Smith v Cooper
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lord Justice Wilson,Lord Justice Jacob |
| Judgment Date | 25 June 2010 |
| Neutral Citation | [2010] EWCA Civ 722 |
| Docket Number | Case No: B2/2009/2695/CCRTF |
| Court | Court of Appeal (Civil Division) |
| Date | 25 June 2010 |
[2010] EWCA Civ 722
His Honour Judge Darroch
Before: Lord Justice Jacob
Lord Justice Lloyd
and
Lord Justice Wilson
Case No: B2/2009/2695/CCRTF
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NORWICH COUNTY COURT
Anna Clarke (instructed by Hawkins Solicitors) for the Appellant
Katharine Bundell (instructed by Roger Green & Co) for the Respondent
Hearing date: 20 May 2010
Lord Justice Lloyd: Introduction
This appeal by Miss Cooper, the Defendant in the action, is brought against an order of His Honour Judge Darroch in the Norwich County Court made on 28 October 2009. By that order he dismissed a counterclaim brought by Miss Cooper against Mr Smith. At trial her counterclaim was based on three distinct grounds. Only one of those three is pursued on the appeal, namely undue influence. The appeal, for which the judge himself gave permission, requires us to consider whether the judge was right to hold that the presumption of undue influence had been successfully rebutted by Mr Smith and, if he was not, then what the consequences are as regards setting aside the relevant transactions.
Miss Cooper acts in these proceedings by the Official Solicitor as her litigation friend, because she is a protected party in the terms of CPR Part 21, not having the necessary mental capacity to conduct the proceedings. She did not give evidence, although she did attend part of the hearing.
At issue is the beneficial ownership of three properties: first, a bungalow called Fifty Farm, Nordelph, Downham Market, Norfolk, secondly a parcel of land adjacent to Fifty Farm, and thirdly Rose Cottage, Barroway Drove, Downham Market.
Miss Cooper had been married, and has four children. She was divorced in September 2000. She had lived in Essex but wanted to move to Norfolk, her parents having themselves recently moved there from Essex. Having some £100,000 as her settlement following the divorce, she bought Fifty Farm, which cost her £84,800, in her own name on 9 November 2001. Mr Smith had also been married before and was divorced by then. He too emerged from his divorce with a settlement giving him capital of about £100,000. The parties got to know each other in about 2000, Mr Smith being a market trader and having been a customer of Miss Cooper's father. A relationship came to exist between them. At some point after the purchase of Fifty Farm by Miss Cooper, Mr Smith moved to Norfolk to live there with her.
In or about July 2004 Miss Cooper transferred Fifty Farm into the joint names of herself and Mr Smith, to be held by them as beneficial joint tenants. At the same time, they bought a small piece of adjacent land, which cost £9,000, provided by Mr Smith. This too was held in their joint names as beneficial joint tenants. In January 2006 they bought Rose Cottage, for an expressed cash price of £115,000, though it is clear that a camper van changed hands from the purchasers to the vendor and was part of the price. This property, too, was placed in their joint names, to be held as beneficial joint tenants. The bulk of the price, £100,000, was provided through a mortgage advance on the security of Fifty Farm. £15,000 cash was provided by Mr Smith. A great deal of work had to be done to Rose Cottage before it was fit for occupation. The two moved into it in September 2006, but their relationship ended in November that year, shortly after Fifty Farm had been sold.
Miss Cooper seeks to set aside the gift of half of Fifty Farm to Mr Smith, and also the declaration of a joint tenancy in relation to Rose Cottage. She accepts that he has an interest in Rose Cottage, having provided part of the price, but contends that it is a modest share.
The net proceeds of Fifty Farm are held by solicitors pending the resolution of this dispute. Miss Cooper lives in Rose Cottage. To the extent that Mr Smith has a beneficial interest in it, he seeks to realise it by being bought out or by an order for sale.
At the trial the other issues were whether Miss Cooper had had the necessary capacity to enter into the transactions at all, and whether they were vitiated (if not by undue influence) by mistake or misrepresentation, it being alleged on her behalf that Mr Smith represented to her that he would pay her £60,000 as part of the transactions. The judge rejected these claims and they are not revived on appeal. However, some of his findings on these points, and on the more general question as to what the parties’ intentions had been as regards beneficial ownership, have a bearing on the resolution of the issues on the appeal.
The appeal
The judge held that the presumption of undue influence applied, but held that it had been adequately rebutted by Mr Smith. Miss Clarke, on behalf of Miss Cooper, submitted that the judge's reasons for finding that it had been rebutted were inadequate, and that there was no other basis on which he could properly have reached that conclusion. Miss Bundell, for Mr Smith, argued that the judge had not in fact found that the presumption did apply at all, and that he had been justified in that, but alternatively she supported his reasons for concluding that the presumption had been rebutted. By a Respondent's Notice she contended that, even if the appeal was otherwise justified, the same conclusion should be reached by way of the doctrine of constructive trusts. On opening the appeal Miss Clarke invited us, when addressing the consequences if the appeal was to be allowed, to apply principles set out in a Court of Appeal decision, Cheese v Thomas [1994] 1 WLR 129, which had not previously been cited. This emphasises the need to do practical justice to both parties when a transaction is set aside.
Thus, the issues on the appeal are, first, whether the judge did hold that the presumption of undue influence applied, secondly whether he was right to hold that it was rebutted, thirdly whether, if so, the principles of constructive trusts lead to the same result, and fourthly, if not, what order should be made as a consequence of setting the transactions aside.
Both Counsel before us had appeared at the trial. Each of them presented submissions that were admirably and refreshingly clear, economical and sensible. Miss Bundell, in particular, evoked for us vividly something of the tenor of the oral evidence before the judge. The appeal bundle (which commendably, if unusually, had been prepared with proper care to avoid duplication of documents) included the witness statements and documents exhibited to them but not the further documents produced at trial, nor transcripts of the oral evidence other than that of one witness, a solicitor, to which I will refer in detail.
The proceedings at first instance
Mr Smith brought the proceedings in order to establish his right to half of the net proceeds of sale of Fifty Farm (with the adjacent land), just over £80,000, which, by the time the proceedings were brought in November 2007, were held by solicitors pending resolution of the dispute. In addition he sought either half the value of Rose Cottage to be paid to him or an order that Rose Cottage be sold and that he should then receive half of the proceeds of sale. The claim was commenced by a Part 8 claim form, on the footing that no contentious issue of fact was involved.
Miss Cooper raised the substantive disputes by her defence and counterclaim. Acting by the Official Solicitor from the outset of the proceedings, she relied first on the contention that she had not had the necessary mental capacity to enter into the transactions, secondly on undue influence as a ground for setting the transactions aside and thirdly on a contention as to misrepresentation or mistake. Mr Smith did no more in his reply and defence to counterclaim than join issue in the briefest possible terms. He did not identify or assert any facts to be relied on in support of his defence. We were not shown any details of any orders made by way of case management but it seems to have been common ground that the case was not formally treated as proceeding under Part 7 until the judge's order made at the conclusion of the trial. No orders were made for disclosure on either side.
Witness statements were served on both sides. Some documents were exhibited to those witness statements. More documents were made available through the files of Ward Gethin, the solicitors who had acted for both parties on all the relevant transactions. Other documents were produced at trial. One difficulty was that Miss Cooper, living in Rose Cottage, was not willing to make available documents held there which Mr Smith said belonged to him and might have been relevant to the issues at trial, and no attempt was made to force Miss Cooper to make those documents available. Nor was the property inspected for valuation purposes so there was no valuation evidence before the court. Mr Smith made a number of assertions in his witness statements about what he had spent and done in relation to Fifty Farm and Rose Cottage, and generally during the relationship. He exhibited to one of his witness statements three pages of his bank statements, but he produced many more such pages at trial. Miss Cooper could not and did not give evidence, and there was only very limited and indirect evidence from witnesses called on her side which bore on this subject. Some of Mr Smith's assertions were investigated during oral evidence, and the judge made some comments on some...
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