Ms Jones and Mr Kernott bought a property, 39 Badger Hall Avenue, in 1985 and the property was conveyed into their joint names. The purchase price was £30,000 of which £6,000 was contributed by Ms Jones. The remainder was financed by an interest only mortgage, supported by an endowment policy. The mortgage and endowment policy payments were shared between the couple. The following year a further loan of £2,000 was taken out against the property for the purpose of building an extension and this was built and paid for largely by Mr Kernott. This is estimated to have enhanced the value of the property by almost 50%, from £30,000 to £44,000. Ms Jones and Mr Kernott shared the household expenditure (including bills and mortgage repayments) until the couple split up and Mr Kernott moved out of the property in 1993 (some 8 years later). Thereafter, Ms Jones made all of the interest only mortgage payments together with the payments against the endowment policy and met all expenditure in relation to the upkeep of the property. There were two children of the relationship who remained with Ms Jones. Mr Kernott made little or no contribution to their maintenance and none had been sought by Ms Jones.

Some time after the relationship had ended a life insurance policy was cashed and the proceeds split between the parties. In part this was to enable Mr Kernott to purchase a property for himself which he did in 1996, acquiring 114 Stanley Road, which he then financed alone. It is undisputed that Ms Jones never acquired any interest in the Stanley Road property. It is also undisputed that until the couple split up and Mr Kernott moved out of the property in 1993, the beneficial shares in the property were owned equally. The question for the court was whether, following the couple’s separation in 1993, the beneficial shares in the property were altered. At first instance the judge held that they had altered and concluded that Ms Jones was entitled to a 90% beneficial interest in the property on the basis that it was “fair and just”.

The leading judgment in the Supreme Court was, unusually, a joint judgment by Lord Walker and Lady Hale. Inevitably there was much reference to the applicability of the principles set out in Stack -v- Dowden [2007] UKHL 17. The crucial question at the heart of this particular case was whether, following Mr Kernott’s departure from 39 Badger Hall Avenue, an intention between the parties could be found which would rebut the presumption of joint beneficial ownership (which presumption generally arises where there is joint legal ownership and no express declaration of trust that the co-owners should own in anything other than equal shares). Reversing the decision of the Court of Appeal and restoring the determination of the trial judge (upheld in the High Court on appeal) the Supreme Court concluded that the facts in the present case did give rise to an inference that the intentions of the parties (to own the property in equal beneficial shares, consistent with their legal ownership) did change when Mr Kernott acquired his own property independently of Ms Jones. That finding, said Lord Walker and Lady Hale, was a finding made by the trial judge and there was, therefore, no need to impute any intention. This seems to me to fail to recognise that there was no evidence of such an intention referred to by the trial judge in his judgment (as was, in my view, implicitly recognised in Lord Walker and Baroness Hale’s judgment where, at para [48], it is said that “[the parties] intentions did change significantly. [The judge] did not go into detail”) and that this was the intention which he imputed to the parties. At para [47] it is explicitly recognised that the court cannot impose on the parties a solution which is contrary to the evidence of what the parties actually intended.

However, where the court cannot deduce from the evidence what the intentions of the parties were as to shares it was said that the court would have to ask what the parties intentions would have been as reasonable and just people had they thought about it at the time. At para [48] the abortive attempts to sell the jointly owned property, the cashing of the life insurance policy to, amongst other things, help fund Mr Kernott’s acquisition of a new property in his own name and the fact that he would not have been able to afford to do this had he still had to contribute to the property at 39 Badger Hall Avenue all gave rise to the “logical inference” that Mr Kernott and Ms Jones intended Mr Kernott’s interest in the Badger Hall Avenue property to crystallise then. Still looks like “imputed” intention to me, whatever the label given to the exercise…

Postscript: Inevitably, there has been a significant level of interest in this decision and there are lots of other interesting posts (adopting various views) which can be viewed at the following links (my apologies if I have left any out – if you would like links to your posts included please contact me):

http://www.marilynstowe.co.uk/2011/11/10/kernott-v-jones-on-bbc-breakfast/

http://nearlylegal.co.uk/blog/2011/11/jones-v-kernott-ending-the-big-debate/

http://obiterj.blogspot.com/2011/11/cohabitation-what-about-house-part-2.html

http://www.familylaw.co.uk/articles/HayleyTrim10112011-632

http://www.familylore.co.uk/

http://hklandlaw.wordpress.com/2011/11/11/jones-v-kernott-in-the-supreme-court/

For what it’s worth, I agree with those who denounce the lack of enthusiasm for introducing legislation to deal with the distribution / allocation / re-allocation of property rights upon the breakdown of relationships between co-habiting (non-married) couples – my objection is concerned with the use of property law principles for dealing with the same which, in my view, distorts and makes inappropriate use of well established principles (even if the outcome reached might, on the face of it, seem “fair”).

The first issue which arises for determination in a case such as this is clearly articulated in Stack v Dowden [2007] UKHL 17 – where property is jointly owned at law, from which it follows that there is a presumption that the beneficial interests in that property are equal, can that presumption of equal beneficial ownership be rebutted? It is, quite logically, only necessary to address the question of the amount of the parties’ shares if this presumption is first rebutted. However, this is a high threshold to meet as was made clear in Stack – only exceptionally will it be possible to establish that the property is intended to be owned in anything but equal shares. In the present case the Court of Appeal, reversing the decision of the lower courts, concluded that there was no evidence from which it could be determined that the parties had, at some time after their separation, intended that their beneficial shares should be held other than equally. Lord Wall said this:

55. …This is not a case under the Matrimonial Causes Act 1973, and the government has not implemented the Law Commission’s proposals relating to unmarried couples. This court must resolve this appeal under the law relation to trusts as explained in Oxley v Hiscock and Stack v Dowden.

57. The critical question is whether or not I can properly 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 respondent and 10% by the appellant…

58. …I simply cannot infer such an intention from the parties’ conduct. In my judgment, the 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.

Not surprisingly the relevant authorities were examined at length. This was, it should be noted, a majority decision, Lord Justice Jacob dissenting. The judgments highlight, once again, the folly of unmarried couples purchasing property jointly and failing to contemplate the possibility of their later separation and the proper division of their property interests should such an event occur. In close personal relationships such discussions seem particularly unpalatable. However, they would probably have been more palatable than the three hearings to which Mr Kernott and Ms Jones have subjected themselves, together with all of the associated costs. From the perspective of the lawyer who has to advise parties who now find themselves in this position, it should make the likely outcome a little more predictable, thankfully…

For a more extensive discussion of this decision see Nearly Legal’s post here.

Ms Jones and Mr Kernott bought a property, 39 Badger Hall Avenue, in 1985 and the property was conveyed into their joint names. The purchase price was £30,000 of which £6,000 was contributed by Ms Jones. The remainder was financed by an interest only mortgage, supported by an endowment policy. The mortgage and endowment policy payments were shared between the couple. The following year a further loan of £2,000 was taken out against the property for the purpose of building an extension and this was built and paid for largely by Mr Kernott. This is estimated to have enhanced the value of the property by almost 50%, from £30,000 to £44,000. Ms Jones and Mr Kernott shared the household expenditure (including bills and mortgage repayments) until the couple split up and Mr Kernott moved out of the property in 1993 (some 8 years later). Thereafter, Ms Jones made all of the interest only mortgage payments together with the payments against the endowment policy and met all expenditure in relation to the upkeep of the property. There were two children of the relationship who remained with Ms Jones. Mr Kernott made little or no contribution to their maintenance and none had been sought by Ms Jones.

Some time after the relationship had ended a life insurance policy was cashed and the proceeds split between the parties. In part this was to enable Mr Kernott to purchase a property for himself which he did in 1996, acquiring 114 Stanley Road, which he then financed alone. It is undisputed that Ms Jones never acquired any interest in the Stanley Road property. It is also undisputed that until the couple split up and Mr Kernott moved out of the property in 1993, the beneficial shares in the property were owned equally. The question for the court was whether, following the couple’s separation in 1993, the beneficial shares in the property were altered. At first instance the judge held that they had altered and concluded that Ms Jones was entitled to a 90% beneficial interest in the property on the basis that it was “fair and just”.

On appeal, Nicholas Strauss QC (sitting as a Deputy Judge of the High Court) reviewed the main authorities quite extensively. Unsurprisingly, he undertook a fairly lengthy analysis of the Oxley v Hiscock and Stack v Dowden decisions. On the facts Jones v Kernott was contextually more similar to Stack v Dowden given that the property with which the litigation was concerned had been conveyed into the joint names of the couple and the question for the court was whether the presumption of joint beneficial ownership in circumstances where there was joint legal ownership could be rebutted, as it had been in Stack v Dowden. The relevance of Oxley v Hiscock, despite being factually distinct because the property there had been conveyed into the sole name of one of the parties, was the extent to which the decision in Stack v Dowden had endorsed (to a large extent) the approach of the Court of Appeal in Oxley v Hiscock in respect of the proper approach to quantification of shares in the family home.

The starting point, according to Stack v Dowden, is that where property is conveyed into joint names there is a presumption that the beneficial shares are owned equally (in the absence of any express declaration to the contrary). Establishing that the shares are held other than equally will depend upon identifying a common intention that the shares should be so held; only in very unusual cases is this likely to be established according to the House of Lords in that case. The reality, of course, is that such a common intention is very unlikely to have ever been expressly stated and agreed upon; it will be for the court to look at the evidence and determine whether the facts speak to there having been such an intention. In so doing the courts will look at the whole of the parties’ conduct.

There is a fine distinction between inferring the intention of the parties from the facts and imputing their intention. This is a line which Lord Neuberger (dissenting as to the reasoning but not as to the result in Stack v Dowden, para [125]) thought ought not to be crossed. The former being the product of some objective analysis and the latter being essentially an invention of the court where no such intention could be identified from examining the parties’ actions and statements.

Of course, in Stack v Dowden the parties had never really had a domestic partnership in the financial sense, the finances having been kept separate throughout their relationship, whereas until the time Ms Jones and Mr Kernott separated there appears to have been a clear financial partnership between them. Even after Mr Kernott moved out of the property, until 2008 the Badger Hall Avenue property continued to be held under a beneficial joint tenancy, Mr Kernott serving a notice of severance of the joint tenancy in May of that year.

Given that the financial contributions of the parties to the property were clearly very different once Mr Kernott had left the property it is not at all surprising that Ms Jones should acquire a greater interest in the property, thus rebutting the presumption of beneficial joint ownership. However, the quantification in this case is open to question. On appeal Nicholas Strauss QC said that whilst he is not sure that he would have arrived at exactly the same result (in terms of the proportions apportioned to the parties) as the judge he did not think that the attribution of 90% of the property to Ms Jones was unjustifiable. On the facts it is clear that Mr Kernott had contributed far more than 10% to the purchase and increased value of the property. The fact that Ms Jones had paid all of the mortgage payments and household expenses once Mr Kernott had left the property is only to be expected; she also enjoyed the whole benefit of the property. A point which had been pursued on behalf of Ms Jones in the County Court was a suggestion that once Mr Kernott had acquired his own separate property he did not intend to have a subsisting interest in the Badger Hall Avenue property. This was not pursued on appeal. Also, it was clearly a feature of the case that Mr Kernott had made no payment for the maintenance of the children although Ms Jones had never pursued such contributions from him. It is, however, something which both the trial judge and the judge on appeal thought would be a legitimate consideration.

Nicholas Strauss QC recognised that the trial judge, in coming to the conclusion which he did, had attributed to the parties a common intention which they did not have, or at least did not express to each other. In other words, he had imputed to the parties an intention which was not apparent from their conduct. This, he said, was the right thing to do in this case. This, whilst being consistent with the approach advocated by the majority in Stack v Dowden, really is to be questioned. If the courts are entitled, in the absence of any evidence, and arguably in defiance of the evidence, to invent common intentions and graft those onto the minds of the litigating parties, we are left with a level of discretion which will provide unacceptably high levels of uncertainty when it comes to the quantification of shares in the family home upon the dissolution of relationships. It is precisely this sort of outcome which Lord Neuberger warned against in his dissenting speech in Stack v Dowden and he was right to be concerned; the rot is setting in.

Postscript

For another view on this decision, see here. See also a piece I wrote for the NLJ on this here.