Not fit for purpose?

Date: 25 June 2010
Authors: Geraldine Morris
Issue: Vol 160, Issue 7423
Categories: Features, Family

Kernott demonstrates once again that cohabitants deserve better justice. Geraldine Morris explains why

The Court of Appeal decision in Kernott v Jones [2010] All ER (D) 244 (May) has highlighted again that the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996) is like an ill fitting suit for cohabitants, trying to squeeze family breakdown, with all its messiness and uncertainty, into a fundamentally arms-length civil framework.

The facts

Briefly, the facts in Kernott v Jones were as follows:
l The parties met in 1980, they did not marry and had two children. In 1985 they bought a house in joint names for £30,000, with £6,000 funded by the claimant and an interest-only mortgage supported by an endowment policy.
l The defendant gave the claimant £100 per week and from that and her own earnings the claimant paid for housekeeping, mortgage, outgoings and an insurance policy. The defendant built an extension to the property, which increased its value by 50% of the purchase price. In 1993, the parties separated.
l Following separation the claimant paid for all the outgoings on the property and did not receive (or ask for) any child maintenance.
l In 1996, the defendant bought a house (the second property) in his sole name funded by his half share in a joint life policy surrendered by the parties and a mortgage. He made all mortgage payments and maintained the second property.

The claimant made a claim under TOLATA 1996. It was common ground that the parties had held the beneficial interest in the first property in equal shares until 1993, and that the claimant had not acquired a beneficial interest in the second property. At first instance the judge held that the beneficial interests had changed, and that the claimant was entitled to 90% of the value of the first property on the basis that that was “fair and just”.

First appeal

The defendant appealed to the Chancery Division. The principal issues were:
l whether the court should infer that the parties' intentions as to their respective beneficial interests had changed; or
l should the court impute a change to the parties intentions; and
l if so, how the amount of such a change should be ascertained.
The defendant’s appeal to the Chancery Division was unsuccessful.

Second appeal

The defendant’s appeal to the Court of Appeal was allowed on a majority judgment on the basis that:
l The question was whether or not a joint intention could properly be inferred from the parties' conduct since separation that, over time, the 50/50 split would be varied so that the property was currently held 90% by the claimant and 10% by the defendant. The Court of Appeal concluded that on the evidence, such an intention could not be conferred from the parties conduct.
l The conveyance into joint names created joint beneficial interests, and the parties had agreed that when they separated they had equal interests. There had to be something to displace those interests, and the passage of time was insufficient to do so, even if, in the meantime, the defendant had acquired alternative accommodation, and the claimant had paid all the outgoings.
l In the circumstances, the defendant had a 50% interest in the property, and the judge had been wrong to conclude otherwise.

The Court of Appeal made a declaration that the parties held the severed joint tenancy as tenants in common in equal shares applying Stack v Dowden [2007] 2 All ER 929 and explaining Oxley v Hiscock [2004] 3 All ER 703.

Intention v course of dealing

The parties’ course of dealing or conduct, as referred to in Stack and its predecessor Oxley v Hiscock, seemed to largely fall away in the Court of Appeal’s decision in Kernott v Jones. It is worth re-considering the principles established in Stack:
l A conveyance into joint names indicates both a legal and beneficial joint tenancy, unless and until the contrary is proved.
l The court must ascertain the parties' shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it.
l The burden is on the person seeking to show that the parties intended their beneficial interests to be different from their legal interests and in what way.

In the defendant’s first appeal, to the Chancery Division, Nicholas Strauss QC, sitting as a deputy High Court judge commented “in many cases...the parties have not indicated in any way what their respective shares are to be, or how they are to be altered to take account of changing circumstances...their actual or subconscious intention may well be that their respective shares, if they cannot reach agreement when circumstances change, should be whatever the court decides is fair in all the circumstances”. Such an approach raises issues of “fairness” and whether this is “forbidden territory”.

The post-Stack approach

In Kernott, as in Stack, the property was jointly owned. In Oxley it was solely owned. In Stack despite joint ownership and the starting point of a 50/50 split, the property was divided on a 65/35 basis. There are relatively few reported cohabitant cases but TOLATA 1996 cases involving family relationships also shed light on the courts’ varying approach.

Fowler v Barron

Fowler v Barron [2008] All ER (D) 318 (Apr) is the first post Stack decision of the Court of Appeal in a case involving jointly owned properly. The parties made a conscious decision to put the property in joint names, but did not take any legal advice. There was no discussion or agreement between them as to how the property should be held, nor was there any express declaration of trust. The Court of Appeal held that the judge at first instance had erred in concentrating on the parties financial contributions to the property but emphasised the importance of a shared intention.

Adekunle v Ritchie

Adekunle v Ritchie [2007] WTLR 1505 concerned a property in joint names (mother and son) with no express declaration of their respective beneficial interests. Upon the death of the mother, the son claimed sole ownership of the property under the doctrine of survivorship. The court rejected the son’s claim largely on the basis that the parties had not intended a beneficial joint tenancy and granted the son a one-third beneficial interest under a constructive trust. In doing so, the court looked at factors other than simple financial contribution and directly linked the issue of the shared intention of the parties (although as one party at this stage was deceased, that must have been somewhat challenging).

Laskar v Laskar

In Laskar v Laskar [2008] All ER (D) 104 (Feb) the property was owned jointly by a mother and daughter. It is not the approach of the Court of Appeal (adopting the Stack framework) which is of interest in Laskar but rather the first instance decision which led to the appeal. The daughter had originally been awarded a 4.8% share in the property which was substituted with a 33% share by the Court of Appeal, in the light of the contributions made by each party. The difference between the two figures illustrates the difficulties faced by the lower courts in applying the complex Stack framework.

Call for reform

The guidelines in Stack seem relatively clear but the courts seem to have great difficulty in applying them with consistency. When, as in Kernott, an award can shift from 90% to 50%, or, as in Laskar from 4.8% to 33%, how can the parties and their legal advisers approach any attempts at settlement with certainty? What is crystal clear is that a reform of the law to provide a consistent and clear framework for cohabitants is long overdue.

Geraldine Morris is a solicitor & technical editor of Butterworths Family Law Service. E-mail: geraldine.morris@lexisnexis.co.uk

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