Hodge Jones & Allen

Jones v Kernott, 2011

In November 2011 the Supreme Court gave another “landmark” judgment about property rights of cohabiting couples in a case called Jones v Kernott. But has the case made the law any clearer?

The judges had to decide how to divide the “beneficial interest” in a property owned by an unmarried couple as joint tenants, where the couple had not reached an agreement in advance about how the beneficial interest would be divided if they split up. As is usual in such cases, when the relationship broke down and one of the owners sought to realize their interest, there was an argument about what share each of them was entitled to.

Facts of the Case

The case concerned an unmarried couple with two children, who bought a home together in 1985 as joint tenants. The purchase price was £30,000 with a deposit of £6,000 being paid using the money from the sale of Ms Jones’ previous home. No declaration was made as to how the beneficial interest in the property would be owned. The mortgage and maintenance of the house was shared.

In 1993 the relationship broke down and Mr Kernott moved out. Ms Jones and the two children continued to live in the property. Mr Kernott stopped paying towards the mortgage or upkeep of the property. Mr Kernott bought his own property in 1996. 

In 2006 Mr Kernott indicated that he wanted to claim a beneficial interest in the property. Ms Jones responded by obtaining a declaration from the county court that she owned the entire beneficial interest in the property, which was then valued at £245,000.

At trial it was noted that when the property was bought in joint names a presumption arose that the parties intended to jointly share the beneficial interest as well as the legal ownership. Ms Jones argued that the parties’ intentions changed following their separation, evidenced by the fact that Mr Kernott moved out, eventually purchased another property and stopped contributing towards the family home. The trial judge accepted Ms Jones’ contention and ordered that the value of the property be divided 90:10 in favour of Ms Jones.

Mr Kernott appealed to the High Court on the basis that the trial judge had been wrong to decide that the parties’ intentions had indeed changed.  The appeal was dismissed but was subsequently allowed by the court of appeal, which ruled that it was not possible to infer that the parties’ intention had changed, so Mr Kernott remained entitled to a greater share.

Supreme Court Judgment

The Supreme Court unanimously allowed Ms Jones’ appeal and agreed with the trial judge’s division of the value of the property between the parties.

The leading judgment ruled that the starting point in such a case is that both parties have an equal legal and beneficial interest in the property. This starting point can be displaced when it can be shown that the parties had a different common intention when they acquired the property or that they later formed a common intention that their respective beneficial shares would change.

The court stated that it must first examine the history and conduct of the parties to determine whether there is evidence from which to infer what their common intention was. In the present case, the leading judges ruled that the developments following the parties’ separation were sufficient evidence that the parties intended that Mr Kernott’s beneficial interest in the family home should crystallize at that point. His beneficial share in the property was therefore calculated as half of the value of the property at the time of the couple’s separation. Ms Jones derived the full beneficial interest thereafter.

Had it not been possible to infer the parties’ intentions from past events, the Supreme Court ruled that the next question to consider would be what would the parties’ intentions have been as reasonable and just people had they thought about it at the time?  In order to determine what would be a fair outcome, the court stated that it will have regard to all the circumstances, including financial contributions.

Analysis

We welcome this judgment because it demonstrates that, in Lord Collins’ words, ‘the courts are courts of law, but they are also courts of justice’. The judges point out the continued failure of Parliament to legislate on cohabitees’ rights to bring clarity to this area of law. The courts however have recognized that they must decide on the matters before them and stepped up to the challenge in this case in a careful and considered fashion.

The case makes it clear that the courts will always look first of all for evidence of the parties’ actual common intention in respect of the beneficial shares in their property in order to give effect to those intentions. If the parties had reached a written agreement setting out the sizes of their respective beneficial shares, the courts would no doubt enforce the agreement. However it will not always be possible to identity or infer what the common intentions of the parties were and whether they have changed. In such circumstances the courts will determine the size of the beneficial shares according to what is fair based on an analysis of the full circumstances.

This may be a positive development for those cohabitees, often women, who are unable to show that the common intentions of the parties in respect of the beneficial shares in the property had changed over time.

However, there remains a level of uncertainty as to how such cases will be decided. Although the Supreme Court judges allowed the appeal unanimously, they did so upon different grounds. Three out of five believed there was sufficient evidence to infer that the common intentions of the parties had changed. Two out of five believed it was impossible to infer that the intentions of the parties had changed but ruled that it was fair to adduce that they had. Furthermore although there may be the fall-back scenario whereby a court will impute a change of intention because it is fair to do so, there is no certainty as to what the court will consider to be a fair outcome. A court’s conclusion as to how the beneficial shares should be attributed fairly may well differ to the parties’ views.

Whilst it continues to be unlikely that Parliament will legislate in this area, we advise cohabitees who intend to buy a property to take the following steps:

• Discuss and agree on what share you intend to each have in the property
• Get expert legal advice
• Record your intentions in a written agreement that should be drafted by a family law solicitor.
• If your circumstances change, revisit your agreement to consider whether your intentions have changed in respect of how the shares in the property should be held.

Contact our leading London cohabitation agreement solicitors at Hodge Jones & Allen in London NW1 on 0800 437 0080 today.