Heath v Heath & Anor

Reginald Heath (“the deceased”) and the 1^st Defendant were husband and wife who lived for a number of years at 1 Birchall Avenue, Sandyford, Stoke-on-Trent, Staffordshire (“the Property”). They were divorced in 1994.

The Claimant is the deceased’s second wife. They married in 2002 and lived together at the Property until his death. The Claimant continues to live there.

The deceased died intestate on 18^th October 2006 and letters of administration to his estate were granted to the Claimant on 9^th November 2006.

The Property was purchased by the deceased and the 1^st Defendant as joint tenants legally and beneficially. The Property remained in their joint names until the deceased’s death. In those circumstances, the 1^st Defendant now claims to be legally and beneficially entitled by survivorship to the Property.

The Claimant, on the other hand, seeks specific performance (and allied relief) relating to an agreement in writing dated 8^th August 1997 for the sale of the 1^st Defendant’s half share in the Property for £10,000.

There is no doubt that such an agreement was made, signed by each of the deceased and the 1^st Defendant. It is said however that the agreement should not be enforced for a number of reasons, which I shall come to.

Mr Burton for the Claimant says that the essential terms of the agreement have been fully performed and that there is no basis for refusing specific performance, which is required merely to clothe an undisputed equitable title with legal form.

If that is wrong, Mr Burton points out that, by the agreement, even if ineffective or otherwise unenforceable, the parties were treating their joint interests as severed, so that on any footing the parties became tenants in common in equity. Mr Brockley for the 1^st Defendant had no answer to this point. It follows that the Claimant as administratrix is entitled to at least a half interest in the Property, and that the 1^st Defendant’s claim to the entirety of the Property by survivorship fails.

Both the Claimant and the 1^st Defendant also invoke the Court’s jurisdiction under the Inheritance (Provision for Family and Dependants) Act 1975. The extent to which that Act has any practical scope in this case is dependent upon the resolution of the specific performance claim, so I shall consider that first. I should however add that the 2^nd Defendant, who is the daughter of the deceased and the 1^st Defendant, has been added to protect the estate from the Claimant’s family provision claim. This came about because the Claimant’s evidence (resulting in an adjournment and disclosure) suggested that the deceased had very large insurance policies in which the estate might be interested. As subsequent evidence demonstrated, that evidence was wide of the mark, and the estate is modest. There are 2 other sons of the first marriage, but they have not been joined, though one gave evidence.

The agreement dated 8^th August 1997 between the deceased and the 1^st Defendant is in the following terms:

“This is the official agreement between [the 1^st Defendant] and [the deceased] for the purchase of [the 1^st Defendant’s] half of the matrimonial home 1, Birchall Avenue, Sandyford, Stoke-on-Trent making [the deceased] sole owner of the above property at the agreed sum of £10,000

£8,5000 paid by cheque on the date: 7-8-97

Cheque number: 329290-40-2801-4102401

With £1,500.00 to be paid at a later date after which arrangements with the bank and solicitors for completion of said contract.

If anything happens before the contracts are completed everything goes to Martin John Heath (son) as beneficiary of my estate.”

As will be seen, the agreement acknowledges payment of £8,500. A later receipt dated 1^st July 2000 signed by the 1^st Defendant acknowledges receipt of £500 cash “as part of settlement on 1 Birchall Ave”.

It is thus clear that those 2 sums totalling £9,000 were paid towards the purchase price.

It is said by the 1^st defendant that the balance of £1,000 was never paid. This is clearly wrong. She wrote out a receipt dated 29^th July 2000 in her own handwriting, attached to a letter dated 20^th July 2000 from her then solicitors to the deceased, which she then signed, in the following terms:

“I Jacqueline Heath have recieved (sic) £300 cash and cheque for £7,000 (50796 40-2801 41012401, (sic) as full settlement on agreed 10,000 for my share of property 1 Birchall Avenue 29/7/2000”

The 1^st Defendant originally claimed that the signature on this document was not hers, but handwriting evidence clearly demonstrated the contrary. She accepted in her evidence that this was her handwriting and signature but continued to deny receipt of the £1,000. She was unable to explain how she came to give the receipt. I have no doubt that she received the £1,000 at this time.

It is said that the agreement was procured by the undue influence of the deceased, or was otherwise unconscionable. I reject this claim. Whilst there is evidence that the 1^st Defendant during her marriage lived from time to time in fear of the deceased, the agreement was signed at their son’s house in the presence of their son and daughter-in-law, and there is no sufficient evidence of any undue influence being brought to bear at this stage. The marriage was long over and the 1^st Defendant, though still uncomfortable in the deceased’s presence, was in no sense dominated by him. The agreement was typed by the 1^st Defendant’s daughter-in-law, probably based upon the deceased’s draft. The Property was on the expert evidence worth £41,000 at the time, subject to a building society mortgage of approximately £5,700. The 1^st Defendant was, however, content to accept the agreement as she understood that the Property would be left eventually to their son, Martin, described in the agreement as “beneficiary of my estate”. The £10,000 was acceptable because this was all the deceased could raise at the time. The 1^st Defendant also understood that if either party remarried or if the property were sold, there would be an equal division (notional in the case of remarriage) after giving credit for the £10,000. This was not, however, part of the agreement, as was obvious from reading it, nor (I find) was it intended to limit the effect of the agreement. To the extent that the 1^st Defendant had discussions with the deceased on these lines, she took him on trust, but was not the victim of any undue influence or other unconscionable behaviour.

It is said that the written agreement is incomplete and therefore void for want of writing as to the additional agreed terms. I take this to be a reference to the accounting exercise contemplated on remarriage or resale. However, that never was (I find) intended to be a contractual obligation. There is, therefore, nothing in this point.

It is also said that there were breaches of condition precedent as to the timing of the additional payments totalling £1,500, and the arrangements to be made with the bank and solicitors for completion of the contract.

As to the payments, these were made. Assuming they were late (and the agreement merely provided for them to be made “at a later date”) late payment was accepted, and cannot now be the subject matter of a complaint.

As to the bank and solicitor arrangements, I doubt whether it is apt to refer to these requirements as condition precedents as opposed to terms of the bargain. It is not clear what arrangements with the bank were contemplated, a point to which I return on the issue of uncertainty later. As regards the solicitors, the arrangement in question was clearly meant to consist of instructing solicitors to complete the transfer. The deceased did not attend to this until much later and the matter was not concluded before his death. However, the reason they were not concluded was because of the 1^st Defendant’s withdrawal from the process. The real question therefore is whether any right to specific performance has been lost by delay, a point to which I shall come. Subject to that question, I do not consider that the 1^st Defendant, in the case of an agreement which remained specifically enforceable, could rely upon non-completion which was caused by her own refusal to proceed.

It is also said that the agreement was uncertain.

The uncertainty relied upon by Mr Brockley centres upon the words:

“If anything happens before the contracts are completed everything goes to Martin John Heath (son) as beneficiary of my estate”

As the agreement was in the form suggested by the deceased (though typed by his daughter-in-law) I would take the reference to “my” as being a reference to the deceased. The reference to anything happening can only be a reference to the death of the deceased. The words “beneficiary of my estate” do not otherwise make sense. Thus construed, the provision is not uncertain, although it apparently rested upon the assumption that Martin was the beneficiary of the deceased’s estate when he was not. This impacts on the mistake issue, to which I refer below.

I am more troubled, on the uncertainty issue, by the reference to having to make arrangements with the bank. It is unclear what this means. The probability is that this was a recognition of the need to procure (or endeavour to procure) a release of the 1^st Defendant from the mortgage, a point which certainly came to trouble the 1^st Defendant later. There are however obvious dangers in reading too much into the “bank” reference. The mortgagee was Leek United Building Society, which was not a bank, though the parties probably did not appreciate the distinction. By a process of construction or implication, I would hold that the deceased was bound to procure or use reasonable endeavours to procure the 1^st Defendant’s release from the mortgage covenants, and to indemnify her from any liability thereunder. On that footing, there is no uncertainty. If I am wrong about that, the provision was merely part of the machinery for completion. As that could take place without any approach to a bank, I do not consider that the agreement as a whole would be rendered void for uncertainty. The Court might not, in the exercise of its discretion, award specific performance of the agreement unless steps were taken to procure the 1^st Defendant’s release from the mortgage, but that does not invalidate the agreement.

Mistake is also pleaded by the 1^st Defendant as avoiding the agreement. It is said that the mistake related to the ability of the deceased to pass on his estate to Martin, his son. There is no doubt that the deceased had that ability, but he needed to make a will to that effect. However, the agreement also mistakenly treats Martin as already being the deceased’s beneficiary, when he was not. I do not however consider that this is the kind of mistake which would avoid the agreement.

I do however consider that both parties were, on the evidence I have heard, acting under a serious misapprehension as at 8^th August 1997. The 1^st Defendant was clearly motivated by her belief that Martin was the beneficiary of the deceased’s estate. She had that belief because that is what the deceased told her and caused to be put into the agreement. In entering into the relatively informal agreement she reached, she took comfort from the fact that her children would benefit, the expectation being that Martin would receive everything, and act fairly towards his brother and sister. The deceased must have shared this belief at the time, as he prepared the draft so describing Martin, which was typed up by Martin’s wife. I also accept the 1^st Defendant’s evidence to the effect that the deceased told her that their children would eventually benefit on his death. If he did not also believe at the time that Martin was the beneficiary of his estate, he was being disingenuous by putting forward an agreement so describing him. Some corroboration for the fact that he did harbour this belief came from Martin’s evidence. He said that his father told him that he was leaving it to his (Martin’s) discretion how to divide the estate.

Considerations of this kind may justify the court in refusing the remedy of specific performance. Mistake as a vitiating element has been eliminated as a separate equitable doctrine by Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679. Nevertheless, specific performance is a discretionary remedy and mistake may in my judgment still be a relevant factor in refusing equitable relief, at all events where the mistake has been induced by the words or conduct of the person seeking specific performance. In such a case, of which I consider the present to be one, the mistake may also amount to, or be practically indistinguishable from, a misrepresentation. Here, the statement of the deceased that Martin was the beneficiary of his estate may well have accorded with what the deceased thought to be true, but it was wrong. That statement was a significant inducement in persuading the 1^st Defendant to make the agreement of 8^th August 1997. It would not be right or fair, in those circumstances, for the agreement now to be specifically enforced.

In addition, I consider this to be a case where the delay in seeking specific performance justifies the refusal of that remedy. Had the deceased sought specific performance before his death, he could have been asked searching questions as to what was said or done to induce the agreement, as to whether anything else was agreed, as to why he did not take early steps to procure the 1^st Defendant’s release from the mortgage covenants, and as to the reasons for not seeking to enforce the agreement earlier. The Court is deprived of any first hand evidence from the deceased on these points. Although an unsigned statement, prepared on the instructions of the deceased during his lifetime, has been put in evidence, the deceased has not been available for cross-examination.

The 1^st Defendant pressed for payment of the outstanding sum of £1,000, and a release from the mortgage covenants, in her solicitors’ without prejudice letter dated 20^th July 2000. She confirmed her then willingness to adhere to the original agreement upon such payment and release. Although the £1,000 was paid, nothing was done to release her from her mortgage covenants, though she has not in fact been required to pay anything under the mortgage. Nonetheless, it subsisted, and the risk remained. No explanation of why the deceased did nothing at that stage to procure a release has been given.

Subsequently, on 5^th September 2002, the 1^st Defendant’s solicitors asked again for a release from the covenants, but this did not happen. One of the reasons it did not happen was because of the 1^st Defendant’s failure to provide an authority to release the deeds to enable a transfer into the deceased’s sole name to take place. The reason for this (according to the unsigned statement of the deceased) is that the 1^st Defendant wanted a further payment. It was thus evident from this point that the 1^st Defendant rightly or wrongly did not regard herself as bound by the agreement. It was also common ground before me that it would have been open to the 1^st Defendant to seek a property adjustment order under section 24 of the Matrimonial Causes Act 1973. The deceased did not at this stage press the point and his solicitors even obtained reimbursement of a fee paid to the building society in that connection. No attempt was made by the deceased to enforce the agreement.

Mr Burton says that the letters I have referred to show the 1^st Defendant affirming the agreement. There is however no evidence that the 1^st Defendant then knew of the misapprehension she had been under as to Martin being the deceased’s beneficiary under his estate. Moreover, affirmation did not justify the continuing delay, and the affirmation (such as it was) was dependent on discharge of the mortgage covenants.

I doubt in those circumstances whether the affirmation would be effective to bar the 1^st Defendant from seeking rescission. However, what I am now considering is not rescission but whether the deceased’s estate has lost the right (assuming it had one) to specific performance by delay.

It is well established that a prolonged delay may evidence an abandonment, or at all events be a bar to specific performance: see, generally, Snell’s Equity, 31^st ed., at 15-38.

In P & O Nedlloyd B.V. v Arab Metals Co [2007] 2 All ER (Comm) 401 at 420, Moore-Bick L.J. at para [50] had this to say:

“For more than two hundred years delay on the part of the claimant has been recognised as a defence to a claim for specific performance, which, like all equitable remedies, is discretionary. Lord Alvanley MR's words in Milward v Earl Thanet (1801) 5 Ves 720n have passed into Chancery folklore: 'a party cannot call upon a Court of Equity for specific performance, unless he has shewn himself ready, desirous, prompt, and eager.' See also Lord Cranworth in Eads v Williams (1854) 4 De GM & G 674 at 691, 43 ER 671 at 678: 'Specific performance is relief which this Court will not give, unless in cases where the parties seeking it come promptly, and as soon as the nature of the case will permit.' Any suggestion that a claimant can delay for years in bringing his suit for specific performance is therefore contrary to well-established principle.”

This is to be contrasted with the position of a purchaser let into possession whose rights are not disputed: Williams v Greatrex [1957] 1 WLR 31. Given that the 1^st Defendant was claiming more money from 2002, and that the deceased was vulnerable to a property adjustment order, I do not think this case applies. The 1^st Defendant, by refusing to go ahead with the proposed transfer, was not treating the deceased as having an undisputed right.

At this point, it is worth noting that in 2006, the deceased offered to pay the 1^st Defendant £2,000, and to procure the 1^st Defendant’s release from the mortgage, in return for a transfer. This ultimately did not proceed. Nevertheless, the draft transfer, drawn up by the deceased’s solicitor, presumably upon his instructions, stated the consideration to be half of the amount outstanding under the mortgage and £2,000. No mention was made of the £10,000 previously paid, which suggests that the deceased was not claiming to be able to enforce the 1997 agreement.

A note of an attendance on the deceased by his solicitors to take instructions for his will on the day he died records the deceased as explaining:

“He was married before and held the house in his joint names with his wife. This was never transferred and she is now claiming a proportion of the property.”

This note also does not contain any assertion by the deceased that he regarded himself as entitled under the 1997 agreement. It is possible that he did, and that the note is incomplete on the point, as the purpose of the attendance was different. Unfortunately, owing to the untimely demise of the deceased, he cannot be asked about this. What is apparent is that he regarded himself as vulnerable to the 1^st Defendant’s claim to be entitled to a share of the Property.

In those circumstances, delay seems to me to be another reason for refusing the remedy of specific performance. The 1^st Defendant is prejudiced by her inability to cross-examine the deceased, and no good reason has been shown for the deceased’s failure to claim specific performance much earlier. Such indications as there are suggest that he was abandoning any such claim.

In those circumstances, I decline to enforce the agreement of 8^th August 1997. As, moreover, the deceased’s alleged beneficial interest is dependent on that contract remaining specifically enforceable, I decline to make a declaration that the deceased’s estate is entitled to the entirety of the beneficial interest in the Property.

It follows that the Property is now held upon trust for the Claimant and the 1^st Defendant in equal shares. I shall make a declaration to that effect. It is clear from the agreement of 8^th August 1997, though not specifically enforceable, that a severance of the beneficial interest was effected.

I am also asked to order a sale. I decline to make an order for sale at this stage.

The Property is a 2-bedroomed semi-detached house with a market value as at 3^rd February 2009 of £115,000. The Claimant has paid all the outgoings, including mortgage instalments, since the deceased’s death. Upon his death, she also received sums of approximately £30,000 from 2 insurance policies, and the relatively small balances on the joint bank accounts of herself and the deceased. She has spent some of these monies and invested the rest. None of her expenditure has been extravagant. I am satisfied that she has made full disclosure of her assets and means. Given my findings as to beneficial ownership of the Property, she is (subject to the family provision claims) entitled to the whole of the estate on an intestacy, the value of which does not exceed the statutory legacy of £125,000. She is also in receipt of benefits.

It is clear that the Claimant needs a roof over her head. The Property has provided it and should continue to do so. I shall however require her, so long as she remains in occupation, to pay all the outgoings, including mortgage instalments, and to maintain the Property in its present state. If of course she chooses to move out, or when she dies (whichever is the sooner) the Property may then be sold. If necessary, an order for sale may then be sought.

It is reasonable in the circumstances for the 1^st Defendant to be excluded from occupation for so long as the Claimant wishes to live in the Property. Clearly, she cannot expect (and does not ask) to live with the Claimant.

The 1^st Defendant also lives on benefits, but has survived for many years without support from the deceased. Moreover, her wish has always been to provide for her children ultimately, not herself. She chose to divorce the deceased and make her own way in life without making financial claims for maintenance against him. In those circumstances, there is no unfairness in her continuing as before.

The Claimant need not pay an occupation rent so long as she pays the mortgage and other outgoings. This is on the figures and valuations I have seen beneficial to the Claimant, as an occupation rent at market value would be greater than those outgoings. Nevertheless, the 1^st Defendant has received £10,000 for nothing, and any shortfall in occupation rent may be regarded as broadly off-setting that £10,000, which I am not ordering to be repaid.

As regards past occupation, it would for similar reasons not be right to order the estate or the Claimant in her individual capacity to pay an occupation rent. Again, the Claimant, and the deceased before her, paid all the outgoings, and the 1^st Defendant received £10,000 for nothing.

These orders and directions seem to me to be in line both with the guidance given in the authorities reviewed in Byford v Butler [2004] 1 FLR 56 and the criteria set out in sections 12-15 of the Trusts of Land and Appointment of Trustees Act 1996. I shall ask Counsel to agree an order to give effect to these orders and directions in appropriate form.

In the light of my findings as to beneficial ownership and the relative smallness of the estate, I do not think it appropriate to make any order for family provision.