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Cohabitation appeal ruling prompts new calls for law review

8 June 2010

Judges hearing cohabitation claims over a former couple’s home should only depart from the principle of equal interests where there is a clear indication of joint shared intentions to the contrary, the Court of Appeal has held in a 2-1 majority ruling.

Giving judgment for the majority in Kernott v Jones [2010] EWCA Civ 578 Lord Justice Wall said there was “a total lack of evidence about the parties’ intentions” in this case and overturned the findings by the county court and High Court that the interests should shift to 90-10 in favour of Patricia Jones.

Ms Jones and Leonard Kernott had lived together unmarried for eight years in the house they had jointly bought in 1985 in Thundersley, Essex, before separating in 1993. Since then Mr Kernott has lived in his own property, leaving Ms Jones to pay for the remaining mortgage on the house and fund the upbringing and education of their two children.

“The critical question is whether or not I can properly infer from the parties’ conduct since separation a joint intention that, over time, the 50-50 split would be varied,” said Wall LJ.

“This is a point which I have considered anxiously, and at the end of the day I simply cannot infer such an intention from the parties’ conduct,” the judge concluded.

“The conveyance into joint names following Stack v Dowden created a joint beneficial interest, and the parties agreed that when they separated they had equal interests. There has to be something to displace those interests, and I have come to the conclusion that the passage of time is insufficient to do so, even if in the meantime [Mr Kernott] has acquired alternative accommodation, and [Ms Jones] has paid all the outgoings.”

“In my judgment, [Mr Kernott] has a 50 per cent interest in the property, and both the judge and the deputy judge were wrong to conclude otherwise,” Wall LJ found. The dissenting judgment by Lord Justice Jacob, however, suggests that the issue of evidence of joint intention is far from closed.

Jacob LJ’s view was that the district judge had correctly applied the law and that his findings should not be interfered with.

According to Jacob LJ, Lady Hale, who gave what is usually regarded as the lead speech in Stack, specifically considered the fact that the financing structure in place for the jointly owned property after separation was a relevant factor.

In referring to her words that “how the purchase was financed both initially and subsequently”, and by italicising the word ‘subsequently’, the judge had made it clear he recognised that subsequent financing was a relevant consideration.

“The judge is, rightly and in accordance with Stack, still focusing on the parties’ intentions. He is saying they have changed over the years. That is just what Lady Hale contemplates as a possibility [in her opinion in Stack],” said Jacob LJ.

Further, he did not consider that the judge had crossed the boundary between the law and fairness by putting himself in the parties’ shoes and envisaging that the parties in this case would have intended, should they separate, “that they should each have a fair and just share”.

Jacob LJ’s opinion overall was that it was possible to infer or impute a shared intention that the parties’ interests were to vary over time. The fact that Mr Kernott had asked for the endowment policy supporting the mortgage to be cashed so that he could fund the purchase of his own property, he said, was “of particular significance”. Accordingly, his interest in the property could be said to have become “ambulatory”, in the words of Lord Hoffmann in Stack.

Indirectly, Lord Justice Jacob also placed the question of whether the law should be changed on the agenda.

Citing Lord Neuberger’s dissenting opinion in Stack, which favoured the application of a resulting trust to property-related cohabitation claims, he said this “cry in the wilderness” could be construed as “an appeal to future lawmakers or the Supreme Court to reconsider Stack”.

Tom Farley-Hills, a solicitor at Speechly Bircham, agreed. “This case is another cry in the dark for a new law providing more certainty in respect of property disputes between unmarried couples,” he said.

In the absence of a change in the law, Farley-Hills said, the assumption that the parties intended to be joint owners in law and equity remained a strong one even when one party’s contributions, as in this case, were unmatched by the other party’s contributions over a long period of time.

And, in such cases, “a claimant who asks the court to declare his equitable interest in a property greater than his legal interest has a very high evidential hurdle to overcome”, he said.

“The courts are not concerned with fairness; where no express declaration of each party’s share exists they will look for the reality of ownership via an inferred common intention. But applying equitable principles to resolve issues arising from people’s domestic circumstances is highly complex, and more clarity is needed.”

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Procedures Divorce Marriage & Civil partnership Children