Probate valuation and equitable accounting

In 1972, A, B and C purchased a £10,000 freehold house as tenants in common with a mortgage. They agreed to live together and that each would pay one-third of the expenses monthly. They hoped to renovate the property, convert it into flats and sell it. Purchaser A (born 1936) paid his monthly contributions for 12 months. He then abandoned the property, paid no more contributions and was heard from only rarely until his death in 2018. He left a will leaving his estate (unspecified) to 11 individuals. No grant has been taken out. When A abandoned the house, purchasers B and C continued in the property, paying A’s share as well as their own. B died in 2008. He left his share in the house to certain charities but on terms that C could remain in the house until C’s death. Probate was obtained for B’s estate. The probate value included one-third of the value of the house as at B’s death in 2008. Following A’s death in 2018, C has paid all the outgoings. C is now in his late 80s. The house is now worth £2 million. C wants to try to resolve matters relating to A. Is it correct that A’s interest in the house is to be valued as at the date of his death in 2018? Was it correct to value B’s interest in the house as at the date of his death in 2008? Is A’s interest (at whatever valuation date) subject to his estate giving credit for the very significant expenses incurred by B and C (and latterly by C alone) for almost 50 years in accordance with the principles of equitable accounting? With interest? (See, for example, Clarke v Harlow [2007] 1 FLR 1, Wilcox v Tait [2006] EWCA Civ 1867 and McKenzie v Nutter 2007 SLT (Sh Ct) 17. My own interest is as an intended executor of C.

Wilcox v Tait is a persuasive authority on the approach in principle to this type of case. Issues arise usually where the co-owners have given no thought to the matter at all or did not foresee all the circumstances which have arisen. However this means that actual decisions will be heavily fact- and intention-dependent and based on the available admissible evidence.

Jonathan Parker LJ however enunciates one clear point of principle about the batting order in these cases at para 62: “Similarly, the issue as to the precise division of the net proceeds of sale to reflect the parties respective beneficial interests (in the instant case, one half each), is in my judgement, more appropriately addressed once the property has been sold and there is a fund in place available for division. To attempt an equitable accounting exercise in advance of any sale is, as it seems to me, in general an inherently risky and uncertain process. Certainly I can see no good reason for the judge to attempt to undertake that task in the instant case.”

1 Adjudicate equitable interests
2 Order sale
3 After sale, equitable accounting

It also seems very likely process 3 will start from the very beginning of the co-ownership relationship unless there was a later agreement by the parties to regulate it.

Jack Harper