Jones v Kernott [2011] UKSC 53

 Cohabitees’ interests in their jointly-owned home

Facts

In 1985 Mr. Kernott and Ms Jones decided to purchase a property with the benefit of an endowment mortgage taken in their joint names.  The deposit of £6,000 on a purchase price of £30,000 was paid solely by Ms Jones.  The two subsequently lived together for eight years during which time they had approximately the same income.

In 1993 Mr. Kernott decided to move out, and made no further contribution to the property, leaving Ms Jones with their two children to meet all household and mortgage bills herself.

The situation continued for some 14½ years until Mr. Kernott sought to claim his beneficial interest in the property.

Points of Principle

In an unusual judgment, given jointly by Lord Walker and Lady Hale, the pair expressly revisited their judgments in Stack v Dowden, a case which case they had both also heard.

In a thorough review of this authority, the following points of principle were made:

  1. The starting point in joint ownership cases is joint beneficial ownership.  The starting point in single ownership cases is no shared beneficial ownership.    Equity still follows the law.
  2. These presumptions can be displaced by showing a different common intention.
  3. In single ownership cases, once it is shown that the parties intended to share ownership, there is no presumption of joint beneficial ownership.
  4. The task of the courts is to find the parties’ objective intention from the evidence of the parties’ conduct available.
  5. It is only where this is not possible that the court steps in to determine the share ‘which the court considers fair having regard to the whole course of dealing’ – the judgment quoting Oxley v Hiscock.

Result

Applying these principles to the case, the court held that it had been the intention of the parties to share the beneficial interest from the time of purchase until Mr. Kernott moved out, or at least there was not sufficient evidence to show otherwise.

However the court held that the ‘logical inference’ from Mr. Kernott moving out, setting up a new home and not contributing towards the mortgage, maintenance or repair of the property was that it was the parties’ shared intention that his interest in the property should crystallise at this time.  Therefore Ms Jones was to have the sole benefit of any capital gain in the property from that point onwards.

This resulted in a split in the beneficial interest so close to the trial judge’s order (90% to 10% in favour of Ms Jones) that the court declined to interfere.

Discussion

It is the fifth point of principle above in particular that is striking.  It is based upon the footing that the court, as an arbiter of what is reasonable and just, is able to decide in the absence of evidence what the parties’ intention would (or perhaps should) have been in the given situation.

Indeed, the judgment seems to suggest that the test in Oxley v Hiscock – the fair share – will come to the same result as asking what the parties’ intentions as reasonable and just people would have been had they thought about it at the time – the parties’ imputed intention.

This creates a hierarchy of intentions; that which can be objectively determined, then that which can be inferred, with that which can be imputed as a ‘fallback position’.

So, what does this mean for the realisation of a bankrupt’s home? Trustees in bankruptcy need to think carefully about the evidence available to them from which the co-owners’ objective intention can be discerned. If there is insufficient evidence, the court will look for the logical inference from such facts as it can establish and impute an intention to the parties – making more difficult the identification of the share of the property available for the benefit of the bankrupt’s creditors.

Ian Tucker

You can read the judgment here

Ian is a junior tenant at Exchange Chambers. His profile is here