Supreme Court unanimously allows appeal in Jones v Kernott

By Hugh Logue, Newswatch Editor

The Supreme Court has unanimously allowed the appeal in Jones v Kernott [2011] UKSC 53 and clarified the correct approach to calculating beneficial interests in property where the legal title to the property is held in joint names by an unmarried couple but there is no express statement of how it is to be shared.

The case concerns an unmarried couple, Ms Jones and Mr Kernott, who met in 1981 and had two children together.  In 1985 they purchased a house in their joint names, with the deposit paid by the proceeds of sale from Ms Jones's previous home. The mortgage and upkeep on the house was shared between them and they jointly took out a loan of £2000 to build an extension with Mr Kernott doing some of the work himself.

The relationship deteriorated and in 1993 Mr Kernott moved out, leaving Ms Jones to live in the property with both children. Over the years, the value of the property increased and in 2006 Mr Kernott indicated that he wished to claim a beneficial share in it. In response, Ms Jones, in 2007, applied to the county court for a declaration under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 that she owned the entire beneficial interest in the property.

The county court judge decided Mr Kernott was only entitled to only a 10% share of the property. Although the property was bought in joint names and a presumption arose that they intended to jointly share the beneficial ownership, the judge held that the common intention had changed.

Mr Kernott unsuccessfully appealed to the High Court arguing that it was wrong for the court to infer or impute a change of common intention and further wrong for the judge, in effect, to substitute a division that he considered to be fair as between the parties. Mr Kernott appealed to the Court of Appeal which allowed his appeal.

Today's judgment restores the order of the county court. The Supreme Justices noted the principle recognised in Stack v Dowden is that where people purchase a family home in their joint names the presumption is that they intend to own the property jointly in equity also. The starting point is different in cases where the property is bought in the name of one party only. The presumption of joint beneficial ownership arises because (i) purchasing property in joint names indicates an "emotional and economic commitment to a joint enterprise" and (ii) the practical difficulty of analysing respective contributions to the property over long periods of cohabitation.

The Court held that the presumption may be rebutted by evidence that it was not, or ceased to be, the common intention of the parties to hold the property jointly.  The court should try to ascertain the parties' actual intentions, expressed or inferred but if it is clear that the beneficial interests are shared but impossible to infer a common intention as to the proportions in which they are shared, the court will have to impute an intention to them which they may never have had.

The judgment applied the following principles:

(i) the starting point where a family home is bought in joint names is that they own the property as joint tenants in law and equity;

(ii) that presumption can be displaced by evidence that their common intention was, in fact, different, either when the property was purchased or later;

(iii) common intention is to be objectively deduced (inferred) from the conduct and dealings between the parties;

(iv) where it is clear that they had a different intention at the outset or had changed their original intention, but it is not possible to infer an actual intention as to their respective shares, then the court is entitled to impute an intention that each is entitled to the share which the court considers fair having regard to the whole course of dealing between them in relation to the property; and

(v) each case will turn on its own facts; financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended or fair.

Last month the Government announced that it will not implement the Law Commission's recommendations to introduce a new scheme of financial remedies for cohabitants. However some family lawyers argue that reform is urgently needed.

"The judgment achieves what most people would think is a fair outcome and is very welcome," says Jane Craig Head of Family Law at law firm Manches. "The Supreme Court has clarified how cases involving unmarried couples who did not execute a declaration of trust when they bought a property together, and later disagree how the sale proceeds are to be split, should be dealt with by the courts. Nonetheless, this decision does not detract from the need for the government to implement the Law Commission recommendations on cohabitation because this whole area of the law is a mess and desperately needs reform."

Family Law will be publishing the 5th Edition of Cohabitation Law, Practice and Precedents in January 2012. It will provide commentary, including on Jones v Kernott, along with checklists, procedural guides and precedents in a single volume, making it an invaluable aid to all practitioners advising unmarried couples. To pre-order your copy today, click here.