Jones V Kernott
The long awaited Supreme Court decision of Patricia Jones v Leonard Kernott has been published.
The parties were the joint owners of 39 Badger Hall Avenue, Thundersley, Essex, which was purchased in May 1985. There was no evidence that either party was advised as to the implications of joint ownership or what would happen to their respective shares in the event of separation. The purchase price was £30,000 with a deposit of £6,000 paid exclusively from the proceeds of sale of Ms Jones’s previous home.
They never married and they separated in late 1993. They both contributed towards the property during the cohabitation. There was no express declaration of trust as to their respective interests in the property.
In May 2006 Mr Kernott sought payment of a half share in the property and on 19th March 2008 purported to sever the joint tenancy. On 26th October 2007 Ms Jones commenced proceedings seeking a declaration that she owned the entire beneficial interest in the property. By 2008 the property was valued at £245,000.
At first instance, before His Honour Judge Peter Dedman, it was held that Ms Jones was entitled to 90% of the equity in the property and Mr Kernott to 10%.
The County Court judge held that, initially a presumption arose of joint and equal ownership and that, prior to 1993, nothing had occurred to rebut that presumption, but that the common intention had changed after separation. Mr Kernott had ceased to make contributions towards the running of the house and made only very limited contributions towards the maintenance of the children.
Having decided that the common intention had changed, but that there was no evidence as to the division of shares, the Court had to infer or impute an intention to the parties as to the division of the property that they, as fair and reasonable people, would have intended. On that basis the Judge held that Mr Kernott was entitled to 10% of the net equity.
That decision was upheld by Mr Nicholas Strauss QC sitting as a High Court Judge.
The Court of Appeal overturned that decision and held (Jacob LJ dissenting) that the conveyance into joint names created joint beneficial interests in the property and it was agreed that on separation those interests were equal; nothing had happened since separation to displace those interests and the passage of time was insufficient to do so; there was also nothing to displace the presumption of equality when a property was transferred into joint names; and consequently, Mr Kernott was entitled to 50% of the equity in the property.
The Supreme Court has now overturned the Court of Appeal’s decision and reinstated the decision of HHJ Dedman.
Lord Walker and Lady Hale give the lead judgment. Lord Collins agrees with them. Lord Wilson and Lord Kerr agree in the result but reach it by a different route.
Lord Walker and Lady Hale held that in accordance with the principle set out in Stack v Dowden where people purchase a family home in joint names a presumption arises that they intend to own the property jointly in equity as well as legally. However that presumption can be rebutted by evidence that it was not, or ceased to be, the common intention of the parties to hold the property jointly. The Court should seek to infer the intentions of the parties from the evidence but where it is impossible to infer an intention the Court can impute an intention which they may never have had.
Five principles apply:
(1) The starting point where a family home is bought in joint names is that they own the property as joint tenants in law and equity;
(2) That presumption can be displaced by evidence that their common intention was, in fact, different either when the property was purchased or later;
(3) Common intention is to be objectively inferred from the conduct and dealings of the parties;
(4) Where it is clear they had a different intention at the outset or changed their original intentions, but it is not possible to infer an actual intention as to the respective shares, then the Court is entitled to impute an intention that each is entitled to the share which the Court considers fair having regard to the whole course of dealing between them in relation to the property;
(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 intended or fair.
In this case the County Court Judge found that the intentions had changed after separation and it was a logical inference that the parties intended Mr Kernott’s interest to crystallise in 1995 when they took the property off the market and cashed in an insurance policy to allow Mr Kernott to purchase a property of his own. The calculations of their shares as at 1995 produced a result so close to the 10% awarded by the County Court Judge that it was wrong for an appellate Court to interfere.
Lord Walker and Lady Hale make clear that the resulting trust analysis is inappropriate in the context of a family home purchase.
Lord Collins agrees with Lord Walker and Lady Hale.
Lord Wilson considers that on the facts of the case it is impossible to infer the intentions of the parties from the evidence and the Court can only impute an intention that the house be held in fair proportions in accordance with the decision of the County Court judge.
Lord Kerr is of the view that the Court must strive so far as possible to infer the common intention and give effect to that intention but, where it is impossible to do so, the Court can impute an intention. On the facts of this case it is not possible to infer an intention but the division the original Judge made was fair and should stand.
The significant matters to come out of this decision are the recognition that the Court can and should impute an intention to parties, where it is not possible to infer a common intention from the evidence, including an intention which they never actually had; and that the Courts can infer or impute an intention which alters the original intention or presumption of equality on the basis of a change of circumstances.
In so far as advising clients is concerned, the decision complicates matters further, as it will be difficult to predict in the context of individual cases, when the Courts will say an intention is to be imputed rather than inferred, and what a Court may decide is “fair” if an intention is to be imputed.
It must be noted that the decision is specifically limited to cases where a property is purchased in joint names and there is no express declaration of trust. Lord Walker and Lady Hale expressly stated that properties purchased in the name of one party have a different starting point, although it is also recognised that in such cases once a common intention to share beneficial ownership is found, the Courts can impute an intention as to shares if there is insufficient evidence to establish the intention.
Where there is an express declaration of trust that does indicate the intentions of the parties have been expressly decided, so there may be no room for an imputed intention (although this is not specifically addressed in the judgments).
The question of how far a resulting trust analysis will apply, and how far the Courts will go in imputing intentions, in more commercial scenarios is not addressed and remains open to debate. Please click here for the full Judgment.
This summary was provided by Trinity barristers Nicola Shaw who is a member of Trinity's Family and Ancillary Relief Group and Michelle Temple who is a member of Trinity's Chancery Group. Both barristers operate from Trinity's Chambers in Newcastle and Middlesbrough.