A Less Beneficial Interest

Thompson v Hurst [2012] EWCA Civ 1752

This is a rather fact specific case which shows application of the principles of Stack v Dowden and Kernott v Jones. Our report on Kernott which covers the whole debate is here.

Background

H was the tenant of a local authority and had been since 1983. In 1985 T moved in with her. They did not marry but lived as a couple in the property. However, H remained the sole tenant of the property. In 2001 they bought the property under the right to buy scheme at a discount. The mortgage was in the name of H and she contributed the full purchase price. While they had apparently wanted to buy the property together they had not been able to do so as T had a somewhat chequered employment history and no mortgage could be obtained with his name on it. They then had two children and lived together in the purchased property as a family. The relationship broke down in 2005 but T continued to live in the property until 2009. The proceedings were begun in 2009 by T who sought a declaration of a joint beneficial interest on the basis that the purchase of the property had been a joint enterprise intended to provide a home for the children.

First Instance
Without spending too much time on the issue the District Judge found that H was the primary breadwinner and described her as “running the home show” throughout. She had had two jobs in order to pay the rent and had contributed all the money associated with the purchase. She had also paid the mortgage. T had been in and out of employment as a labourer and had made contributions as and when he could, he had also paid the council tax. The DJ found that their finances had been entirely separated and that they had gone to some lengths to keep them that way. Finally, and probably most importantly the DJ found that while there was a common intention that T should have a beneficial interest there was no common intent as to what value should be put on it because it was not something the parties had considered at all. T did not seem to be concerned that his name was not on the deeds of the property. Accordingly the DJ proceeded on the basis that there should be a beneficial interest calculated on e basis of what was fair looking at the contributions across the life of the relationship. This was calculated at a 10% share for T. T appealed and the case was certified for a direct appeal to the Court of Appeal.

Appeal
There were two grounds of appeal.

  1. The purchase was intended to be in joint names but this was not possible because of the employment history of T. This was an external “random” factor and it was
    argued that in such case the Court should treat the property as having been purchased jointly. The principles of Stack and Kernott should then apply and the starting point should be a 50/50 split.
  2. The DJs apportionment was in error and was plainly unfair. She did not properly consider the long history of the relationship and the fact that T and H had lived as equals, raising children together, for 20 years.

The first ground of appeal is the more interesting, at least for lawyers. The argument was simply that the Court should give effect to what the parties intent was when purchasing the property and ignore the fact that only H’s name ended up on the deeds. It was argued for T that there was intent they should buy the property together with a joint mortgage and it was only the “random intervening event” of a mortgage advisor stating that no mortgage would be possible with H’s name on it that prevented this occurring. The Court simply did not accept this argument.

I do not accept, however, the appellant’s starting point. The transfer was not in fact into the joint names of the appellant and the respondent. There is, therefore, no scope for a legal presumption that the parties intended a joint tenancy both in law and equity. Mr Josling’s argument amounts to a submission that there should be a legal presumption of joint beneficial ownership, not merely where the parties are indeed the joint legal owners, but where there is evidence that they would have liked to be joint legal owners but for one reason or another that was not practical or desirable. Neither Stack nor Jones, nor any other case, is authority for such a proposition. Indeed, the proposition is neither consistent with principle nor sound policy.

The Court made the further point that there was no evidence that, had the transfer into joint names proceeded as intended, there would have been an equal division as any legal advisor would have been bound to advise the parties to make a declaration of trust to make clear what their respective shares were. It was impossible to say what would have been agreed in such a case. The second ground of appeal was dismissed out of hand with the DJ’s assessment of shares being described as “careful and exemplary”.

Conclusions
There are two key points in the Court of Appeals final paragraphs which are worth noting. Etherton LJ, giving the leading judgement, finished by saying:

It is worth emphasising … that the trial judge has the onerous task of finding the primary facts and drawing the necessary inferences and conclusions, and appellate courts will be slow to overturn the trial judge’s finding. That applies just as much to the trial judge’s conclusions on fairness as it does to inferences of fact. Indeed, … the District Judge’s decision on fairness cannot be successfully challenged unless an error of principle has been made or the overall decision was plainly wrong.

This is a clear warning that the Court of Appeal will be reluctant to accept appeals on issues of fact or assessments of fairness unless the trial judge has clearly misdirected themselves on the principles to be applied. Lewiston LJ, highlighted that Stack was, as Baroness Hale stated, and unusual case in that the couple had gone to great lengths to keep their finances separate. This case fell into the same category of unusualness. Appeal dismissed.

Posted in FLW case note, Housing law - All, right-to-buy and tagged , , . RSS feed for this post and comments.

About

David is a solicitor specialising in landlord and tenant matters with Anthony Gold Solicitors. He particularly specialises in newer legislation and has written widely on the Housing Act 2004.

One Comment

  1. Squatter
    Posted 04/01/2013 at 10:34 am | link to comment

    Ground 1 of appeal was breathtaking, wasn’t it! It is worth noting, however, that this approach has worked (at first instance) when the starting point has been changed by way of deed of trust: Qayyum v Qayyum [2008] EWHC 2274 (Ch).

    There, a property was bought under joint ownership, but Mr Qayyum executed a deed acknowledging that the property was held beneficially for his wife. It was held to duly do just that. There was a later oral agreement between Mr and Mrs Qayyum that the property would be held beneficially 50/50. The court proceeded on the basis that for the oral agreement to alter the parties interests, that agreement would have to satisfy the requirements of the Stack/Jones common intention constructive trust, which it did. The court required ‘some compelling evidence of an actual agreement to change the beneficial interest’ which suggests it needed another displacement of the Stack presumption, rather than merely evidence that the parties’ intentions had changed or the scope to impute and intention that was fair; this suggests another displacement/acquisition act was required rather than merely another quantification act.

    Even if Qayyum were right on this, T would have needed far more compelling evidence than what he had. Moreover, this principle from Qayyum would have had to have been extended from where the initial displacement was by deed to where the initial displacement was by constructive trust in order to raise the requirement for a second displacement phase.

    Moreover, Qayyum pre-dates Jones where it was accepted that the court can take cognisance of the fact that the parties interests may have changed over time. Therefore it is less likely that this principle would or should be extended.

    Regarding ground 2, Etherton J’s dictum that ‘appellate courts will be slow to overturn the trial judge’s finding’ is more interesting. As the article says, the CA will be very reluctant to accept appeals on assessments of fairness. But Etherton J’s dictum goes further than that – to ‘drawing the necessary inferences and conclusions’. This is important because, as we are reminded in Jones v Kernott [2011] UKSC 53 [51], if intentions can be inferred, fairness has no place in the determination.

    However, the construction of intention and the allowable range of conclusions has been fought over since Pettitt and Gissing brought the CICT to life. Most notably, Rosset severely restricted the kind of behaviour that allows the conclusion of a change of beneficial interests. Rosset looks to be on its way out (see, recently, e.g. Geary v Rankine [2012] EWCA Civ 555). So, if the appellate courts are reluctant to interfere with a trial judge’s findings, the trial judge’s discretion is effectively increased greatly. The development of new rules as to construction will be suppressed and thus the fig-leaf that the judges are inferring rather than imputing common intention will be enlarged. I think the court went further than the article suggests in this respect.

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