Ipsofactoj.com: International Cases [2001] Part 6 Case 15 [CAEW]


COURT OF APPEAL, ENGLAND & WALES

Coram

Rodway 

- vs -

Landy

LORD PHILLIPS M.R.

LORD JUSTICE PETER GIBSON

LORD JUSTICE LATHAM

4 APRIL 2001


Judgment

Peter Gibson LJ

  1. The Claimant, Anne Rodway, is a doctor. Prior to 1994 Dr. Rodway carried on a medical practice from her own home, Chantry House, in Sevenoaks, Kent. In 1991 she became interested in purchasing a property known as the Vitasan Clinic, South Park, Sevenoaks ("the Property") with a view to demolishing the building on it and constructing a new purpose-built surgery. In 1994 she entered into a partnership with another doctor, the Defendant Paul Landy. He shared her ideal of developing a multi-disciplinary practice at the new surgery. They were equal partners in a partnership at will. Together they purchased the Property in 1994, thereby becoming trustees of the Property for themselves as beneficiaries. Planning permission was obtained in 1996 for the demolition of the old building and the construction of the new surgery. The costs of the purchase and the building work were funded by a loan to them both from the General Practice Finance Corporation Ltd. ("the GPFC") secured by a first charge on the Property. From March 1997 Dr. Rodway and Dr. Landy practised from the Property.

  2. Disputes arose between the partners. Dr. Landy by notice terminated the partnership as from 1 July 1998. On 5 October 1998 Dr. Rodway commenced proceedings against Dr. Landy. She sought orders for the winding up of the affairs of the partnership and an order for the sale of the Property which she claimed was an asset of the partnership. Dr. Landy by his Defence and Counterclaim resisted the order for sale. He said that the Property was not a partnership asset and counterclaimed for a declaration to that effect and an order pursuant to s. 14 Trusts of Land and Appointment of Trustees Act 1996 ("the 1996 Act") for the partitioning of the Property between Dr. Rodway and himself. By her Reply and Defence to Counterclaim the order for partition was opposed by Dr. Rodway.

  3. The Master ordered the trial of a preliminary issue as to whether or not the Property at the date of dissolution of the partnership was a partnership asset. That issue came before Mr. Michael Kallipetis Q.C. sitting as a Deputy Judge of the High Court. On 28 June 1999 he held that the Property was not a partnership asset.

  4. By 14 February 2000 Dr. Landy was proposing, as an alternative to an order for partition, an order for the trustees to exercise their powers under s. 13 of the 1996 Act so that each of the doctors had exclusive occupation of a part of the Property. On that day Mr. John Jarvis Q.C., sitting as a Deputy Judge of the High Court, ordered three issues to be tried:

    1. whether, and if so how, the Property should be sold;

    2. whether, and if so how, the Property should be partitioned; and

    3. whether, and if so how, the trustees of the Property should exercise their powers under s. 13 to exclude or restrict the entitlement of Dr. Rodway and Dr. Landy to occupy the Property or to impose conditions on them in relation to their occupation of the Property.

  5. Those issues were tried by Mr. Michael Mann Q.C., sitting as a Deputy Judge of the High Court. On 13 October 2000 he gave judgment, determining the issues as follows:

    (1)

    the Property should not be sold;

    (2)

    the Property should not be partitioned;

    (3)

    (a)

    the trustees of the Property should exercise their powers under s. 13 to restrict the entitlement of Dr. Rodway and Dr. Landy to occupy the Property and to impose conditions on them in relation to their occupation of the Property;

    (b)

    subject to any order of the court or any agreement of Dr. Rodway and Dr. Landy to the contrary the trustees should exercise their powers to impose restrictions and conditions which achieved the objectives set out in the schedule to the judge's order.

  6. The schedule set out the following objectives:

    (1)

    The Property was to be divided into two separate units and adapted broadly as shown on two specified plans.

    (2)

    With effect from the date of completion of the works necessary to divide and adapt the Property and of such works as the parties might agree or the court might determine should be carried out to separate the services installed in the Property ("the Works"):

    (a)  

    Dr. Rodway's entitlement to occupy the Property was to be restricted so that she was to cease to be entitled to occupy the right hand unit; and

    (b)

    Dr. Landy's entitlement to occupy the Property was to be restricted so that he was to cease to be entitled to occupy the left hand unit.

    (3)

    The cost of the Works was to be borne by Dr. Rodway and Dr. Landy in equal shares.

    (4)

    In the event of a lift being installed in either unit, appropriate arrangements were to be made for it to be available for use by elderly or disabled users of the other unit.

  7. The judge ordered Dr. Rodway to pay two thirds of Dr. Landy's costs of the issues. He refused Dr. Rodway permission to appeal; but permission was given by Chadwick L.J. An application by Dr. Landy to appeal against the restriction by the judge of the award of costs to two-thirds was adjourned by Chadwick L.J. to come on before this court after hearing the appeal.

  8. Before the judge and this court argument has been confined to the first and third issues ordered to be tried by Mr. Jarvis Q.C.

  9. It is not in dispute that Dr. Rodway and Dr. Landy jointly hold the Property for themselves as beneficial tenants in common in equal shares, and that they are therefore trustees of land holding the Property on a trust of land for the purposes of the 1996 Act. By s. 6(1) of the 1996 Act they have in relation to the Property all the powers of an absolute owner for the purpose of exercising their functions as trustees.

  10. The jurisdiction of the court is derived from s. 14.

    By s. 14 (so far as material):

    (1)

    Any person who is a trustee of land or has an interest in property subject to a trust of land may make an application to the court for an order under this section.

    (2)

    On an application for an order under this section the court may make any such order -

    (a)  

    relating to the exercise by the trustees of any of their functions (including an order relieving them of any obligation to obtain the consent of, or to consult, any person in connection with the exercise of any of their functions), or ....

    as the court thinks fit.

  11. By s. 15(1) (so far as material):

    The matters to which the court is to have regard in determining an application for an order under section 14 include -

    (a)  

    the intentions of the person or persons (if any) who created the trust,

    (b)

    the purposes for which the property subject to the trust is held,

    (c)

    ...., and

    (d)

    the interests of any secured creditor of any beneficiary.

  12. By s. 15(3), in the case of (amongst other things) an application for the court to direct the trustees to sell land subject to a trust of land,

    the matters to which the court is to have regard also include the circumstances and wishes of any beneficiaries of full age and entitled to an interest in possession in property subject to the trust or (in case of dispute) of the majority (according to the value of their combined interests).

  13. It is convenient at this stage also to refer to ss. 12, 13 and 15(2), as the judge in deciding not to order a sale took into account what he was proposing to do in respect of the request by Dr. Landy that the judge should direct the trustees to exercise their powers under s. 13.

  14. By s. 12(1) a beneficiary who is beneficially entitled to an interest in possession in land subject to a trust of land is entitled to occupy the land if the purposes of the trust include making the land available for his occupation. But that section is made subject to s. 13, which provides:

    (1)

    Where two or more beneficiaries are (or apart from this subsection would be) entitled under section 12 to occupy land, the trustees of land may exclude or restrict the entitlement of any one or more (but not all) of them.

    (2)

    Trustees may not under subsection (1) -

    (a)

    unreasonably exclude any beneficiary's entitlement to occupy land, or

    (b)

    restrict any such entitlement to an unreasonable extent.

    (3)

    The trustees of land may from time to time impose reasonable conditions on any beneficiary in relation to his occupation of land by reason of his entitlement under section 12.

    (4)

    The matters to which trustees are to have regard in exercising the powers conferred by this section include -

    (a)

    the intentions of the person or persons (if any) who created the trust,

    (b)

    the purposes for which the land is held, and

    (c)

    the circumstances and wishes of each of the beneficiaries who is .... entitled to occupy the land under section 12.

    (5)

    The conditions which may be imposed on a beneficiary under subsection (3) include, in particular, conditions requiring him -

    (a)

    to pay any outgoings or expenses in respect of the land, or

    (b)

    to assume any other obligation in relation to the land or to any activity which is or is proposed to be conducted there.

    (6)

    Where the entitlement of any beneficiary to occupy land under section 12 has been excluded or restricted, the conditions which may be imposed on any other beneficiary under subsection (3) include, in particular, conditions requiring him to -

    (a)

    make payments by way of compensation to the beneficiary whose entitlement has been excluded or restricted, or

    (b)

    forgo any payment or other benefit to which he would otherwise be entitled under the trust so as to benefit that beneficiary.

    (7)

    The powers conferred on trustees by this section may not be exercised -

    (a)

    so as to prevent any person who is in occupation of land (whether or not by reason of an entitlement under section 12) from continuing to occupy the land, or

    (b)

    in a manner likely to result in any such person ceasing to occupy the land,

    unless he consents or the court has given approval.

    (8)

    The matters to which this court is to have regard in determining whether to give approval under subsection (7) include the matters mentioned in subsection (4)(a) to (c).

  15. By s. 15(2) (so far as material):

    In the case of an application relating to the exercise in relation to any land of the powers conferred on the trustees by section 13, the matters to which the court is to have regard also include the circumstances and wishes of each of the beneficiaries who is .... entitled to occupy the land under section 12.

  16. Dr. Landy's opposition to sale was partly based on the provisions of s. 54(1) National Health Service Act 1977 (as amended by s. 34 National Health Service (Primary Care) Act 1997) which render unlawful the sale of goodwill of a medical practice of a medical practitioner (including the sale of the medical practitioner's share of the goodwill of a partnership practice). Sch. 10 to the 1977 Act (as amended) contains additional provisions to supplement s. 54(1). Para 1(1) of that schedule makes it a criminal offence for any person to sell or buy the goodwill of a medical practice. But by para. 1(2) a person proposing to be a party to a transaction which he thinks might amount to a sale of the goodwill of a medical practice in contravention of s. 54(1) may ask the Medical Practices Committee ("the MPC") for a certificate under that paragraph. If the MPC are satisfied that the transaction does not involve the giving of valuable consideration in respect of the goodwill of such a medical practice, they are to issue to the applicant a certificate to that effect. The certificate provides a defence to any charge under para. 1(1).

  17. Para. 2(1), however, provides:

    For the purposes of section 54(1) and paragraph 1, a disposal of premises previously used for the purposes of a medical practice shall be deemed to be a sale of the goodwill of a medical practice if -

    (a)

    the person disposing of the premises did so knowing that another person ("A") intended to use them for the purposes of A's medical practice, and

    (b)

    the consideration for the disposal substantially exceeded the consideration that might reasonably have been expected if the premises had not previously been used for the purposes of a medical practice.

  18. Para. 2(4) contains provisions deeming the goodwill of a medical practice to have been sold if any of certain conditions is satisfied. But by para. 2(5):

    Subparagraph (4) does not apply -

    (a)  

    if it is proved that no part of the consideration was given in respect of the goodwill ....

  19. The question of illegality arises in these circumstances. On 24 May 2000 the outstanding loan principal owed to the GPFC amounted to 895,137. A sale of the Property is not possible unless the loan is redeemed. Interest of around 85,000 per annum is met largely out of the cost rent allowance of about 80,000 per annum paid by the West Kent Health Authority to Dr. Rodway and Dr. Landy. An early redemption fee of 307,000 is payable to the GPFC in the event of a sale, though that would be waived if the sale were to Dr. Rodway or Dr. Landy and the purchase by that doctor WERE refinanced by the GPFC. The judge said that it was common ground that a valuation in accordance with para. 2(1)(b) of schedule 10, which disregarded cost rent, would produce significant negative equity. He also found that there would probably be negative equity even if cost rent were taken into account, but that it would be less. The judge found therefore that an offer for purchase in an amount sufficient to repay the loan principal would entail the giving of excessive consideration in the sense of para. 2(1)(b) and that para. 2(1) thus deemed the transaction to be a sale of goodwill and so unlawful.

  20. Dr. Rodway has obtained an offer of an advance from GPFC in the sum of 895,000, but it is a term of the offer that the loan is to be utilised fully in repaying the existing loan.

  21. Mr. Simon Berry Q.C. for Dr. Rodway submits that the judge was wrong to hold that a sale to Dr. Rodway which she effected in accordance with the GPFC loan offer would be illegal. He argued that the "consideration for the disposal" of the Property would be no more than nominal. He sought to derive support for this from the remarks of Lord Oliver in Abbey National Building Society v Cann [1999] AC 56 at p. 93. In that case it had been argued that a purchaser borrowing the purchase moneys on the security of the property being purchased must have acquired the unencumbered property for a moment before he created the mortgage; thereby it was argued that the interest of the mortgagee became subject to an overriding interest. Lord Oliver said:

    The reality is that the purchaser of land who relies upon a building society or bank loan for the completion of his purchase never in fact acquires anything but an equity of redemption, for the land is, from the very inception, charged with the amount of the loan without which it could never have been transferred at all and it was never intended that it should be otherwise. The "scintilla temporis" is no more than a legal artifice.

    So, Mr. Berry argued, the redemption monies do not amount to consideration for the disposal. Dr. Rodway, he said, would be doing no more than producing a situation in which the Property can be sold in an unencumbered state.

  22. I am wholly unable to accept that Lord Oliver's solution of the legal conundrum in the Abbey National case can be transposed to the very different circumstances of the present case or that "the reality" is what Mr. Berry has asserted it to be. On the contrary: the reality is that the Property, and not just an equity of redemption, would be sold and that on the sale of the Property by the trustees to Dr. Rodway, the consideration would be 895,000 paid to or to the direction of the trustees; it matters not that the mechanics of the sale involve no transfer of cash but the utilisation of the 895,000 in the extinction of the secured loan by GPFC. It is the same as if Dr. Rodway, on borrowing the purchase moneys from the GPFC, paid them to herself and Dr. Landy and they then paid them to the GPFC. It is quite unreal to suggest that the trustees would receive no consideration for the Property, when their joint and several liability under the original mortgage is, as a result of the sale, extinguished. That result is a consequence of the application of the purchase moneys in discharging the loan.

  23. On the application of para. 2(1) to those facts, there can be no doubt that a sale to Dr. Rodway would be a sale of premises previously used for the purposes of a medical practice. It is not disputed that subpara. (a) is satisfied, Dr. Rodway and Dr. Landy knowing that Dr. Rodway intended to use the Property for her medical practice, nor (subject to Mr. Berry's argument on obtaining a certificate) can it be disputed on the figures that subpara. (b) is satisfied.

  24. Mr. Berry then said that the transaction would not in fact involve the giving of valuable consideration in respect of the goodwill, and an application to the MPC would result in the obtaining of a certificate. He said that the certificate would override the deeming provision in para. 2(1). I do not see how a certificate would be forthcoming. The evidence of both Dr. Rodway and Dr. Landy was to the effect that if one of them moved away from the Property after a sale, the other who remained would take over a significant proportion of the other's patients, Dr. Rodway putting that proportion as high as between one in four and one in two. The MPC cannot ignore para. 2(1). That provision is expressed to apply for the purposes of para. 1, which includes the subparagraphs relating to the MPC giving a certificate. If it had been intended that the MPC should not be bound by the deeming provision of para. 2(1) in the event that it was proved that no part of the consideration was in fact given in respect of the goodwill, there would surely have been an express statutory provision to effect that intention such as one finds in para. 2(5)(a).

  25. I therefore conclude that the judge was right to hold that the envisaged sale to Dr. Rodway, were a sale to be ordered, would be illegal. The judge in refusing permission to appeal, said that even if wrong on that, he would not have ordered a sale in the exercise of his discretion.

  26. Mr. Berry contends that the judge in exercising his discretion erred in relation to the purposes for which the Property is held. The judge said:

    I do not accept that the primary purpose of the trust was to give life to Dr. Rodway's visionary dream of a "one-stop health shop containing a range of services". That was an important objective, I accept, but the primary purpose was to enable them to occupy the property as medical practitioners.

    The judge had earlier pointed to the requirement of s. 15(1) to have regard to subparas. (a) and (b) and he said that he had done that in light of the evidence of Dr. Rodway and Dr. Landy and the decision of Mr. Kallipetis Q.C. that both doctors intended their joint entitlement to occupation of the Property to last beyond the end of the partnership and to continue notwithstanding Dr. Rodway's retirement as a National Health Service practitioner on her 70th birthday.

  27. Mr. Berry submitted that "the purposes for which [the Property] is held" within s. 15(1)(b) was to provide a one-stop health shop containing a range of services. He sought to justify this by reference to the evidence of both Dr. Rodway and Dr. Landy as to their vision before the acquisition of the Property of what was to be done at it. That seems to me to go more to the requirement of s. 15(1)(a), to have regard to the intentions of the parties who created the trust, than subpara. (b), which requires the examination of the purposes for which the trust property "is held". I emphasise the present tense, which shows that the relevant purposes are those subsisting at the time the court is determining the application. The judge in recognising the one-stop health shop as an important objective did have regard to it. Mr. Berry said that the judge failed to take any account of the fact that the relevant purpose was that the Property would be occupied by the doctors in practice as medical practitioners jointly and as partners. I see no proper basis for that submission. The judge was well aware that their original intention was to practise from the Property in partnership. But at the time the court was considering whether to make an order the partnership was at an end and the purposes for which the Property was then held did not include practising in partnership. That demonstrates the fallacy in Mr. Berry's approach of conflating subparas. (a) and (b) of s. 15(1). The judge was also aware that the Property was not a partnership asset and that the joint occupation was intended to continue beyond the end of the partnership. Dr. Rodway accepted in cross-examination that the provision of National Health Service services was the core function of the Property. It was properly open to the judge to conclude as he did as to the purpose for which the Property was held at the relevant time.

  28. Mr. Berry further submitted that the judge ought to have paid, but failed to pay, weighty regard to the fact that the purpose which Mr. Berry identified no longer obtained, at any rate as regards the intentions and objects of Dr. Landy in relation to the Property. That submission falls with his submission as to the correct purposes on which the Property was held. I would add that each of the two portions of the Property is sufficiently large to enable a modest version of the concept of a one-stop health shop to be fulfilled. The left hand portion contains on the ground floor two consulting rooms and a treatment room, a waiting area, two WCs and space for records and administration, while the upper floor contains two more rooms. The right hand portion is smaller, but it still contains two consulting rooms and a treatment room, a waiting area, one WC and space for records and administration, with three more rooms on the upper floor. On the judge's order each doctor is free to use his or her premises as he or she thinks fit.

  29. Mr. Berry next submitted that the judge erred in refusing to order a sale by taking into account considerations which were unjustified and by wrongly taking the view that he could and should direct the trustees to exercise their s. 13 powers.

  30. One such consideration was what the judge called the unsatisfactory consequence that a sale could place the GPFC in the invidious position of having to decide between which of the two doctors it should support with loan finance, should Dr. Landy resolve to bid. Mr. Pearce does not seek to support the judge on this point.

  31. Another such consideration was said by Mr. Berry to be Dr. Landy's difficulty in relocating to alternative premises in Sevenoaks. Mr. Berry pointed to the evidence of Dr. Landy that he had taken no steps to see what the prospects were in relation to relocation. But in my judgment there was evidence not only from Dr. Landy but also from Mrs. Fowle of the West Kent Health Authority which supported the judge's finding. The judge was entitled to give weight to the Health Authority's opposition to an order for sale and support for the division of the building which they considered would be an obvious option. He could properly take account of Mrs. Fowle's views that not only would the departure of a doctor from the Property cause "an awful lot of stress and difficulty for whichever doctor had to relocate" but would cause distress to patients and the use of additional funds from the National Health Service.

  32. The main argument of Mr. Berry related to s. 13. He submitted that the judge erred in concluding that he could make an order excluding or restricting each of the two doctors from a part of the Property. This point turns on the construction of the words in parenthesis in s. 13(6) "(but not all)". The judge said of those words:

    The words should not be read in isolation. Section 13 is a limiting provision. It further limits the right of occupation expressly conferred by section 12(1). An exercise of the power so as to exclude or restrict the entitlement of all of the beneficiaries in respect of some part of the land subject to the trust would render section 12(1) nugatory to that extent. The .... words therefore prohibit so extensive an exercise of the power. Accordingly, an exercise of the power to exclude or restrict the entitlement to occupation of one of two beneficiaries in relation to part is not offensive to section 12(1) so long as the other beneficiary is entitled to enjoy his right of occupation of that part. There is no ambiguity. The construction merely reflects that every part of a piece of land is unique.

  33. Mr. Pearce supports the reasoning and conclusion of the judge. He said that to construe the subsection literally, as Mr. Berry urges, would produce an irrational limitation on s. 13(1) as it would mean that the trustees can exclude one of two beneficiaries entirely from the occupation of trust property but not limit each of them to occupation of only part of it. Mr. Pearce urges that the words "but not all" mean that the trustees may not exclude or restrict the entitlement of the beneficiaries collectively; after the trustees have exercised their powers the beneficiaries collectively must have rights which are as extensive as those which the beneficiaries collectively had previously. Mr. Berry on the other hand submits that the limitation on the power to exclude or restrict is in terms on the number of beneficiaries who may be excluded or restricted, and it is not related to the land which happens to be the subject of the restriction.

  34. I accept that the limitation on the power to exclude or restrict is expressed as a limitation on the number of beneficiaries who may be excluded or restricted. Plainly it would make no sense if there was no beneficiary left entitled to occupy land subject to a trust of land as a result of the exercise of the power under s. 13. That is the force of the words "but not all". But if an estate consisting of adjoining properties, Blackacre and Whiteacre, was held subject to a trust of land and A and B were entitled to occupy the estate, it would be very surprising if the trustees were not able under s. 13 to exclude or restrict B's entitlement to occupy Blackacre and at the same time to exclude or restrict A's entitlement to occupy Whiteacre, thereby leaving A alone entitled to occupy Blackacre and B Whiteacre. So also I do not see why in relation to a single building which lends itself to physical partition, the trustees could not exclude or restrict one beneficiary's entitlement to occupy one part and at the same time exclude or restrict the other beneficiary's entitlement to occupy the other part. Each part is land subject to a trust of land and the beneficiaries are entitled to occupy that part until the entitlement of a beneficiary is excluded or restricted by the exercise of the power under s. 13. So construed s. 13(1) seems to me to make good sense and to provide a useful power which trustees might well wish to exercise in appropriate circumstances so as to be even-handed between beneficiaries. In contrast, I can see no good reason why Parliament should want to confine the trustees to the all or nothing approach urged by Mr. Berry. I therefore agree with the conclusion of the judge on this point.

  35. Mr. Berry next submits that the judge erred on the facts in arriving at his conclusion that division of the Property was practicable, though the judge acknowledged that the result might be less than ideal. The judge referred to the layout of the Property being on two floors, with the ground floor divided by a central corridor. The original intention had been for the left hand portion of the ground floor (if one looks at it from the front) to accommodate the reception and the National Health Service practice, while the right hand portion of the ground floor was to accommodate complementary practitioners in the private sector and teaching facilities. Dr. Landy's expert, Peter Deeks who is a building surveyor, produced plans illustrating a scheme accommodating a single-handed National Health Service practice and limited facilities for complementary practitioners in each portion using both floors. The left hand portion, which would offer better facilities, would account for 52% of the net internal floor area, the right hand portion 48%. Dr. Rodway's expert, James Waghorn, who is a chartered surveyor, whilst saying that the left hand portion

    would probably be suitable for use by a small practice for the provision of general medical services,

    expressed the opinion that the right hand portion would be

    relatively small with a ground floor layout which would .... be inadequate for the provision of general medical services within the National Health Service, having for example a particularly small reception and patient waiting area and very restrictive circulation space.

    But the Health Authority supported the plan to divide the Property and have continued to pay the full cost rent by giving each doctor half of the rent. Mrs. Fowle's evidence was that the full cost rent would continue to be paid if the Property were divided between the two doctors. Dr. Landy, with about 1,300 patients on his list, was content to take either portion. The judge said that Dr. Rodway, with slightly under 2,000 patients, considered that the left hand portion was adequate but not ideal (in contrast to the right hand portion which she considered inadequate). The judge's solution was to restrict Dr. Rodway to the left hand portion and Dr. Landy to the right hand portion.

  36. Mr. Berry challenged two findings by the judge. One was that

    the Property was in fact so constructed as to lend itself fairly readily to division, as experts have confirmed in reports to the Court and in evidence.

    Mr. Berry said that Mr. Deeks was not a relevant expert with previous experience of the practicalities of subdivision of premises for medical practices, and that his views can therefore be ignored. The judge did not accept that, nor do I. Mr. Deeks had a lot of experience of the practicalities of subdividing buildings, and was guided by Dr. Landy on the facilities which would be required. There were many matters on which he and Mr. Waghorn agreed, as can be seen from their joint reports. Mr. Berry said that Mr. Waghorn did not give the confirmation attributed to the experts by the judge. But in para. 1. 0 of their first joint report, on the first issue of "Physical internal partitioning", Mr. Deeks said that a possible physical internal partitioning of the building to provide two practices was set out in two specified drawings, to which Mr. Waghorn responded: "Agreed it could be carried out in this way." It seems to me, as it appears to have done to the Health Authority, self-evident that a property consisting of a ground floor which is divided by a central corridor and a second floor which can be divided into two lends itself fairly readily to division.

  37. The other finding of the judge which is challenged is that Dr. Rodway considered the left hand portion to be adequate but not ideal. There is no doubt that Dr. Rodway used the phrase "less than ideal," but it is said by Mr. Berry that she was not thereby accepting that the left hand portion was adequate. In my judgment it was for the judge to assess whether that was using conversational understatement to suggest that the left hand portion was not adequate, as Mr. Berry argued, or, as is commonly the case when such words are used, whether she meant what the judge found. I of course accept that to restrict Dr. Rodway's entitlement to occupying the left hand portion departs from her original vision of the use of the building as a whole. But that does not mean that the judge's finding was wrong.

  38. Another finding to which Mr. Berry takes objection relates to access for the disabled. The judge accepted that there were problems. He said:

    Complementary practitioners attached to the left hand portion, for example a chiropodist, would have to be accommodated on the first floor. There is inadequate access to the first floor, especially for the elderly. A lift might have to be installed. There is provision for a lift shaft in the right hand. Routing from a lift would therefore have to be through the right hand portion.

  39. Mr. Berry criticised the judge for losing sight of the fact that the difficulty was in providing access to the first floor for the disabled, not just the elderly. But the judge in saying "especially for the elderly" has not confined his consideration to the elderly, and cannot justly be said to have overlooked other disabled who could not or might prefer not to use the stairs which now provide access to the first floor. Mr. Berry further said that the judge failed to take account of the cost and the disadvantageous consequences of providing a lift in circumstances where the premises had been designed to accommodate the needs of the disabled on the ground floor, and he pointed to problems of obtaining planning permission. But there was incomplete evidence about a lift and the judge did not make any order requiring its installation. There was evidence from Mr. Deeks of the likelihood that planning permission would be obtained. There was no evidence put to the judge of the cost of installing a lift.

  40. I cannot help but feel that Dr. Rodway is exaggerating the problems which the judge accepted did exist but which in his view were not substantial enough reasons for rejecting the idea of physical division. It should be borne in mind that there is a planning restriction prohibiting the simultaneous use of more than four rooms in the building for patient consultations or treatment.

  41. Mr. Berry also says that the judge failed to have regard to the purposes for which the Property was held and the circumstances and wishes of Dr. Rodway. I do not agree. The judge was well aware of the purpose that both doctors should occupy the Property as medical practitioners. He was well aware that if either doctor had to leave the Property there would be a loss of patients from his or her list and distress to the patients and that Dr. Rodway would have preferred to be the purchaser of the Property to try to fulfil her original vision. But he was entitled to have regard to the ages of the doctors (Dr. Rodway is 66, Dr. Landy 50), and to the fact that Dr. Rodway will have to retire from National Health Service practice at 70, and that she gave evidence that she had no wish to retain ownership of a share of the Property after she retired from that practice. In reaching the conclusion that there should be no sale but that on a scheme under s. 13 each doctor should be excluded from the other's separate part of the Property, the judge in my judgment can only be found to have erred in the one respect relating to the GPFC being left in an invidious position. That, in my judgment is not so significant an error as to undermine the exercise of his discretion.

  42. As for the details of the judge's order, the sole criticism made by Mr. Berry is that in imposing conditions as to the sharing of the costs of the works to effect the division, the judge exceeded what could be imposed under s. 13(3). He said that a condition "in relation to [the beneficiary's] occupation of land" is one which has reference only to the way in which the beneficiary conducts himself whilst in occupation. I do not see why the very wide prepositional phrase "in relation to" should be construed so narrowly. On any footing s. 13 allows the trustees to divide a building subject to a trust of land between two out of three or more beneficiaries entitled to occupy, and also, if I am right, between the only beneficiaries entitled to occupy. It would be surprising if the cost of adapting the building to make each part suitable for the separate occupation of a beneficiary could not be imposed on the beneficiary. Mr. Berry's construction would in this case, and, I suspect, in many cases, frustrate the exercise of the power under s. 13. In my judgment a condition requiring a beneficiary to contribute to the cost of adapting the property to make it suitable for his occupation falls within the statutory wording.

  43. Accordingly, for all these reasons I would dismiss Dr. Rodway's appeal.

  44. That leaves the question whether the judge was wrong to deduct one third of Dr. Landy's costs from the judge's award of costs in Dr. Landy's favour. The judge heard no argument on whether a proportion, and if so what proportion, of costs should be deducted. Mr. Pearce had asked for costs to be awarded to Dr. Landy. Mr. Berry had argued that the judge should defer making an award of costs. But the judge proceeded to give a short judgment in which he concluded that there should be a deduction of one third. He said that Dr. Landy had failed in some respects. He referred to the three options which Dr. Landy had put forward in correspondence, viz. partition, leases and an agreement, and said that some costs had been wasted in relation to the proposals. The judge acknowledged that his order that Dr. Rodway should pay two-thirds of Dr. Landy's costs was to some extent rough justice.

  45. Mr. Pearce submits that the judge was plainly wrong to make such deduction and that Dr. Landy should be given permission to appeal and that his appeal should be allowed. He says that whilst partition of the premises was claimed by Dr. Landy in his counterclaim, it had been made clear since 2 May 2000 that partition was the least preferred of three options. On that day Dr. Landy sent Dr. Rodway proposed documentation for (a) partition, (b) leases and (c) an agreement, saying that they were stated in the reverse order of preference, and that, if they could not agree he would ask the court to make a scheme under s. 13 modelled on the principal terms of the draft agreement. Mr. Pearce points out that the judge said that it was reasonable for Dr. Landy to put forward an agreement as a possible way forward, and he submits that it was equally reasonable to put forward the leases and partition as alternatives. He says that Dr. Rodway made no constructive response to the draft documentation. Further Mr. Pearce points out that the position of the GPFC for a short time was that it would regard the agreement / scheme option as an event of default whereas it would agree to the grant of leases or a partition on certain terms. He therefore argues that it was reasonable to put forward for consideration by the GPFC and Dr. Rodway proposals for the grant of leases and for partition as alternatives to the agreement / scheme option. He submits that Dr. Landy should have been awarded all his costs, alternatively 95% of his costs.

  46. Mr. Berry argues that permission to appeal should not be given. He says that the three schemes required separate consideration and that each side adduced expert evidence in relation to the valuation effects of partition and leases. Terms proposed by Dr. Landy for the s. 13 scheme were not wholly adopted by the court. In the circumstances, Mr. Berry submits, the judge who had regard to all the circumstances cannot be shown to have erred in principle and this court should not interfere with his order.

  47. Because of the not entirely satisfactory way in which the question of costs was dealt with, I would give permission to appeal on this point. But in my judgment the judge was acting within the proper ambit of his discretion in making the deduction which he did. Dr. Landy's pleaded case throughout was to ask for an order for partition. The alternative proposal for a s. 13 scheme was only made more than a year after service of the Defence and Counterclaim. Partition and the further proposal for the grant of leases had to be investigated by Dr. Rodway and expert evidence, in writing and orally, was adduced. The judge with his knowledge of the conduct of the entire proceedings was in a far better position than this court to decide whether there should be a deduction and, if so, what was the appropriate proportion. He cannot be shown to have erred. I would therefore dismiss Dr. Landy's cross-appeal.

    Latham LJ

  48. I agree.

    Lord Phillips MR

  49. I also agree.


Cases

Abbey National Building Society v Cann [1999] AC 56

Legislations

Trusts of Land and Appointment of Trustees Act 1996, s.12, s.13, s.14, s.15

National Health Service Act 1977, s.54(1) (as amended by s. 34 National Health Service (Primary Care) Act 1997), Sch. 10 para 1(1), para 2(1), para 2(4)

Representations

Mr. Simon Berry Q.C. for the Appellant (instructed by Messrs Cripps Harries Hall of Tunbridge Wells)
Mr. Robert Pearce for the Respondent (instructed by Messrs Warners of Sevenoaks)


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