Murphy v Murphy

30th June 2007

[2007] EWCA Civ 603; Mummery LJ, Sedley LJ and Lightman J; Court of Appeal, Civil Division; 27 JUNE 2007

Ms Murphy (the claimant) and Mr Gooch (the defendant) had been together for many years by the time they purchased a home under a shared ownership scheme: they purchased a 25% share in a property, with the help of a mortgage, and the other 75% was bought by a housing association. They paid mortgage interest instalments to the bank and rent to the housing association in respect of the 75% share. They also paid premiums to an insurance company for an endowment policy.

Unfortunately, the relationship lasted only 2 years after the purchase of the property. The claimant left, taking their infant child with her. She wanted to realise her share of the property and tried to sell it to the defendant. He declined, not being able to afford it.

The defendant remained in occupation of the property for over 12 years after that, paying all of the expenses, mortgage interest instalments and insurance premiums. The claimant finally brought proceedings, seeking a declaration that she and the defendant each owned a half of the 25% share in the property, and an order for sale. She also asked for an order that, if the defendant were to continue in occupation of the property, conditions should be attached to that occupation.

The defendant accepted that the claimant had a half share in the property; the main dispute concerned the value of the claimant’s share, which turned on the amount of contribution she needed to make to the defendant for the moneys paid out by the him while he was occupying the property. Against that, the claimant argued that she should be able to set off an amount of compensation from the defendant for his sole occupation of the property during that time.

It was held that both the defendant and the claimant were entitled to credit for payments and occupation (whether or not she had been ousted), respectively. Following the decision of the House of Lords in Stack v Dowden [2007] UK HL 17; [2007] 2 WLR 831, HL; see per Baroness Hale at para [93]), however, as the application was under s.13 of the Trusts of Land and Appointment of Trustees Act 1996, the credits had to be determined but according to the principles set out in s.15 of the 1996 Act, not under the doctrine of equitable accounting, as had previously been applied in such cases. Under these statutory principles, the claimant was entitled to a complete set-off against the credits to which the defendant was entitled.

The matters to be taken into account under s.15 of the 1996 Act

are:

the intentions of the person or persons (if any) who created the trust
the purposes for which the property subject to the trust is held,
the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and
the interests of any secured creditor of any beneficiary.

The court is also to have regard to the circumstances and wishes of each of the beneficiaries who is (or apart from any previous exercise by the trustees of those powers would be) entitled to occupy the land under s.12 of the 1996 Act

In Dennis v McDonald [1982] 1 Fam 63 (Purchas J), a couple lived as man and wife for many years before buying a property to live in. They contributed equally to part of the purchase price, funding the remainder with a mortgage. It was registered in both their names and they held as tenants in common in equal shares. Because of the defendant’s violence, the plaintiff left the property with her children. The defendant continued to occupy the property. Soon afterwards three of the children returned to live with him and the other children remained with the plaintiff, in rented property. The defendant continued to make the mortgage repayments, and after some years it was paid off. It was held that a tenant in common who had been excluded from occupation of the property by the other tenant in common was entitled to compensation. He was ordered o pay one half of what would have been a fair rent. The position might be different now, if the plaintiff needed additional funds to provide a proper home for the children living with her.

In Byford v Butler [2004] 1 FLR 56 (Lawrence Collins J), husband and wife jointly owned their matrimonial home, which they bought with the assistance of an endowment mortgage. While money remained outstanding on the mortgage, the husband was adjudicated bankrupt. After that the wife bought his interest in the endowment policy and contrinued to make all mortgage repayments herself. The husband continued to live in the property. After the husband’s death, the wife and the trustee in bankruptcy negotiated for the wife to purchase the trustee’s interest in the property. Proceedings were brought to determine whether the wife should set-off an occupation rent against any credits owed to her for the mortgage repayments that she had paid. It was held (applying principles of equitable accounting) that the court was seeking to do broad justice in equity between co-owners (here the wife and the trustee). While the wife was living in the property, the trustee had no right to occupy it, nor to derive any financial benefit from it. His refraining from enforcing his rights earlier had benefited the wife and so a set-off for occupation rent was ordered. If the statutory criteria had been taken into account, it is unlikely that the result would have been different.

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