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Davis v Jackson & Anor [2017] EWHC 698 (Ch)

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In a tweet: Equitable accounting exercise carried out after H’s bankruptcy

Summary:  An unusual set of circumstances where a property was held on express trust (a signed TR1) for the husband (“H”) and wife (“W”) as joint tenants but the couple had, at all relevant times, been estranged and had been living apart even when the house was originally bought by W in her sole name. It had never been intended that H would live in the property (and neither had he done so) and the property had only been transferred into joint names when the house was remortgaged. H had never contributed to the mortgage payments or other outgoings. H had subsequently been made bankrupt and the trustee in bankruptcy (“TiB”) was seeking an order for sale.

Findings had already been made that the TR1 was conclusive as to the parties’ beneficial interests in the property and there was no evidence of any subsequent variation nor any facts that could have given rise to an estoppel against H.  W had unsuccessfully appealed those findings but the subsequent order for sale that had been made was varied to provide that it should be subject to an equitable account between W and the TiB. The order for sale was stayed until that equitable account was finalised (the idea being that the parties might be able to reach an agreement over the property’s value and, depending upon the outcome of the account, W might be able to buy out TiB’s interest). 

The house was valued at £450,000 with an outstanding mortgage of £203,619.  W had paid some £123,906 towards the mortgage.  

Held: After reviewing the authorities, Mr Justice Snowden set out the starting point: a 50:50 division between W and the TiB. However, W was entitled to additional credit because of the mortgage payments she had been making. She therefore received additional credit equivalent to half of the total mortgage payments made to date. 

Snowden J then turned to the issue of occupation rent. Again, he reviewed the authorities on the issue. He concluded that he was not bound by the statutory regime of ToLATA and could instead apply general equitable principles. The default position, he determined, was that where one co-owner was in occupation and the other was not, occupation rent was not payable. To make the occupier pay rent, the court of equity required conduct by the occupier to justify moving away from the default position.  

However, this case was significantly different from all the other authorities and Snowden J considered that where a property has been acquired to provide a home for one co-owner alone and the bankrupt had never had nor was intended to have any right of occupation the position as regards occupation rent may be materially different.  

Here, at no time during the entire history of ownership of the property, prior to the bankruptcy, had there been any agreement or expectation either that H would have a right to occupy the property, or that W would have to pay rent to anyone for her occupation of it. It was difficult to see how the TiB could in effect claim to stand in a better position than H and charge W rent in place of seeking to occupy the property. The circumstances made it inequitable to charge W occupation rent.  

Snowden J concluded that the correct apportionment of the proceeds of sale of the house would be first to split the net proceeds equally between the TiB and W, and then to give W additional credit for one half of all the payments she has made under the mortgage(s) from the date the house had been purchased to the date upon which the house was sold. There should be no credits in respect of other payments which Mrs. Jackson has made, and no debits in respect of her occupation of the Property. (I calculate that to mean W ended up with £247,096.50 and the TiB ended up with £61,953).  

Submissions were invited as to whether the parties might be able to reach an agreement meaning W would buy out the TiB so as to avoid an order for sale.

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