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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Lavelle v Tracy Lavelle & Ors [2004] EWCA Civ 223 (11 February 2004) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2004/223.html Cite as: [2004] EWCA Civ 223

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
(HIS HONOUR JUDGE HOWARTH)

		Royal Courts of Justice Strand London, WC2A 2LL
		11 February 2004

1. LORD PHILLIPS, MR:

Introduction

2. This is an appeal from the judgment delivered on 21 May 2003 by His Honour Judge Howarth, sitting as a judge of the High Court. That judgment resolved an unhappy family dispute as to the ownership of a flat, Flat 6, Churchill Place, Monton, which is on the outskirts of Manchester ("the flat").
3. The claimant, George Lavelle ("George"), purchased the flat in 1997. The solicitors acting for George were MB Cuttle & Co of Sale. On 13 November 1996 they wrote to George advising him that, because of uncertainty about access to the flat, they would not recommend exchanging contracts. On 26 November 1996 they received a reply, which appeared to be signed by George, in the following terms:

"With reference to your letter dated 13 November regarding the above, I wish to confirm that I want to proceed to enter into a legally binding contract for the flat and complete the matter as quickly as possible. The contract and deeds should be in the name of Tracy Lavelle, notwithstanding the difficulties and despite your advice to the contrary I wish for you to exchange contracts and complete the matter on my behalf. Enclosed please find bankers draft for £1l,500."

4. The solicitors complied with those instructions, and the flat was conveyed into the name of Tracy Lavelle ("Tracy"). She is George's daughter and the first defendant. The issue before the judge related to the nature and effect of this transaction.
5. It was George's evidence that he was buying the flat for his own use, that he had no knowledge of the letter of 26 November 1996 and that Tracy must either have forged his signature or tricked him into signing it unread. It was Tracy's evidence that she had no recollection of the letter of 26 November, but she accepted that she had typed it. The signature was George's. George had been taking advice about avoiding inheritance tax, and in November 1996 he had told her that he was putting the flat into the name of herself and her brother, Craig Lavelle ("Craig"), the second defendant, in order to save inheritance tax on his estate. Tracy concluded that he had instructed the solicitors to put the flat in her name in order to save inheritance tax. Her case was that the effect of this was to vest the flat in her to hold for the benefit of herself and Craig absolutely.
6. Craig advanced the same case. In his witness statement he gave the following explanation for what had occurred:

"Whilst we [Craig and his wife] were away the key letter in this litigation was written -- the one dated 26 November 1996 from Lavelles (signed by my father) to Cuttles asking that the deeds to the Property should be in Tracy's name. One evening soon after my return (it would have been about the first week in December 1996), he and I drove over to the Property to see how works were progressing. We made the journey in my two-door Mercedes. During that journey, my father said to me that he had heard from the accountants who told him that he could put the flat in our names for Inheritance Tax purposes and that accordingly he told the solicitors to put the Property in Tracy's name. He said that he would have told them to put the Property in both my name and Tracy's name, as it was his wish that it be left to the both of us, but because I was overseas at the time, he told the solicitors only to put it in Tracy's name."

In his oral evidence he added that George said that he was giving the flat to himself and Tracy.

7. The judge rejected Craig's evidence of the conversation in his Mercedes; equally he rejected George's assertion that Tracy had forged his signature or tricked him into signing the letter of 26 November 1996 in ignorance of its contents.
8. In the light of these findings the judge went on to consider the effect of the other evidence. His starting point was that, as Tracy was George's daughter, there was a presumption that, in having the flat conveyed into her name, George intended to pass to her the beneficial interest in the flat. He then considered whether there was evidence that rebutted this presumption of advancement. He held that the presumption was comprehensively rebutted by evidence that George was buying the flat for his own use. He gave a declaration that Tracy held the flat upon trust for George.
9. Mr Chaisty QC, who appeared before us on behalf of Craig and Tracy, challenged the judge's approach and his conclusions. He observed that the only case that George had advanced to explain the conveyance of the flat to Tracy was the allegation that she had forged the letter of 26 November 1996 or tricked him into signing it. As the judge had rejected that allegation, George had no explanation at all for the conveyance to Tracy. Furthermore, he had put forward a false story. In those circumstances the judge should have held that George was not able to rebut the presumption of advancement in favour of Tracy.
10. Mr Chaisty further submitted that, had the judge made a proper appraisal of the evidence, he would have been driven to the conclusion that George's intention was to make a gift of the flat to Tracy and Craig, reserving no interest to himself. This submission founded critically on the evidence and advice given by accountants on how to avoid inheritance tax. They had advised that inheritance tax on the flat would be avoided if George made a gift of it to Tracy and Craig. Mr Chaisty criticised the judge for failing to address the issue of whether George was aware of this advice. Had he addressed that issue, he would have concluded that George was aware of the advice and that the instructions he gave to his solicitors to convey the flat to Tracy were intended to give effect to it.
11. Mr Chaisty submitted that the evidence that George was purchasing the flat for his own use was not inconsistent with his making a gift of the flat to Tracy and Craig. He could naturally have assumed that they would have been prepared to permit him to use the flat, as indeed they were.

The Law

12. I propose at this point to set out in simply terms the law that is relevant in the case. For the most part this is not in dispute.

Intention and presumptions

13. Where one person, A, transfers the legal title of a property that he owns or purchases to another, B, without receipt of any consideration, the effect will depend on his intention. If he intends to transfer the beneficial interest in the property to B, the transaction will take effect as a gift and A will lose all interest in the property. If he intends to retain the beneficial interest for himself, A will take the legal interest but will hold the property in trust for A.
14. Normally there will be evidence of the intention with which a transfer is made. Where there is not, the law applies presumptions. Where there is no close relationship between A and B, there will be a presumption that A does not intend to part with the beneficial interest in the property and B will take the legal title under a resultant trust for A. Where, however, there is a close relationship between A and B, such as father and child, a presumption of advancement will apply. The implication will be that A intended to give the beneficial interest in the property to B and the transaction will take effect accordingly.
15. Some of the older authorities upon which Mr Chaisty relies indicate that the presumption of advancement is not lightly to be displaced by evidence. Chettiar v Chettiar [1962] AC 294 involved a transfer of land from father to son. In giving the advice of the Privy Council, Lord Denning had this to say about the presumption of advancement:

"He [the father] had also to get over the presumption of advancement, for whenever a father transfers property to his son, there is a presumption that he intended it as a gift to his son; and if he wishes to rebut that presumption and to say that he took as trustee for him, he must prove the trust clearly and distinctly, by evidence properly admissible for the purpose, and not leave it to be inferred from slight circumstances: see Shephard v Cartwright [1955] AC 431."

He then dealt with the facts. Lord Denning continued:

"In these circumstances it was essential for the father to put forward a convincing explanation why the transfer took the form it did....."

16. In Shephard v Cartwright the issue was whether a father, in registering shares in the names of his children, had transferred the beneficial interest in those shares to them. Many years later the father had treated the shares as his own. The question arose as to whether this fact displaced the presumption of advancement. Mr Chaisty particularly relies on this passage from the speech of Viscount Simonds at page 445:

"My Lords, I do not distinguish between the purchase of shares and the acquisition of shares upon allotment, and I think that the law is clear that on the one hand where a man purchases shares and they are registered in the name of a stranger there is a resulting trust in favour of the purchaser; on the other hand, if they are registered in the name of a child or one to whom the purchaser then stood in loco parentis, there is no such resulting trust but a presumption of advancement. Equally it is clear that the presumption may be rebutted but should not, as Lord Eldon said, give way to slight circumstances: Finch v Finch (1808) 15 Ves 43.

It must then be asked by what evidence can the presumption be rebutted, and it would, I think, be very unfortunate if any doubt were cast (as I think it has been by certain passages in the judgments under review) upon the well-settled law on this subject. It is, I think, correctly stated in substantially the same terms in every textbook that I have consulted and supported by authority extending over a long period of time. I will take, as an example, a passage from Snell's Equity, 24th ed, p153, which is as follows:

'The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration...But subsequent declarations are admissible as evidence not only against the party who made them, and not in his favour'."

17. These authorities relied upon by Mr Chaisty have lost much of their force in modern times. Pettitt v Pettitt [1970] AC 777 involved a dispute between husband and wife as to the ownership of the matrimonial home. At page 793, Lord Reid said about the presumption of advancement:

"These considerations have largely lost their force under present conditions, and, unless the law has lost its flexibility so that the courts can no longer adapt it to changing conditions the strength of the presumption must have been much diminished. I do not think it would be proper to apply it to the circumstances of the present case."

Lord Hodson said at page 811:

"Reference has been made to the 'presumption of advancement' in favour of a wife in receipt of a benefit from her husband. In old days when a wife's right to property was limited, the presumption, no doubt, had great importance and today, when there are no living witnesses to a transaction and inferences have to be drawn, there may be no other guide to a decision as to property rights than by resort to the presumption of advancement. I do not think it would often happen that when evidence had been given, the presumption would today have any decisive effect."

Lord Upjohn at page 813 said:

"But the document may be silent as to the beneficial title. The property may be conveyed into the name of one or other or into the names of both spouses jointly in which case parol evidence is admissible as to the beneficial ownership that was intended by them at the time of acquisition and if, as very frequently happens as between husband and wife, such evidence is not forthcoming, the court may be able to draw an inference as to their intentions from their conduct. If there is no such available evidence then what are called the presumptions come into play. They have been criticised as being out of touch with the realities of today but when properly understood and properly applied to the circumstances of today I remain of opinion that they remain as useful as ever in solving questions of title."

At page 814 Lord Upjohn continued:

"Though normally referred to as a presumption of advancement, it is no more than a circumstance of evidence which may rebut the presumption of resulting trust, and the learned editors of White and Tudor were careful to remind their readers at p763 that 'all resulting trusts which arise simply from equitable presumptions, may be rebutted by parol evidence....' This doctrine applies equally to personalty.

These presumptions or circumstances of evidence are readily rebutted by comparatively slight evidence."

Lord Upjohn then gave some examples. A less rigid approach should also be adopted to the admissibility of evidence to rebut the presumption of advancement.

18. In Tribe v Tribe [1996] Ch 107 at page 129, Millett LJ said:

"But it does not follow that subsequent conduct is necessarily irrelevant. Where the existence of an equitable interest depends upon a rebuttable presumption or inference of the transferor's intention, evidence may be given of the subsequent conduct in order to rebut the presumption or inference which would otherwise be drawn."

19. In these cases equity searches for the subjective intention of the transferor. It seems to me that it is not satisfactory to apply rigid rules of law to the evidence that is admissible to rebut the presumption of advancement. Plainly, self-serving statements or conduct of a transferor, who may long after the transaction be regretting earlier generosity, carry little or no weight. But words or conduct more proximate to the transaction itself should be given the significance that they naturally bear as part of the overall picture. Where the transferee is an adult, the words or conduct of the transferor will carry more weight if the transferee is aware of them and makes no protest or challenge to them.

Illegality

20. Sometimes the reason why property is put in the name of a nominee is in order to perpetrate a fraud or some other illegality. Equity will not permit the transferor to pray in aid the existence of that illegal purpose in order to rebut a presumption of advancement (see Collier v Collier [2002] EWCA Civ 1095 and the authorities there cited).

Taxation

21. Where a person gives away property and thereafter survives for at least seven years, that property will not be counted as part of his estate for the purposes of calculating inheritance tax on his death. The exemption will however not apply if at any time during the seven year period before his death:

"the property is not enjoyed [by the donee] to the entire exclusion, or virtually to the entire exclusion, of the donor and of any benefit to him by contract or otherwise." (see the Finance Act 1986 section 102(b)).

22. Permission to appeal in this case was given by Aldous LJ. He suggested that the court might have to consider whether George could only explain the transfer to Tracy by relying on an illegal purpose, namely an intention to deceive the Inland Revenue into believing that George had parted with the enjoyment of all benefit in the flat so that it would not form part of George's estate for the purpose of inheritance tax. It has never been part of the appellants' case that George had any such intention or, indeed, knowledge of the effect of the Finance Act that would be a pre-requisite to the forming of such an intention. Illegality has no part to play in this appeal.

Facts found by the Judge

23. I shall now summarise the facts found by the judge, which include those that persuaded him that the presumption of advancement was displaced.
24. George has three children: David, Craig and Tracy. At the start of the story he was on good terms with Craig and Tracy who were helping him to run a family business, but he was estranged from David. In 1990 George and his wife, the mother of David, Craig and Tracy, were living in a large house in Chatsworth Road, Worsley. In that year they purchased an apartment on the Costa del Sol in Spain. They decided to retire there and George handed over the management of the family business to Craig and Tracy, although he kept a shareholding in it. Thereafter George and his wife spent about three-quarters of the year in Spain and about one-quarter at their home in Chatsworth Road.
25. In 1999 George's wife died. He then sold the house in Chatsworth Road and proceeded to purchase the flat. On 26 November 1996 he signed the letter to which I have referred. Accordingly, although the entirety of the purchase price of the flat (£115,000) was provided by the father, the contract was signed by Tracy and the flat was conveyed into and registered in her name.
26. George then arranged, and paid for, various alterations to be made to the flat; the garage was extended to a size which would accommodate his Jaguar car, the bathroom fittings were changed, a new fitted kitchen was installed and various other alterations were made. George installed his own furniture in the flat. He insured the new fittings and the furniture. He took shares in and became a director of the management company. He kept keys to the flat, although Craig and Tracy also had a set. He continued to spend the majority of his time in Spain, but when he came to England he used the flat as his own. He paid the utilities bills and the council tax. Neither Tracy nor Craig made any use of the flat.
27. In the summer of 2000, the family business was in financial difficulty. At a meeting with Craig and Tracy, George offered to sell the flat and put the proceeds into the business. Craig and Tracy refused his offer. Neither asserted that the flat was not his to sell. By 2002 the good relationship between George and his two children had soured as a consequence of a dispute about ownership of the family business and an associated business that Craig and Tracy had developed. That dispute initially formed part of the subject matter of litigation, but was resolved at a comparatively early stage.
28. Mr Chaisty made a number of criticisms of the judge's findings. The least weighty of these was the finding that George had insured the furniture and fittings of the flat. The evidence was that the insurance had been effected by the family company. Once my attention had been drawn to the evidence relating to this, it struck me that a more forceful point might have been made in favour of George's case by referring to the information provided to the insurance brokers when the risk was placed:

"George Lavelle spends over 75% of the year in Spain. Every three months or so he returns to Manchester and stays in his flat...Mr Lavelle's family visit the flat weekly."

Mr Chaisty then criticised the judge for the reasons he gave for rejecting Craig's account of the conversation in his Mercedes. This was essentially that the account that Craig gave of his reaction to being told of the gift did not ring true. Mr Chaisty referred us to the relevant portion of the transcript and submitted that the judge's reaction was not justified. It would not be right for this court to reverse the finding that the judge made in relation to this issue on the basis of our reaction to this portion of the transcript, unless persuaded that it could not possibly justify the reaction of the judge who heard all the evidence. I am not so persuaded. Furthermore, as the judge remarked, this was the only direct evidence that George had stated that he was making a gift to Craig and Tracy, and it had to be evaluated having regard to the entirety of the evidence bearing on George's intention.

29. Mr Chaisty also criticised the judge's finding in relation to the conversation at the meeting in the summer of 2000. When giving oral evidence, Craig and Tracy had denied the details of this conversation given by George. The judge failed to refer to this conflict of evidence, or to give any reasons for resolving it as he did. I consider that this criticism of the judgment is well founded. The only hint that George's evidence was challenged was the judge's comment, after summarising his evidence, "I am inclined to think that was precisely what did happen". Once again, however, there is no sound basis for challenging the judge's evaluation of this part of the evidence, if the manner in which he weighed the evidence as a whole is not open to attack. Mr Chaisty did launch such an attack and it is to that which I now turn.

Dishonesty

30. Mr Chaisty submitted that the judge failed to deal with the implications of his rejection of George's evidence that Tracy had forged his signature on the letter of 26 November 1996 or induced him to sign it by trickery. He submitted that the judge should have concluded that George was a dishonest witness, and that the clear implication was that he was attempting to conceal the fact that he had given away his flat. I consider the judge should have addressed expressly the implications of George's evidence. I have no doubt, however, that, had he concluded that George had been deliberately advancing false evidence, he would have said so. The inference is that he did not consider George to be dishonest. This inference is strengthened by the judge's approach to the evidence about tax advice, to which I shall shortly refer.
31. Should the judge have held that George was dishonest? I do not consider that he should. Mr Chaisty sought to attach significance to the finding of the judge in relation to a request made by George to his solicitors, by letter of 8 February 2002, to know whether the deeds of the flat were in his name or in Tracy's name. As to this the judge said:

"It seems to me there can be no good reason why he should even contemplate that possibility unless he was aware of at least something that had gone on which might have induced him to agree to the deeds going in his daughter's name. And, of course, if he had signed the letter at page 344 dated 26 November 1996 and had this at the back of his mind, and maybe had a copy of that letter as at page 335, that would be perfectly simply explicable. It seems to me that, inevitably, must be what had taken place."

32. I do not consider that this passage should have led the judge to conclude that George was dishonest in denying knowledge of the letter of 26 November 1966. Neither does the other finding upon which Mr Chaisty relies; that is that George was in England on 26 November 1996 when his case had been that he was in fact abroad. The correspondence between solicitors made makes it plain that George was attempting to reconstruct his movements at the material time. All the evidence and the judge's finding to which I have just referred is consistent with George having forgotten the details of the arrangements for the conveyance of the flat. I do not think this is unlikely, given the passage of time, if George had not attached much importance to this. This again links with the question of George's reaction to the inheritance tax advice.
33. In this context I consider it significant that Tracy herself had no recollection of the letter of 26 November 1996. She accepted that she had typed it and that the precise wording would have been her own, although George would have given her the gist of what he wanted to say. The fact that she had written the letter had, however, slipped from her memory over the passage of time, as had other details of the communications with the accountants about inheritance tax.

Inheritance tax advice

34. I propose to summarise the evidence in relation to this on the basis of the contemporary documents, for the judge's summary of these was not wholly accurate. The documents in question are memoranda made by the staff of the accountants who provided the advice. The accountants were the firm of Downham Train Epstein ("DTE"), who acted as accountants to the family company. The evidence shows that in April 1995 George visited DTE and had some initial advice on inheritance tax planning, which included the possibility of lifetime gifting. This is the backcloth to the following evidence about advice given over a year later at the time of the purchase of the flat. On 11 November 1996 there was a memorandum from Miss O'Loughlin, to Mike Jacques as follows:

"G Lavelle is to purchase a residential property for approximately £120,000.

Client is to consider buying in the name of T Lavelle making a gift of the property to T Lavelle.

Client wishes to know what effect this would have on them? Could this need to go on Tax Return?"

35. There was an inter-office memorandum dated 12 November 1996, which is not in evidence. The response to this is the next document, a memorandum from Mr Teale to Mr Jacques dated 13 November 1996, as follows:

"Thank you for your memo of 12 November 1996, the gift by George Lavelle of cash of £120,000 to Tracy and Craig, or alternatively a newly acquired property to that value, would be a potential exempt transfer for Inheritance Tax purposes. There will be no Inheritance Tax implications unless George were to die within the next 7 years. It is sensible tax planning but the clients need to be aware of the operation of the 7-year rule and what would happen if George were to die before the end of 7 years. Please discuss if you need further information."

36. There followed a letter from Mr Jacques to Tracy dated 14 November 1996 as follows:

"Dear Tracy.

Further to our last meeting I have now had confirmation that should your father wish to gift his new property to yourself and Craig, this would be a potential exempt transfer for inheritance tax purposes.

There will be no inheritance tax implications unless your father were to die within the next seven years and in this respect it represents sensible tax planning, but need to be aware of this seven year rule."

A copy of this document was disclosed by George. He said that he had no recollection of seeing it at the time. He thought it might have been placed in a file of documents kept for him by Craig at the flat.

37. Mr Chaisty submitted that the only possible conclusion to which this evidence leads is that George did receive the advice that he could save inheritance tax if he made a gift of the flat to Tracy and Craig, and that it was in order to make such a gift that he instructed the solicitors that the flat should be conveyed to Tracy.
38. In dealing with the issue as to whether George had signed the letter of 26 November 1996, the judge posed the following question.

"At the time, was it a matter of any great importance to the parties or was it just a matter of routine? After all, if the claimant is right and he was signing a number of routine letters that he asked Tracy to prepare, he would not necessarily have any clear recollection of the transaction at all. Or was it, as has been adumbrated with the accountants, a scheme to reduce liability to inheritance tax by taking out of Mr George Lavelle's estate this flat, in which case it would have been a deliberately conceived scheme whereby a very significant part of Mr George Lavelle's free estate was being given by him voluntarily and absolutely for the benefit of one or two of his children."

39. The judge did not expressly answer this question. The clear inference from the judgment as a whole is that he concluded the former was the correct interpretation of the events and that George was not attaching great importance to the formalities of the transaction.
40. Mr Chaisty complained that the judge never addressed the crucial question of why George instructed the conveyance of the flat to be put into Tracy's name. The judge observed at one point that the only independent advice which George, "may or may not have had is that coming from Downham Train Epstein." In the passage that I have already quoted, the judge appears to have concluded that, "something had gone on which might have induced [George] to agree to the deeds going in his daughter's name". This is not a satisfactory analysis of the extent to which DTE's advice was the reason why George directed that the flat should be conveyed to Tracy.
41. One thing that the judge did decide quite clearly was that, in putting the property in Tracy's name, George did not intend to make a gift of it to her. The judge's final conclusion was:

"I take the view that all the evidence, or the majority of it, points firmly in favour of the fact that this was a transaction whereby the property was to remain father's, albeit in Tracy's name."

Was this a finding that was not open to the judge having regard to the inference that he should have drawn from the evidence of the inheritance tax advice? It is significant that it was Tracy who was making the running in obtaining this advice. She was the link between DTE and George. I think that the clear inference is that George instructed his solicitors that the flat should be conveyed to Tracy because he understood from her that this would be a good idea from the viewpoint of inheritance tax. Did Tracy appreciate the implications of that advice; namely that, to achieve the inheritance tax saving, George had to give away his flat and did she convey to George that this was what was required? Alternatively, did she merely convey to George that it would be a good idea for the flat to go into her name without going into detail of what was needed in order to avoid inheritance tax?

42. The evidence given by Tracy about this in her witness statement is significant.

"In the lead up to the purchase of the Property, one of the things my Dad said to me was that he was thinking of putting the Property in my name and Craig's name for Inheritance Tax purposes. He asked me to contact DTE to ask whether this should be done.

Accordingly, some time early in November 1996 (I cannot remember the exact date) I spoke to Mike Jaques of DTE to ask what to do on buying the Property. I suspect I asked him this during one of the meetings we had with him from time to time when, as Lavelle's accountants, he visited Lavelle's premises on Lavelle's business.

I cannot really remember what was discussed at the meeting save that I told Mike that my Dad wanted to put the Property in mine and Craig's names for Inheritance Tax. He said he would check that this was viable and he would write to me."

43. Turning to the letter to her from DTE dated 14 November 1996, Tracy states that she has no recollection of receiving this letter. A little later in her statement Tracy states that her father:

"....told me in November 1996 that he was putting the Property in our names (ie Craig and I) to save Inheritance Tax on his estate (even if ultimately the Property was only put in my name)."

After hearing Tracy give evidence about this, the judge made the following finding:

"Tracy really gave unconvincing evidence, in my view, of a conversation that could amount to a gift at all. I accept that Father did tell her he was putting the flat in her name, and by using that expression, and that is what she said she could remember him saying, it seems to me to indicate in his very words that she was to have the flat as a nominee, not as a recipient of a gift."

44. I am not persuaded by Mr Chaisty that it was not open to the judge on the evidence to make this finding. On the contrary, I have formed the view that the judge's final conclusions were correct. The evidence, taken as a whole, speaks strongly against the conclusion that George intended to give away his flat to Craig and Tracy. The evidence also suggests to me that Craig and Tracy did not believe that George was doing this at the time.
45. The appellants have always had a problem in marrying their contention that George intended to give his flat to both Craig and Tracy with the fact that he instructed the flat to be placed in the name of Tracy alone. At one and the same time they have sought to rely upon the presumption of advancement and yet accept that the flat was conveyed to Tracy as trustee for herself and Craig. I note that the grounds of appeal advance the following contentions:

"The case of the Defendants was that the Claimant made a gift of the Flat/the purchase price to the First Defendant for inheritance tax purposes the Claimant having taken inheritance tax advice from DTE Accountants in 1995 and prior to the purchase of the flat in November 1996.

....

The Learned Judge ought to have found and held that the Claimant had made a gift of the Flat/the purchase price to the First Defendant."

This mirrors the contention advanced by the appellants' solicitors in a letter dated 21 March 2003:

"I am instructed that once again, George Lavelle has his facts wrong. Rather, that the flat was given to Tracy Lavelle unconditionally as a gift, for Inheritance Tax purposes; the flat belongs legally and beneficially to Tracy Lavelle."

46. Mr Cawson QC, on behalf of George, has drawn our attention to two pieces of evidence that I consider to be significant. The first is to be found in the statement of Mr Yeardley, Tracy's husband:

"Craig and Tracy's solicitors had told them that if George Lavelle had truly given the Property to Tracy for Inheritance Tax purposes then that constituted a gift and George was not entitled to change his mind and demand that the flat be given back to him. Solicitors were concerned that when the full truth of this actually dawned on George Lavelle, that he would do something stupid such as cause damage to the Property. Accordingly, in agreement with their solicitors, Craig and Tracy had resolved that the best thing to do was to change the locks on the Property."

This is plainly hearsay and does no more than corroborate the evidence given in Craig's witness statement:

"Until this dispute with my father arose in relation to ownership of Hodgejoy, Tracy and I had never even considered denying my father the right to live in the Property when he was in the UK. However, when my father began to make his allegations about the Property, my solicitors suggested that we should change the locks. Without waiving privilege on the advice we received, their concern was that when my father realised that he had given the Property as a gift and he could not claim it back, he might do something stupid such as cause damage. Accordingly, when our solicitors, Addleshaw Booth & Co, responded to my father's solicitors on 21 March 2002 they confirmed that the Property in fact belonged to Tracy and that the Property was simply the place that we had previously allowed my father to use when he visited to the UK."

47. This peep we have been afforded under the cloak of legal professional privilege suggests that Craig and Tracy and their solicitors were not confident that George had appreciated in 1997 that he was giving away his flat. I am led to suspect that the appellants' contention that George made a gift of the flat to them is based on a subsequent analysis of the legal effect of events in 1996 and 1997, rather that upon a belief held by them throughout that George had given away to them all the interest in his flat.
48. The judgment under appeal is not a good judgment. It is discursive and does not clearly set out and resolve the material issues. It is not satisfactory that this court has had to deduce the judge's conclusions on these issues by a process of analysis of his reasoning. The core issue was, however, whether the considerable evidence demonstrated that, in 1997, George had intended to give away his flat. The evidence left no room for the application of the presumption of advancement. After a two-day trial in which he heard the witnesses, the judge concluded that George had had no such intention.
49. For the reasons that I have given, I can see no ground for upsetting this conclusion and would dismiss this part of the appeal.

Costs

50. The appellants also have permission to appeal against the costs order made by the judge that the defendants should pay 90 per cent of the claimant's costs, excluding the costs of the handwriting expert. As I understand the position, George had to bear the costs of this expert.
51. We have a note of the argument on costs below. Essentially this was that George had lost on every issue that he raised, namely that he did not sign the letter of 26 November 1996, he was out of the country when the letter was signed and that he had not sought inheritance tax advice. The costs' order should reflect the defendants' success on these issues to the extent that there should be no order as to costs or a very substantial discount on the claimant's costs.
52. No note was kept of the judge's reasons for the costs order that he made. We understand that the costs were dealt with at the end of a long day and that the reasons were perfunctory. Costs are important, particularly where, as I fear in this case, they are disproportionate to what is at stake. Judges must be sure that their reasons for costs' orders are clear; they should not be left to inference, albeit that it is often possible to infer the reasons.
53. In this case it is clear that the judge concluded that there should only be a modest departure from usual rule that costs follow the event to reflect the matters raised by the defendants. Was that a view he could properly take? I consider that it was. George was resisting a claim that he had given away his flat when he had not done so. His positive assertions were a product of faulty recollection about matters which had occurred five years before. Had I been awarding the costs, I might have adopted a more generous approach to the defendants, but I find it impossible to say that the judge's order was outside the ambit of that which he could reasonably make.
54. Accordingly, I would dismiss the appeal against his costs order.
55. LORD JUSTICE MAY: I agree.
56. LORD JUSTICE JONATHAN PARKER: I also agree.

Order: Appeal dismissed. Costs to be subject to detailed assessment if not agreed. Payment on account of costs to be made in the sum of £20,000 within 14 days.