Agarwala v Agarwala [2013] EWCA Civ 1763

Analysis

The appellant (Jaci) and the respondent (Sunil) were sister and brother-in-law respectively. This case related to the beneficial ownership of a property which Sunil had identified as a business opportunity (for Sunil to run as a B&B). Due to Sunil’s poor credit rating, the property was purchased in Jaci’s name via a mortgage, also in her name. Both parties agreed that there was an express oral agreement between them as to the terms on which the property was bought and held. The terms of that agreement were disputed and each party argued that they owned the beneficial interest in the property as to 100 per cent.

Sunil’s evidence was that he had identified the property for himself as a home business. Jaci had agreed to help him out as he was unable to acquire the property without a ‘front man’. Sunil would provide Jaci with the money to pay the mortgage. The house and business would be his and Jaci would be a bare trustee. She would receive a monthly salary in return for completing the accounts.

Jaci’s evidence was diametrically opposed. She stated that the property was intended to be hers entirely. Sunil would arrange the funding, conversion and run the business for her at no charge. The benefit to Sunil was that he would be able to ‘farm out’ overbookings from the B&B he already ran without any significant cost.

At first instance, the trial judge held that as this was not a joint ownership matter, the question became whose account was more probable. Given that the property was in Jaci’s name and there was no written evidence demonstrating Sunil’s interest, Sunil needed to establish his claim by way of constructive trust and estoppel.

Despite the fact that Sunil had attempted to forge a trust deed which purported to show him as the owner of the property, the trial judge found that based on all the evidence, Sunil’s account was more probable. He considered it unlikely that such an ‘unscrupulous and self-interested character’ would identify a business opportunity such as this and hand it over to his sister-in-law whilst he worked in the business for no other reason than to save on the ‘farming out’ of the occasional overbooked client.

Jaci appealed this decision on ten grounds which were dealt with in turn by the appeal judges.

Held (dismissing the appeal):

1. 1) Insufficient weight was given to the presumption that the legal and the beneficial interest coincide. The trial judge had the presumption ‘well in mind’. He was clear that it was for Sunil to establish his case for beneficial ownership and to demonstrate that he had acted to his detriment in reliance on the agreement. In a case like this the ‘presumption’ was only a starting point.
2. 2) The burden of proof had been reversed and was incorrectly placed on Jaci. This was not correct. Given the approach the trial judge had taken in respect of the ‘presumption’, it was apparent that he had placed the burden on Sunil.
3. 3) Insufficient weight was given to Jaci being solely liable under the mortgage. The trial judge had recognised that financial contributions were often a ‘vital source of evidence on the issue of beneficial ownership’, in this instance the repayments were met from the profits of the business and paid via Jaci. The mortgage repayment history was therefore considered of little help in deciding who the beneficial owner was.
4. 4) The trial judge erred in trying to determine what the common intention was without first considering whether there was one. Both parties contended that there was a common intention and disagreed on what the nature of this was, not whether it existed in the first place.
5. 5) The trial judge did not make a finding that there was a common intention. As at 4) above.
6. 6) The trial judge failed to consider documentary evidence in support of Jaci’s case. This related to two letters and two emails. The wording in the letters was not conclusive (it was clear that the trial judge had properly considered them). The trial judge was at liberty to determine that the emails corroborated Sunil’s account.
7. 7) The trial judge asked the wrong question in considering which account was more probable. Instead the question was whether Sunil’s case was sufficient to displace the presumption of beneficial ownership following legal ownership. The judge had not erred by asking which account was more credible. This submission added nothing to the appellant’s submissions at 1) and 2) above.
8. 8) The trial judge wrongly gave weight to the forged trust deed. It was plain that the trial judge placed no weight on the forged deed and gave proper weight to the fact it was forged when assessing Sunil’s account.
9. 9) The trial judge gave no/insufficient reasons for believing Sunil’s account. The trial judge’s reasons for choosing Sunil’s account were ‘perfectly intelligible’. He had considered Sunil’s discussions with another party to act as his ‘front man’ for this transaction, the contemporary emails and Sunil’s nature/character. The suggested benefit which Sunil had received from the agreement (of being able to farm out overbooked clients) was ‘inadequate and unconvincing’.
10. 10) The trial judge made no finding as to whether Sunil had acted to his detriment. In his judgment, the trial judge had recognised that Sunil must establish that he had relied on the agreement to his detriment. It was unfortunate that he had not dealt with this as a distinct issue in his conclusions later in his judgment. However, the detail of the detriment had been set out and the trial judge did not need to repeat it at the conclusion of his judgment. There was a clear acceptance of the detriment and clear reference to the relevant principles.

JUDGMENT SULLIVAN LJ: Introduction [1] On 6 December 2012, HHJ Moloney QC handed down a judgment in the Cambridge County Court in which he found that the appellant held No 79 High Street, Cherry Hinton, Cambridge (the property) on trust for the respondent. The appellant appeals against the judge’s order dated 14 December 2012 which …

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