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Garwood v Ambrose & Anor [2012] EWHC 1494 (Ch)

  • Neutral Citation Number: [2012] EWHC 1494 (Ch)

    Case No: 6/M/2011


    Rolls Building, Fetter Lane, London EC4 1NL

    Thursday, 26 April 2012



    (Sitting as a Judge of the High Court)


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    GARWOOD (Claimant)

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    AMBROSE & ANOTHER (Defendants)

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    MR J LOPIAN (instructed by Carrick Read) appeared on behalf of the Claimant. 

    The Defendants appeared in person.

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    Approved Judgment

    Crown Copyright ©

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    Thursday, 26 April 2012



    1. This is an application by Mr Christopher Charles Garwood, the trustee of the estate in bankruptcy of Mr Mark John Ambrose, for declaratory relief and for an order for the possession and sale of the house in which Mr Ambrose, his wife Jane Elizabeth Ambrose (the second respondent) and their family have lived for some 30 years. The house is at 70 Bush Elms Road, Hornchurch in Essex, and is (and so far as I am aware has always been) registered in the names of Mr and Mrs Ambrose jointly. The declarations sought by Mr Garwood are in respect of a declaration of trust dated 27 February 2008 purportedly made between Mr and Mrs Ambrose.

    2. It is the trustee’s case, in a nutshell, first, that the deed of trust does not evidence a declaration of trust made, as is suggested by Mr and Mrs Ambrose, in July 2007, or at any time prior to the date of its execution. Indeed, it is the trustee’s case, as submitted to me by Mr Lopian – who has acted throughout with conspicuous fairness towards Mr and Mrs Ambrose, who, although they had been represented by solicitors until shortly before the hearing, have represented themselves in the hearing before me – that there was no declaration of trust by Mr Ambrose in 2007. Secondly, it is the trustee’s case that the deed of trust is ineffective to vest Mr Ambrose’s beneficial interest in the property in Mrs Ambrose as from 18 July 2007, as it purports to do. Thirdly, that if the deed of trust was effective to vest Mr Ambrose’s beneficial interest in the property in Mrs Ambrose as from the date of its execution, 27 February 2008, it was a transaction at an undervalue within the meaning of section 339 of the Insolvency Act 1986, and an order should be made vesting that interest in the trustee as part of Mr Ambrose’s bankruptcy estate. Finally, it is submitted by the trustee that if it is suggested that there was an implied trust of Mr Ambrose’s beneficial interest in the property as from July 2007, or at any time, there cannot, as a matter of law, be such an implied trust in favour of Mrs Ambrose.

    3. Mr Ambrose has been the subject of two bankruptcy orders. The first was made on 1 May 1996. Mr Ambrose was discharged from that on 1 March 1999. The second was made on 7 May 2009. Mr Ambrose was discharged from that on 6 May 2010, although, for the purposes of collecting in the assets to pay the creditors, Mr Garwood remains the trustee in bankruptcy in respect of Mr Ambrose’s estate. Between the dates of the first and second bankruptcies, Mr Ambrose was a director of a company, Limited (“Vetec”). Vetec went into compulsory liquidation on 20 November 2003, and Mr Garwood was appointed the liquidator of Vetec in June 2004.

    4. Mr Ambrose’s trustee in his first bankruptcy was a Mr Stephen Katz of HW Fisher & Company. On 29 March 2007 Mr Katz issued proceedings against Mr and Mrs Ambrose for possession and sale of the house. Those proceedings were issued just within the time limit provided for in the transitional provisions of the Enterprise Act 2002. If they had not been issued by 1 April 2007, the trustee’s interest in the property would have re-vested in Mr Ambrose.Those proceedings were settled when, in July 2007, Mr and Mrs Ambrose remortgaged the property and paid Mr Katz the sum of £86,500 in full and final settlement of his claims. As a result of that payment, Mr Katz removed the caution which had been placed on the register against the title of the property and applied for the dismissal of the proceedings which he had instituted for possession and sale of the property. Those proceedings were dismissed by order of the court on 17 September 2007.

    5. By section 283A(4) of the Insolvency Act 1986, the effect of the dismissal of those proceedings was that the property ceased to be part of Mr Ambrose’s estate in bankruptcy and vested in Mr Ambrose without the necessity of a conveyance, an assignment, or a transfer from Mr Katz.

    6. Prior to Mr Katz’ application to the court for possession and sale of the property, Lloyds TSB Bank had obtained a judgment against Mr Ambrose on 20 March

    2006 in respect of personal guarantees that Mr Ambrose had given in respect of Vetec’s borrowings. That judgment was not satisfied, and on 11 September 2007 Lloyds TSB applied for a charging order on Mr Ambrose’s interest in the property. On 7 November 2007 it obtained an interim charging order against Mr Ambrose’s interest in the property to secure the judgment debt, which, together with interest, amounted to some £36,388. The application for the charging order to be made permanent was due to be heard in January 2008, but was adjourned to March 2008, and was later compromised.

    7. In late 2007 or early 2008 Mr Ambrose, who in relation to the application for possession and sale made by Mr Katz had been represented by a firm of solicitors, Brignalls Balderston Warren, who had also acted for Mr and Mrs Ambrose in the remortgage of the property, consulted a new firm of solicitors, McCorry Connolly, about the charging order. On 9 January 2008 those new solicitors wrote to Lloyds TSB’s solicitors, offering them the sum of £15,000 in full and final satisfaction of the judgment and charging order. £8,000 was to be paid immediately and the balance of £7,000 was to be paid by way of some 60 instalments. The letter setting out the proposed terms went on to say this:

    “4. Mr Ambrose accepts that the bank would retain the security of having a charging order over his property until he discharges the final instalment of the £15,000.”

    He went on to say:

    “Failure by the bank to accept this proposal will result in a contested application for the sale of the property and Mrs Ambrose, the joint owner, will not consent to the sale and the parties are not in a position to re-finance with the substantial existing mortgage.”

    8. It will immediately be noted that the assertion in that letter that Mr Ambrose accepted as part of the terms offered that the bank would retain the security of having a charging order over his property until he discharges the final instalment of the £15,000 is inconsistent with the case presently advanced  by Mr and Mrs Ambrose.

    9. The solicitors acting for Lloyds TSB Bank did not immediately accept the offer, but asked for a questionnaire to be completed and confirmation as to how Mr Ambrose intended to raise the sum of £8,000. On 5 February Mr McCorry Connolly, acting for Mr Ambrose, responded to that request from the solicitors for Lloyds TSB Bank in these terms:

    “We have been in negotiations with the solicitors for Mr and Mrs Chaplain [who had been involved in Vetec with Mr Ambrose] as it seems rather unfair to Mr Ambrose that he should have the whole of the joint and several debt charged against his property without any contribution from Mrs Chaplain.”

    Again it is to be noted that the reference in the letter to “his property” is inconsistent with the assertion now put forward by Mr and Mrs Ambrose that at that time Mr Ambrose had no interest in the property because he had made a declaration of trust in favour of his wife in July 2007. By this date, the judgment debt, together with interest and costs, had risen to something over £42,000, and the offer that was made by McCorry Connolly was rejected, although it is right to say that subsequently Lloyds TSB did accept £15,000 and the charging order was withdrawn.

    10. The next important event is that on 25 February 2008 McCorry Connolly wrote to Lloyds TSB’s solicitors saying that Mr Ambrose “has no beneficial entitlement to any of the net proceeds of the property at 70 Bush Elms Road”. They referred to the payment to Mr Katz and continued:

    “On 18 July 2007, Mr and Mrs Ambrose remortgaged the property at 70 Bush Elms Road, Hornchurch, Essex.”

    They then enclosed a copy letter from Brignalls Balderston Warren and went on to say that the sum of £86,500 represented 50 percent of the net equity in the property as of July 2007. They then said this:

    “Mr and Mrs Ambrose have entered into a trust deed from that date, confirming that the remaining equity belongs solely to Mrs Ambrose. There is therefore no beneficial interest in the property for Lloyds TSB to attach their charge in respect of Mr Ambrose.”

    Then, rather confusingly, McCorry Connolly referred to a substantial early redemption penalty on the new mortgage and said that Mr Ambrose was not in a position to offer any security on the property for the debt to Lloyds, and hence his efforts to come to a reasonable settlement to repay the same at a reduced amount. That letter was the first indication that there had been some arrangement between Mr and Mrs Ambrose.

    11. The agreement that was shortly afterwards reached with Lloyds TSB was unfortunately not the end of Mr Ambrose’s troubles, as Mr Garwood, as liquidator of Vetec, then issued a claim against Mr Ambrose for repayment of the balance of Mr Ambrose’s director’s loan account. Mr Ambrose vehemently disputes the existence of a loan account, which appears to have arisen because Mr Ambrose drew more from Vetec than he was entitled to draw by way of salary. That claim had been the subject of correspondence over a period of some three years before Mr Garwood made the claim, although it is fair to say that during part of that period there was only very desultory correspondence.

    12. In any event, in relation to that claim, McCorry Connolly took up the cudgels on Mr Ambrose’s behalf and on 9 April 2008 wrote a letter (which is headed “without prejudice” but which appears in the bundle of documents before me). In that letter they said, amongst other things:

    “As a result of a previous bankruptcy, all Mr Ambrose’s equity in the property was purchased by his wife on a remortgage of the property in 2007. We enclose herewith a copy of the Trust Deed between Mr and Mrs Ambrose which sets out the main points. We would respectfully suggest that it is not economic to pursue Mr Ambrose any further in relation to any liabilities to an insolvent company where it is unlikely that any dividend can be retrieved for the creditors.”

    13. On 18 April 2008 Mr Garwood obtained a judgment in default of acknowledgment of service again to Mr Ambrose in the sum of £15,101. A statutory demand was served on Mr Ambrose on 29 July 2008. I should also mention that on 30 November 2007 HSBC had obtained a judgment against Mr Ambrose for the sum of £4,090 in respect of a credit card debt, and on 19 August 2008 obtained an interim charging order against Mr Ambrose’s interest. The order was made final on 22 October 2008. Again to have obtained a charging order in respect of property in which Mr Ambrose was claiming that he had no beneficial interest might seem rather unusual.

    14. On 29 January 2009 a bankruptcy petition was issued against Mr Ambrose and a bankruptcy order was made against him on 7 May 2009.

    15. I referred earlier in this judgment to the remortgage of the property. It is necessary, I think, in order to make this judgment more comprehensible, to say a few words about that remortgage, which occurred on 18 July 2007. The mortgagee was Birmingham Midshires and the amount raised was £179,965, of which £77,588 was used to redeem the existing mortgage and, as I have said earlier, £86,500 was paid over to Mr Katz’s solicitors. The net sum left after those payments of some £14,454 was paid over to Mr and Mrs Ambrose. It is Mr and Mrs Ambrose’s case that when the property was remortgaged, they agreed between themselves that as £86,500 had been spent on settling with Mr Katz, who, as Mr Ambrose’s trustee in bankruptcy, had vested in him Mr Ambrose’s 50 percent in the property, and as that sum represented half of the equity in the property, the beneficial interest in the property from then on was to be held by Mrs Ambrose alone, and that she alone was beneficially entitled to the whole of the remaining equity.

    16. It has to be said that there is no contemporaneous evidence of any such an agreement. In law, the effect of Mr Ambrose’s bankruptcy was to sever the previous joint tenancy, but after Mr Katz’s interest re-vested in Mr Ambrose on 17 September 2007, Mr and Mrs Ambrose held the beneficial interest in the property as tenants in common. It will be recalled that in late 2007 or early 2008 Mr Ambrose consulted McCorry Connolly initially in relation to Lloyds TSB’s charging order. Mr Ambrose does not appear to have told McCorry Connolly of any agreement with Mrs Ambrose that she alone was beneficially entitled to the property. I have already referred to the letter dated 9 January 2008, which was the first letter that McCorry Connolly wrote on Mr Ambrose’s behalf. I have also referred to the letter of 5 February 2008 in which again McCorry Connolly refer to Mr Ambrose’s property. They say “…the whole of the joint and several debt charged against his property.” And I have already pointed out that it was only on 25 February that McCorry Connolly first stated that Mr Ambrose had no beneficial entitlement in the property. But curiously in that letter they say that Mr and Mrs Ambrose have entered into a trust deed from 18 July 2007. That statement was inaccurate, because the trust deed which eventually came into existence was dated 27 February 2008, not 25 February 2008, and so it was not in existence when McCorry Connolly wrote the letter of 25 February 2008.

    17. The trust deed is a short, but rather unusual, document. It records that it is made on 27 February 2008 between Mr and Mrs Ambrose, and the recitals are: 


    Mr and Mrs Ambrose are registered at the HM Land Registry as joint proprietors of ‘the property’ at 70 Bush Elms Road...

    Mr and Mrs Ambrose hold the property as tenants in common in unequal shares.”

    Quite what was meant by that is unclear, but it is inconsistent with a contention that Mr Ambrose had no beneficial interest in the property. Clause 5 of the agreement itself records that Mr and Mrs Ambrose agree that, as from 18 July, Mrs Ambrose is beneficially entitled to the whole of the remaining net equity in the property. Mr Lopian very fairly does not rely upon the interesting point that on 18 July Mr Ambrose in fact had no interest in the property, because his interest was still held then by Mr Katz and did not revert to him until September 2007.

    18. It is clear from the authorities that nobody can create a trust of an estate which he does not possess. That point is made in a passage in the judgment of Fry LJ in Dye v Dye [1884] 13 QBR 147 at 157. It was the judgment of the court, with which Sir William Brett, MR, and Bowen LJ agreed.

    19. So what should I make of the deed of trust? I have heard and seen Mr and Mrs Ambrose. I have no doubt that they are honest witnesses and that they have tried very hard to tell me the truth, but equally I have no doubt that there was no agreement or declaration of trust between them on 18 July 2007. They were no doubt mightily relieved to put Mr Katz's action for possession behind them, and they no doubt believed that the payment of Mr Katz put their troubles behind them, but I do not accept that they agreed that, with the payment of Mr Katz, Mr Ambrose’s half share in the equity had been exhausted and that the house belonged solely to Mrs Ambrose. What I find, on the evidence, and it is evidence that both Mr and Mrs Ambrose consistently gave, is that that was what they understood to be the position, but I am clear, having seen them and heard them, that there was no agreement to that effect and no declaration of trust. So I reject the contention that there was an agreement or declaration of trust in July 2007.

    20. If one looks at the arrangements both before and after July 2007, it appears that there has in fact been no real change. Mr Ambrose now pays his salary into an account which is largely looked after by Mrs Ambrose. He brings home something in the order of £1,800 a month, and out of that account the mortgage repayments are made. I am told that they are something of the order of £489 per month. Mrs Ambrose works part time at Marks and Spencer, but does not earn a significant sum. So it would appear that both before and after 18 July 2007 Mr Ambrose was the person who was responsible for the payment of the mortgage. But there are other indications that there was no agreement in July 2007. In paragraph 1 of her witness statement, having quoted from Mr Katz’s report to creditors dated 7 September 2007, Mrs Ambrose said, towards the end of that paragraph:

    “This shows the entire 50% of the equity due to my husband was used to discharge the debts of his first bankruptcy. I therefore understood that the remaining equity in the property at that time which was £86,500 belonged beneficially 100% to me. I did not receive any independent legal advice at the time.”

    There again one sees the word “understood” being used by Mrs Ambrose. Again in paragraph 4 of her witness statement Mrs Ambrose, having recorded in paragraph 3 that she was distraught to discover the charging order against the property that had been obtained by Lloyds TSB in late 2007, says this:

    “4. I wanted to protect my interest in the property from claims being made by Lloyds TSB Bank and I instructed McCorry Connolly to advise me in relation to a Trust Deed so that no further creditors of my husband could claim against my equity in the property and as a result the Trust Deed of 27 February 2008 was drawn up.”

    Her evidence to me was: “I’m not sure when I first went to see McCorry Connolly” – I interpose to say that it appears that it would be sometime in February 2008 – “I asked her what I could do to protect my half of the house. I said, ‘What do I do?’ She suggested we should execute a trust deed.” Again, it seems to me that there is little or no evidence there to support any preexisting agreement or declaration of trust.

    21. Mrs Ambrose also referred in her witness statement to the doctrine of the equity of exoneration, a point which had also been raised by her solicitors, McCorry Connolly, in a letter dated 27 May 2008. But the doctrine of exoneration is inconsistent with Mr Ambrose having no interest in the property. Mr Lopian referred me to the case of Re Pittortou (a bankrupt) [1985] 1 All ER at 285 and in particular to a passage in the judgment of Scott J (as he then was) at page 287-288, where Scott J described the equity of exoneration in these terms:

    “As a general proposition, if there is found a charge on property jointly owned to secure the debts of one only of the joint owners, the other joint owner, being in the position of a surety, is entitled as between the two joint owners to have the secured indebtedness discharged so far as possible out of the equitable interest of the debtor.”

    So one sees again that there must be an interest that the debtor has.

    “The principle is expressed in 22 Halsbury’s Laws (4th edn) paras 1071-1076, under the general heading “Equity of Exoneration”. Paragraph 1071 begins:

    ‘If the property of a married woman is mortgaged or charged in order to raise money for the payment of her husband’s debts, or otherwise for his benefit, it is presumed, in the absence of evidence showing an intention to the contrary, that she meant to charge her property merely by way of security, and in such case she is in the position of surety and is entitled to be indemnified by the husband, and to throw the debt primarily on his estate to the exoneration of her own…’”

    Later on page 288:

    “However, the equity of exoneration is a principle of equity which depends on the presumed intention of the parties. If the circumstances of a particular case do not justify the inference, or indeed if the circumstances negate the inference, that it was the joint intention of the joint mortgagors that the burden of the secured indebtedness should fall primarily on the share of that of them who was the debtor, then that consequence will not follow.”

    Scott J then referred to the case of Paget v Paget [1898] 1 Ch 470, and to another judgment of Walton J in Re Woodstock (a bankrupt), a judgment given on 19 November 1979 and unreported.

    22. So the equity of exoneration does seem to me to be wholly inconsistent with the case that is principally put forward, which is that Mr Ambrose had no interest in the property as and from July 2008. I am quite clear also that the deed is not evidence of an earlier valid declaration. So what is the deed? If it is a declaration of trust on 27 February 2008 (and it will be recalled that the terms of the deed say that it is in the present tense and that Mr and Mrs Ambrose “agree” on 27 February 2008 that as from 18 July 2007 Mrs Ambrose was beneficially entitled to hold the remaining net equity in the property), then other difficulties face Mr and Mrs Ambrose. First, it is clear to me that there was no consideration given for the transaction. The transaction would therefore be a transaction at an undervalue within section 339 of the Insolvency Act 1986. I do not need, for the purposes of this judgment, to read out the provisions of section 339: but it is to be noted that I refer, in particular, to section 339(1) and (3)(a) and (c) and section 341(1) and (2), which relate to “the relevant time”, and in the context of the relevant time, the bankruptcy petition was presented in January 2009, and so within two years of July 2007 and February 2008 (whichever date is taken).

    23. Finally, if it is suggested that there was an implied trust of Mr Ambrose’s beneficial interest in the house, I would reject that submission. For there to be an implied trust, there has to be – and again I cite from an authority to which Mr Lopian took me, the case of Lloyds Bank plc v Rosset [1991] 1 AC 107 at page 132, in the speech of Lord Bridge of Harwich, where he says:

    “The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made it will only be necessary for the partner asserting a claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or proprietary estoppel.”

    24. I have already concluded that there were no such discussions between Mr and Mrs Ambrose, and I would also go on to say that, even if I had found that there were discussions, there was no change of position on the part of Mrs Ambrose or detrimental reliance by her. She took on no additional responsibility for payment of the mortgage. Indeed, it would seem to me that the financial arrangements in the Ambrose house remained as they were.

    25. So for all of those reasons, I conclude that the trustee is entitled to the orders which he seeks. I have been told that there has been an agreement reached between Mr and Mrs Ambrose and the trustee in bankruptcy, Mr Garwood. That agreement will be recorded and, as I understand it, it is agreed that, although I have given judgment and an order will be made in the terms sought by Mr Garwood, it will not be enforced so long as Mr and Mrs Ambrose maintain the payments that they have undertaken to make in settlement of Mr Garwood’s claim.

    26. That, to my mind, is the best possible result that could be achieved in this case. I think that no judge of this division takes any pleasure in concluding that a couple and their family should lose their home, and so I was very, very concerned at the prospect of that happening to Mr and Mrs Ambrose and their family, who have lived in this house for some 30 years. Fortunately, it would appear that that possibility has been, at least for the time being, removed, and all I can say is that I wish them the best for the future and I hope that they can manage to keep up the payments. I think the last few years must have been a hideous experience for both of them, and I hope that they can now put that well behind them and get on with the rest of their lives, without the pressures of constant bankruptcy petitions, statutory demands and the like. But no agreement would have been possible without the efforts of Mr Lopian, Mr Garwood and Miss (inaudible) sitting behind Mr Lopian, and I congratulate them on their approach to Mr and Mrs Ambrose’s dilemma and problems, and I part with this case simply by saying that I very much hope that the agreement that has been reached is the end of the story and that Mr and Mrs Ambrose can get on with the rest of their lives.

Judgment, published: 13/09/2012


See also

Published: 13/09/2012


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