Paul Michael Davis (as trustee in bankruptcy of Audley Glendon Jackson) v Audley Glendon Jackson and Another

JurisdictionEngland & Wales
CourtChancery Division
JudgeMr Justice Snowden
Judgment Date07 Apr 2017
Neutral Citation[2017] EWHC 698 (Ch)
Docket NumberCounty Court Case No. 266 of 2013

[2017] EWHC 698 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

IN BANKRUPCTY

ON APPEAL FROM THE COUNTY COURT SITTING AT ST ALBANS

ORDER OF DISTRICT JUDGE CROSS DATED 22 DECEMBER 2015

Royal Courts of Justice

7 Rolls Building, Fetter Lane,

London, EC4A 1NL

Before:

Mr Justice Snowden

County Court Case No. 266 of 2013

High Court Case No. BR-2016-1662

Between:
Paul Michael Davis (As trustee in bankruptcy of Audley Glendon Jackson)
Applicant
and
(1) Audley Glendon Jackson
(2) Hazel Rose Jackson
Respondents

Daisy Brown (instructed by Harrison Clark Rickerbys) for the Applicant

The Second Respondent appeared in person, assisted by her daughter, Miss Monique Lewis

The First Respondent did not appear and was not represented

Hearing date: 19 January 2017

Judgment Approved

Mr Justice Snowden

Introduction

1

This case raises issues in relation to the equitable accounting which should occur between the parties on the sale of a house which was declared in a Land Registry TR1 transfer form to be held on trust for a husband and wife as joint tenants. The facts are unusual, because the parties have at all relevant times been estranged and lived apart when the house was originally acquired by the wife in her sole name, and the husband was never intended to live in the house and has not done so at any time. The property was only transferred into joint names when the house was re-mortgaged, but at no time did the husband pay any of the instalments of either mortgage or contribute to any of the outgoings. The issues have arisen because the husband has been subsequently been made bankrupt and an order for sale is sought by the trustee in bankruptcy.

Factual background

2

Mr. and Mrs. Jackson are a married couple, but at all times after 2001 they were estranged and lived apart. Mr. Jackson was a mortgage broker. In January 2003, Mrs. Jackson re-mortgaged the property which she then owned, and in which she lived with her four children. This released £36,180.21, which Mrs. Jackson put towards the purchase of a second property at 194 Harrington Road, London SE25 4NE (the "Property") on 14 March 2003 for £196,000. The remainder of the purchase price was borrowed by Mrs. Jackson on an interest-only mortgage. The title to the Property and the mortgage were in Mrs. Jackson's sole name, and she moved to live in the Property with her children. Mr. Jackson has never lived at the Property.

3

Shortly after the purchase, on 17 April 2003, Mrs. Jackson executed a deed entitled "Declaration of Trust" (the "Trust Deed") concerning the Property. The Trust Deed was drafted by solicitors who had previously acted for Mr. Jackson, but appear in this instance to have been acting for both Mr. and Mrs. Jackson. In the Trust Deed Mrs. Jackson declared, among other things, that:

i) she held the Property on trust for herself and Mr. Jackson in equal shares;

ii) she would, at the request of Mr. Jackson, assign, transfer or convey the Property to such persons as Mr. Jackson might direct and would apply to the Land Registry to register his interest in the Property; and

iii) both parties had full power to sell or charge the Property with the consent of the other with all the power of an absolute owner.

4

The Trust Deed then contained a clause stating,

"Consequently I the said Audley Jackson agree to pay half of the mortgage payments in favour of [the mortgagee] or any subsequent mortgagee of the Property in consideration of my being entitled to half of the equity of the Property.

The Trust Deed was countersigned by Mr. Jackson.

5

The purposes for which the Trust Deed was executed are wholly unclear. In evidence, Mrs. Jackson's explanation for this document was simply that,

"I was advised [by solicitors] that this was in order to protect the interests of my children if anything should happen to me."

6

Notwithstanding the terms of the Trust Deed, Mrs. Jackson continued to pay all of the interest payments under the mortgage and all of the household costs alone. Mr. Jackson never made any interest payments under the mortgage or any contribution towards the Property or its maintenance.

7

After a relatively short period of time, Mrs. Jackson started to experience cash flow problems and could not keep up with the repayments under the mortgage as they fell due. The mortgagee took proceedings and obtained an order for possession of the Property in April 2005. The threat of Mrs. Jackson and the children being evicted from their home led to Mr. Jackson arranging for the Property to be re-mortgaged with a new mortgage lender in March 2007. The new lender required the title to the Property to be transferred into Mr. and Mrs. Jackson's joint names and for both of them to be liable for repayment of the new mortgage loan.

8

The transfer of the Property into Mr. and Mrs. Jackson's joint names was achieved by execution of a Land Registry TR1 form on 6 March 2007. That form contained a box in which an "X" was inserted by Mr. and Mrs. Jackson, signifying that they held the Property on trust for themselves as joint tenants.

9

After the re-mortgage, Mrs. Jackson continued to make all of the payments under the new mortgage and in respect of the running and up-keep of the Property as before. Mr. Jackson paid nothing and never occupied the Property. Any contact between Mr. and Mrs. Jackson was sporadic and confined to telephone calls concerning the children.

10

Five years' later, on 29 June 2012, a bankruptcy petition was presented against Mr. Jackson by Her Majesty's Revenue and Customs. A bankruptcy order was made against him on 6 August 2013 at the Central London County Court. The Applicant, Mr. Davis, was appointed as trustee in bankruptcy ("the Trustee") with effect from 18 November 2013. The amount required to pay the debts and expenses of Mr. Jackson's bankruptcy was, as at 26 October 2016, £83,636.12.

11

Following his appointment, the Trustee wrote to Mrs. Jackson on 22 November 2013 and again on 28 August 2014 asserting that the Property was held beneficially in equal shares by himself and Mrs. Jackson, but inviting Mrs. Jackson to provide evidence if she believed that she had a greater share in the Property than 50%. The Trustee also asked whether, rather than the Property being sold, Mrs. Jackson was interested in making an offer to buy out Mr. Jackson's interest in the Property.

12

Mrs. Jackson did not respond, and so on 19 November 2015, the Trustee issued an application in the County Court in which Mr. Jackson's bankruptcy was being administered seeking: (i) a declaration that the Trustee was entitled to one half of the equity in the Property; and (ii) an order for sale of the Property.

13

On 22 December 2015, District Judge Cross made an order declaring that the Trustee was entitled to one half of the equity in the Property (the "Declaration") and granting an order for sale and a direction that the net proceeds of sale be divided equally between the Trustee and Mrs. Jackson (the "Order for Sale"). Mr. and Mrs. Jackson attended the hearing before District Judge Cross as litigants in person but did not make any substantive submissions. They were granted a limited suspension of the Order for Sale to allow time for Mr. Jackson to take advice and make an application to annul his bankruptcy, and for Mrs. Jackson to take her own legal advice.

14

Mr. Jackson did not apply for an annulment of his bankruptcy and Mrs. Jackson did not make any application by the date upon which the suspension of the Order for Sale expired, with the result that a warrant for possession was granted to the Trustee on 15 March 2016. This prompted solicitors instructed by Mrs. Jackson to file a lengthy witness statement advancing a case to the effect that Mr. Jackson could have had no beneficial interest in the Property, as he had not complied with his obligations under the Trust Deed (which document had not been in evidence before the District Judge). A stay was sought of the warrant for possession pending an application for permission to appeal out of time against the Declaration and Order for Sale.

15

The solicitors' involvement was, however, short-lived, because the SRA intervened in the practice on 11 April 2016, after which time Mrs. Jackson was again unrepresented. Nonetheless, on 18 April 2016 the warrant for possession was suspended pending appeal, and on 22 April 2016 Mrs. Jackson formally applied for permission to appeal out of time. Her argument was that if District Judge Cross had known about Mr. Jackson's failure to comply with his promise in the Trust Deed to make half of the mortgage payments, he would not have made the Declaration that the Trustee had a 50% beneficial interest in the Property. Mrs. Jackson contended that in the absence of any contributions having been made by Mr. Jackson towards the mortgage(s) of the Property, the District Judge ought to have held that she was entitled to the entire equitable interest in the Property.

The first decision

16

After a hearing on 26 October 2016, I refused Mrs. Jackson permission to appeal against the Declaration and ordered her to pay costs, summarily assessed in the sum of £7,200. I did so on the grounds that the relevant TR1 form executed in 2007 contained an express declaration of trust signed by Mr. and Mrs. Jackson, which had been made in full knowledge of Mr. Jackson's failure to make any contribution to the first mortgage, and which nonetheless expressly declared that they held the Property on trust for themselves as joint tenants in equity.

17

In Stack v Dowden [2007] 2 AC 432 at paragraphs 49 – 52, Baroness Hale considered the effect of such an express declaration,

"49. In the olden days, before registration of title on certain events, including a conveyance on sale, became compulsory all over England and Wales, conveyances of unregistered land into joint names would in practice declare...

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1 firm's commentaries
  • Financial Interests When Separating – ‘Make Your Intentions Known'
    • United Kingdom
    • Mondaq UK
    • 22 November 2017
    ...associate Lucy Gould reviews the recent case of Davis v Jackson [2017] EWHC 698 (Ch), in which the court determined the beneficial interests a separated (but not divorced) married couple each held in a property. The property was owned in joint names but occupied only by the wife, who had so......

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