Georgina Benjamin Deceased (Represented by her Personal Representatives Russell Crowe and Allicca Benjamin v Garfield Reece
| Jurisdiction | England & Wales |
| Judge | Nicholas Davidson |
| Judgment Date | 21 December 2005 |
| Neutral Citation | [2005] EWHC 3005 (Ch) |
| Court | Chancery Division |
| Date | 21 December 2005 |
| Docket Number | HC 97/06377 |
[2005] EWHC 3005 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Nicholas Davidson QC
Sitting as a Deputy Judge of the Chancery Division
HC 97/06377
Mr Phillip Bliss Aliker (instructed by Messrs Biggs & Co, of 8 Broad Street, Wokingham) for the appellant Defendant
Mrs Alison MacLennan (instructed by Community Law Clinic, Kensal Rise) for the respondent Defendant
Hearing date 16 December 2005
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
On 16 December I heard the appeal of Mr Reece, the Defendant, against an Order made by Master Price on 27 July 2005. The Order under appeal was that the Defendant pay two-thirds of the Claimant's costs of the case since 29 May 2003 and the costs of the hearing before Master Price. At the end of the hearing I told the parties that my decision was that the appeal would be dismissed and that my reasons would be given in writing. This judgment contains my reasons.
The case is the unfortunate by-product of enterprise by family members. Mr Reece is the son of Mrs Georgina Benjamin, who started these proceedings in 1997 but did not live to learn their conclusion: she died in 2003. Mrs Benjamin was a council tenant of the London Borough of Ealing from at least 1969, and when tenants were given the right to buy council properties she was the tenant of 2 Barlow Road, Acton. At the time she was nearing the age of 50. She found that she was entitled to buy the property at a substantial discount to open market value. The price paid may have been as low as £21,240, and the discount from market value was at least 41%. She, Mr Reece, and his sister Velma arranged to buy the property together. They took a mortgage loan, which provided the bulk if not all of the price. Their respective beneficial interests in the property were not expressly stated. Within a short period Velma sold her interest in the property to Mr Reece for £5,000.
Mrs Benjamin lived at the property until 1996. By that stage, unhappily, she was registered as blind. She decided to live elsewhere – she said, largely because of the difficulties that gave rise to these proceedings – and was rehoused by Ealing Council.
Over the years considerable work had been done at the property. It was extended. It has been split into two flats, 2A and 2B, and 2A had been let out. Much of the work, of expansion, improvement, maintenance and management, had been done by the Defendant in person.
There was considerable dispute between mother and son. He had handled the physical and financial side of the property. They did not agree what their respective interests were. He had carried out substantial work for the cost of which he claimed reimbursement – Mrs Benjamin had paid £6,000, and he wanted a good deal more. Some of the work he had commissioned from third parties; some he had done himself and claimed payment for the work, described as the "self-billing" work. Mrs Benjamin thought some of the figures exorbitant. He has at some stage obtained a Master of Science degree related to building services and considers that he is well placed to give evidence about building matters and costs. There was also no accounting for income and current expenditure, and there was a dispute about selling the house. So Mrs Benjamin started these proceedings, seeking among other things (1) a declaration that the property was held by the parties on trust for themselves in the proportions 77% as to Mrs Benjamin and 23% to Mr Reece (her case evidently having that the right-to-buy discount should be treated as a contribution by her relevant to the determination of beneficial interests) (2) an order for sale and (3) an Account. It is clear that trust between the parties had broken down. It is also clear that Mr Reece was a party obliged to account for his financial dealings in relation to the property.
The proceedings were slow, partly at least because the parties attempted negotiation, which included a mediation in May 2001. In July 2001 there was a professional valuation at £375,000. In the early part of 2005 there was a valuation at £425,000. An enormous gain in capital value has been achieved, and achieved in part by the successful exploitation of the asset rather than merely by passivity during a period of property price rises, over a period stretching to about 25 years. It is obviously a pity that this has involved both the personal costs of a strained relationship and the financial costs involved in the dispute. I am told that the costs incurred on the Claimants' side since the May 2003 Order are about £30,000, and those on the Defendant's about £70,000.
On 31 October 2002 Master Price gave directions. These included:
"There shall be an Inquiry before the Master as to the beneficial interest of the Claimant and the Defendant in the property… and at the same time an Account of the rents and profits received by the Defendant in respect of the said property and in relation to such other sums as the parties claim should be brought into account by reason of their joint ownership of the property."
This Order resulted in a 2-day hearing on 14 and 15 May 2003. Mr Aliker says that the Claimant was not ready to deal with the Account and submits that she had been dilatory in her preparations. I shall assume without deciding that that was so. As it was, the hearing occupied 2 days without going significantly into any accounting question. Master Price decided that the Claimant had a one-third beneficial interest and the Defendant two-thirds. This was a substantial success for the Defendant. The Claimant was ordered to pay three-quarters of the Defendant's costs to date.
The Defendant had previously made an offer that the parties settle on the simple basis that each party "take 50% of the value of the property". This was a constructive proposal, expressly aimed at reducing the family rift. While I agree with the Master that the 2005 question was as to costs after the May 2003 Order, I do not agree that the offer before that Order should be absolutely discounted in considering matters in 2005. It seems to me reasonable for a party relying on efforts to settle in 2005 to point to an earlier proposal to support his case that his side always was, and the other was not, constructive, but I do not think that issue has any real weight when considered in context.
The Master also ordered a sale, and for the proceeds of sale to be paid into Court. No sale has in the event occurred.
The directions the Master gave for dealing with the Account part of the claim included a direction that there be a stay until September 2003 to allow time for mediation. The directions went further than the October 2002, because there was now provision for accountancy evidence.
The Defendant promptly followed with a money offer on 3 June 2003. (p.84) Mr Aliker says that this offer was as favourable to Mrs Benjamin as the end result has been, and I assume that that is so. But to base a costs order on that would in my opinion have been wrong, for reasons explained below.
During the summer of 2003 Mrs Benjamin was taken seriously ill and she died that July.
Mediation did not take place. In due course personal representatives were appointed and appointed to represent the Claimant in these proceedings. The Defendant was proactive in proposing resolving the claim by agreement, but the case was pushed forward towards the taking of the Account. Spreadsheet accounts were prepared, and eventually were analysed by an accountant on the Claimant's behalf.
On 29 March 2005 the Claimant's forensic accountant, Mr Steele, reported. He had reviewed the spreadsheet accounts and categorised items under 4 headings: 1) substantiated, 2) items needing further substantiation, 3) unsubstantiated, 4) items documented but not carried to the spreadsheet.
Category 2, items needing further substantiation, amounted to 72.52% of the expenditure in question. This is not to say that such expenditure was not incurred, but 23.48 percentage points were represented by "self-billing invoices", i.e. the Defendant invoicing at rates selected by him for work done by him, and 38.67 percentage points for work done by "possibly industry colleague". As to these items, what was being said was in effect that the figures claimed as expenditure could be identified, but that it was questionable whether the expenditure could properly be charged and in particular whether it could properly be charged in the sums claimed.
The parties were heading for a July 2005 trial. Before Mr Steele had reported in March, both sides had made offers in 2005. On the Claimant's side the proposal was that her share be sold to the Defendant for one-third of the property's open market value, with no order as to costs and no enforcement of the existing costs order in the Defendant's favour. The Defendant had offered to settle for a net payment of £46,000, inclusive of the costs to which he was entitled under the May 2003, which in good faith but wrongly were thought to be three-quarters of £20,000, i.e. £15,000 (this estimate was substantially high: the actual costs were about £12,000 and thus the Claimant's liability about £9,000).
Then Mr Steele reported. The Claimant then proposed settling for a net payment from the Claimant of £11,265.92 to include the existing costs liability. On 25 April the Defendant asked for £50,000 plus the existing costs liability. The offer on behalf of the Claimant was increased on 10 May to £22,000 to...
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