JONES v KERNOTT PRACTICE POINTS
01/01/2012
"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.
While Lord Reid's plea was answered on behalf of married couples by the Matrimonial Causes Act 1973, for unmarried cohabitants the wait for legislation continues some 4 decades later. However for Chancery and family practitioners dealing with cohabitation claims the latest wait is over: from a hearing which took place on 4th May 2011 the Supreme Court finally handed down its Judgment in the eagerly awaited case of Jones v Kernott on 9th November 2011.1
The latest in a long line of judicial efforts to grapple with the problems created by co-ownership of property, the main impact of the judgment will be in 'joint names' cases. The purpose of this brief article is to highlight what at first blush seem to be the key principles which emerge from the judgment.
It should be stressed that the Judgment is of specific application to cases where "...a family home is bought in the joint names of a cohabiting couple who are both responsible for any mortgage, but without any express declaration of their beneficial interests." (per Lord Walker and Lady Hale at [51]. It is however to be anticipated that the principles espoused will prove to be of application in a far wider gamut of cases concerning jointly owned property.
Key Principles
Joint names cases
(1) The starting point in joint names cases is that equity follows the law. That is, a beneficial joint tenancy is presumed, due to the joint legal ownership.
(2) That presumption may be displaced by showing that:
(a) the parties had a different common intention at acquisition; or
(b) they later formed the common intention that their respective shares would change.
(3) Their common intention is to be deduced objectively from their conduct, on a wide consideration of the circumstances of the case.
(4) Where it is clear that the presumption of beneficial joint tenancy is displaced, but it is not possible to ascertain by direct evidence of by inference what the parties' actually intended as to the amount of their beneficial interests, then 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.
(5) Each case will turn on its facts. Financial contributions are relevant but there are many other factors which may enable the court to decide that shares were intended (as in (3) above) or fair (as in (4) above).
Sole name cases
The starting point is different. The first issue is whether it was intended that the other party have any beneficial interest in the property at all. If so, the second issue is what that interest is. There is no presumption of joint beneficial ownership, but the common intention has once again to be deduced from the parties' conduct (see (3) above). If the evidence shows a common intention to share beneficial ownership, but does not show what shares were intended, the court will have to proceed as at (4) and (5) above.
Practice Points
• Loosens the criteria for a finding, in a joint names case, that parties intended to own unequal shares or, most particularly, change previously established beneficial interests. It seems the requisite intention must be established by direct evidence or inferred.
• It does not appear that a constructive trust or a proprietary estoppel is a pre-requisite of such an alteration of beneficial interests – despite the requirements of subsection 53(1) of the Law of Property Act 1925.
• The presumption of resulting trust has been killed off in most, if not all, domestic cases. There is no presumption that the parties intended that the beneficial interest be shared in proportion to their financial contributions to the acquisition – although that may be their common intention: actual, inferred or imputed.
• "Fairness" is still not a basis for establishing an interest in a 'sole name' case.
• It remains to be seen how this decision will be applied in a case where there is an express declaration of trust.
• A significant feature of the judgment is the dramatically improved prospect for successful arguments of post-separation variation.
• One effect that will be likely to create significant future difficulty will be the impact upon professionals seeking to advise couples. The prospects of later variation are likely to render the traditional provision of advice concerning beneficial interests in need of reconsideration.
• Jones v Kernott turns on its facts. The Supreme Court found it of central importance that soon after separation the property was put on the market for sale. Around that time the parties cashed in a joint life insurance policy (not the endowment policy supporting the mortgage) and divided the proceeds to enable the man to purchase his own home, after which he made no contribution to the property and no significant contribution to the support of his children. Had the woman's appeal failed, the final score would have been: man - one and a half houses; woman - half a house.
• All 5 of their Lordships approved of the trial judge's 90:10% apportionment of the altered beneficial interests: 3 of them on the basis this was to be inferred from the facts of the case – but if it could not be inferred, it was to be imputed; 2 of them on the basis that an intention to share 90:10% could not be inferred, but was to be imputed.
1 [2011] UKSC 53. The text of the full judgment may be accessed online here:
http://www.supremecourt.gov.uk/docs/UKSC_2010_0130_Judgment.pdf