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Divorce law blog

A cautionary tale for cohabiting couples

23/01/2012   By: Katherine Kennedy

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 Judgements, 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 Judgement 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%..  I have no idea of the total cost of proceedings financially – though I can imagine (most couples, with the disappearance of legal aid, could never have afforded to test the law in the way this couple have; I suspect they would have reached some form of compromise when looking at the matter commercially); 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 judgement 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.  I am not sure that we have clarity now – though the waters are certainly not as muddy - and I am sure that within the next 5 years there will be another case heading for the Supreme Court arising out of a cohabiting relationship gone sour.  Three years before Kernott and Jones we had  the House of Lords deciding Stack and Dowden (the case which Kernott and Jones now interprets more clearly).  There have been other cases in the Court of Appeal in between. 

That is no criticism of the courts or indeed those unfortunate people who feel the need to knock on the doors of justice – there is a distinct difference between the treatment of property following the breakdown of a cohabiting couple and the treatment of property following the breakdown of a marriage.  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 reign in how to distribute property to reach a “fair” outcome – of course I accept that one man’s “fair” is another’s injustice. 

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.  I am constantly shocked by the number of couples and individuals who 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 – then you could jump over a broomstick at the entrance to the threshold to become a common law spouse and it was pretty easy to reverse the 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 break down of that relationship.  Those claims would be less wide ranging and generous yet akin to those available to divorcing spouses.  Many family lawyers would welcome this solution to the present unsatisfactory state of affairs..  I am not one of them.  Though able to see the merits of legislation I am 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.  As many couples cohabit quite intentionally aware that they do not have the legal protection or obligations akin to marriage, as those who believe they do have rights.   So I am more for making sure that people have the information they need to make the right decision for them.  This could be at obvious trigger points – an information pack given to the purchaser(s) and their partner when a property is bought; and during antenatal appointments,  backed up by a committed public information campaign – probably cheaper and more effective that rushing through legislation that history shows, few would probably know about anyhow.  I am not sure the paternalistic approach is the answer.

Whilst the decision of the Supreme Court does not solve the problem it does, as I have said, 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 -  I shan’t even go into the case of a house being owned by one party only – that is a discussion for another day!

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.   Was Mr Kernott entitled to the beneficial half share as suggested by the original conveyance into joint names or had ownership changed over the period of time since separation – without any specific agreement between the parties to that effect? 

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.  So the court had no express evidence presented to them.
The trial Judge held the declaration of trust, implicit in the joint purchase, had been varied such that Ms Jones was now sole the beneficiary owner – this was an ambulatory trust, where ownership changes over time.  Her investment towards the purchase of the property particularly since separation meant she was entitled to a greater share.  She had received little contribution from Mr Kernott to maintenance and support of two children (now grown up).  Since separation he had 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.

Interestingly if you were to include the house Mr Kernott had purchased in 1996 (in respect of which Ms Jones had originally tried to lay claim) the overall outcome was broadly an equal share of the assets – not far off what a divorce court may have decided.

The matter then proceeded through 3 further court hearings and finally The Supreme Court reinstated the decision at first instance.

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 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.  On the face of it, it seems harsh to leave Mr Kernott with only 10% of a property of which he was after all a joint owner – in fact they gave him 50% of the equity at the time of separation when he stopped paying towards it..  I think the decision could have been different had Mr Kernott not also owned the house he bought post separation – which he afforded by not paying the mortgage on the first house and not supporting his children.  Interestingly if you were to include the house Mr Kernott had purchased in 1996 (in respect of which Ms Jones had originally tried to lay claim) the overall outcome was broadly an equal share of the assets – not far off what a divorce court may have decided.

The law now stands as follows:

1. 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.

2. That presumption can be displaced by evidence that the couples intention was different, either when the property was purchased or later.

3. The couples common intention should be deduced objectively from their conduct – inferred common intention.  The cashing in of an endowment, purchase of a second property and lack of contributions towards the first property was 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.  Lord Kerr did not agree, he felt that the bare facts of Mr Kernott’s departure from the family home and acquisition of another property were a slender foundation on which to infer that he had entirely abandoned whatever stake he had had previously in the shared property.  I am inclined to agree since his actions cannot be that unusual in a case where the relationship has broken down and parties find it intolerable to live together. 

4. If it is clear that the couple did intend the beneficial interest to be shared other than equally, but is was not possible to ascertain by evidence or inference what shares were intended then the court can impute a common intention.  Imputing an intention attributes an intention to the parties that they have never had – it will be based on the intention reasonable people would have had had they thought about it at the time and inevitably will involve a search for “fairness.”

5. 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 (per 3 above) or can be imputed as fair (as per 4).

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.  It is rather ironic that those people keen to avoid the paperwork of marriage are advised to put down on paper their own arrangements.

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