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Date: 18 September 2009
Issue: Online only
Categories: Features, Family
The recent case of Jones v Kernott [2009] EWHC 1713 (Ch), [2009] All ER (D) 123 (Jul) concerned a claim by Ms Jones under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996) for the determination of the beneficial ownership of two properties, 39 Badger Hall Avenue and 114 Stanley Road.
Facts of the case
Ms Jones and Mr Kernott formed a relationship in 1980. In 1985 they jointly purchased 39 Badger Hall Avenue for £30,000.
Ms Jones contributed £6,000 and the balance was funded by way of an interest only mortgage, supported by an endowment policy. The property was conveyed into their joint names.
The following year a further loan of £2,000 was taken out to fund an extension to the property which was built and paid for largely by Mr Kernott.
This enhanced the value of the property by almost 50%, from about £30,000 to £44,000. Ms Jones and Mr Kernott shared the household expenses including the mortgage repayments. Mr Kernott’s capital contribution to the property was estimated by the judge (on appeal) to have been “not far short of 50% of its value”.
There were two children of the relationship, the first being born in 1984 and the second in 1986. Towards the end of 1993 the relationship broke down and Mr Kernott left 39 Badger Hall Avenue where Ms Jones continued to live with the children.
Thereafter she made all of the payments due under the mortgage and endowment policy and all of the expenses associated with running and maintaining the house. Mr Kernott made little or no contribution towards the upkeep of the children and Ms Jones sought no such contribution.
Some time after the relationship had ended, the couple cashed a life insurance policy and divided the proceeds.
One of the reasons for doing this was to provide Mr Kernott with the means which would enable him to purchase his own property—which he did in 1996, acquiring 114 Stanley Road in his sole name.
Some 12 years later, in May 2008, Mr Kernott served a notice of severance of their joint tenancy upon Ms Jones in respect of their jointly owned property, 39 Badger Hall Avenue, prompting Ms Jones’ claim under TOLATA 1996.
In the county court
At trial, HH Judge Dedman considered— having regard to the two leading cases of Stack v Dowden and Oxley v Hiscock— what outcome would be “fair and just” between the parties, taking account of “the whole course of dealing” between them.
He concluded that the property should be divided 90:10 between Ms Jones and Mr Kernott respectively.
He also decided that: Mr Kernott’s ability to afford his own accommodation by not contributing to 39 Badger Hall Avenue; the fact that Ms Jones had paid the initial deposit on that house together with the significant majority of all of the mortgage repayments, and the fact that Mr Kernott had not provided any significant assistance with the children were all sufficient support for the view that “while the intention of the parties may well have been at the outset to provide them as a couple with a home...those intentions have altered significantly over the years”.
There appeared to have been no explicit recognition that Mr Kernott was entitled to receive some credit for the extension to the property in 1986.
In the High Court
Mr Kernott appealed against the decision of the trial judge. Mr Nicholas Strauss QC, sitting as a deputy judge of the High Court, dismissed the appeal. It was always common ground that until Mr Kernott left 39 Badger Hall Avenue in 1993 he and Ms Jones held equal beneficial shares in that property.
Before the High Court it was also common ground that Ms Jones had acquired no beneficial interest in 114 Stanley Road. The only issue for determination was whether the beneficial interests in 39 Badger Hall Avenue changed following Mr Kernott’s departure.
Nicholas Strauss QC conducted a thorough review of the two leading cases. Factually there were greater parallels between the present case and Stack v Dowden given that both were concerned with jointly owned property.
However, the House of Lords in Stack v Dowden had explicitly endorsed the approach of the Court of Appeal in Oxley v Hiscock, which was concerned with sole legal ownership, to the question of the proper approach to the quantification of the beneficial interests.
In the present case the deputy judge identified three questions which needed to be addressed in the appeal.
- First, whether on the facts the trial judge was right to decide that the parties intended, or were taken to have intended, that their respective beneficial interests should be altered to take account of changing circumstances.
- Second, if so, what intention should be inferred or, more realistically, imputed to the parties. And finally, whether the result arrived at in the lower court was unfair or unjust.
Altered beneficial interests?
Relying upon the dictum of Baroness Hale in both Stack v Dowden where, at para [61] of her speech, she said “…the search is still for the result which the parties must, in the light of their conduct, be taken to have intended” and in the Privy Council case of Abbott v Abbott [2007] UKPC 53, [2007] All ER (D) 432 (Jul) where she said “the search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in light of their whole course of conduct in relation to it”, Nicholas Strauss QC concluded that it is open to the court to “attribute to the parties a common intention which they did not have, or at least did not express to each other”.
He said he was satisfied that the judge was correct to do so in this case. He drew a parallel between the couple in Stack v Dowden who had maintained separate financial arrangements throughout their relationship and Ms Jones and Mr Kernott whose financial arrangements were kept even more separately than those of the couple in Stack v Dowden from the time of Mr Kernott’s departure from the jointly owned property in 1993.
He then said that the trial judge had been “quite right to infer from these facts that they no longer intended equal beneficial ownership, or to impute to them such a change in intention”. He noted that in drawing this conclusion the judge had not needed to invoke the concept of fairness because the change in intention as to the beneficial ownership of the property was easily to be inferred or imputed from the parties’ conduct.
The intention of the parties?
Having established that a changed intention could be inferred or, as the deputy judge acknowledged as being more realistic, imputed from the conduct of the parties, the next question to be addressed was what that different intention should be.
Despite recognising that Mr Kernott had contributed “not far short of 50% of [the property’s] value” Nicholas Strauss QC was satisfied that “in the absence of any indication by words or conduct as to how they should be altered, the appropriate criterion was what [the trial judge] considered to be fair and just”.
In determining what was, in the trial judge’s view, fair and reasonable, he had not overridden any different intention to that which he had imputed and the approach he had adopted was, therefore, justifiable. In the event that this approach was to be regarded as a fiction,
Nicholas Strauss QC said that the approach could be justified in the alternative as the only approach available to the court on the issue of quantification of the beneficial shares once it had been rightly decided that the parties had intended that their beneficial interests should be changed.
Was the result unfair or unjust?
While Nicholas Strauss QC did not necessarily think that he would have arrived at the same result as the trial judge regarding the appropriate apportionment of the beneficial shares, he did not think that the 90:10 split was unjustifiable. In reaching this conclusion he recognised that Ms Jones had made the most significant “direct contributions to the value of the property” (by way of deposit and mortgage repayments).
However, he also took account of the fact that there had been a very significant financial gain in respect of both the Badger Hall Avenue property and the Stanley Road property. Given that it was undisputed in the High Court that Ms Jones had acquired no beneficial interest in the Stanley Road property it is difficult to see the direct relevance of any capital increase in the Stanley Road property.
The deputy judge said that because Mr Kernott had not been contributing to the Badger Hall Avenue property he was therefore able to purchase another property. What is not apparently accounted for is that as a beneficial owner of the Badger Hall Avenue property Mr Kernott should have been entitled to some benefit from that property.
He did not receive the benefit of living in it so he might ordinarily, perhaps, have expected to receive some financial return.
Nicholas Strauss QC concluded that it was unnecessary for him to decide whether the fact that Mr Kernott had not contributed to the maintenance of the children was a factor which could legitimately be taken into account as it was not a major factor in his own reasoning, nor did it appear to have been at first instance.
He nevertheless stated that he thought such a matter could legitimately be considered when assessing the appropriate quantification of beneficial shares, relying upon Baroness Hale’s dicta in Stack v Dowden.
The implications
What this decision illustrates, if indeed further illustration were needed, is that in practice there are no clear principles upon which the question of quantification of shares in the family home is to be approached.
Issues as detached from the property concerned as financial gain in respect of other property and the contribution, or lack thereof, to the maintenance of children may be regarded as relevant. The measure of direct capital contribution, however, may become irrelevant, being displaced by other factors such as those identified above.
While the judgment illustrates the flexibility of approach which is being adopted by the courts in response to questions of the proper division of interests in the family home, it provides little comfort to those who are charged with the task of advising prospective litigants of the likely outcome of litigation and their prospects of success.
This decision demonstrates no obviously principled approach to the proper quantification of the beneficial shares in jointly owned property. As long as the result is not “unfair or unjust”, when trying to assess the likely division of beneficial shares one may as well just pick a number.
Rowena Meager is a barrister at Harcourt Chambers & lecturer in law, University of Buckingham
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