Nearly Legal: Housing Law News and Comment

Less than ambulatory intentions

Kernott v Jones [2010] EWCA Civ 578

This was the Court of Appeal hearing, on a second appeal, of a case on equitable interests in a property. We reported the first appeal to the High Court and were uneasy about the outcome of that appeal, which seemed to turn more on an idea of fairness than on any of the scant facts in imputing intention as to the distribution of equitable shares. The Court of Appeal judgment, while perhaps harsher on one of the parties, goes some way towards re-establishing certainty for those who, foolishly but inevitably, purchase property jointly while remaining unmarried.

The facts are set out in the earlier post. Ms J and Mr K bought the property together and lived there for 9 years. In 1993, Mr K moved out and in 1996 bought another property in his sole name. Ms J remained in the property. She paid the mortgage and outgoings wholly after 1993. It was common ground that up to the point Mr K moved out, the property was held in equal shares (although it appears on the facts that Mr K had made a greater overall contribution to the value of the property during that time). The first instance Judge had found that the interests in the property had changed and awarded 90% to Ms J and 10% to Mr K. This was upheld in the High Court on the basis that the separate finances after 1993 passed the Stack v Dowden [2007] UKHL 17 burden of displacing the presumption of equal shares and that, where there was scant or no evidence as to intention, the parties could be taken to intend that the shares would be whatever the court decided was fair.

The issue for the Court of Appeal, as Wall LJ put it, was:

Where; (1) an unmarried couple has acquired residential accommodation in joint names, which by common agreement was held by them beneficially in equal shares as at the date of their separation, and; (2) one party (here the respondent) thereafter; (a) continues to live in the property; and; (b) assumes sole responsibility for its continuing acquisition and maintenance – i.e. not only supports herself and the parties’ children but pays the mortgage and all the outgoings (including repairs and improvements) – can the court properly infer an agreement post separation that the parties’ beneficial interests in the property alter or (to use the phrase coined by Lord Hoffman in argument in Stack v Dowden [2007] UKHL 17. [2007] 2 AC 432) become “ambulatory”, thereby enabling the court – as here – to declare that, as at the date of the hearing before the court, the beneficial interests in the property are held other than equally?

By a majority, the Court of Appeal found that the answer was no.

Wall LJ considers Lord Chadwick’s formulation in Oxley v Hiscock [2004] EWCA Civ 546, :

In those circumstances, the second question to be answered in cases of this nature is “what is the extent of the parties’ respective beneficial interests in the property?” Again, in many such cases, the answer will be provided by evidence of what they said and did at the time of the acquisition. But, in a case where there is no evidence of any discussion between them as to the amount of the share which each was to have – and even in a case where the evidence is that there was no discussion on that point – the question still requires an answer. It must now be accepted that (at least in this Court and below) the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property. And, in that context, “the whole course of dealing between them in relation to the property” includes the arrangements which they make from time to time in order to meet the outgoings (for example, mortgage contributions, council tax and utilities, repairs, insurance and housekeeping) which have to be met if they are to live in the property as their home.

Without anything further, this would have been a basis to dismiss the present appeal as the Judge found the 90:10 split on the basis of fairness and on taking into account the whole course of dealing between the parties. However, Stack v Dowden is not only more recent, but a House of Lords decision. It also deals specifically with joint interests, where Oxley didn’t. He notes Baroness Hale’s formulation that holding in joint title must be taken as giving an intention of equal shares, and that an assertion to the contrary must be proved. Further, he notes Baroness Hale’s view that:

61. […] the search is still for the result which reflects what the parties must, in the light of their conduct, be taken to have intended. Second, therefore, it does not enable the court to abandon that search in favour of the result which the court itself considers fair. For the court to impose its own view of what is fair upon the situation in which the parties find themselves would be to return to the days before Pettitt v Pettitt [1970] AC 777 without even the fig leaf of section 17 of the 1882 Act.
62. Furthermore, although the parties’ intentions may change over the course of time, producing what my noble and learned friend, Lord Hoffmann, referred to in the course of argument as an “ambulatory” constructive trust, at any one time their interests must be the same for all purposes. They cannot at one and the same time intend, for example, a joint tenancy with survivorship should one of them die while they are still together, a tenancy in common in equal shares should they separate on amicable terms after the children have grown up, and a tenancy in common in unequal shares should they separate on acrimonious terms while the children are still with them.

Wall LJ then spends rather more time on and expresses sympathy for Lord Neuberger’s dissenting view in Stack v Dowden that the starting point must be resulting trust from contributions to purchase and, alternatively, in a constructive trust approach that there should be no ‘imputed’ intentions, where they could not be inferred. Again, ‘fairness’ is not the appropriate yardstick for reaching a conclusion as to the parties’ inferred or imputed intentions.

On the facts of this case, both an Oxley v Hiscock and a Stack v Dowden approach should reach the same end point. Oxley would find an intention to share but no definition of the interests. Thus an express joint intention to share should result in 50:50 interest. Stack would start from the presumption of joint names meaning joint (equal) interest and without anything further to show changed intentions, the passage of time is not enough:

There has to be something to displace those interests, and I have come to the conclusion that the passage of time is insufficient to do so, even if, in the meantime, the appellant has acquired alternative accommodation, and the respondent has paid all the outgoings. In my judgment, the appellant has a 50% interest in the property, and both the judge and the deputy judge were wrong to conclude otherwise.

Rimer LJ concurs with Wall LJ, emphasising Baroness Hale’s view in Stack v Dowden that while the whole course of conduct between the parties should be considered, “the search is ‘for the result which reflects what the parties must, in the light of their conduct, be taken to have intended.’ In the same paragraph she said that it is not open to the court to abandon that search ‘in favour of the result which the court itself considers fair'”. Rimer LJ confesses himself unsure what Baroness Hale meant by ‘imputed intentions’ when saying that the Court must seek the parties’ intentions, whether ‘actual, inferred or imputed’. If it is not a synonym for ‘inferred’ then it is inconsistent with her insistence that the goal is to find the parties’ intentions, which must be what they actually meant. Accordingly, Rimer LJ does not see Stack as authority for imputing an intention where none was expressed or can be inferred, even without Lord Neuberger’s ‘demolition’ of the idea in his dissenting judgment.

The facts of this case

cannot, however, in my view without more – and there was nothing more of relevance – have justified the inference of a joint intention that Ms Jones should have some, presumably, steadily increasing beneficial share in the house as the years rolled by (I put it that way because it is improbable that the judge would have arrived at the same beneficial division if he had been deciding the case in, say, 1998: his assessment of a ‘fair and just’ solution would surely then have required him to give Ms Jones a smaller share than he gave her in 2008).

Jacob LJ dissents. On his view the appeal should only be considered by the Court of Appeal if the Court below applied the wrong legal test, as otherwise, the issue is solely one of drawing inference from the primary facts and there was no sign that the findings below were perverse.

The Judge at first instance had applied the correct legal test, starting from the presumption of joint interest, considering the ‘whole course of conduct’. There was no reason for either the High Court or the Court of Appeal to interfere with this.

Appeal allowed and the interest in the property given as 50:50 as tenants in common.

Wall LJ, noting that there was no evidence that the parties had been advised on the meaning of joint tenancy when first purchasing, adds some words of warning:

I described this case as a cautionary tale. So, in my judgment, it is. The purchase of residential accommodation is perhaps the single most important financial transaction which any individual transacts in a lifetime. It is therefore of the utmost importance, as it seems to me, that those who engage in these transactions, and those who advise them, should take the greatest care over such transactions, and must – particularly if they are unmarried or if their clients are unmarried – address their minds to the size and fate of the respective beneficial interests on acquisition, separation and thereafter. It is simply impossible for a court to analyse personal transactions over years between cohabitants, and the costs of so doing are likely to be disproportionate in any event. Cohabiting partners must, it seems to me, contemplate and address the unthinkable, namely that their relationship will break down and that they will fall out over what they do and do not own.

Comment
While this is undoubtedly a somewhat harsh outcome for Ms J, as the Court notes, it does re-establish some certainty for those involved in or advising on these situations. What is particularly interesting is that the approach of both Wall LJ and Rimer LJ is to limit or deny any suggestion that Stack v Dowden allows for intentions to be imputed, that is ascribed to the parties by the court, rather than inferred. Inferred intention requires some evidence from the course of conduct that the parties did intend a certain division (or change in share). Where, as here, there is simply not enough evidence to suggest that the parties’ intentions changed, it is not for the court to consider that the course of conduct, in fairness, allows it to impute that intention to them. The presumption in Stack v Dowden cannot be overcome that way.

Also worthy of note is that separation of finances, although a key element in Stack, is not enough per se to overcome the presumption – although difference here was that Ms J was seeking to argue a change from an admitted intention of equal shares, where Stack was an argument that the intention from the start was unequal shares.

Now, are the conveyancers advising properly on joint tenancy?

Rowena Meager also has a comment on this case.

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