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Where Parliament fears to tread...

12 December 11

Separating cohabitants in England & Wales still await legislation to support a financial claim, but the Supreme Court has recently advanced their cause

by Fiona Kendall

The Supreme Court has reached the end of its tether with Westminster. That, at least, is one reading of the final decision in the longrunning saga of financial issues between Leonard Kernott and Patricia Jones: [2011] UKSC 53.

A complicated patchwork of common law principles and tortuous decisions makes up the law applicable when cohabiting relationships break down in England & Wales. In the clamour for certainty, mostly from lawyers desperate to provide clients with clear advice, criticism of the current situation is approaching fever pitch. That is evident from numerous articles and comments in law journals, newspapers and blogs.

This decision makes clear how acutely aware the Supreme Court is of the criticism levelled at the judiciary, and how willing it is to use decisions to redress that. Some may consider this an indulgence; in the author’s view, it is welcome. As Lord Walker and Lady Hale confirm, “this appeal provides an opportunity for some clarification”. As a result, each of the four judgments offered is dedicated not only to considering the circumstances of Jones and Kernott, but to clarifying the law in the much commented-on case of Stack v Dowden [2007] 2 AC 432. In doing that, each judge provides a stronger platform for the decision in the current case.

Changed intentions

Ms Jones, a mobile hairdresser, and Mr Kernott, seasonal ice cream seller, began living together in Jones’s mobile home in 1983. A child was born in 1984. In 1985, they jointly purchased a house for £30,000, using the proceeds from the mobile home (£6,000) as a deposit. In 1986 the property was extended. A joint loan for £2,000 covered the cost; Kernott did some of the labouring. The judge found that this increased the property’s value to £44,000. Another child was born. Kernott contributed £100 a week to household bills. Jones used their joint resources to pay for everything, including mortgage repayments and related endowment premiums.

The couple separated in 1993, at which point Kernott ceased to make any contribution to the household finances, and very little towards the children’s maintenance. Jones bore the costs herself, an attempt to sell the property in 1995 for £69,995 bearing no fruit. At that point, the parties cashed in another life policy; Kernott used his half share to buy himself a property.

Eleven years later, some 13 years after separation, Kernott intimated his wish to claim his interest in the property, and Jones commenced proceedings under the Trusts of Land and Appointment of Trustees Act 1996, which provides the English courts with declaratory rather than adjustive powers in respect of interests in property.

Controversially, the judge, recognising that there was a common intention constructive trust in respect of the beneficial interests in the property, found that the parties’ intentions in respect of these interests had changed over the years. While they began with equal beneficial interests, their conduct showed that these interests were now held 90% by Jones and 10% by Kernott. This was overturned by the Court of Appeal, but restored by the Supreme Court. In doing so, the Supreme Court has developed the notion of the “ambulatory constructive trust”.

The picture so far

From a social perspective, the decision is proving popular. From a legal perspective, certain aspects are challenging. This much is clear, building on Stack v Dowden:

  • where a property is held in joint names, it should be presumed that beneficial interests mirror the legal title;
  • unequal contributions to the price are unlikely to be sufficient to rebut that presumption (and a resulting trust analysis based solely on financial contributions will not usually be appropriate in a domestic context);
  • each case will turn on its own facts;
  • an attempt to rebut the presumption should not be lightly embarked upon. If the task is attempted, common intention is to be deduced objectively from the parties’ conduct.

Further, “In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, ‘the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property’: Chadwick LJ in Oxley v Hiscock [2005] Fam 211 para 69” (Lord Walker and Lady Hale, para 51).

The controversy lies principally in the last point: first, the assertion that it may be appropriate for the court to impute an intention that the parties may never have had; secondly, the notion that, in limited circumstances, the court is seeking to achieve fairness in assessing the parties’ shares.

Losing patience

“Fairness” is the test applicable in England & Wales in assessing financial issues between married couples. It is a source of anxiety to some that this should now creep in (albeit as a last resort where no intentions can be discerned) to the assessment of interests in property. The only justification can be that this analysis of property law takes place in a domestic context. Evidently, the Supreme Court is acutely aware of this tension, hence the sideswipes at the “continuing absence of legislative intervention”, which makes it “necessary for the judiciary to respond by adapting old principles to new situations” (Lord Collins, para 57; see also Lord Wilson, para 78).

Notably, some English commentators are beginning to compare the position of English cohabitants unfavourably with that of Scottish couples. Notwithstanding the limited nature of the Scottish regime and the ongoing challenges it has created for practitioners, it is seen by many in England as legislative acknowledgment that cohabitation is here to stay, and an attempt to address the potential legal consequences. When will Westminster take up the challenge?

Fiona Kendall is a partner at Jones Myers LLP, Leeds. She is a co-author of the recently published Cohabitation (2nd ed).

 

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