EQUITY

Assessed Coursework
Jenny and Sam are two university friends who purchased a rural property, ‘Rocky Road’, on Druridge Bay, Northumberland in October 2010. The property was formerly a conference centre. It has 20 residential units and a meeting hall. Jenny and Sam decided to renovate the property and to turn it into a retreat centre for stressed London lawyers.

Sam has legal title to the property. The total purchase price was £1,000,000. Jenny contributed £100,000 to the purchase price. Sam contributed £300,000 and took out a mortgage of £600,000 in her own name. Jenny did not want her name to go on the title because she wanted to preserve her entitlement to social security benefits. She listed her residential address as a house in Newcastle. Sam was aware of this, and the social security payments formed part of their household income.

The retreat centre opened in July 2011. It was a phenomenal success. It was featured in lawyers’ magazines and became a key place for lawyers to discuss business issues while ostensibly relaxing on weekends. Jenny and Sam worked hard running the retreat centre. They did not take a proper salary, and paid for many of their living expenses out of the funds of the retreat centre. The mortgage instalments on the property were paid from the earnings of the retreat centre. Sam said on one occasion before the property was purchased that she regarded ‘Rocky Road’ as being as much Jenny’s as hers. Later, at the end of 2013, she told Jenny: ‘Whatever happens we will divide the profits from this venture equally.’ By July 2014, the mortgage debt had been discharged.

In August 2015, Jenny and Sam had a serious disagreement. So strong was the disagreement that Jenny left and demanded her share of the profits of the venture. Sam decided that the best course was to sell ‘Rocky Road’. The property was sold in October 2015 for £2,000,000. The proceeds for sale were placed in an account with the Trustworthy Investment Bank.

Jenny is seeking £1,000,000 as her half share of the proceeds of sale of ‘Rocky Road’.

Advise Jenny on the merits of her claim.

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