One of the things I really don’t like about academics is the way they sit in their offices with their heads so full of doctrinal legal theory that they forget (if they ever knew) about the ways real people lead their lives. What got me through land law as a student was Gray and Symes’ textbook, Real Property and Real People. The great thing about the re-invention of the constructive trust in the 1960s was that it seemed to provide a sufficiently malleable tool to connect real property and real people. So what if it was improper or that, properly, the approach should be the strict presumed resulting trust – that clearly didn’t respond to everyday life. So, I’m an impure property lawyer and quite proud of it. Any reader of the (excellent) work of the team of researchers on cohabitation lead by Gillian Douglas at Cardiff will appreciate the real problems that are just not amenable to the clean and fundamentally unfair solution provided by a resulting trust theory.
Be that as it may, it has become apparent over many years that the constructive trust doctrine is not exactly easy to operate. Partly, this is because judicial rhetoric, when unrestrained, may be capable of many meanings; partly also, I fear, it is because sometimes (even the greatest) judges don’t understand the difference between some of the key concepts. One such set of key concepts is the difference between an “inference” and an “imputation”. That difference has always (until now) seemed pretty important. It is what divided the House of Lords in Stack v Dowden  UKHL 17 in part (or so it seemed) but it was never entirely clear whether the majority of the House in that case was explicitly accepting an imputation, perhaps partly (unfairly) because previous judges had occasionally elided them when they should have known better. In Stack, Lord Neuberger provided what might be regarded as the classic definition of the difference between the concepts:
An inferred intention is one which is objectively deduced to be the subjective actual intention of the parties, in the light of their actions and statements. An imputed intention is one which is attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had no such intention. Imputation involves concluding what the parties would have intended, whereas inference involves concluding what they did intend. ()
And so, Jones v Kernott  UKHL 53. In many ways, the facts are a perfect testbed for the application of the doctrine in Stack and the SC largely play a straight bat in doing so.An inferred intention is one which is objectively deduced to be the subjective actual intention of the parties, in the light of their actions and statements. An imputed intention is one which is attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had no such intention. Imputation involves concluding what the parties would have intended, whereas inference involves concluding what they did intend.
A quick re-cap of the facts. Ms Jones and Mr Kernott set up home together and subsequently bought the lovely sounding 39 Badger Hall Avenue in their joint names in 1985. They had two children together. They built an extension (well, they jointly financed it, he built it with his family and friends). He left in 1993. Ms Jones paid all the mortgage and other outgoings and, in truth, Mr Kernott doesn’t sound like the best sort of Dad (ie “very little contribution to their maintenance and support). In 1995, they cashed in a life insurance policy to enable Mr Kernott to buy his own place. 14 and a half years later, Mr Kernott asks for half of the Badger Hall property. The only surprise on these facts to be honest is that the Court of Appeal agreed with him. They did so because it was accepted on all sides that at the time they split up (ie 1993), it was accepted that they owned it equally and there was no other common intention to justify departing from that outcome. Now, that was just a load of old b********. The real underlying question was one of law, ie over whether one could impute a common intention as to the quantification of the beneficial interest.
It must be emphasised (over and over again) that both Stack and Jones are cases where the parties are joint owners. They do not deal, or properly any comments can’t be considered to be absolutely authoritative, about the situation where one partner is a sole owner. There, it is clear that the presumption is that the sole owner also has the sole beneficial interest, a presumption which can be overcome by demonstrating a common intention that the property was to be shared, which has been acted on. That last sentence is supposed to be neutral, and obscures some pretty fundamental and difficult questions which have been the subject of exploration in property law, gender studies, law and economics, and socio-legal studies. There are no easy answers in this branch of the law.
Back to the point: Stack clearly held that where the parties held the property jointly at law, that provides the necessary common intention as to beneficial interests. The next question is about quantification and, here, Stack said that the usual result would be that the beneficial interests follow the legal title (ie half, half). Only in rare cases, according to Baroness Hale in Stack, would it be possible to override that position. [Pause to observe the empirical assumption inherent in that comment, cf Pinnock). How do you displace that position? Baroness Hale in Stack said that one had to look to the common intention of the parties in light of their whole course of conduct but she warned strongly against that course of action, a warning which she (together with Lord Walker, in a joint judgment) repeats and emphasises at - – one is dealing with joint enterprises and it is practically difficult to unravel everything.
So, what does the SC do in Jones? Well, the first thing they do is repeat what they said in Stack, make crystal clear (if it wasn’t already, which it was, but those Oxford types keep on sticky beaking) that the doctrine of resulting trusts has absolutely no bearing on domestic cases (at )(except where they are business partners: ), and then they have to deal with the imputation/inference problem. Baroness Hale/Lord Walker are quite amusing about the foundational case, Gissing v Gissing  AC 886 noting that “their Lordships speeches were singularly unresponsive to each other” (at ), but then the hard work begins. They argue that we do actually quite often impute intention, without necessarily calling it such:
Whenever a judge concludes that an individual “intended, or must be taken to have intended,” or “knew, or must be taken to have known,” there is an elision between what the judge can find as a fact (usually by inference) on consideration of the admissible evidence, and what the law may supply (to fill the evidential gap) by way of a presumption. The presumption of a resulting trust is a clear example of a rule by which the law does impute an intention, the rule being based on a very broad generalisation about human motivation … ()
They accept that the starting point is to find the parties’ actual shared intentions (ie expressed or inferred). However, “… where it is clear that the beneficial interests are to be shared, but it is impossible to divine a common intention as to the proportions in which they are to be shared … the court is driven to impute an intention to the parties which they may never have had” (). They argue that the difference between an inference and imputation may not be so great in practice (see also Lord Collins at  and , where he notes “one person’s inference will be another person’s imputation”) – given the difference between the members of the SC on the facts of Jones, this seems an amazing observation, but they note that the scope for inference is wide (). One final word on this is given at  where they note that
In a case such as this, where the parties already share the beneficial interest, and the question is what their interests are and whether their interests have changed, the court will try to deduce what their actual intentions were at the relevant time. It cannot impose a solution upon them which is contrary to what the evidence shows that they actually intended. But if it cannot deduce exactly what shares were intended, it may have no alternative but to ask what their intentions as reasonable and just people would have been had they thought about it at the time. This is a fallback position which some courts may not welcome, but the court has a duty to come to a conclusion on the dispute put before it.
Then they turn to the facts and note that the trial judge had found that there was a common intention that the beneficial interests would change (Lord Wilson in Jones notes at : “… the case does not require us to consider whether modern equity allows the intention required by the first question [ie whether the beneficial interests would change] also to be imputed if it is not otherwise identifiable. That question will merit careful thought” – so off to the supreme court again in such a case, perhaps a leapfrog?). They hit on the sale of the life insurance policy to demonstrate that one could infer a new common intention that Ms Jones was to have sole benefit of the capital gain in Badger Hall Avenue and Mr Kernott in his new property  – ingenious but not a finding made by any court below but, again ingeniously, “it is clearly the intention which reasonable people would have had had they thought about it at the time”. There is an interesting point made about occupation rent as a footnote, had they been required to go into a full accounting process: as Mr Kernott had basically done nothing for the kids at all and hadn’t contributed to the outgoings, no occupation rent would probably have been payable (which seems like quite an important point on the s 13 TLATA claim – see ).
They conclude with a pithy summary at , which is repeated here for good measure:
(1) The starting point is that equity follows the law and they are joint tenants both in law and in equity.
(2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change.
(3) Their common intention is to be deduced objectively from their conduct: “the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party” (Lord Diplock in Gissing v Gissing  AC 886, 906). Examples of the sort of evidence which might be relevant to drawing such inferences are given in Stack v Dowden, at para 69.
(4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, “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”: Chadwick LJ in Oxley v Hiscock FAm 211, para 69. In our judgment, “the whole course of dealing … in relation to the property” should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties’ actual intentions.
(5) Each case will turn on its own facts. Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended (as in case (3)) or fair (as in case (4)).
So far so good. But Lord Kerr and Lord Wilson are, in different ways, refuseniks against the “it makes no difference” line; in fact, both of them would have eschewed the inference adopted by Hale/Walker and would have gone for the fairness line. Lord Kerr does the job of noting where the agreement and disagreement lies, identifying two issues: how far should the court go to infer actual intention as to shares? and is the inference/imputation problem likely to be practically significant? On the first question, Lord Kerr said that the court should not overly strain to infer a common intention so as to avoid imputing one. He does not like the idea of imputing intention, and would have preferred a fairness jurisdiction “… without elliptical references to what their intention might have – or should have – been. But imputing intention has entered the lexicon of this area of law and it is probably impossible to discard it now”(). There does need to be a clear dividing line between inference and imputation, the latter involving a rather different exercise (). On the facts, Lord Kerr would not have found the inference from the “slender foundation” accepted by Hale/Walker but would have easily imputed the same outcome.
Similarly, Lord Wilson would have imputed the same outcome, but he rather takes apart the crucial paragraph from Baroness Hale’s judgment in Stack (), which he neatly divides into four sentences (at ), and demonstrates how her third sentence (about doing away with fairness) was manifestly incorrect. As he puts it: “Where equity is driven to impute the common intention, how can it do so other than by search for the result which the court itself considers fair?” He regards the observation that the difference between inference/imputation has limited practical utility goes too far.
My hope is that this line of cases will somehow re-connect the law with everyday life to the extent that is possible. It will undoubtedly lead to more litigation (inference or fairness?), and the following questions are absolutely up for grabs:
(1) In a sole ownership case, can one only infer a common intention that the beneficial interest is to be shared from direct contributions? If so, what does that mean? If not, what do we mean by indirect contributions? This is sometimes referred to as the Burns v Burns question after that famous case to which there is much harping back – for what it’s worth, my take on that case is that the difference would have been neither here nor there because Mr Burns was rich enough not to need any direct/indirect contributions to the purchase price of the property, so on either view Mrs Burns was stuffed by the law – and the case just demonstrates the inner workings of the law of trusts (making the rich richer broadly).
(2) In joint ownership cases, just how rare are those rare cases where the court will re-open the joint ownership issue? this seems an important, as yet unanswered question, although it is perhaps significant that in both Stack and Jones the highest court has re-opened it. In retrospect, it may have been wrong to regard such cases as empirically rare.
(3) In a sole ownership cases, can one impute a common intention that the non-owning party will have an interest in the property? In joint ownership cases, can one impute a common intention that the parties are to share unequally?
Those are the questions which seem to me to remain; there will be others. But, I suppose the point of that is to note that it is absolutely pathetic that after 40 odd years of this stuff, these issues aren’t resolved, the principles aren’t clear, governments weakly decide to ignore the issues (because they don’t want the “government supports cohabitants over marriage” type headline). All the while, this charade carries on. It doesn’t do us any favours.
[Ed: On BBC R4 today programme this morning (10.11.2011), I heard the correspondent say that the outcome prescribed by the SC in this case was based on fairness. That was the way Lords Kerr and Wilson preferred to decide the matter, but the majority clearly did so on the basis of a (wide) inference of fact as to the intentions of the parties. Please, please, please, don’t repeat the reporter’s error]