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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Woodman v Tracey [2002] EWCA Civ 880 (13 June 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/880.html Cite as: [2002] EWCA Civ 880

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CANTERBURY COUNTY COURT
(His Honour Judge Poulton)
Royal Courts of Justice
Strand
London WC2
Thursday, 13th June 2002

		Royal Courts of Justice Strand London, WC2
		Thursday, 13th June 2002

LORD JUSTICE WARD:

1. We heard this appeal on 10^th May 2002. The appellant, Mr Tracey, appeared in person; the respondent, Mrs Woodman, took no part. Having heard all Mr Tracey had to say, Sir Martin Nourse gave the first judgment dismissing his appeal. I began a short judgment to explain why it appeared to me that the judge was correct to find that Mr Tracey held the property with which we are concerned on trust for himself and Mrs Woodman in equal shares. I was minded to dismiss the appeal but for one matter which had occurred to me as I listened to my Lord's judgment and we wished to take time to consider it. That we have done carefully and I am now in a position to conclude my judgment.
2. To make sense of it, let me recapitulate very swiftly. The parties moved into the property in about September 1997. It was then in the joint names of Mr and Mrs Woodman and had in recent times been occupied by Mr Woodman. It was in a dilapidated condition. The evidence was that efforts to sell the property in June 1997 had come to nought. The best offer Mr and Mrs Woodman had received was £33,000 which was as much, perhaps even less, than the outstanding mortgage. The judge accepted a valuation of the property in its dilapidated condition at that time to be about £35,000. By September 1997 the plan was hatched for Mr Tracey to take over Mr Woodman's interest in the property, assuming responsibility for the mortgage repayments and upkeep. The plan was not acceptable to the mortgagee. Accordingly it was decided that Mr Tracey would borrow £38,000 from the Abbey National Building Society upon the false basis that he was purchasing the property for £45,000, the value the Abbey National Building Society's valuer had put on the property in December 1997. By then Mr Tracey had begun renovating the property with the help of his father. That conveyancing transaction was effected in April 1998. At that date the property was worth some £48,000 according to the valuer whose evidence the judge accepted. There was approximately £33,500 outstanding on the mortgage and so the equity at that stage was in excess of £14,000. I readily understand Mr Tracey's argument that that windfall had been acquired by virtue only partly of inflationary rises in property prices but mainly because of the work of improvements he had effected. But it is not as simple as that. A volunteer does not always obtain an equitable interest in another's property which he improves. Even if he could establish some constructive trust, his interest was either going to be in the proportion the value of the improvement had to the value of the property or, given the original plan, an interest in accordance with a common intention on the part of Mr and Mrs Woodman and Mr Tracey that he stepped into the shoes of Mr Woodman. That would have entitled him to only a half of the surplus and that is the effect of the proposal put to the Abbey National Building Society, namely that he was paying Mrs Woodman £7,000 (her share of the equity). Be that as it may, I am quite satisfied that the common intention arising out of the April 1998 conveyancing was quite clearly what the judge found it to be, namely that the beneficial interests were being held by these parties in equal shares.
3. Mrs Woodman made her originating application asking for an order for sale. It is not at all clear from the judgment nor from the papers before us why that order was not made. I can only assume that the parties, who were then represented by counsel, were urging the judge to allow Mr Tracey to buy out Mr Woodman's interest, or at least there seems to have been no opposition to the judge's doing so. He took the value of the property to be £62,000, which was a figure not apparently in dispute. After deduction of the amount of the mortgage of £38,000, the equity was £24,000 which was to be shared equally between the parties subject to equitable accounting.
4. It is the way the judge dealt with that accounting which suddenly set alarm bells ringing as I listened to Sir Martin Nourse dealing with that part of the judge's judgment. Let me now explain what caused me anxiety.
5. The judge dealt with the matter in this way:-

"30.In those circumstances I consider that the claim for a constructive trust is made out and in principle it should be a half share but there must be some adjustment in respect of the amount of money which ought to be paid for the work done. The difficulty with that is that I am not at all satisfied with the figures that have been put forward by the defendant in respect of the work that has been done. Indeed, it was readily acknowledged in cross-examination that they have done very little more than take a flier at them. There is no doubt that he did work and I would have thought there is no doubt that it was work which contributed to the value of the property and was worthwhile work. Apart from the things bought, there was his labour and there was his father's.

31. 31.To a very large extent, however, this was funded by the extra money that was borrowed on the house; that is to say, the £38,000. What I mean by that when I call it extra money is that the existing mortgage was some £33,500 so there was some £4,500 which was borrowed and that would have the effect of reducing the equity in the property to be shared between him and Mrs Woodman. So to some extent Mrs Woodman, the claimant, has already contributed towards this. ...

39.The result is that in principle the claimant is entitled to a share and it is acknowledged that some allowance has to be made. I would allow them that mortgage payment for a year until the claimant moved out, which was just about a year afterwards in April 1999 ( This was conceded in the skeleton argument and I have calculated these in fairly round terms at £3,230.

40.The work I consider to be worth some £4,000 but I take into account that money was raised for this purpose and all of that money was paid over to the defendant. He used it all. Whether he used it all on improvements or not does not really matter. He certainly had it all and in my judgment he is fully compensated for the work he has done. It follows that what has to be deducted is £3,230."

6. I became anxious that the judge was wrong to conclude that Mr Tracey had been fully compensated for the work he had done. Assume for the moment that the whole of the surplus between the sum borrowed, £38,000, and the amount paid to redeem the old mortgage, say £33,500, was used by Mr Tracey to cover the cost of the work, the fact remains that it was borrowed money. The only person likely to be paying off the mortgage was Mr Tracey and, had the mortgage been repaid, he would have received no recompense for the cost of that work. He would have borrowed the money and he would have paid it off. So I wondered whether the judge was wrong not to allow a further sum of £4,000, the judge's finding as to the value of the work, to be deducted from the £8,770 which Mr Tracey had to pay Mrs Woodman.
7. Upon careful reflection and for the following reasons I conclude that the deduction should not be made.

i)On the evidence before us there was a dispute as to how the surplus of £4,500 was applied. Mrs Woodman says in her affidavit that he paid £5,000 to clear the double glazing and £2,000 was paid to the broker. On the arithmetic the figures do not add up correctly. Mr Tracey says that he paid £2,000 to his parents and £1,000 off the arrears. So the position is far from clear.

ii)In his calculation the judge deducted from the current value of the property the whole of the mortgage of £38,000. The deduction includes that surplus of £4,500. That came out of the pockets of each of the parties. As the judge observed in paragraph 31, Mrs Woodman had in fact "contributed" £2,250.

iii)It appears to have been common ground that Mr Tracey should have been compensated for the £4,000. He was not. He had had to pay one half of £4,500 (£2,250) himself and Mrs Woodman therefore still owed him the balance of £1,750. That is his best position. If he had used £2,000, as he says, to discharge a debt to his parents then Mrs Woodman should not have to pay for it and he would have to account to her for a half of that sum, £1,000. That would leave only £750 owing by her. Without the necessary findings of fact from the judge we cannot resolve all the uncertainties involved in these calculations.

iv)The matter does not, however, end there. It appears to have been conceded by counsel and accepted by the judge without question that Mr Tracey was entitled to £3,230 in respect of mortgage payments he had made during the year or so that the parties had lived in the property from the time Mr Tracey acquired it until separation in 1999. I very much doubt whether that is the correct position. In the first year of its life most of the mortgage repayments would have gone to cover interest and very little to reduce the capital amount of the loan. Strictly speaking he might have been entitled to some credit for the amount of the capital reduction but not the interest repayments. I note from papers placed before us that the amount outstanding on the mortgage as at 21^st November 2000 was £38,327. At best, Mr Tracey would have been entitled to credit for only half of the amounts paid, namely the half which benefited Mrs Woodman. He had to pay for his own share.

8. It can be seen, therefore, that on a correct taking of equitable accounts, the sum actually allowed by the judge is more or less correct, and probably more in Mr Tracey's favour than Mrs Woodman's. Having the benefit of an order requiring payment of a fixed sum rather than half the proceeds of the sale at the time when it takes place gives him an added advantage in the light of well publicised increases in house prices.
9. I would not allow Mr Tracey to succeed on this point in any event. It was not taken by him in his grounds of appeal. He would need permission to amend. Mrs Woodman would be entitled to have notice. It is too late for that.
10. In the result I conclude that fairness and justice is done by dismissing the appeal. I am very mindful indeed of Mr Tracey's concern that the result may be to render him and, more importantly for this purpose, his teenage son homeless. That is mainly because of the second charge dating after the separation which is his debt, not Mrs Woodman's. It is true that the welfare of the minor child was a matter which ought to have been taken into consideration in deciding under Section 15 of the Trusts of Land and Appointment of Trustees Act 1996 whether to order a sale. Other factors were the intentions of the persons creating the trust and the purpose for which the property subject to the trust was held. Although the judgment is silent as to these matters, for my part I would conclude on the facts of this case that the interests of the child do not outweigh the interests of Mrs Woodman in being able to enforce a sale. I would not allow the appeal to succeed on this point. What I am happy to consider, as we indicated to Mr Tracey on the last occasion, is extending him some time to raise the necessary money to avoid the prospect of that sale and I would hear him on that point, but only that point.
11. Unfortunately he is not present today and that may be no fault of his. The course I would therefore take is to agree with my Lord that the appeal must be dismissed. In his absence I would be inclined to dismiss the appeal, save that I would give him the extension of time which I indicated was probably fair for both parties. The judge allowed him a further four months in which to raise the necessary money. We indicated to him when the matter was last before this court that we would be sympathetic to that request but warned him to make preparations to allow for that eventuality. That was a month ago and in my judgment a fair extension of time would be three months from today. So the order will be for the appeal to be dismissed save that the defendant have until 13th September to pay the sum of £8,770 to the claimant, Mrs Woodman. If that payment is not made then, Mrs Woodman will be entitled to enforce the order for sale in accordance with the directions which have already been given by the district judge for that purpose. Meanwhile those directions will be stayed. A copy of this judgment and of the draft order will be sent by the Court of Appeal office to Mr Tracey. It will not be drawn. It will therefore not come into effect for two weeks, which gives him ample time to apply to the office to restore this matter before us, or before me at first instance, to consider any further representations he may wish to make to this court. I would dispose of the appeal in that way.
12. SIR MARTIN NOURSE: I agree.
Order: appeal dismissed, but defendant to have until 13th September to pay to claimant sum of £8,770, with a stay meanwhile; copy transcript and draft order to be sent to the defendant; order not to come into effect for two weeks.