Preedy & Anor v Dunne & Ors

In these proceedings, the Claimants, as freehold owners of The Albert Arms Public House, High Street, Esher, Surrey (“the Property”), seek an order for possession of the Property against the Defendants, who (or some one or more of whom) are carrying on the pub and restaurant business at The Albert Arms. At the trial of the action, Mr Robert Bowker of counsel appeared for the Claimants, and Mr Nigel Burroughs of counsel appeared for the Defendants.

The Claimants are the present trustees of the trusts of the will of Jean Montgomery, who died on 6 September 1997. The Defendants are, first, one of Mrs Montgomery’sthree children, Mr Jonathan Anthony Dunne (whom, without intending any disrespect, I shall call “Jonathan”), and, second and third, two companies, one of which he entirely owns, but of which he is not currently a director, and one of which he is at least associated with. The Defendants admit the Claimants’ title, and admit possession, but defend by reason – and only by reason – of a claim of Jonathan to a right to stay in occupation of the Property on the basis of a proprietary estoppel equity.

During her life Mrs Montgomery, as sole beneficial owner, had run The Albert Arms in partnership with her second husband, Mr Bruce Montgomery (whom, without intending any disrespect, I shall call “Bruce”). Mrs Montgomery had three children by her first marriage: Sarah (now Mrs Fenton), Peter and Jonathan. Again, I shall use their forenames without intending any disrespect. By clause 6 of her will she left the Property to her trustees

“I GIVE to my Executors all my interest in the freehold public house known as The Albert Arms 82 High Street Esher Surrey including the contents thereof the stock in-trade and the goodwill of the business of publicans run from the property for many years by my said husband Bruce Montgomery and myself (the ‘Property’) to hold on trust to sell call in and convert into money such parts as do not consist of money but with full power to postpone doing so and run the said business for so long as they shall in their absolute discretion see fit and to grant leases of or deal with the same in any manner in their absolute discretion without being liable for loss to hold the same upon the following trusts that is to say –

(a)

To pay the income of the Property to my said husband Bruce Montgomery for his life in the event that my said husband Bruce Montgomery does not wish to continue to run the said business after my death. In the event that my said husband Bruce Montgomery does wish to continue to run the said business after my death he may do so for as long as my said Executors shall in their absolute discretion deem appropriate and for so long as he shall run the said business he shall enjoy and be entitled to all the income of the said business

(b)

I express the wish and hope that for so long as my said husband Bruce Montgomery does continue to run the said business he allow my said son Jonathan Anthony Dunne to assist in the running of the said business at reasonable remuneration

(c)

Subject to sub-clauses (a) and (b) above absolutely for such of my said children Sarah Akehurst Peter Lee Dunne and Jonathan Anthony Dunne as are alive at my death and if more than one in equal shares absolutely PROVIDED that is any of them shall predecease me leaving issue such issue shall on attaining the age of twenty-five years inherit per stirpes.”

The executors and original trustees of her will were Mr Anthony Shilson, her solicitor (who drafted the will), and Mr Raymond Preedy, an accountant and incidentally her sister’s husband, who is now the First Claimant. In December 2003 Mr Preedy retired from the trusteeship and a Mr Stephen Lewis replaced him. In August 2008 both Mr Shilson and Mr Lewis retired, and they were replaced by Mr Preedy and a Mr Philip (but known as “Charlie”) Baker, a local farmer and family friend. Mr Baker is the Second Claimant. Bruce died on 1 February 2013.

The Claim Form was issued on 27 January 2015 with particulars of claim attached. The Defence and Counterclaim was filed on 17 March 2015. Directions to trial were given on 18 March 2015. These did not include permission for the adduction of expert evidence. A Request for Further Information in respect of the Defence and Counterclaim was made on 30 March 2015, and responded to on 21 April 2015. In the meantime, on 31 March 2015 the Reply and Defence to Counterclaim was filed. On the same day an order was made for the trial to be heard by me over three days to be fixed. On 1 May 2015 the trial was fixed for 15-17 July 2015, and the parties were informed.

In accordance with the directions made on 18 March 2015, at the end of May witness statements were filed and served in respect of Mr Preedy, Mr Baker and Sarah for the Claimants, and Mr Shilson, Jonathan, Mr Andrew Nicholson and Mr Michael Clark for the Defendants. Mr Nicholson is an accountant who acts or has acted for Jonathan and his companies. Mr Clark is the sole director of the Second Defendant. On 14 July I was asked on behalf of the Defendants to, and did, give permission for witness summonses to be issued in respect of Peter and a Mr Paul Mustoe. Mr Mustoe is Peter’s accountant. On the first day of the trial, at the outset, the Defendants applied for an adjournment of the trial on the grounds that Mr Shilson was not available to give evidence. After hearing argument I gave a reasoned judgment, dismissing the application, and the trial proceeded.

There are two other procedural points to mention here. The first is that at the outset of the trial, I mentioned that during my pre-reading I had identified an issue which I thought I should raise, as to how it was possible that trustees holding property for the benefit of others could (even acting unanimously) by themselves create an equity of proprietary estoppel in favour of others having priority over the interests of the beneficiaries.

By the end of the trial it was agreed that this issue would be dealt with in the first instance by way of serial written submissions during the course of the following week. This would enable the parties if they wished to involve leading or other specialist counsel in the preparation of the submissions. I said that once I had considered the submissions I would decide whether I needed to hear any oral submissions on the point as well. I duly received those submissions, and after reading them I concluded that I did not need to hear any further oral submissions.

Secondly, no effective application has so far been made to amend any of the pleadings, so that the claim and counterclaim have been tried up to now on the basis of the Statements of Case in their original form. But Mr Burroughs for the Defendants did tell me, in relation to the point of law envisaged above, that if I considered that it was necessary for the beneficiaries to have acquiesced in or agreed to the trustees’ alleged assurances, he would apply for permission to amend the particulars of claim. I consider this later.

As already stated, the Defendants admit occupation of the Property, but deny the Claimants’ right to possession by reason of Jonathan’s claim to a proprietary estoppel equity. As to this, para 3.3 of the Defence states, in a very compressed form:

“As is hereinafter pleaded, it is the Defendants’ case that the 1st Defendant and the 2nd Defendant advanced and/or expended monies and/or incurred liabilities and/or expense on the Premises and the business of a public house carried on at the Premises and acted to their detriment with the knowledge and encouragement of the Trustees on the understanding shared by the 1st and 2nd Defendant and the Trustees that the 1st and 2nd Defendant would be entitled to occupy the Premises either alone or together, or through or by licensing their corporate trading vehicles, for so long as the 1st Defendant lived or wished.”

A request for further information of the phrase “with the knowledge and encouragement of the Trustees” produced the following lengthy response:

“(a)

The 1st Defendant had been involved with running the business of the Albert Arms public house since his teenage years. When his mother died in September 1997, he became more heavily involved. He had an office upstairs and he assisted Mr Montgomery whenever he needed help. This was known to Mr Anthony Shilson and the 1st Claimant (Mr Preedy) who were trustees of Mrs Montgomery’s will trust at the time.

(b)

By 1999 it had become apparent that Mr Montgomery’s management of the business was deteriorating. The Premises had also fallen into disrepair, and the 1st Defendant drew it to the attention of Mr Shilson and Mr Preedy.

(c)

Matters came to a head when an electrical fire started on the Premises. There were then discussion between the 1st Defendant, Sarah Fenton (who at that time was working at the Albert Arms), Peter Dunne, Mr Shilson and Mr Preedy about the situation and it was agreed that renovation of the ground and first floors of the Premises was needed.

(d)

Initially, the 1st Defendant, Sarah Fenton and Peter Dunne attempted to obtain a loan from Allied Irish Bank to fund the refurbishments. Although the bank made an offer on 2 September 1999, there were difficulties with accepting it principally due to Mr Montgomery’s (supposed) life interest in the Premises and the ownership of the Premises by the Trustees (as opposed to the beneficiaries to whom the offer of loan had been made).

(e)

Due to the difficulties with borrowing the money from Allied Irish Bank, the 1st Defendant offered to find the monies himself. Mr Shilson agreed that any money that the 1st Defendant put into the business (which was thought at that time (wrongly) to be owned by the Trustees and Mr Montgomery equally) and in to renovating the Premises would be repaid out of the proceeds when the Premises were sold, or were refinanced. Mr Shilson also said that until he was repaid, the 1st Defendant would be entitled to occupy the Premises.

(f)

The 1st Defendant assumes that Mr Shilson discussed the monies to be introduced with Mr Preedy his co-trustee, the terms on which they were to be repaid and the 1st Defendant’s right to occupy the Premises until repayment, but did not have such a conversation with Mr Preedy at the time himself.

(g)

Whilst Mr Shilson and Mr Preedy might not have known the actual sums paid by the 1st Defendant through the 2nd Defendant to renovate the ground floor of the Premises (£201,479) they knew that the sums were substantial.

(h)

The second stage of the works took place in 2003 when the first floor of the Premises were renovated. These works cost £140,433, and were paid for by the 2nd Defendant. Whilst Mr Shilson and Mr Preedy might not have known the actual sums spent on the 2003 renovations, they knew that the sums were substantial.

(i)

Mr Shilson and Mr Preedy also knew that as part of the works a new fire escape was to be constructed. Mr Shilson acted as solicitor on the grant of the easement for the fire escape by the neighbouring landowner, and was provided with drawings which showed the proposed works. Mr Shilson received further drawings showing the works to the first floor so that he could apply for a supper extension licence from Mr Henson on 17 April 2003. It was apparent from the drawings which Mr Shilson received that the works to the first floor were substantial and he knew that they were being funded by the 1st Defendant.

(j)

Due to the difficulties with Mr Montgomery’s management of the business in 1999, Mr Shilson asked the 1st Defendant to take over the running of the business from Mr Montgomery and viewed the 1st Defendant’s involvement as being in accordance with Jean Montgomery’s wishes as set out in paragraph 6(b) of the Will. Mr Shilson knew that the 1st Defendant had other business interests, and that he would have to give them up if he were to run the business at the Albert Arms.

(k)

Since that time, the 1st Defendant has devoted substantially all or a substantial proportion of his time to the business of the Albert Arms at the expense of other lucrative business interests. The Trustees (particularly Mr Shilson and Mr Preedy) knew that the 1st Defendant was devoting most of his time to the business.

(l)

The 1st Defendant has also incurred liabilities and expense (either by himself or through the 2nd Defendant or other corporate vehicles) in the ordinary course of business in running the public house business at the Albert Arms. Whilst the Trustees might not have known the precise liabilities and expenses incurred by the 1st Defendant, they knew that he was running the business (at Mr Shilson’s initial request), and that he would necessarily incur them in the ordinary course of the business.

(m)

At no stage (until the present dispute arose) had the Trustees ever indicated to the 1st Defendant that he was not entitled to the repayment of the monies he had introduced (including the costs of the renovations totalling £351,922) from the sale or refinancing of the Premises. Nor had they given the 1st Defendant to understand that the Premises could be sold without his consent or that he did not have a right to occupy the Premises for so long as he wished and the monies remained unpaid.”

In addition, paras 11 to 18 of the Defence state:

“11.

In or around 1999, Mr Montgomery’s management of the business had deteriorated, and the condition of the Premises had fallen into disrepair. There were discussions between the 1st Defendant, the Trustees and the beneficiaries of the Trust (the 1st Defendant’s siblings Sarah Fenton and Peter Dunne) about the situation in which it was agreed that renovation of the ground and first floors of the Premises was needed.

12.

The 1st Defendant agreed to fund the renovations to the Premises via the 2nd Defendant and the trade fixtures and fittings of the business on the basis that the 1st Defendant and/or the 2nd Defendant were regarded by the Trustees as a ‘sitting tenant’. By this phrase the Trustees 1st Defendant understood that he would be entitled to occupy the Premises for life or for as long as he wished, whether by himself or through the 2nd Defendant (and/or through or by licensing corporate trading vehicles), together with Mr Montgomery (during his lifetime).

13.

In reliance upon the understanding that he was entitled to occupy the Premises for life or as long as he wished, the 1st Defendant loaned monies to the 2nd Defendant to pay for renovations to the ground floor of the Premises. The 1st Defendant then caused the 2nd Defendant to undertake and pay £201,479 for renovations to the ground floor of the Premises. The 2nd Defendant undertook these works with the knowledge of the Trustees and on the understanding that it would be entitled to occupy the Premises for as long as the 1st Defendant lived or wished, whether by itself and/or through or by licensing corporate trading vehicles, together with Mr Montgomery (during his lifetime).

14.

In 2003 the 1st Defendant caused the 2nd Defendant to undertake and pay £140,433 for renovations to the first floor of the Premises. The 1st Defendant and 2nd Defendant undertook these works with the knowledge of the Trustees and on the understanding that they would be entitled to occupy the Premises for as long as the 1st Defendant lived or wished, whether by themselves and/or through or by licensing corporate trading vehicles, together with Mr Montgomery (during his lifetime).

15.

As part of the renovations to the first floor of the Premises undertaken in 2003 a new fire escape was constructed which overhung a neighbour’s land. By deed dated 10 April 2003 Palace Street Investments plc (the registered proprietor of the neighbouring land) granted Mr Shilson and the 1st Defendant as the registered proprietors of the Premises the right to retain and pass on foot over the fire escape overhanging its land for a fee of £10,000. The 1st Defendant and 2nd Defendant paid the fee of £10,000.

16.

In an undated letter sent in or around January 2013 to the 1st Defendant, Sarah Fenton and Peter Dunne, the 1st Claimant stated that the 1st Defendant was a ‘sitting tenant’ of the Premises and that ‘We have been advised that [the 1st Defendant] has certain tenant’s rights which I’m sure you know.’

17.

In reliance upon the representations of the Trustees and his understanding that he was entitled to occupy the Premises for life (whether by himself or through corporate vehicles), the 1st Defendant has since 2000 (at the latest) devoted substantially all of his time to the business carried on at the Premises. If he had not understood that he was entitled to occupy the Premises for life, or as long as he wished, the 1st Defendant would have spent his time on other lucrative business interests.

18.

In reliance upon the representations of the Trustees and their understanding that they were entitled to occupy the Premises for life (whether by themselves or by licensing their corporate trading vehicles), the 1st Defendant and 2nd Defendant have not regularised the payments made for the renovations in 2000 and 2003. If they had understood that they were not entitled to occupy the Premises for the 1st Defendant’s life, or as long as he wished, the 1st Defendant and 2nd Defendant would have taken steps in 2000 and 2003 to regularise and protect the payments made for the renovations.”

A request for further information of the words in para 12 “on the basis that the 1st Defendant and/or the 2nd Defendant were regarded by the Trustees as a ‘sitting tenant’.” By this phrase the Trustees 1st Defendant understood that he would be able to occupy the Premises for life” produced the following response:

“5(a) Although it is not alleged that the Trustees used the phrase ‘sitting tenant’ prior to the carrying out of the works, the 1st Defendant had a conversation with Mr Shilson prior to the works being carried out in which he (Mr Shilson) said that any money that the 1st Defendant put in to the business (which was thought (wrongly) to be owned by the Trustees and Mr Montgomery equally) and in to renovating the Premises would be repaid out of the proceeds when the Premises were sold, or refinanced. Mr Shilson also said that until he was repaid, the 1st Defendant would be entitled to occupy the Premises.

(b)

Subsequently, the Trustees (and Mr Preedy in particular) have referred to the 1st Defendant as a ‘sitting tenant’, and have proceeded on the basis that he cannot be prevented from occupying the premises until he has been repaid all the monies he has put into the business and the Premises.

(c)

The Trustees have never given any indication that the Premises could be sold without the 1st Defendant’s consent, and the use of the phrase ‘sitting tenant’ reflects their understanding that the 1st Defendant could continue to occupy the Premises, and object to a sale, for as long as he liked. The 1st Defendant might never agree to a sale, so he would be entitled to occupy the premises for life.”

Two points are of importance in considering the pleaded case for proprietary estoppel. The first relates to the question whether the promises or encouragement on which the Defendants relied were those of both Trustees or only one of them.

In para 3.3 of the Defence the case is put that the Defendants acted to their detriment with the knowledge and encouragement of both Trustees on an understanding shared by the First and Second Defendants and both Trustees. But the further information supplied of this allegation is that only one of the Trustees, Mr Shilson “agreed that any money that the 1st Defendant put in to the business …would be repaid out of the proceeds when the Premises were sold, or were refinanced”, and only Mr Shilson “said that until he was repaid, the 1st Defendant would be entitled to occupy the Premises”. The further information goes on to say that “The 1st Defendant assumes that Mr Shilson discussed the monies to be introduced with Mr Preedy his co-trustee”. In my judgment, the allegation made in substance is one against Mr Shilson alone, and not against the First Claimant.

Para 12 of the Defence asserts in substance (via use of the phrase ‘sitting tenant’) that the First Defendant agreed to fund the 2000 renovations to the Premises on the basis that he was regarded by the Trustees as someone who would be entitled to occupy the premises for life or as long as he wished. Para 13 goes on to assert that “the 2nd Defendant undertook these works with the knowledge of the Trustees and on the understanding that it would be entitled to occupy the Premises for as long as the 1st Defendant lived or wished...” Strictly, although there is an allegation that the Trustees knew of the works, there is no allegation that the Trustees knew that the asserted ‘understanding’ was the basis on which the First and Second Defendants were acting.

Moreover, the further information supplied under para 12 of the Defence accepts that the phrase ‘sitting tenant’ was not used before the works were carried out, though it asserts that the promise was made to the First Defendant by Mr Shilson alone, and that the Trustees including the First Claimant thereafter used the phrase ‘sitting tenant’, meaning that the First Defendant cannot be prevented from occupying the premises until he has been repaid. In my judgment this also is not an allegation that the First Claimant made any promise or gave any encouragement or knew at the time of the 2000 renovations that the basis on which the First or Second Defendant was acting was as pleaded, even though such an allegation is made against Mr Shilson, and a further allegation is made that both trustees made statements about the Defendants’ rights afterwards.

Para 16 alleges that “The 1st and 2nd Defendants undertook [the 2003 renovations] with the knowledge of the Trustees and on the understanding that they would be entitled to occupy the Premises for as long as the 1st Defendant lived or wished...” The same comments apply to this allegation as to that in para 13 above. The Trustees are alleged to have known of the works, but not that they knew that the asserted ‘understanding’ was the basis on which the First and Second Defendants were acting.

My conclusion is that there are sufficient allegations against Mr Shilson to found a proprietary estoppel if proved on the evidence, but not against the other trustee at the time, Mr Preedy, now the First Claimant. Irrespective of my findings of fact, therefore, I will have to consider whether and how far it is possible for two or more trustees to be bound by the promises, encouragement or standing-by of only one of them.

The other pleading point is this. On the assumption that both trustees are bound by the promises, encouragement or standing-by of only one of them, there is a question of law, already noted in paragraph 7 above, as to how far such promises, encouragement or standing-by bind the beneficiaries of the trusts on which the trustees hold the assets. It is relevant to this question to know whether and how far allegations are made against the beneficiaries that they (or some one or more of them) made, gave or adopted the promises, encouragement or standing-by alleged.

In para 11 there is an allegation of “discussions [in about 1999] between the 1st Defendant, the Trustees and the beneficiaries of the Trust … about the situation in which it was agreed that renovation of the ground and first floors of the Premises was needed”. This is amplified in the further information supplied (under para 3.3, at letter (c)). But there is no allegation that the beneficiaries made any promises to the effect of, gave any encouragement to the Defendants to act on, or stood by realising that they were acting on, the basis pleaded. Indeed, there is no allegation that the beneficiaries did anything at all of this kind. Once again, irrespective of my findings of fact, it will be necessary for me to consider whether and how far it is possible for the beneficiaries and their interests in the trust assets to be bound by a proprietary estoppel equity created by the trustees without the beneficiaries’ concurrence.

However, during the hearing, the Defendants made plain on a number of occasions that their ‘real’ case went wider than their pleaded case. For example, on day 1, after I had given judgment on the application to adjourn the trial, Mr Burroughs said, in response to a question from me about how a proprietary estoppel equity could be created by the trustees which would bind the beneficiaries (page 12 of the pdf transcript, lines 16-17):

“Because it’s also our case of course that the beneficiaries agreed it.”

And subsequently (page 13 line 19 – page 14 line 2):

“We said that the trustees had agreed it. We also have included in our evidence, evidence to the effect that the beneficiaries had agreed it. If you, Master, take the view that it is necessary to defend the possession claim by pleading that the beneficiaries acquiesced or agreed in that, then I can add a paragraph, and it will not prejudice anybody.”

In addition to this, the evidence of Jonathan was expressly that promises and assurances had been made not only by Mr Shilson but also by Mr Preedy, Peter and Sarah (day 2, page 80, lines 23-24), and that Peter, Sarah and Mr Preedy were all in agreement with Mr Shilson to pay back the money that Jonathan had put into the refurbishment (page 81 line 24 – page 82 line 1, page 99 lines 3-5), or at any rate knew of the agreement between him and Mr Shilson to that effect (page 108, lines 24- 25, page 112, lines 19-20).

Finally, in the written submissions dated 23 July 2015 on the “trust point” made by Ms Clare Stanley QC and Mr Burroughs, it is stated (para 2) that:

“It is … the Defendants’ case that Sarah and Peter knew that Jonathan had spent substantial sums of money on The Albert Arms in 2000 and 2003 … and that they agreed that he would be entitled to be repaid from the sale of the property and could remain in occupation … until repayment.”

These three views are not completely consistent, which both complicates matters and strengthens the hand of a party resisting an application for permission to amend, but the general thrust is clear. The question is what to do about them.

In the English system of civil justice, where judges have an arbitral rather than inquisitorial role, and the burden lies on the parties to prepare and present their cases as they think fit, it is crucial that persons involved in litigation know before they come to court what is the case they have to meet. Hence the importance of properly pleaded statements of case. At the same time, if substantive justice is to be done, the courts must be able to look through purely procedural difficulties to the merits of the case, and to give permission to amend the case wherever this can be done consistently with the overriding objective.

My view therefore is that where, as here, the pleaded case of the Defendants seems to have been exceeded by the informal statements, referred to above, of the Defendants’ case, I should not simply consider the pleaded case but should go on to consider the evidence adduced against the wider case expressed to me.

If then I were to find that the evidence justified some or all of the wider case, it would be open to the Defendants to apply – even at that late stage – to amend their case formally, and at that stage I would be able to assess the strength of any objections of the other side based on unfairness, inability to prepare properly, to call and adduce relevant evidence, to cross-examine properly, and so on. But if the evidence were not to justify that wider case, then there would be no point in acceding to any application to amend.

The law in play in this case is that concerning the Defendants’ case, rather than the Claimants’. The general principles of proprietary estoppel were not however controversial between the parties. The Claimants relied on the summary exposition (“without attempting to provide an exclusive definition”) in Megarry & Wade’s The Law of Real Property, 8th ed 2012, at para 16-001:

“(i)

An equity arises where:

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 upon this belief, C acts to his detriment to the knowledge of O; and

c.

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

This equity gives the right to go to court to seek relief. C’s claim is an equitable one and subject to the normal principles governing equitable remedies.

(ii)

The court has a wide discretion as to the manner in which it will give satisfy [sic] the equity in order to avoid an unconscionable result, having regard to all the circumstances of the case, but not limited to, the expectations and conduct of the parties.

(iii)

The relief which the court may give may be either negative, in the form of an order restraining O from asserting his legal rights, or positive, by ordering O either to grant or convey to C some estate, right or interest in or over his land, to pay C appropriate compensation, or to act in some other way.

(iv)

The issue in any given case is whether it would be unconscionable for O to deny that which he has allowed or encouraged C to assume to his detriment. The courts no longer inquire (as once they did) whether the circumstances can be ‘fitted within the confines of some preconceived formula’.”

Although the Defendants did not in terms endorse this formulation, I did not understand them to dispute it in principle. I only add in passing that the formulation of para (i)a. appears to equate the legal power of positive actions by O with O’s negative action in allowing C to act in a particular way. Yet in a case (which is not this one) where O has made no positive representation but merely allows C to act in a mistaken belief, it is essential that O be aware of that mistaken belief, whereas if O makes a positive representation it does not matter whether O knows that his representation is false or not.

The Defendants referred me to two recent leading cases on proprietary estoppel, Thorner v Major [2009] 1 WLR 776, Gillett v Holt [2001] Ch 210, and to older cases such as Taylors Fashions Ltd v Liverpool Victoria Trustees Co [1982] QB 133, Dann v Spurrier (1802) 7 Ves 231, and Ramsden v Dyson (1866) LR 1 HL 129. In particular the Defendants cited this dictum of Lord Walker of Gestingthorpe in Thorner v Major [2009] 1 WLR 776, [29]:

“… most scholars agree that the doctrine [of proprietary estoppel] is based on three main elements, although they express them in slightly different terms: a representation or assurance made to the claimant; reliance on it by the claimant; and detriment to the claimant in consequence of his (reasonable) reliance”.

That summary formulation covers the three elements set out in para (1)(a)-(c) of the extract from Megarry & Wade. In the context of the present action the point to note is that this is not a case of a representation that the present legal position was such-and- such; no-one was deceived by another’s statement (or silence) into thinking that his or her actual legal rights were different from what they were. Instead, the case put by the Defendants is that promises (even agreements) were made about what would be the position in the future. This case is about promises which are alleged to have been be made, binding in equity although not binding at law (for if they were, there would be an ordinary contract to create or convey legal rights).

In this case however two other points arise which are not covered by the summary from Megarry & Wade. This is because the present case, unusually, concerns two co- owners of land who hold on trust for others as beneficiaries. The first such point is the extent to which one of two or more joint owners can by words or actions (or indeed inactions) bind the other or others. If one of the trustees (but not the other or others) makes a promise to a third party, and the third party relies on it to his detriment, is that enough for the equity to arise? I will call this the ‘trustee unanimity point’. The second point is how far the trustees (even acting jointly) can create a proprietary estoppel which is binding on the beneficiaries. I will call this the ‘trustee/beneficiary point’. (This latter is the point already mentioned in paragraph 7 above.) I deal here with both points in turn.

As to the trustee unanimity point, the general law was not in dispute. Unless authorised to act by a majority, trustees of a private trust are required to exercise trustee powers unanimously. Authority can be conferred by the terms of the trust, the court or the unanimous decision of all the beneficiaries (assuming they are of full capacity). There was no suggestion here of any such authority having been conferred, by any of these means.

The Claimants referred to a decision of the Leeds County Court in Lloyds Bank Ltd v Picken [1962] CLY 2611, where in a case about forfeiture of a lease, and in particular where the trustees of the reversion expectant on a lease were alleged to have waived a forfeiture, the judge held that

“If it is the reversion which is vested in the trustees, all of them must join in waiving a breach of covenant if the waiver is to be effective.”

As the note was contributed by the late Mr EG Nugee QC (then a junior), I am confident not only that it correctly expresses the decision, but also that Mr Nugee was the counsel who put forward the argument that won the case.

That case was about trustees, though not about proprietary estoppel. It was about waiver of forfeiture of a lease. And I am not at all sure that the considerations which apply to the need for unanimity for trustees to exercise powers conferred on them are the same as for trustees to waive a forfeiture. Waiver of forfeiture is a doctrine concerning the circumstances in which equity will prevent an already established estate in land being lost for an insubstantial reason. Proprietary estoppel is a doctrine concerning how a person who does not have an estate in land may acquire one for a substantial reason. But I do not need to concern myself now with that.

This is because a very recent case of proprietary estoppel raised the very point which I am faced with: Fielden v Christie-Miller [2015] EWHC 87 (Ch), decided by Sir William Blackburne. In that case the several trustees of two settlements were faced with claims in proprietary estoppel made by one of the beneficiaries for an interest greater than that given to him under the settlements. The claimant’s statements of case pleaded (as the judge on examination held) promises by only one of the trustees. The trustees sought to strike out the claim or obtain summary judgment against the claimant. The claimant sought to argue that the promise of one trustee bound all. For the purposes of estoppel, he said, it was sufficient that the promisor had the appearance of authority to bind the others and that the claimant believed that the promisor in fact had it.

The judge (at [26]) rejected this submission. He held that

“Elementary fairness requires that before a person can be bound by the acts of another purporting to act on his behalf, that other must have his authority to bind him in the matter. Whether he has will depend on the usual principles of agency. This applies, in my judgment, just as much in the field of estoppel as it does in other contexts.”

Thus it was necessary for the claimant to plead the facts and matters relied upon for saying that the other trustees were bound by the promise of one.

As to this, in his skeleton argument for the Defendants, Mr Burroughs said (para 25):

“It would be quite unconscionable if the Court accepted that [Mr Shilson] had made the representation, but that it could not found an estoppel because it was given by one of two trustees.”

But unconscionability is not all of it. Mr Burroughs, having referred to the decisions in Thorner v Major, Gillett v Holt (including references to Re Basham and Taylor Fashions v Liverpool Victoria Friendly Society, accepted this in his closing submissions (day 3, page 137, lines 17-22):

“I don’t suggest, it’s not open to me to suggest, that the only guiding principle is unconscionability. Obviously you have to fit within the rubric. Perhaps that’s an overly restrictive word, but the elements which are identified in Megarry and by Lord Walker in Thorner v Major have to be followed.”

As I see it, however, even where one only of two beneficial co-owners makes a representation or promise in which the other does not join or acquiesce, I would have thought that the innocent co-owner who has done nothing to put his or her own interest at risk should not be bound. Any equity should at most attach only to the interest (at best equitable) of the co-owner who so represented or promised. As Sir William Blackburne said in Fielden v Christie-Miller [2015] EWHC 87 (Ch), [26]:

“In the language of estoppel, there is nothing unconscionable in a person denying what another has come to believe and acted upon to his detriment if that person has not, either himself or through his agents, allowed the other to reach that belief.”

In any event, however, even that is not this case. Here the legal owners are not beneficial co-owners, but trustees for others, with limited powers to bind their beneficiaries’ interests. If, for the protection of the beneficiaries themselves, the rule is that the trustees must (in the absence of authority to the contrary) be unanimous in exercising a power to bind the beneficiaries, I fail to see how it can be unconscionable for trust beneficiaries, innocent of any conduct putting their beneficial interests at risk, to assert those interests against a person to whom a representation or promise even inside the trustees’ limited powers has been made by one only of those trustees. At best, the equities are equal. And a representation or promise outside trustees’ powers would be a fortiori.

So the question I must ask myself is whether, on the ordinary principles of agency, Mr Shilson had authority to bind Mr Preedy, whether by actual, implied or ostensible authority. Mr Burroughs accepted that he had to show that either Mr Preedy was party to the promise to Jonathan or that he realised that there was a promise which Jonathan was relying on but said nothing (day 3, page 143, lines 11-20). I will return to this in due course, after considering the evidence.

I turn now to the second, the “trustee-beneficiary” point. This was the subject of written submissions from the parties, filed and served in the week after the trial and all the evidence and closing submissions had been heard and made. For the Claimants Mr Fenner Moeran QC argued (in summary) that it was impossible for the trustees, even acting jointly, to have created an equity of proprietary estoppel binding on the trust estate and beneficiaries. First, they had no power under the terms of the trust or the general law to vary the terms of the trust so as to give an increased share to Jonathan. Secondly, the trustees could not transfer the legal title to a third party except subject to the beneficiaries’ interests, because overreaching could not take place without a conveyance to a purchaser in good faith for valuable consideration, which in the circumstances was not possible. Thirdly, the trustees could not have created any interest in the trust property having priority over the beneficiaries’ interests, because (i) they are not beneficial owners; (ii) a mere equity must rank after an existing equitable interest, and (iii) the court could not grant any relief to the Claimants infringing or diminishing the beneficiaries’ existing equitable interests.

For the Defendants, Clare Stanley QC and Mr Burroughs argued (again in summary) that the trustees, having “all the powers of an absolute owner of land” as trustees of land within the Trusts of Land and Appointment of Trustees Act 1996, had power binding on the beneficiaries (inter alia) to mortgage, sell or lease or license the land to Jonathan, and could therefore enter into the arrangements with him which it is alleged that they did. Moreover, they say that the trust beneficiaries (including Jonathan) had the right under the 1996 Act to occupy the trust property. And finally they argued that Jonathan did not claim an indefeasible beneficial interest displacing that of his siblings. Instead he claimed an enforceable contractual licence to occupy, at least until his loans were repaid. In essence, this was a claim, not to a handout, but to a bargain.

I agree with Mr Moeran’s submissions in reply that these submissions represent a significant retreat from the position originally pleaded. I do not however agree with him that all claim to proprietary estoppel has been abandoned by the Defendants. This is because proprietary estoppel covers a broad spectrum running from (i) “deals” (in broad terms, contracts for consideration stipulated for) which are invalid only for lack of compliance with formalities rules, through to (ii) executory acts of bounty made enforceable in equity by (for example) standing by in the knowledge that another person mistakenly thinks you have encouraged him or her to act in reliance on the belief that he or she will obtain an interest in your property in the future.

I agree with Ms Stanley QC and Mr Burroughs that in principle the trustees as trustees of land had the powers under the 1996 Act, as against the beneficiaries, to sell, lease, mortgage (and so on) the trust land, though only, as they accept, for the purpose of exercising their functions as trustees. They must not exercise them in contravention of any rule of law or equity (s 6(6)), and in exercising them they must have regard to the rights of the beneficiaries (s 6(5)). Whether they may properly exercise such powers in a given case would depend on the circumstances, of course. But, despite the seemingly unlimited terms of section 6(1) of the 1996 Act, one power the trustees plainly did not have as against the beneficiaries was to give it away for nothing to a person not otherwise entitled to it. A power to give away the trust property is dispositive. But the powers conferred by section 6(1) are (as the Defendants accept) administrative, and not dispositive.

Moreover, in my judgment, s 6(1) is concerned with administrative transactions which are formally and substantively complete. I accept that it would be possible for a settler or testator, or indeed Parliament, to confer power on trustees to commit the trust assets and bind the trust beneficiaries by informal transactions such as proprietary estoppel. But here the testatrix certainly did not do so. And although the words of s 6(1) are wide (“all the powers of an absolute owner”), in my judgment the proper protection of the beneficiaries demands that these words be confined to formally and substantively complete transactions. Those which do not meet the requirements of valid contracts of sale, lease, mortgage and so on are simply outside the scope of the section. So a bargain for an interest in land which fails as a contract because of lack of formality is not within s 6 and does not bind the beneficiaries as an exercise of trustees’ powers.

Such a transaction can still be binding on the beneficiaries through the entirely separate and self-standing principle that where a trustee acts outside his powers but confers a benefit on the beneficiaries, the beneficiaries may ratify the transaction and take the benefit if they wish, but do not have to. That would be their decision. So if the trustees here were to make promises to Jonathan of an interest in the land, and Jonathan did something to benefit the land, the beneficiaries could ratify it if they wished.

The second point made on behalf of the Defendants is that by the 1996 Act, ss 12-13, beneficiaries of a trust of land have an entitlement to occupy the land. It is difficult to see what difference this makes. During Bruce’s lifetime, he was the only beneficiary with an interest in possession. The trustees could not have exercised any power under the 1996 Act to deprive him of that. On the face of it, given that it was clearly a purpose of the trust under clause 6 of the will to make the premises available for his occupation, and that, not being let to anyone else, they were so available, prima facie he alone was entitled under s 12 to occupy them. And, because he was the only such beneficiary, the discretion arising under s 13 did not arise.

After his death, the three siblings Jonathan, Peter and Sarah became together absolutely beneficially entitled (assuming no rights created in favour of Jonathan and having priority). Because there is now more than one person with a beneficial interest in possession, in theory the discretion under s 13 may arise. (There is of course a question as to what are the purposes of the trust after the death of Bruce. Clause 6 refers to Jonathan occupying the land only in the context of assisting Bruce to run the pub, and that is now over.) But, as Mr Moeran points out, the reality is that this is now just a dispute between co-owners, and s 13 has become irrelevant. Any of the three siblings (and indeed the trustees) can ask the court for an order for sale under s 14, and, if the trustees attempted to exercise s 13 powers in favour of one of them, no doubt one or more of the others would do so. The further reality is that, far from the trustees seeking to exercise s 13 powers in favour of Jonathan, they have decided to seek possession against him.

More importantly for present purposes, the mere fact that the trustees might have a theoretical power to exclude the others and enable Jonathan to stay until the court ordered a sale by itself is not an authority for trustees to be able to create a proprietary estoppel equity binding on the beneficiaries. Section 13 is essentially a power of management of land that does not take away a beneficiaries’ interest in it. Proprietary estoppel, however, is a doctrine which alters beneficial interests.

The third point made is that Jonathan says that he does not (or at any rate does not now) claim an indefeasible beneficial interest displacing that of his siblings. Instead he claims “an enforceable contractual licence against the trustees” and “an equity being a right of occupation … until the loans are repaid …” For this purpose I will assume that, if trustees of land agree for consideration that a third party may occupy trust land under a contractual licence, the contract is not required to be in writing, on the basis that it does not create an interest in land. This is a quite different basis from that pleaded in the Defence (as explained in the responses to the requests for further information) on which to resist the claim for possession. But it is more a case of changing the legal conclusion to follow from particular facts than changing the factual allegations. It seems to me that, as long as the facts are found to support such a claim, the Defendants will not need permission to amend their statements of case to put it forward. And such a transaction would be within s 6(1) of the 1996 Act.

However, the modern law holds that a licence granted for consideration and coupled with an agreement not to revoke until a specified time or event is irrevocable until that time or event (see the authorities collected in Chitty on Contract, 31st ed, 2012, vol 1, para 13-030). It seems to me that, in contrast to a licence under the old common law unprotected by equitable remedies (eg Wood v Leadbitter (1845) 13 M & W 838, in a common law court before 1875), this is very close to an interest in property. The fact that it is non-assignable and cannot be turned into a right to income is irrelevant. Compare the case of a trust of land to permit a person to occupy personally until a certain time or event or until that person no longer wishes to occupy personally. The crucial question is whether the licence binds third parties. But, if the land is transferred, the same equity that Jonathan seeks to raise now may be capable of being raised against the purchaser: cf Ashburn Anstalt v Arnold [1989] Ch 1, CA. Arguing then that a claim to such a right “does not defeat, and is not inconsistent with the interests of Sarah and Peter” because “They retain an absolute right to 1/3 of the proceeds of sale of the property” is pure sophistry. If Jonathan has a right that keeps him in occupation of the premises, paying nothing in rent while running a business there, and postpones the enjoyment by Sarah and Peter of their mother’s inheritance, then that is inconsistent with, and pro tanto derogates from, their right in just the same way as Bruce’s life interest was and did.

Accordingly, I conclude that (1) neither trustee powers under s 6 of the 1996 Act nor beneficiary rights under s 12 authorise proprietary estoppel claims binding on beneficiaries who have not at least acquiesced in them, but that (2) a contractual licence could be created potentially binding on the trust estate and therefore on the beneficiaries.

I turn now to consider the evidence. I heard from the following witnesses. Mr Philip Baker, known as Charlie; Mr Raymond Preedy; Mrs Sarah Fenton; Mr Jonathan Dunne; Mr Peter Dunne; Mr Paul Mustoe; Mr Andrew Nicolson; Mr John Clark.

Mr Baker was slow, deliberate and cautious in his evidence, every inch a farmer. He followed the lead of his professional co-trustees or advisers, whether lawyers, accountants or surveyors, in matters related to their fields. He accepted that he was more reactive than proactive. He was careful not to go beyond what he knew. He was unsympathetic to Jonathan, but I found him to be a truthful witness in the evidence that he gave.

Mr Preedy was affable, knowledgeable and forthcoming. Like Mr Baker, he had no personal interest in the proceedings. He tried hard to help, and gave full explanations where called for. At the same time he was careful not to go beyond what he knew. He was criticised for “following the party line”, sailing close to the wind in his dealing with the bank, and for changing his evidence, but in context I do not think these are fair criticisms. As to the first criticism, you have to show not only that there was a “party line” which the witness followed, but also that it was wrong. I do not think either is shown here. The trustees no doubt sought legal advice on these complex facts, and ultimately launched proceedings on the back of it.

The second does not stand up to scrutiny. Unless there are special circumstances (eg those that might found an estoppel through silence), a professional dealing with a bank is not obliged to point out that his appreciation of the facts is different from what appears to be the bank’s. Each party to a commercial relationship looks after his own interest. In any event, the Defendants relied on this, not as evidence but really as an attack on Mr Preedy’s credit. I reject it.

As to the third, slips of memory, until corrected after contemporary records, are to be expected in a retired man confronted with events that had occurred up to 15 years earlier. One of the purposes of cross-examination is to enable the court to establish whether a witness who says something which can be shown to be incorrect was making an accidental slip, or was trying to deceive. Even if once or twice Mr Preedy initially shied away from answers that he thought might reflect badly on the trustees’ case, I am satisfied that his evidence was both objective and truthful. Indeed, the Defendants expressly accepted that he was not lying.

Mrs Fenton was more emotionally involved. It was plain to see that the breakdown in family relations hurt her. She had worked closely with her brother Jonathan in the Albert Arms in the years following their mother’s death. Nevertheless she gave her evidence fluently and without hesitation. On occasions, however, faced with a difficult question, she would not answer it directly but went off at a tangent. She was plainly aware of the point with which questions were being asked, but nevertheless strove to give her evidence honestly and fairly, and I am confident that what she told me was truthful.

Mr Jonathan Donne was also emotionally involved. It was clear that he too was affected by the breakdown. In giving evidence, he was a man of contrasts. Where questions could be answered in his favour he answered immediately and forcefully. Where he judged that they could not, he slowed down, used circumlocutions or changed the subject. He frequently answered that he could not remember the answer to a question which was hard for him to deal with, but then he remembered great detail from matters arising at about the same distance of time which were easier to deal with. I do not think he deliberately lied. But I do think that he had convinced himself of the justness of his cause and therefore that the facts as he recalled them fitted that cause rather more than they actually did, viewed objectively. I accepted his evidence easily where it was corroborated by an independent source, but less so when it was not.

Mr Peter Dunne was the most detached of the three siblings in giving evidence. He attended under a witness summons issued by the Defendants, but gave his short evidence calmly and dispassionately, fluently and without hesitation. I accept his evidence as truthful.

Mr Paul Mustoe, who also attended under a witness summons issued by the Defendants, was a voluble but nonetheless careful witness. He had little to contribute, but I accept his evidence as truthful.

Mr Andrew Nicholson was a reluctant, rather guarded, cautious witness, but who nevertheless gave clear and full evidence, insisting (perfectly properly) on completing his answers when counsel sought to move on. He had a little more than Mr Mustoe to say. I accept his evidence also as truthful.

Mr John Clark was a charming, if rather carefree witness, almost laid-back. He engaged easily with the process, and freely accepted that he had not been aware of a number of steps taken by the solicitors acting for the company of which he was sole director (the 2nd Defendant) even though he had signed documents taking responsibility for what had been done. But he was palpably telling the truth throughout his evidence. It was clear from him that in relation to the affairs of the 2nd Defendant since Mr Clark became director, Jonathan still called the shots.

There was also the witness statement of Mr Tony Shilson, which I admitted in evidence. Obviously I had no opportunity to judge his demeanour in court, and he was not there to answer questions. I record also that I had no evidence as to the circumstances in which his statement was prepared (eg whether he or the Defendants’ solicitors prepared the first draft), or to what documents he had access as he did so or when he checked it.

After reading the witness statements filed, considering the documents put in evidence and hearing and observing the witnesses who were tendered for cross-examination, I find the following facts.

Before her death in 1997 Mrs Montgomery and her second husband Bruce carried on the business of The Albert Arms public house in partnership, but in the freehold premises which belonged to her alone, legally and beneficially. On her death the premises passed by her will to her executors and trustees, essentially for the benefit of Bruce for his life and subject to his interest for her three children in equal shares.

On the other hand, and in the absence of some agreement to the contrary (and no-one suggested that there had been one), the partnership carrying on the business was dissolved by Mrs Montgomery’s death, subject only to the right of her estate to an account for anything that might have been due to her at that date. So when, after the death, Bruce carried on the public house business, he did so as a sole trader. (In this connection I note that the title of the Midland Bank account before Mrs Montgomery’s death was “MR B MONTGOMERY AND MRS J MONTGOMERY TRADING AS THE ALBERT ARMS” but afterwards was “MR B MONTGOMERY TRADING AS THE ALBERT ARMS”: see Bundle B, pages 354-55) . This is consistent with Peter’s oral evidence that, when he asked Mr Shilson questions about the business soon after Mrs Montgomery’s death, he was told it was none of his business because the business was separate from the will trust of the building, and the trustees and beneficiaries were not involved (day 2, page 73, lines 18-22).

But Mr Preedy gave evidence that at the time he thought differently, and that Mrs Montgomery’s share of the business had passed to the trustees (day 1, page 124, lines 9-11; page 131, lines 3-6). He still held that view in July 2002 when he wrote to Sarah about it. It is also clear that Mr Schaverien took the same view as Mr Preedy in his letter of 4 January 2002 to Mr Shilson, when he said that half the business formed part of the estate of Mrs Montgomery. The change of mind by Mr Shilson is described by him in his letter to Mr Schaverien (copied to Jonathan) of 19 February 2003, where he contrasted his view at the date of the death with what he now thought: “On reflection, I agree with you that as Jeannie and Bruce were in partnership Jeannie’s share did not pass to Bruce by survivorship but came into the estate as you suggest.” (Mr Preedy, at least, thought that was still the position in 2012, as evidenced by his email to Andrew Nicholson of 9 June 2012.)

After the death of Mrs Montgomery, although Bruce was still known to customers as “The Guv’nor”, and was lawfully carrying on the business, his drinking was causing concern. Jonathan became the licensee, and became more involved in running the pub business, although he also had other financial interests. The business was run on a bank overdraft, the account being (as mentioned above) in the joint names of Bruce and Mrs Montgomery before her death, and Bruce’s sole name afterwards. In 1998 there were problems with the bank because the overdraft was consistently exceeding its limit. This was in part because Bruce failed regularly to bank all the takings. On one occasion £40,000 cash was discovered in the premises.

By July 1998 there had been a refurbishment of the pub, and a greater emphasis on the restaurant side of the business, and, after September 1998, Sarah as well as Jonathan was involved in the business. However, Bruce’s drinking and deteriorating state of health were still causing concern (as shown by the fax letter from Peter on behalf of the siblings to the trustees dated 16 July 1998). This came to a head in March 1999, when Sarah, Peter and Jonathan by fax letter requested the trustees, then Messrs Preedy and Shilson, to remove Bruce from the day to day management of the pub, and Mr Preedy wrote on 22 April 1999 to Mr Shilson to propose measures to secure the business going forward. On 13 May 1999 Jonathan wrote to the trustees threatening to leave if Bruce was not made to retire.

Mr Shilson, after discussing the matter with his co-trustee Mr Preedy, then asked Jonathan to take over the day to day running of the Albert Arms from Bruce. This was contemplated by Mrs Montgomery’s will, in that clause 6(a) permitted Bruce to run the business in the pub only so long as the trustees considered it appropriate for him to do so (so implying that they could put someone else in), and clause 6(b) contemplated Jonathan being put in to assist Bruce if he continued to run the pub. Either way, in practice Jonathan took over the pub. Mr Shilson’s statement does not make clear exactly when this took place. He implies that it was in the light of issues with the bank arising “some time after [Mrs Montgomery’s] death”. Jonathan’s own evidence was that this was in 1999, and I accept this.

Notwithstanding Jonathan’s greater involvement, and the reduced role for Bruce, the problems with him continued into 2000, as shown in a further letter from Sarah, Peter and Jonathan to the trustees of 14 April 2000 (Bundle B, pages 377-78), in which they referred to a recent accidental fire that Bruce had caused in the premises, and proposed that he retire immediately, on certain financial terms.

During the same period, 1999-2000, works were done to the ground floor of the Albert Arms. These works were funded by Jonathan or one of his companies, after the siblings had unsucessfuly attempted themselves to obtain a loan for them. The sums claimed by Jonathan to have been spent amounted to £201,479. He says in his statement that Mr Shilson agreed that any money he put into the business and in renovating the premises would be repaid out of the proceeds of sale of the building when sold or refinanced (paragraph 11). But he accepts that he did not speak to Mr Preedy about it. He assumed that Mr Shilson had done so (paragraph 12). Mr Shilson says in his statement that the money spent was a loan “to the trust” and that he expected it to be repaid either on a sale or refinancing (though he does not say of what). He says that both he and Mr Preedy knew of and had no objection to the works (paragraph 9). I note that in his letter to Jonathan’s accountant Mr Schaverien of 4 December 2000 Mr Shilson refers to an injection of monies by Jonathan “into the business of The Albert Arms which is of course still run by Bruce Montgomery under the terms of his late wife’s Will”.

Jonathan was cross-examined by Mr Bowker. He said that the promises and assurances were made not just by Mr Shilson, but by everybody (day 2, page 80, lines 23-25). However, he accepted that his witness statement referred only to those of Mr Shilson. He did not know why he had not referred to those of his siblings, and he had had many conversations with Mr Preedy over the years and was trying in his statement to stick to salient points (day 2, page 81, lines 5-16). He had not mentioned the dates of the promises and assurances because he could not remember them (day 2, page 82, lines 3-7).

Mr Preedy says in his statement that he was not involved in any discussions prior to the works being done (para 25), but that after they were completed he became aware that they had been funded by Jonathan and that the cost would be repaid from the business (para 27). He adds that the loan was not made to the will trust in any event (paragraph 38). Later he says he was always under the impression that the money loaned would be repaid “when the Albert Arms was sold” (para 45). In oral evidence he explained the latter reference to the Albert Arms as one to the business, and not to the building (day 1, page 151, lines 2-6). It also follows a paragraph (43) where he referred to a letter in which Jonathan is stated to have “loaned The Albert” money, and another (44) in which he explained the reference to “The Albert” as one to the business rather than to the freehold of the building.

Mr Preedy was cross-examined by Mr Burroughs for the Defendants. In his oral evidence he said that he was not informed of the works before they were carried out, (day 1, page 139, lines 14-15, page 141, lines 12-15), that the loan was to the business (day 1, page 140, lines 204; day 1, page 153, lines 1-4) and not to the trust (day 1, page 146, lines 5-8). But he did accept that he like others believed at that time that the trust was a partner in the business for 50% (day 1, page 131, lines 3-6; page 133, lines 18-20; page 137, lines 10-13), although that 50% was held on trust for Bruce during his lifetime (day 1, page 137 line 23 – page 138 line 10; page 149, lines 9-10). He accepted however that there was never any question of selling the business separately from the building; they would be sold in conjunction (day 1, page 148, lines 8-12).

He was also asked whether, in view of the application to the licensing justices which was apparently to be made in June 2000, and the correspondence between Mr Shilson and Gary Henson on 21 and 28 June about the copy plans which would have to be included, he remembered having to sign the application for the justices’ licence, and he said that he did not (day 2, page 165, lines 20-24). In his closing submissions Mr Burroughs asked me to “take a view on” whether this was accurate, as the licence correspondence might suggest that Mr Preedy must in fact have known about the works at the time (day 3, page 142, lines 17-18). But in the absence of any submissions or agreement as to the law in 2000 on who had to apply for a variation in a justices’ licence, I do not think I can do any such thing. It may very well have been the licensee or other person carrying on the business (ie Jonathan and/or Bruce) rather than the proprietors of the legal estate in the premises concerned.

Sarah in her statement said she was involved in the discussions about the renovations because she was then working there, and knew that Jonathan was funding them (para 28), but was clear that Jonathan would be repaid from the business and not from the trust of the freehold (para 29). In cross-examination by Mr Burroughs, she confirmed that she knew about the renovations before they happened (day 2, page 40, lines 14- 16), emphasised the distinction between the business and the building (day 2, page 10, lines 13-20; page 12, lines 18-22), and explained that she thought the loan would be repaid by the business out of cashflow (day 2, page 36, lines 21-25; page 42, lines 7- 11).

Peter, having been the subject of a witness summons, did not provide a witness statement of his evidence. Examined by Mr Burroughs, he said in oral evidence that the first refurbishment was widely discussed, and that he was consulted sometimes, but was not very involved (day 2, page 74, lines 17-24). He was clear that Jonathan should be repaid for the cost of the refurbishment, but less clear about how it was to be repaid. No-one thought to be specific. However he was “not surprised” later to see in the minutes of a meeting that it was to be repaid from cashflow of the business (day 2, page 76 line 23 – page 77 line 8).

In the light of all the evidence, I find that Mr Shilson, Sarah and Peter knew, but Mr Preedy did not know, of the works beforehand, but none of them (in Mr Preedy’s case, once he knew) had any objection. They knew (Mr Preedy only afterwards) that Jonathan or his companies were funding or had funded the works. Mr Preedy and Sarah considered the cost to be a loan to the business, and not to the trustees as freeholders of the building, to be repaid on sale or refinancing of the business. Peter had no fixed view.

The statement of Mr Shilson does not say clearly that it was a loan to the trustees of the building itself. His statement referring merely to “the trust” is at best ambiguous, and of course I did not have the advantage of being able to observe his giving evidence and answering questions on the point, whereas I saw and observed Mr Preedy and Sarah. In addition there is Mr Shilson’s letter of 4 December 2000, where he refers to the loan as being to “the business”.

Although it comes later in time, there is also correspondence between Alan Schaverien (Jonathan’s accountant) and Mr Shilson in December 2002 which bears on what everyone thought. On 13 December Mr Schaverien wrote to Mr Shilson, asking him to draw up a loan agreement “between The Albert Arms and Blue Mango Investment Holdings Ltd for the sum of £296314 being the amount owed by The Albert Arms to Blue Mango Investment Holdings Ltd”. Mr Shilson replied on 19 December 2002 asking precisely who Mr Schaverien meant by “The Albert Arms”. He came back to Mr Shilson the next day, saying “when I state AA this relates to the trading division of the Albert Arms rather than the freehold property which you are holding in trust for the three children”. All three letters were copied to Jonathan. So it is clear that Mr Schaverien considered in December 2002 that the loan made to The Albert Arms had been made to the business and not to the trustees of the will trust of the freehold. The implication is that Jonathan too so considered. I record here that he was taken to these letters in cross-examination, and, although he was not specifically asked about the meaning of The Albert Arms in them, he did not disagree with what his accountant had said on his behalf.

There is a further point. The trustees as trustees of the building would have had to be formally involved if they were to be made liable as such for the loan, and they were not. To my mind it is inconceivable that Mr Shilson as a solicitor and Mr Preedy as an accountant, acting together as trustees in this close family trust (of which Mr Preedy indeed was a member by marriage), would have agreed to something as important as that without (i) its being formally agreed and recorded, and (ii) contemporary discussion by them with the beneficiaries, of which in the evidence there is no trace.

Even if it were correct (as some believed) that the trustees owned 50% of the business, the trustees would then have been holding that 50% on trust for Bruce during his lifetime, who held the other 50%, and as owners of the premises they had already arranged for Jonathan to take over the day to day running of the business from Bruce. Whether or not it was sensible in law, it is unsurprising that in these circumstances the trustees did not engage more closely, but in effect left the arrangements for funding the business to Jonathan, who was running it. Accordingly in my judgment Jonathan is wrong when he says that the funds provided for the 2000 refurbishments were a loan to the will trust rather than to the business. I find that they were a loan to the business.

A further aspect of Jonathan’s having financed these works is that, according to Jonathan, Mr Shilson made an agreement with him that the money that Jonathan put into renovating the premises would be repaid out of the proceeds when the premises were sold or refinanced, and that until the money was repaid Jonathan would be entitled to occupy the premises (statement, para 11). He supplemented this in oral evidence, where, cross-examined by Mr Bowker, he accepted that he could not say exactly when or where this conversation took place (day 2, page 82, lines 3-11), and that he did not think anyone overheard the conversation (lines 15-19).

Then, in response to a question as to whether he discussed with anyone else the agreement he said he had made with Mr Shilson, Jonathan said that he had had various conversations with Sarah and Peter and Mr Preedy, and that all knew he was putting money into the business and (in Mr Preedy’s case) the building and “everyone was agreed that it would be paid back” (page 83, lines 4-13). What Jonathan did not say in response to this question was that he told anyone else that Mr Shilson had agreed that, until the money was repaid, he would be entitled to occupy the premises. In response to a further question from Mr Bowker as to whether he made a record of the agreement, Jonathan also gave evidence that Mr Shilson would have documented the agreement, as in paragraph 11 of his (Jonathan’s) statement (day 2, page 82, line 20 – page 83, line 3). By implication, therefore, Jonathan was answering the question by accepting that he himself had not made a record of the agreement.

Later in his evidence Jonathan was asked whether by halfway through 2002 he had told anyone of the agreement between himself and Mr Shilson. He repeated the answer he had given earlier. This was that he did not need to tell anyone else because “everyone was aware that the money was going in, the works were taking place and that I would be paid back” (day 2, page 99, lines 2-5). Further on, Jonathan was asked whether by October 2005 he had told anyone else about the agreement with Mr Shilson. This time he answered that his siblings and the trustees knew, and that his accountants would probably have known, of it (page 108, line 19 – page 109, line 1).

In the same way, Jonathan accepted that, at the meeting at The Albert Arms in June 2003 with his siblings and various accountants (Bruce arriving about halfway through) he did not raise the matter of the agreement with Mr Shilson. He said again that this was because Mr Preedy, Sarah and Peter all knew about it and he had no need to go on about it (page 112, lines 13-21). But he qualified his answer by adding that “they knew I put the money in and I was going to be getting it back” (lines 22-24). Similarly, in his letter of 29 September 2008 to Mr Preedy, proposing a sale of the trust assets and a distribution to the beneficiaries, Jonathan did not mention the agreement with Mr Shilson. He said that this was because everyone had acknowledged the agreement earlier and no-one had said that they did not agree (day 2, page 111, lines 9-17). He made the same response in substance as to why he had not mentioned the agreement with Mr Shilson at a meeting at Sarah’s house attended by his siblings and the trustees, among others, in 2010 (day 2, page 114, lines 1-6).

When Jonathan was challenged on these responses and it was put to him that there never was any such agreement with Mr Shilson as he alleged, he replied

“No, that’s not the case because it is in Tony Shilson’s evidence which the Master admitted as I believe fact and he stated in that clearly” (page 117, lines 11-13).

The statement of Mr Shilson goes some way towards this. But it does not, as Mr Bowker in submissions pointed out to me (day 3, pages 103-106), go as far as Jonathan says it does. What it actually says is:

“9.

Ray and I were aware of and had no objection to the works to the Albert Arms carried out by Jonathan in 2000 and 2003. We were aware that the funding of the works was by way of loan from Jonathan or his company. We expected such loan to the trust to be repaid either on a sale or refinancing and that Jonathan would be able to continue to run the pub until repayment”.

I have no difficulty in accepting Jonathan’s evidence that he funded the renovations in 2000 and that everyone agreed that he should be repaid. Mr Preedy, Sarah and Peter all agree on this. But I have great difficulty in accepting his evidence that there was an agreement with Mr Shilson (a) that the will trustees would be liable to repay the costs of the renovations (other than as 50% partners in the business, if the loan could not be paid out of cashflow: see Mr Preedy, day 1, page 155, lines 1-4), (b) that Jonathan would be repaid out of the proceeds of a sale or refinancing of the building, and (c) that Jonathan could occupy the premises for his life or at least until he was repaid. I do not think that he was deliberately lying to me about this. But I do think he has convinced himself that this was what happened, when the weight of the evidence and the balance of probabilities are against it.

Mr Preedy in several places in his statement says that, so far as he was aware, there was no agreement with Jonathan that he could occupy the building for as long as he wished or at least until he was repaid, and further says that, if there were, he did not consent to it (paragraphs 8, 29, 37). Of the passage from the statement of Mr Shilson just cited, Mr Preedy specifically says “I can clearly say that that was not my expectation, neither did I agree that with Tony or Jonathan” (paragraph 38). In cross- examination on the same passage, Mr Preedy said that Mr Shilson and he never discussed the “expectation” attributed in part to him by Mr Shilson, and he never shared it (day 1, page 163, lines 14-22).

Challenged by Mr Burroughs, in oral evidence he said that it was not true that Jonathan put money into the Albert Arms, devoted most of his time to the business, and looked after Bruce, on the basis that he would get his money back and that he could stay in the Albert Arms as long as he liked. Asked what then was the reason for doing all this, Mr Preedy said it was to enhance the profits of the business (day 1, page 156, lines 5-16). Mr Preedy was also asked about his use of the phrase “sitting tenant” in an undated letter sent by him to the three siblings and Sarah’s husband. He said that he meant that an investor might buy the business and building with Jonathan still there, presumably at a rent, to earn a return on the price paid (day 1, page 159 line 22 – page 160 line 11). In my judgment Mr Preedy’s evidence in his witness statement referred to above was not weakened by cross-examination, and I accept it.

Sarah in her statement said there was “no discussion that I was party to that suggested that there were any ‘strings’ attached to the funding being provided – I was confident that Jonathan saw the funding as either an investment where he would realise some of the value (because he was investing in the business) or a loan which would be repaid” (paragraph 28). She also said that a draft loan agreement was discussed in 2003, but never formalised (paragraphs 36, 38). In addition, she denied that Jonathan ever asserted that he or his companies had an entitlement to occupy the Albert Arms on the basis of the monies paid for the works (paragraphs 42, 51), and said that, if he had, she and Peter would not have agreed to it (paragraphs 44, 52). She certainly did not consent to any arrangement whereby Jonathan could stay in the pub until he was repaid (paragraph 46.6).

In cross-examination she was asked about the basis upon which Jonathan put money into the renovation works, but she replied that she could not comment on what he thought (day 2, page 42, line 1). For herself she repeated that she understood it would be repaid “over five years cashflow permitting” (day 2, page 42, lines 7-11). However she accepted that Mr Preedy in the undated letter referred to above may have thought that Jonathan had some rights as a tenant, but she was not an expert and did not know (day 2, page 49, lines 15-20). The evidence in her statement referred to above was not shaken by cross-examination in any material particular, and I accept it.

Peter in examination by Mr Burroughs said that it was agreed between them that Jonathan would be repaid what he could show he had paid, although he was unclear as to where it would come from, but it came as no surprise to him to see in the minutes of the meeting that it was to come from the cashflow of the business (day 2, pages 76 line 14 – page 77 line 8). He was not asked whether he knew of or had agreed to any agreement of the kind alleged by Jonathan.

The letters written by Mr Schaverien to Mr Shilson in December 2002 asking for a loan agreement to be drawn up refer to the loan, but do not mention the agreement allegedly made between Jonathan and Mr Shilson that Jonathan could occupy the premises either as long as he liked, or at least until he was repaid. Such terms were plainly relevant to the loan agreement that Mr Shilson was to draw up. But they are simply not mentioned.

All this evidence is contrary to the case put forward by Jonathan. But, in addition to the evidence, it strikes me as highly improbable that Jonathan, at a time when relations with his siblings were good, and the three of them were united in facing up to the difficulties created by Bruce, would have gone behind their backs to seek to agree with the trustees special rights for himself giving him priority over them in relation to the will trust (under which they had equal shares). And in my judgment it is equally improbable that, if Jonathan had put it to them openly, Sarah and Peter would have agreed to it.

I have not overlooked the point I suggested to Mr Burroughs during closing submissions that, as in Rosset, the court might infer from the fact that Jonathan put so much money into the business that that is only explicable on the basis that there must have been suitable promises made to him. On consideration of all the evidence, it seems to me that, at the time of the 2000 renovations, when the business either belonged to Bruce outright or at least was being run for his benefit, the payment of this money is much more easily explicable as a loan to the business (and therefore to its owner or owners, whoever they were) as a response to promises from the trustees that Jonathan could stay in the premises for as long as he wished.

As a result, I find that there was no promise made by Mr Shilson to Jonathan, and no agreement between them, to the effect that Jonathan could continue to occupy the building and run the business for as long as he wanted, or at least until he was repaid. In case I am wrong about that, I also find separately that Mr Preedy made no such promise or agreement nor was aware of or acquiesced (whether by silence or otherwise) in any that Mr Shilson might have made, and (again separately) that Sarah and Peter neither knew of, acquiesced in nor made or consented to any such promise or agreement. This means that the question whether Jonathan acted in reliance on the promise or agreement, in the sense that he would not have acted as he did but for the promise or agreement, does not arise.

I should however mention separately the question of authority of Mr Shilson to bind Mr Preedy. As mentioned earlier, Mr Burroughs argued for ostensible authority. He relied on what he called the “casual way” in which the trustees separately dealt with third parties, including the bank. Each trustee, he suggested, seemed to have authority to bind the other. He said this was sufficient for ostensible authority to arise (day 3, page 153, lines 5-6). On the facts of this case I disagree. As I said in argument, there is a world of difference between relatively trivial matters clearly within the scope of trustees, such as operating a bank account, on the one hand, and making promises (outside the scope of the powers conferred) intended to bind the land subject to the trust, on the other. I do not think it would be safe to infer from the way that the trustees dealt with bank that Mr Preedy was thereby representing to Jonathan that Mr Shilson was authorised to bind him in matters relating to the trust land, and I decline so to do. I find that Mr Shilson had no authority to bind Mr Preedy as trustee of the will trust at the times of the alleged promises by Mr Shilson.

According to the letter from Alan Schaverien (Jonathan’s accountant) to Mr Shilson dated 20 December 2002, in August 2001 Bruce sold 50% of the business to the Second Defendant for the sum of £60,000 (in the note of the meeting of 3 June 2003, and elsewhere in the accounting documents, it is stated to be £50,000). The sale documentation was not in evidence, and it is not clear whether this was a sale and purchase of the whole of Bruce’s share (whatever it was) of the pub business (which may then have been believed to be 50%, but in fact turned out to be 100%) or a sale and purchase of 50% of the pub business, leaving the remaining 50% either in Bruce’s hands or (as was then believed by some, at least) in the hands of the trustees as part of the estate of Mrs Montgomery. Mr Shilson’s letter of 19 February 2003 to Mr Schaverien assumed that Bruce had transferred what they thought to be the whole of his 50% share to the Second Defendant, leaving the other 50% in the estate. However, Suzanne Page of DAK Auditing Service Ltd in her letter to Mr Shilson dated 10 December 2007 (pp 396-7) postulated that at the time it was assumed that Bruce owned the whole business and was selling 50% of it.

There are references to the sale in various accounting documents which, from internal evidence, seem to date from 2004 (pages 249-51 of the bundle). They refer to a sale in 2001, which is consistent with the letter from Allan Schaverien to Mr Shilson dated 20 December 2002, referred to above. There is also an email from Mr Preedy to the three siblings of 12 December 2010, in which he says “having now seen various documentation including a barristers opinion dated September 2005 I am happy that Bruce sold his share of the business to Blue Mango/Jonathan for £50K” (emphasis supplied). Of course, I have not seen this opinion.

A fax from Jonathan’s and the Second Defendant’s accountants, Alexander James & Co Ltd, dated 17 October 2005 (p 395) said that they had been given to understand that 2nd Defendant “has been a ‘50% partner’ in the Albert Arms for some considerable time”. And in the letter of 10 December 2007 already referred to, DAK Auditing Services Ltd had written to Mr Shilson on behalf of 2nd Defendant saying

“I believe that the issue is then further complicated by the purchase of Bruce Montgomery’s share of the business by [the 2nd Defendant] for £50,000 (Although at the time I think it may have been assumed that Bruce owned the whole of the business and that BMIH were purchasing 50% of the business from Bruce Montgomery). This in theory would make a partnership between The Trust and [the 2nd Defendant]”.

Notwithstanding this, it appears from an email from Andrew Nicholson to Mr Preedy dated 21 March 2013 that Bruce only ceased to be a partner in the business of the Albert Arms on 1 October 2010. (There are also references to his having been ‘sectioned’ under the Mental Health Act “in late 2010”.) That is not consistent with Bruce having sold all his interest (whatever it was) in the Albert Arms business in 2001 or so. But it is consistent with Bruce having then sold 50% of his interest (whatever it was), and thereby going into partnership with Jonathan/the 2nd Defendant. After October 2010 the business was carried on by Jonathan alone, through his corporate vehicles, the Second Defendant, The Albert Arms (Esher) Ltd, and Tato Projects Ltd. On the balance of probabilities, and to the extent that it matters, I find that Bruce sold 50% of his interest, intending to leave himself the other 50% of whatever it was that he originally had. He still thought of himself as running the pub even after the sale, even if in practice Jonathan was taking over. Jonathan and the 2nd Defendant treated Bruce as continuing to be a partner till October 2010. What the trustees thought, on the other hand, is irrelevant to what he thought he was doing.

One point which was not made clear at the trial was whether the share (whatever it was) in the business included the right that Bruce enjoyed under the will trust to the income of the property (or not to pay rent) in case the business was carried on at the property. Plainly that was something of value to a prospective purchaser of the share, because if the business did not have to pay any rent it would be more profitable than if it did. But rent – or even use of the premises – seems not to feature in the notes on the meetings in June 2003 or November 2010. Mr Preedy’s answer to a question why he had become proactive about rent in 2012 was that Jonathan was occupying the pub but not paying any rent (Day 1, p 97, lines 2-6).

The documentary evidence is limited. A document headed “Blue Mango Investment Holdings Limited/Albert Arms” with a subheading “Per R E Jones schedule supplied by DAK” (p 251) shows for the year ended 31 December 2001 “Rent payable by Blue Mango to AA” the sum of £20,000. There are some figures for two of the following years, but no mention of rent. An untitled document in the bundle (p 250) shows some comparative figures between two columns, one headed “Per AA Books” and the other “Per Blue Mango Books”. This covers the period between 1 August 2000 and 31 December 2004. In the whole of that period there are two entries of “Rent”, one in the seven month period to 31 July 2001, in the sum of £6,667 (in both columns) and one in the following five month period to 31 December 2001 of £13,333 (in the Blue Mango column only). These two figures correspond to the figure of £20,000 in the document discussed immediately before. But these are not formal accounts, or even draft accounts, and there is no explanation why there is a figure for rent in only one out of four years.

The information in the draft accounts of the business included in the papers before the court is moreover unhelpful. The draft accounts for the year ended 31 July 2006 show figures for ‘rent’ of £590 for 2005 and £125 for 2006, although also a figure of £6,314 for ‘use of premises’ in 2006 but nothing the year before (p 292). Those for the eight months ended 31 March 2009 show figures of £3,750 for the period ended 31 July 2008 and zero for the eight months to 31 March 2009, although also a figure of £10,516 for ‘use of premises’ in 2008 but £4,390 for the eight months following (p 300). These figures are so variable, bear no relation to the £20,000 recorded for 2001, and are so far removed from the comparison annual rents for other local pubs (£55,000 to £87,000) shown in the letter to Mr Baker from the letting surveyor Mr Grimes dated 14 June 2012 (pp 425-26), and even from the lower figures of £52,000 and £54,000 given by Jonathan in cross-examination (day 2, page 115, lines 21-25), that I do not think any sensible conclusion is to be drawn from them. Certainly in closing speeches, Mr Burroughs appeared to accept that Jonathan had occupied the pub rent-free for some eighteen years (day 3, page 175, line 23), though most of that of course was during Bruce’s life (page 176, lines 9-11), and Jonathan had done a deal with Bruce (who was life tenant of the premises) to acquire a share in the business.

In oral evidence Peter said that Sarah and he were told about the purchase “as a fait accompli” at a meeting at the pub, though apparently not the one in June 2003 discussed below (day 2, page 74, lines 2-5; page 75, lines 22-24). It would appear from letters passing between Mr Preedy and Sarah in July 2002 that at that time they at least were not aware of the sale. In her letter of 19 July she said that Bruce had said that he wanted to give the three siblings 25% each of the business. Leaving aside the question how, if Bruce had sold either the whole of his interest or 50% of the business, he could still have 75% of the business to give away, it shows that she at least did not know of the sale. Mr Preedy’s reply of 30 July proceeds on the same hypothesis.

In 2003 further renovations were carried out at the pub, this time to the first floor. Once again Jonathan or his company financed them. He claims to have spent some £140,433. Mr Preedy at one point in his oral evidence said that he was not aware of the works “in 2000 and 2003” until “after the event” (day 2, page 162, line 25). But he had previously said in his statement, and on being reminded of the fact in oral evidence repeated, that he knew about the 2003 works once he was asked to (and thereafter did) sign a deed of easement dated 10 April 2003 – drafted by Mr Shilson – in connection with those works (paragraph 26; day 2, page 164, lines 3-20)).

Sarah said she did know, but was not consulted, about them, and did not agree to them in advance of their being carried out (paragraphs 32, 46.2). She repeated this in oral evidence (day 2, page 40, line 14 – page 41, line 13). She accepted that Jonathan put in “substantial amounts of money” to fund the works (day 2, page 40, lines 10- 13), and (as already mentioned) said that she thought the loan would be repaid by the business out of cashflow (day 2, page 42, lines 7-11). Peter gave oral evidence about the 2000 works, but said nothing about those of 2003. Mr Shilson’s statement in paragraph 9 covers the 2000 and 2003 works together. I have already considered what he said above, and the same comments that I made there apply also in relation to the 2003 works.

I find that Mr Shilson, Mr Preedy, Sarah and Peter knew of the works beforehand, but none of them objected. They also knew that Jonathan or his companies were funding or had funded the works. I have already reviewed the evidence on whether the cost was to be a loan to the business, rather than to the trustees as freeholders of the building, to be repaid on sale or refinancing of the business. Here too I find thatMr Preedy and Sarah considered that it was the former rather than the latter. I have no evidence, and therefore make no positive finding, in relation to Peter. Overall, whatever Jonathan says now, I find that it was a loan to the business.

I have already referred to Jonathan’s allegation that Mr Shilson made an agreement with him that the money that he put into renovating the premises would be repaid out of the proceeds when the premises were sold or refinanced, and that until the money was repaid Jonathan would be entitled to occupy the premises (statement, para 11). Because of the context in which that allegation is made, it might appear to be made only in relation to the 2000 works. However, in his oral evidence, Jonathan could not say when exactly the promise/agreement was made (day 2, page 82, lines 3- 7), and the evidence he gave at trial was generally on the basis that the funds for the 2003 works were paid on the same footing as those for the 2000 works. So I need to deal specifically with this issue in relation to the 2003 works as well.

However, the evidence which I examined in relation to that allegation is broadly the same as for the 2000 works. (This includes the Rosset point discussed above, since by 2003 Jonathan had acquired a share of the business from Bruce, and payments for the 2003 works can be seen as benefiting himself more directly.) So my finding that there was no promise made by Mr Shilson to Jonathan and no agreement between them to the effect that Jonathan could continue to occupy the building and run the business for as long as he wanted, or at least until he was repaid applies to theseworks too. The same applies to my alternative findings that Mr Preedy made no such promise or agreement nor was aware of or acquiesced in any that Mr Shilson might have made, and (again separately) that Sarah and Peter neither knew of, acquiesced in nor made or consented to any such promise or agreement. Again, this means that the question whether Jonathan acted in reliance on the promise or agreement does not arise.

The renovations were finished before 3 June 2003, when a meeting took place in an upstairs room at the pub between the three siblings, Sarah’s husband, three of Jonathan’s accountants, and Bruce (who arrived halfway through). The trustees were not present. At that meeting it was “confirmed” that Bruce had sold what was then believed to be his 50% share in the business to Jonathan’s company the Second Defendant. Second, it was also “made clear that [Jonathan’s] ‘investment’ in The Albert Arms could only be treated as a loan”. A “formal loan agreement” was to be drawn up. Finally, it was agreed that, in respect of remuneration for the work done by Jonathan, “a management charge of £50,000 per annum, to be reviewed annually and paid (and invoiced) monthly, would be raised by Blue Mango to The Albert Arms.”

As to the first of these points, I have already discussed the question of what share of the business Bruce may have sold to Jonathan/the 2nd Defendant. I simply repeat here that I was not shown any formal documents relating to that sale.

As to the second point, no “formal loan agreement” is to be found in the papers before the court. In their letter of 10 December 2007 already referred to, DAK Auditing Services Ltd said

“Following on from this in a meeting dated 3 June 2003 it appears to have been agreed that [the 2nd Defendant]’s investment of £50,000 should be treated as a loan to the Albert Arms and that a loan agreement to this effect was to be drawn up by Paul Mustoe. (Does this loan agreement exist? If so I would be

grateful if we could have a copy of this agreement.) This would have the effect of again making the Albert Arms a partnership between the trust and Bruce Montgomery.”

The papers before the court do not appear to contain any reply to this enquiry.

Moreover, a letter dated 19 June 2009 from Dermot Kennedy of Giltinan and Kennedy (Jonathan’s accountants) addressed to Mr Preedy, says in respect of an entry in the accounts for the Albert Arms of a long term loan to the Second Defendant that “there is no formal arrangement to set out the repayment of this loan”.

Similarly, as to the third point, I have not seen any formal documentation in relation to the management charge to compensate for Jonathan’s time spent. But the fact that it was agreed at all is significant. If Jonathan’s intention is to work in the business for a remuneration paid to his company by the business (as in fact contemplated by the will, clause 6(b)), he cannot easily rely on that work as conduct to his detriment in reliance on alleged agreements with the trustees and/or the beneficiaries.

After 2003 Jonathan was running the business, and neither Sarah nor Peter was concerned directly in it. In 2006 Sarah and her husband John Fenton (whom she had married in January 2002) moved away to Saxon House, Upper Lambourn in Berkshire. By September 2008 Jonathan was proposing to the trustees (pp 398-99) that the trust assets be sold, provision be made for Bruce, and the remainder split between the three siblings. Mr Preedy ascertained in October that Sarah and Peter would be happy to sell in principle, but each raised questions or points on the current situation (pp 400-04). Mr Preedy chased for information in May 2009, and received draft accounts for the business for the year ended 31 March 2009, on which he then sought further information, before passing it on to the three beneficiaries (pp 406-11).

Plainly this information did not lead to any agreement between the three siblings. By February 2010 positions were hardening, and Jonathan refused to allow a valuer instructed by the trustees into the Albert Arms (p 412). In November of that year a meeting was held at Sarah’s house in Berkshire to try to seek a way forward. It was attended by the trustees, the three siblings, Sarah’s husband and Jonathan’s accountant Andrew Nicholson, who made notes of it (pp 305-06). At the meeting proposals were made for Jonathan to buy out his siblings, but these were not accepted. Further attempts were made to negotiate a way out, whether by selling the Albert Arms or by granting a lease to Jonathan or his corporate vehicle, but by November of that year those attempts had broken down. In the meantime, as already noted, Bruce had ceased to be a partner in the business on 1 October 2010 and had been compulsorily detained under the Mental Health Act.

Matters were brought to a head by Bruce’s death, on 1 February 2013. His life interest under the will trust therefore came to an end. This meant three things. First, there was no longer the obstacle to settlement created by the need to provide for Bruce in any negotiated agreement between the three siblings. Second, the ‘rent holiday’ enjoyed by Jonathan during Bruce’s continuing life interest, whether de iure or just de facto, was over. And, third, the three capital beneficiaries were now absolutely entitled between them, the purposes of the trust of the land had arguably come to an end and any one of them could seek a sale of the property. There was a petty quarrel between them as to who should pay for the wake held after Bruce’s funeral (pp 436-37). Jonathan made further proposals to buy out Sarah and Peter in April-May (pp 438-41), but this seems to have foundered on the question of what exactly was the debt due to Jonathan in respect of the refurbishment of the Albert Arms (p 442). By November of that year the lawyers were involved, and, on 21 February 2014, the Claimants’ solicitors sent a letter before action to Jonathan seeking possession of the Albert Arms (pp 448-49).

I summarise the main facts as follows, though without prejudice to all the other findings set out above:

The fundamental problem for Jonathan in this case has been that he paid for the refurbishments without securing a clear commitment from the trustees or his siblings as to whether any of them and if so who should repay him for them. I have found that there were in effect loans to the business, in the sense that it was the business that was to repay. But the business at the beginning was just Bruce, and then Bruce and Jonathan, and finally just Jonathan. His attempts to found a claim on proprietary estoppel and latterly on contractual licence have foundered on the need for promises or at least expectations created or acquiesced in by the persons whom he seeks to make liable. He himself may have believed in those promises or expectations, but I have found that the claimants and Jonathan’s siblings were not responsible for them.

I have found that Mr Shilson did not make the promises alleged by Jonathan and that Mr Shilson had no authority to bind Mr Preedy if he did. Further, I have found that Sarah and Peter did not make any such promises, and nor (if I am wrong and Mr Shilson in fact made them) did they acquiesce in any of Mr Shilson’s. In my judgment these findings, applied to the propositions of law I have set out above, mean that the defence of the Defendants, whether as strictly pleaded, or on the wider, informal basis indicated earlier, must fail. There is no need for me to consider the question of permission to amend.

Accordingly, there being no defence to the claim, there must be judgment for the Claimants. If the parties are able to agree a form of order to carry this judgment into effect, and agree any consequential matters, there need be no attendance at the hand- down of this judgment. Otherwise, these matters can be dealt with then.