JH v AM

J H (to whom I shall refer as “the Wife”) and A M (to whom I shall refer as “the Husband”) were married on the 4^th June 1983 when they were each respectively aged 26 and almost 28 years old. By this date, each had already established their own careers. The Wife was the owner of a jewellery business and the Husband was a solicitor in private practice.

The Wife was born on the 3^rd March 1957 (she is now some 47 years old). She is a member of a very close-knit family and has 2 younger sisters – called J and G. At all material times, her parents Mr B and Mrs B H, lived on a property called M P Farm (“M P”). This property had come to Mrs H through inheritance. Mr H is 70 years old and his wife will be 70 years old in June 2004. The parents ran a chicken business at M P and, for many years, they were successful and fairly prosperous. Such was their affluence, that they were able to assist the Wife when she commenced her own business at the age of 23 years old in about 1980.

The Wife’s jewellery shop – J Jewellers – is situate at the X Shopping Centre. At the outset, the business was nominally held as a partnership with Mr H and Mrs H because they had provided some start up capital and general assistance. But, although her parents were entitled to drawings from the business, they did not take them and, eventually, “forgave” the monies that were due to them. The Husband says in 1979 he was already courting the Wife and he assisted her with some start up costs and legal advice. If he did so, I do not consider that his input was of any real importance to the business.

The Wife’s shop has been successful over the years as a result of her personal devotion to it and her commercial nous. I find that it has been built up by a great deal of hard work by her alone. It is now valued by the joint accountant at £216,000. The Husband is dubious as to whether this is an accurate valuation because, he says, the Wife has failed to reveal all her stock. He told me that he had taken stock sheets from the former matrimonial home which showed that, in October 1997, the business had stock (at the lower of cost or realisable value) of £397,000. He had downloaded these stock sheets from the parties’ home computer and removed them when the parties separated. In February 1999 the Wife entered his new home and removed various documents including those stock sheets. Moreover, the Husband says that the Wife was in the habit of receiving cash from customers which was not put through the books. He says that at one time there was £50,000 in the business safes. The Wife denies these contentions. I find that she did remove the stock sheets from either the study at the former matrimonial home or from the Husband’s home at 23 The C, (I am uncertain as to which, but that does not matter). However, I am sure that the Wife had them in her possession. When she was ordered to produce the records, her then solicitors informed the Husband’s advisers that the records had been destroyed. They have never surfaced and so there is a lingering doubt as to the real value of the jewellery stock. However, in the final analysis I do not consider that this will affect my Judgment about the fair distribution of the assets. Moreover, whilst there may be an element of cash to this business, I am unable to make any positive findings about whether it has occurred (or more relevantly) whether it still occurs and the amount.

The Husband was born on the 17^th June 1955 (so he is approaching 49 years old). His parents are still alive and are in their 80s. He only has one brother who was a bank manager for a time and is now a school bursar. He qualified as a solicitor before the marriage and was already well embarked on a career that lead to him being an equity partner with Messrs F B and B. His area of expertise was (and is) residential conveyancing. Eventually, the Husband encountered difficulties whilst at the firm. Consequently, in about 1994 he left it and joined X whose senior partner was (and is) a Mr A J.

Originally, there were 4 equity partners at X’s – including a Mr K, who left the practice (with other members of staff) and commenced an action against the partnership (which was eventually compromised). Mr K still maintains that he has a claim against the firm as a result of incorrect work–in-progress figures. The Husband informed me that he is very concerned that Mr K – who has helped the Wife in this case by providing her with 2 bundles of documents plus additional information/assistance – may commence a further action when this case is finished. There has been an issue as to whether the joint accountant’s valuation of the practice is accurate because the work-in-progress has been under valued or incorrectly stated. A great deal of costs have been expended on that issue. Suffice it to say the joint valuation is now some £67,700 and that is the figure which I propose to adopt. The practice now consists of two equity and one salaried partner. Mr J undertakes commercial work, the Husband - the residential conveyancing and the salaried partner PI litigation. It has some 40 members of staff. The firm has had some hard times but the Husband has told me that the position has now stabilised and that he is hopeful that prospects are better than they have been for some time. The Husband’s new wife – E J – works in the firm as practice manager drawing £18,000 per annum as her salary.

Despite this, the practice still has a number of potential problems - in particular, the threatened action by Mr K and some 4 outstanding complaints which fall to be considered by the Solicitor’s Disciplinary Panel. Any of these could affect the Husband’s ability to continue in practice. However, I am satisfied that once this litigation is over, he will be able to concentrate on matters within the firm and will overcome the present problems. I feel confident that the practice will survive and within 2 years the Husband will be able to draw more from the practice. I make it clear that I find that the Husband has been solely responsible for his success as a solicitor.

The parties having married on the 4^th June 1983, proceedings were initiated by the Wife in February 1998 and they separated finally in July of that year. Thus, the marriage lasted just less than 15 years. In reality, it had been in difficulties from 1997, if not somewhat earlier. The Wife had been to see a solicitor in the summer of 1997 and knew by the end of that year that her husband was committing adultery – although she only discovered the name of the woman involved in early 1998.

The parties have one son called N who was born on the 13^th August 1989 – so he is 14½ years old. He attends T College as a weekly boarder. During the marriage, he was a day boy at D High School and the Husband paid his fees at that private school. In September 2000, (without any consultation) the Wife moved N to his present school (thereby increasing the fees due) and then in September 2003, she caused him to become a weekly boarder – again with no consultation with the Husband. She told me that N wanted to become a boarder as he felt he needed his “own space” having been distressed by these continuing proceedings and the attendant ill-feeling that that has been engendered between his parents. He was awarded a scholarship to assist with cost of his boarding (because he was considered a caring member of the school community). His fees are now about £5,000 per term (as opposed to £3,800 as a day boy). The Wife told me that she had not communicated with her Husband about schooling - first because, she knew that he did not want N to continue in private education and, secondly, because all/any communication was very difficult. I consider that it was and (is unfortunate) that the Wife decided that she would not keep N’s father fully informed and I note that he has not paid any school fees since the summer 2002. It is an essential part of parental responsibility that vital decisions affecting a child’s life are taken after joint input. If they are not, it inevitably leads to dissatisfaction and problems - for example in this case, in relation to the non-payment of school bills. Since June 2002 the Wife has been solely responsible for the fees. The Husband has said that he could not afford them but I find that he has chosen to spend such resources as he did have on holidays with N so to ensure their continuing relationship (because, as she told me, his weekend contact has virtually ceased). I do not criticise him for this but it does mean that he has not made a proper contribution for the last 20 months odd to his son’s basic educational needs. It is the Husband’s case that once he is able to pay (and he hopes this will be soon) he will contribute one half of the fees. I consider that it is very important that he begins to make these payments at the end of this case. I made it clear that I wanted specific proposals and in his final submissions Mr Brudenell on behalf of the Husband indicated that he would start paying next January 2005. The Wife is seeking payments from the Summer term 2004. I am going to order the payments to commence from the Autumn term 2004 – that is next September.

The Husband was paying £225 per month towards N’s general maintenance. In November 2003 this was increased to £300 per month. The parties have entered into a written agreement which enables me to make an order in the sum set out above.

I will now set out the chronology of relevant events as I find them. For the avoidance of doubt, insofar my chronology differs from the evidence of any particular witness, that is because I have preferred the evidence of another.

In contemplation of their marriage, the parties purchased a plot of land upon which they built the former matrimonial home – 10, G. Road. The plot cost some £12,000 and – there is no dispute that this money was provided from the Husband’s savings. The Husband says that he invested a further £13,000 in building costs – the Wife does not accept this – but suffice it to say the Husband put all his then monies into their new home. The Wife’s parents also assisted – they were quite knowledgeable about building projects and gave valuable assistance in this regard. They also lent funds until the parties were able to borrow £25,000 on mortgage. These monies were used to repay Mr and Mrs H when the project was almost complete. This house was the only home in which the parties lived during the marriage. The Wife continues to live there with N. It is now worth some £280,000 and is subject to a mortgage of £93,500 odd (the latter having been increased [to about £120,000] in 1990 in respect of jointly owned investment properties bought at C). During the marriage the Husband paid the mortgage on this property (and was able to use the rental income from C to defray that expenditure). Since June 1998 the Wife has paid the mortgage. There is no dispute but that at the end of this case, the Wife will have the former matrimonial home transferred into her sole name. It seems that the transfer will cost the Husband some £9,300 in CGT, because, even though PPR relief will be available to him for the period up to June 2000 (given he left the property in 1998), he has to pay CGT in respect of the last 4 odd years.

In about 1988, the parties decided that they would invest in property. This suited them both because the Husband had a good knowledge of the property market as a result of his practice and the Wife enjoyed overseeing renovation work. Their first project was a house at 48, S Road. It was purchased for £8,250 with monies which emanated solely from the Husband. There is a dispute as to who funded the renovations. I am unable to decide who paid for what but I have no doubt that it was a joint project. It was bought in the Wife’s sole name and, when it was sold, the net profit was put into another project at No 82, P Street which cost some £21,000. This house was also bought in the Wife’s sole name but was, as I find, a joint project. When this was sold for £34,950 it seems that the Husband used some £7,500 to repay a car and aeroplane loan. There has been some criticism about these actions and his alleged failure to tell the Wife the truth about the precise sale price. The allegation is that he skimmed off the £7,500 used to repay his loans. If he did not tell her about the exact sale price (and I make no finding about it) it does not seem to me to be of any importance in the context of this case, particularly as the Wife must have signed the conveyancing documents and could (indeed should) have checked the figures for herself.

Throughout this period the parties both worked and contributed to the best of their respective abilities. The Husband received some inheritances which he folded into the family pot. In short, each party did all that they could and jointly sought to better their position and finances.

In February 1990, the parties bought two adjoining properties Nos 21/23 The C. The cost was £106,000. It was the Wife who found the premises. She was attracted by the rental potential of the 2 cottages and the possibility, as she saw it, of planning permission in relation to the extensive grounds at the rear. She persuaded the Husband that the project would be a good buy. The Wife was able to raise a commercial loan (for a total of £115,000) from her bankers - the Yorkshire Bank – albeit at a high rate of interest. When the marriage broke down, she sought to argue that C was really “her” project and was only put into joint names only because the Husband had persuaded her that this was tax efficient. I do not accept her evidence in this regard. Whilst I have no doubt that she was the driving force behind the project, it was part of a pattern of joint property deals that the parties had undertaken on previous occasions. Indeed, in order to reduce the cost of borrowing the commercial loan was soon repaid with monies (some £109,000) raised against the jointly owned former matrimonial home. I am satisfied that this was done because the parties considered this to be another joint project. The renovation works cost some £50,000 which was funded by a council renovation grant, the net proceeds of P Street and £10,000 from one of the Husband’s inheritances.

The C properties had been purchased from the executors of an Estate for whom the Husband’s firm acted. A complaint was made to the Solicitors Complaints Bureau and the Husband was reprimanded for failing to disclose his interest as a potential purchaser – although it was accepted that he had not gained any benefit from insider information.

In 1990 the parties obtained planning permission for a dwelling at the rear of the cottages. In 1993 they were granted permission for second property on that land. The Husband has cast some doubt on whether that permission is still extant. I have seen a number of documents and I am satisfied that sufficient work has been carried out (albeit with defects which are capable of remedy) so that the plots have extant permission for development.

No 21, The C is rented out and the Husband still receives the rent of some £300 per month. He has not made any part of it available to defray the mortgage on W. That cottage is worth some £139,300 net of costs of sale and CGT. At present, the Husband lives in No 23 and it is worth some £137,350 net. He moved there in about December 1999. As presently configured, it is not suitable as a long-term home. The 2 plots are worth £110,000 net. The Wife wishes to have the plots transferred to her. She told me that her original plan was to develop them herself but she now considers that - if transferred to her – she would sell them on. I consider that the properties and land at C should all be transferred to the Husband in this case – in my view it would be intolerable if the Husband were to have problems in relation to the development of houses close to his current home. Such a transfer will result in assets worth some £386,800 to him and will result in a charge to CGT to the Wife of some £39,000 payable in about 12 months time.

In 1991 the Wife bought 2 plots of land from her mother at T. The cost was £9,900. The land was sold because Mrs H was facing potential bankruptcy because her family business had failed. It is the Wife’s case that the land is still owned by her mother because the sale was a paper transaction to ensure that her mother did not lose the land to her creditors. She says that (i) no consideration passed, the Husband had (ii) backdated the transaction and (iii) had caused the sale to be accomplished at an undervalue. If her allegations were correct the whole transaction would have been a fraud on the creditors. In the event, none of the above allegations was made out by her. The Husband was able to prove that the Wife had paid for the plots from her Tessa account (into which, inter alia, her modest salary from his previous firm was paid); the land was independently valued and the sale took place at a proper value and the sale was not backdated. Accordingly, I find that the land belongs to the Wife and not her mother. It seems that a great deal of aggravation has been caused by these allegations and the need to disprove them. However, it is symptomatic of the manner in which this case has been conducted that both parties felt the need to expend considerable energy (and therefore costs) on an asset (which in the final analysis) is worth, as I find, some £18,000 net – and even on the Wife’s case was worth some £8,000.

The next property that the parties purchased in December 1992 was M. P. Farm. But as it is of particular importance in this case, I will deal with it as a special category.

In 1997 the parties purchased a property at No 35 E. Street. This was bought in joint names for £24,000 with the assistance of a 90% mortgage. The Wife paid the initial deposit of £2,400 which the Husband reimbursed. This property which consists of 2 flats is still held in joint names – although it has been operated by the Wife since the separation. The flats provide a monthly income of some £560 per month. This is a good rate of return on a property worth some £56,100. The Wife wishes this property transferred to her and I consider that this should occur. This will result in a charge to CGT of some £5,800 by the transferee.

In 1993 D was incorporated as a property investment holding company. The Husband paid £10,000 for his 1/6^th interest. The original agreement was that the owners would not be able to withdraw their funds (save for the initial investment) until the company was wound up. The Husband regards this venture as a form of pension. The company has been quite successful over the years and now has a number of valuable properties. It has been paying dividends of some £500 per month and there is a suggestion that in the short term this may increase to £1,000 per month whilst the investors seek new property ventures. The value of D is basically agreed at some £39,100 (which is the average of the Accountant’s valuation) – in addition to which the Husband’s loan account stands at some £28,500.

In addition to these matters, the parties were able to amass some other personal assets. Most have agreed values but particular issues have arisen relating to the Wife’s jewellery and the Husband’s interest in an aeroplane. When the parties separated, the Husband believes that the Wife’s jewellery was worth some £150,000. She says that it was worth only £50 - 60,000 and she has produced an insurance schedule which shows that was the sum on the contents policy. Moreover, she says that she has been obliged to sell most of it, in order to fund her lifestyle (and pay some costs) since 1998. The Husband takes exception to her explanation but I am unimpressed by this dispute. It is rare for a Court to take account of jewellery with this sort of value in this sort of case. Even if this jewellery were in existence I would not take it into account.

There has also been an issue about the Husband’s interest in a plane – held through an entity called A T. The Husband’s evidence on this point has been inconsistent. Initially he said that he owned a third of the plane, then he said that he owned a 50% stake and finally he said he had been mistaken and the interest was only a third. At its maximum, the asset is worth according to the Wife some £51,500. I consider that the Husband’s evidence on the plane is muddled and I am of the view on the balance of probabilities that he has a 50% share in the net assets of the company (viz the plane value less the borrowings) of £56,163 - that is some £28,000 plus his loan account of £10,000 – a total of £38,000. I propose to allow only a modest discount for illiquidity because he owns it with a close friend. The value which I place on this asset is £30,000.

This property was inherited by Mrs B H – having been in her family for some time. In her grandfather’s time some 39 acres of adjoining land was taken by the Coal Board by compulsory purchase for open cast mining. In about 1994, when the mining had ceased and the land had been re-instated, it came back on to market and was bought by the Wife (in circumstances that I will outline below). The farm was the only home which the Wife and her sisters knew as they grew up. Indeed, her sisters still live on the premises – J in her own cottage called The P (for which she paid some £75,000) and G in the main house with her parents.

The Hs ran a chicken farm which involved buying day old chicks and then “growing” them over a six week period – whereupon they were sold for slaughter.

As set out above, Mr and Mrs H were quite successful until they decided to branch out into the processing and packing side of the business. This decision involved a large investment in equipment and they borrowed heavily to build/reconfigure the necessary premises. By 1991, they had very significant debts which the documents show peaked at over £700,000. Their lending bank – Lloyds - had security over the farm and personal guarantees from Mr and Mrs H.

When the business failed, Lloyds Bank put in the receivers. Messrs Cork Gully were appointed in May 1991 and decided to market the property in 2 lots – being land at M W and M P Farm itself. The family were distraught at the prospect of Mr and Mrs H losing their home and livelihood. Initially, the Receivers considered that the land at W could be sold for about £50,000 and M P Farm (which they valued as a going concern) at about £400,000.

The family knew that they could not afford to buy M P at that high value and so the initial plan was that the Husband and Wife would buy the land at W. There was planning permission for a dwelling on the plot and this, when built, would provide a home for the H family. Mr (and therefore I assume) Mrs H did not seem to mind that the Husband and Wife were to own that land.

In the end the property at W, was subject to a contract race and was lost to the family.

By this time, M P Farm had been on the market for a considerable time with no offers. The papers show that, whilst ideal as a farming enterprise, it is not an appealing prospect as a dwelling. The Husband who was acting as a solicitor on behalf of the family (at no charge) went through the documentation and discovered that the Bank’s security did not cover the broiler houses. Without these units as part of the sale, the farm could not be sold as a going concern. This discovery meant that the price fell dramatically and M P became a prospect within the reach of the family.

In the light of this, J tried to buy the premises. She offered £255,000 and this sum was accepted by the Receivers. However, in the event, she could not raise the necessary loan and so her offer fell through.

By now, the H’s situation had become desperate. The Receivers had been in charge for in excess of a year and on the 20^th August 1992 Lloyds Bank began proceedings against Mrs H in the County Court seeking judgement for £556,000. There was no defence to their claim and so on the 30^th September 1992, they entered Judgement – with an order for possession on or before the 25^th November 1992 (some 56 days later).

When J’s bid for M P fell through, only the Wife was left to offer assistance because (i) Mr and Mrs H’s debts were such that they faced potential bankruptcy and (ii) G was (as J told me) still a school girl only some 18 years old.

The Wife had not put forward herself forward in the first place because she knew that the Husband was most reluctant to be involved in the farm venture. He did not want to risk his own assets because he considered that the project was very risky. He gave evidence that he had tried to assist Mr and Mrs H before disaster struck by suggesting a consultant who could offer advice. The H’s had failed to heed the recommendations and he did not have faith in their business acumen.

The Wife visited the Yorkshire Bank (her own bank) to discover whether they would make the funds available to her. The bank offered some £200,000 to enable a purchase to proceed at £225,000 (which was £30,000 lower than J’s offer). She offered the farm as security. The Wife planned to buy M P in her sole name. The bank then informed her that they required additional security. She told me in her evidence that when she had left the bank, the loan had been agreed and the only security sought was M P. She told me that she had then asked her husband to deal with the legal matters and, after his involvement, the bank had insisted on additional security. She considered that the Husband was in some way to blame for this state of affairs. She feels that he had manipulated the situation so that he could have his name on the title deeds. This explanation, which was not in any of her affidavits, seems to me to be wholly without foundation. Her earlier case was to the clear effect that the Husband wanted nothing to do with this project and was very reluctant to risk his own assets. This evidence sits in sharp contradistinction with an allegation that the Husband manipulated the bank to ensure that his assets – namely his share of the C properties – were required as additional security before the loan was sanctioned. I consider that the more likely explanation is that the bank agreed to lend some £200,000 in principle subject to valuation and/or further investigation and, when those investigations were complete, the relevant bank official decided that M P on its own, was not sufficient security.

The result was that the Yorkshire bank required the C properties to be secured. The Husband, not surprisingly, was not prepared to agree to this without his name being added to the title deeds. Thus, the loan was taken out in the Wife’s sole name but was supported by a joint mortgage over M P and the C properties. Indeed, the bank documents show that the bank obtained an all monies charge over C and, as such, the Husband stood effective guarantor to all the Wife’s indebtedness with the bank – which included her business overdraft. It does not seem that either party appreciated this fact in 1992.

All these matters took a great deal of time - and time was a very precious commodity - as the date for possession was fast approaching. The Husband had a meeting with the Receivers in order to convince them that the proposed deal was bona fide and would proceed as soon as practicable. His meeting was successful.

That evening the Husband and the Wife went to M P and told Mr and Mrs H that “they” had secured the farm. The Wife, her father and sister, J, all told me that the Wife did not tell her parents that the Husband’s name was on the title deeds. She says that they would have been very upset if she had told them because this was a H family matter. I find her evidence on this point together with that of B and J H to be unreliable. I have no doubt that they now believe it to be true but that is only because, with hindsight, they have convinced themselves of the fact. Thus, whilst I acquit them of deliberate lying, I am equally sure that they are wholly mistaken.

In November 1992, the H’s were about to be made homeless. Mr and Mrs H had few assets and they were frantic to secure their home. They held regular family meetings about how they were going to save the property and the Husband took part in some. His expertise was sought on occasion. At this time, there is no real suggestion that the marriage was going seriously wrong even though the parties may have some difficulties. Their son was only 4 years old and the real troubles were about 5 years away. As the Husband was an integral part of the negotiations with the receiver (and he was proud of his achievement in that regard) it is inconceivable that he did not tell everyone about his role and his (as he perceived it) generous gesture of putting his own assets on the line.

I am clear that the family knew that he was a joint owner from the outset – by the family I mean all the H’s. The fact that the Husband was on the title Deeds did not concern Mr and Mrs H unduly because they had secured their home. It was retention of M P that was the most important and relevant fact as far as they were concerned.

Apart from the loan – some £25,000 of capital was needed as a deposit. The H’s and the M’s (as they then were) discussed how these sums were to be paid. The Husband put up the initial £5,000 which was subsequently repaid by the H family in a matter of days. The remaining funds had to be found somehow. Mr H was entitled to a share of £5,000 in the proceeds of sale of his mother’s bungalow at P. His sister T H was entitled to the remainder of the net proceeds because she had purchased the bungalow from her mother at an earlier date (no doubt to assist the old lady with her capital needs). Mr H persuaded his sister that the property should be sold to his daughter G for some £70,000. In reality, by the date this he had already secured another buyer for £100,000. He did not inform his sister of this prospective purchaser at the time. He told me that his sister was content to receive £70,000 because that was the sum that she wanted. He also said that, when eventually she was told of the back to back deal, she was content because (i) he had looked after their mother whilst she lived in J and (ii) he had done work on the property to improve it. I consider that whole scenario and explanation to be dubious but it is not my job to cast aspersions about the 3^rd party transaction. However, it does indicate to me that Mr H was prepared to do anything to secure the farm - even if it meant being parsimonious with the truth even to his own sister. It is clear that he regarded the £30,000 profit as “his” money albeit that G was the conduit because of his own perilous financial position. Indeed, “G” appears to have “gifted” part of her profit to the Wife and Husband because some £20,000 of those monies were used to fund the purchase. I do not know what became of the remainder. There is a suggestion in the written evidence that the Husband did not account for the additional amount but he was not questioned about this matter and there is no evidence to support the assertion.

I assume that these extra funds went into the general melting pot –and were used to enable Mr and Mrs H to survive and set up in a new business. The fluidity of contribution and cash is a clear indicator that the family were all pulling together to ensure that M P was saved – irrespective of rights or wrongs of how the monies were raised.

In fact, a very good deal was achieved. The Farm, as a going concern was worth a great deal more than the sum that was paid for it. No figure has been placed upon its real value – but it must have been substantial. It was the Husband that was responsible for finding the defect on the bank’s security and I regard that as valuable contribution by him because – without that – the farm would never have been within reach. Moreover, without his willingness to put up C as additional security – the deal would have foundered. This was also a real contribution by him.

The Wife did not put up any money herself, but she (like the Husband) was prepared to risk her share of C. Her family made funds available as set out above. There was no demarcation because everyone concerned knew the purpose of the purchase. It may not have been verbalised on any one occasion but I am sure that all the parties knew that the property had been purchased in the names of the Husband and the Wife. The purpose was to provide a home and a livelihood for Mr and Mrs H for as long as they required it – by that I mean to the end of their lives if that is what they wanted or earlier if they chose to leave. It was not a formal life interest, but it was an understanding and they did not seek to have their position formalised in any way. They did not want their names on the titles Deeds for two very good reasons – first, because they were facing potential bankruptcy and secondly, it made sensible tax planning if the property was held by the next generation because it avoided potential inheritance tax in the long term. Moroever, they could not have had any beneficial interest in the property because that would have been a fraud on the creditors.

Against this background, Mr and Mrs H did not mind if they spent their own monies on the property because, it was a quid pro quo, for a continuation of the life they had always known. I am clear that they did not expect to be reimbursed for any funds which they expended on the land or buildings at M P.

Mr and Mrs H may have hoped in the long term to be able to secure funds for each of their daughters – but I do not consider that the Husband was aware of their hopes in this regard. He had been prepared to invest in the project because the Wife had informed him that it would be a “good long term investment”. She has denied saying this to him but I find that she did. Indeed, in her oral evidence, she frankly told me that she would have said anything in order to save the farm. She knew that she had to make the purchase attractive to her husband – a long term profit was the manner in which she sold it to him.

By the purchase, the Wife had achieved a 50% share in the farm. J’s future was also secured by a purchase of a 2 bedroomed cottage in the grounds called, as I have said, The P. She bought this house, from the Husband and the Wife for £75,000 (which sum she raised on mortgage). Of this, she only paid the Husband and the Wife £53,000 which then was used to reduce the mortgage. She retained the remaining £20,000 and used it as a deposit to fund her own pharmacy business. As the Husband and the Wife owned M P – they were legally entitled to the whole amount. However, the H family decided that J deserved the additional funds for the unpaid work that she had undertaken through 1991/2. Insofar as the Husband and the Wife agreed to this it was a generous gesture.

It seems to me that these actions support the finding that I have already made that the financial situation was fluid and all parties were acting together in order to secure the farm on the understanding that I have set out above. Funds were passing in order to benefit such member of the family as was appropriate at the time. The munificent gesture by the Husband and the Wife, secured J’s home and future business (which I was told continues to this day and is successful). Mr H told me that he had made this decision. I think that one of the difficulties that has bedevilled this case, is the general failure to grasp the fact that he and Mrs H had lost the farm because of the guarantees they gave the Bank. As at December 1992 it no longer belonged to them. The fact that they were able to remain in situ was as a result of the kindness of their daughter and the Husband.

The Wife was concerned that the Husband had been obliged to put some of his assets at risk. She knew that he was unhappy about this and so she visited the Yorkshire Bank and obtained their agreement that once the debt had been reduced to £100,000, the C properties would be released from the charge. The debt was reduced to less than £100,000 in good time. This was achieved in the following way

P P Limited – was owned equally by the Wife and J. In reality, Mr and Mrs H continued to run the farm operation for which they received a salary. By the start of 1993, production had been defunct for some 18 months to 2 years and Mr H used some of his spare cash (no doubt, from the P bungalow deal) to re-establish the chicken rearing business.

The Wife said that she was very concerned to ensure that the property was back in the H family as soon as possible. Having obtained the Bank’s agreement to release C (when the borrowing was at the £100,000 level), it is her case that she secured the Husband’s promise that (once C was free from encumbrance) he would transfer his share to J. The Husband denies this agreement. The indebtedness was reduced below the £100,000 level by mid 1993, but, despite this, the property remained vested in the parties’ joint names. The Wife and her family say that this was because the Husband refused to honour his promise. In the final analysis, I am of the clear view that no such agreement existed. At least 4 years passed from 1993 until the marriage was in real difficulties. The Wife is a competent businesswoman and I have no doubt that she would have taken positive steps to deal with the situation if she had been concerned or considered that the Husband had reneged on his promise. Moreover, throughout this period the parties made returns to the Inland Revenue whereby they each paid income on 50% of the rental income from P P and 50% of the CGT in respect of the sale of the P. The Wife seeks to avoid this point by saying that she asked the Husband to give her the figures so that she could reimburse him. I do not believe that this occurred.

In January 1997 the land surrounding the farm – that is the 39 acres – came on the market. The Wife bid for it at auction and bought it for some £85,000. The purchase price was added to the mortgage which remained charged on M P and which, by then, had reduced to some £63,000. Thus, the land represented some 57.5% of the new sum outstanding on the mortgage. The Husband considered that the land purchase was “an affectation” but he did not demur when it was charged on M P. By this time, C had been released as security for a number of years.

The new, extra debt had the potential to reduce the value of M P – for example, if the cost of the additional interest could not be met from a grazing tenancy. If the Wife had really secured a promise from the Husband to transfer his share of M P to her sister, then I consider that this would have been an opportune (if late) time to ensure that the documents were drawn up. That this did not occur is a pointer to the fact that the Wife was not concerned (even as late as January 1997) to affect any transfer and the Husband was content to risk part of the equity of M P.

I also note that the affidavit evidence of the Wife, her sister J and Mr H differs as to the supposed transferee. Thus, I do not accept her evidence that the Husband agreed to transfer M P back to any other member of the H family. He did not promise to or fail to affect such transfer – he was entitled to retain his 50% and that is what he chose to do.

Since 1993 M P has continued to operate as chicken rearing enterprise. Mr H has been in charge of all operations. Initially, he drew a salary from P P Limited. In 1998, shortly before she filed divorce proceedings, the Wife transferred her 50% shareholding in P P to her sister G. She did so and I quote from her oral evidence “in order to distance herself” from the business/farm. The Husband was concerned about her actions but, in the event, nothing turns on them because P P has been wound up - although this fact was not known until this case was well underway. P P failed because the packaging plant to which the chickens were sent went into receivership owing the company some £60,000. This meant that the P P could not pay its own suppliers and was wound up with debts of some £30,000 unpaid.

Mr and Mrs H set up a new company called R Limited. It undertakes the chicken business and, may, receive the rents from 2 of the flats at M P. (The rent from the 3^rd property having being allocated to G because of her contribution to the renovation costs – as to which see below).

On his own case, Mr H learned that M P was held in joint names some time in 1993- when he says - the Wife informed him while she was ill in hospital. In 1994 and 1996 – long after that date – the H’s spent a considerable amount of money improving M P and converting outbuildings into 3 flats for rental. A number of invoices were produced in support of the contention that H monies were expended. I caused a schedule to be drawn up of this expenditure. It shows that P P Limited spent about £20,800, The H’s spent some £41,075 - of which some £26,000 apparently came from term policies held by Mr and Mrs H and £15,000 was spent by G in respect of the flat which she was proposed to occupy (but in event did not).

These monies were spent in the full knowledge that the Husband had a share in property. There was no agreement that the money expended would give the H’s any interest in the property. It was simply spent and thereafter P P collected the rents from 2 flats and G from the 3^rd. Without an express agreement, it is clear that the works inured to the benefit of the property. It has been suggested that the funds in some way gave rise to a propriety estoppel in favour of Mr and Mrs H. I shall deal with that issue when I come to consider the Law as it applies to the facts as I have found them. Suffice it to say, Mr and Mrs H were given leave to intervene in these proceedings but chose not to do so. Although, they spent their own monies on the property, they passed the rent through a company – namely P P - in which they had no interest. I am of the clear view that they did not expect any form of recompense for the improvements which they funded – rather, they regarded the money as being spent for the benefit of the property.

Mr H told me quite candidly that he did not want a legal or beneficial interest in the property because it would not make sense from an Inheritance Tax perspective.

The H family continued to pay the mortgage through the profits of the chicken business. Initially, they were paying sufficient to cover the interest and repay the capital as quickly as possible. When these proceedings commenced, they decided – unilaterally – that they would only pay sufficient to cover the basic repayments as they did not want to increase the equity in the property if that would benefit the Husband. Thus, from about 1998, the repayments have not reduced the capital outstanding to any significant extent.

I have been referred to a number of Authorities in relation to this aspect of the case. On behalf of the Wife, Mr Wood asserts that Mr and Mrs H are the beneficial owners of M P. In support of that contention he has drawn my attention to Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 and the decision of the Court of Appeal in Yaxley v Gotts 1999 2 FLR 941 – this confirms the proposition that for an interest to arise under a constructive trust it is necessary to show first, either an express agreement, an arrangement or understanding that W’s parents have an interest in M P or a direct contribution by them towards the purchase price from which such intention can be inferred and secondly the W’s parents have acted to their detriment in reliance upon such understanding. In support of his contention Mr Wood sets out in his able written submissions all the facts which he says point to the necessary understanding and payment of capital in this case – all of which he says point to a Constructive trust. I will not repeat all the facts and matters which are set out at page 5 of his submissions but I have taken each point made fully into account and I have made my own findings of fact which do differ from the gloss which Mr Wood seeks to put on the events that happened in 1992. I am struck by the need – in all the authorities – for the need of parties to act to their detriment before the Court will come to their aid in Equity.

Mr Wood has also referred me to the cases of Huntingford v Hobbs 1993 1FLR 736 and Carlton v Goodman 2002 2 FLR 259. In the course of the trial Mr Wood also suggested that Mr and Mrs H may have acquired rights through proprietary estoppel. He did not pursue this matter in his final submissions but I will consider it further for completeness.

Mr Brudenell on behalf of the Husband asserts that the legal and beneficial interest lies with the Husband and Wife. In support of that contention, he points to the chronology of events and to the fact that the mortgage itself states that the parties are legal and beneficial owners. He points out that the H’s were likely to be made bankrupt and that, as a result, it would be a fraud on the creditors if they were to have an beneficial interest. He refers to the case of Hyett v Stanley 2003 EWCA Civ 942. This case concerned an unmarried couple (who had been together since 1988) lived in a property solely owned by the man. He had financial difficulties and could not service his debts with the result that the bank required him to secure his borrowings by way of a mortgage. As his income was insufficient, they also required the woman to enter into the charge which then became a joint mortgage. She asked for an interest in the house but the man said that this was unnecessary as she could prove her rights as a result of the mortgage. The Court of Appeal held that a constructive trust arose immediately upon entering into the mortgage by which she had rendered herself jointly and severally liable to considerable debts. As a result of which she had acquired an immediate 50% beneficial interest in the equity of the property because she had acted to her detriment and this was the only reasonable explanation to be inferred from all the circumstances. Mr Brudenell’s point is that this case is so much the stronger because his client made it clear that he would not act to his detriment, by assuming the liability for the mortgage by securing C, unless he acquired both a legal and beneficial interest in M P.

To my mind the most striking feature in this case is that Mr and Mrs H did not act to their detriment in any way. They were facing potential personal bankruptcy – their debts were such that any funds which they managed to husband (by fair means or foul) would (and indeed should) have been paid to Lloyds Bank in reduction of their indebtedness. Even after the sale of W and M P they owed the Bank some £280,000 and there were some £200,000 of additional creditors. Moreover, the sale of the farm to the Husband and the Wife secured them a benefit – that is a home and the ability to continue to run their chicken business. Even if they spent capital over the years, it was a small price to pay for the facilities that they enjoyed and the lifestyle that it provided. In addition, if they had achieved a beneficial interest that would have been a fraud on the creditors and if they were to be found to have one now that would cause potential Inheritance Tax problems which Mr H was clear he did not want. For all these reasons I find that they do not any beneficial interest under a constructive or resulting trust.

As to the claim that Mr and Mrs H have acquired rights by way of proprietary estoppel arising from their works to the premises, Mr Brudenell relies upon Gillet v Holt 2001 CH 210

The findings which I make in relation to M are that it is held both legally and beneficially by the Husband and the Wife. It is subject to an agreement that Mr and Mrs H can live there as long as they wish and can run the business as they wish – provided that they pay sufficient monies to cover the mortgage.

This finding means that the property is not readily realisable at the moment because it is subject to the rights of Mr and Mrs H. They are aged about 70 years old. Actuarially, Mrs H will live longer than her Husband and she will have a life expectancy depending of the Life table used (see At a Glance page 22) of some 14.5 years. Of course, this couple may decide to move when they retire – as the chicken business seems fraught with financial difficulties and is hard work. But that will be a matter for them. At the start of this case, I did not have any evidence of the discount to be applied in such circumstances. There was out of date valuation evidence of the reduction for a formal life interest which had not been updated because, as I was told, the Wife’s Counsel had objected at an earlier directions Hearing. I asked the joint accountant to assist me by giving discount rates based on a 7 – 5% return on capital. His evidence was to the effective that the appropriate discount rates were:-

In this case I consider that the appropriate discount rate in all the circumstances of this case is 5% as that is the relatively low cost of borrowing at the present time and it marks the rather informal nature of the understanding with Mr and Mrs H. Accordingly, I find that the value of M P is some £400,000 – although the mortgage is some £128,700 – some 57.5% of the mortgage relates to the purchase of the additional 39 acres. In so finding, I accept the approach of Mr Brudenell as set out in his final submissions. Accordingly, the amount of the mortgage which is properly to be deducted from the property itself is £54,700. The net value of the parties’ interest in M P is therefore:-

There are a number of assets which require a special mention.

The parties’ business interests.

The 39 acres at M P – I consider that the right way to deal with this asset is to deduct the mortgage which is referable to its purchase. Thus, it has a value of £97,000 but is subject to a mortgage of £74,000 with sale costs and CGT of some £3,700. Thus, its net equity is some £19,300.

Pensions. The parties have very modest pension funds which are broadly of equal value and I do not consider that an adjustment needs to be made.

On the basis of the net values of the assets the proper division of the joint assets is as follows

Wife CGT cost

Former matrimonial home 169,500 H (assume H the total £9,327)

M P Farm 204,500 H nil

35, E Street 56,100 H £5,837

Husband

21 The C 139,300 W - 10,569

23 The C 137,350 W – 7,906

Development Land 110,000 W – 21,073

Norwich Union Policy 28,600

These figures show that the Wife has net assets worth some £15,000 more than the Husband but this fails to take into account, the fact that she will be paying more in Capital Gains Tax (H - £15,164 and W 39,548). The effect of this is to the benefit of the Husband by some £24,000 because it will reduce his ultimate liability by that amount as 50% of the properties values will be rebased for CGT purposes. In all the circumstances – because his pension is somewhat lower and because his business is prima facie worth less, I deem this slight advantage to be fair in all circumstances of this case. I note that in his final presentation Mr Brudenell on behalf of the Husband indicated that there would be no CGT on M P farm on its reduced value. Of course, it may be that the Revenue will deem that transfer to be at market value in which event the Husband will have to pay CGT – if this does occur then there will be no advantage in net terms as set out above. If this does occur then, I still consider that the overall outcome is fair. If it is of any assistance I find as a fact that the true value of the property – subject to Mr and Mrs H’s rights – must be discounted because it could not be sold on the open market. Its value is thus some £204,500.