Unmarried couples’ beneficial interests
The Supreme Court has allowed the appeal by Patricia Jones and held unanimously that she had a 90% interest in the property she owned with Leonard Kernott, restoring the decision of the county court judge and reversing the Court of Appeal which had held that she and Mr Kernott were each entitled to an interest of 50%.
In a joint judgment Lady Hale and Lord Walker sought to clarify Stack -v- Dowden  UKHL 17 and expressly confirmed the approach of Chadwick LJ in Oxley -v- Hiscock  EWCA Civ 546. The court remains primarily bound to discover what the parties’ actual shared intentions were, whether express or to be inferred from their conduct.
Where the court is satisfied that the parties did intend to hold other than equally, but there is no evidence of what the proportions are, the court is entitled to impute to the parties an intention to hold the shares fairly.
Lord Collins, Lord Kerr and Lord Wilson agreed with the conclusion, but their reasons differed. Lord Kerr and Lord Wilson were quite ready to impute intentions to the parties which they may never have had.
Lady Hale and Lord Walker summarised the principles that apply where a family home is bought in the joint names of a cohabiting couple without any express declaration of their beneficial interests:
Patricia Jones and Leonard Kernott met in 1980. She was a mobile hairdresser and he was an ice-cream salesman who claimed benefits in the winter when he could find no other work. She bought a mobile home in 1981, and he moved in in 1983. They had a child and bought 39 Badger Hall Avenue, Thundersley, Essex in 1985 for £30,000. Patricia Jones used the proceeds of sale of her mobile home for the deposit. They took out a mortgage together of £24,000. They extended the property which increased its value by about 50%. Mr Kernott did some of the labouring involved. In 1986 they had a second child. They each contributed to the mortgage payments and other household expenses for the eight and a half years they lived together.
In 1993 they separated and Leonard Kernott moved out. In 1995 the house was put on the market for £69,995 but did not sell. To provide Mr Kernott with a deposit on a house of his own, Patricia Jones agreed to cash in a joint life insurance policy, and they split the proceeds. He then bought 114 Stanley Road, Benfleet, Essex for £57,000 with a mortgage.
He was only able to afford his own accommodation by not paying towards the mortgage on 39 Badger Hall Avenue or significantly towards his children.
In 2006 Leonard Kernott claimed 50% of 39 Badger Hall Avenue. He still had his own house, 114 Stanley Road, valued at £205,000 at the trial in 2008. If his claim succeeded, Patricia Jones would have to sell 39 Badger Hall Avenue, valued at £245,000 at trial, and pay Leonard Kernott about £120,000, notwithstanding that it was she who had paid all the mortgage instalments since 1993 and that it was she who had paid for bringing up the children. She would not have had much left from the proceeds of sale to buy an alternative home.
The county court judge held that Miss Jones was entitled to 90%. Mr Kernott appealed to the High Court and lost. He appealed again, to the Court of Appeal, which held that his share was 50%.
There were two broad issues to be decided by the Supreme Court:
whether there was sufficient evidence from which the trial judge could infer that the parties intended to hold other than equally or jointly; and
if so, whether the trial judge was permitted to infer, or to impute an intention to the parties that they held in particular proportions.
Lady Hale and Lord Walker noted that the trial judge had found as a fact that the intentions of Miss Jones and Mr Kernott “[had] altered significantly over the years to the extent that [Mr Kernott] demonstrated that he had no intention until recently of availing himself of the beneficial ownership in this property having ignored it completely by way of investment in it or attempt to maintain or repair it whilst he had his own property upon which he concentrated”.
They considered that there was no need to infer from the parties’ conduct whether their intentions were to hold other than equally, because the judge had made a finding of fact that they had.
As to quantification of those shares Lady Hale and Lord Walker adopted the approach of Mr Nicholas Strauss QC in the High Court:
“... if [the court] cannot deduce exactly what shares were intended, it may have no alternative but to ask what their intentions as reasonable and just people would have been had they thought about it at the time. This is a fallback position which some courts may not welcome, but the court has a duty to come to a conclusion on the dispute put before it”.
Lord Collins agreed with Lady Hale and Lord Walker but considered that the difference between inference and imputation would hardly ever matter. He thought that “what is one person’s inference is another person’s imputation”.
Lord Collins also said that it might be absurd to imagine a scenario in which the court will infer a common intention which is unfair.
Lord Kerr considered that “as soon as it is clear that inferring an intention is not possible, the focus of the court’s attention should be squarely on what is fair”. Lord Kerr did not agree with Lady Hale and Lord Walker that there was sufficient evidence in this case to infer a change of intention, but had no difficulty in imputing an intention that the parties should hold in proportions which were fair.
Lord Wilson also considered that it was impossible to infer an intention to hold in particular shares but had no difficulty in imputing an intention to hold in shares that were fair.
Richard Power represented Patricia Jones at the original trial and all three appeals
Richard Power / 1st Nov 2011
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