KERNOTT V JONES: WHAT ARE THE ISSUES AND WHAT CAN WE EXPECT FROM THE SUPREME COURT?

SOME INTERESTING QUOTATIONS ...

“This is, therefore, a very unusual case.”

Baroness Hale in Stack –v- Dowden [2007] 1 FLR 1858

“I agree with Baroness Hale of Richmond that this is, on its facts, an exceptional case.”

Lord Walker of Gestingthorpe in Stack –v- Dowden [2007] 1 FLR 1858

“I am not sure, with respect, what is to be made of the emphasis by Baroness Hale and Lord Walker that Stack was an exceptional case.”

Rimer LJ in Jones –v- Kernott [2010] 2 FLR 1631

“When everyone is somebody, then no-one's anybody"

The Grand Inquisitor in Act II of the Gondoliers by Gilbert & Sullivan. December 1889

‘[i]t is widely accepted that the present law is unduly complex, arbitrary and uncertain in its application. It is ill-suited to determining the property rights of those who, because of the informal nature of their relationship, may not have considered their respective entitlements

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Law Commission’s 8th Programme of Law Reform, Law Com No 274 of 2001

‘[i]t is quite simply not possible to devise a statutory scheme for the ascertainment and quantification of beneficial interests in the shared home which can operate fairly and evenly across the diversity of domestic circumstances which are now to be encountered’

Paragraph 1.31 of the Law Commission Discussion Paper, Sharing Homes (Law Com No 278) published in 2002

“I wish to make the following Statement to the House announcing the Government's

response to the Law Commission's report Cohabitation: The Financial Consequences

of Relationship Breakdown.

The Law Commission published its report on 31 July 2007, but no action was taken by

the previous Administration, who wished to first seek research findings on the Family

Law (Scotland) Act 2006. This Government have now carefully considered the

recommendations of this thorough report, together with the outcomes of research on

the 2006 Act.

The findings of the research into the Scottish legislation do not provide us with a

sufficient basis for a change in the law. Furthermore, the family justice system is in a

transitional period, with major reforms already on the horizon. We do not therefore

intend to take forward the Law Commission's recommendations for reform of

cohabitation law in this parliamentary term.”

Mr Jonathan Djanogly, Parliamentary Under-Secretary of State, Ministry of Justice

in a Written Ministerial Statement dated 6th September 2011 published in Hansard.

“We hope that implementation will not be delayed beyond the early days of the next

parliament, in view of the hardship and injustice caused by the current law,”

Professor Elizabeth Cooke, Law Commissioner in charge of the Cohabitation Project,

a few days later ...

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“Even if my views are accepted they only go a short way towards solving

the many problems which are coming before the Court in increasing numbers.

We were informed that last year there were 900 applications in the High

Court besides an unknown number in the County Courts. The whole question can

only be resolved by Parliament and in my opinion there is urgent need for

comprehensive legislation.”

Lord Reid in Pettitt –v- Pettitt [1970] AC 777

“The road to hell is paved with good intentions.”

William Blake: Songs of innocence and experience 1789

KERNOTT –v- JONES

1. The Supreme Court heard the arguments in Kernott v Jones on 4th May 2011. My

clerk, Dan Barnett, had ascertained that it was hoped that a decision would be handed

down within 8 to 12 weeks of the arguments. This did not seem unreasonable: the

argument lasted less than a full day and it was a five person tribunal. The decision in

Radmacher –v- Granatino, with a nine judge panel had only taken six months to be

handed down.

2. The truncated afternoon session of the hearing had been largely concerned with an

endowment policy (not as I understand it) before the Court of Appeal which, it was

common ground, was owned as to about 80% to Ms Jones and as to 20% to Mr

Kernott. Ms Jones had used her 80% ish share to pay down the mortgage. Issues of

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equitable accounting had not been, as yet, addressed by any of the courts that had

heard this case as it moved up the ladder.

3. In March of this year, Becky Bailey-Harris and I wrote an article for Family Law

Week. In it we urged practitioners to beware of taking cohabitation claims to a final

hearing prior to the judgment of the Supreme Court in case they fell foul of the fate

that caught some practitioners post White –v- White1. We wrote that article in part

because we were against one another in a substantial large TLATA claim that was

pending and it was the view of Mostyn J that there was no point in having a quasi-

FDR prior to the law being clarified by the Supreme Court. We built a timetable

around a hearing on 11th November as, surely, there would be a decision by then.

That hearing (insofar as it was intended to deal with the merits) has now been

adjourned off until the New Year.

4. I learnt yesterday that, in fact, the judgment will be handed down on 9th November

2011.

5. There have been very few developments in the law of cohabitation since it was

announced that Kernott v Jones was going to the Supreme Court. Practitioners have

been perhaps conscious of Dharamshi –v Dharamshi [2001] 1 FLR 736 and S –v- S

(Ancillary Relief: Consent Order) [2002] 1 FLR 992 amongst others.

6. Why has it taken so long? This was a case where the assets in dispute amounted to

half of £218,000. The case took less than a day to argue and most of the issues were

1 See S v S (Consent Order: Ancillary Relief) [2002] 1 FLR 992

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considered at some length by the House of Lords in Stack v Dowden as recently as

2007! What is their problem?

7. Well, I think that the problems facing the Supreme Court are substantial. They are,

furthermore, compounded by developments that are completely outside their remit. In

September 2011 the Government stated that it was not going to take on board the

proposals of the Law Commission upon the reformation of the law as it relates to

cohabiting couples. The Supreme Court must therefore consider plugging the gap left

by Parliamentary inactivity. I believe that the Supreme Court will do so it’s best to

do so.

8. The Government has chosen to leave the law in its current arbitrary mess. The

reasons for doing so are not satisfactory. However, it is the case that there is little by

way of consensus as to how cohabiting couples should be treated when it comes to

property rights on separation. There is no broad church that easily permits

compromise. When the FLBA met with the Law Commission as part of its

consultation process it was not possible to address it with a single voice on behalf of

the association. Just as within Parliament there is within the FLBA a very broad

range of views upon this issue.

9. I suspect that the Government’s decision to sit on its hands has added a greater

urgency (and difficulty) to the task facing the Supreme Court. The decision of the

Court of Appeal in Jones –v- Kernott [2010] 2 FLR 1631 was greeted with relief by

the purists (including me). The decision of the lower courts, whilst just, appeared to

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be arbitrary. In the wider, tabloid, world, however, it was received with dismay and

astonishment. It was seen to be unfair.

The facts of Jones v Kernott

10. An unmarried couple purchased a property in joint names for £30,000, for use as

their family home. The woman supplied a deposit of £6,000; the balance was

funded by an interest only mortgage. A year later the man built an extension to the

property, with the help of a £2,000 loan, paid for largely by the man; the extension

enhanced the property’s value by about £14,000. During the relationship the

household bills, including the main mortgage payments, were shared. The couple

had two children together. After over 8 years in the property the relationship broke

down and the man moved out; thereafter all payments were met by the woman,

who maintained the property and supported the children with little or no

contribution from the man. The parties agreed to cash in a life insurance policy,

dividing the proceeds, in part to enable the man to buy a property in his sole name.

Subsequently, when both properties had increased in value, the man served a notice

of severance in respect of the property in joint names. The equity in the property in

joint names was about £218,000; the equity in the man’s sole property was about

£167,000. The woman responded by bringing a claim under the Trusts of Land and

Appointment of Trustees Act 1996 in respect of both properties. At first instance

the judge held that the woman was entitled to 90% of the value of the property in

joint names, on the basis that this was fair and just. The man appealed contending

that the court’s view of what was fair was not the correct criterion and relying

heavily on Holman v Howes [2007] EWCA Civ 877 in which a woman left in sole

occupation of a property had been denied more than 50% of the property.

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11. The man’s appeal was heard by Nicholas Strauss QC sitting as a Deputy High Court

Judge. He refused the man’s appeal ([2010] 1 FLR 38) and confirmed that the

beneficial interests in the property were held as to 90% to the woman and 10% to the

man. The head note reads as follows:

 Held – dismissing the man’s appeal –

(1) Applying Oxley v Hiscock [2004] EWCA Civ 546, para [69] and the House of

Lords decision in Stack v Dowden [2007] UKHL 17, para [61] per Baroness

Hale of Richmond, while the court should not override the intention of the

parties in favour of what the court itself considered to be fair to the extent

that the intention of the parties could not be inferred, the court was free to

impute a common intention to the parties, which attributed an intention that

they either had not had or had not communicated to each other. It was

difficult to see how that process would work without the court supplying, to

the extent that the intention of the parties could not be deduced from their

words or conduct, what the court considered to be fair. The court was not

entitled to disregard evidence of what the parties had probably intended, and

substitute what it thought was fair, but the court could, while respecting the

parties’ intentions so far as they were apparent, consider what was fair so as

to supply any missing elements. In cases in which the parties had not

indicated in any way what their respective shares were to be, or how they

were to be altered to take account of changing circumstances, their actual or

subconscious intention might well be that if they could not reach agreement

in changed circumstances, their respective shares, should be whatever the

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court decided was fair in all the circumstances. The court could not assume

that two parties, who had not fully clarified their intentions as to their

respective beneficial interests either initially or on the breakdown of the

relationship, had not intended considerations of fairness to be relevant in

determining their respective beneficial interests. Further, if considerations

of fairness were to be wholly set aside in such cases, there would be a

practical difficulty in searching for a result that the parties must in the light

of their conduct be taken to have intended, in preference to what the court

itself considered to be fair, when there was no evidence as to what they did

intend as regarded their respective shares; in many cases there would be no

way of resolving the issue if fairness were disregarded. The view expressed

by Lord Neuberger of Abbotsbury in Stack v Dowden that fairness was

‘forbidden territory’ was part of his dissent from the majority view. Holman

v Howes depended on its own facts, in particular the fact that the

breakdown of the relationship had been contemplated by the parties, and

they had discussed what would then happen: the court hearing that case had

not laid down any general rule, or even made any general observations, on

the effect of one of the parties remaining in occupation of the property

following a breakdown in the relationship with the other (see paras [28]–

[36], [40]).  

(2) Despite the absence of any communication by either party to the other of any

actual intention, there was evidence of conduct from which it was right to

conclude that the parties intended their respective shares to alter following the

man’s departure. The first instance judge had been right to decide that the

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parties had intended, or were to be taken as having intended, that their

respective beneficial interests should be altered to take account of changing

circumstances, and in reaching that decision he had not needed to invoke

fairness: the change in intention could easily be inferred or imputed from

the parties’ conduct. After the split the couple’s original intention to pool

their resources had ceased, and they had maintained separate finances (see

paras [31], [47], [49]).

(3) However, in the absence of any indication by words or conduct as to how the

parties’ interests should be altered, the appropriate criterion was what the

judge considered to be fair and just; the only available criterion was what

was objectively fair and the only available judge of that was the court. Since

the parties had no discernible intentions as to the amount of the adjustment,

they must be taken to have intended that it should be whatever was fair and

reasonable; this conclusion did not override any different intention that,

from their words or conduct, could reasonably have been attributed to them.

The judge’s approach could either be justified as being in accordance with the

common intention of the parties, or, if this were regarded as a fiction, as the

only option available to the court on quantification, once it had rightly been

decided that the parties had intended their respective beneficial interests to

change (see paras [31], [49]).

(4)   The first instance judge’s attribution of 90% to the woman was

justifiable, without taking into account the possibly controversial factor of the

man’s failure to contribute to the maintenance of the children. The man’s

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departure and acquisition of another property did not justify saying that he

was to be taken as having entirely abandoned whatever stake he had in the

previously shared property, but his decision no longer to contribute to the

jointly-owned property had allowed him to purchase another property, on

which he had made a substantial capital gain. It would not be reasonable for

the man to have, and the parties could not be taken to have intended that he

should have, a significant part of the increased value of both properties,

therefore, it would not be reasonable for him to retain more than a small

interest in the jointly-owned property (see paras [48], [50], [51]).

   

Per curiam: although it was taken into account as a major factor in this case,

a parent’s failure to contribute to the maintenance of the children was a factor

that could legitimately be taken into account (see para [52]).

12. Mr Kernott appealed to the Court of Appeal. The Court of Appeal allowed his appeal

by a majority (Wall and Rimer LJJ with Jacobs LJ dissenting) declaring that he had a

fifty percent interest in the equity in the property. The head note reads as follows:

(1)   The appeal was to be resolved under the law relating to trusts, in particular

by applying Stack v Dowden [2007] UKHL 17 to the facts, not by analogy with

cases involving married couples (see paras [6], [24], [55], [65]).

(2)   The starting presumption was that the beneficial interest followed the legal

interest. The critical question was whether, given the total lack of direct evidence

about the couple’s intentions on separation, the court could infer from the parties’

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conduct since separation a joint intention that, over time, the beneficial interests

would be varied so that they were no longer equal. Stack v Dowden did not enable

the courts to find, by way of the imputation route, an intention where none was

expressly uttered nor inferentially formed; the court’s goal was to find the parties’

intentions, which meant their real intentions (see paras [56], [57], [69], [70],

[77]).

(3)   The court could not infer a joint intention to vary the shares in which the

property was held from the parties’ conduct in this case. The conveyance into joint

names had created joint beneficial interests, and the parties had agreed that when

they separated they had equal interests; the mere passage of time was insufficient

to displace those equal interests, even though during that time one party had

acquired alternative accommodation and the other had paid all the outgoings. If

the parties had truly intended that the man’s beneficial interest in the property

should reduce post-separation, or on acquisition of his own property, they should

have adjusted their beneficial interests in the property accordingly. The parties

held the severed joint tenancy as tenants in common in equal shares (see paras

[58], [62]–[64], [69], [82], [83]).

Per Wall LJ: the man’s failure to maintain the children might be relevant were the

man to seek to charge the woman for her occupation of the property, and were the

process of equitable accounting to be applied between them (see para [51]).

Per Wall LJ: it was of the utmost importance that those who purchased residential

accommodation, and those who advised them, took the greatest care over such

transactions and, if the purchasers were unmarried, addressed their minds to the

size and fate of the respective beneficial interests on acquisition, separation and

thereafter. Cohabiting partners must contemplate and address the possibility that

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the relationship would break down and that there would be disagreements over

what they did and did not own (see para [61]).

Per Jacob LJ dissenting: the judge had been entitled to infer or impute a shared

intention that after the split the parties’ shares in the property were to be

‘ambulatory’: of particular significance was the cashing in of the insurance policy

to enable the man to purchase a home for himself, and the fact that because he

made no payments concerning the main property, he was able to make the

payments required for his own house (see paras [107]–[109]).

13. Thus, by the time the Court of Appeal had delivered their judgment the case had been

considered by five judges, only two of whom found in favour of the man. All of the

judges had relied upon the House of Lords decision in Stack –v- Dowden as support

for their conclusions. It is ironic that one of the intentions of the House in Stack was

to bring some certainty to the law and to discourage litigation over beneficial interests

in property. The main difference between the various judges was upon whether the

court was entitled to impute an intention to the parties or simply to infer one. A

further difference lay in the extent to which concepts of fairness could be introduced

into the reckoning.

14. Why is Kernott so important and what is the significance of the distinction between

imputation and inference? To answer this question it is necessary to look back at the

way in which the law in this troubled area has developed.

RECENT HISTORY IN RELATION TO COHABITATION CLAIMS

STARTING WITH ROSSET

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Lloyds Bank –v- Rosset [1991] AC 107

15. In Rosset the House of Lords set down a two stage enquiry:

(i) Was there a common intention for the ownership of the property to be shared?

(ii) If so, what was the parties’ common intention as to the quantum of shares?

There was also a need for the claimant to establish detrimental reliance. It was important

to keep the above two stages separate. At the first stage of the enquiry, whilst it was

relatively easy to infer an intention to share ownership where the legal title was shared,

where the property was in the sole name of one party Lord Bridge held that the common

intention to share ownership might be established either:

(a) By express discussions evidencing an agreement or understanding (Rosset I); or

(b) By drawing inferences from conduct (Rosset II).

16. The necessary conduct, in Lord Bridge’s view consisted of direct contributions to the

purchase price of the property, whether initially or by assuming liability under a

mortgage and / or by payment of mortgage instalments. It was, he said, “extremely

doubtful whether anything less will do”. This was a strict test. On the basis of this

analysis, therefore, indirect contributions to the acquisition of the property and to the

upkeep of the home and the household generally remained problematical at the first

stage of the enquiry (“was there a common intention to share ownership?”) although

indirect contributions might well be relevant at the second stage of the enquiry (“if

there was a common intention that ownership be shared, what were the nature and

proportions of the parties’ respective shares of the beneficial ownership?”).

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17. It is important to bear in mind that in Stack the property was in joint names so that the

first stage of Lord Bridge’s enquiry did not arise for consideration.

The second stage per Rosset (as seen through Stack)

18. The second stage of the enquiry is usually reached relatively easily when a property is

in joint names. In a “sole name” case the claimant will have to have established the

existence of a common intention to share ownership. In a joint names case Stack

established that there would be a presumption of equally shared ownership, certainly

between cohabiting couples. However, if there is an express declaration of trust

(perhaps unlikely in a sole names case) that will usually determine the outcome of the

second stage of the enquiry. There is a tendency for litigants and sometimes their

legal advisers (sometimes even judges) to overlook the fact that the TR1 contains a

declaration of trust. It is important to remember also that Stack was not only a joint

names case but also a case where the property in question had been conveyed before

the advent of the TR1 and where there was no other express declaration of trust.

Kernott was also such a case.

19. Thus, the second stage of the enquiry is most likely to be engaged in circumstances

where the subject property is in one party’s sole name and there is no express

declaration of trust. In such circumstances, the two most likely vehicles for

establishing the quantum of a party’s share are the resulting trust and the constructive

trust. The majority of the House of Lords in Stack favoured the constructive trust

approach. Lord Neuberger, who also disagreed with the majority’s use of the word

“impute” leaned more towards a resulting trust analysis.

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Constructive Trusts

20. The doctrine operates as follows: If there is evidence that, at the time of acquisition of

the property, or at a later date, the parties had a common intention that a property is to

be jointly owned, in reliance upon which there was detrimental reliance / change of

position by the claimant, a constructive trust will arise and the parties will both be

beneficially entitled notwithstanding the legal title and the absence of written express

declarations of trust of the beneficial interests.

The court’s task at the second stage of the enquiry

21. Just as at the first stage of the enquiry the court must search for the parties’ common

intention. Traditionally, it was not permissible for the court to impose on the parties

(in the absence of a common intention) a solution which the court itself considered

fair. It was understood that the court was looking for the parties’ actual intention,

either expressed or to be inferred from conduct.

22. In conducting the second stage of the enquiry the court is entitled to look at the

parties’ express intentions as well as their contributions to the acquisition of the

property. However, certainly prior to Stack and Abbott –v- Abbott [2008] 1 FLR 145

(which combine to suggest that Lord Bridge’s requirements under Rosset II have been

relaxed) at the second stage of the enquiry, the court is entitled to look at a wider

range of direct and indirect contributions to the acquisition of the property as

throwing light on the parties’ actual intentions. Indeed, the evidence that the court

may rely upon at the second stage of the enquiry may be the same, or substantially the

same, as the material used as the first stage of the enquiry.

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23. Generally speaking, however, and subject to the potential relaxation of Rosset II, it is

important for the court to keep stage one separate from stage two of the enquiry or

risk falling into error. Stage one must be established before one can move onto stage

two.

24. In the absence of an express agreement as to the size of the beneficial shares, those

shares were to be determined in the light of the whole course of dealings between the

parties in relation to the property, taking account of conduct which throws light on

the question of what shares of the property were intended. The precise formulation of

the court’s task is not easy. In the leading pre-Stack case of Oxley –v- Hiscock

[2004] 2 FLR 669 the very distinguished Chancery Judge Chadwick LJ said:

“But in a case where there is no evidence of any discussion between them as to the

amount of the share each was to have – and even in a case where the evidence was

that there was no discussion on that point – the question still requires an answer. It

now must be accepted (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.”

25. This formulation opened up divisions in the House of Lords in Stack. Lord Hope

endorsed it, Baroness Hale, Lord Hoffman and Lord Walker adopted it with

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modification (see below) but Lord Neuberger again disagreed. His criticisms were

forceful, namely:

(i) Fairness was not the appropriate yardstick;

(ii) The formulation appears to contemplate an imputed intention;

(iii) The “whole course of dealing ... in relation to the property” is too imprecise and

gives insufficient guidance as to what is primarily relevant, namely dealings

which cast light on the beneficial ownership of the property, and too limited, as all

aspects of the relationship could be relevant in providing the context, by reference

to which any alleged discussion, statement and actions must be assessed;

(iv) He disagreed with the implicit suggestion that “the arrangements which [the

parties] make with regard to the outgoings” (other than mortgage repayments) are

likely to be of primary relevance to the issue of the ownership of the beneficial

interest in the home.

26. Lord Neuberger, however, favoured Chadwick LJ’s analysis insofar as it led to a

resulting trust analysis and on that basis agreed with the majority in rejecting the

appeal.

A summary of the majority decision in Stack v Dowden

27. The majority came to the following conclusions:

(1) Just as the starting point where there was sole legal ownership was sole beneficial

ownership, the starting point, in the domestic context, where there was joint legal

ownership, was joint beneficial ownership. The onus was on the party contending

that the beneficial interests were divided otherwise than as the title showed to

demonstrate this on the facts. A conveyance of a domestic property into joint names

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indicated both legal and beneficial joint tenancy, unless and until the contrary was

proven.

(2) In identifying the extent of the parties’ beneficial interest in a property, the court was

seeking to ascertain the parties’ shared intentions, actual, inferred or imputed, with

respect to the property, in the light of their whole course of conduct in relation to it

(note that this is stage two of the Rosset enquiry as stage one is not usually engaged

where the property is in joint names).

(3) In the context of homes conveyed into the name of one party only, a more flexible

approach to quantification of an established beneficial interest had emerged;

curiously, in the context of homes conveyed into joint names, but without an express

declaration of trust, the courts had sometimes reverted to the strict application of the

principle of resulting trust. The approach to quantification in cases in which the

home was conveyed into joint names should certainly be no stricter than the approach

to quantification in cases in which it had been conveyed into the name of one only and

to the extent that cases such as Walker –v- Hall [1984] 1 FLR 126, Springette –v-

Defoe [1992] 2 FLR 388 and Huntingford –v- Hobbs [1993] 1 FLR 736 held

otherwise they should not be followed. When quantifying an established beneficial

interest, the court should take a wide view of what contributions were to be taken into

account (note again this is stage two of the “Rosset enquiry”), while remaining

sceptical of the value of alleged improvements that were really insignificant, or

elaborate arguments, suggestive of creative accounting, as to how the family finances

were arranged.

(4) In a joint names case, the questions were not simply “what is the extent of the parties’

beneficial interests?” but “did the parties intend their beneficial interests to be

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different from their legal interests?” and “if they did, in what way and to what

extent?” There were differences between sole and joint names cases when trying to

divine the common intentions or understanding between the parties, including the fact

that the decision to put the property into joint names would almost always have been a

conscious decision.

(5) The burden would be on the person seeking to show that the parties had intended their

beneficial interests to be different from their legal interests, and in the ordinary

domestic case it would be difficult to establish to the court’s satisfaction that an

intention to keep a sort of balance sheet of contributions existed or should be inferred

or imputed to joint owners. The domestic context was very different from the

commercial world. Many factors other than financial contributions were likely to be

relevant. Ultimately, cases in which joint legal owners would be taken to have

intended that their beneficial interests should be different from their legal interests

would be very unusual.

(6) Stack –v- Dowden was a very unusual case in that, although the couple had cohabited

for a long time and had four children together, they had kept their financial affairs

rigidly separate. This was strongly indicative that they did not intend their share, even

in the property in joint names, to be held equally. Ms Dowden had made good her

claim for 65% of the property, having contributed far more to the acquisition of the

house than Mr Stack

The minority view in Stack v Dowden

28. It is important to stress that Lord Neuberger’s view is not the law insofar as it is in

conflict with the view of the majority2. Lord Neuberger argued for a stricter more

“Chancery based” approach which would lead to greater certainty and clarity in the 2 As the Court of Appeal was careful to remind itself in Kernott –v- Jones [2010] 2 FLR 1631

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law. The approach should be the same in the commercial context as it was in the

domestic context albeit that the different factual circumstances could lead to different

results. Where cohabitants had made different contributions to the purchase price of a

property, the beneficial ownership, in the absence of relevant evidence to the contrary,

would be held in the same proportions as the contributions to the purchase price under

a resulting trust, because, given that the presumption of advancement did not apply,

this was the practical and most consistent approach. If there was other relevant

evidence enabling the court to deduce the intention of the parties, the resulting trust

could be rebutted and replaced by a constructive trust. Such an intention could be

express or inferred, but not imputed. Where the resulting trust presumption applied

at the date of acquisition, only subsequent discussions, statements or actions which

could fairly be said to imply a positive intention to depart from the apportionment

would justify a change in the way in which the beneficial interest was held.

Inference and Imputation

29. The linguistic argument around the words “impute” and “infer” may have

considerable significance. Lord Neuberger identified the difference thus at paragraph

126:

“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.”

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30. It is not entirely clear that Baroness Hale, who gave the main speech for the majority

differed substantially from Lord Neuberger on this point. In paragraphs 60 and 61 she

(along with the majority) adopted Chadwick LJ’s formulation but modified it by

reference to the Law Commission’s Discussion Paper on Sharing Homes (which

suggested a holistic approach to quantifying a beneficial share with the court

undertaking a survey of the whole course of dealing between the parties and taking

into account all conduct which throws light on the question of what shares were

intended):

“That may be the preferable way of expressing what is essentially the same thought

for two reasons. First, it emphasises 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 to 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 Married Women’s Property Act 1882.”

31. Such a formulation would suggest that it would be wrong to “impute” a common

intention. However, the fact remains that the mantra “actual, inferred or imputed”

was adopted by the majority and repeated in Abbott and some subsequent cases.

What does “imputed” add? This was the point that was to trouble Rimer LJ

significantly in Kernott –v- Jones. Thus, he was moved to say at paragraph 77 – with

somewhat forced politeness – after analysing Baroness Hale’s opinion on this point:

21

“As for Baroness Hale’s statement in [60] that the court must or can also look for the

parties’ imputed intention, I do not, with the greatest respect, understand what she

meant.”

32. The House of Lords was plainly intending to discourage cohabitation disputes where

the title was in joint names. However, there was a strong argument for saying that

Stack –v- Dowden itself was not an exceptional case. Furthermore, Baroness Hale, at

paragraph 69 of her judgment set out a non-exhaustive list of the factors which might

persuade a court to conclude that the beneficial interests should not follow the legal

title. Potentially, therefore, there was plenty of ammunition for litigation going

forward.

33. Stack was concerned with stage two of the Rosset enquiry and so anything said on

stage one was strictly obiter. However, they did indicate that Lord Bridge’s test,

summarised above, was too narrow and potentially productive of injustice. The law,

they said, had moved on.

34. Fortunately, the Privy Council was able to consider stage one only a few months later

in Abbott –v- Abbott [2008] 1 FLR 1451. Abbott was an appeal from the Eastern

Caribbean Court of Appeal where there is no statutory ancillary relief regime

operating on divorce and property disputes are resolved under the general law of

property and trusts. The case concerned the beneficial ownership of a former

matrimonial home in the husband’s sole name. The Eastern Caribbean Court of

Appeal relied heavily on Lord Bridge’s dicta as a reason for strictly limiting the

wife’s claims. The Privy Council followed up on their disapproval (as Law Lords) of

22

the narrow Rosset test and concluded that the court had to ascertain the parties’ shared

intentions “actual, inferred or imputed with respect to the property in the light of their

whole course of conduct in relation to it.” In other words Rosset II has been

significantly widened. There was, however, also a concern that the way in which the

Board dealt with the point in Abbot tended to blur the distinction between stage one

and stage two of the Rosset enquiry3.

Cases decided subsequent to Stack

35. This lecture is concerned primarily with Kernott –v- Jones and I do not want to clog

up my analysis more than is necessary with a recitation of the many cases that have

been decided since 2007 in which the courts have grappled with the implications of

Stack. However, I have included them in an Appendix to these notes.

36. In the main it would be fair to say that the lower courts have paid a certain amount of

lip-service to imputation and rejected approaches that are based on the a subjective

view of what constitutes fairness. They have also adopted a fairly rigorous approach

to properties that are in joint names4. In addition, they have emphasised that where a

property is in one party’s sole name the other party may have an uphill task in

displacing the presumption that the sole legal owner is also the sole beneficial owner.

Finally, they have, in sole owner cases, found that the non-legal owner (usually a

woman) might have all sorts of motives for her contribution / change of position /

detriment that are not referable to a common intention to share ownership5.

3 Note that Rebecca Bailey-Harris, in lectures we gave last year for Lime Legal, has cast doubt on whether this was in fact a “first stage” case in that the property in question was built on land gifted to the man and the wife, the wife paid instalments towards the mortgage and the man admitted in cross-examination that the wife had an interest in the property so that, if she is right, a lot of commentators (me included) have given too much weight to it.4 See for example Fowler –v- Barron [2008] 2 FLR 8315 See, for example, James v Thomas, Morris –v- Morris, Thomas v Humphrey, Walsh v Singh

23

37. In Holman –v- Howes [2008] 1 FLR 1217 Lloyd LJ stated that stated at paragraph

[30] that the Court’s inquiry should be directed to what was intended between the

parties or, if that cannot be identified directly, what they must be taken from their

conduct to have intended. “It is not for that which the court considers fair.”

38. In James –v- Thomas [2008] 1 FLR 1212 The CA rejected the judge’s contention that

a constructive trust could only arise at the time of acquisition of the property. The

common intention necessary to found a constructive trust could be formed at any time

before during or after the acquisition of a property. A constructive trust could

therefore arise some years after the property had been acquired by and registered in

the sole name of one party. However, in the absence of an express post-acquisition

agreement, the court would be slow to infer from conduct alone that the parties

intended to vary existing beneficial interests established at the time of acquisition6.

This is an important case as the law currently stands at it bears closer study (see the

Appendix).

39. In Morris –v- Morris [2008] EWCA Civ 257 Sir Peter Gibson said at paragraph 23:

“The authorities make it clear that a common intention constructive trust based only

on conduct will only be found in exceptional circumstances. The evidence in the

present case seems to me, with respect to the judge, to be wholly inadequate to

establish any such common intention.”

As to “fairness” see paragraph 30:6 Sir John Chadwick at paragraphs [23] to [25]

24

“For these reasons it seems to me that, with all respect to the judge, he was beguiled

by the submissions made to him into believing that he could produce what he

regarded as a reasonable or fair result in favour of the claimant. I am afraid that he

did not have that luxury. The law would be in a hopelessly unsatisfactory state if that

were the basis on which decisions in this area were made. The court’s approach must

always be principled. The court must be satisfied that the requisite tests have been

satisfied with sufficient certainty and any inferences must be founded on findings of

fact which can be sustained.”

40. In Thomas –v- Humphrey [2010] 2 FLR 107 Warren J adopted a rigorous analysis

based on Rosset as modified by the majority in Stack.

Stack –v- Dowden and Kernott –v- Jones

41. Returning to Kernott this is the most important post Stack decision. Whilst accepting

that there was considerable force in Lord Neuberger’s minority view, the CA

reminded itself that this was not the law. Wall LJ, as he was at the time of the

hearing of the appeal, identified the critical question (see paragraph [57]) as being

whether he “infer” from the parties’ conduct since separation a joint intention that,

over time, the 50 – 50 split would be varied so that the property is currently held 90%

by the woman: “Presumably, if the beneficial interests are “ambulatory” and the

ambulation continues in the same direction, the appellant’s interest in the property

will at some point be extinguished.” At paragraph [58]:

“This is a point which I have considered anxiously, and at the end of the day I simply

cannot infer such an intention from the parties’ conduct. In my judgment, the

25

conveyance into joint names, following Stack –v- Dowden created joint beneficial

interests, and the parties agreed that when they separated they had equal interests.

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.”

42. Rimer LJ, having revisited what Baroness Hale said at paragraphs [60] and [61] of her

speech, he said at paragraph [72]:

“All that Baroness Hale said might, therefore, suggest that a bid by a joint purchaser

to establish a greater beneficial interest than a joint interest will involve the steepest

of climbs, usually resulting in a failure to attain the summit.”

43. And at paragraph [74]:

“I suspect that Stack may be regarded by trial judges as presenting something of a

challenge. I am not sure, with respect, what is to be made of the emphasis by

Baroness Hale and Lord Walker that Stack was an exceptional case. The unequal

contributions to the purchase in that case would not, I would think, be unusual and it

was that fact that appears to have influenced Lord Hope. The `context’ to which

Baroness Hale referred may be unusual. I do not know, but the fact in every case will

be different and each case has to be decided on its own facts.”

26

44. Rimer LJ’s scepticism about whether Stack was an exceptional case echoed the

academic views about that conclusion. In paragraphs [76] and [77] he submitted the

words “actual, inferred or imputed” to a rigorous analysis. Since an inferred intention

is also, by definition, an actual intention, “actual” must be a synonym for “express”.

He had far greater difficulty in attempting to work out what “imputed” was supposed

to mean. He said, at paragraph [77]:

“As for Baroness Hale’s statement in [60] that the court must or can also look for the

parties’ imputed intention, I do not, with the greatest respect, understand what she

meant. It is possible that she was using it as a synonym for inferred (cf such use by

Lord Pearson in Gissing –v- Gissing [1971] AC 886 at 902G – H), in which case it

adds nothing. If not, it is possible that she was suggesting that the facts in any case

might enable the court to ascribe to the parties an intention that they neither

expressed nor inferentially had: in other words, that the court can invent an intention

for them. That, however, appears unlikely, since it is inconsistent with Baroness

Hale’s repeated reference to the fact that the goal is to find the parties’ intentions,

which must mean their real intentions. Further, the court could and would

presumably only consider so imputing an intention to them if it had drawn a blank in

its search for an express or an inferred intention but wanted to impose upon the

parties its own assessment of what would be a fair resolution of their differences. But

Baroness Hale’s rejection of that as an option at paragraph [61] must logically

exclude that explanation. In his dissenting speech, Lord Neuberger at [125] to [127]

advanced an apparently comprehensive demolition of the “imputation” theory. I

recognise that those paragraphs cannot be invoked as support for the view that

Baroness Hale’s unexplained use of the word “imputed” was not intended to mean

27

what it might be read as meaning. But if she was using the word in its ordinary

meaning, it is in my view also difficult to see how the imputing to the parties of a non-

existent intention can stand with her emphasis that the burden of rebutting the

presumed joint beneficial interest is heavy and that, only in very unusual cases, will it

be discharged. That is because, if the “imputing” of an intention is open to trial

judges, they could in principle do it in every case in which an assessment of the

relevant history reflects an unequal contribution to the purchase. I accordingly do

not myself interpret Stack as having intended to enable the courts to find, by way of

the imputation route, an intention where none was expressly uttered nor inferentially

inferred.”

45. Rimer LJ agreed with Wall LJ that there was no evidence to displace the 50 – 50

beneficial interests. At paragraph [84] he noted that Ms Jones might perhaps

question the fairness of an outcome which leaves her with the same 50% she had in

1993. However, he said, fairness can only be assessed by reference to the principles

which govern these disputes.

46. The decision in Kernott –v- Jones has exposed the fault-lines in Stack. In particular:

(i) Is there any future for imputation?

(ii) To what extent is a court entitled to look to its own view of “fairness”?

(iii) Alternatively, can “imputation” be resurrected using Commonwealth

developments in the law of unconscionable bargains?

(iv) What is the nature and extent of the court’s obligation to investigate stage two

of Lord Bridge’s enquiry – does Chadwick LJ’s test, as modified by the

28

majority of the House of Lords survive or should the investigation that the

court has to carry out be rendered more precise and more limited?

(v) Was Stack an exceptional case and, if it was not, what is required to establish

an exceptional case?

(vi) Should the burden of reversing the presumption be heavier in joint name cases

(where there must usually have been a conscious decision to put the property

in joint names) than in sole name cases?

(vii) Should the operation of the principles enunciated in Stack (as inevitably

modified by the Supreme Court in Kernott) be restricted to cases involving

cohabiting couples and the family home or should they apply in more

commercial cases and/ or in cases where a couple, whether or not they were in

a relationship, purchase an investment property7?

(viii) To what extent, if at all, will the Supreme Court revisit the issue of equitable

accounting in the light of Re Barcham and Amin –v- Amin (it has to be borne

in mind that in Kernott –v- Jones the question of an equitable account had not

been reached)?

What is the Supreme Court likely to do?

47. This must be speculation up to a point. However, some smoke signals can be

discerned. Lord Wilson, in an interview given to Philip Cayford QC in the last

edition of Family Affairs, was asked about Kernott –v- Jones. He was understandably

reticent pending the finalisation of the judgment but he did indicate that the Supreme

Court’s room for manoeuvre was limited by virtue of the trust principles that must be

applied. Furthermore, Baroness Hale in a recent lecture indicated that the decision

will be given during this legal term but not in October and possibly not in November 7 See Laskar –v- Laskar and Adekunle –v- Ritchie

29

(it is now understood that 9th November 2011 is D-Day). It is understood that she

and Lord Walker are working together to produce a single judgment. This is to be

welcomed. It was notoriously difficult to ascertain a single precedent in the famous

“twin peaks”8 of Pettitt and Gissing and practitioners were not helped by the

divergence of views in Stack.

48. The Supreme Court Justices are Lords Walker, Collins9, Wilson and Kerr and

Baroness Hale. There are therefore two judges with a background in family law.

Lords Walker and Collins sat in the Chancery Division before their elevation to the

Court of Appeal and then the House of the Lords. Lord Kerr was Lord Chief Justice

of Northern Ireland and was, prior to his appointment, Junior Crown Counsel

(Common Law) and Senior Crown Counsel in Northern Ireland.

49. So there is a broad balance within the Supreme Court. If there is to be one judgment

it suggests that a compromise is being sought between the strict Chancery approach

and the “quasi-matrimonial” approach that is likely to be favoured by Lord Wilson

and Baroness Hale. The fact that, almost six months on, no judgment has yet

emerged suggests that the negotiations on the terms of the judgment are less than

straightforward.

50. Will the Supreme Court uphold the Court of Appeal or allow the appeal against that

decision? Objectively speaking the Court of Appeal’s decision, whilst correct on the

law, is unfair to Ms Jones. The easier option would be to uphold the Court of Appeal

on traditional trust principles and to say that House of Lords was wrong (by a

majority) to include the word “impute”. However, this is a five person tribunal and,

8 See Grant –v- Edwards [1987] 1 FLR 879 Now retired.

30

if the Supreme Court was intending to decide (or contemplating deciding) that Stack

was wrongly decided one would expect a larger tribunal10.

51. I believe that the Supreme Court is likely to overturn the Court of Appeal and either

restore the declaration that is 90% in Ms Jones favour or allow her a slightly smaller

percentage. The long gestation period is more explicable if that were to be the case.

As we have seen with Stack it is possible for there to be unanimity in the result but

disharmony about how that result should be reached. If it is right that the Supreme

Court intends to overrule the Court of Appeal and to do so within one judgment then

it is also likely that there will be tensions between the approach that would appeal to

family practitioners and that which would appeal to Chancery / property lawyers.

Perhaps it is this tension that is holding up the handing down of the judgment? On

top of this is the fact, announced in September, that the Government is spurning the

opportunity of assisting cohabitees by changing the law. That decision was a

hospital pass to the Supreme Court.

52. During the argument before the Supreme Court I understand that it became apparent

that there was another endowment policy. It was common ground that this was held

as to approximately 80% by Ms Jones. When that policy matured Ms Jones used her

share to pay down the mortgage. It must be remembered that in Kernott issues as to

equitable accounting had not been decided. It would therefore be open to the

Supreme Court to conclude on the particular facts of this case, that there were

exceptional circumstances warranting the conclusion that what had been agreed to be

an ownership in equal shares had changed, with Mr Kernott’s share waning like the

moon. I do not think that the Supreme Court will take the easy way out. One of the

10 See, for example, Radmacher –v- Granatino [2010] 2 FLR 1900.

31

problems created by Stack was that it was treated by the House of Lords as an

exceptional case when, arguably, it was not.

53. A further factor that may influence the Court is that there is a difference between the

“family” dynamic and the situation that applies in a more commercial context. It has

been said many times that the law is the same in the Family Division as it is in the

other Divisions of the High Court11. However, the context can be radically different.

Personal relationships are rarely commercial.

54. The fact that the context is so different ought, perhaps, to affect the conclusions that a

court should be entitled to draw. The point was well illustrated by the two recent

House of Lords decisions on proprietary estoppel: Yeoman’s Row –v- Cobbe [2008] 1

WLR 1752 and Thorner –v- Majors [2009] 2 FLR 405. The former was a case set in

a commercial context and the latter in a familial context.

“The point that hopes by themselves are not enough is made most clearly in cases with a

commercial context, of which Attorney General of Hong Kong is the most striking example. It

does not appear so often in cases with more of a domestic or family flavour, from Inwards v

Baker [1965] 2 QB 29 and Pascoe v Turner [1979] 1 WLR 431 to Windeler v Whitehall [1990]

2 FLR 505, Gillett v Holt [2001] Ch 210, Grundy v Ottey [2003] WTLR 1253, Jennings v Rice

[2003] 1 P & CR 8 and Lissimore v Downing [2003] 2 FLR 308. The son who built the

bungalow in Inwards v Baker, the young farm manager in Gillett v Holt, the elderly country

neighbour in Jennings v Rice and the female companions in the other three cases almost

certainly did not take any legal advice until after the events relied on as creating the

estoppel. They may not have had a clear idea of the quantum of what they expected to get

(in Grundy v Ottey, unusually, the expected quantum was precisely defined). But in those

11 See the many judgments of Munby J and, in particular, see Whig –v- Whig [2008] 1 FLR 453

32

cases in which an estoppel was established, the claimant believed that the assurance on

which he or she relied was binding and irrevocable.”

55. In Thorner’s case this was said of Cobbe:

[96]   Secondly, the analysis of the law in Cobbe was against the background of

very different facts. The relationship between the parties in that case was entirely

arm’s length and commercial, and the person raising the estoppel was a highly

experienced businessman. The circumstances were such that the parties could well

have been expected to enter into a contract. However, although they discussed

contractual terms, they had consciously chosen not to do so. They had intentionally

left their legal relationship to be negotiated, and each of them knew that neither of

them was legally bound. What Mr Cobbe then relied on was ‘an unformulated

estoppel … asserted in order to protect [his] interest under an oral agreement for

the purchase of land that lacked both the requisite statutory formalities … and was,

in a contractual sense, incomplete’ – para [18].

[97]   In this case, by contrast, the relationship between Peter and David was

familial and personal, and neither of them, least of all David, had much

commercial experience. Further, at no time had either of them even started to

contemplate entering into a formal contract as to the ownership of the farm after

Peter’s death. Nor could such a contract have been reasonably expected even to be

discussed between them. On the deputy judge’s findings, it was a relatively

straightforward case: Peter made what were, in the circumstances, clear and

unambiguous assurances that he would leave his farm to David, and David

reasonably relied on, and reasonably acted to his detriment on the basis of, those

assurances, over a long period.

56. Kernott was, like Stack a case where the property was held in joint names. As

indicated above the most difficult cases are those where the property is in one party’s

name where the court must grapple with both the questions set out in Rosset: was

33

there a common intention to share ownership and, if so, what was the common

intention as to the quantum of those shares. It would be open to the Supreme Court to

limit itself to answering the second question. Although this approach has its

attractions it is submitted it would be a dereliction of duty. Any observations from the

Supreme Court, even if obiter, would carry great weight. The legal profession needs

guidance on what evidence is required to establish a common intention to share

ownership. The House of Lords has indicated obiter that Lord Bridge’s approach in

Rosset is now too narrow. In simplistic terms should the fact that a woman has

foregone a career and devoted herself to looking after the children of the family and /

or used her, let us say, more limited income to take the financial pressure of the man

have no impact on the shared ownership of a house, a family home, bought in the sole

name of the man, even if he has provided the deposit and paid the mortgage

instalments? Justice suggests that that the answer to this question should be ”No!”

Egg on my face

57. With the above considerations in mind and with the knowledge that I am bound to be

wrong to a greater or lesser extent, I think that the outcome of Kernott will be as

follows:

(i) The Supreme Court will overrule the Court of Appeal and restore a 90 / 10

division of the equity;

(ii) There will be one unanimous judgment;

(iii) Kernott will not be regarded as an exceptional case.

34

(iv) A distinction will be drawn between “family” cases and “commercial cases” if

not in terms of the applicable law then in the context and factual matrix that

should be considered when applying the applicable law;

(v) The concept of imputation will be left with its toe in the door, if only in the

way in which it was expressed in Oxley namely that the Court is entitled to

assume that the parties, if they have not discussed things between themselves

would be content for a court to assist them in reaching an objectively fair

outcome;

(vi) A greater emphasis will be placed on fairness;

(vii) The Supreme Court will make obiter comments about the first stage of the

Rosset enquiry as to what is required in terms of conduct / contributions to

satisfy a court that there was a common intention to share ownership. More

weight will be given to non financial contributions (such as bringing up the

children and being a home maker) and to financial contributions not directly

attributable to the acquisition of the property (such as buying food and paying

the nursery fees).

58. Of course, I could be wrong. But if I am right, unfortunately, there will be a lot of

work for the lawyers.

John Wilson QC

1, Hare Court,

Temple, EC4Y 7BE

3rd November 2011

59.

35

APPENDIX

The application of Stack in subsequent cases1. In Holman –v- Howes [2008] 1 FLR 1217 was one of the earliest applications of

Stack by the Court of Appeal. Citing the speech of Baroness Hale Lloyd LJ stated at

paragraph [30] that the Court’s inquiry should be directed to what was intended

between the parties or, if that cannot be identified directly, what they must be taken

from their conduct to have intended. “It is not for that which the court considers fair.”

This was a case where attempts were made to rely on “post-acquisition” matters as

part of the whole course of dealings in relation to a property as indicating the

necessary common intention to share ownership. The legal owner of the property, a

man, had left the property in 1980 and the woman had then been solely responsible

for its upkeep and did not pursue claims for maintenance in respect of the parties’

daughter. The Court of Appeal declined to take these matters into account (at

paragraph [32]):

“With the benefit of Stack v Dowden to assist, it seems to me that the matters sought

to be relied on can be seen as plainly irrelevant to this particular inquiry. To take

them into account would be to go back to the impermissible question of what the court

considers fair.”

In other words, inference but not imputation was necessary.

2. In James –v- Thomas [2008] 1 FLR 1212 the property was in the man’s sole name

when the woman moved in with him. She gave him £5,000 to enable him to pay a tax

bill and worked with the man in carrying out some remedial work to the property as

well as assisting him in his business. Over the years they carried out extensive

renovation to the property funded by the man’s business. Planning applications were

in joint names and both were involved in the hands-on aspects of the work. The man

had observed that such works would benefit both of them and that the woman would

be well provided for on his death. Some years later the relationship broke down, the

woman moved out and their business partnership was dissolved. She relied on the

doctrines of constructive trust and proprietary estoppel to establish a beneficial

36

interest in the property. In cross-examination the man conceded that in fairness the

woman was entitled to some interest in the property. The judge dismissed the

woman’s claim and the Court of Appeal upheld that judgment.

3. The CA rejected the judge’s contention that a constructive trust could only arise at the

time of acquisition of the property. The common intention necessary to found a

constructive trust could be formed at any time before during or after the acquisition of

a property. A constructive trust could therefore arise some years after the property

had been acquired by and registered in the sole name of one party. However, in the

absence of an express post-acquisition agreement, the court would be slow to infer

from conduct alone that the parties intended to vary existing beneficial interests

established at the time of acquisition. These observations by Sir John Chadwick at

paragraphs [23] - [25] are of increasing significance as parties attempt to get round

the strictures of Stack by relying on post-acquisition activities (e.g. renovations or

extensions) to alter the beneficial interests favourably for them. Frequently, there is

an absence of the necessary post-acquisition agreement / common intention necessary

to vary the existing beneficial interests.

4. The CA also confirmed that a common intention as to beneficial shares in a property

could be inferred from evidence of the parties’ conduct during the whole course of

dealings in relation to the property. Perhaps surprisingly the court concluded that this

woman’s contributions / conduct did not give rise to the inference of a common

intention to share ownership12.

5. The CA also accepted that the assurance that the woman relied upon – “this will

benefit us both” – meant no more than the improvements to the property would

improve the quality of the couple’s life together. The representation that she would be

well provided for out of his estate on his death dealt with the position after his death

and not with current beneficial interests. She had not acted to her detriment: the true

position was that she had worked with the man in the business and helped with the

improvements because she and he were making their lives together. Furthermore, the

man’s concession as to “fairness” could not govern the result and neither could the

12 For similar more recent decisions see Walsh –v- Singh, Morris –v- Morris and Thomson –v- Humphreys all discussed below

37

court’s sense of what would be fair. The CA relied upon paragraph [61] of Baroness

Hale’s speech: (see paragraph [38])

“it is not for the court to abandon the search for the result which reflects what the

parties must, in the light of their conduct, be taken to have intended in favour of the

result which the court itself considers fair.”

6. In Fowler –v- Barron [2008] 2 FLR 831 the man and woman had a relationship over

23 years which began when the man was 47 and the woman 17. They had two

children and five years into their relationship they purchased a property in joint names

as a family home. There was no declaration of trust but the survivor could give valid

receipt for capital money. The man paid the deposit and other capital towards the

purchase of the property from the proceeds of his previous home and, although the

mortgage was in joint names, he always paid it out of his pension. The woman used

her income for herself and the children and the man paid everything else. The trial

judge (the case took place before Stack in the Lords) rejected the woman’s claim for a

beneficial interest in the property and declared the man as the sole beneficial owner.

The CA allowed her appeal. Following Stack it held that the relevant technique in

such cases was the common intention constructive trust, rather than the resulting trust.

In concentrating on the parties’ financial contributions, rather than their shared

intentions, the judge had erred in principle and the CA had to intervene and reach its

own conclusions.

7. As a matter of law, a presumption of joint beneficial ownership arose from the fact

that the parties were joint legal owners. Without any declaration of trust the onus to

rebut the presumption was on the individual asserting that the property was owned

other than in equal shares. In determining whether the presumption arising from the

transfer into joint names had been rebutted, the court must in particular consider

whether the facts were inconsistent with the inference of a common intention to share

the property in equal shares, to an extent sufficient to discharge the civil standard of

proof on the person seeking to displace the presumption. The emphasis was on the

parties’ shared intentions.

38

8. For the purpose of determining the parties’ shared intentions about beneficial

ownership of the property the court must consider the whole of the parties’

relationship so far as it illumined their shared intentions about the ownership of the

property, drawing any appropriate inferences. The conduct that the court would take

into account included, but was not limited to, financial contributions made towards

the acquisition of the property. If the parties had made unequal contributions to the

cost of acquiring their home, it was obvious that there was a thin dividing line

between the case in which the parties’ shared intention was properly inferred to be

ownership of the home in equal shares, and the case in which the parties’ shared

intention was properly inferred to be unequal shares. Importantly, the man could not

rely on his secret intention that the woman should only benefit in the event of his

death. It was not evidence of the parties’ shared intention. Similarly, the fact that

man did not understand the legal effect of putting the property into joint names was

not relevant.

9. Fowler –v Barron is an important case in that it applies Stack fairly strictly and

emphasises the need for something exceptional to rebut the presumption created by

putting the property into joint names. It can be seen as attempting to close the door

(or at least narrow the opening) left by the lengthy list of potential factors set out by

Baroness Hale at paragraph 69 of her speech. Indeed, there have been academic

doubts (now echoed by the CA in Kernott –v- Jones) as to whether Stack itself was an

exceptional case warranting the rebuttal of the presumption. It is also important to

bear in mind, when considering Fowler –v- Barron that the court was concerned with

the second stage of the Rosset enquiry so that the range of factors that could be taken

into account was wider than would have been the case at stage one, notwithstanding

the widening of the categories at that stage by Abbott –v- Abbott (which was not,

apparently, cited to the CA).

10. In Morris –v- Morris [2008] EWCA Civ 257 the CA allowed a man’s appeal against

an order granting the woman a beneficial interest in a farm. In doing so, it echoed and

approved the conclusions reached in James –v- Thomas. For there to be a common

intention constructive trust and for a beneficial interest to arise thereunder the court

has to be satisfied that the parties each had the intention communicated to each other

that, notwithstanding the paper title (this case was concerned with a farm in the man’s

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late mother’s name) and notwithstanding the absence of writing there should be a

disposal of a beneficial interest in land to the claimant woman. Whilst, see James –v-

Thomas, the court can find that a beneficial interest is subsequently acquired by

reason of conduct alone, the court should be slow to infer from conduct alone that the

parties intended to vary existing beneficial interests established at the time of

acquisition. Such a constructive trust would be “a rare bird” – see paragraph 20 of the

judgment. The CA reminded itself of what Baroness Hale said at paragraph [61],

albeit reminding themselves that Baroness Hale was concerned with the second

question that Rosset poses (“what is the extent of the beneficial interest?”). Sir Peter

Gibson said at paragraph 23:

“The authorities make it clear that a common intention constructive trust based only

on conduct will only be found in exceptional circumstances. The evidence in the

present case seems to me, with respect to the judge, to be wholly inadequate to

establish any such common intention.”

11. The CA also held that the conduct relied upon by the woman in Morris did not have to

lead to the conclusion that she was acquiring an interest in land. Again, echoing

James –v- Thomas the CA held that the court should be cautious before finding that

the activities of a wife or cohabitant can only be explained on the footing that she

believes that she was acquiring an interest in land. As to “fairness” see paragraph 30:

“For these reasons it seems to me that, with all respect to the judge, he was beguiled

by the submissions made to him into believing that he could produce what he

regarded as a reasonable or fair result in favour of the claimant. I am afraid that he

did not have that luxury. The law would be in a hopelessly unsatisfactory state if that

were the basis on which decisions in this area were made. The court’s approach must

always be principled. The court must be satisfied that the requisite tests have been

satisfied with sufficient certainty and any inferences must be founded on findings of

fact which can be sustained.”

12. Morris is an important appellate case. For some reason it does not appear to have

been reported whilst many first instance cases find their way into the law reports. It

deals with an issue that is likely to arise with increasing frequency as a party whose

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name is not on the title deeds (and may not have been around when the property was

purchased) seeks to establish a post-acquisition change in the beneficial interests or,

conversely, where a party who shares legal title seeks to show an expansion in his /

her share of the beneficial interest attributable to post-acquisition contributions. This

decision reinforces the CA’s stance in James –v- Thomas and makes it clear that the

task will be an uphill one.

13. In Q –v- Q [2009] 1 FLR 935 the brother and father of a husband claimed in ancillary

relief proceedings that the matrimonial home, which was in the name of the brother,

remained the property of the brother and father and did not belong to the husband and

wife. The spouses had reached an agreement whereby the father moved out of the

property and they would sell their assets including their former matrimonial home in

order to raise money for the renovation of the property which would become their

home and they would become the beneficial owners. Although draft transfers were

prepared, so that the brother could transfer the property to the husband, they were

never executed. The property had originally been in the father’s name and he had

transferred it out of his name to avoid inheritance tax. Black J found that whether

one considered the matter on a constructive trust analysis or on the basis of

proprietary estoppel, the beneficial ownership in the property belonged to the husband

and wife. There had been an agreement entered into by all the parties and the

husband and wife had acted upon it to their detriment. The shared intentions were

clear from the terms of the agreement. Whether the husband and wife had established

a proprietary estoppel or a constructive trust the minimum award necessary to do

justice in the case was for the property to belong either to the husband or to the

husband and wife. Furthermore, the father’s claim that he had retained the beneficial

ownership in the property even after transferring legal title to the brother could not be

pursued because, in effect, the father was pleading an illegal purpose and under the

presumption of advancement the transfer by the father to his son was presumed to be

a gift. In reaching her conclusions Black J relied upon Baroness Hale’s comments at

paragraph [60].

14. Webster –v- Webster [2009] 1 FLR 1240 was another 1975 Act claim. The man and

woman had lived together for 27 years and had two children. The family home had

been registered in the man’s sole name. They kept separate bank accounts and the

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man paid the mortgage throughout. The woman paid at least some of the bills for

furnishings, services and the children’s clothes and food. Both worked but the man’s

income was considerably larger than the woman’s. The man died suddenly, intestate,

at the age of 54. The woman claimed a beneficial interest in their home and a

beneficial interest in company shares vested in the man’s sole name. She accepted

that there had been no express discussions as to the beneficial interests each were to

have but claimed that the property had been regarded as by both of them as joint

property. At the time of the hearing the property was worth about £160,000 with a

mortgage of just under £12,000.

15. HHJ Behrens took the view that a considerable degree of caution was needed when

considering uncorroborated evidence of evidence of events that took place over 20

years ago (see also the words of caution in James –v- Thomas) given that the other

party to the transaction was dead. The fact that there had been no express discussions

as to beneficial interests, that the woman’s financial contributions to the family

budget had been considerably less than the man’s, that there had been no formal

commitment to the relationship by the man, and the degree of caution needed, it was

impossible to impute (sic) to the man and woman a common intention that the

property was to be held as beneficial joint tenants, or any common intention that the

woman should have any interest in the shares. However, the indirect contributions

made by the woman would lead to an inference that she had some interest in the

family home, assessed at between 33% and 40%.

16. The court was influenced in coming to its decision by Oxley –v- Hiscock [2004] 2

FLR 669 and James –v- Thomas [2008] 1 FLR 1598

17. In Mirza –v- Mirza [2009] 2 FLR 115 the facts are, again, complicated. The husband

and wife lived in a property owned by the husband’s middle brother pursuant to an

assured shorthold tenancy. The middle brother was the only financially astute and

successful member of the family. In divorce proceedings the wife alleged that the

tenancy agreement was a sham and that the husband was the real beneficial owner of

the property but that he had concealed this ownership in order to be able to claim

housing benefit. A declaration was made in favour of the middle brother. It was not

credible that the husband could have saved the amounts of money required to acquire

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an interest in the property. As a matter of fact the court did not accept that the boasts

he had made about his financial situation were sustainable. The evidence supported

the contention that the middle brother, who was wealthy in his own right, had made

the capital investments and was the sole beneficial owner of the property. In coming

to that conclusion Stephen Smith QC (sitting as a Deputy High Court Judge) relied

upon Stack v Dowden and James –v- Thomas.

18. In Qayyum –v- Hameed & Another [2009] 2 FLR 962 the factual background is

relatively complex. The property was transferred from the wife’s name into joint

names on the husband’s innocent misrepresentation that a freezing order obtained

against him would prevent him from using monies to pay legal costs. The wife

argued, when faced with a charging order, that she was the sole beneficial owner of

the property and that she had been induced into transferring the property into joint

names on the basis of the husband’s misrepresentation, albeit innocent. That

argument was not accepted in bankruptcy proceedings. Her appeal was dismissed.

19. The judge had been entitled to conclude that there had been an agreement between the

husband and wife that involved transferring the property back into joint names. There

was sufficient detriment to the husband in the agreement to satisfy the requirements of

a constructive trust (the husband had taken responsibility for a mortgage as part of the

arrangements). Therefore, subject to the issues of mistake and misrepresentation, it

would have been unconscionable to have left the husband saddled with the liabilities

under the mortgage without the promised property interest. The fact of the innocent

misrepresentation by the husband did not prevent the creation of a common intention

constructive trust. In those circumstances, notwithstanding the innocent

misrepresentation by the husband a common intention constructive trust arose.

20. As time has passed the decisions of the courts can be seen to be moving towards an

orthodoxy based upon the decision in Stack that acknowledges the reasoning of the

House of Lords whilst taking a fairly strict line on exceptions to the presumption that

equitable title follows the legal title. Thus, in Thomson –v- Humphrey [2010] 2 FLR

107. Warren J adopted a classical, and it is submitted, correct approach to the law

as it now stands.

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21. In Thomson –v- Humphrey when the man and woman began their relationship the

man lived in his own property and the woman lived in rented accommodation. After a

time the man purchased a property (“the original property”) for the woman and her

children to live in. The woman gave up her part-time job on the basis of the

assurances from the man that he would look after her. Subsequently, the couple

decided that the woman and her children should join the man in his home. Before this

happened the man tried to get the woman to sign a “living together” agreement,

acknowledging that she would have no interest in either the property she was about to

move into or any future property. She refused but moved in anyway. Some time later

the man sold the original property and purchased a new property as a “family home”

for himself, the woman and her children. The woman acted as housekeeper, did a

little work for businesses belonging to the man, and helped to manage various

development projects at the new property. When the relationship eventually broke

down, the woman asserted a beneficial interest in the new property on the basis that

there had been a common intention that she should have a share, or that the value of

the original property which had been purchased for her use, was to be taken as her

contribution to the new property.

22. Warren J dismissed her application. In doing so he applied Stack strictly. It was not a

matter of fairness. A claimant who sought to establish a beneficial interest as against

the holder of the legal title must show that it was intended that she should have a

share, and must then establish the extent of that share. The task of the court was to

ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the

property in the light of their whole course of conduct in relation to the property.

Wherever reliance was placed on an actual agreement as to beneficial ownership, it

was only if the claimant had acted to her detriment that she would be able to establish

a right.

23. The man’s instructions to his solicitor to draft the “living together” agreement, and his

attempt to get the woman to sign it, made it clear that at that stage the man did not

intend the woman to have any beneficial interest in his home, or in any future

“family” home and a heavy onus was on the woman to show that this clear intention

had changed by the time of the actual acquisition of the new property. It was not

possible to infer from the fact that the agreement was not signed that the man

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recognised that the woman already had an interest in the original property, or was

intended to have an interest in a future property. In any event the woman was unable

to establish sufficient detriment. At paragraph [95]:

“But even if it is wrong to say that there is no agreement giving rise to a common

intention that the claimant was to own the Long Stratton property, I do not consider

that the matters relied on here amount to sufficient detriment to allow her to assert

that claim. The detriment was essentially giving up her job and leaving her home,

effectively losing employment prospects. I am afraid that I cannot attach much weight

to that in the context of her circumstances at the time. She had a poorly paid part-

time job with no prospects. The giving up of a job is referable, in my judgment, not to

an expectation that she would own or have a share in the property, but to the

assurance that she would be looked after. Now, that may or may not be an assurance

that she now regards as having been breached, but even if she does, I am not satisfied

that her move can be seen as having been in any way in reliance on the prospect of

ownership of the property.”

24. Thomson –v- Humphrey represents a return to the traditional orthodoxies as

expressed in Rosset and modified by Stack. Warren J’s lucid judgment is one that

practitioners should consider carefully before advising in any case where there is

likely to be loose reliance on generalised representations and, perhaps, insubstantial

detriment. It needs to be considered alongside Kernott –v- Jones (see below).

25. In Walsh –v- Singh [2010] 1 FLR 1658 the female claimant (a barrister) again failed

to establish a beneficial interest in property owned by her former partner. Again, the

claimant carried out works in making a property habitable and, indeed, was

instrumental in finding the property eventually purchased by the man, in his sole

name and from his resources. At paragraph 19, after outlining some of the works

carried out by the woman, HHJ Purle QC, sitting as a Deputy High Court Judge, said:

“Overall, though, these works were explicable by her wish to live at Vale Cottages,

and said nothing about ownership.”

26. Her claim in respect of a field and paddock also failed as these were not owned by Mr

Singh but were owned by his SIPP. The claimant had paid £7,500 to Mr Singh in

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connection with the fields and £25,000 to him in respect of the paddock. Mr Singh

said that these were loans which in the case of the £7,500 he had repaid and in respect

of the £25,000 he acknowledged were repayable with the interest. The judge accepted

that they must have been loans as otherwise the SIPP arrangements would have been

ineffective.

27. An important element of her case was that she had given up the Bar at Mr Singh’s

request to concentrate on an equestrian business. The judge accepted that she had

given up the Bar and that she had been motivated by her wish to devote herself to the

development of the Vale Cottages property, especially once the additional fields had

been acquired. She said that she would not have given up her career if she had not

been told that “half of everything we were doing was mine.” The judge did not

accept her evidence. At paragraph 35:

“Nevertheless, I do accept that she gave up the Bar so as to devote more time to the

horse side of the business. She was willing to do this because she was engaged and

planning to get married to Mr Singh, and saw her future life with him. ... [36]... I

have no doubt that it was a joint decision (to give up the Bar), which suited both of

them. It suited Mr Singh to have Miss Walsh on the premises running an equestrian

business, and it suited Miss Walsh because she preferred to be working with horses

than be at the Bar. She was successful at the Bar, but the life was pressured and she

preferred to be around horses.”

28. The learned judge rejected her claims for a beneficial interest in the property (see

paragraphs [38] to [60].

Investment properties

29. The first major inroad into the principles set out in Stack came in Laskar –v- Laskar

[2008] 2 FLR 589. The Court of Appeal, with Lord Neuberger presiding, held that

the presumptions as to ownership of jointly owned property enunciated in Stack

applied to a family property occupied by cohabitants but not to commercial property

or property purchased as an investment. Note that Laskar was not itself a case

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concerning cohabitants so that we do not know what would transpire if cohabiting

couples purchased an investment property in joint names with unequal contributions

to the purchase price.

30. The Court of Appeal held that it was not right to apply the Stack reasoning to a case

where the primary purpose in purchasing a property was for investment or capital

appreciation. Even though the parties’ relationship was familial (in this case mother

and daughter). Even if the Stack presumption had applied it would have been

rebutted because the parties had kept their finances separate and the property had not

been purchased primarily as a home for either party. Thus, in the absence of any

relevant discussion between the parties, their respective beneficial shares should

reflect the size of their contributions. In other words a resulting trust analysis applied

in the absence of anything that could give rise to a constructive trust in different

shares. On the facts of this case, in any event, a division of two thirds to the mother

(recognising her contribution by way of right to buy discount) and one third to the

daughter was a fair one.

31. In fact, the problem had already arisen in August 2007 in the County Court case of

Adekunle –v- Ritchie [2007] EW Misc 5 (EWCC). In that case a mother and son

had purchased a property in joint names but with no express declaration of trust as to

ownership. HHJ Behrens concluded that this case was also an unusual one within the

parameters set out in Stack. The mother had contributed 50% of the acquisition price

by way of right to buy discount and thereafter mother and son had contributed equally

to the mortgage etc until her death in 2003 with the son contributed solely thereafter.

HHJ Behrens concluded that the starting point for the son’s share was 25% but that

taking a holistic approach that share should be quantified, albeit with all the

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qualifications as to the subjectivity of the quantification, at 33%. Lord Neuberger

approved the decision in Adekunle in Laskar. In Amin –v- Amin [2009] EWHC 3356

(Ch) there was discussion of Laskar and Adekunle at paragraph 273 concluding that,

in the circumstances of that case, the Stack approach should prevail.

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