Posted by: RM | July 27, 2009

Beneficial Interests in the Family Home: The Rot Sets In

A recent decision of the High Court, on appeal from the County Court, has revisited the proper application of the principles expounded in Stack v Dowden [2007] UKHL 17 and Oxley v Hiscock [2004] EWCA Civ 546. The case is Jones v Kernott [2009] EWHC 1713 (Ch). The facts are as follows:

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.


Responses

  1. Damn, you’ve beaten us to it 😉 I blame those long academic holidays.

    An interesting case and I think I agree with your conclusion. Inferring a common intention is one thing, and may, of course, involve considering conduct in the light of fairness, but the court just making it up is something altogether different.

    Our version will be along in a bit…

  2. Long academic holidays?!?! I should be so lucky! Buckingham’s 2 year degree means 4 terms – I am now in Week 3 of the summer term – no leisurely perusal and contemplation of the law reports for me! I should tip my hat to John Bolch on this one – it was his Family Lore Focus which tipped me off about this particular case which had previously escaped my attention. I’ll look forward to reading your post about it… RM 🙂

  3. I used to be an academic, if you recall. I know how the time gets filled in, but as I am sweating under getting half a dozen witness statements, two applications, two Tomlin Orders, a letter before claim and a particulars of claim, as well as assorted tricky correspondence, out of the way by the end of Thursday, my sympathy is limited 😉 I swear loudly when the telephone rings.

    The case was only on Lawtel today! I can’t do day time posts. (Bloody academics…). Hopefully have something up this evening.

  4. Oh dear – sounds like the pressure is getting to you 🙂 I do recall … that you used to be an academic that is. I’m sure you have no regrets 😉 I’ll look forward to your post … in the early hours eh?!

  5. […] is difficult enough where one is examining the whole course of dealing (and there are plenty, like Rowena Meager, who side with Lord Neuberger in his opposition to the very idea of imputing intention), but where […]

  6. Our post finally up. I am less concerned about ‘Stack’ style ‘imputing’ of intention than you, but the portable palm tree of ‘fairness’ in this case worries me, and, like you, I find it hard to see on what basis a 90/10 split was arrived at.

  7. […] RM wrote an interesting post today onBeneficial Interests in the Family Home: The Rot Sets In « Rowena <b>…</b>Here’s a quick excerpt […]

  8. […] is difficult enough where one is examining the whole course of dealing (and there are plenty, like Rowena Meager, who side with Lord Neuberger in his opposition to the very idea of imputing intention), but where […]

  9. […] in the case of Kernott v Jones [2010] EWCA Civ 578. I wrote about the decision of the lower courts here, having been left with a distinctly uneasy feeling about the way in which the authorities were […]

  10. […] I have previously written about the first appeal (from the decision of the trial judge) here and the appeal to the Court of Appeal here. My views since those posts were written are unchanged […]


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