Tinsley v Milligan

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Keith of Kinkel,Lord Goff of Chieveley,Lord Jauncey of Tullichettle,Lord Lowry,Lord Browne-Wilkinson
Judgment Date24 June 1993
Judgment citation (vLex)[1993] UKHL J0624-2
Date24 June 1993

[1993] UKHL J0624-2

House of Lords

Lord Keith of Kinkel

Lord Goff of Chieveley

Lord Jauncey of Tullichettle

Lord Lowry

Lord Browne-Wilkinson

Tinsley (A.P.)
(Appellant)
and
Milligan (A.P.)
(Respondent)
Lord Keith of Kinkel

My Lords,

1

I agree with the speech to be delivered by my noble and learned friend Lord Goff of Chieveley, which I have had the advantage of reading in draft. I would therefore allow this appeal.

Lord Goff of Chieveley

My Lords,

2

There is before your Lordships an appeal by the appellant, Stella Ruth Tinsley, from an order by the Court of Appeal whereby the court, by a majority (Lloyd and Nicholls L.JJ., Ralph Gibson L.J. dissenting), dismissed the appellant's appeal from an order of Judge Hywed Ap Robert, sitting in the Caerphilly County Court, ordering (inter alia) that the appellant's claim for possession of 141 Thomas Street, Abertridwr, Mid-Glamorgan, be dismissed, and that the appellant holds 141 Thomas Street on trust for the respondent, Kathleen Milligan, and herself in equal shares.

3

The appeal, which is brought by leave of the Court of Appeal, raises the question whether the claim of the respondent to an interest in the property in question is defeated by reason of frauds practised on the Department of Social Security. The facts of the case can be encapsulated in a few brief sentences. However it is desirable to obtain the full flavour of the case; and for that reason I propose to adopt the account given by Nicholls L.J. in the report in [1992] Ch. 310, 315–317, which for convenience of reference I propose to set out in full.

"The house in question is 141, Thomas Street, Abertridwr, Mid-Glamorgan. It is registered in the name of the plaintiff Miss Stella Tinsley. She is the sole legal owner. She and the defendant Miss Kathleen Milligan were, to use the judge's expression, lovers for about four years, from 1984 to 1988. In the discussions they had during the course of their relationship, both the plaintiff and the defendant expressly recognised they were running a lodging house first at 9, Fitzhamon Embankment, Cardiff, and subsequently at Thomas Street, as a joint business venture and that the ownership of the respective houses was also on a joint basis.

The parties are intelligent and articulate. They met in 1984. The plaintiff was then 19, and the defendant 38. The defendant was the dominant character, but not such as to be able to impose her will on the plaintiff. The defendant was living at 9, Fitzhamon Embankment, which belonged to a Mr. Slater. She was running a bed-and-breakfast business. In 1983 a Miss Llewellyn began living in the house, and after a while she was treated as being the housekeeper in place of the defendant. The housekeeper was the person to whom the D.S.S. turned for verification that those to whom it was paying benefits were indeed resident there. In December 1984 the plaintiff moved in and Miss Llewellyn moved out. After a month or two the plaintiff took her place as the nominal housekeeper, although most of the physical work and much of the managerial work were done by the defendant.

The bank and building society accounts used by the parties were put in the plaintiff's sole name, but they were regarded as joint property. Through these accounts the parties conducted most of their financial affairs: nearly all their money went into them, and nearly everything they spent was paid from them. In July 1986 9, Fitzhamon Embankment was purchased in the plaintiff's name. The price was £29,000. A bank provided £24,000 by way of a mortgage loan to the plaintiff alone. The balance was provided principally from the sale proceeds of a car which belonged to them jointly.

Two years later this house was sold for £33,000, and the mortgage repaid. 141, Thomas Street was bought for £19,000, again in the sole name of the plaintiff. That was in August 1988. £12,000 was provided by a bank loan to the plaintiff alone, and the balance came from the proceeds of sale of 9, Fitzhamon Embankment. In this way all the money provided by the parties for 141, Thomas Street cam ultimately from their joint business. Shortly thereafter, the parties quarrelled. The plaintiff moved out, and the defendant remained in occupation. The plaintiff divided the money in her building society account between them in roughly equal shares. In February 1989 she gave the defendant notice to quit. Six months later she brought this action, claiming possession and asserting ownership of the whole of the house. The defendant was willing that the house should be sold. Indeed she counterclaimed for an order for sale. She also sought a declaration that the property was held by the plaintiff upon trust for the two of them in equal shares.

I can now turn to the illegality. Over a period of years the defendant with the knowledge and assent of the plaintiff, made false claims to the D.S.S. for benefits of one kind or another. The money paid by the D.S.S. in response to those claims was paid into the bank or building society accounts I have mentioned. The defendant was not alone in perpetrating frauds upon the D.S.S. The plaintiff also did so. She was prosecuted, convicted and fined, and had to make some repayments to the D.S.S. As to 141, Thomas Street, the judge shied away from holding that the reason why the transfer of this house was in the plaintiff's sole name was to assist in a fraud on the D.S.S. Having the property in the plaintiff's sole name assisted with the fraud in the sense that it assisted in the concealment of the defendant's fraud. On the claim forms the defendant answered "No" to the question, "Do you own you own home?" and she named the plaintiff as her landlady, to whom she said she was paying rent. If the D.S.S., having received such claims, had made further inquiries, the falsity of the defendant's answers would be more likely to remain concealed with the title deeds in the plaintiff's sole name. The judge considered it was a great over-simplification to regard fraud as the sole or even main objective of the defendant in rendering herself invisible not only as to the legal title to the house but also as to the bank account and the accounts for electricity, gas, rates and so forth. He seems to have regarded this as a 'psychological quirk'.

I do not think this conclusion can stand. At the outset of her cross-examination the defendant frankly accepted that the reason why the business and 9, Fitzhamon Embankment and 141, Thomas Street were in the plaintiff's sole name was so that she, the defendant, could misrepresent to the D.S.S. that she had no stake in the business or the properties and that she was simply a lodger. The defendant did not suggest any other reason for either property being put in the plaintiff's sole name. The case was fought on that footing. It should be decided on the same footing.

Two further features are to be noted. First, the money obtained from the D.S.S. helped the two of them meet their bills, but it was not a substantial part of their income. Their income consisted mostly of rent from their lodgers. The fraud perpetrated by them both on the D.S.S. played only a small financial part in the acquisition of the equity in the house which is now in dispute. Secondly, there is no continuing illegality. Late in 1988 the defendant made her peace with the D.S.S. She told the D.S.S. what she had done. Thereafter she continued to draw benefit, but on a lawful basis. Apparently the D.S.S. did not regard the situation with any alarm. The judge observed that no doubt this was because it had become inured by daily experience of much worse forms of fraud being practised upon it than any which could be laid at the door of these two women."

4

Before the Court of Appeal it was the submission of the appellant that there was a principle of law, binding on the Court of Appeal, that the court will not give effect to an equitable interest arising from a transaction which is unlawful by reason of a claimant's unlawful purpose; and that accordingly the respondent was unable to establish any equitable interest in 141, Thomas Street, or to defeat the appellant's claim to possession. This principle was said to be well recognised in a number of authorities; but reliance was placed in particular on Gascoigne v. Gascoigne [1918] 1 K.B. 223 and Tinker v. Tinker [1970] P. 136, both decisions of the Court of Appeal. It was this line of authority which ultimately persuaded Ralph Gibson L.J., in his dissenting judgment, that the appellant's appeal should be allowed. But Nicholls L.J. was not so persuaded. He first invoked a group of recent Court of Appeal decisions, which point to a more flexible approach than has been adopted in the past in cases of illegality under which, according to Nicholls L.J. (at p. 319H):

"… the underlying principle is the so-called public conscience test. The court must weigh, or balance, the adverse consequences of granting relief against the adverse consequences of refusing relief. The ultimate decision calls for a value judgment."

5

On that approach he concluded (at p. 321D) that "… far from it being an affront to the public conscience to grant relief in this case, it would be an affront to the public conscience not to do so." Furthermore, Nicholls L.J. rejected (at p. 323G) the inflexible approach embodied in the earlier authorities as according ill "with the underlying considerations of public policy the court is seeking to discern and apply in this field"; the approach would, he considered, also mean that equity was taking a less flexible attitude to illegality than the common law, which would constitute a remarkable reversal of the traditional functions of law and equity. He accordingly sought to rationalise the older authorities in which relief was denied as cases in which, in particular circumstances, the court considered that to have granted relief would have been an affront to the public...

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