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Title : Merritt v Merritt

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*1211 Merritt v Merritt

Court of Appeal

27 April 1970

[1970] 1 W.L.R. 1211

Lord Denning M.R. , Widgery and Karminski L.JJ.

1970 April 27

Contract—Formation—Intention to create legal relationship—Uncertainty—Husband and wife—

Separation—Husband's agreement to transfer matrimonial home to wife's sole ownership—
Whether intention to enter into legal relations.

A husband and wife married in 1941. In 1949 they built a house as a matrimonial home. It was
in the husband's name with a large sum on mortgage with a building society. In 1966 they
agreed to put the house in their joint names. Shortly afterwards the husband left the house and
went to live with another woman.

At a meeting on May 25, 1966, the husband agreed to pay the wife £40 a month out of which
she was to pay the £180 outstanding to the building society. At her insistence he signed a
document stating that in consideration of her paying all charges in connection with the house
until the mortgage repayments had been completed he agreed to transfer the house into her
sole ownership. The wife paid off the balance of the mortgage and the husband then reduced
the £40 a month to £25 a month.

Stamp J. granted the wife's application for a declaration that the house belonged to her and
ordered the husband to join in the necessary conveyance.

On the husband's appeal:—

Held, dismissing the appeal that since the parties had separated the agreement regarding the
ownership of the matrimonial home was one which was intended to create legal relations and
was binding upon them.

Balfour v. Balfour [1919] 2 K.B. 571, C.A. ; Jones v. Padavatton [1969] 1 W.L.R. 328; [1969] 2 All
E.R. 616, C.A. and Gould v. Gould [1970] 1 Q.B. 275; [1969] 3 W.L.R. 490; [1969] 3 All E.R. 728,
C.A. distinguished .

Per curiam. In deciding whether or not an agreement is intended to establish legal relations the
surrounding circumstances must be looked at to see whether reasonable people would regard
the agreement as intended to be binding (post, pp. 1213D–E, H, 1214E).

Decision of Stamp J. affirmed.

The following cases are referred to in the judgments:

Balfour v. Balfour [1919] 2 K.B. 571, C.A.

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Gould v. Gould [1970] 1 Q.B. 275; [1969] 3 W.L.R. 490; [1969] 3 All E.R. 728, C.A.
Jones v. Padavatton [1969] 1 W.L.R. 328; [1969] 2 All E.R. 616, C.A.

The following additional case was cited in argument:

Gissing v. Gissing [1969] 2 Ch. 85; [1969] 2 W.L.R. 525; [1969] 1 All E.R. 1043, C.A. ; (Note)
[1969] 2 Ch. 105; [1969] 2 W.L.R. 1208, C.A.

APPEAL from Stamp J.

The defendant, John Bertram Merritt, appealed against the judgment of Stamp J. on May 14,
1969, adjudging that the plaintiff, Millicent Joan Merritt, was entitled to a declaration that she
was the sole beneficial owner of the freehold property known as 133 Clayton Road, Hook,
Surrey and *1212 ordering that the defendant join with the plaintiff in transferring the
property to the plaintiff.

The grounds of appeal were, inter alia: that the judge misdirected himself in law in holding that
the parties intended to and did enter into legal relations; that he misdirected himself in holding
that the agreement between the parties was legally binding and enforceable, in holding that
there was valid consideration for the contract and in failing to declare that the plaintiff held the
property on trust for the plaintiff and the defendant.

The facts are stated in the judgment of Lord Denning M.R.

Representation

Anthony Thompson for the defendant.

Michael Johnston for the plaintiff.

LORD DENNING M.R.

Husband and wife married as long ago as 1941. After the war in 1949 they got a building plot
and built a house. It was a freehold house, no. 133, Clayton Road, Hook, Chessington. It was in
the husband's name, with a considerable sum on mortgage with a building society. There they
lived and brought up their three children, two daughters, aged now 20 and 17, and a boy now
14. The wife went out to work and contributed to the household expenses.

Early in 1966 they came to an agreement whereby the house was to be put in joint names.
That was done. It reflected the legal position when a house is acquired by a husband and wife
by financial contributions of each.

But, unfortunately, about that time the husband formed an attachment for another woman. He
left the house and went to live with her. The wife then pressed the husband for some
arrangement to be made for the future. On May 25 they talked it over in the husband's car. The
husband said that he would make the wife a monthly payment of £40 and told her that out of it
she would have to make the outstanding payments to the building society. There was only
£180 outstanding. He handed over the building society's mortgage book to the wife. She was
herself going out to work, earning net £7 10s a week. Before she left the car she insisted that
he put down in writing a further agreement. It forms the subject of the present action. He wrote
these words on a piece of paper:—

“In consideration of the fact that you will pay all charges in connection with the house
at 133 Clayton Road. Chessington, Surrey, until such time as the mortgage repayment
has been completed, when the mortgage has been completed, I will agree to transfer
the property into your sole ownership.
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Signed, John Merritt. May 25, 1966.”

The wife took that paper away with her. She did, in fact, over the ensuing months pay off the
balance of the mortgage, partly, maybe, out of the money the husband gave her, £40 a month,
and partly out of her own earnings. When the mortgage had been paid off, he reduced the £40
a month down to £25 a month.

The wife asked the husband to transfer the house into her sole ownership. He refused to do so.
She brought an action in the Chancery Division for a declaration that the house should belong
to her and for an order that he should make the conveyance. The judge made the order; but
the husband now appeals to this court.

*1213

The first point taken on his behalf by Mr. Thompson is that the agreement was not intended to
have legal relations. It was, he says, a family arrangement such as was considered by the court
in Balfour v. Balfour [1919] 2 K.B. 571 and in Jones v. Padavatton [1969] 1 W.L.R. 328 . So the
wife could not sue upon it.

I do not think those cases have any application here. The parties there were living together in
amity. In such cases their domestic arrangements are ordinarily not intended to create legal
relations. It is altogether different when the parties are not living in amity but are separated, or
about to separate. They then bargain keenly. They do not rely on honourable understandings.
They want everything cut and dried. It may safely be presumed that they intend to create legal
relations.

Mr. Thompson then relied on the recent case of Gould v. Gould [1970] 1 Q.B. 275 , when the
parties had separated, and the husband agreed to pay the wife £12 a week “so long as he
could manage it.” The majority of the court thought those words introduced such an element of
uncertainty that the agreement was not intended to create legal relations. But for that element
of uncertainty, I am sure the majority would have held the agreement to be binding. They did
not differ from the general proposition which I stated at p. 280 that:

“when husband and wife, at arm's length, decide to separate, and the husband
promises to pay a sum as maintenance to the wife during the separation, the court
does, as a rule, impute to them an intention to create legal relations.”

In all these cases the court does not try to discover the intention by looking into the minds of
the parties. It looks at the situation in which they were placed and asks itself: Would reasonable
people regard the agreement as intended to be binding?

Mr. Thompson sought to say that this agreement was uncertain because of the arrangement for
£40 a month maintenance. That is obviously untenable. Next he said that there was no
consideration for the agreement. That point is no good. The wife paid the outstanding amount
to the building society. That was ample consideration. It is true that the husband paid her £40 a
month which she may have used to pay the building society. But still her act in paying was
good consideration.

Mr. Thompson took a small point about rates. There was nothing in it. The rates were adjusted
fairly between the parties afterwards.

Finally, Mr. Thompson said that, under section 17 of the Act of 1882, this house would be
owned by husband and wife jointly: and that, even if this house were transferred to the wife,
she should hold it on trust for them both jointly. There is nothing in this point either. This paper
which the husband signed dealt with the beneficial ownership of the house. It was intended to
belong entirely to the wife.
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I find myself in entire agreement with the judgment of Stamp J. This appeal should be
dismissed.

WIDGERY L.J.

I agree with Lord Denning M.R.'s judgment, feeling, as he does, that no criticism can be levelled
at the finding of the judge below.

When a husband and wife are living together in amity it is natural enough to presume that
their discussions about money matters are not intended to create legally binding contracts. As
Lord Atkin said in Balfour v. Balfour [1919] 2 K.B. 571 , 579: *1214

“The common law does not regulate the form of agreements between spouses. Their
promises are not sealed with seals and sealing wax. The consideration that really
obtains for them is that natural love and affection which counts for so little in these
cold courts.”

But, of course, once that natural love and affection has gone, as it normally has when the
marriage has broken up, there is no room at all for the application of such a presumption.
Salmon L.J. made this clear in Jones v. Padavatton [1969] 1 W.L.R. 328 , to which reference has
already been made, where he said, at p. 332:

“As a rule when arrangements are made between close relations, for example
between husband and wife, parent and child or uncle and nephew in relation to an
allowance, there is a presumption against an intention of creating any legal
relationship. This is not a presumption of law, but of fact. It derives from experience of
life and human nature which shows that in such circumstances men and women
usually do not intend to create legal rights and obligations, but intend to rely solely on
family ties of mutual trust and affection.”

The experience of life and human nature which raises this presumption in the case of a
husband and wife living together in amity does not support it when the affection which
produces that relationship of confidence has gone.

I find it unnecessary to go so far as to say that there is a presumption in favour of the creation
of legal relationships when the marriage is breaking up, but certainly there is no presumption
against the creation of such legal relations as there is when the parties are living happily
together.

I would dismiss this appeal.

KARMINSKI L.J.

I agree, and only desire to add this. It is in my view of great importance, in considering whether
or not an agreement of the kind which we have to consider here would create legal relations, to
look at the surrounding facts. In the present case on May 20, 1966, the husband informed his
wife that he was in love with another woman with whom he was living, and he added these
words: “When the house is paid for, I will consider signing over the other half to you.” That was
followed five days later by the meeting in the motor car which resulted, after full discussion, in
the signing of the agreement to which reference has already been made by my Lord. I do not
propose to read it again.

In deciding therefore whether or not an agreement is intended to establish legal relations, it

seems to me essential to look at the surrounding circumstances. In Balfour v. Balfour [1919] 2
K.B. 571 , the relevant facts were that the husband, who was employed in Government service
in Ceylon, had to return there in 1916. The wife could not join him there at any rate for the time
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being because of her own ill-health and the husband agreed to pay her £30 a month for her
support. At that time therefore the agreement was a perfectly friendly one occasioned by a
separation which was not, at any rate at that time, the desire of either of them.

In the present case it is manifest that the husband had left the wife by his own choice, because
he preferred the company of another woman. He was therefore not only presumably
committing adultery with her, but was also in desertion. The wife therefore had several grounds
for which she could have commenced divorce proceedings, or taken such proceedings as
*1215 she might have been advised for maintenance, either in a justices' court or in the High
Court, on the ground of desertion or wilful neglect to maintain. In fact no proceedings became
necessary, because the husband arranged to pay £40 a month, and undertook that when she
had discharged a small amount outstanding on the mortgage he would transfer the property to
her sole ownership.

I have no doubt, therefore, that on the facts of this case Stamp J. was perfectly correct in
coming to the conclusion which he formed, and I agree that this appeal must be dismissed.

A. H. B.

Representation

Solicitors: Wilkinson, Howlett & Durham; C. A. Maddin & Co., Surbiton .

Appeal dismissed. Costs of £50 ordered to be paid to plaintiff by defendant personally.

(c) Incorporated Council of Law Reporting for England & Wales

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