unspecified stake in any newly acquired property. But I find that by the time of the break in 1995 all that early work had been paid for in full (save for the odd few hundred pounds which the correspondence showed the Deceased tended to knock off the bills submitted to him). Any claim for unpaid work must therefore arise from the resumption of the relationship in January 1998.

I hold that Mr Delahunty has failed to establish on the balance of probabilities that is any significant sum outstanding in respect of unpaid work after January 1998. Further, because he is unable to produce any invoices and to prove that they are unpaid, and because he acknowledges that he is unable to place before the court the state of account between himself on the one hand and the Deceased and his companies on the other, I am unable on the evidence to adjudicate what less than significant sum might be due.

I have considered whether I can subject the narrative account given by Mr Delahunty in evidence to some form of analysis (an exercise not undertaken on his behalf by those representing him). But it is clear (for three reasons) that I cannot.

First, I have given my assessment of Mr Delahunty’s reliability as a witness: I do not think I can rely upon his witness statement as accurately recollecting the work actually undertaken.

Second, whenever the generalities of his witness statement could be tested against some documentary record it seemed to me that in his witness statement he overestimated the proper charge for the work done. Examples include the following:-

Third, whenever the generalities of the witness statement could be tested against some documentary record it seemed to me that Mr Delahunty’s evidence under-estimated the amount that he had been paid for the work. Examples include the following:-

For these reasons I would be unable to find that there was any debt now due to Mr Delahunty. This factual finding renders unnecessary a consideration of the legal problem (never squarely addressed in submissions) that Mr Delahunty was working on properties which belonged in the main to Armitage (or latterly Blackfriars), he was paid by cheques drawn on Armitage and Blackfriars accounts. Armitage and Blackfriars can only act through human agency and the human agent with whom Mr Delahunty dealt was the Deceased: but that does not mean that the building works contracts were made with the Deceased personally, nor would it make the Deceased personally liable to pay for works which Mr Delahunty undertook for Armitage or Blackfriars. On the evidence led I would not in any event have concluded that it was the Deceased’s estate that was liable to pay for unpaid work, save in relation to those properties registered in the name of the Deceased himself (as to which I received no submissions).

In his closing speech Mr Steynor accepted that he could not prove that the specific sum was owed and he asked me simply to find as a fact that Mr Delahunty had not been fully paid. I do not consider that I should find facts in the abstract: I consider that I should make findings only in so far as they bear upon some legal conclusion. I have reached the conclusion stated in the preceding paragraph.

This matter can now be dealt with much more shortly. Mr Delahunty’s evidence interweaves two threads: an initial general understanding about his participation in the business, and a specific agreement about specific assets.

His witness statement (paragraphs 73 to 82) contained evidence about an alleged agreement between Mr Delahunty and the Deceased following the completion of Lowther Hill (the first property on which Mr Delahunty was employed) that Mr Delahunty would do jobs “at cost”, and that

“the money [the Deceased] saved and the appreciation of the properties which we worked on…. would be rolled back into the business….we both agreed that I would take my contribution when we parted our ways”.

This evidence is no longer relied upon as founding a partnership. Its function is presumably to render more credible any subsequent specific agreement.

This evidence is of no assistance in relation to any subsequent specific agreement. First, it is not possible to conclude on the evidence that Mr Delahunty worked “at cost”, because the evidence does not permit a properly based finding as to what he spent (even if it permits a finding what he was paid). Second, it is apparent Mr Delahunty’s own evidence that he did personally receive money: he kept whatever was left after paying immediate expenses, there was a time when he was in receipt of monthly payments, and he also gave evidence that he was entitled to a salary of £1000 per week. Third, I have reached the conclusion the by the time of the break in 1996 Mr Delahunty had in fact been paid in full when the matter as tested against the available documents. Fourth, if there was any such arrangement it is extraordinary that when the break occurred Mr Delahunty did not claim “his contribution”, for the evidence led does not warrant the conclusion that at its commencement both Mr Delahunty and the Deceased knew that the break was only temporary and that they would resume transacting business.

I therefore turn to the second thread. In his statement of case Mr Delahunty alleged that in June 2001 he and the Deceased had discussed the state of account between them and agreed that the sum then due to Mr Delahunty “in settlement of his business relationship with the Deceased and the work undertaken” was £600,000. He then alleged that in return for his not requiring payment of £600,000 the Deceased promise him that he would receive “certain flats in future developments” namely one at Tooley St and four at Grange Road. In his witness statement (at paragraph 348 to 352) Mr Delahunty expands upon this slightly. He says that the initiative came from the Deceased who asked Mr Delahuntyhow much he wanted for his “significant contribution to [the Deceased’s] property portfolio and all the work [Mr Delahunty] had carried out for him during the previous 6 years” and that Mr Delahunty asked for £600,000 for “[his] contribution and [his] hard work”. Mr Delahunty says that he told the Deceased that he wanted this invested in the Grange Road project (which he felt would yield him £1 million), and that after about a fortnight (which would put the conversation in July or August 2001) he was promised the flats.

This account did not survive cross-examination. First, I have rejected the notion that the Deceased recognised Mr Delahunty as a co-venturer or “contributor to his business” over the preceding six years. No such agreement was made after the Lowther Hill project. Mr Delahunty was paid in full by the time of the break. The break lasted two years. There was therefore no six-year period of “contribution”.

Second, I have rejected the idea that there was significant unpaid work accumulated. Between January 1998 and the beginning of August 2001 (which includes the year 2000 when Mr Delahunty did relatively little work for the Deceased) according to the ledgers the Deceased had paid Mr Delahunty of the order of £295,000. The idea that the Deceased would have felt he owed Mr Delahunty a further £600,000 in respect of work undertaken since January 1998 (Mr Delahunty would have permitted so large a sum to remain outstanding) is beyond belief.

Third, the notion that the Deceased should in June, July or August 2001 have discussed with Mr Delahunty giving him a flat at Tooley Street is not credible. The timing is wrong. The initial inquiry made by the Deceased in relation to Tooley Street was in September 2002. Blackfriars did not buy the Tooley Street site until December 2002. Faced with this difficulty Mr Delahunty said that the Deceased had made a promise when they had visited the site together when it was still a hole in the ground. If so it was an oral promise in respect of an unspecified flat not then in existence in a development that had not then been commenced in relation to which the Deceased had yet to make an inquiry but which it was never his intention personally to acquire, and in apparent satisfaction of debts not of the Deceased but of other legal entities. This does not hold together.

Fourth, the suggested arrangement is itself incongruous. The Deceased’s proposal was to purchase the unencumbered freehold of a block of mixed residential and commercial premises (14 flats and some offices) in the course of construction, with the object of selling the units on. There were offers to purchase some of the units already in place. Contracts were only exchanged in December 2002, the purchase price being £7.15 million. The original purchaser was Blackfriars: but the contract was transferred to a special purpose vehicle Blackfriars (Tooley Street) Ltd. The Deceased, against the advice of his professional team, did not pursue the existing potential sales, believing that he could secure higher prices in the open market. There was a debate about the price to be achieved for individual units, how many units would need to be pre-sold in order to fund completion, and how many units could be retained and rented to fund any continued borrowing. My attention was not draw to a single reference in any of this correspondence to the Deceased having agreed to give one of the 14 flats to Mr Delahunty: yet this would have had a significant impact on the project funding.

Fifth, some of the same points about timing and incongruity can be made in relation to Grange Road. Although the site had been owned since 1995 it had been the subject of a number of unsuccessful applications for residential development. In May, June and July 2001 its planning status was for business or commercial units. It was not until the autumn of 2002 that planning permission was granted for mixed business and residential use. It too needed bank funding (and a loan was raised secured on another property in the portfolio to fund the professional costs of obtaining planning permission). Once again my attention was directed to no document in which the Deceased drew to the attention of his professional team or his funders that 20% of the residential accommodation was to be given to Mr Delahunty.

I accordingly hold that it is not established by the preponderance of probability that the Deceased ever agreed to pay Mr Delahunty £600,000, or that he agreed to perform that obligation by giving Mr Delahunty five flats. The disposal of the case on that basis means that it is unnecessary for me to address the legal problems arising from the fact that at the time the alleged agreement was made the flats did not exist and never came into existence (so that on one view of Mr Delahunty’s evidence what he did was choose to invest £600,000 in projects that did not come to anything, and simply lost his money in the way that the Deceased himself did when the Tooley Street project collapsed). Nor do I have to address the difficulty that Mr Delahunty is seeking to recover against the Deceased in respect of the composition of obligations owed by the Deceased’s companies. Nor do I have to address the difficulty that the promise to give Mr Delahunty flats could only be performed by the companies that owned and developed the relevant sites. But I express the view that even if the factual foundation about an agreement had been laid the legal conclusion contended for could not have been reached on the evidence led.

It is the unchallenged evidence of Mr Delahunty that in late 2002 he was obliged to leave the house in which he lived with his partner, children and grandchildren, and that the Deceased suggested to him that he should live in a flat in Coldharbour Lane for as long as he wanted, rent-free. It is also not disputed that after a couple of months Mr Delahunty asked to move from Coldharbour Lane, that the Deceased was very sympathetic and understanding, and suggested that he moved into the Flat. The Flat has a current rental value of £650 per month: it has a capital value of about £150,000 (but cannot in fact be sold because it lacks a building certificate, Mr Delahunty having done the conversion work). The evidence undoubtedly establishes permissive occupation of the Flat. What is in issue is the nature of that occupation.

On behalf of Armitage it is said that the occupation is by way of gratuitous license or tenancy which has been terminated. The suggestion of a tenancy arises because when on the 29^th of January 2003 the managing agent of the Flat (Mr Jeremy Galloway) handed over the key he insisted upon the signing of a piece of paper recording the “taking [of] the tenancy …..as agreed with [Armitage]”. I hold that there is no tenancy. The true arrangement is recorded in a letter which Mr Jeremy Galloway wrote to the Deceased that day:-

“I confirm your instruction with regard to [the Flat]…. you are happy for me to release the keys to [Mr Delahunty] and you do not wish me to pursue the appropriate tenancy forms for rental…….”

It is no surprise that (having regard to the degree of friendship between the Deceased and Mr Delahunty, the informal nature of the other arrangements between them and Mr Delahunty’s current predicament) such an arrangement should be made. It is an act of simple generosity. But a gratuitous license is ordinarily revocable, and there is no doubt that Armitage has revoked it.

In his witness statement Mr Delahunty explained the transaction in this way:-

“The reason why [the Deceased] offered to let me live in [the Flat] for as long as I wanted without paying any rent was in recognition of my contribution to building up his portfolio of properties and for the substantial amount of building work I had carried out for which I had not been fully paid”.

Mr Delahunty does not contend for a contractual license (viz. that he acquired the right to live in the Flat rent-free for as long as he wanted in return for giving up his claim to a share of the business and to be paid his outstanding bills). Indeed he has brought an action claiming for those unpaid bills and for damages for the non-performance replacement agreement. What Mr Delahunty contends for is a proprietary estoppel, permanent in its effect, preventing Armitage from recovering possession of the Flat for so long as Mr Delahunty wants it.

In principle there is nothing wrong in such a claim. But as advanced by Mr Delahunty it requires detrimental reliance. His actual evidence (if believed) establishes past actions which explain present generosity: but it does not establish any detrimental reliance on the continued existence of the license which would make it in equitable for Armitage now to insist upon its strict legal right to possession.

In his closing speech Mr Steynor commendably sought to repair this omission in the evidence available to him. He submitted that Mr Delahunty had continued to work on the same basis as before after the arrangement about the Flat had been made, and drew my attention to passages in Mr Delahunty’s witness statement which said that every property in the portfolio was maintained by himself and his handyman, that in 2004 he had maintained the roof of the building in which the Flat was situated, and that there was no evidence that he had ever been paid for this work (or other maintenance). The reason why there was no evidence was that until Mr Steynor’s closing speech this had never been identified as the detriment which made it inequitable for the license to determine.

Whatever my sympathies for Mr Delahunty’s present predicament may be I cannot see any proper ground upon which equity can restrain Armitage from exercising its legal right to possession. It gave notice on the 8^th June 2005. Although there is a formal claim for mesne profits at the rate of £750 per calendar month, Armitage in fact led no evidence as to rental value (that evidence being elicited by Mr Delahunty’s counsel in cross examination), and neither in the skeleton argument nor the final submission was I asked to assess mesne profits. That seems to me to be an entirely fair and appropriate response (and it happens to make it any difficult for Mr Delahunty to establish any detriment as at the date of the trial).

I therefore propose to grant the possession order sought in the claim and (subject to any further submissions made after judgement) propose to order the possession be delivered up on the 1st October 2007.

The claim on the dishonoured cheques was originally pleaded in relation to five cheques drawn on Blackfriars’ accounts (the first of which was one dated the 20th of December 2002) and one in the sum of £100,000 drawn on an account in the name of Atlantic Imports. It was then substantially enlarged in May 2007. As now pleaded it relates to 11 cheques drawn on accounts in the name of Blackfriars, ranging in date from the 8^th August 2001 to the 12^th May 2003, plus claims against Atlantic Imports and a further company - Blackfriars (Tooley Street) Ltd.

It is accepted at each of the identified cheques was dishonoured. The Part 20 defendants acknowledge that the burden lies upon them to show either that no consideration was given for the cheque or that the obligations it creates have otherwise been satisfied.

I find that relation to the cheques drawn on the 10th and 13^th of August 2001 the obligations created by them have been otherwise satisfied. Satisfaction explains the very long delay between dishonour of the cheques and their addition as claims in these proceedings. There were insufficient funds in the Blackfriars account at the time when these cheques were drawn. The unpaid cheques totalled £27,000. On 27^th August 2001 (four days after the cheques were returned unpaid) £27,000 was paid by direct transfer from an offshore account into the Blackfriars bank account and the following day the identical sum was drawn in cash. At some point the cheques were given by Mr Delahunty to the Deceased. On that evidence I find on the balance of probabilities that the unpaid cheques were satisfied by that cash payment.

On the 14^th December 2001 a cheque for £10,000 was drawn. On that day there were insufficient funds in the account to meet it and it appears to have been returned on the 18^th December. But on the 20^th of December a fresh cheque for £15,000 was issued. The ledger entries show that both cheques were issued in relation to work then being undertaken at 12 to 14 Cotswold St., and had been preceded by a number of cheques of £5000 or £6,000. It was submitted (though not put directly to Mr Delahunty) that from this pattern of payment it may be inferred that cancelled cheque is made up by the next cheque in the series rather than simply being left as an unpaid item. I consider this argument sound and that the cancelled check was incorporated in the fresh cheque issued two days later.

The Part 20 claim then identifies a cheque dated the 11th of February 2002 in the sum of £1500 which it is said was dishonoured. In the Defence to the Part 20 claim it was asserted that Blackfriars had no record of this transaction and Mr Delahunty was put to proof that the cheque was drawn upon a Blackfriars account. He did not rise to that challenge and I was shown no cheque matching the description. The essential foundation for the claim was not laid.

On the 22nd March 2002 a cheque in the sum of £25,000 drawn on Blackfriars was admittedly dishonoured (a cheque return fee of £30 was charged ). On the 28th of March 2002 a cheque in the sum of £25,000 drawn to cash was prepared and met on presentation (by the transfer of £20,000 from Armitage's account). It is the case for Blackfriars that the cash payment was given to Mr Delahunty in satisfaction of the unmet cheque (which cheque it is common ground Mr Delahunty returned to the Deceased). This is supported by the notation “ Peter” alongside the entry on the bank statement and by the completion of the cheque stub as “Cash P Delahunty”. Given Mr Delahunty’s admitted inability to tell me the state of account between himself and the Deceased's companies I am not persuaded in the face of this record by his denial of the receipt of this cash. I accordingly find this cheque to have been satisfied.

On the 20th December 2002 a cheque in the sum of £20,000 was dishonoured. My attention was directed to no payment of that or a similar sum in the period following dishonour; but I was asked to infer from the fact that there is a consistent payment of other dishonoured cheques, from the fact that the unpaid cheque was returned to the Deceased, and from the long delay in advancing a claim, that this cheque was also otherwise satisfied. I do not consider that this amounts to a legitimate inference from the proven facts. In all other cases it is possible to identify some entry on the bank statement, some cheque or some ledger entry which supports the fact of payment. No specific case was put to Mr Delahunty on this cheque.

On 10^th January 2003 a cheque in of £20,000 was drawn. Had it been presented it would not have been met. The cheque was cancelled. That same day a cheque in the sum of £14,800 was drawn (representing the balance on the account) and the Deceased's ledger records a cash payment to Mr Delahunty of £5,000. I find that these payments were in satisfaction of the £20,000 cheque that was cancelled. Mr Delahunty says that his bank account does not show a credit in the sum of £14,800 But it appears to have been the practice of the Deceased to draw cheques “to cash” and then make appropriate ledger entries: so a cheque drawn on a Blackfriars account that finds no corresponding entry in Mr Delahunty’s bank account is not unusual.

On 24^th March 2003 a cheque was drawn in the sum of £4000 of which was returned unpaid on the 26^th of March: likewise on the 12^th May 2003 a cheque in the sum of £5,000. These cheques were not specifically addressed in evidence or argument by or on behalf of Mr Delahunty: they simply appear on various schedules with which I was provided, and I am left to make the best of the material. There is a cheque dated the 20^th May 2003 in sum of £10,000, and it was suggested that this was likely to be in satisfaction. There was no argument on behalf of Mr Delahunty against this suggestion founded (for example) upon the nature of the ledger entries, and it seems to me that it is probably right.

I have reviewed the Blackfriars cheques and noted that in all but one case it is possible to see that the dishonoured cheque is otherwise satisfied. I have reconsidered whether it is appropriate to draw the same inference in respect of the exception, but I remain of the view that it is not. It is simply the one case where Blackfriars has not discharged the burden laid upon it.

I turn to the non-Blackfriars cheques. The claim under this head relates to a cheque drawn on the 2nd July 2003 in the sum of £100,000 upon a dormant account in the name of “Atlantic Imports”. There is a letterhead bearing such a name which suggests that this was a limited company. No evidence was led to establish the true position. On this state of the evidence I must proceed on the footing that Atlantic Imports was a limited company (not simply a trading name of the Deceased who would be personally liable).

I reject the claim under this head for two reasons: (a) I find that the cheque was paid as an advance in respect of work to be done (not in respect of work that had been done): (b) I see no basis upon which the Deceased can be made personally liable on the cheque.

As I have noted above, one of the sites on which Mr Delahunty worked was the site at Grange Road SE1. This was a vacant site acquired by Armitage in 1995. Thereafter it was the subject of various planning applications, a co-ordinated by a professional team assembled by the Deceased with the assistance of his friend David Calcott. Any development of necessity involved extremely complex party wall issues. In December 2001 title to the site was transferred by Armitage to Blackfriars, that this made no difference to carrying forward the development. Mr Delahunty became involved against the wishes of the development team. His attitude was that the professional team were only in the project for their fees, and that their advice was of no advantage to the Deceased and the permissions for which they were applying practically unnecessary. By August 2002 planning permission for the construction of 20 flats some commercial units and parking spaces had been granted.

The development was going out to tender and at the Deceased’s request Mr Delahunty was invited to submit to tender. The development was to use bank funding, and the contractor therefore had to meet the lender’s standards and to enter into a form of contract of which the bank could take an assignment. This was not the way Mr Delahunty worked and he was not awarded the contract. Nonetheless Mr Delahunty appears to have moved in and to have begun doing some work. He carried out excavations on site, built a temporary toilet block and built a wall. There were howls of protest from the professional team, who wrote to the Deceased in the strongest terms saying that these things must stop. (The surface of the site had to be restored and Mr Delahunty’s constructions demolished). Not only did Mr Delahunty begin work but he took the Deceased to a bank manager to obtain a loan. (It should be noted that the board of Blackfriars did not give its approval to any of the steps that Mr Delahunty was undertaking, and from the correspondence appear to have shared the views of the professional team). Mr Delahunty was quite frank in his evidence to me that he was extremely keen to takeover the development at Grange Road because he considered that he could make a very substantial sum of money- indeed enough to retire.

On 18^th June 2003 the consulting engineers wrote to Blackfriars indicating that the current matter in hand was the development of a pilling scheme, stating that “the project design is not yet ready for work to commence on site”. On the 26^th June 2003 Mr Delahunty wrote to the Deceased saying that he would like a complete set of working drawings, the loading for the piles and the steel bending schedule adding

“..we have already booked the piling rig for the 6 July so you could see we need this information urgently”.

He added as a postscript:-

“we also need a cheque for materials i.e. steel, concrete, pipes, ballast, cement, DPC, machines and digger. So if we could please have a cheque on account for those items and the ongoing work £250,000….”

The cheque drawn on the dormant Atlantic Imports account was dated the 2^nd July 2003. Mr Delahunty said that the cheque was not in response to this letter but was payment for work already done.

I reject Mr Delahunty’s evidence. I find that the £100,000 Atlantic Imports cheque was a payment in advance for work to be undertaken (and which was not undertaken). First, that is the plain conclusion to which the state of the development, the terms of the correspondence and the date of the cheque leads. Second, it was the contemporaneous analysis of those involved: Mr Calcott immediately wrote to protest that he had been advised that “you have issued monies to Peter Delaney (sic) with regard to Grange Road and you are anticipate (sic) commencing works imminently” and emphasising that this could not be done. Third, it takes account of the clear evidence that Mr Delahunty had already been paid £77,500 in respect of Grange Road during the period in which he had been doing work. He asserted that the true value of this work was £225,000 but there was simply no evidence to lend that assertion credibility. Finally, it is corroborated by the arrangements made when he began work at Grange Road. In a letter dated the 8^th October 2002 (the original of which was shown to him and the signature on which he was constrained to acknowledge as his own) Mr Delahunty proposed the commencement of piling and said “we would like £50,000 on credit on account”. Advance payment for piling was a feature from the outset.

As a further ground I hold that the Deceased is not liable personally upon cheques drawn on company accounts where he happens to be the authorised signatory. Mr Steynor confirmed that he was not arguing that a Director who happened to sign a company cheque was personally liable on it. He submitted that personal liability arose where the Director was also the majority shareholder, or alternatively where director was using the company as a device.

It is common ground that he Deceased was the beneficial owner of the shares in Armitage (possibly by means of a Guernsey trust). The board of Armitage consisted of people in Panama and Guernsey (in particular Sharon Kershaw, an employee of the Guernsey solicitor’s practice of H.Gold (and subsequently of its successors CSC and Mason & Co). It is also common ground that the Deceased had authority to act for Armitage in the United Kingdom. Armitage is described in the accounts of Blackfriars as its ultimate holding company. (The Deceased's four children are the registered holders of 40% of the shares in Blackfriars: it was not suggested that they were nominees, and I therefore infer that 50% to 60% of the Blackfriars shares belonged beneficially to Armitage, for the Deceased held none). The Deceased's four children were directors of Blackfriars along with their father. Blackfriars (Tooley Street) Ltd had an identical Board of Directors. The shareholders in Blackfriars (Tooley Street) Ltd were the four children (with 10% each) and the Deceased (with 60%). I know nothing of the structure or true nature of Atlantic Imports

The Deceased is therefore not the majority shareholder in Blackfriars (though he is in Blackfriars (Tooley Street) Ltd). I cannot see any basis (even on Mr Steynor’s argument) for holding the Deceased personally liable to pay for work done on land belonging to Blackfriars or personally liable on a cheque drawn on an account of Atlantic Imports. But I in any event reject Mr Steynor’s argument. The true rule is that summarised in paragraph 8 above. The Deceased had no primary personal liability which he sought to avoid by interposing a company between himself and his obligee.

Because I reject the legal proposition on which the argument is founded I also reject the claim for payment by the deceased’s estate of the £25,000 cheque dated the 9^th February 2004 draw on an account of Blackfriars (Tooley Street) Limited.

For these reasons I propose:-