Pietro Gallarotti v Fabio Sebastianelli

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLady Justice Arden,Lord Justice Tomlinson,Lord Justice Davis
Judgment Date03 July 2012
Neutral Citation[2012] EWCA Civ 865
Date03 July 2012
Docket NumberCase No: B2/2011/2646

[2012] EWCA Civ 865

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM CENTRAL LONDON COUNTY COURT

MISS RECORDER MICHAELS QC

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lady Justice Arden

Lord Justice Tomlinson

and

Lord Justice Davis

Case No: B2/2011/2646

Hd41–8

Between:
Pietro Gallarotti
Respondent
and
Fabio Sebastianelli
Appellant

Mr Christopher Aylwin (instructed by Lyndales Solicitors) for the Appellant

Miss Wendy Parker (instructed by Singhania and Co.) for the Respondent

Hearing date : 9 May 2012

Lady Justice Arden
1

In 1997, Mr Sebastianelli and Mr Gallarotti did what many single people do: they decided to buy a flat with the help of a mortgage and with each of them making a cash contribution. Mr Sebastianelli paid the larger share. The transfer was into Mr Sebastianelli's sole name, and he took out the mortgage for the balance of the price and proceeded to pay the mortgage repayments. Recorder Michaels found that Mr Sebastianelli and Mr Gallarotti expressly agreed that they would each have a 50% interest in the flat, notwithstanding their unequal contributions. The Recorder also found that this agreement was qualified by a further agreement, or rider. The parties made this when they realised that their contributions would be unequal. They agreed that Mr Gallarotti would pay a larger proportion of the mortgage repayments. However, on the Recorder's findings, this did not happen though Mr Gallarotti did make some other, lesser, payments for the parties' joint benefit.

2

Was the Recorder right to conclude that the parties were beneficially entitled to the flat in equal shares? That is the only issue on this appeal. It is essentially a question as to the proper inferences to be drawn from the evidence. We are not asked to decide any new question of substantive law. Nonetheless, this appeal may be of wide interest as the factual paradigm is not uncommon.

3

The starting point is to consider the background to the parties' agreement. Mr Sebastianelli and Mr Gallarotti's friendship went back to about 1988 and their friendship was a strong, platonic one. There were cultural and other ties. They were both Italian in origin, though Mr Sebastianelli's family then lived in Spain. Mr Sebastianelli and Mr Gallarotti had both come to London to make their careers here. They started to rent flats together. On one occasion Mr Sebastianelli took out the lease in his name alone. They both contributed to the outgoings of the flats they rented. They joined together for companionship, not because they wished to establish themselves as a family unit.

4

The acquisition of the flat to which this appeal relates was a natural step in their becoming more settled in London. No doubt both felt that it would be a sensible step to take. They agreed to buy the first floor flat at 122, Holland Park Avenue, London W11 4UA ("the Flat"). The price was attractive. The relevant figures for their contributions at the time of purchase were as follows. The total cost of acquisition was £188,287.44. Mr Sebastianelli and Mr Gallarotti made cash payments of £86,500 and £26,896.20 respectively. Mr Gallarotti agreed to postpone any interest he might have in the Flat to that of the mortgagee.

5

The parties did not execute a written declaration of trust as to the proportions in which they owned the Flat. Accordingly the parties did not comply with the legal requirements for creating a trust. The Recorder relied for her conclusions on a common intention constructive trust, that is, a trust arising by operation of law where parties agree that beneficial ownership should be held in a particular way but do not follow the formalities required by law and where one of the parties has suffered detriment in reliance on the agreement. In the case of a constructive trust, the court looks at the conduct of the parties throughout their relationship. It is not restricted, as it would be in the case of a resulting trust, to examining the contributions made to the acquisition. The common intention constructive trust is thus more flexible. It is also more appropriate where the parties have incurred expenditure on the strength of their personal relationship and without expectation of having to account, or to call for an account, of every item as they would have to do in the case of a true legal partnership.

6

In giving her reasons for the conclusion that the parties had equal shares in the Flat, the Recorder held that the onus of proof was on Mr Gallarotti. The Recorder held that the principles to be applied to a constructive trust were the same whether the parties were in a relationship such as that of husband and wife or were business associates, though the court might draw different inferences as to their conduct in the latter case. The Recorder held that "in the light of the close relationship between the parties when the Flat was purchased" the analysis to be carried out "is to be seen more in the domestic than in the commercial context" (Judgment, paragraph 106). I agree with all those points.

7

Nothing now turns on why the Flat was registered in Mr Sebastianelli's sole name. Neither party had a secure source of income. Mr Gallarotti had a series of jobs in the catering trade. He undertook a university course and developed an interest in acting. While Mr Sebastianelli was also not in regular paid employment there was a period when his mother, Mrs Rose Estrella, supplemented his income. This ceased on her death in 2008. Mr Sebastianelli had various financial ventures. At one point he and Mr Gallarotti were in business together producing songs written and performed by Mr Sebastianelli and others. Later they had a café business together. Their joint ventures came to an end when their friendship terminated in 2008.

8

There was a certain amount of informality in the way the parties met the outgoings of the Flat. They did not have a formal system for accounting between them to ensure that they each paid an equal share. It was on occasions a matter of convenience who paid what outgoing. During 2008, when Mr Sebastianelli's mother was terminally ill, and Mr Sebastianelli returned to Spain to be with her, Mr Gallarotti took steps to see that the outgoings were paid.

9

The autumn of 2008 also saw the end of the parties' great friendship. Following disagreements arising from their joint ventures, Mr Gallarotti was one evening excluded by Mr Sebastianelli from the Flat. Mr Sebastianelli wished to occupy it with his girlfriend. Mr Gallarotti has married and he now lives elsewhere. The value of the Flat now substantially exceeds the price paid at acquisition. Mr Gallarotti therefore brought proceedings to obtain a declaration as to his interest in the Flat.

10

The contributions which each party made directly towards the cost of the Flat can be established. If account is taken of their cash contributions to the purchase price and Mr Sebastianelli's mortgage repayments in the period April 2003 to September 2008, Mr Sebastianelli paid approximately 75% and Mr Gallarotti 25%. Mr Sebastianelli had in fact made mortgage repayments of £59,165.76 from April 2003 up to the time when the parties fell out in 2008. (This was the only period for which copies of his bank statements were available.) There is nothing to suggest that Mr Sebastianelli did not similarly pay the mortgage debt in the year prior to April 2003. If, as Mr Sebastianelli contends, the whole of the amount raised by way of mortgage is treated as contributed by Mr Sebastianelli, his share increases to approximately 86% and that of Mr Gallarotti is reduced to some 14%. There is still money owing on the mortgage. However, some of that balance has to be left out of account as Mr Sebastianelli used the Flat as collateral for further advances to himself from the mortgagee. Likewise payments made to the mortgagee after Mr Gallarotti left the Flat must also be left out of account.

11

The Recorder's finding of an agreement must be read as a whole. The agreement found was not just for equal shares in the Flat. A crucial part of the Recorder's conclusion was that the agreement contained a rider. The Recorder found that, when the parties realised that they were going to make unequal contributions, they agreed that Mr Gallarotti would make larger contributions to the mortgage repayments than Mr Sebastianelli.

12

Mr Gallarotti's case was that he had performed his side of the bargain. He contended at trial that he in fact had made very substantial contributions to the various outgoings, renovations and repairs to the Flat. He did not rely on any resulting trust, so he did not assert that these payments enhanced his share based on his initial cash contribution. But the problem for him was that there was little satisfactory evidence about any payments following the initial cash contribution. The Recorder did not wholly accept his case.

13

The evidence about the mortgage...

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5 cases
  • (1) Stephen John Culliford v Jocelyn Thorpe
    • United Kingdom
    • Chancery Division
    • 8 March 2018
    ...no evidence on this. I can therefore say nothing about it. 59 The claimants also relied on the decision of the Court of Appeal in Gallarotti v Sebastianelli [2013] EWCA Civ 865. In that case, two young friends, both Italian, bought a London flat together in 1997. Each made a cash contributi......
  • Juliette Malisz Wodzicki v Monique Wodzicki
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    • Court of Appeal (Civil Division)
    • 24 February 2017
    ...was, for example, applied in the case of two close friends in a platonic relationship sharing a flat that they had jointly bought: Gallarotti v Sebastianelli [2012] EWCA Civ 865. However, there was nothing close about the relationship between the appellant and the respondent. There is no ev......
  • Shorey, Lewis and Lewis v Roettgen
    • Barbados
    • High Court
    • 1 July 2013
    ...required by law and where one of the parties has suffered detriment in reliance on the agreement.”. (See Gallarotti v. Sebastianelli [2012] E.W.C.A. Civ. 865 at para.5). 27 The constructive trust has been prayed in aid as a remedy after the collapse of commercial joint ventures. (see Pallan......
  • Chan Yuen Lan v See Fong Mun
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    • 24 June 2014
    ...(refd) Baumgartner v Baumgartner (1987) 164 CLR 137 (refd) Curley v Parkes [2004] EWCA Civ 1515 (not folld) Gallarotti v Sebastianelli [2012] EWCA Civ 865 (refd) Geary v Rankine [2012] EWCA Civ 555 (refd) Gissing v Gissing [1971] AC 886 (refd) Jones v Kernott [2012] 1 AC 776 (not folld) Ker......
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1 firm's commentaries
  • Cohabitants And Constructive Trusts After 'Jones v Kernott'
    • United Kingdom
    • Mondaq United Kingdom
    • 21 February 2013
    ...of common intention constructive trusts to sole name cases. Delineating the domestic consumer context In Gallarotti v Sebastianelli [2012] EWCA Civ 865, two male friends - not a couple - bought a flat together as their home. They also engaged in business ventures together. The parties agree......

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