Chisholm v Smith

• Jurisdiction: Cayman Islands
• Judge: (Williams, J.)
• Judgment Date: 13 May 2013
• Court: Grand Court (Cayman Islands)
• Date: 13 May 2013

Grand Court, Civil Division

(Williams, J.)

CHISHOLM

and

SMITH

J. Kennedy for the plaintiff;

D. Dinner and S.Symons for the defendant.

Cases cited:

(1) Antoni v. Antoni, [2007] W.T.L.R. 1335; [2007] UKPC 10, referred to.

(2) Cowcher v. Cowcher, [1972] 1 W.L.R. 425; [1972] 1 All E.R. 943, considered.

(3) Dyer v. DyerUNK(1788), 2 Cox Eq. Cas. 92; 30 E.R. 42, applied.

(4) Esso Standard Oil S.A.Ltd. v. Jose”s Ltd., 1999 CILR 51, applied.

(5) Fowkes v. PascoeELR(1875), L.R. 10 Ch. App. 343, applied.

(6) International Credit & Inv.Co.(Overseas) Ltd. v. Adham, 1996 CILR 89, followed.

(7) Lavelle v. Lavelle, [2004] 2 F.C.R. 418; [2004] EWCA Civ 223, followed.

(8) Lee Tso Fong v. Kwok Wai Sun, [2008] 4 HKLRD 270; [2008] 4 HKC 36; [2008] HKCFI 385, followed.

(9) Lohia v. Lohia, [2001] EWCA Civ 1691, followed.

(10) Sagicor Gen. Ins. (Cayman) Ltd. v. Crawford Adjusters (Cayman) Ltd., 2011 CILR (1) 130, distinguished.

(11) Shepherd v. Cartwright, [1955] A.C. 431; [1954] 3 W.L.R. 967; [1954] 3 All E.R. 649, distinguished.

(12) Tinsley v. Milligan, [1994] 1 A.C. 340; [1993] 3 W.L.R. 126; [1993] 3 All E.R. 65; [1993] 2 FLR 963; (1994), 68 P. & C.R. 412, followed.

(13) Vajpeyi v. Yusaf, [2004] W.T.L.R. 989; [2003] EWHC 2788 (Ch), applied.

(14) Vandervell v. Inland Rev.Commrs., [1967] 2 A.C. 291; [1967] 2 W.L.R. 87; [1967] 1 All E.R. 1, referred to.

(15) Warren v. Keen, [1954] 1 Q.B. 15; [1953] 3 W.L.R. 702; [1953] 2 All E.R. 1118, followed.

(16) Westdeutsche Landesbank Girozentrale v. Islington London Borough Council, [1996] A.C. 669; [1996] 2 W.L.R. 802; [1996] 2 All E.R. 961, followed.

Trusts-resulting trusts-presumption of intention-when transferor”s intention as to beneficial interest unknown, presumed that transfer not gift and intention imputed that property held by transferee on resulting trust-transferee may rebut presumption by showing that transferor had no intention at time of transfer for property to be held on trust-may use evidence arising after transfer only if reflects transferor”s earlier intention

Trusts-resulting trusts-presumption of intention-transferee not able to rely on illegal act to rebut presumption but may rely on evidence incidental to illegal act (e.g. may rely on fact that disputed transfer payment for earlier transfer of property even though earlier transfer illegal)

The plaintiff sought a declaration that the defendant, her nephew, held a property on trust for them both.

The parties agreed to purchase a property comprising several flats (‘the North Side property’) using the defendant”s status as a first-time buyer to avoid stamp duty. The defendant was registered as the sole owner and a mortgage was taken out solely in his name, but the deposit was paid entirely by the plaintiff and both parties contributed equally to the mortgage. The parties leased the flats and split the income equally but, after the North Side property had been held for five years, the defendant transferred it to the plaintiff for ‘natural love and affection.’ The plaintiff claimed that the parties had agreed that this would be done before they had originally purchased the property, but the defendant claimed that they had agreed that he would be paid for doing so, and that the plaintiff had reiterated this promise at the transfer.

After the North Side property was damaged and the plaintiff received a cheque from her insurers, the parties agreed that the plaintiff would contribute to the purchase of a house (‘the Kingbird property’). The plaintiff gave the insurance cheque to the defendant, who used it pay the deposit, and the property was registered, and a mortgage was taken out, solely in his name. The parties moved into the Kingbird property and the defendant spent significant time and money renovating it, whilst the majority of plaintiff”s contributions were limited to improving her bedroom. She initially made monthly payments to the defendant equal to one-third of the mortgage payments (which she referred to as ‘rent’

during cross-examination), but the amount she paid did not increase when the mortgage payments were increased. The plaintiff claimed that she had given the cheque to the defendant on the understanding that she had obtained a one-third beneficial interest in the Kingbird property and that it would be transferred into her name after five years. The defendant denied this, claiming that the plaintiff had given the cheque to him as payment for the transfer of the North Side property and that she had lived in the Kingbird property as his tenant.

The parties” relationship deteriorated and, after the plaintiff left the property, she demanded repayment of the cheque (which she described as having been a loan) with interest. This demand was later abandoned and the plaintiff claimed that the cheque had been in exchange for a one-third interest. The defendant refused to pay her and the plaintiff applied for a caution over the Kingbird property. This was granted based on her supporting affidavit, in which she claimed that the parties had agreed that the Kingbird property would be registered in both of their names when it was purchased. She later alleged, however, that the agreement had been that it would be in the defendant”s name alone and claimed that she did not know why the affidavit had stated otherwise. The plaintiff brought the present proceedings and the defendant counterclaimed for, inter alia, removal of the caution and compensation for the cleaning of the Kingbird property which had been required after the plaintiff had moved out.

The plaintiff submitted that, as she had paid the deposit and contributed to the Kingbird property”s mortgage, the presumption of a resulting trust arose in her favour. Although her contributions to the mortgage payments had not increased with the defendant”s, she had left the determination of payments to the defendant due to her poor mathematical ability. Further, the defendant could not attempt to rebut the presumption of resulting trust by relying on his own fraud or illegality. The transfer had been stated as having been made in consideration of natural love and affection, and it would have been an offence under the Stamp Duty Law (2010 Revision), s.29 for this to have been untrue; he could not, therefore, argue that the cheque had been in payment for the transfer. Alternatively, either a constructive trust or proprietary estoppel had arisen as the plaintiff had contributed to the purchase price and mortgage payments only because of the defendant”s representation that the title would be transferred after five years.

The defendant submitted in reply that a resulting trust did not arise because the cheque was payment for the transfer of the North Side property and the monthly payments had been rent. Even if the transfer had been illegal, which the defendant did not accept, this could be rectified by a late payment of the stamp duty and any required penalty. Moreover, any illegality had not been the dominant purpose of the arrangement and the registration of the North Side property in the defendant”s name had not been for any unlawful purpose. He was therefore able to rebut presumption of resulting trust by relying on the representation that the cheque was payment for the transfer. Additionally, there could be no constructive trust

or proprietary estoppel as the defendant had not represented that the Kingbird property would be transferred to the plaintiff and the plaintiff had not suffered any detriment.

In the counterclaim, the defendant submitted that, as the caution had been obtained through fraudulent representations to the Land Registrar, the court should remove it and award damages. Although the defendant had not pleaded special damages, a caution should be viewed as similar to a wrongful undertaking, for which general damages could be awarded.

The plaintiff submitted in reply that the placing of a caution, being an injunction in rem, was very different from a wrongful undertaking, which operated in personam. The two were therefore not comparable and the court was not entitled to award general damages. Further, as there was a paucity in detail in the counterclaim relating to the cleaning of the leased area, damages could not be awarded.

Held, dismissing the claim and allowing the counterclaim in part:

(1) The plaintiff”s contribution to the purchase of the Kingbird property had given rise to a presumption of a resulting trust, but this had been successfully rebutted by the defendant. The presumption had arisen because the plaintiff had transferred the insurance cheque to the defendant and her intention as to who would hold the equitable interest in that property had not been known or expressed in the transfer documents. The intention that the cheque had not been a gift to the defendant-and that any property purchased with it was to be held on trust for both parties-was therefore imputed to the plaintiff. The presumption could be rebutted by the defendant if he could show that the plaintiff”s actual intention, at the time of the transfer, had been that the money was transferred solely for his benefit and, accordingly, that she would acquire no beneficial interest in the Kingbird property. This had to be shown to the civil standard of proof, and evidence which arose after the transfer could only be presented if it could reliably be said to reflect the plaintiff”s intention at the time of the transfer itself. The presumption had not arisen, however, from the monthly payments as these were properly recognized as rent. The court could not accept the plaintiff”s contention that they were a contribution to the mortgage as they did not increase proportionally with the mortgage; the claim was inconsistent with her other pleadings, as it was unclear why she would contribute to the mortgage if an interest in the property had already arisen from the transfer of the insurance cheque; and the plaintiff had...