JENNIFER YALCINKAYA v METIN HASSAN & Anor

This is the trial of two consolidated cases which relate to the ownership, proceeds of and rental income from five residential properties in South London.

The properties are as follows:

The Claimant originally issued proceedings in the County Court at Bromley on 2^nd September 2019 seeking an order for possession of 33 Kashmir Road against the Second Defendant who occupies that property under a tenancy granted by the First Defendant. Possession was (and still is) claimed under Ground 8 to Schedule 2 of the Housing Act 1988 on the basis of alleged rent arrears. The proceedings were defended by the Second Defendant on the basis that there were no arrears as he had paid his rent to the person who was his landlord, that is the First Defendant. The First Defendant intervened in the County Court proceedings.

In the meantime, on 27^th October 2020, the Claimant issued proceedings in this court seeking declaratory and other relief in relation to the Properties. By order of Master Teverson dated 29^th January 2021, the County Court proceedings were transferred to this court and consolidated.

In summary, the Claimant claims as follows.

She asserts that she allowed the First Defendant to manage on her behalf three of the Properties, being Devonshire Road, 33 Kashmir Road and 38 Highcombe, which were acquired and owned legally and beneficially by her. In breach of trust and fiduciary duty, the First Defendant failed to:

She also alleges that she paid to the First Defendant £80,000 in exchange for a 50% beneficial share in the other two Properties, namely Charlton Dene and 14 Kashmir Road, of which he was already the legal and beneficial owner. This is accepted by the First Defendant (although he asserts that the sum was £85,000). However the Claimant alleges that, in breach of trust and fiduciary duty, the First Defendant has failed to:

As stated, the Second Defendant is the present occupier of 33 Kashmir Road and the Claimant continues to seek possession of that property from him.

The First Defendant denies these claims. His case is, in short, that in late 2002 or early 2003, the Claimant and he entered into a partnership or joint business venture whereby it was agreed that:

He alleges that, pursuant to this arrangement or agreement:

Thus he asserts that:

However, he asserts that, in or around late 2006 or early 2007, the Claimant, having married a Turkish national, wished to move permanently to Turkey and therefore the parties agreed to dissolve or terminate their joint arrangement. He says they came to an agreement as follows (which in his Defence is referred to as “the Dissolution Agreement”):

The First Defendant asserts that, in effect, the Dissolution Agreement was put into effect. From March 2007 the Claimant has been permanently resident in Turkey and between that date and early 2019, she had little, if anything, to do with the three remaining Properties which have been treated by him as if he owned them. He has retained the rental income from the remaining Properties because, he asserts, he was entitled to do so. At the same time he has paid all the outgoings including the mortgage payments. He did sell 38 Highcombe and retain the proceeds because he was entitled to do so. He has “sold” 14 Kashmir Road to his daughter for the price of £162,000 because the term of the existing interest only mortgage was about to come to an end and that was the sum his daughter could obtain by way of mortgage loan which was sufficient to discharge the capital sum that was due. He accepts that this sum is well below the market value of 14 Kashmir Road but asserts that the whole point of the exercise was to pay off the existing loan and retain the property as a family home.

I shall hereafter refer to the First Defendant simply as “the Defendant”.

The Claimant is 70 years of age. Until her retirement (perhaps through redundancy) at some time in the early 2000s, she worked as a patent formalities officer. She is clearly able both to use a computer and to type.

She first moved into Devonshire Road in 1978 as a tenant of Lewisham Council. She purchased the long leasehold interest in that property pursuant to the “right to buy” legislation in 1999 with the help of a mortgage of £13,500.

The Defendant has worked, and still works, as a bus driver. He has had other part time jobs but has also bought, sold and rented out properties.

The Claimant first met the Defendant in 2002 when he was in a relationship with her daughter Gemma. At that time she was considering selling Devonshire Road as she wished to move to Turkey. She says that the Defendant knew this and held himself out as someone who was experienced in property investment. He said that he would advise her as to the best way of going about this. Although there is a dispute as to the extent of his experience in this regard, it is clear that, at that time, the Defendant did have some experience in the property market and, following discussions, it was decided that the Claimant would not sell Devonshire Road but would, rather, re-mortgage it.

As I have stated, there is a dispute as to the exact nature of the relationship between the parties, however it is accepted that the Claimant took out a loan of £141,965 from the Birmingham Midshires Building Society secured on Devonshire Road on 19th September 2003. It is accepted that, of that sum: the Claimant paid £85,000 to the Defendant; £13,495.84 went to discharge the existing mortgage debt; £43,069.78 was paid out to the Claimant.

There is a dispute about the work that was carried out to Devonshire Road. The Claimant says that, of the £85,000 paid to him, the Defendant was to spend £5000 on works to the property. She also asserts that, at his request, she gave him a further sum of £17,000 in November or December 2003 to pay for the installation of new windows. She visited the property and saw that some work was being or had been carried out but she now does not believe that the Defendant spent these sums, or anything like them, on renovation work.

Following the renovation work (whatever its extent), it is agreed that the property was rented out and the rental income paid into a joint bank account that had been set up. It is the Claimant’s case that throughout his dealings with Devonshire Road, the Defendant was simply acting as her agent.

The Defendant’s account is different. He says that, pursuant to their agreement, the Claimant gave him £85,000 as payment for 50% beneficial shares in properties which he already owned, 14 Kashmir Road and Charlton Dene. The Claimant paid him nothing towards the cost of renovations to Devonshire Road. Rather, he says, he paid for the extensive renovations which included: putting in a new boiler a new kitchen new windows and a new front door; thorough re-decoration and repairs throughout the whole house. These were required before the property could be let out to tenants. He asserts that he spent approximately £20,000 of his own money on these works and that it was agreed that he would be treated as the 50% beneficial owner of Devonshire Road.

So far as 14 Kashmir Road is concerned, this property had been owned solely by the Defendant since May 2003. It is agreed that the payment by the Claimant to the Defendant of either £85,000 or £80,000 entitled her to a 50% beneficial share in that property which was rented out at various points but has, for some time, been the Defendant’s family home and is his present address.

Similarly, Charlton Dene was a property which was already owned in the Defendant’s sole name. It is agreed that the payment by the Claimant to the Defendant of either £85,000 or £80,000 entitled her to a 50% beneficial share in that property which was rented out with the rental payments being made into the joint account.

33 Kashmir Road was purchased in the Claimant’s sole name for £170,000 on 30th October 2003 with the aid of a buy-to-let mortgage (again in the Claimant’s sole name) of £150,000. The property was rented out and the proceeds paid into the joint bank account.

It is the Claimant’s case that this property was always (indeed still is) legally and beneficially hers. The £20,000 deposit was paid by her out of the funds from the re-mortgage of Devonshire Road. It is the Claimant’s case that throughout his dealings with 33 Kashmir Road, the Defendant was, and is, simply acting as her agent.

The Defendant’s case is that he found the property (which is opposite 14 Kashmir Road) and it was bought in the Claimant’s sole name simply because she could get a much better mortgage deal if the property was purchased in her name. This was because of his credit rating at the time. He asserts that he provided £11,000 towards the deposit and points to his bank statements which show three withdrawals in cash of £1000, £5000 and £5000 on 12, 13th and 14th November 2003. He says these were given to the Claimant. He also asserts that he spent a further £4800 on refurbishment works to the property prior to its being let. His case is that this property was always intended to be jointly owned beneficially in equal shares.

38 Highcombe was purchased again in the Claimant’s sole name for £175,000 on 28th April 2004 with the benefit of another mortgage again in her sole name.

The Claimant asserts that the deposit ultimately came from her funds released by the re-mortgage of Devonshire Road although she cannot remember exactly how the deposit of £25,000 was paid. The property was always legally and beneficially owned by her alone and, as with both Devonshire Road and 33 Kashmir Road, throughout his dealings with 38 Highcombe, the Defendant was simply acting as her agent.

The Defendant’s case is again different. He asserts that the property was put into the Claimant’s sole name simply because she could get a much better mortgage deal if the property was purchased in her name. This was, again, because of his credit rating at the time. He asserts that he provided money towards the deposit and the other acquisition costs. In his witness statement he said that he paid £20,000 to the solicitors Cook Taylor Woodhouse by way of transfer on 9th March 2004. Later on in the same statement, he asserts that he paid a total of £27,932 which represented the deposit, stamp duty and solicitors fees. He originally pointed to his bank statements which show a transfer out of that sum on 20th October 2003. In cross examination, although he maintained that he had paid the deposit, he was forced to concede that: the payment on 20th October 2003 could not have related to the purchase of 38 Highcombe which took place 5 months later and that the sum payable by way of stamp duty would only have been £1750.

Nevertheless, it was and is the Defendant’s case that 38 Highcombe was on its purchase intended to be jointly owned beneficially in equal shares.

Thus, as already set out, the Claimant accepted that there was a joint business in respect of those properties owned legally by the Defendant but in respect of which she had purchased a 50% beneficial interest (14 Kashmir Road and Charlton Dene). Her case in respect of the other properties was that they were each both legally and beneficially owned by her and the Defendant’s status was merely that of her agent. The Defendant’s case is that all of the properties were jointly owned beneficially and that they were all part of the partnership or joint venture between him and the Claimant.

It is agreed that on 5th October 2004 the Claimant (who was at that time in Turkey) executed an Enduring Power of Attorney in favour of the Defendant in respect of Devonshire Road, 33 Kashmir Road and 38 Highcombe (“the 2004 PoA”). It is also accepted that on 17th July 2007 the Claimant (who was then resident in Turkey) executed another Enduring Power of Attorney in virtually identical form in favour of the Defendant in respect of 33 Kashmir Road and 38 Highcombe (Devonshire Road having by that time been sold) (“the 2007 PoA”). This was done, at least in part, because the Defendant had thought (wrongly as it turned out) that the 2004 PoA had been mislaid or lost. I have seen copies of both documents in which the Claimant’s signature is witnessed by a Turkish lawyer whose official stamp appears on the document.

It is clear that, by late 2006, the Claimant, having married a Turkish national, wished to relocate permanently to Turkey. In fact she moved there permanently in March 2007. It is agreed that, at some time before its eventual sale, the Claimant took out a further loan of £30,000 secured on Devonshire Road which she used to purchase a property in Turkey.

Devonshire Road was then placed on the market and sold, the transaction completing on 10th May 2006 for a price of £250,000. Solicitors Cook Taylor Woodhouse acted for the vendor. It is now accepted that the net proceeds of £54,013.86 were paid by that firm into the joint bank account.

The parties gave very different evidence as to the circumstances in which the property was sold. The Claimant asserts that the Defendant took the lead in selling the property and in instructing the solicitors. He told her the sale price was £220,000 and that out of this he had to pay £20,000 to the next door neighbour, Mr Henry, who had purchased it. She says that she was unaware of how much the net proceeds were: indeed she was told by the Defendant that there were none. She thus received nothing, she says, from the sale of the property.

The Defendant disputes this. He refers to a number of documents. There is a letter dated 25th January 2021 from Cook Taylor Woodhouse asserting that they never acted on the sale on the property for him as the client. He also refers to a letter dated 6th May 2006 which was admittedly typed and signed by the Claimant on notepaper headed with her then residential address, 25 Bernard Ashley Drive London SE 7. The letter is addressed to Cook Taylor Woodhouse and instructs the solicitors to pay the sale proceeds of Devonshire Road into the joint Woolwich Building Society account. The letter states:

The Defendant’s case is that the Claimant was well aware of the sale price, signed the contract and received the letter dated 12th May 2006 at her home address. The proceeds were paid into the joint bank account and removed from that account by her. The Claimant denies receipt of the letter dated 12th May 2006. She asserted that it had probably been handed direct to the Defendant, who acted under the 2004 PoA, when he attended the solicitors’ offices. She pointed out, as was the case, that the Defendant was, at trial, in possession of the original letter. His response was that the letter was in a four-drawer filing cabinet of papers kept by the Claimant at her home which she had given him on her departure for Turkey. The Claimant denied that there was any such filing cabinet.

Charlton Dene was sold on 2nd February 2007 for £170,000. The Defendant asserts that the net proceeds were £29,000. There is no evidence to contradict that assertion. This sum was paid to the Defendant. It is agreed that, following the sale and as a result of it, the Claimant received a bankers draft from the Defendant’s son in the sum of £30,000. It is accepted that this represented some or all of the proceeds of sale of Charlton Dene. The Claimant claims that she was, and is still, owed a further £15,000.

The Defendant states that she has received that additional sum by way of set-off or deduction. Firstly he says that he agreed to repay a loan of £8000 which the Claimant had taken out on 4th May 2004 with the Woolwich Building Society. Secondly he said that he agreed to write off or cover £7000 of rent arrears which were due on 38 Highcombe from the Claimant’s daughter Gemma and son Dan. He points to documents which he says show that Gemma had made simultaneous claims for housing benefit on two different properties in two different London boroughs and that benefit had been stopped by one borough and reclaimed by another.

The Claimant denies that she took out the loan agreement, asserting that her purported signature on it is a crude forgery. Mr Brodsky invited me to compare it with other, admittedly genuine, signatures and note the clear differences. When asked about it, the Claimant appeared effectively to make no admission as to whether Gemma and Dan had been in arears with their rent but asserted that the sums were not due from her and that she had made no agreement to allow them to be set off against the sums owed to her by the Defendant.

Indeed the Claimant in evidence originally denied knowledge of there being any arrears in respect of 38 Highcombe. However, the Defendant produced a possession order in respect of 38 Highcombe made by the Woolwich County Court on 10th August 2005 in a possession claim brought by the mortgagee, Mortgage Express, against the Claimant as Defendant in respect of arrears in the sum of £2789.91. The order recites that the Defendant (i.e. the Claimant in this claim) attended in person. Therefore the Claimant must have been there and must have been aware that there were arrears in respect of the mortgage on that property. The Defendant asserted that the only method by which the mortgage could be paid was by way of rental payments and thus there must have been rent arrears of which the Claimant would have been aware.

The Claimant left the country to permanently reside in Turkey in March 2007. She has had no income from any of the remaining Properties since that time. Indeed it appears that she has had little to do with them. They have been administered by the Defendant who has arranged for any lettings, paid any outgoings (including the mortgage payments) and collected any rental income.

I have seen a letter typed and signed by the Claimant dated 19th March 2007 sent to Mortgage Express about 38 Highcombe. It says:

In the meantime, the Claimant and Defendant appear to have remained on friendly terms until 2019. Indeed they appear to have holidayed together on a number of occasions over those years.

However, it is the Claimant’s case that she formally revoked the 2007 PoA in 2010. She produced and relied on a formal document headed “Business Forms: Revocation of Power of Attorney” which is addressed to the Defendant and purports to revoke the 2007 PoA. This document had clearly been downloaded in draft from the web. The document, she said, was signed by her on 12th October 2010 and witnessed by two people Geoffrey Wells and David Jackson.

I heard evidence from Mr Wells who stated that the Claimant had indeed visited his residence in Turkey on that date in October 2010 and that he had seen her sign the document and had signed it himself. I accept Mr Wells’ evidence. However he was clear that there was no one else present when the Claimant signed. Thus the purported witness Mr Jackson (from whom I did not hear) could not have witnessed the Claimant’s signature.

The Claimant asserted that she had taken this document to a Turkish solicitor who had formally notarised or stamped it and stated that he would send it to the Defendant. It is the Defendant’s case that he never received this. The copy produced by the Claimant was not notarised or stamped and the Claimant said in evidence that, when she tried to contact the Turkish lawyer who had acted for her, she was unable to do so because he had moved office.

Her evidence is also that, although she had sent to the Defendant a document formally terminating the power of attorney, she nevertheless expected him to continue to manage the Properties on her behalf as her agent.

The Claimant belatedly produced some documents which, she said, date from 2011.

There are two letters dated 15th March 2011 typed and addressed by her to Birmingham Midshires Building Society and Mortgage Express respectively. They refer to 33 Kashmir Road and 38 Highcombe respectively and both request “an estimate of how much the above property would be likely to sell for if you were to sell it on my behalf”. She then gives her email address in Turkey and a copy of her old and new passports.

There are also a series of handwritten notes produced by the Claimant, she said in March or April 2011. These, she says, were produced at a time when she was considering removing the Defendant from his management role in relation to the remaining Properties and either selling them or replacing him with one Terence Blackman. There is an email from Mr Blackman which is undated. It refers to the Claimant contacting her Turkish solicitor to produce a document revoking the power of attorney. That email also refers to changing the locks, contacting the bank and speaking to tenants. He concludes:

In the handwritten notes, there are detailed references to 38 Highcombe and 33 Kashmir Road, the mortgages, their capital and rental values, the solicitors who acted on the purchase and the possibility of selling those properties. There is reference to revocation of the power of attorney and to the fact that “Capital Gains Tax should be zero” on the sale of either property. There is also a draft letter of revocation and draft letter of instruction to Mr Blackman to “represent me and manage the following properties”.

There is also the following passage;

There is thus clear evidence that, in or around that time, the Claimant was giving serious and detailed consideration either to selling 38 Highcombe and/or 33 Kashmir Road or purporting to revoke the power of attorney granted to the Defendant and replacing him as manager with Mr Blackman.

However there is also repeated reference to the need to pay £30,000, or some greater capital sum, to the Defendant. The following is stated twice:

There are then two letters dated 11th April 2011 both addressed to her from Mortgage Express and both relating to 38 Highcombe with the mortgage account number at their head. One letter is addressed to her at an address in Turkey and refers to a “recent change of address notification”. The gist of this letter is that further documentation is required before the company’s records can formally be updated. The other letter is addressed to her at 25 Bernhard Ashley Drive and refers to a “recent letter regarding your change of name”. Again further documentation is requested.

When asked about the references to paying £30,000 to the Defendant, the Claimant initially stated that it was what she thought she owed him. However she then stated that she wanted to pay back the £30,000 which had been paid to her on the sale of Charlton Dene because, although that money was owed to her (and indeed she was owed further sums), it had been raised by the Defendant by selling properties in Cyprus (she initially said Turkey but then corrected this) and she felt somehow obliged to pay it back. As I commented at the time, I thought that explanation was, to say the least, rather bizarre. I shall have to decide whether or not I believe it.

The Claimant accepted that she had never told the Defendant about her proposals and discussions in 2011 and that these had come to nothing as Mr Blackman was not, in the end, able to do what was required.

There is no mention of 14 Kashmir Road in any of these letters or handwritten notes.

The Second Defendant has been occupying 33 Kashmir Road as a tenant of the Defendant since on or around 2012. He has paid rent to him. The latest of his tenancy agreements is one dated 12th September 2018.

The next event of significance is a letter sent by the Claimant to the Defendant from her address in Turkey dated 5th September 2015. This is typed and is in the most friendly terms. It is headed with the Claimant’s address in Turkey and is addressed to the Defendant at 14 Kashmir Road. It states:

The letter was clearly in response to a communication from the Defendant. It enclosed the following: a notarised copy of an official document in Turkish (I assume the address confirmation); copies of two different United Kingdom passports (one of which was expired); a copy of a Turkish identity card (the size of a United Kingdom Drivers Licence). There is also a letter typed by the Claimant and headed “Mrs Jennifer G Lee c/o Mr Metin Hassan 14 Kashmir Road London SE7 8QL” and was addressed to “Mortgage Express/Bradford & Bingley plc”. It was headed with the mortgage account number for 38 Highcombe and with that property address. It states as follows:

The only other thing which is worth noting is that, on the copy of the up to date United Kingdom passport, there was written in hand the following:

When asked why, in the letters addressed to the building societies, she had referred to the Defendant having a power of attorney when, on her case, she had revoked it nearly five years previously, the Claimant said that she had made “a mistake” in the letters that she was “flustered” and “panicked” at the time and what she really meant to say was that: “he has my authority”.

In July 2018 the Defendant put 38 Highcombe on the market for sale. It was eventually sold on 23rd January 2019 for the price of £408,000 with the net proceeds of £241,205.54 being paid into a Barclays Bank account in the joint names of the Claimant and the Defendant and thereafter paid out to another account in the Defendant’s sole name and (according to him) dissipated. The Claimant asserts that she was unaware of this sale. The Defendant states that he spoke to her on the phone about it in January 2019. He admittedly used the 2004 PoA which the Claimant asserts she had long since revoked.

Having, she says, only just discovered that the sale had taken place, the Claimant objected to the registration of the purchaser, Well-Living Limited. However, in a letter dated 23rd May 2019 to HM Land Registry, the Claimant withdrew her objection.

In the meantime, on 26th March 2019, the Claimant wrote to the Second Defendant asserting that she was the legal and beneficial owner of 33 Kashmir Road. She demanded that he pay any rent to her via a new agent. She wrote, or caused to be written, further letters to him dated 4th and 17th June and 8th July and 13th August 2019.

On 28th March 2019 the Claimant executed a further “Revocation of Power of Attorney” document. This was sent by email to the Defendant on that date. In a letter dated 11th June 2019 the Claimant requested that the Defendant return the originals of both the 2004 PoA and the 2007 PoA. This request for the return of the documents was repeated in a solicitor’s letter dated 17th June 2019. As made clear by the Claimant’s solicitor, Mr Khan, in his statement dated 15th December 2021, the Defendant refused to return the original powers of attorney for many months.

On 2nd September 2019, the Claimant issued the possession proceedings in the County Court at Bromley against the Second Defendant in respect of 33 Kashmir Road.

As stated, in July 2020, the Defendant claims that he agreed to transfer 14 Kashmir Road to his daughter for the price of £162,000. This was, he says, because the term of the existing interest only mortgage was about to come to an end and this was the sum his daughter could obtain by way of mortgage loan which was sufficient to discharge the outstanding capital sum. He accepts that this sum is well below the market value of 14 Kashmir Road but asserts that the whole point of the exercise was to pay off the existing loan and retain the property as a family home. Solicitors were instructed on both sides. This transaction was apparently completed on 30th July 2020, but it has not been registered.

The proceedings in this court were issued on 27th October 2020.

By order made on 29th January 2021, Master Teverson transferred the possession proceedings to this court and consolidated them with the High Court proceedings.

At that hearing the Defendant, who was at that time legally represented, gave an undertaking to the court:

At a without notice hearing on 17th February 2021, Falk J granted to the Claimant a freezing order against the Defendant and a proprietary injunction preventing him dealing with 14 Kashmir Road, 33 Kashmir Road and the proceeds of sale of 38 Highcombe. I have seen a note of Falk J’s ex tempore judgment given that day.

The return date was on 25th February 2021 before Upper Tribunal Judge Cooke. I have also seen a note Judge Cooke’s ex tempore judgment given that day. Both the Claimant and Defendant were represented by counsel. The Defendant applied to discharge the injunctions granted by Falk J. Judge Cooke discharged the freezing order but continued the proprietary injunctions. She ordered the Defendant to pay the Claimant’s costs of the application summarily assessed in the sum of £26,400.

Neither the order made by Falk J nor that made by Judge Cooke had the effect of discharging the undertaking. Indeed, in his Fourth Statement dated 12th February 2021, the Defendant expressly confirmed that he had given the undertaking and that, as a result, no relief was required in relation to the rental income from 33 Kashmir Road.

The court faces a number of difficulties in assessing the evidence in this case which evidence comes principally from the two protagonists: the Claimant and the Defendant.

Firstly, the Claimant and the Defendant are both trying to remember events which happened up to 20 years ago. Their memories must be, of necessity, much more vague than if they were attempting to recollect events which had happened much more recently.

Secondly, it seems clear from what both parties have said that their dealings were marked by a striking degree of informality. Arrangements appear to have been made orally and not in writing despite the fact that properties were being purchased and liabilities incurred for hundreds of thousands of pounds. There was, for example, no document or documents which contained or reflected the arrangement between them. No one suggested that there were any formal building contracts for works to the Properties despite it being agreed that substantial works were carried out to various of the Properties.

Thirdly, the documentary evidence which has been produced to the court is incomplete. There are, for example, some bank statements but they are “snapshots” only. I have not seen complete statements for the relevant bank accounts for much of the relevant periods. I have seen some correspondence between the parties, on the one hand, and the various mortgage companies and firms of solicitors, on the other, but I am sure that it is by no means complete. Both parties have produced various documents to the court during the course of the trial. Despite the length of time which has expired between the purchase and sale of various of the Properties, I am by no means convinced that either party has fully disclosed all the relevant documentation which is in their possession.

The parties give differing accounts of important aspects of the case. They have each repeatedly accused the other of lying and of being guilty of fraud.

Finally, and most importantly, having read the parties’ statements and heard each of them give evidence, I have come to the clear view that neither the Claimant nor the Defendant is a witness of truth. I have found that significant parts of the evidence of each are unbelievable and, indeed, untruthful.

So far as the Claimant is concerned I note the following:

There were also many troubling aspects of the Defendant’s evidence, both generally and relating to specific issues. I start with two general points:

Thus, and in addition to the other difficulties in this case, the court is faced with two main witnesses whose evidence, in large parts, is untrustworthy.

When considering the oral evidence given by the various witnesses at the trial, I remind myself of the well-known words of Leggat J (as he then was) as to the weight to be placed upon documentary evidence and the fallibility of oral evidence: GESTMIN SGPS SA V. CREDIT SUISSE (UK) LTD. [2013] EWHC 3560 (Comm.), at [15-23]. At paragraph 22 he concludes:

This is not strictly a “commercial case” and, as I have already noted, there are comparatively few documents. However, given my view as to the veracity (or lack of it) of the evidence given by the Claimant and the Defendant, I am forced to make my findings of fact “on inferences drawn from the documentary evidence and known or probable facts”.

I find that, contrary to the Claimant’s case, the arrangement between the parties was more than simply the Defendant acting as the Claimant’s agent for purchasing and letting out Devonshire Road, 33 Kashmir Road, 38 Highcombe. It seems to me much more likely that there was a more general arrangement in line with that asserted by the Defendant and, in particular, that it was intended that properties bought in the Claimant’s sole name were to belong to both or were to be business assets of the joint arrangement.

There are number of reasons for this.

Firstly, it is agreed that the Claimant, by the payment of £80,000 or £85,000 from the mortgage proceeds of Devonshire Road, effectively “bought into” 14 Kashmir Road and Charlton Dene, which were properties previously owned solely by the Defendant. It would seem to me to be odd if the arrangement was that, whilst the Claimant jointly owned those properties of which the Defendant was the registered proprietor, he was to have no interest in those properties which were in her sole name. The fact that she admittedly purchased a 50% beneficial share in the properties owned by the Defendant in my view supports the Defendant’s assertion that this was a form of joint venture or partnership in respect of all the Properties.

Secondly, if the Defendant had genuinely been acting solely as the Claimant’s agent in respect of Devonshire Road, 33 Kashmir Road and 38 Highcombe, then I would have expected there to have been some arrangement for the payment of fees to the Defendant for this service. The Defendant is not a man who would have worked for nothing. However, by the Claimant’s own admission, there was no such arrangement. As I have already indicated, I do not accept her evidence to the effect that she assumed that the Defendant was deducting some sort of reasonable fee. That is not credible. To my mind the lack of any agreement or arrangement for the payment of agency fees to the Defendant supports the Defendant’s case that he was more than simply the Claimant’s agent in respect of those properties of which the Claimant was the registered proprietor.

I also think that the fact that the income from, and the expenses of, the Properties were paid into, and from, a bank account in the joint names of both the Claimant and the Defendant tends to indicate that there was an overarching business arrangement between the parties in respect of all of the Properties. The fact that the Claimant prepared tenancy agreements for the Properties and signed cheques on the joint account also supports this finding.

Further, whilst I am by no means sure that I can make any finding as to how much time and money the Defendant might have spent in carrying out refurbishment works on various of the Properties, it is clear in my mind that he did carry out more than minimal work to Devonshire Road, 33 Kashmir Road and 38 Highcombe. I think it unlikely that he would have done this, or arranged for this to be done, if he did not think that he had an interest in those properties.

I find that the Defendant’s explanation of the reason why 33 Kashmir Road and 38 Highcombe were purchased in the Claimant’s sole name is believable (or at least not incredible).

I also think that the fact that the Claimant executed both the 2004 PoA and the 2007 PoA supports the Defendant’s case. I find that the Claimant knew or must have known the meaning and effect of these documents. They entail giving the donee much more than a mere agency. As is made clear on the face of both the 2004 PoA and the 2007 PoA, the Defendant was effectively given owner’s powers in relation to the Properties.

Thus, on this aspect of the case, I prefer and largely accept the evidence of the Defendant.

Thus I find that:

As I have stated, I also reject the Claimant’s case that she was as ignorant of the day to day administration of the business as she would have the court believe. Whilst I am prepared to accept that the Defendant took the leading role in purchasing the Properties, refurbishing them and arranging for them to be let out to tenants, I think it likely, and I so find, that the Claimant was well aware of what was being paid into and out of the joint bank account. She admittedly typed letters to various solicitors and mortgage companies. She prepared tenancy agreements. She signed cheques on the joint account. The picture which the Defendant paints of the Claimant being concerned with some or all of the paperwork of the business is, to my mind, believable. I find that it is more likely than not to be true. It seems to me to be overwhelmingly likely that, having mortgaged her major asset, Devonshire Road, and invested a substantial sum with the Defendant, the Claimant would be concerned not only to monitor how her investment was being managed but also to secure the income that was being generated. The detail about 38 Highcombe and 33 Kashmir Road contained in the handwritten notes from March or April 2011 would also tend to give the lie to any assertion that the Claimant was somehow an inexperienced naïf whose lack of knowledge was exploited by the Defendant. I also think that her initial denial of any knowledge of there being mortgage arrears in respect of 38 Highcombe was part of an attempt by her to paint a false picture of herself as uninvolved.

For what it is worth, I accept the Defendant’s assertion that the Claimant did keep a file or cache of documents relating to dealings with the Properties which she subsequently left to him on her emigration to Turkey.

I also accept the Defendant’s case that, in or around late 2006 or early 2007, with the Claimant keen to emigrate to Turkey, the parties agreed to dissolve their business arrangement and part company. I thus accept the Defendant’s evidence that the arrangements made prior to the Claimant’s permanent departure for Turkey in March 2007 were intended to result in a permanent separation of the parties’ joint business assets. There are a number of reasons why I think that this is what is likely to have happened.

Firstly, as I have already indicated, I simply do not accept that the Claimant would have left the Properties in the hands of the Defendant as her agent and taken no steps between 2007 and 2019 to secure, or attempt to secure, any income from those properties. Her account is particularly incredible given her own evidence as to her impecuniosity at various points throughout this period. One is driven to ask: if she was as impecunious as she says, why then did she not press the Defendant for some of the income from the remaining Properties? I think that the most likely explanation for this is the fact that, having received substantial capital sums in 2006 and 2007 from the mortgage and sale of various of the Properties, she considered that the remaining Properties belonged beneficially to the Defendant who was entitled to deal with them as he saw fit.

The fact that she signed the 2007 PoA and the terms of her letters to the mortgage companies dated 19th March 2007 and 5th September 2015 are also entirely consistent with the fact that she was content over the years for the Defendant to treat the remaining Properties effectively as his own. There is no hint, in the typed letter from her to the Defendant dated 5th September 2015, that the Claimant was in any way concerned about not having received any income from what she now asserts were always her properties or that she wanted to have any information about them.

A key piece of evidence to my mind is the handwritten notes made by the Claimant in March or April 2011. I accept that, on the one hand, these notes can be seen as clear evidence that the Claimant was contemplating dealing with both 38 Highcombe and 33 Kashmir Road at that time and, thus, that they belonged to her. However the fact that this was all done without the knowledge of the Defendant would tend to undermine this version of events: had the Defendant genuinely been acting only as the Claimant’s agent in dealing with these properties and had she been dissatisfied with how he was handling her property, one would have expected there to have been an open discussion particularly as it appears that the parties were on good terms at this time.

However, perhaps the most significant element in the handwritten notes is the constant reference to the need for the Defendant to be repaid £30,000. As I have already explained, I do not accept the explanation given for these references by the Claimant. In my view they are a clear recognition by her that she received a substantial capital sum in 2007. To my mind, when coupled with the reference to the sum being given back, the clear inference is that this sum had been paid out to her in return for her interest in those Properties which remained unsold. It is a recognition that, if she wanted to deal with the two properties in the future she would effectively have to buy them back from the Defendant. This inference is strengthened by the matters discussed in the paragraphs immediately above.

Further, the lack of any mention of 14 Kashmir Road in these handwritten notes is also clear evidence that the Claimant did not think at that stage that she had any interest in that property in any event.

It is agreed that the Claimant had re-mortgaged Devonshire Road for a further £30,000 in April 2006. I find that she received that sum for herself. Devonshire Road was sold on 10th May 2006 for the price of £250,000. Contrary to the Claimant’s evidence, I find that she was well aware of the sale price and of the amount of the net proceeds of sale. Having admittedly typed the letter dated 6th May 2006, I find that it is much more likely than not that she received the letter dated 12th May 2006 informing her of the net sale proceeds on completion. It was addressed to her at the same address as she had given in the letter of 6th May. I find it impossible to accept the Claimant’s account that she was misled by the Defendant about the sale price and the (lack of) net proceeds. She had access to the joint account and could very easily have discovered what was or was not paid into it. I accept the Defendant’s evidence that it was the Claimant who withdrew the net proceeds from that joint account and transferred them out for her own benefit.

Thus, if, as I have found, Devonshire Road was treated effectively as a joint asset of the parties’ business, then the Claimant had received £30,000 and £54,013.86 from it, whilst the Defendant had received nothing.

It is agreed that Charlton Dene was sold on 2nd February 2007 for £170,000. The unchallenged evidence is that the net proceeds were £29,000. It is also agreed that following the sale, the Claimant received a bankers draft in the sum of £30,000 from the Defendant’s son (acting on the Defendant’s behalf) which represented the sale proceeds. It is also agreed, and I so find, that, in addition to the sale proceeds from Charlton Dene, it was agreed that the Defendant was to pay the Claimant an additional £15,000.

As stated, it is the Claimant’s case that she has not been paid any sum over and above the £30,000 and that this sum is still owing. The Defendant asserts that the sum has been paid by agreed set-off: £8000 by repayment of a loan which the Claimant had taken out; £7000 in writing off arrears owed by the Claimant’s children.

It seems to me that, in the circumstances, the key piece of evidence here is the handwritten note on the copy of the Claimant’s passport sent under cover of the letter from her to the Defendant dated 5th September 2015. This states:

Thus, I find that the agreement made by the parties in late 2006 or early 2007 to dissolve their business arrangement was to this effect:

The Claimant received £30,000 plus another £8000 but did not and has not received the additional £7000.

Given the assertion made in the handwritten note as to what was then owed, I do not have to decide whether or not the Claimant took out the loan which the Defendant asserts he repaid. For whatever reason, £8000 of the remaining £15,000 was paid by the Defendant, leaving £7000 unpaid.

From 2007 onwards (and until 2019) the parties behaved as if the three remaining properties belonged beneficially to the Defendant.

I do not accept that the Claimant revoked either the 2004 PoA or the 2007 PoA in 2010 as she asserts. I accept that she downloaded a draft from of revocation from the web and signed it in front of Mr Wells. However I reject her evidence to the effect that she then took it to a Turkish lawyer who stamped or notarised it and undertook to serve it on the Defendant. I accept the Defendant’s evidence that he never received any such notice.

There are a number of reasons for this.

Firstly, as I have already pointed out, the Claimant’s case that she had revoked the powers of attorney in 2010 is directly contrary to the assertion in her letters to the mortgage companies dated 5th September 2015. I do not accept the Claimant’s assertion that she made a “a mistake” in drafting those letters. Nor do I accept her explanation that, having formally terminated the power is attorney in 2010, she had assumed that the Defendant would nevertheless continue to manage her properties as agent. That scenario is to my mind highly unlikely.

Secondly, I think that if she had genuinely taken the form of signed revocation to a Turkish lawyer both the lawyer and the Claimant would have ensured that she kept a copy of the document as stamped or notarised. After all, the copy of the confirmation of address sent under cover of the letter to the Defendant dated 5th September 2015 was formally notarised and I see no reason why she should not have been given a copy of the final document.

Further, and in any event, as the letter dated 5th September 2015 shows, not only did the Claimant have the Defendant’s address, but she also maintained cordial relations with him. I think that, had she genuinely revoked the powers of attorney, then she could and would have sent the formal revocation herself, rather than relying on a Turkish lawyer.

Finally, and although the court heard no evidence about the practice of Turkish lawyers, I suspect that, had the Claimant genuinely relied on such a lawyer to serve the revocation, some form of formal acknowledgment or receipt would have been forthcoming. The only document which the Claimant could produce, however, was the signed but un-notarised form.

I find that the Defendant did have a conversation with the Claimant in January 2019 in which he told her that he had sold 38 Highcombe.

I find that, whilst I cannot make any findings about exactly what he has done with the net proceeds of sale of 38 Highcombe, I am prepared to find that he is likely to have dissipated at least some of the funds by either giving them away or spending it.

For what it is worth, I accept the explanation given by the Defendant as to why he agreed to “sell” 14 Kashmir Road to his daughter for £162,000: the interest only mortgage had come to the end of its term; the capital had to be repaid; his daughter could get another mortgage which would pay off the capital; the property could thereby be retained as a family home. I accept that, if one was suspiciously minded (and there is much in the Defendant’s conduct about which to be suspicious), one might see this as an attempt to put assets beyond the reach of the Claimant. However it would have been a particularly unsubtle and transparent contrivance and, as stated, solicitors were involved on both sides of the transaction. Thus, to my mind, the Defendant’s explanation has the ring of truth about it.

As Mr Brodsky for the Claimant points out, there are two particular legal hurdles which the Defendant has to overcome in this case if he is to defeat the Claimant’s claim.

The first is the burden of proof. The general principle is that, unless proven otherwise, the beneficial interest in property follows the legal interest. This was discussed by the Privy Council in CHEN V NG [2017] UKPC 27 (at paragraphs 41 to 42) where Lord Neuberger and Lord Mance said this:

Thus, as the Claimant was the registered freehold proprietor of 38 Highcombe and still is the registered freehold proprietor of 33 Kashmir Road, the burden is on the Defendant to show that he has acquired the beneficial interest which he asserts.

It seems to me that the same principle applies by analogy in relation to 14 Kashmir Road. Whilst it always has been and still is registered in the sole name of the Defendant, it is agreed that in 2003 the Claimant acquired a 50% beneficial interest in that property as well as Charlton Dene. Thus the burden is on the Defendant to show that the Claimant’s admitted beneficial interest has been transferred or relinquished.

The second hurdle is that contained in sections 53 and 54 of the Law of Property Act 1925. These provide as follows:

On the evidence before the court, there is no written document within section 53(1) on which the Defendant can rely to show either the creation of his alleged beneficial interest in 38 Highcombe or 33 Kashmir Road or the transfer of the Claimant’s admitted beneficial interest in 14 Kashmir Road.

However, Mr Brodsky, in his closing submissions, accepted (rightly in my view) that, if I was to accept the Defendant’s factual case as to the basis on which 33 Kashmir Road and 38 Highcombe were purchased, then I could and should find that the Claimant held the legal interest in those properties on trust for herself and the Defendant jointly. In PARAGON FINANCE V THAKERAR [1999] 1 All ER 400 (at 408-9) Millett LJ said this:

The intended effect of the oral agreement that, as a matter of fact, I have held was made by the Claimant and the Defendant in late 2006 or early 2007 is this. The Claimant had already received the £30,000 raised as a mortgage loan on Devonshire Road and, in return for the net proceeds of sale of both that property and Charlton Dene plus £15,000, she would (in effect): relinquish her beneficial interest in 14 Kashmir Road; hold the legal title to 33 Kashmir Road and 38 Highcombe on trust for the Defendant who would be solely entitled to the beneficial interest in those properties. In addition to the £30,000 raised on Devonshire Road, I have held that she received: the net proceeds of sale of Devonshire Road in the sum of £54,013.83; £30,000 representing the net proceeds of sale of Charlton Dene; an additional £8000 out of the remaining £15,000.

Further, thereafter, having emigrated to Turkey, she allowed the Defendant to deal with the remaining Properties as his own until 2019. He: organised the lettings; arranged for the upkeep of, and any repairs to, the Properties; paid the mortgage payments; received the rental income. She allowed the Defendant to retain both the 2004 PoA and the 2007 PoA and did not seek to revoke them until March 2019 by which time the Defendant had used one or both of them to sell 38 Highcombe and apply the proceeds elsewhere.

It may well be that the effect of the oral agreement in 2006 or 2007 is that the Claimant was to hold any interest which she had in the three remaining Properties on constructive trust for the Defendant. I was not addressed by either party on this but it seems to me that it is at least a possible outcome. If that is right then such an arrangement would not fall foul of either section 53(1) of the LPA 1925 or, for that matter, section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (see sections 53(2) and 2(5) respectively).

However, even if section 53(1) of the 1925 Act or section 2 of the 1989 Act were otherwise to apply, it seems to me that the Defendant is entitled to rely on the doctrine of proprietary estoppel.

In THORNER V MAJOR [2009] 1 WLR 776 (at paragraph 15) Lord Scott summarised:

All three of the elements recognised in BROOKER case are, to my mind, clearly present here. By the terms of the 2006 or 2007 oral agreement (what the Defendant calls the “dissolution agreement”) the Claimant clearly agreed, and represented, that the Defendant was to be the sole beneficial owner of 14 Kashmir Road, 33 Kashmir Road and 38 Highcombe. Acting in (perfectly reasonable) reliance on that agreement and representation, the Defendant: allowed the Claimant to retain the £30,000 released by the mortgage on Devonshire Road; allowed her to have the net sale proceeds of that property in the sum of £54,013.86; gave her £30,000 representing the net proceeds of sale of Charlton Dene; gave her £8000 out of the further £15,000 which he had agreed to pay here; (as already discussed) treated those properties as if they were his own between 2007 and 2019; sold 38 Highcombe in January 2019 and utilised at least some of the net proceeds elsewhere. These matters represent substantial detriment to the Defendant in consequence of his reliance on the agreed terms.

Put another way, it would in my view be unconscionable in all the circumstances for the Claimant now to be permitted to go back or renege on the terms which she agreed in 2006 or 2007 as a result of which terms she has received substantial sums and on which terms both she and the Defendant acted between 2007 and 2019. She is estopped from: denying that she holds 33 Kashmir Road on trust for the Defendant beneficially; denying that she held 38 Highcombe on trust for the Defendant at the date it was sold; asserting that she has any beneficial interest in 14 Kashmir Road.

It is true that there has been some debate in the authorities as to whether estoppel can be relied on to circumvent the requirements of, particularly, section 2 of the 1989 Act. This point was not discussed in submissions to me by either party. However I think it is right that I consider it.

That being said, I do not think that there is any caselaw which would prevent the Defendant from relying on proprietary estoppel in this case.

In ROCHEFOUCAULD V BOUSTEAD [1897] 1 Ch 196 (at 206) referring to a predecessor to section 53 of the 1925 Act, Lindley LJ said this:

In relation to section 2 of the 1989 Act, in YAXLEY V GOTTS [2000] Ch 162 Beldam LJ said this (at pages 191 and 193) in relation to the ambit of section 2(5):

Now it is true that doubt has been cast on the correctness of that case as a result of certain obiter comments made by Lord Scott and Lord Walker in the case of COBBE V YEOMANS ROW [2008] 1 WLR 1752 (see paragraph 29). However there is now a clear line of subsequent cases at Court of Appeal level which have held that proprietary estoppel can apply in certain circumstances to prevent a party from relying on the strict terms of section 2 of the 1989 Act.

In HERBERT V DOYLE [2010] EWCA Civ 1095 Arden LJ considered the meaning and effect of what Lords Scott and Walker said about section 2 and the doctrines of estoppel and constructive trust. She said this (at paragraphs 56 and 57):

There are two points to note here.

Firstly, this is not a case in which the Claimant and the Defendant intended to make a formal agreement setting out the terms on which the Defendant was to acquire an interest in the properties; no further terms for that acquisition remained to be agreed; the Claimant and the Defendant expected their agreement to be immediately binding. Thus, this case on its facts falls outside the scope of what Lords Scott and Walker said in the COBBE case.

Secondly, in this context, the necessary requirements of a constructive trust are very similar, if not identical, to those of proprietary estoppel - see HERBERT (at paragraphs 41, 56 and 64); DOWDING V MATCHMOVE [2016] EWCA Civ 1233 (at paragraph 29) and GHAZAANI V ROWSHAN [2015] EWHC 1922 (Ch) (at paragraph 187). Thus there is no reason in principle why the exception in section 2(5) of the 1989 Act (and therefore in this context by extension section 53(2)) cannot apply.

The passage quoted from HERBERT V DOYLE has been subsequently endorsed by the Court of Appeal in GENERATOR DEVELOPMENTS V LIDL [2018] EWCA Civ 396 and KAHRMANN V HARRISON-MORGAN [2019] EWCA Civ 2094.

In FARRER V MILLER [2018] EWCA Civ 172, a party took the point that an amendment to a pleading should not have been allowed to permit reliance on proprietary estoppel because “a proprietary estoppel can never avoid the need to comply with s.2(1) of the 1989 Act”. Reference was made to COBBE and YAXLEY V GOTTS. Kitchen LJ said this (at paragraphs 56-63):

In HOWE V GOSSOP [2021] EWHC 637 (Ch) Snowden J dealt with a claim for possession of land by the Claimant the defence to which was proprietary estoppel by reason of a previous oral agreement between the Claimant and the Defendants for the former to sell the land to the latter. It was said that the Defendants were entitled to an irrevocable licence to occupy the land. The defence succeeded. Snowden J considered the authorities and academic writings on the whether or not proprietary estoppel could be relied on in relation to section 2 of the 1989 Act. He quoted from Snell’s Equity as follows (at paragraph 45):

He then concluded (at paragraph 64):

Standing back, I would make two points in this regard.

Firstly, I do not think that the authorities described above dealing with the interplay between section 2 of the 1989 Act and the doctrine of proprietary estoppel have any relevance to a case such as the present which involves not section 2 but rather section 53 of the LPA 1925. None of the more recent authorities cited above cast doubt on the statement of Lindley LJ in ROCHEFOUCAULD V BOUSTEAD. The oral agreement made between the parties in late 2006 or early 2007 here was not a contract for the sale or other disposition of an interest in land but was rather a declaration or creation of a trust or the immediate disposition of an existing equitable interest. Thus section 2 of the 1989 Act, and the authorities relevant to it, had no application.

Secondly, even if those authorities were of application by analogy or directly and even ifsection 2 is intended to affect the operation of proprietary estoppel, I think that this is one of those cases, as described in HERBERT V DOYLE, which falls outside the scope of the restriction identified by Lords Scott and Walker in the COBBE case.

It is worthwhile in this context citing two further passages from the speeches on THORNER V MAJOR. At paragraph 20 Lord Scott said this:

At paragraph 99 Lord Neuberger said this:

This to my mind is a “straightforward estoppel claim” to which section 2 has no application.

However, as Robert Walker LJ stated in GILLETT V HOLT [2001] Ch 210 (at 235) a claim or defence based on proprietary estoppel having been established:

As Lewison LJ noted in HABBERFIELD V HABBERFIELD [2019] EWCA Civ 890 (at paragraph 25):

He continued (at paragraphs 61 and 62):

In relation to the form of relief, in GUEST V GUEST [2020] 1 WLR 3480, Floyd LJ said this:

In my view this is a “not far short of contract” case. Thus the expectation of the Defendant should be met. He should be entitled to the full beneficial interest in the three properties which remained after 2007 and to the entirety of the rental income from them. However, as I have held, part of the bargain was that the Defendant was to pay the sums agreed. As I have also held, he has not paid £7000 which he owed pursuant to the oral agreement. Whilst of course any contractual claim for the £7000 would be statute barred, it would not be equitable or conscionable for the Defendant to obtain the fruits of the bargain he made with the Claimant in 2006 or 2007 without also paying all of what he agreed to pay.

Thus it seems to me that, in order to rely on the equitable doctrine of proprietary estoppel which he seeks to do, the Defendant must pay to the Claimant the £7000 which I have found that he still owes to her. I think that he should also pay interest on that sum at an appropriate rate.

Save for ordering the Defendant to pay her £7000 plus interest at a rate to be determined and for a period to be determined, I dismiss the Claimant’s claims.

I will hear the parties on: the rate and period of interest which the Defendant should pay on the £7000; the relief to be ordered on the Counterclaim; the form of order otherwise; the issue of costs.