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Judgment of the Supreme Court in Jones v Kernott

Introduction

How should the court approach the determination of the beneficial interests in a property acquired in joint names by an unmarried couple?  The Court of Appeal had held the decision of the House of Lords in Stack v Dowden did not allow the court to impute to the parties an intention that they would divide their beneficial interest in their property fairly. The Supreme Court revisited the decision in Stack v Dowden and disagreed with the Court of Appeal: If the presumption of joint beneficial ownership is rebutted, the court can, in the absence of finding any intention as to the shares, impute to the parties an intention that their beneficial interest would be divided in a manner that the court considers fair.

The facts of Jones v Kernott

In 1985 J and K purchased a house in their joint names (“the Property”). The purchase was funded by the proceeds of the sale of J’s mobile home and an endowment mortgage in their joint names.

K moved out of the property in 1993. The parties agreed to cash in a joint life insurance policy to enable K to put down a deposit on a home of his own which he did in 1996.

J remained living in the property with their two children and paid all the household expenses. K made no further contribution towards the acquisition of the property and he made very little contribution to the maintenance and support of their two children. This situation continued for some 14 and a half years.

The appellate history

At first instance, the judge accepted J’s case that when the property was purchased, it was intended that the beneficial interest would be held in equal shares between herself and K, but that after their separation that was no longer their intention. He concluded that J was entitled to 90% of the equity in the Property and K entitled to 10%.

K appealed to the High Court  and the Court of Appeal on the basis that the trial judge had erred in either inferring or imputing that the parties intended the Property to be held other than in equal shares.

In Court of Appeal, the majority allowed the appeal and held that the parties owned property in equal shares. A crucial part of the majority’s reasoning was the view that Stack v Dowden did not enable the court to impute an intention to the parties as to their respective beneficial interests; the parties must have either expressly addressed what proportion they were each entitled to or the court can infer the parties actual intention from the evidence before it but it cannot impute to the parties an intention which they did not have.

The Judgment of the Supreme Court

The Supreme Court upheld J’s appeal. The majority held that on the facts it could be inferred that the parties had intended their interests in the property to be held other than equally after their separation. It could also be inferred that the common intention of the parties was that K’s interest in the Property would crystallise at the time when K to bought his new home. On that basis, the proportion of equity held by each party was so close to that ordered by the trial judge it would be wrong for the appellate court to interfere.

However, the Lord Justices unanimously concluded that where the court cannot infer an agreement as to the parties’ respective shares, then the court can impute an intention that the beneficial interest be divided fairly.

Delivering a joint lead judgment, Lord Walker and Lady Hale, set down the principles to be applied when assessing the beneficial interest of co-habiting couples who own property in joint names:

(a) The presumption is that the parties are joint tenants in law and equity. That is the case even where the parties contribute to the purchase price in unequal shares; there will be no presumption of a resulting trust in this context.

(b) The presumption of joint beneficial ownership can be rebutted by showing either (a) a different common intention at the time of purchase or (b) that a different common intention was subsequently formed.

(c) The court should look to the parties conduct to try to deduce what the objective common intention of the parties is or was.

(d)  If the court concludes that it was commonly intended that the property would be held other than equally, but it is not possible to ascertain either actually or by inference what share of the property each was intended to have, the court is driven to impute an intention to the parties.

(e) The court will impute to the parties the intention that their beneficial interests should be divided in a manner than is fair having regard to the whole course of dealing between them.