Source: https://www.scribd.com/document/99915708/Cohabitee-Disputes-Trusts-of-Land-by-Sarah-Harrison
Timestamp: 2017-12-14 10:30:14
Document Index: 716581637

Matched Legal Cases: ['UKHL ', 'UKHL ', 'UKSC ', 'EWCA ', 'EWCA ', 'EWCA ', 'UKHL ', 'EWCA ', 'EWCA ']

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COHABITEE SARAH HARRISON
DISPUTES: CHANCERY
TRUSTS OF LAND HOUSE CHAMBERS, LEEDS
The vast majority of cohabitee disputes about domestic
property will involve cases
where the property in question has been purchased in the name of one cohabitee only, usually the male cohabitee.
DECLARATION 2.
The first stage is always to ascertain whether the property is injoint names and whether there is a declaration of trust. Where there is a declaration of trust signed by the parties this is conclusive in the absence of fraud or mistake (see Goodman v Gallant [1986] Fam 106). In order to ascertain this the purchase conveyance or transfer will need to be examined. The office copy entries will not be sufficient to ascertain the position. The Land Registry are not concerned with the trusts of the property but only with whether the proprietors have power to give a receipt for capital monies.
If the registered title contains a tenancy in common (joint proprietor) restriction, this will indicate that there is a declaration of trust but not what the shares are. However, if there is no tenancy in common restriction on the title, this is consistent either with there being a declaration of trust that there is a beneficial joint tenancy or there being no declaration of trust or even a trust for a third party. Therefore, the purchase document must be checked.
In this regard, it should be remembered that the Court of Appeal held in Harwood v Harwood[1991] 2FLR274 and Huntingford v Hobbs [1993] 1 FLR 736 that a standard form receipt clause to the effect that the survivor of the purchasers can give a valid receipt for capital monies is not a declaration of trust that there is a beneficial joint tenancy. In Stack v Dowden [2007] UKHL 17 the House of Lords suggested that the inclusion of such a receipt does not have evidential significance unless the parties had been advised as to the consequences of its inclusion.
The position should be easier in more recent cases because Form TRI contains alternatives as to the type of co ownership intended which should be ticked whereas the old Transfer simply included a bank box for the trusts to be inserted and was commonly
ignored. The problem is that the Land Registry will accept a TRI where this has not been completed.
Of course, in a sole name purchase case it is possible but most unlikely that there will be a declaration of trust as in such cases there will generally have been a lack of formality between the former cohabitees. A case where there was such a declaration in a single name purchase case occurred in Young v Lauretani [2007] EWHC 1244.
There can be other explanations for payments being made in relation to a property than the existence of a trust. In Chapman v Jaune [2012] [LawtelJ C lived at 1's house and paid for an extension and other payment works. The evidence indicated that this had been a loan and not a gift. J argued that it was a non repayable contribution to household expenses. On appeal it was held that the Court should have ordered repayment of the loan in a reasonable time which would be on the sale of the property.
PURCHASE IN ONE NAME 8. If there is no declaration of trust the law of constructive trust is of central importance. I will consider the law in that regard both before and then after the Lords decision in Stack v Dowden [2007] UKHL 17. This is because Stack has not changed the law in this area to any great extent. To what extent Jones v Kernott [2011] UKSC 53 has changed matters is very uncertain,
The law relating to resulting trusts has little role to play now in cohabitee disputes. A presumption of resulting trust has traditionally arisen automatically where A contributes directly to the purchase price of property held in the name of B. Indirect contributions could not lead to the presumption arising. It was commented in Jones v Kernott that in the case of a purchase in joint names by a couple where both are responsible for the mortgage there is no presumption of resulting trust arising from their having contributed to the purchase in unequal shares. It was also stated that it would be rare where a resulting trust could apply in a domestic context unless the couple were also business partners.
It had seemed that the Courts were increasingly equating the law of constructive trust and proprietary estoppel in this area. That trend has now stopped and it is clear they remain
different causes of action in particular offering different remedies. In Stack v Dowden the Lords were not keen to equate the concepts of constructive trust and proprietary estoppel. Lord Walker stated that he was less enthusiastic than in the past about the notion the concepts could be assimilated. He noted the differences in remedy.
11. The leading case in relation to the formation of such a constructive trust between cohabitees was Lloyds Bank v Rosset [1991] AC 107 . What Lord Bridge stated in that case was that a constructive trust could be founded in two ways : either expressly or impliedly. He stated that in the case of an express constructive trust what the Court looked for was evidence of discussions between the patties however informal and imprecise that ownership was to be shared, that is that there was an express common understanding between them to that effect. If the Court could find such evidence, it was sufficient that the claimant understanding. acted to their detriment on the basis of such a common
For the purposes of an express constructive trust, detriment could take the form of the payment of household bills or payment for improvements. However, there had to be some degree of substance to the acts relied upon. It was made clear in Rosset that neither a common intention that a house was to be renovated as ajoint venture or shared by parents and children as the family home threw any light on the parties' intentions with respect to the beneficial ownership of the property. Cases often failed on that ground alone.
In that regard it is useful to look at the acts carried out in Rosse! by the wife in respect of which the Court said it had doubts whether her contribution could ever have founded a constructive trust. She relied on acts such as obtaining materials for the builders,
planning the renovation, wallpapering two rooms and beginning to prepare the surfaces of other rooms. Trivial works any cohabitee would do are not sufficient. 14. Lord Bridge also stated that in the case of an implied constructive trust, the Court had to be prepared to infer an intention to share ownership. He stated that it would be prepared to do so ifthere had been contributions to the purchase price or the payment of mortgage instalments. However, he said that it was extremely unlikely whether anything else would do. Again this led to many cases failing where reliance was placed by the claimant on payment for improvements or their own labour.
Therefore, if the claimant could give evidence of an actual agreement to own the property between them, and this could have been as informal as repeatedly stating that the property would be "ours", the detriment which could be relied upon could be wide. Such an express understanding could be found where excuses were put forward to prevent the property being purchased in joint names. In Eves v Eves I1975] 1 WLR 1338 the excuse was that the female claimant was under 21 and but for that the property could have been in joint names. In Grant v Edwards
I1986] Ch 638 the excuse was that the woman was
involved in divorce proceedings which would be prejudiced by putting the property in joint names. In more recent times the excuse could be that the claimant had a poor credit history.
If there was insufficient evidence of such an agreement,
evidence was needed of
contributions to the purchase price or mortgage repayments. If the claimant did not pay for these items, there would be no trust. In practice proving the payment of mortgage instalments could be evidentially difficult if the payments were collected by direct debit from the account of the legal owner and that person could have afforded to make those payments without the contribution of the other cohabitee .. This was illustrated in Barton v Wray [2002] [Lawtel] where the claimant paid W £400 per month which he said was a direct contribution to the mortgage. It was held that the £400 per month was not earmarked for expenditure in any particular way and that W was not dependent on that sum to enable her to pay the mortgage. They were not direct contributions to the purchase price which would justify the inference necessmy for a constructive bust. 17. Therefore, Rosse! dealt with the issue of whether the trust existed at all. The leading case prior to Stack dealing with the ascertainment of beneficial shares was Oxley v Hiscock. In Oxley it was confirmed that if there was evidence that the parties' beneficial shares had been agreed, that would be sufficient. Therefore, if the parties orally agreed their shares, this would be conclusive. If there was no evidence of such discussions, each party was entitled to the share the Court considered fair having regard to the whole course ofdealing between the parties in relation to the property. The whole course of dealing would include the arrangements made from time to time to meet the outgoings including the mortgage and bills to be met so that the parties could live in the property as their home. The question was described as being "what would be afair sharefor each party having regard to the whole course of dealing between them in relation to the property." This test involves the imputation of an intention to the parties as to their shares.
Therefore the test in Hiscock was only relevant where a trust existed but there was no actual agreement reached between the parties as to their respective shares. This analysis of Hiscock was endorsed in Lightfoot v Lightfoot-Brown (2005] [Lawtel] and in Crossley v Crossley [2005] EWCA Civ 1581. In Crossley it was confirmed that the task of determining the fair share to which a person was entitled having regard to the whole course of dealing only had to be performed in the absence of an agreement or understanding as to the nature and extent of the respective beneficial interests.
Hiscock was an unsatisfactory case because it gave little practical guidance as to how the C0U11 should approach quanti fication of shares. InHiscock itself the female cohabitee had made very significant capital contributions to the purchase price. Having severely criticised the approach in Springette v Defoe of applying resulting trust principles to the quantification of shares, the Court then awarded a 40% share which is similar to what she would have been entitled to under a resulting trust. The case did not indicate how the Court might deal with a far more common case such as a woman who had a limited income because of child rearing responsibilities in which she was encouraged by the man so that her cash contributions are far less than his. In older cases such as Mcllardy v Warren, such a woman was awarded a 50% share even though she only contributed half of the deposit on the basis that the Court of Appeal inferred this is what the parties would have intended.
The cases following Hiscock did not really make matters clearer. In Pinfield v Eagles [2005] [Lawtell the test set out in Hiscock was applied to a joint commercial enterprise entered into between cohabitees rather than the purchase of a house. What was of interest was that the judge awarded the female claimant the value of her contributions, that is equal to what she would have received under a resulting bust. In contrast was the result in Lloyd v Pickering [2004] [Lawtel] (which postdated Hiscock but does not refer to it) where L contributed to the start up costs of a business and the operation of a business. The case concerned male cohabitees. There was no express agreement that L should have an interest. It was held that the evidence justified the inference of a common intention that ownership of the business was to be shared equally.
In Cox v Jones [2004] 2 FLR 1010, a Mill was purchased in the name of the man for £480,000 with a mortgage of £450,000. Works of improvement were carried out for which the man paid to the cost of £163,000, The female claimant spent £5000 on works
and over £6000 on furniture. However, it was found that she had spent some months project managing the renovation when an architect would otherwise have been needed to the detriment of her practice. It was held that whilst there was an express agreement to share ownership of the Mill, there was no agreement as to shares so that the shares had to be fixed according to what was fair. The claimant was awarded a 25% share. It was not fair to award her 50% given the man's considerable expenditure when she had paid virtually nothing. Her detriment in terms of project management was significant. 22.
It was clear that a constructive trust argument could found a claim to the total ownership
of the property. In Cox v Jones the female claimant C also claimed the entire ownership of a flat which was purchased in the name on. She paid more than half of the deposit and said she borrowed the remainder from 1. It was held that the basis of its acquisition, on which both C and J had operated, was that J was purchasing the flat as nominee for C. C acted to her detriment by not finding other means to fund the purchase and by managing the flat thereafter. Therefore, it was inequitable for J to claim any share in the flat However, it was stated that the constructive trust which arose was based on the principles set out in Banner Homes v LI!Ol2000] Ch 372 rather than Lloyds Bank v Rosset, that is it would inequitable for the legal owner to retain ownership. In contrast in III the matter of Lorraine Share [2002] 2 FLR 88 it was held that where the evidence was that it had been the intention ofF and S that the property should belong to F alone and S should hold the same on trust for him this agreement was conclusive under the principles in Rosset. The fact F had paid all of the costs of acquisition was consistent with the agreement. 23. Therefore, pre Slack the law seemed to be clear as to the formation of a constructive trust between cohabitees. An express oral agreement as to shares would prevail. There was more uncertainty as to the quantification of shares where there was no such agreement as the reported cases largely concerned large capital contributions which are not typical of the majority of cases. In practice judges interpreted Hiscock as being more generous to claimants.
The decision in Stack 24. On its facts Stack was a case concerning a purchase in joint names. However the House of Lords did make comment on sole name purchases. 25. Firstly they commented on the issue of burden of proof. Lord Hope commented that if
a party wished to show that the beneficial ownership of property is different from the legal ownership he bears the burden of proof. "So in a case of sole legal ownership the is on the party who wishes to show that he has Clnybeneficial interest at all and
that interest is." Baroness Hale agreed that the starting point where there is sale legal ownership is that there is sale beneficial ownership. In sale ownership cases it is for the non owner to show that he has any interest at all. This states no more than the obvious. They have not stated that the presumption is particularly difficult to rebut although this does seem to have been the intention in joint purchase cases.
Secondly they commented on the test in Rosset relating to where an implied intention to share beneficial ownership may be found as follows: (i) Lord Walker stated that it was doubtful whether the view of Lord Bridge in Rosset took account of comments in Gissing. "Whether or not Lord Bridge's observation was justified in 1990 i11my opinion the law has moved on and yOl/l' Lordships should move it a little more ill the same direction while bearing in mind that the Law Commission may soon come forward with proposals. " He then does not make it clear how the law has moved in sale purchase cases although it seems to be suggested that the
may look at wider contributions "In a case about
beneficial ownership ... (whether registered ill the names of one or two legal owners) the resulting trust should not in my opinion operate as a legal presumption although it may (in an updated form which takes account of all significant contributions direct or indirect in cash or in kind) happen to be reflected in the parties' intentions:" He went on to say that "the law should recognise that by taking a wide view of what is capable of counting as a contribution towards the acquisition of a residence whilst remaining sceptical of the value of alleged improvements that are really insignificant or elaborate argument .. as to how the family finances were arranged." (ii) Baroness Hale commented that the law has moved on and 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 if." It is unclear whether she is discussing the actual formation of the trust or the quantification of shares. More clearly she later stated that "There is undoubtedly an argument for saying. ..that Rosset have set that hurdle rather too high in certain respects. But that does not concern us /low."
Therefore, the Lords seemed to be saying that the test in Rosse! was too strict and wider contributions might be regarded as a contribution sufficient to justify the inference of a trust. Their discussion on this issue seemed to confuse the difference between the evidence necessary to found the trust and the evidence relevant to the quantification of shares. What they did not do was set out a new test in sale purchaser cases.
In relation to the test set out in Oxley v Hiscock they made the following comments: (i) Lord Hope stated that he endorsed Oxley v Hiscock and regard should be paid to the whole course of dealing in relation to the property. Indirect contributions such as making improvements which added significant value to the property or the complete pooling of resources in both time and money ought to be taken into account as well as contributions to the purchase of the property. Again it is not entirely clear here whether he is referring purely to the quantification of shares or also to the formation of the trust. (ii) he also stated that in single purchaser cases the reference in Hiscock to the whole course of dealing in relation to the property was correct as qualified by Baroness Hale. Hiscock did not refer to contributions in kind by way of manual labour on improvements and that ought to be included provided they are significant. (iii) Baroness Hale stated that the search must be for the result which reflects what the parties must in the light of their conduct have been taken to have intended. It does not enable the Court to impose its own view of what is fair on the parties.
What Baroness Hale seemed to be saying was that it was not for the Court to consider the course of dealing and fix its own view of fairness but search for what the parties intended. This seemed to be a rejection of the idea that the Court would impute an intention to the parties. This has now been placed into doubt by the decision in Jones v Kernott.
All this suggested that the test in Rosset is too strict but what the Lords have not done is formulate an alternative test. Given that their avowed intention what to increase certainty they have increased uncertainty by suggesting that wider contributions can lead to the implication of an intention to share ownership but without making it clear precisely what contributions may be taken into account. The test in Rosset had the great virtue that it was clear what was required to found a trust.
The issue was considered by the Privy Council in Abbott v Abbott [2007] [Lawtel] and the
Council included Lord Walker and Baroness Hale. In that case Wand H were married. H's mother transferred land to H to build a home. H's mother contributed to the building costs but Hand W paid the costs of a bridging loan and then a mortgage. All payments were made out of a joint bank account. This was a case where W would have won on the facts under the test in Rosset in any event because she paid the mortgage and was the recipient of a gift of the land made to herself and H. 32. The Privy Council made the following findings: (i) the Court of Appeal had paid undue attention to Lord Bridge's comments as to the conduct to be taken into account in quantifying an acknowledged beneficial interest. This is a very strange comment because Rosset does not deal with quantification of shares. (ii) the parties' whole course of conduct in relation to the property had to be taken into account to determine their shared intentions as to ownership following Stack. This seems to be confusing the Court's task in finding a trust with the task of quantification of shares. Baroness Hale's short judgment is unclear on this point. (iii) (iv) if a parent gave financial assistance to a newly married couple to acquire a home the usual inference was that it was intended as a gift to both as in McHardy. it was significant that Hand W arranged their finances jointly and undertook joint liability for the mortgage as in Hyett v Stanley. 33. Since then most of the reported cases have concerned joint name purchases. However the cases on single name purchases do not show the Court adopting a significantly more relaxed approach to when the Court will infer that there was a common intention to share ownership. In James v Thomas [2007] EWCA Civ 1212 a claim in constructive trust and estoppel failed. T owned the property before meeting J. T operated a business and J worked in that business for no pay. She later became a partner. The household expenses were paid out of an account in the name of T which was also the business account. In 2002 it became a joint account. Extensive works of renovation were carried out at the property and both T and J carried out works themselves. The works were funded from the income of the business. 34. J relied on an express or implied constructive trust. It was held that the real question was whether J could rely on the use of partnership monies or the receipts of the business to fund payment of the mortgage as evidence of an agreement that she should have a
beneficial share. The answer was no. Although it was possible to envisage circumstances where the fact one party made contributions to repayments under a mortgage might evidence such an agreement this was not such a case. The only source of funds in the household was the receipts of the business. As the parties were dependent on the business it was not surprising that J did what she could to assist. What she did gave rise to no inference that the parties agreed that she was to have a share as what she did was explicable on other grounds.
In addition comments such as T saying that works would benefit them both and that he would provide for her on his death were insufficient to show a common intention. Such comments meant that the works would make their home more comfortable as part of their quality oflife. It was unreal to suggest that this was intended to be a promise of a property interest. A representation as to the death position could not be seen as a promise of a present proprietary interest. Lord Justice Chadwick concluded that as was stated in Stack the Court has to search for the result which the parties must in the light of their conduct be taken to have intended.
This strict approach was followed in Morris v Morris [2008] EWCA Civ 257. In that case the asset in issue was a farm. The claimant relied on her assistance in the farming business for no pay to found a claim to a beneficial share. Later she operated her own riding business on the farm. There was a finding that there was no express agreement to share ownership. The Court of Appeal made the following findings: (i) it had been established in James v Thomas that a beneficial interest may be subsequently acquired byreason of conduct alone. However it also indicated that the
would be slow to infer from conduct alone that the parties intended to
vmy existing beneficial interests established at the time of acquisition. This seems to be largely a return to the position in Rosset that a trust would be inferred ouly in exceptional circumstances after the date of acquisition. (ii) the Court referred to the comments of Baroness Hale in Slack and stated that her comments were directed to the question of quantification of interests and not the formation of the trust. This suggests a more limited interpretation is to be placed on her comments. (iii) the authorities made it clear that a common intention constructive trust based only on conduct will only be found in exceptional circumstances. It was impossible on the facts to see how it could be said that helping in the business on land owned by
her mother in law led to such an inference. The works were not of such an exceptional nature as to lead to such an inference. 37. These cases suggest that whilst an inference may be drawn of a common intention to share ownership from acts other than direct payment of the mortgage in practice the Court will be slow to do so particularly where the cohabitee moved in after the property had been purchased.
Jones v Kernott made limited comments about single name purchase cases. Lord Walker did state that the parties' intention had to be deduced objectively from their conduct. If the evidence showed an intention to share ownership then shares would be calculated in accordance with the approach in Hiscock. Whether this means a more relaxed approach to the formation of a trust remains unclear. The judge in Thomson v Humphrey [2009] EWHC 3576 proceeded to find that a common intention had not been established in that case "Although the law may have moved on from Rosse! and although it is not possible to lay down a clear line between what is and what is not sufficient ...."
JOINT NAME PURCHASES 39. Prior to the decision in Stack v Dowden there was very little case law concerning purchases in joint names. The law following Hiscock appeared to be that where there was a purchase in joint names but there was no declaration of trust the same approach would apply as where the property was bought in the name of one cohabitee, 40. However, in Stack v Dowden [2007] UKHL 17 it was held that, where there was a purchase in joint names by cohabitees, a presumption arose that the parties intended to hold the beneficial interest on the same basis, namely as beneficialjoint tenants. The onus was on the party disputing this to rebut the presumption. The contrary could be shown by ascertaining the parties' shared intentions whether actual inferred or imputed with respect to the property in light of their whole course of conduct in relation to it. The presumption was rebutted on the facts of that case because the parties had over a long relationship kept their resources entirely separate and it was suggested that there would be few couples who did so to such an extent. 41. Baroness Hale stated that the task of showing that the beneficial interests were different fr0111 legal title was "not a task to be lightly embarked on" and that" «full exploration the
of the facts is likely to involve disproportionate costs. 111 joint name cases it is also unlikely to lead to a different result unless thefacts are very unusual." She also warned that where a property is purchased in joint names with a joint mortgage, an arithmetical calculation ofwho paid for what was likely to be less important and it was easier to draw the inference that each party would contribute what they could. However, intentions could change over time if for example substantial improvements were paid for by one party.
She suggested that relevant matters to consider could be: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) advice or discussions at the time of transfer which case light on their intentions then the reasons the home was acquired in joint names the reason why the survivor was authorised to give a receipt for capital monies the purpose for which the home was acquired the nature of the parties' relationship whether they had children how the purchase was financed initially and subsequently how the parties arranged their finances how they discharged the outgoings and household expenses.
She concluded that cases in which the owners were taken to intend that the beneficial interests should be different from the legal title would be 43.
The intention of the House of Lords was clearly to remove uncertainty in relation to joint name purchases so that there would be little point in having costly litigation. The problem was that Baroness Hale appeared to regard the facts in Slack as unusual. Experience suggests that it is not unusual for cohabiting couples to keep their finances entirely separate.
There followed a number of cases discussing when the presumption applies. The first was Adelunke v Ritchie [2007] [Lawtell In that case M had purchased her council house
under the right to buy legislation. The cash price was raised by a mortgage on which both M and her son R were liable. The property was transferred into their joint names but with no declaration of trust. R came and went from occupation of the property, Eventually the mortgage was paid from a joint account. It was held that the approach in Stack was not limited to cohabiting couples living together in a platonic or sexual relationship. It would also apply to a domestic relationship between mother and
However, on the facts the
presumption of a beneficial joint tenancy was rebutted. The parties' finances were separate and the purpose of the purchase was to provide M with a home. She also had 9 other children she would not have wanted to disinherit. R was to have a beneficial interest which the Court quantified at one third as M had also contributed the right to buy discount.
On the other hand in Laskar v Laskar [2008] EWCA Civ 347 it was held that where a council house was purchased by mother and daughter under the right to buy scheme the presumption did not apply. This was because the propertywas purchased as an investment to be let out. The shares were to be calculated on strict resulting trust principles.
The only case discussing the strength or otherwise of the presumption in Stack in any detail is the case of Fowler v Barron [2008] EWCA Civ 377. This case indicates that the presumption is a very strong one and will be of assistance to claimants who have made lesser financial contributions.
In Fowler the parties purchased the property in joint names but had no legal advice about the consequences of doing so. There was no discussions between them as to how the property was to be held. B paid the deposit for the property, the mortgage was in joint names and B paid the rest of the price from the proceeds of sale of his flat. B paid the mortgage. The parties never had a joint bank account and B paid the council tax and utility bills. B's evidence was that he agreed to the property being in joint names, he intended that it would be F's home ifhe died and that he only put the property into joint names to provide for her ifhe died. B also made a Will in her favour indicating that he did not think she would otherwise benefit.
The Court of Appeal stated that the task was to look at the whole of the relationship to determine their shared intentions drawing appropriate inferences. Any intention ofB that F should only benefit if he died did not provide an evidential basis for rebutting the presumption as it was not shared. Likewise the fact that B was mistaken as to the effect of putting the property into joint names and did not appreciate that this would give F an immediate beneficial interest was not material as he did not communicate this to her. The facts had to be examined to see whether they were inconsistent with F being a joint beneficial owner. The fact that F used her monies to pay for items such as clothing for the children and holidays did not rebut the presumption either as they were household
It has recently been confirmed that the presumption of joint tenancy cannot apply to a sale name purchase case. In Thomson v Hurst [20 12][unreported] where a couple had intended to purchase a property in joint names but were advised not to do so due to his poor employment history, it could not be argued that the presumption of joint tenancy applied. It did not follow equal shares had been intended. There was sufficient evidence of an intention to share ownership but as they had not given any thought as to their respective shares the Court assessed their shares as being 90-10%.
Can the beneficial interests under the trust alter over time? This was the point raised in Jones v Kernott [2009] EWHC 1713 where the House of Lords considered whether there could be a variation of existing beneficial shares without an express agreement to do so. It has always been the case that shares can be altered by express agreement even where there is a declaration of trust. A recent example was in Clarke v Meadus [2010] EWHC 3117 where it was held that express declarations of trust were capable ofbeing overridden due to a proprietary estoppel arising. It could not be argued that if there was a declaration of trust the position could not be altered.
In Stack Baroness Hale had made the point that intentions could change over time indicating that the parties' beneficial interests could change during the relationship where a presumption of joint tenancy had arisen. The issue was described as Lord Walker and Baroness Hale as being that it has been accepted in Stack that the parties common intentions could change over time: "An example given in para 70 was where one party finances or constructed an extension or major improvement to the property so that what they had now was differentfrom what they had first acquired. But of course there are
other examples. The principal question in this case is whether this is one," The issues were more clearly put by Lord Ken as being "(a) is there sufficient evidence in thepresent case FOIn which the parties' intentions can be inferred (b) is the difference between inferring and imputing an intention likely to be great as a matter of practice"
Inference is what occurs when the Court determines what the parties must have been taken to have intended from their actions and statements. It is the actual subjective intention of the parties in the light of their actions and statements. Imputation is what occurs where an intention is imputed to the parties even though no such actual intention
could be deduced from their actions and statements and even though they had no such intention. Therefore imputation involves concluding what the parties would have intended whereas inference involves concluding what they did intend.
In Kernott itself J and K purchased a home in 1985 which it was accepted that they initially owned as legal and beneficial joint tenants although there was no express declaration of trust. K moved out in 1993 and made no further contribution to the acquisition of the property. The property was put up for sale in 1995 but did not sell. J and K agreed to cash in a life policy and they divided the proceeds between them. K used the monies to place a deposit on the purchase of a new home which he was able to afford because he was not contributing to the former family home. The judge at first instance had held that these circumstances indicated a change of intention by the parties in relation to their existing beneficial shares and he concluded that their shares had been varied to 9010%. This equated to K's share of the equity at the time of separation.
The Court of Appeal reversed the decision on the basis that following Stack an intention to vary could not be imputed to the parties and the evidence did not justify the inference of such an intention. The House of Lords allowed an appeal from that decision. The difficulty is that there was a 3 :2 split as to the reasoning applied.
The lead judgments were given by Lord Walker and Baroness Hale (with whom Lord Collins agreed) and their judgments were typically confused in their reasoning. The
central issue considered in the appeal was to what extent the Court could impute to former cohabitees an intention they had never had and the difference between inference and imputation. The majority held that there was no need for the Court to impute an intention to the parties as the trial judge had made a finding that their intentions had actually changed. The primary search was for what the parties intended which was to be deduced objectively from their words and actions. If that could be deduced then the Court could not impose a solution on them contrary to those intentions merely because it would be fair. Whether the majority considered it was possible as a matter of law to impute an intention to vary is left unclear. The only two examples they gave where imputation was possible was in resulting trust cases and quantification cases where Hiscock applied.
On the facts they would have prepared to infer such an intention existed. At the outset the property had been purchased as a family home. The inference to be drawn from events
including the encashment of the policy and J's payment of all household costs was that the parties intended K's interest to crystallise at separation (which equated to a 90-10% split). It was stated by the trial judge that K "demonstrated that he had
intention until
recently of availing himself of the beneficial interest in this property having ignored it completely by way of any investment in it or attempt to mail/fain or repair it whilst he had his own property on which he concentrated." 57. They accepted that the could impute an intention to the parties in relation to the
issue of quantification of shares once it had found or inferred that they had an intention to alter their beneficial shares. However they appear to have left open the issue as to whether the Court could impute to the parties the intention to vary their shares in the first place. Other commentators read the judgment as saying that such imputation is possible but I find it totally unclear. 58. They summarised the relevant principles as follows (i) the starting point is that equity follows the law and the parties will be presumed to be joint tenants in law and equity (ii) this presumption of joint tenancy can be displaced by showing that the parties had a different common intention or later formed a common intention that their shares should change (iii) (iv) the common intention is to be deduced objectively from their conduct in those cases where it was clear the parties did not intend joint ownership or their intention changed and it was not possible to ascertain by direct evidence what shares would be then each would be entitled to the share which is fair in light of their entire course of dealing (v) each case would tum on its own facts.
The task of imputation as to shares was described widely by them. "In a case such as this where the parties already share the beneficial interest and the question is..whether their interests have changed the court will
to deduce what their actual intentions were at
the relevant time. It cannot impose a solution on them which is contrary to the evidence shows they actually intended. But it may have
deduce exactly what shares were intended
alternative but to ask what their intentions as reasonable and just people
would have been had they thought about it at the time ...." On the specific facts of Kern ott it was commented as follows :"The logical inference is that they intended that his interest
ill Badger Hall Avenue should crystallise then. Just as he would have the sale benefit of
any capital gain in his own home Ms Jones would have the sale benefit of any capital gain in Badger Hall Avenu. Insofar as thejudge did not in so many words infer that this was their intention, it is clearly the intention which reasonable people would have had had they thought about it at the time ... it is an intention which he both could and should have inferred from their conduct,"
Lord Collins suggested that in this context the difference between inferring and imputing was not great. Lord Walker stated that whilst the conceptual difference between inferring and imputing is clear the difference in practice might not be great.
The minority view was expressed by Lord Kerr and Lord Wilson. Lord Kerr disagreed that there was little difference between inference and imputation. He said that the Court should .where possible, ascertain the parties' intention but should also recognise that where it is not possible the imputation of an intention was the only course to follow. On the facts of the case he would not have inferred an intention to alter shares but would have been prepared to impute it. Lord Wilson also considered that the evidence did not merit the inference of an intention to vary shares but on the evidence he would have imputed it. "When equity is driven to impute the common intention how can it do so other than by a search/or the result which the court itself considers/air." to the size of those shares. Therefore the minority view
was that imputation could occur both as to an intention to vary beneficial shares and as
What does seem clear from Kern ott is that there is no suggestion as yet that the Court can impute to the parties the common intention to share ownership in the first instance in sale name cases. Otherwise the case is unsatisfactory. It seems very odd and wrong to
consider that a presumption of joint tenancy can then be rebutted by the imputation of an intention that never existed. Further what is left entirely unclear from the judgments is whether the principles as to inference and imputation of an intention to vary only apply in a case where the presumption of joint tenancy applies (which was described as being an ambulatory trust in Stack) and not where there is an express declaration of trust. My own view is that it could but the point was not discussed.
All the judges agreed that where the evidence indicates an intention of the parties to alter their shares the Court can then impute an intention to them as to the size of those shares.
Where the majority and minority may diverge is whether the Court can impute the actual intention to vary. Having said that all the judges found on the facts that the shares had been altered either a matter of inferred intention or because it was fair on the evidence.
It is also unclear how far the decision affects the law as to equitable accounting. Lord Walker suggested that there could be no scope for accounting in such a case. If the beneficial shares had stayed the same then there could have been accounts claimed. Interestingly it was commented that an occupation rent would probably not have been ordered whilst the property was needed as a home for the couple's children.
Jones v Kernott has not made the law clearer. It indicates that the law may well develop in the direction that fairness will be the determinative test in all aspects of this area of the law but we have not reached that point yet.
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