Formerly Central London Collaborative Forum

A cautionary tale for co-habiting couples

Kernott v Jones [2010] EWCA Civ 578

16 November 2011

The long running saga of Kernott and Jones finally came to an end in November 2011, after some three years of litigation, appearances before 4 levels of courts and the Opinions, indeed Judgments, of some 10 Judges, from the original trial judge at Southend on Sea county court to Judges sitting in the highest court in the land, the Supreme Court.  Family lawyers have been poring over the Judgment of Lord Walker and Lady Hale,  Lord Collins, Lord Kerr and Sir Nicholas Wilson – who unanimously allowed the appeal of Ms Jones and restored the original decision reached in Essex – whereby Mr Kernott, a joint owner of the family home retained a 10% interest after seeking 50%.  Neither Ms Jones nor Mr Kernott can possibly have foreseen the level of interest the disintegration of their relationship and subsequent property dispute would result in.

The final judgment was intended to give much sought after clarity to lawyers advising couples who own property jointly and then dispute exactly how much each of them should get when things turn sour.  Many commentators are not sure that we have clarity now – though the waters are certainly not as muddy.  That is no criticism of the courts or indeed those unfortunate people who feel the need to knock on the doors of justice Put simply, if you are married it matters not a jot who or how the family home is owned – it will fall into the pot for division regardless.  The courts have a pretty free rein in how to distribute property to reach a “fair” outcome.

 

If you are not married however then you are thrust into the hugely complex arena of property law, express and implied trusts – now even imputed trusts.  This area of law has not been designed for the shift in social norms we see today.  An estimated 2.2 million of us (1 in 6 of all couples) are currently living with their partner and more children than ever before are born outside of marriage.  It is surprising how many couples and individuals continue to believe there is such a thing as the common law wife/husband despite the fact that it has not existed in English Law since the introduction of the Marriage Act   As long ago as 2007, the Law Commission attempted to address this wholly unsatisfactory state of affairs and recommended the introduction of a law allowing separating couples to make financial claims against one other following the breakdown of that relationship.

Though able to see the merits of legislation some lawyers are concerned about the unintended consequences of introducing a system which would impose legal rights and obligations upon couples after they have been living together – even without children.  Many couples cohabit quite intentionally aware that they do not have the legal protection or obligations akin to marriage. Further paternalistic legislation may not be the answer.

Whilst the decision of the Supreme Court does not solve the problem it does clarify how we should be interpreting the law in relation to establishing how much each owner is entitled to, when the house is owned jointly. -To outline the facts, Mr Kernott, an ice cream salesman, and Ms Jones, a hairdresser met in 1980, began cohabiting in 1981 and bought a house in joint names in 1985 for £30,000 although they did not specifically set out the proportions in which the beneficial interest was owned.  Ms Jones paid £6000 towards purchase from the sale of her mobile home and the remainder was funded by an endowment mortgage.  They had two children.  In 1986 a further loan was taken out of £2000 and building works were carried out to extend the property largely funded by Mr Kernott.  They shared household bills including mortgage payments.

They separated in 1993.  Ms Jones and the children remained in the property with Ms Jones meeting all outgoings post separation.  Mr Kernott purchased another house in 1996 with his new partner for £57,000 – partly funded by his share of joint endowments that were encashed by agreement.  

In 2008, 15 years after separation, Ms Jones issued proceedings claiming she was entitled to all of the house, despite Mr Kernott being a joint owner.   Ms Jones accepted that at the time of separation the beneficial interests were equal.  They both accepted that they had had no discussions as to the variation of their beneficial interests. 

The trial Judge held the declaration of trust, implicit in the joint purchase, had been varied such that Ms Jones was now the sole beneficiary owner Her investment towards the purchase of the property particularly since separation meant she was entitled to a greater share.  Since separation Mr Kernott shown no intention to avail himself of the beneficial ownership, ignoring the property completely by way of any investment in it, not contributing towards the mortgage or attempting to maintain the property or repair it.

The beneficial interests were fixed at 90% Ms Jones and 10% Mr Kernott.

 

The Supreme Court's decision amounts to an approval of the increasing tendency of the courts to avoid the harsh results of a strict interpretation of property law, under which Miss Jones and Mr Kernott would have both received a 50% share of the property’s equity.  Through the use of "inferred intentions" as a means of getting round legally correct but morally unfair results,  it seems that the court can now – in the absence of clear intention of the parties – impute an intention to achieve fairness. 

The law now stands as follows:

  • There is a presumption that where a couple buy a family home in joint names, the couple own the property as joint tenants both in law and in equity.
  • That presumption can be displaced by evidence that the couple’s intention was different, either when the property was purchased or later.
  • The couple’s common intention should be deduced objectively from their conduct – inferred common intention.  In this particular case Lord Walker and Lady Hale deemed the cashing in of an endowment, purchase of a second property and lack of contributions towards the first property, sufficient to infer an intention that Mr Kernott’s 50% interest in the first property effectively crystallised then, and thereafter he had no further interest.    

If it is clear that the couple did intend the beneficial interest to be shared other than equally, but it was not possible to ascertain by evidence or inference what shares were intended then the court can impute a common intention.

 

Each case will turn on its own facts.  Financial contributions are relevant but there may be other factors which will determine what shares were intended

The price of this approach is that cases will continue to come before the court requiring an extensive examination of the history of a relationship and evidence from the parties as to who said and did what when before arriving at what was (or should have been) agreed as to property ownership a result.  That has a high cost, both emotional and financial, for all concerned. 

Whilst good news for many, the decision is unwelcome for those who have taken a deliberate decision not to marry specifically because they do not wish to place themselves in a situation whereby their assets could come under attack on relationship breakdown.  The decision of the Supreme Court means that these individuals would be well advised to enter into some form of written agreement – be that a Deed of Trust or cohabitation contract sooner rather than later; and set down their intentions clearly at points when a change in beneficial ownership is agreed or could be imputed by others – e.g. relationship breakdown, an injection of capital from one person;  rather than risk a protracted dispute within which a court would determine what it considers to have been the intention irrespective of whether  or not it was.  Anything to avoid an imputed decision.

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