Supreme Court rules on house ownership

On 9 November 2011, the Supreme Court handed down its long-awaited judgment in the case of Jones v Kernott. The decision has been eagerly anticipated by legal practitioners hoping for clarification of the court’s approach to deciding how the ownership of assets should be split between unmarried, cohabiting couples.

It is debateable whether any such clarity has been provided.

The facts

In Jones –v- Kernott, the couple purchased 39 Badger Avenue in their joint names in 1985. All household expenses were shared equally. The couple made no express declaration regarding the beneficial ownership of the property.

In 1993, the relationship ended and Mr Kernott moved out. Shortly after that, the parties agreed to cash in a joint life insurance policy and the proceeds were divided equally to allow Mr Kernott to put down a deposit on another property, which he did in 1995. During the period from 1993 to 2007, Mr Kernott did not make any appreciable contribution towards the mortgage or household expenses of 39 Badger Avenue, and Miss Jones was left to service the mortgage and maintain the property by herself.  

It was not until 2006, some 13 years later that Mr Kernott attempted to claim a beneficial interest in the property.

The Judge at first instance awarded Miss Jones a 90% share in the value of the property and Mr Jones a 10% share in recognition of the fact that, by ceasing all contributions to the upkeep of the family home in 1993, Mr Kernott had been able to finance the purchase of his own property.

The Court of Appeal overturned the ruling at first instance and decided that the beneficial interest in 39 Badger Avenue should be split equally. The Court of Appeal’s rationale for this was that there were no facts from which it could be inferred that the parties’ joint intention had changed after Mr Kernott moved out. The Court of Appeal’s view was that it was not able to find, by imputation, an intention where none was expressly uttered nor inferentially formed.  

The Supreme Court’s ruling

The Supreme Court unanimously reaffirmed the first instance decision and confirmed the 90/10 split in favour of Miss Jones. It held that Mr Kernott’s interest in 39 Badger Avenue crystallised in 1995 when he purchased another property for himself. In 1995, Badger Avenue was worth £70,000. If Mr Kernott’s interest was fixed at 50% as at that date, he was entitled to £35,000, which amounted to 10% or thereabouts of the property’s value in 2008. Mr Kernott was not awarded any of the benefit of house price inflation nor any other return on his investment.

In their judgment, Lord Walker and Lady Hale confirmed the following principles:

• Where there is no express declaration confirming the extent of beneficial ownership and the property is purchased in joint names, the presumption will be that the parties are beneficial joint tenants entitled to 50% each of the value of the property.
• This presumption can be displaced if it can be shown that either:

(a) The parties had different intentions when the property was first purchased; or

(b) The parties later formed a common intention that their respective shares in the property would change.

• Common intention is to be determined by objectively examining the conduct of the parties. Relevant to this will be the purpose for which the property was purchased, how the purchase was funded, the nature of the relationship and how the parties managed their finances.
• Where it is not possible to infer actual intention the Court will decide the shares according to what is fair having regard to the whole course of dealings between the parties, i.e. it is open to the Court to impute an intention which the parties may never have had.

It is the last of these principles that the Jones v Kernott case is particularly notable for. In previous cases relating to beneficial interests, such as Stack v Dowden, the Court had not considered it proper to impute an intention for the parties even where the intention could not be inferred or established from the parties’ course of dealings, but it seems that now that the Court will be prepared to do so.  It seems, but it is far from clear, that the task of the Court will primarily still be to ascertain what the parties’ actual shared intention was, but if that proves impossible to ascertain, then the Court will be able to conclude for itself what the parties intended in order to achieve what it considers a fair result.

There are some practical difficulties presented by the decision. The first is whether there can be any value in the presumption of a beneficial joint interest if it will now be open to the Court to impute an intention for the parties. Furthermore, it is far from clear what will be the factors which will lead a Court to impute an intention to vary the beneficial interests as opposed to assessing the split of the beneficial interest by reference to the financial contributions made to the upkeep, maintenance and mortgage payments.

For more information about cases relating to beneficial interests in property, please contact Lucinda Brown on lucindabrown@hewitsons.com or on 01223 532721.