Lee Hudson v Jayne Hathway
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lady Justice Andrews,Lord Justice Nugee |
| Judgment Date | 14 December 2022 |
| Neutral Citation | [2022] EWCA Civ 1648 |
| Docket Number | Case No: CA-2022-000673 |
| Court | Court of Appeal (Civil Division) |
[2022] EWCA Civ 1648
Lord Justice Lewison
Lady Justice Andrews
and
Lord Justice Nugee
Case No: CA-2022-000673
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, KING'S BENCH DIVISION
THE HON. MR JUSTICE KERR
Royal Courts of Justice
Strand, London, WC2A 2LL
Alexander Learmonth KC and Zoë Saunders (instructed by Veale Wasbrough Vizards LLP) for the Appellant
Michael Horton KC and Guy Holland (instructed by Ashtons Legal) for the Respondent
Hearing dates: 22 & 23/11/2022
Approved Judgment
This judgment was handed down remotely at 11.00am on 14.12.2022 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction and issues
Kerr J, from whom this appeal is brought, framed the original issues accurately and concisely on the first appeal from HHJ Ralton:
“This is an appeal in a case about equitable ownership of a family home purchased in joint names, initially with equal ownership rights, where the unmarried parties later separate. Must a party claiming a subsequent increase in her equitable share necessarily have acted to her detriment? Or does a common intention alone suffice to alter the beneficial shares? And if the former, was the judge right to decide that the requirement of detriment was met?”
His answer to the first two questions was that it was not necessary to show detriment; but that a common intention alone was sufficient. But in case he was wrong, he also answered the third question. His answer to that question was that the trial judge was entitled to find that sufficient detriment had been established. His judgment is at [2022] EWHC 631 (QB).
For the reasons that follow, in relation to the original issues, I would hold:
i) A party claiming a subsequent increase in her equitable share as a result of a post-acquisition changed common intention must show detrimental reliance on that changed common intention;
ii) The trial judge was right to decide on the facts that the requirement of detrimental reliance was met.
I would also hold (in response to a point not argued below) that the communications which expressed the parties' common intention that Ms Hathway should have the whole equitable interest in the family home in fact complied with the necessary statutory formalities. Logically, it is this last question that comes first.
The facts
Ms Jayne Hathway and Mr Lee Hudson started a relationship in 1990. He moved into her home and became joint owner. They did not marry. They had two sons. They sold the home and bought another, in joint names. Then in 2007, with a mortgage, they bought Picnic House, again in joint names, with no declaration of trusts. Both worked. His earnings soon overtook hers; she left the financial services industry to work in the charity sector; he remained in financial services.
In 2009, Mr Hudson left Ms Hathway for another woman, moved in with her and later married her. They are now estranged. Ms Hathway stayed at Picnic House with the two sons. The mortgage was converted to an interest only basis. It was paid, as before, from the joint bank account into which both their salaries were paid. Over the years, Mr Hudson substantially paid the mortgage; the amount he contributed far exceeded Ms Hathway's contributions.
Then in 2011, the house was blighted by an oil spill, making it very difficult to sell. An environmental disaster was how the trial judge described it. Oil leaked into the house from a neighbouring tank and under the ground beneath the house. An environmental clean up was required. A complicated insurance claim dragged on for years. Over the following 20 months or so, the parties had sporadic email discussions about financial arrangements.
On 9 November 2011 Ms Hathway emailed Mr Hudson. Her email read in part:
“Your shares are the main matter outstanding. You have told me that they are not worth anything. Whether or not that is the case, they form part of what was our collective assets at the time we split. I imagine that you feel that I should have no call on them, you earned them, from all the hours of effort you put in at work – my position is, of course, different – you earned them while we were together, your career advancement was part of our relationship, as was the building of pension funds etc. I hope we are both adult and reasonable enough to reach some sort of compromise?”
The email was subscribed “Jayne Hathway”.
Mr Hudson replied on the same day:
“My thoughts on this are that anything accrued while we were together is for us to come to an agreement on, which I think fits with what you are saying.”
The email was subscribed “Lee”; and his full name given. On 24 August 2012 Mr Hudson wrote:
“We'll sort who deserves what in regards to our joint assets (house, shares, savings etc) when we're in a position to liquidate it all, which obviously depends on when you are ready.”
The email was subscribed “Lee Hudson”.
In July and August 2013, Mr Hudson and Ms Hathway agreed terms set out in emails. In an email of 30 July (but not sent to Ms Hathway until the following day) he said:
“So here it is. We were never married. You have no claim over what is mine. What I consider ring-fenced is what I get from my years of personal graft. They are not up for discussion. I'm not agreeing to give you any. …. The liquid cash, you can have. Savings in the bank, other plans, take it all. Physical property, the contents of the house … again I don't want it; keep it. Which leaves the house, a bad asset which is preventing all of us [from] .. moving on with our lives…. You know what, I want none of the proceeds of that either. Take it. Buy yourself somewhere you can afford to live….
As for a Will, if I were to die before this financial mess is sorted, Heidi [his wife] will have no rights to Picnic House …
What I want is an end to it. So have everything that's available to have now and when the house is sold.”
The email was subscribed “Lee”.
Ms Hathway replied on the same day. She said:
“Can't see any point in putting “my side” of the argument. Not because I don't feel that I have a valid case to make, but because it is clear that it would be pointless.”
On 12 August 2013 she emailed again:
“So that we can move forward and get to a point of completely severing our financial connections, your suggestion, as I understand it, is you get sole ownership of your shares and pension, I get the equity from the house, the house contents, savings and income from endowments. Is that right? If so, then I will accept this and will do everything I can to get the house ready for sale as soon as the situation with the oil spill is resolved.”
He replied on 9 September:
“Yes, that's right. …
Under this arrangement, I've no interest whatsoever in the house, so whilst I will continue to contribute, I won't do so forever.”
This email was subscribed “Lee”.
In the autumn and winter of 2013 there was some discussion about Mr Hudson's buying the house. But as his email of 15 December 2013 made clear what was under discussion was his purchase of the whole house and not simply a half share in it.
Time passed and Mr Hudson became impatient with a lack of progress in resolving the oil spill clean up, the insurance claim and the sale of Picnic House. In May and July 2014 he referred in emails to how much time had passed “since we came to a deal”. In his email of 2 July 2014 he added:
“If you want to continue to “wait” on the house to maximise your gain (means nothing to me if it sells for a pound or a million) then that needs to be your decision and your responsibility.”
On 24 August 2014 he wrote:
“Remember the House is of no value to me: the deal from one year ago which was supposed to be finalised 6 months ago gave you all liquid assets, including the proceeds of the house sale. I don't care what it sells for.”
In January 2015, he ceased contributing to the mortgage. Ms Hathway took over the payments. It was cheaper than renting. The two sons, now young adults, remained at Picnic House with her.
The trial judge found that the parties had clearly reached a deal, but at that stage it was accepted that the deal did not satisfy the formalities for transferring legal title, an equitable interest or a declaration of trust.
In October 2019, Mr Hudson issued his claim under CPR Part 8 and the Trusts of Land and Appointment of Trustees Act 1996. He sought an order for the sale of Picnic House, with equal division of the proceeds. Ms Hathway agreed that the house should be sold but contended that she was entitled to the whole of the proceeds under a constructive trust following a common intention and agreement, in reliance on which she had acted to her detriment.
The detrimental conduct relied on was: paying all interest payments on the joint mortgage from January 2015; desisting from claiming against assets in Mr Hudson's sole name acquired during their relationship; not claiming financial support for the benefit of the children under the Children Act 1989; accepting sole responsibility for the oil spill and insurance claim; at her own expense, maintaining and redecorating the property from January 2015; relying from 2014 on the understanding that she was sole beneficial owner, in conducting her finances and lifestyle; and living frugally to afford the upkeep and mortgage.
In her first witness statement Ms Hathway explained at paragraph 13 that Mr Hudson was keen to buy Picnic House, but that she did not relish the thought of a large mortgage. She continued:
“However, Lee was certain that the equity from our house and our savings of £100,000 would mean a manageable mortgage and, if things became tight, he always said...
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