A v B (2008)
| Jurisdiction | England & Wales |
| Judge | Mr Jeremy Cousins QC |
| Judgment Date | 13 November 2008 |
| Neutral Citation | [2008] EWHC 2687 (Ch),[2008] EWHC 2812 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC05C02945,Claim No HC 06 C 03496 |
| Date | 13 November 2008 |
[2008] EWHC 2687 (Ch)
Mr Jeremy Cousins Qc, Sitting as a Deputy Judge of the Chancery Division
Case No: HC05C02945
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Jonathan Russen (instructed by Cripps Harris Hall, Wallside House, 12 Mount Ephraim Road, Tunbridge Wells, Kent TN1 1EG) for the Claimant
Mr William McCormick (instructed by Mayo Wynne Baxter, Century House, 15–19 Dyke Road, Brighton BN1 3FE) for the Defendant
Hearing dates: 3, 4, 7, 8, 9, 10, 11, 17 and 18 July and 8 October 2008
APPROVED JUDGMENT
Before the commencement of this trial, and on the Claimant's application, I ordered that the identity of the parties should not be identified in any report of this case. I made this order, for reasons given in a separate judgment, because it is important that the Claimant's whereabouts do not become known to her former husband. Her marriage to him broke down in 1994. The Defendant, whilst not seeking to preserve her own anonymity, was supportive of the Claimant's application. Throughout this judgment I have therefore refrained from identifying persons, properties, or companies, where to do so might lead to the identification of the Claimant.
OVERVIEW
The company whose shares are the subject of this litigation (“the Company”) was formed with limited liability in 1997. Its two issued shares are held by the Defendant. The Claimant maintains that in equity she is entitled to half of the shareholding. She puts her case on the basis of proprietary estoppel. Alternatively, she asserts that the Defendant holds such half of the shareholding upon a constructive trust for her. As to the latter, she relies in particular upon a Pallant v. Morgan [1953] 1 Ch 43 type equity. The Claimant maintains that if she establishes an equity falling short of an entitlement to half of the shareholding, then she should be entitled to relief sufficient and proportionate to satisfy such equity as she does establish. Finally, she maintains that if she establishes no proprietary claim, then she should be entitled to a quantum meruit payment.
The Claimant's case, however it is formulated in equity, is based upon an agreement, or understanding, which she maintains was made, or reached, with the Defendant not later than April 2003 whereby the parties were to go into business together with a view to running care homes. The Claimant does not maintain that there was a legally enforceable contract (this was expressly conceded), and reference to “an agreement” is to be understood in that light. The business, she says, was to be operated through the Company, and the parties were to share equally in the profits including capital profits. The Claimant maintains that the arrangement with the Defendant was made on the basis that the Claimant would invest capital in the business, and that a “buy in” price would be ascertained by reference to the value of a care home at Bexhill-on-Sea, Sussex (“the First Property”) which, at that time, was beneficially owned by the Company, although its registered proprietor was the Defendant.
The Claimant says that on the basis that there was an agreement or common understanding between her and the Defendant to the effect that they were equal parties in this venture, she acted to her detriment, and also conferred considerable advantages upon the Defendant. In particular she claims that she worked full-time, without remuneration, in the business for more than 12 months, refrained from entering the care home business on her own account, and introduced £5,000 (as did the Defendant) into a bank account, designated “Company Two”, for the purpose of meeting business expenses such as valuation and conveyancing fees.
In her pleaded case the Claimant relies, in addition to the matters mentioned above, on other steps which she took pursuant to the understanding between the parties. These include:
(i) Registering details with agents with a view to obtaining particulars of residential care homes for sale.
(ii) Putting her own investment properties in Crawley on the market and eventually selling them, and further attempting to sell another investment property in Sevenoaks.
(iii) Viewing a number of care homes in conjunction with the Defendant, and making offers for such homes, on behalf of the Company. Some of these offers led to the Company's subsequent acquisition of a number of care homes.
(iv) Preparing a business plan with the Defendant.
(v) Together with the Defendant, meeting bankers to discuss finance.
(vi) Together with the Defendant, meeting solicitors and an accountant in order to further the implementation of the business venture.
(vii) Attending courses in connection with the care homes business.
(viii) Taking steps with a view to ensuring that occupancy levels at the Company's care homes were maintained.
At all times, the Claimant says, she was ready, willing and able to make the capital investment required of her. The reason for her not having done so, she says, was failure on the Defendant's part to give a precise figure for the “buy in”.
In these circumstances, the Claimant maintains that it was unconscionable for the Defendant to refuse, in May 2004, to proceed in accordance with the agreement between the parties, yet to retain sole ownership of the shares in the Company. Instead of proceeding, the Defendant determined the arrangement.
The Defendant's case is that there was never anything more than an agreement in outline or principle, and that the understanding between the parties amounted to no more than that the Claimant would be allowed to invest in the business subject to agreement of necessary terms including the price, the extent of the interest to be purchased, the timing of payment and the terms under which the Company would be controlled.
The Defendant denies that common ground was reached on these important points, and disputes the suggestion that the Claimant acted to her detriment. In particular, it is said against the Claimant, that she never introduced the capital that was required of her, and her ability to do so is challenged.
The Defendant disputes the suggestion that the Claimant worked full-time in the business and says that, in any event, the Claimant did receive modest remuneration. The Defendant says that at least in substantial part, the Claimant's preparedness to work in the business at all, and for modest remuneration, is explained by the fact that at the relevant time the Claimant was in receipt of sickness pay from her employers, a very large company, and the Claimant's professed desire to become familiar with the care home business since she was contemplating going into that business in any event. Similarly, the Defendant says, the Claimant would have had to sell her investment properties, whether or not there was a business venture involving the Defendant, because the Claimant had independently decided to realise her investments and go into business. The Claimant's attendance upon any courses is similarly explained.
THE FACTS
The Claimant's circumstances
At the time of the events under consideration, the Claimant was a single parent bringing up two children, a son and a daughter. In 2002, when the business discussions between the parties first took place, the Claimant's children were of school age, with several years' more schooling in prospect.
Throughout the period under consideration, the Claimant was employed as an account manager. Her work involved a very great deal of travelling, possibly as much as 45,000 miles in a year. In February 2003, the Claimant suffered a fall, and almost immediately took sickness leave from her employment. Her employers allowed her full pay, and she was permitted to keep her company car, although her evidence was that she paid for the use of her car. In cross-examination she was asked whether, when medically assessed on behalf of her employers as to her fitness for work, she had disclosed what is now her case that she was working full-time in a care home. Her explanation for not doing so was that she was unable to carry out the duties for which she was employed because of the driving required. In fact, the Claimant eventually did go back to work for her employers in about August 2004, but that was on the basis that her employment would require less driving. When the driving element of her work was increased again in around August 2006, she decided to leave, and was made redundant.
The Claimant received approximately £1,730 per month net from her employers in 2002. She also received a yearly bonus, which she estimated at around £4,000 to £5,000 after tax. She paid rent, around £795 per month for her accommodation. She accepted in evidence that her expenditure ran at about the same level as her income. However, from 2002, she anticipated that her outgoings would rise because she wished to educate her children privately with effect from September 2003.
In 2002, although the Claimant lived in rented accommodation, she owned, subject to borrowings, two investment properties in Crawley, and had previously owned a third which she had sold. Those investment properties she had bought in the late 1990s. She was unable, when asked in cross-examination, to say whether in 2002 she was making a profit from those investment properties.
The investment properties represented much the most of the Claimant's capital assets. According to the business plan discussed by the parties in around March 2003, and prepared in the Defendant's handwriting, at that time the Claimant had some £30,000 in the bank and equity in the two properties was around £187,000. According to a letter dated 4 th July 2008 from the Claimant's accountant, those two properties were sold respectively in December 2003 and February 2004. At that time the...
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