Cohabitation: what about the house? Part 2 - Jones v Kernott [2011] UKSC 53.

Post updated 10th November and further links added 11th November

Introduction:

The Supreme Court has given its judgment in the appeal by Patricia Ann Jones against the decision of the Court of Appeal in Kernott v Jones [2010] EWCA Civ 578.    The Supreme Court's judgment is Jones (Appellant) v Kernott (Respondent) [2011] UKSC 53 and a "Press Summary" of the judgment is also available.  The Court of Appeal's decision was discussed on Law and Lawyers 4th November 2011 - "Cohabitation: what about the house?  A cautionary tale."

The case was about the shares in a home which unmarried cohabitees held.  It is an example of the type of property dispute which the courts have wrestled with for well in excess of 40 years.  A full analysis of the law involves a lengthy journey.  It would take us back to at least Pettit v Pettit [1970] AC 777, [1969] UKHL 5; then Gissing v Gissing [1971] 1 AC 886, [1970] UKHL 3 and, twenty years later, to  Lloyds Bank v Rosset [1991] 1 AC 107, [1990] UKHL 14.  The next principal stop would be just four years ago with Stack v Dowden [2007] UKHL 17 and now Jones v Kernott.   Many many other cases, with all their factual twists and turns, would be encountered en route.  A full reading would take many hours and the reader would have to wrestle with discussion of concepts such constructive trusts, resulting trusts and proprietary estoppel which have, from time to time, been used by the judges in the absence of a statutory scheme to decide the cases before them.  The law has been, and regrettably remains, unclear and unsatisfactory.

The facts of Jones v Kernott:

It is convenient to set out the essential facts which can be taken from the Supreme Court's Press Summary:

"Ms Jones and Mr Kernott met in 1981. They had two children together. In 1985 they purchased a house in
Thundersley, Essex in their joint names. The price paid was £30,000 with a £6,000 deposit paid exclusively
by the proceeds of sale from Ms Jones’s previous home. No declaration was made as to how the beneficial
interest in the property was to be held. The mortgage and upkeep on the house was shared between them. In
1986 they jointly took out a loan of £2000 to build an extension. Mr Kernott did some of the work himself.
The relationship deteriorated and in 1993 Mr Kernott moved out. From that point onwards Ms Jones lived in
the Thundersley property with both children. In 1996 Mr Kernott bought his own house in Benfleet, Essex.
Over the years, the value of the Thundersley property increased and in 2006 Mr Kernott indicated that he
wished to claim a beneficial share in it. In response, Ms Jones, in 2007, applied to the county court for a
declaration under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 that she owned
the entire beneficial interest in the property. By 2008 the property was valued at £245,000."

An important first point to note here is that J and K purchased the Thundersley house as a home.  It was conveyed to them in their joint names.  In the absence of a clear statement of how the property is to be shared, the basic rule is that they will hold it jointly both at law and in equity.  On the facts of Jones v Kernott, there was nothing up to 1993 to justify not applying (i.e. "rebutting") that presumption.  Clearly, over the next almost 15 years, things changed and the value of the property increased considerably.

In the County Court, the judge applied the House of Lords decision in Stack v Dowden [2007] UKHL 17 and held that the initial presumption of joint beneficial ownership had been displaced.  The judge decided that the shares were 90% to J and 10% to K.

K appealed to the High Court but lost the appeal.  He further appealed to the Court of Appeal where it was decided that J and K held the property as tenants in common with a 50:50 division.  However, the Supreme Court has restored the 90:10 division.

The Supreme Court:

Lord Walker and Lady Hale issued a joint judgment.  Counsel had not argued that Stack v Dowden 2007 was incorrectly decided and it appears that counsel were reasonably economical with the material they asked the court to consider.  (Legal costs are always a very relevant consideration and here they would already have been very high).  Lord Walker and Lady Hale indicated that they had looked at the work of some legal writers, some of whom had received Stack v Dowden with "qualified enthusiasm" whereas others disapproved.  However, the Jones v Kernott appeal was an opportunity for some clarification.  (See para. 2 of the judgment).


In summary, Lord Walker and Lady Hale set down the following five principles applicable in a case such as this, 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.

(1) The starting point is that equity follows the law and they are joint tenants both in law and in equity.

(2) 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.

(3) 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 law, "context is everything" and the domestic context is very different from the commercial world. Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties' true intentions. These include: any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the home was acquired in their joint names; the reasons why (if it be the case) the survivor was authorised to give a receipt for the capital moneys; the purpose for which the home was acquired; the nature of the parties' relationship; whether they had children for whom they both had responsibility to provide a home; how the purchase was financed, both initially and subsequently; how the parties arranged their finances, whether separately or together or a bit of both; how they discharged the outgoings on the property and their other household expenses. When a couple are joint owners of the home and jointly liable for the mortgage, the inferences to be drawn from who pays for what may be very different from the inferences to be drawn when only one is owner of the home. The arithmetical calculation of how much was paid by each is also likely to be less important. It will be easier to draw the inference that they intended that each should contribute as much to the household as they reasonably could and that they would share the eventual benefit or burden equally. The parties' individual characters and personalities may also be a factor in deciding where their true intentions lay. In the cohabitation context, mercenary considerations may be more to the fore than they would be in marriage, but it should not be assumed that they always take pride of place over natural love and affection. At the end of the day, having taken all this into account, cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual. 

This is not, of course, an exhaustive list. There may also be reason to conclude that, whatever the parties' intentions at the outset, these have now changed. An example might be where one party has financed (or constructed himself) an extension or substantial improvement to the property, so that what they have now is significantly different from what they had then. 

(4) 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.

(5) 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)).

At para. 52. they noted that this case was not concerned with a family home which is put into the name of one party only. In those cases there is a different starting point. The first issue is whether it was intended that the other party have any beneficial interest in the property at all. If he or she does, the second issue is what that interest is. There is no presumption of joint beneficial ownership. But their common intention has once again to be deduced objectively from their conduct. 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.

Lords Collins, Kerr and Wilson:

They agreed with the result.

There clearly is a difficulty in a case where the parties had changed their original intention but where 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.  Indeed, it would be entirely logical to argue that, where this is the position, the basic presumption - (No. 1 in Lord Walker and Lady Hale's 5 principles) - has NOT been rebutted.  However, the judgment has not adopted such an approach.

A terminology of "IMPUTED intention" has entered the law - see No.4 in the list of principles.  Inference and Imputation are not the same.  It is one thing to infer that a person intended something when the inference is drawn from evidence.  However, where no such inference is possible, how is the court to decide the case?   One solution would be to IMPUTE an intention to the parties as to the proportions in which the property would be shared. In deducing what the parties, as reasonable people, would have thought at the relevant time, regard would obviously be had to their whole course of dealing in relation to the property.

Obviously, an "imputed intention" could be an intention which neither of the parties either held or, if they had considered the matter, would have held.    In Jones v Kernott, Lord Walker, Lady Hale and Lord Collins felt able to INFER the parties' intentions.  However, Lord Kerr and Lord Wilson were not and they then proceeded to IMPUTE an intention.  However, they reached the same result but it is a moot point whether, in all cases, the different routes would lead to the same result.

The judgments of Lords Kerr and Wilson are particularly concerned with the line between "inference" and "imputation."  The court's press summary states:

"Lord Collins agrees with Lord Walker and Lady Hale, holding that the differences in reasoning set out
below are “largely terminological and conceptual and are likely to make no difference in practice.” [58].

Lord Kerr holds that the divergence in reasoning might, in practice, make a difference [67]. The question
concerns how far the court should go in seeking to infer intention and when it is justified in imputing it. It is
preferable to give effect to the parties’ intentions where possible but the courts should not be reluctant to
recognise when it is not and to impute an intention accordingly. In agreement with Lord Wilson it is not
possible to infer the intention in this case but the division that the judge made is a fair one as between the
parties and should stand.

Lord Wilson considers that on the facts of this case, it is impossible to infer the intentions of the parties and
the court can only impute to the parties an intention that the house be held in fair proportions along the lines
of those set out by the county court judge [89]."

Still a cautionary tale:

The conclusion must be that this litigation remains a "cautionary tale" for all cohabiting couples.  It is essential to obtain sound legal advice on the question of ownership of the home and the possibility of breakup must be considered.

An interesting and difficult point arises as a result of Jones v Kernott since some doubt may have been thrown on the question of whether interests which are clearly defined at the outset may actually change if circumstances change.  Naturally enough, if circumstances change, it would make good practical sense to review the question of the shares and parties are able to declare new trusts by means of a declaration of trust which complies with the Law of Property Act 1925 s.53(1)(b).   The difficulty may arise where they do not do this but perhaps, after many years, there is a dispute and one party seeks to claim a greater share than was set out in the first instance.  Whether this point will lead to further litigation remains to be seen.  In relation to this matter please see the excellent article by Rebecca Bailey-Harris and John Wilson QC (of 1 Hare Court) - "Jones v Kernott - Another helping of the witches' brew."

• For married couples (and those in civil partnerships) there is a statutory basis for deciding these property questions: Matrimonial Causes Act 1973 s.24.

• It is also interesting to note the position where one cohabitee dies after the cohabitation has lasted for two years: Inheritance (Provision for Family and Dependants) Act 1975 as amended by the Law Reform (Succession) Act 1995.  Since the amendment to the law, financial dependence no longer has to be proved where there has been cohabitation for the two years immediately leading up to the death.  The court will take certain guidelines into account in making a claim by a dependant.

It is to be hoped that Jones v Kernott will have added some clarity to the law but statutory reform is urgently needed.  Unfortunately, at least for the duration of this Parliament, the government has decided not to proceed with reforms put forward by the Law Commission in July 2007 (Law Com No 307 - Cohabitation: The financial consequences of relationship breakdown)- see Solicitors Journal 14th September 2011.

Reference:   The magisterial judgment of Chadwick LJ in Oxley v Hiscock [2004] EWCA Civ 546.  (Described a "magisterial" by Lord Collins in Jones v Kernott at para. 61)

Other Posts etc:

The Lawyer - Jones v Kernott: we need an overrarching law of financial claims for umarried couples

Nearly Legal Blog - Jones v Kernott: ending the big debate?

The Guardian 10th November - Cohabitees Property Rights

Marilyn Stowe Blog - What the Kernott v Jones jusdgment means for cohabiting couples 

Rowena Meager's Property Law Blog - "Jones v Kernott: (Round 4)"

Family Law Update - "Hayley Trim's Analysis: Jones v Kernott - A not-so-common intention."

Family Law Week - "Jones v Kernott - Another helping of the witches' brew." - Rebecca Bailey-Harris and John Wilson QC of 1 Hare Court.

Family Law Week - "Further responses to the Jones v Kernott judgment"

The Journal - the law in Scotland - Cohabitation: the new legal landscape

The Guardian 14th November 2011 - Catherine Bennett - "Living together?  Beware, the State's set to move in too."

Solicitor's Journal 14th November - "Lady Hale lays down new rules for cohabitation disputes"

UK Supreme Court blog - "Kernott v Jones [2011] UKSC 53" - Stephanie Smith