The Supreme Court judgment this week in Jones v Kernott was in some ways a missed opportunity. Over the past four decades the courts have struggled with how to deal with property held in joint names by an unmarried couple in the event of a breakdown in their relationship. Stack v Dowden [2007] went some way to advance the relatively new concept of a constructive trust. However, many questions remained unanswered, particularly those regarding sole ownership, indirect contributions and cases where the Court will examine joint ownership. The family law community has therefore eagerly awaited Jones v Kernott in the hope of an authoritative judgment that can be applied with confidence to the way a large number of people live their lives.
By way of background, Ms Jones and Mr Kernott met in 1981 and in 1985 they bought a house together, 39 Badger Hall Avenue. They went on to have two children before the relationship turned sour and Mr Kernott left in 1993. Two years later Mr Kernott wished to buy his own home and the couple agreed to cash in an insurance policy to enable him to achieve this. From the time Mr Kernott left Badger Hall Avenue in 1993, Ms Jones took on the mortgage and all the outgoings and Mr Kernott made very little contribution towards the running of the house or the maintenance of the couple’s children. However over the years the value of Badger Hall Avenue increased and by 2006 Mr Kernott decided to claim a beneficial interest and asked for half of the property. This prompted Ms Jones to apply to the county court for a declaration that she owned the whole of the beneficial interest. The county court followed Stack v Dowden and declared that Mr Kernott was only entitled to 10%. The High Court agreed but the Court of Appeal allowed Mr Kernott’s appeal and so the case landed before the Law Lords in the Supreme Court.
The difference between imputation and inference is a key concept in cases such as this. When unmarried couples purchase a property in joint names, in the absence of any explicit evidence to the contrary, there is a presumption of joint beneficial ownership which means couples are entitled to an equal share of the equity. This presumption can only be rebutted where it is clear that the common intention of the parties has changed. According to Stack and Dowden an intention may be inferred by considering the actions and statements of the parties, that is, the subjective actual intentions of the parties. An intention is imputed when it is attributed to the parties by the court, despite the fact that they had no such intention, that is, it concludes what the parties would have intended.
How did The Supreme Court apply the existing case law to Jones v Kernott? The key event was that a new common intention could be inferred from the sale of the life insurance policy which enabled Kernott to purchase his new property. This was a deviation from the original common intention of joint beneficial ownership of Badger Hall Avenue. So while the Court would not rule contrary to what the parties’ actual intentions were, if it is impossible to deduce those intentions then the Court will impose a solution that the parties as ‘reasonable and just people’ would have thought at the time.
A helpful summary is provided at paragraph 51 of the lead judgment by Lady Hale and Lord Walker:
The starting point is that equity follows the law and they are joint tenants both in law and in equity.
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.
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 [1971] 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.
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[2005] 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.
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)).
The Supreme Court upheld the original County Court decision that while the interests of the parties at the outset might well have been that the property should be split jointly, those intentions had altered significantly over the years. The correct test is what is "fair and just" between the parties, taking into account the whole course of dealing between them. The fact that Mr Kernott stopped paying any bills after he moved out and ceased to provide financially for the couples’ children together with the fact that Ms Jones had contributed over 80% of the equity, brought the Court to the conclusion that the correct split would be 90:10 in favour of Ms Jones.
Although the Supreme Court decision to allow the appeal in Jones v Kernott was a unanimous one, Lord Kerr and Lord Wilson reached the same conclusion via a different line of reasoning. Lord Kerr was concerned with how far a court should go in seeking to infer actual intention as to shares and how much will the difference between inferring and imputing an intention actually matter in general practice?
However, most people are not concerned by the wrangling of Supreme Court judges. They simply need to be given clear guidance and advice in the event of a relationship breakdown. Given that co-habitation is on the rise and marriage is falling, the problem really needs to be addressed through parliament rather than through the Courts. Unfortunately successive governments have been reluctant to be seen to be anti-marriage and it is certain that legislative reform will not happen in this parliament. Therefore, sensible advice to clients who intend to co-habit would be to put all intentions in writing, preferably a deed of trust, or get married. Otherwise they could be facing a potentially long and costly legal battle.
