PROPERTY CHAMBER
FIRST-TIER TRIBUNAL 
LAND REGISTRATION DIVISION

IN the matter of a reference from hm land registry

LAND REGISTRATION ACT 2002

REF No 2015/0211

BETWEEN
JOHN HOGGINS
Applicant 
and

GRETA CERNIAUSKAITE
Respondent

Property Address: 2 Stepped Gable Mews, High Wych Lane, Sawbridgeworth
Title Number: HD491875

Before Judge McAllister
Alfred Place, London
26, 27 and 28 October 2015

Representation: Mr Isaac Jacob instructed by Hughmans  appeared for the Applicant; Mr Lloyd Sefton Smith instructed by Murray Hay appeared for the Respondent.

DECISION

Introduction

1.	The issue in this case relates to the beneficial ownership of a property, 2 Stepped Gable Mews, High Wych Lane, Sawbridgeworth (‘the Property’). The Property is, and at all relevant times has been, registered in the name of the Respondent.  For ease of reference I will refer to her as ‘Greta’ and to the Applicant as ‘John’. John, her former partner, claims sole ownership of the Property on the basis that she holds the Property on constructive trust for him by virtue of a Pallant v Morgan [1953] Ch 43 equity. This equity arises where an agreement is reached whereby one party purchases property with the intention that he other will acquire an interest in the property, and the effect is that the acquiring party becomes bound by a constructive trust to prevent him from benefiting from his unconscionable breach of the agreement. In the familial or domestic context it is more usual to frame the trust in terms of the recent decisions in Stack v Dowden [2007] 2 AC 432 and Kernott v Jones [2012] 1 AC 776, but, in either case, the court’s task is to ascertain the true nature of the arrangement reached by the parties either by agreement or, if appropriate, by course of conduct from which a common intention can be inferred.  

2.	 On 19 November 2014 John applied to the Land Registry to enter a restriction against the title to the Property. In the application form, he stated that he had paid the deposit on the Property, and the mortgage, and funded all the costs. Greta objected, stating that the Property had been put in her name as a gift. The matter was referred to the Tribunal on 19 March 2015.

3.	The Property was purchased on 3 April 2009. The purchase price was £450,000. The deposit of £100,000 was, as explained below, paid in kind by one of the companies owned and controlled by John. The balance was obtained by a mortgage with Alliance and Leicester. The stamp duty on the purchase and the repayments on the mortgage between the date of purchase and August 2013 were made by Greta through money which she received from the companies as salary, although she accepts that she did not in fact work for any of the companies. From August 2013 onwards, she has paid the mortgage and all other outgoings on the Property. John and Greta lived in another property owned by John, until February 2013, when the relationship between the parties broke down, and Greta moved into the Property, where she still lives. 

4.	For the reasons set out below I have no hesitation in finding that the monies paid by John (directly or through his companies) towards the purchase of the Property were a gift by him to Greta, and accordingly I will order the Chief Land Registrar to cancel the application to enter a restriction.

     Background and evidence.

     2004-2009

5.	 John and Greta met in 2004 when his then marriage, to Ania,  was virtually over. John and Ania had two children: Christian, then 6, and Francis, then 2. At that time Greta was living in London and working as a part time cleaner at the National Portrait Gallery, and John was living at Highland Road, Nazeing, in Essex. Greta had been married twice before, in Lithuania, and had a daughter, who was then 16.  John  was the sole shareowner in a number of successful plumbing and heating businesses, variously incorporated as  Adustus Services (UK) Limited, Adustus Services LLP  and Adustus Services and Developments Ltd.  At one time, the companies employed some 54 people. Services UK and Services LLP went into voluntary creditors liquidation in September 2014 and April 2015 respectively. As I understand it, the third company is still active. I will refer to the various companies as ‘Adustus’, save where the context otherwise requires. The position in relation to the three companies is not entirely clear, although John’s evidence before me is that, in any event, he does not now have a company which is trading.  

6.	In April 2005 John and Greta moved into the ground floor of the building in which were the offices of Adustus. and converted this, with the requisite consents, into a flat. Shortly afterwards, Greta sold a flat in Lithuania, realising a sum of money, variously put, in the documents, at about £30,000 or about £22,000. In evidence Greta accepted that the correct amount was £22,000.  In March 2006 John bought a property at 34 Ellis Close, Hoddesdon, Hertfordshire (‘Ellis Close’).  Ellis Close was bought in his sole name, with the assistance of a mortgage.  There is an issue as to whether Greta contributed the proceeds of sale from the Lithunian flat towards the purchase, and a further issue as to whether the parties intended that she should have a beneficial interest in Ellis Close. 

7.	The divorce proceedings between John and Ania were acrimonious and protracted. The final order was made on 26 November 2008. In his Form E application dated 25 April 2007, John stated that he held Ellis Close on trust for himself and Greta in equal shares, and he stated that she had contributed £30,000 towards the deposit. He gave his income from Adustus  as £144,000 odd. Ania had applied for a freezing injunction a year or so earlier, and in his Affidavit in response, John again referred to Ellis Close, stating that this was bought for £440,000 (with a mortgage of £418,000), and that Greta had contributed £30,000 and had a beneficial interest in this property.

8.	John’s Form E was prepared by a Michael Avetoom, who held himself out as a solicitor (but was, it seems, not qualified as such).  John’s evidence is that the reference to Greta paying the deposit of £30,000 on Ellis Close is wrong (and indeed , there is no reference to this payment in a draft form): Mr Avertoom put this in without instructions, as he did in the freezing order affidavit. John was also critical of letters written by Mr Avetoom on his behalf in May 2013 and July 2013, when the relationship had broken down, both because Greta was not asked to vacate the Property (but was asked not to return to Ellis Close), when she should have been (on his case) and because there is a reference to a payment of £20,000 by Greta towards the deposit on the Property, and to the division of the proceeds of sale in proportion to the parties’ contributions. This, of course, is not his case now.   All these matters are not of any great importance in themselves, except that they all demonstrate, to my mind, a tendency on John’s part to attempt to explain inconvenient documents by saying that others acted without instructions, made a mistake or (as in the case of Mr Browne below) bore a grudge against him. 

9.	During the course of the proceedings a document was produced by Michael Lane of Grisby Harrison which appears to confirm that £30,000 deposit on Ellis Close came from the sale of other land owned by John. In view of the amount of money clearly available to John from 2005 onwards, it would be perhaps surprising if he used Greta’s money for the deposit, although it may have been convenient, and not entirely surprising, if he tried to minimise his assets in his divorce proceedings. This does not mean that Greta did not give or lend him the money, however: indeed, John accepts that she gave him £20,000 in 2005. 

10.	In 2007/2008 a local developer, Danny Smith, was in the course of developing a plot of land, known as Bakers Farm, in High Wych, Sawbridgeworth through his company, Steps Construction Limited.  The development consisted of four converted barns, and a converted farmhouse. Adustus  was carrying out the heating, plumbing and electrical work on site. Mr Smith found himself in some financial difficulty (the discovery of bats on site delayed the development between November 2007 and the spring of 2008) and an agreement was reached with John whereby John would buy the Property at a price of £450,000, and would offset against the price £100,000 in respect of work carried out by Adustus  to the site. 

11.	There is an issue as to exactly how much work was done to the Property, and how much to the remainder of the site, and a further issue as to whether this work was done in 2007 or 2008, and whether the agreement to purchase the Property was made in 2007 and not in 2008, but in my judgment these matters are not central to the decision I have to make. What is clear is that the price for the Property was reduced by £100,000 to take account of work done by Adustus.  John provided his solicitor, Mr Browne of Gisby Harrison, with a schedule of work carried out by Adustus, totalling £104,000 odd, in early December 2008. The balance was to be paid by a mortgage. 

12.	It is clear from the documents that Greta was on the payroll of Adustus  from, at least, 2008. It is now accepted on Greta’s behalf that she did not do any work for any of the Adustus companies. In any event, her P60 to 5 April 2008 shows a gross pay of £27,000. Her salary was increased with effect from 1 July 2008 to just under £93,000. The reason for this increase was to enable Greta to make an application for a mortgage to allow the purchase of the Property. It is John’s case that he was advised by Chris Roberts, his financial advisor, that, as he already had two mortgages, he could not obtain a third. 

13.	I heard evidence from Mr Roberts, who attended court following the service of a witness summons. He did not have any written record of any advice given to John and Greta, but recalled that a meeting took place at Ellis Close in which he advised that the mortgage could proceed on the strength of Greta’s salary, as John was already heavily indebted. It appears from John’s diary for 2008 that this meeting took place on 24 July. 

14.	Mr Roberts was not able to say whether John would have been able to borrow more in his own name if his salary had been increased, and further accepted that, in any event, there is no automatic bar on having more than two mortgages. Asked in terms whether he recalled any discussion to the effect that Greta would hold the Property as nominee only, he stated that he could not recall any such discussion. All that he could say was that he had been told that Greta was an employee of the company and that she earned enough. He had no knowledge as to who would be the beneficial owner. Mr Roberts also added that he would have remembered if, during the conversation, he had been told that the Property was to have been John’s alone. 

15.	 Mr Roberts concluded his evidence by stating that he had been offered £10,000 by John to come to court. John dealt with this evidence by saying that he had offered up to £10,000 to cover his costs, and never suggested to him what evidence he should give.  I accept Mr Roberts’ evidence that he offered the full £10,000 to Mr Roberts. Mr Roberts did not, of course, accept the money.

16.	On 29 October 2009 Alliance and Leicester made an offer of a loan of £350,000 to Greta. Shortly afterwards, Gisby Harrison were instructed to act in the purchase. The client care letter was addressed to Greta at Ellis Close. Mr Browne was clearly concerned about the way in which the deposit was to be paid. He wrote to Greta on 28 November 2008 stating that, as he had previously discussed with John, the lender would need to be satisfied, given the fact that not all the money was going through the client account. 

17.	The consent order in John’s divorce proceedings was also made on 26 November 2008. Ania undertook to use her best endeavours  to release John from his liability in respect of the mortgage on Highland Road by 9 January 2009, whereupon the property would be transferred to her (subject to the mortgage). In addition, John agreed to pay £66,000 to Ania until Christian finished school, and then £54,000 per annum until Francis finished school. The mortgage was in fact only transferred to Ania in March 2014. 

18.	On 10 December 2008 Mr Browne wrote to Alliance and Leicester. The letter set out in some detail the nature of the agreement made between John and Danny Smith. Importantly, the letter also stated: ‘ One other matter which you may find of assistance in considering the enclosed is that Mr V J Hoggins is the partner of the borrower and has been in a relationship with her for some years. The money paid by Mr Hoggins as detailed in this letter is effectively a gift from him to the borrower. There is to be no arrangement between the borrower and Mr Hoggins for any part of this money to be repaid to him and further more Mr Hoggins will have no legal or beneficial interest in the property. As advised, it is considered an outright gift from Mr Hoggins to the borrower’.

19.	 There is no evidence that a copy of this letter was sent to either Greta or John, and John’s response, having seen it for the first time in the course of this litigation, was that Mr Browne had never spoken to him about its content and that he had never given these instructions to Mr Browne, nor would he have done. By this time, on his account, his relationship with Greta was not good, and there was no reason whatsoever for him to make a gift of the Property to her. In evidence, John stated that he had told Mr Browne that he had initially wanted to buy the Property in his name, but explained the difficulties with obtaining a mortgage in his name. In his words, he could not understand how a solicitor could give away a house without instructions.

20.	I heard evidence from Mr Browne. He was aware that a witness summons might be issued, and attended in any event. I found him to be an entirely honest witness, doing his best to recall matters which occurred some 7 years ago. He has been a partner in Gisby Harrison since the 1980s, specialising in property and conveyancing. He brought to court such papers as he had, all of which related to contact with John from 2015 onwards, when John raised the question whether the December 2008 letter had been written without instructions with the firm’s managing partner, Michael  Lane.

21.	 In the course of a conversation with Martin Lane, (documented in an attendance note) John referred to the fact that he, John, had, some years before 2008, bought a piece of land in Highland Road (which he referred to as North land) for £100,000 and that Mr Browne had asked him to sell it to him. John had refused. This evidence was advanced by John as providing justification for the possibility that Mr Browne might have been harbouring a grudge against him. In evidence, Mr Browne denied ever having bought or sold land, or having acted in this purchase, or ever wanting to buy this land. Mr Browne described this allegation, in my view correctly, as ‘bizarre’. 

22.	 Mr Browne never met Greta, except on exchange and completion (which took place on same day, 3 April 2009) but had met John a number of times. It was clear from his evidence that Mr Browne was not in the habit of making attendance notes, but relied on his memory. He recalls having had a long telephone call with John before writing the letter referred to above to the lender, and wrote the letter on instructions. The transaction was unusual, because of the way in which the deposit had been paid. When asked whether it would have made any difference if he had been told that John was to be the beneficial owner, he replied that a deed of trust would have been necessary. 

23.	Mr Browne remained clear in his evidence during cross examination. He believed the purchaser to be Greta, even though he knew the money was coming from John (at least the deposit). He had no recollection of being told that John could not obtain a mortgage because he already had two mortgages. He repeated that it was his recollection that the Property was to be a gift from John to Greta. It may be fair to criticise Mr Browne for not having kept better records, or any records, of conversations, but I have no reason to doubt his honesty in his recollection of events. Moreover it is inherently improbable that he would, of his own accord, have provided information to the lenders which he had not received from John. No satisfactory explanation as to why he might have done this was put forward.  

24.	On receipt of the letter of 10 December 2008, Alliance and Leicester withdrew their offer. In order for the sale to proceed, it was necessary to find a way of satisfying the lenders. This was done as follows. John and Greta entered into a loan agreement with a Stephen Lamb for £100,000, to be repaid on completion (through Danny Smith’s account). The money was repaid to Mr Lamb on 6 April 2009. John also paid the fixed interest, or fee, of £6,000, and provided 4 boxes of cigars. 

25.	At the heart of this case is the alleged agreement between John and Greta that she would be merely a nominee for him, and Greta’s case that the Property was given to her, by John, as a gift. John’s evidence as to the agreement made between him and Greta regarding the ownership of the Property was vague and uncertain. In his written evidence he stated that it was ‘understood and agreed’ between them that the Property would be purchased in her name but paid for by him or the companies, and accordingly Greta understood and agreed that she would hold the Property for him. No details were given as to when or where this agreement was made. Moreover, he also stated that the Property would be transferred back into his name when Ellis Close was sold (although, so far as I am aware, no attempt was made to sell this) and, again, when the two existing mortgages were paid off.  In oral evidence (in answer to a question by me) John stated that he recalled the meeting with Mr Roberts in July 2008 very clearly: it was during this meeting that the agreement was reached that the mortgage would be in her name, but that the Property would be his. Greta was apparently very happy with the plan. He stated that there was only ever one conversation between them on this subject. At no time, he said, did Greta ask for the Property to be in her name. This evidence is at odds with the general tenor of his evidence, which is that Greta was constantly nagging him to buy her a property (as well, as he put it, as ‘the contents of most of the shops in Bond Street’).

26.	Greta’s evidence was that she had suffered at the hands of two abusive husbands, and was always concerned about her long term security. John repeatedly told her that he wanted to look after her and provide for her, and that he wanted her to have a property in her own name. John told her that the £100,000 deposit on the Property would be a gift, and the balance would need to be raised by a mortgage in her name, which he would pay.  She understood that she would be taking on the legal responsibility for repaying the mortgage, however; as she put it, this responsibility rested on her shoulders. John did not consider £100,000 to be a great deal of money; at the time, his business was doing extremely well. There is no doubt, as I explain further below, that John was extremely generous in these years, and that considerable sums of money passed through his hands.

2009 to date

27.	On 10 June 2010 Adustus Services LLP was incorporated. The company went into voluntary liquidation on 22 April 2015. Greta continued to be paid by Adustus: her P60 for the year ending 5 April 2011 shows an income of just over £70,000.  The following year her pay slip showed her earning £75,000, and £72,000 in 2013. 

28.	Neither John nor Greta moved into the Property. All the bills relating to the Property have always been in Greta’s name, although the insurance was in joint names until 2014. Until 2013 John paid all the bills. John’s explanation as to why they did not move in was that Greta refused to do so, even though large amounts of money were spent on furnishing and decorating. The house was ready in the summer of 2009, but her complaint, it seems, was that there was insufficient wardrobe space. Greta’s version of events was that they only ever planned to use the Property for weekends or as spare accommodation. She was adamant in her evidence that there was never any plan to sell Ellis Close.  As stated above, she moved into the Property in February 2013, and resides there to this day, and is responsible for the mortgage and all the outgoings.  In August 2013, Greta ceased to be longer employed by Adustus. John has since re-married.   

29.	It is clear from all the evidence I have heard and read that John now feels very bitter towards Greta, and has convinced himself that, from the outset, her intentions were to get what she could out of the relationship financially. John’s evidence is that the relationship had begun to deteriorate badly from 2007 onwards, and that he only stayed with Greta because his youngest son, Francis, adored her. But there is no dispute but that Greta was trying to become pregnant in the years 2005 to 2011, and had sought specialist advice from a consultant gynaecologist in 2008 and 2011.  What is also clear, and is amply demonstrated by the paper work I have seen, is that he was a remarkably generous, some might say, impulsive man, whose own life was complex and not always easy.  

30.	By way of example, John purchased a special edition Bentley for Greta (or at least for her use) which had the registration number G2 ETA. The cost of the car was £160,000. He also owned another 4 door Bentley. Greta sold the Bentley and kept the proceeds.  He had a property in Spain, and property interests in Dubai, and a house was bought, it seems, in Florida. Between 2005 and 2013 Greta spent over £100,000 on items of clothing, and jewellery for herself, all paid for by John. Other expensive items were purchased: in April 2008, by way of example, Greta ordered 11,000 euros worth of monogrammed sheets and towels from Frette in Milan. They travelled, either together or Greta alone, to Thailand, Alaska, Mauritious, Florida, Dubai, Cuba, as well as to Capri, Milan, and Amsterdam. It was, by any reckoning, and for those years, a life of ease and wealth. 

The parties’ submissions

31.	Mr Sefton Smith submitted that, on a proper analysis of the documentation relating to the work done by Adustus on the Bakers Farm site and in particular on the Property, and having regard to the fact that Greta drew a salary from Adustus, John cannot be heard to say that he paid the deposit or any of the mortgage repayments: the money came from Adustus, and not from him. In effect, as I understand it, his argument is that John has no standing to make the application he makes.

32.	Mr Sefton Smith also raised the issue of illegality, arguing that John’s conduct in relation to the obtaining of the mortgage, the use of company money, and possibly in relation to his divorce proceedings, were tainted with illegality. Mr Jacob, on behalf of John, submitted that there was no intention by John of defrauding any of the companies, the building society or his ex wife. If there is an issue as to putting money back into loan account, it is irrelevant to the question of ownership of the Property. The salary Greta received, he submitted, was not hers, but impressed with a trust. 

33.	 In view of my finding that the true arrangement between the parties was that Greta was to own the Property beneficially and legally, I do not need to consider these points further. That said, on the evidence before me, I would not be satisfied that John set out to defraud Audustus or the building society, or, indeed his ex wife. 

34.	It seems to me that, whatever the position may be between John and the liquidator or any creditor of his companies, the reality, in this case, is the parties acted as if the money for the purchase of the Property came from John: she was not concerned with the provenance of the money. The only question for me is whether the Property was indeed a gift to her, or was intended to be owned entirely by John (whether by use of company money or not). As Mr Jacob argued from the outset, this is an all or nothing case: the Property either belongs to Greta or it does not.

35.	The starting point, of course, is that the beneficial interest follows the legal title. This presumption can be displaced if it is shown that the parties intended otherwise. This is the factual issue at the core of this case. Mr Sefton Smith points to a number of factors, which he says, give credence to her case. The first is this. Greta’s concern to secure a property for herself is to be seen in the context of her previous marriages. There was every reason why she should want the Property in her name.  Secondly, having regard to all the evidence (including the IFV treatment, the travels paid for by John, and the amount spent on her) it is wrong to characterise the relationship as being in great difficulty before 2009: to the contrary everything points to a loving relationship until some point very much later. Thirdly, it may also be the case that John was anxious to put assets beyond the reach of his former wife: he would be comforted in the knowledge that the Property would be safe (albeit that the Property was in fact purchased some six months after the final consent order in the divorce proceedings).  Fourthly, the accounts of the Adustus companies, and John’s own evidence, make it clear that he could have repaid the entire mortgage in 2009 but chose not to do so. Fifthly, John spent a great deal of money on Greta over the years; if he could spend £100,000 on what might be described as fripperies, there is no reason to think that a further £100,000 by way of a deposit (and further money to pay the mortgage) should be put in a different category. 

36.	Sixthly, he points to the evidence of Mr Roberts and Mr Browne. Mr Roberts had no recollection of any discussion to the effect that Greta would only be a nominee. John’s case, it will be recalled, is that the agreement between himself and Greta was made during this meeting. Further Mr Roberts made the obvious point that there is no bar to having three mortgages in principle, and that he could see no reason why John’s salary should not have been increased sufficiently to satisfy the lenders. In relation to Mr Browne, Mr Sefton Smith pointed out  that the letter of December 2008 only came to light after she had put in her evidence. More significantly, the suggestion that he wrote the letter without instructions, or on the basis of some misunderstanding, is simply fanciful. Finally, Mr Sefton Smith submitted that John was only too willing to blame others for documentation which did not sit comfortably with his case; this was a recurring pattern throughout the case. 

37.	Mr Jacob submitted that the case is about unconscionability: either on the part of John who made an outright gift of the Property to Greta, or on Greta’s part in seeking to keep what she knows was never intended to be hers. On his case, the latter is the true position. If, as he argues, the parties reached an agreement that the Property was to be John’s alone, then it becomes easier to understand how a misunderstanding may have arisen in the course of the conversations between John and Mr Browne. The agreement that the Property was to be John’s makes perfect sense: he could not obtain a third mortgage, and he trusted Greta. He dealt with the solicitor and paid for all the outgoings on the Property until 2013, when the relationship had broken down. There is no satisfactory explanation as to why Greta did not move in. Greta’s evidence, he submitted, was evasive and dissembling: she did not readily accept that she had never worked for Adustus (and indeed she maintained that she had worked for the companies in her written evidence), and she was less than straightforward in relation to the £30,000/£20,000 sum given by her to John.

My findings

38.	I accept Greta’s evidence and in particular that John reassured her that, whatever happened, she would have the Property. Although she did not work for Adustus, I accept that she did a great deal to make his life easier, and to help with his children. I do not doubt, too, that, whatever the causes of the breakdown of the relationship, the relationship, which lasted 9 years, was not as unhappy as John is now at pains to portray it. There is some force in the criticisms made of her evidence by Mr Jacob (in particular the fact that she did not readily accept that she did not work for Adustus) but I have no hesitation in accepting her evidence on the core issue, namely the nature of the agreement relating to the Property. 
  
39.	I also agree with Mr Sefton Smith’s submissions. In my judgment it is clear from all the evidence that John intended that Greta should own the Property legally and beneficially. The explanation put forward by him (that he could not have a third mortgage in his name) is, on analysis, a weak one, and it is in any event undermined by the evidence of Mr Roberts. It also seems to me relevant that no attempt was ever made to sell Ellis Close: the fact that John and Greta did not move into the Property strengthens, rather than weakens, her case. The Property was intended for her, as security, to do as she wished. 

40.	Ultimately the most compelling evidence is the letter written by Mr Browne in December 2008, and his evidence. This letter was written at the time, and is the best contemporaneous record of the parties’ intentions. It could not be clearer: the Property was to be a gift from John to Greta. Such a letter could only have been written on John’s clear instructions. It does no credit to John’s case to put forward the suggestion that Mr Browne may have borne a grudge against him (in relation to the acquisition of another piece of land by John) and acted,  as it were,  on a frolic of his own, in some way to cause harm to John many years later.  

  Costs
    
41.	The usual rule is that costs follow the event. As the successful party, Greta is, in principle entitled to her costs, which will either be assessed summarily by me or be the subject of a detailed assessment if either party so wishes. In the first instance, a schedule of costs is to be filed and served by 8 January 2016. Any objections or representations John may wish to make are to be filed and served by 22 January 2016.

BY ORDER OF THE TRIBUNAL

Dated this 17th day of December 2015.