Imputed fairness?

Jones v Kernott [2009] EWHC 1713 (Ch) [not on Bailii yet] was an appeal from the County Court on a Trust of Land and Appointment of Trustees Act 1996 case. At issue is the question of fairness and whether and how far a change in common intention can be inferred or imputed.

Ms Jones and Mr Kernott had bought the property involved in joint names in 1984. Both lived there until 1993 when their relationship ended. They were not married. Mr K moved out and in 1996 bought another property in his sole name. Ms J remained in the first property.

Mr K ceased to pay mortgage and other outgoings when he moved out. It was common ground that before he moved out, the parties held the beneficial interest in the property in equal shares. The question was whether and to what extent those shares had changed when Mr K moved out and subsequently bought another property. In the court below, HHJ Dedman had found that the interests had changed and that Ms J was entitled to 90% on the basis that this ‘was fair and just’. Mr K unsurprisingly appealed.

Mr Strauss QC sitting as a deputy High Court Judge found little authority on whether the Court should infer that the parties’ intentions have changed in such circumstances, or impute such a change to them and if so how to quantify the change. On top of that, the main issue as he saw it was whether and if so how far it was open to the court to consider what was fair.

From an extended examination of Chadwick LJ’s judgment in Oxley v Hiscock [2004] EWCA Civ 546, which expressly raises ‘fairness’ on the basis of relevant conduct as the criterea by which share of interest should be assessed, in the absence of express agreement, and Stack v Dowden [2007] UKHL 17, which appears to limit ‘fairness’ and expressly concerned shares in a property in joint names, where Oxley v Hiscock concerned a sole proprietor, Mr Strauss QC extracted the following propositions as to what the current state of play is:

1. Where there is a sole name there is a rebuttable presumption that there is a sole beneficial interest, displaceable by evidence of common intention that both parties should have a beneficial interest. Contribution to purchase price will probably usually suffice.

2. Where there are joint names but nothing more is said, the presumption is of equal beneficial interests. Only in very unusual cases will this presumption be displaced (E.g. Stack v Dowden style separation of finances and unequal contributions).

3. In the latter, where the presumption is displaced and there is no express agreement, the court will quantify them by reference to ‘the whole course of dealing between the parties and taking account of all conduct which throws light on the question of what shares were intended’. The court must not impose what the court itself would consider to be fair (Stack at para 61).

4. It remains the duty of the court to decide what the common intention was or should be taken to have been. In many if not most cases there will be no evidence at all of actual intention, if any, of either party and the court will be attributing a common intention to them.

5. Whatever the beneficial interests at the time of acquisition, a trust may be ‘ambulatory’ – intentions of the parties may change over time. The ‘holistic approach’ of surveying the whole course of dealing should not obscure the fact that initial intentions may change. Following Lord Neuberger in Stack, a structured approach should be followed, to consider first the initial intention and then whether it has altered and to what extent.

6. In relation to the role of ‘fairness’ in the court’s assessment, Baroness Hale’s formulation at para 61 of Stack — ‘the search is still for the result which the parties must, in the light of their conduct, be taken to have intended’ — would seem to rule out fairness. However, Baroness Hale also recognises the Law Commission formulation that the presumed intention is that each party is entitled to the share that the court considers fair. The majority in Stack should be seen as holding that the Court should not override the intention of the parties, so far as that is apparent, in favour of what it considers fair. But, to the extent that the intention of the parties cannot be inferred and must be imputed, that has to involve the court supplying what it considers fair. In the present case, to the extent that there is evidence of conduct from which it is right to conclude that the parties intended their shares to alter, but no evidence as to what that alteration was intended to be, the only available criterion is what is objectively fair.

In fact, where the parties have not indicated in any way what the shares are to be, their actual or subconscious intention may well be that their respective shares, if they cannot reach agreement, should be whatever the court decides is fair. (My comment is that this is, with respect, quite astonishingly unlikely to be the case, in view of the various trust cases I’ve been involved in, but it is a no doubt comforting image for the court…). In any case, the court can’t assume that fairness in division was not an intention of the parties.

Lord Neuberger’s dissent in Stack, referring to fairness as forbidden territory and rejecting imputed common intention, was in the minority and does not limit this view of the majority in Stack.

On the present case, the judge below was right on the evidence to decide that the parties were to be taken as intending that the shares in the beneficial interest should change. The separate finances after 1993 met the Stack test. The judge was right to impute to the parties that changed intention from how they stood at the time they parted. The attribution of a 90% interest to Ms J was justifiable.

Comment
While to some extent the reasoning here is a logical follow on to Stack v Dowden in applying a concept of ambulatory or changing intentions to be inferred from changing conduct, I am somewhat uneasy about aspects of the case and the approach. Firstly, imputing a common intention to the parties where there is no evidence and probably no conscious intention on the part of the parties is difficult enough where one is examining the whole course of dealing (and there are plenty, like Rowena Meager, who side with Lord Neuberger in his opposition to the very idea of imputing intention), but where it is a subsection of the course of dealing, and there was a previous admitted or express shared intention, as here, then the process is surely fraught with the risk of subjective assessment based on the most recent circumstances and a ‘fair’ view of that. Nor am I wholly convinced that, when imputing intention, ‘fairness’ is what there is in the absence of other evidence. If there is so little evidence, or not enough to infer the parties’ intention, could there be enough to establish that this was an ‘exceptional’ case in Stack v Dowden terms?

As an illustration of my unease, let us take the relative contributions and relevant conduct in this case. The property was purchased in joint names. Ms J paid a £6000 deposit, the rest of the £30,000 purchase was by mortgage. In 1986, a loan for £2000 was taken out for an extension ‘which was built and paid for by Mr K’ and added £14000 (or about 50%) to the value of the property. The mortgage payments were shared until Oct 1993 when Mr K left. Thereafter Ms J paid the mortgage solely. A joint life insurance policy was cashed in in 1996, and the proceeds slit, with the purpose of enabling Mr K to buy another property. At trial the property was valued at £245,000, or £218,000 after mortgage. Ms J’s contribution to mortgage payments was held to be about 81.5%. While Mr K had not contributed to the mortgage after 1993, he had also not had any benefit from the property. Moreover, between 1984 and 1993, there had been an admitted shared intention that the beneficial interest should be shared equally.

Now, on any maths, it is clear that Mr K’s contribution to the value of the property across the whole course of dealing is considerably greater than 10%. He paid at least 18% of the mortgage alone, without factoring in the value of the extension. It is hard to see how an intention can be imputed on these facts and this course of dealing that the split should be 90/10, even if he had made no financial contribution to the property since 1993. Alternatively, one might see an argument that he had effectively transferred his interest in the property to Ms J in 1993 or at some point afterwards when he ceased to make any further contributions. But either way 90/10 doesn’t make sense on the reported facts.

The judge below had expressly found that 90/10 was ‘fair and just’, suggesting that fairness was his prime concern. This doesn’t seem to me to comfortably fit even with the analysis of Stack set out in this case, although Mr Strauss QC found to the contrary. The danger is that it is not just the imputed intention that is ambulatory, but the judicial palm trees as well.

About Giles Peaker

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts, and still is Nearly Legal on Google +.
Posted in Housing law - All, Trusts and Estoppel and tagged , , , , .

7 Comments

  1. Better late than never :-) :-) Sorry … couldn’t resist ;-) Glad it was you who did the maths – couldn’t face it myself.

    As you have rightly pointed out, I have some difficulty with this decision. Nicholas Strauss QC accepts that Mr K’s contribution to the property must represent not far short of 50% (see para [48]) and, as you say, Mr K has not received any benefit from the property during the time that he has not lived there despite being a beneficial co-owner and arguably being entitled to some benefit (even if it is not the benefit of living in it). Also, there was no severance of the beneficial joint tenancy until 2008. Need I say more?

    • It is clear that no matter how contribution to the value in the property is worked out, Mr K is well over 10% and possibly over 50%. So on a strict Lord Neuberger view, as you have put forward elsewhere, that should be the result,

      I’m maybe less concerned than you about the late severance. Practically, this is what happens. People have no idea about the legal effect of the forms of title and I have no trouble with the idea that their intentions may be radically different – as long as there is sufficient for that intention to be inferred, or even, post Stack, there is a course of conduct sufficient for the court to impute intention.

      I’m less happy with ‘fairness’, although I can see the argument put forward in this judgment that fairness as a means of weighing up the course of dealing is a necessary component of imputing intention as long as it is not imposed over the apparent intention. But, in this case, it is hard to avoid the view that ‘fairness’ based on current circumstances has overridden a fair view of the whole course of dealing, including the contributions to the value of the property, presumably on the basis that there was a wholescale change in imputable intention which, to some extent (apparently 40% of extent) overrode any previous course of dealing.

      And I say this as one who usually, but not exclusively, acts for those asserting a beneficial interest over their entitlement in law.

  2. Pingback: Beneficial Interests in the Family Home: The Rot Sets In « Rowena Meager's Property Law Blog

  3. …and so the waters get even muddier. This whole area is and always has been a mess, full of abstruse legal concepts twisted to fit the facts, conflicting authorities, judicial fictions such as implied intention and, more recently, the subjective test of fairness, which is impossible to predict. How does one advise a client against that backdrop? Surely, there should be some clear statutory guidance? In my area of family law, property rights for cohabitees would have provided a solution, but that now seems as far away as ever. Ho-hum.

  4. Pingback: Family Lore News: Imputed fairness?

  5. Pingback: The Property Law Blog

Leave a Reply (We can't offer advice on individual issues)