Tuesday, July 03, 2012

Gallarotti v Sebastianelli: Drawing proper inferences from the evidence

Lady Justice Arden
As Lady Justice Arden pointed out in her leading judgment, Gallarotti v Sebastianelli [2012] EWCA Civ 865 did not require the Court of Appeal to decide any new law: "Nonetheless, this appeal may be of wide interest as the factual paradigm is not uncommon."

The case is not, strictly, a family case as it involves a property that was purchased by two people who were simply friends - a scenario that is surely becoming more common, as property prices increase. However, it is clearly of direct relevance to cohabitation cases, involving the drawing of proper inferences from the evidence.

The Facts: In 1997 the parties agreed to purchase a flat, with the aid of a mortgage, and with each of them making a cash contribution. The property was transferred into Mr Sebastianelli's sole name. Mr Sebastianelli and Mr Gallarotti made cash payments towards the purchase of £86,500 and £26,896.20 respectively. The parties did not execute a written declaration of trust as to the proportions in which they owned the flat.

The parties' friendship ended in 2008. Mr Gallarotti left the flat and subsequently brought proceedings to obtain a declaration as to his interest in it. Miss Recorder Michaels QC found that Mr Sebastianelli and Mr Gallarotti expressly agreed that they would each have a 50% interest in the flat, notwithstanding their unequal contributions, and that this agreement was qualified by a rider that Mr Gallarotti would pay a larger proportion of the mortgage repayments, to make up for his smaller initial contribution. However, on the Recorder's findings, this did not happen though Mr Gallarotti did make some other, lesser, payments for the parties' joint benefit. In the view of the Recorder this did not detract from the effect of the express agreement, and thus the parties were beneficially entitled to the flat in equal shares.

Mr Sebastianelli appealed.

Held: Lady Justice Arden found (at paragraph 23) that the agreement between the parties did not apply in the events which actually unfolded, only covering the case where there was a slight imbalance in contributions. In the event, however, the disparity was much greater than the parties had expected at the date of the agreement. Having found that Mr Gallarotti had agreed to make up his smaller initial contribution by paying more towards the mortgage,the Recorder should have looked at the amount of the mortgage payments he had paid. As he "palpably had not made a substantial contribution", the logical result was that the agreement for 50/50 sharing was at an end. By the time Mr Gallarotti left the flat "the only inference that could be drawn was that the parties intended the beneficial ownership should, in substance, reflect their financial contributions" (paragraph 26).

Accordingly, Lady Justice Arden set aside the judge's holding that there was a 50/50 share in the flat, and substituted a finding that Mr Sebastianelli has a 75 % share and that Mr Gallarotti has a 25% share, the approximate proportions of their total contributions.

Lord Justice Tomlinson and Lord Justice Davis gave concurring judgments.

2 comments:

  1. It's quite difficult to see how the Recorder at first instance, having found that C had agreed to make the greater mortgage payments and then had breached that agreement, could do so without consequence.

    ReplyDelete

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