REF/2013/0631
NCN: [2015] UKFTT 149 (PC)

FIRST TIER TRIBUNAL (PROPERTY CHAMBER)
LAND REGISTRATION DIVISION

LAND REGISTRATION ACT 2002

IN THE MATTER OF A REFERENCE FROM HM LAND REGISTRY

BETWEEN
DARSHAN SINGH
APPLICANT

and

MOHAMMAD HARUN ENSAF
RESPONDENT

Property Address:	4 Kingswood Road Moseley Birmingham B13 9AL

Title Number: 		WK37164

Before: 	Mr Hansen (Tribunal Judge)

On: 				27 March 2014

Representation:		Mr Daniels of Counsel for the Applicant
				Mr Mould of Counsel for the Respondent
_____________________________________________________________________

DECISION
_____________________________________________________________________

KEYWORDS – Restriction – Beneficial Interest – Resulting and/or Constructive Trust

Cases referred to

Jayasinghe v. Liyanage [2010] 1 WLR 2106

Grant v Edwards [1986] Ch 638

Laskar v. Laskar [2008] 1 W.L.R. 2695

Morris v. Morris [2008] EWCA Civ 257

Oxley v. Hiscock [2004] EWCA Civ 546

The Application

1.	By an application in form RX1 dated 18 March 2013 the Applicant applied to HM Land Registry to enter a restriction on the register of title relating to a freehold property situate at 4 Kingswood Road Moseley Birmingham registered under title number WK37164 (“the House”). The application seeks a restriction in form II on the basis that the Applicant has a beneficial interest in the House. The principal basis of the Applicant’s claim is that he claims to have contributed £45,000 towards the acquisition of the House and did so on the basis of a common intention that he would thereby acquire an interest in the House. By letters dated 17th and 23rd April 2013 the Respondent’s solicitors objected to the application on the basis that the Applicant had made no contribution to the purchase of the House and had no interest in it. The application could not be resolved by agreement and was therefore referred to the Land Registration Division of the First Tier Tribunal (Property Chamber) on 24th July 2013 to be decided.

2.	At the commencement of the hearing Mr Mould on behalf of the Respondent invited me to strike out claim or debar the Applicant from calling any evidence on the basis that he had served his witness statements late. I declined to do so. The directions made on 16th October 2013 ordered that witness statements be exchanged by 4th December 2013. They did not contain a sanction for non-compliance. The Applicant’s solicitors filed the Applicant’s witness statements with the Tribunal under cover of a letter dated 11th November 2013. However, for reasons which are unclear, they did not serve those witness statements on the Respondent until 5th March 2014. The Respondent’s solicitors did not apply for an unless order or any other order until they sent a letter to the Tribunal on 19th March 2014 seeking a strike out. The Applicant then served a second witness statement on the Respondent on 25th March 2014. There was also a complaint by the Respondent in relation to the late service of the trial bundle. I considered the application by reference to Rules 8 and 9 of the Tribunal Procedure Rules 2013 but concluded that it would not be just or proportionate to strike out the claim or debar the Applicant from calling evidence. No specific prejudice was alleged by the Respondent, the parties were ready for trial and I was satisfied that it would have been contrary to the overriding objective (in Rule 3 of the 2013 Tribunal Procedure Rules) to accede to the Respondent’s application. I note in this connection that the Tribunal’s overriding objective, with its emphasis on avoiding unnecessary formality and ensuring that the parties are able to participate fully in the proceedings, is significantly different in a number of important respects from that now found in the CPR with its renewed emphasis on enforcing compliance with orders. 

The Background

3.	The House is registered in the sole name of the Respondent. The official copy of the register of title shows that the purchase was completed on 27th March 2003 with the assistance of a mortgage and the Respondent was registered as proprietor on 7th May 2003.

4.	Neither side has produced anything like a proper bundle of documents. Nor it seems has either side given proper disclosure. I have no bank statements, no mortgage statements and no conveyancing file. Nor do I have any receipts or any other documentary evidence of payments allegedly made. At the hearing I could not even be confident as to the purchase price paid by the Respondent because although his solicitors alleged in their letter of 23rd April 2013 that the purchase price was £76,000, panel 1 of the TR1 dated 27th March 2003 (at pages 28 and 33 of the very slim bundle that I do have) suggests that the consideration did not exceed £60,000. There is also a document that describes itself as a “Mutual Agreement” [“the Agreement”] (p.8) which purports to recite the fact that “the property was purchased for £140,000 in 2005”. I shall have to return to consider the significance of the Agreement in due course but for present purposes it serves only to muddy the waters further as to the price paid for the House in 2003. The register of title does not assist because this purchase was completed before the register showed the price paid. The only other document provided to me is a mortgage deed dated 27th March 2003 which shows that the Respondent, who is identified as the borrower, charged the House by way of legal mortgage with the payment of all money payable by the borrower to the lender which is identified as Halifax plc. A charge dated 27th March 2003 is noted in the register, the proprietor of which is now shown as Bank of Scotland plc.

5.	I therefore have relatively little to work with in the way of documentation but I must do my best with what I do have, assisted by the witness evidence.

The Issues

6.	The principal issues are whether the Applicant made the alleged or any contribution to the purchase price and if so on what basis. Depending on my findings in relation to those issues, I will need to determine whether the Applicant has any interest in the House and if so what interest. If he does, I will need to consider whether it is necessary or desirable to enter a restriction in the register of title relating to the House.

7.	How far should I go in determining the beneficial ownership of the House? Quite far is the answer. Whilst I cannot grant declaratory relief as such or make an order for sale, I am satisfied that I can and should determine the matter as fully as possible, including the extent of the beneficial interests in the Property: see Jayasinghe v. Liyanage [2010] 1 WLR 2106. 

The Evidence

8.	I heard evidence from the Applicant and the Respondent and the following further witnesses on behalf of the Applicant: his wife, Sharanjit Kaur (“Sharanjit”), and a friend, Mr Inderjit Singh (“Inderjit”). 

9.	The Applicant and his wife gave their evidence in Punjabi through an interpreter. The Respondent gave his evidence in Pashtun through an interpreter. 

10.	I do not propose to summarise all the evidence. I will, however, refer briefly to the relevant evidence given by the Applicant, the Respondent, Inderjit and Sharanjit in the course of setting out my findings of fact. 

11.	At the conclusion of the evidence I heard brief closing submissions from both Counsel but gave them each the option of filing further written submissions (if so advised). Both Counsel filed written submissions which I have taken into account alongside their Skeleton Arguments and their oral closings. The Applicant’s written submissions are dated 1st April 2014 and the Respondent’s written submissions are dated 30th March 2014.

Findings of Fact

12.	As is apparent from what I have said above, this case presents a very stark conflict of evidence which I must resolve without the benefit of any of the contemporaneous documentation that might have assisted, e.g. bank statements, the contents of the conveyancing file etc. 

13.	The House is registered in the sole name of the Respondent pursuant to a transfer from Mr Rahimi and the Respondent to the Respondent alone. He is the only borrower named in the mortgage deed. There is no contemporaneous documentation to evidence any financial contribution by the Applicant. On the face of it, the Applicant faces an uphill task. He is the Applicant and it is for him to prove an interest in the House. His statement of case and two witness statements do not immediately inspire confidence. They refer to a purchase in 2005 (whereas it appears that the House was purchased by the Respondent in 2003) and an undocumented contribution of £45,000 allegedly made towards the deposit. 

14.	In my view, the key to this case is the Agreement (p.8). It is, in one sense, the most reliable source of information because it is admitted to be signed by both parties. The Respondent accepts that he signed the Agreement and did so in the presence of a Mr Hussain. The Agreement is also signed by the Applicant who signed at the same time in the presence of Inderjit. The Agreement is in the following terms:

Mutual Agreement
		Between: Mohammed Harun Ensaf and Darshan Singh
We both hereby agree that property known as 4 Kingswood Road Moseley Birmingham B13 9AL dated 24/10/12
That the property was purchased for £140,000 in 2005 in the name of Mohammed Harun Ensaf with Darshan Singh as silent partner deposit of £90000 was paid in equal share of £45000 each with further repairs spent in equal share totalling £15000
Secured loan of £10000 was taken by Mohammed Harun Ensaf this was for his personal use
It is hereby agreed that the sale and negotiation responsibility and right solely and only lies with the named owner Mohammed Harun Ensaf with no interference in sale process from Darshan Singh
Signed in acceptance by both parties

Harun Ensaf						Darshan Singh

15.	On the face of it, the Agreement lends strong support to the Applicant’s case. It is signed by both parties. It describes the Applicant as a “silent partner” and records the fact that he made equal contributions to both the deposit and the subsequent repair of the House. The last paragraph, whereby the Applicant was precluded from interfering in the sale process, might be said to be somewhat inconsistent with the earlier provisions but in my view it does not detract from the force of the Agreement in terms of the support it lends to the Applicant’s case.

16.	The Respondent, by his Counsel, seeks to suggest that the Agreement is, in fact, a sham. I refer to the Respondent’s Skeleton Argument which says this:

“30.	The mutual agreement was signed to give the appearance of creating legal rights and obligations between the parties to mortgage providers. These rights and obligations which the mutual agreement purported to give were different from the actual legal rights and obligations which the parties intended to create: Snook.

32.	The true purpose for entering into the mutual agreement was in order to secure a mortgage so that money could be lent to the Applicant.

40.	The subjective intention of the parties was to create the impression that the Applicant was a joint owner of the Property. The reason for this was to obtain a mortgage.

42.	In those circumstances the document was a sham. Consequently, there was no intention to create legal relations. The mutual agreement is not binding on the parties”.

17.	Before I consider this allegation in more detail, I should set out my findings of primary fact in relation to the history and the circumstances in which the Agreement was prepared and signed. 

18.	The Applicant’s evidence was to the effect that the Agreement represented the culmination of his insistence, going back over a number of years, that his interest in the House be recognised on the basis of his financial contribution to the purchase which he quantified at £50,000: £45,000 by way of contribution to the purchase price and £5,000 by way of contribution to repairs, solicitors’ fees and other miscellaneous expenses. This contribution had not been made in one lump sum but over a period of years as explained in paragraph 2 of the Applicant’s witness statement dated 2nd September 2013 (p.13) when both parties were living in Germany. Thus by 2003 the Applicant said he had given £32,500 in cash to the Respondent for safe-keeping. The Applicant’s evidence was that they both visited England in 2004 and agreed to buy a property together. On the occasion of their visit he said they stayed at the House on the basis that he was told by the Respondent that it belonged to a member of his family. It was the Applicant’s evidence that it was only in 2005 that he was told by the Respondent that the House was for sale and could be purchased for £140,000. The Respondent suggested that they each contribute £45,000 to the deposit with the balance funded by a mortgage. The Applicant told me that he agreed with the Respondent’s suggestion and he thought that the purchase had proceeded on that basis, using (in part) the money that he had entrusted to Respondent. Despite the lack of any documentary evidence to prove the financial contribution, I accept that evidence. 

19.	In fact, as stated above, it would appear that the House had been purchased in 2002 by the Respondent and a Mr Rahimi for £76,000 before being transferred to the Respondent in 2003 in circumstances which are unclear from the papers. The Respondent told me that he effectively bought out Mr Rahimi for £15,000 plus some land in Afghanistan. I find all this highly suspicious and note that there was no mention of any of this in the Respondent’s statement of case. The Respondent’s pleaded case was that he purchased the House in 2003 for £76,000. The circumstances of the transfer in 2003 appear very murky indeed. I cannot safely accept the Respondent’s evidence on this or any other aspect of the case. Rather I find and shall proceed on the basis that by 2003 the Respondent had acquired House in his sole name for a consideration in money or money’s worth of £76,000 to which the Applicant had contributed £32,500. However, I am satisfied that the Applicant had not been told about this earlier purchase and believed that he was buying the House jointly with the Respondent in 2005 on the basis of what he had been told by the Respondent, namely that the price was £140,000 and was to be funded by both parties equally as to £90,000, with the balance provided by way of mortgage. 

20.	Thereafter the Applicant told me and I accept that he contributed equally to the monthly mortgage instalments of £323.00, the monthly council tax of £105.00 and the quarterly utility bills until the House was rented out in 2006 whereupon the rent covered the outgoings. 

21.	Mr Mould cross-examined the Applicant closely (and quite properly) and revealed a number of discrepancies and inconsistencies in his evidence. The Applicant’s evidence was indeed confused at various points about his financial contribution in particular and indeed on other points and at first blush his whole account seemed somewhat implausible. However, I listened carefully to his evidence and observed his demeanour in giving that evidence and my overall impression was that he was telling the truth and I consider that the Agreement provides significant corroboration for his evidence. It is important to have in mind in this context the fact that both parties are market traders used to dealing with large quantities of cash. Thus the fact that there is no documentary evidence to prove the Applicant’s contribution is not surprising. 

22.	By contrast, I found the Respondent an unsatisfactory and unreliable witness whose evidence I could not accept. I shall return to his evidence in more detail below but it is also important to record the fact that the Respondent was obviously the dominant personality in the relationship between the two of them which is accepted to have been a friendly relationship for many years, at least until the current dispute. This is relevant because it serves to explain the Applicant’s apparent reticence in advancing his claim to an interest and the Respondent’s apparent ability to fob him off with excuses over many years. 

23.	The most significant example of this was the reason why the Applicant’s name was not on the title deeds. The Applicant was asked why his name was not on the title deeds. His evidence, which I accept, was that he was told by the Respondent that his name could not be put on the title deeds because he did not have a National Insurance number but would be put on later. To my mind, that is a classic example of the “excuse” type of case referred to in Grant v Edwards [1986] Ch 638. These facts appear to me to raise a clear inference that there was an understanding between the parties, or a common intention, that the Applicant was to have a proprietary interest in the House; otherwise no excuse for not putting his name onto the title would have been needed. The Applicant was asked whether he was not concerned that his name was not on the title deeds. His reply was that he trusted the Respondent more than his family. I accept this evidence too. 

24.	I return then to the Agreement. The Agreement is largely consistent with the Applicant’s evidence. Being signed by the Respondent, it is, in one sense, an admission against interest and carries particular weight as such. No doubt in recognition of the difficulty caused for the Respondent by the Agreement, his Counsel alleged that it was a sham as explained above. However, I am satisfied that it was not and the evidence as to its preparation gives the lie to any such suggestion. 

25.	Both the Applicant and Inderjit told me that the Agreement was typed out by Mr Hussain following extensive discussions between the parties. They also told me that it was effectively the Respondent who was giving the instructions to Mr Hussain. Inderjit told me that the purpose of the Agreement was to give the Applicant peace of mind because he had paid a lot of money towards the House. Both the Applicant and Inderjit told me that an earlier version of the Agreement was not signed because the Respondent wanted to ensure that he had conduct of any sale. That explains the language of the last paragraph. Apart from that, the earlier draft was identical. Inderjit told me that the Respondent said that when he sold, he would pay the Applicant his share and that the Applicant should trust him. Inderjit’s evidence was that there was no talk at this meeting about any mortgage or remortgage. 

26.	The Respondent’s evidence was diametrically opposed. Although he accepted that he and the Applicant were friends who discussed everything, he denied any conversation about putting the Applicant’s name on the title. He said that the Applicant never asked and he never gave an excuse for not putting him on the title. The issue simply never arose because the Applicant had made no financial contribution to the House and therefore had no interest in it. He said the reason for the Agreement was as follows: the Applicant wanted to borrow money from the Respondent; the Respondent attempted to remortgage the House so as to be able to lend money to the Applicant but his income was insufficient. He said that this had been the purpose of the visit to the Halifax in or about January 2012 which both parties accepted had taken place. When this failed, the Respondent said they went to see another mortgage adviser, Mr Hussain, who “prepared some mortgage related paperwork which the Applicant and the Respondent both signed. This paperwork was signed to get mortgage in the joint names of the Applicant and the Respondent. The nature, consequence and legal effect of this paperwork was never explained to the Respondent as the Respondent is not literate and cannot read, write or speak English”: paragraph 2(k), page 31.

27.	The paperwork to which the Respondent is referring is the Agreement. I am afraid I cannot accept this evidence. The purpose of the visit to the Halifax in January 2012 was, I find, to attempt to transfer the mortgage and the title into the joint names of the Applicant and the Respondent. Whilst the evidence of what was discussed at this meeting is somewhat unclear, and the precise purpose of the visit may have been lost in translation when dealing with the bank employee, I am satisfied that this is what the parties had in mind. As to events in October 2012 at Mr Hussain’s offices in Stratford Road, I prefer the evidence of the Applicant and Inderjit to that of the Respondent and I am quite satisfied that the Respondent understood the Agreement and signed it in full knowledge of and agreement with its contents. I am entirely satisfied that it was not a sham and was not designed to facilitate a remortgage by misleading potential lenders. If that had been its purpose, one would have expected the Respondent to attempt to remortgage the House thereafter but he accepted that he never went back to the bank to pursue the remortgage. This is because that was not the purpose of the Agreement. The Agreement was designed to recognise the Applicant’s financial contribution to the House and to give the Applicant the peace of mind he had been demanding for some time, demands the Respondent could no longer resist. 

Conclusions

28.	Although this is not a case involving an arm’s length commercial transaction, nor is it a case involving a “cohabiting couple”: see e.g. Laskar v. Laskar [2008] 1 W.L.R. 2695. It therefore falls to be dealt with by reference to well-established resulting and constructive trust principles. 

29.	The difficulty with this case, apart from the paucity of contemporaneous documentation, is the fact that the Respondent has misled the Applicant to such a degree that it is difficult to disentangle the lies from the reality. As the Applicant said in evidence, it was not until he saw the Respondent’s solicitors’ letter dated 23rd April 2013 that he discovered the House had in fact been purchased in 2003, not 2005 as he had been led to believe by the Respondent. He had also been misled about the purchase price. The reality was that the House had been purchased for much less (£76,000) than the Applicant had been led to believe (£140,000). 

30.	Mr Mould invited to me to reject the Applicant’s claim to have an interest in the House on the basis of a financial contribution to the purchase on the grounds that there was no documentary evidence to support the alleged contribution. However, as explained above, both parties were used to dealing in cash as market traders and I am satisfied that the Respondent used £32,500 of the Applicant’s money to fund the purchase of the House in 2002/2003. That was the amount which by 2003 the Applicant had entrusted to the Respondent. On this basis I am satisfied that the Applicant would be entitled to a beneficial interest under a resulting trust in proportion to his contribution, i.e. 43%. That interest would be such as to justify the restriction sought. However, the matter does not rest there. 

31.	The Applicant was misled into believing that he had to find another £12,000 to fund the “purchase” in 2005. The purchase had already been completed but I am satisfied that the Respondent represented that the purchase was proceeding on this basis as a joint venture and took a further £12,000 from the Applicant on the basis of this common intention. What, if anything, is the legal consequence of this post-acquisition agreement in 2005 and the Applicant’s further contribution together with the other payments made by the Applicant referred to in paragraph 20 above? So far as the Applicant was concerned, this was a pre-acquisition agreement but I have to proceed on the basis of the facts as they now appear.

32.	As a result of the agreement in 2005, and the Applicant’s detrimental reliance on that agreement by his further payment of £12,000 and the other contributions referred to in paragraph 20 above, I am of the view that there has, in effect, been a post-acquisition constructive trust or a variation of the beneficial interests (see e.g. Morris v. Morris [2008] EWCA Civ 257) and that the Applicant’s share should be quantified by reference to the agreement: Oxley v. Hiscock [2004] EWCA Civ 546 at [69]. I have found that the Applicant already had an interest in the House under a resulting trust but whatever the previous position may have been I am satisfied on the basis of the agreement in 2005 and his detrimental reliance on it that the Applicant is entitled to an enhanced 50% share on the basis of a common intention constructive trust. As stated above, the Applicant thought it was a pre-acquisition agreement because he had been misled by the Respondent but it was in fact a post-acquisition agreement. In the circumstances I do not consider that this makes any material difference to the outcome; the legal result is that the Applicant is entitled to a 50% share in the House. 

33.	The Agreement is consistent with that result. Mr Daniels described the Agreement as “a memorandum to give him [the Applicant] some comfort”. It was not submitted to have created a trust or to take effect as a disposition; rather it was said to evidence and record the Applicant’s contributions to the purchase and to be supportive of the Applicant’s claim to an interest in the House on the basis of a resulting and/or constructive trust, to which the formalities rules do not apply. In my view, it accurately reflects what the Applicant had been told by the Respondent in 2005 and what he understood to have been the common intention, namely that the acquisition of the House was a joint venture to be funded equally by both parties. It was to be their property and was to be owned 50:50. That was what the parties agreed in 2005 and on the faith of that agreement the Applicant provided the Respondent with a further £12,000 and made the payments referred to in paragraph 20 above. 
34.	Accordingly, I determine that the Applicant has a beneficial interest in the House and I quantify that interest at 50%. Given the amount of the Applicant’s contribution, and the price in fact paid for the House in 2002, it might be said that the Applicant is entitled to a larger share but the Applicant has not in fact contended for a larger share and I believe that this would be contrary to the parties’ intentions. The result that I have arrived at accords with the whole course of dealing between the parties as described by the Applicant, whose evidence I accept, as well as being consistent with the Agreement which was not a sham but reflected what the Applicant had been told by the Respondent and what he thought had happened. 

35.	This is not to say that the account between the parties is now necessarily clear. The Applicant alleged that the Respondent owed him other monies. I make no finding on this allegation and would emphasise that I have not attempted to undertake anything like an account as to the dealings between the parties but have confined myself to making the findings necessary to resolve this application. 

36.	If and when the House is sold, it will be for another Judge to determine what (if any) equitable accounting and the like is necessary or appropriate.

37.	The Respondent’s Counsel submitted that even if the Agreement were taken at face value, it did not assist the Applicant in this application because the restriction sought would be inconsistent with the last paragraph of the Agreement whereby the Applicant agreed not to interfere in the sale process. 

38.	I am not persuaded that it would be inconsistent with that provision but in any event I am satisfied that it is necessary or desirable to enter the restriction sought for the purpose of protecting the Applicant’s right or claim in relation to the House. 

39.	I shall therefore order the Chief Land Registrar to give effect to the application. 

40.	As presently advised, I see no reason to depart from the normal rule that costs should follow the event but I invite both parties to file and cross-serve written submissions on both the incidence and quantum of costs, supported by a Schedule in the normal way. 

BY ORDER OF THE TRIBUNAL

Dated this 25th day of April 2014