The Supreme Court has today given guidance on the principles to be applied when determining the ownership of property when unmarried couples separate. In the absence of a statutory regime, the courts have to resort to the law of trusts to give effect to the parties’ intentions. In today’s judgment, the majority of the court has stated that when there is no direct evidence as to what they intended the size of their respective shares to be, the court will have to work out what it was, if needs be imputing an intention to them, by looking at all the surrounding circumstances of the case. It also acknowledged that the parties’ intention might alter during the course of their relationship in the light of changed circumstances.

Kernott v Jones [2011] UKSC 53 (ownership of property when unmarried couples separate)
Supreme Court: Lord Walker JSC, Lady Hale JSC, Lord Collins JSC, Lord Kerr JSC, Lord Wilson JSC
Date of Judgment 9 November 2011

Since April 1998, couples who buy the house together and are properly advised by their conveyancing solicitors will ensure that the TR1 deals with that question. Quite aside from purchases made before then however, there will always be cases where the TR1 is completely silent on the point. Where there is no express agreement, as the Supreme Court has made clear today, the primary search is for what the parties actually intended, to be deduced objectively from their words and actions.

Although this is the first time that the Supreme Court has considered the question, the House of Lords did so only four years ago in Stack v Dowden. As Lord Walker and Lady Hale said in today’s case, reflecting upon that earlier decision: “it is always salutary to be confronted with the ambiguities which later emerge in what seemed at the time to be comparatively clear language”. On this occasion, the Supreme Court has set out a series of crisply worded propositions to guide both judges hearing trials and of course legal advisors in assisting their clients.

Where the property is conveyed into joint names:

1. The starting point is still that the beneficial interests are held jointly.
2. That presumption can be displaced however if it is shown either that they had a different common intention or that they later formed a common intention that the size of their shares would change.
3. The common intention is to be deduced objectively from their conduct. The Supreme Court repeated the guidance given in Stack v Dowden as to the matters to be taken into account to deduce that common intention, emphasising that many more factors than financial contributions will be relevant.
4. Where it is not possible to ascertain either by direct evidence or inference what the common intention, the well known guidance given by Chadwick LJ in Oxley v Hiscock continues to apply: “each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property”. The Supreme Court emphasised that a range of factors should be taken into account when embarking on this task.

Where the property is conveyed into just one of the parties’ names:

1. The first requirement is to show that it was intended that the other person would have any interest at all. That common intention is to be deduced objectively from their conduct.
2. Once that hurdle has been overcome, the size of the interest is determined in the same manner as the person seeking to show that the interests in a jointly owned property are different from the legal interests.

When Kernott v Jones came before the Court of Appeal, Rimer LJ drew attention to the distinction between on the one had inferring the parties’ common intention and on the other hand imputing one to them which they may never have had. The majority of the Supreme Court has today made clear that while in the first instance, the court should limit itself to drawing inferences from their conduct, in most cases, the difference between inferring and imputing a common intention may in practice not be so great. There will always be cases where the court will have to apply the test of Chadwick LJ which the majority has recognised will require it to impute an intention to them. As the court cannot delve into the minds of the parties to ascertain their subjective intentions, all it can do is work out what they were by looking at the way in which they conducted themselves.

The court has left one question open. Since the decision of the Court of Appeal in Goodman v Gallant in 1986, if the parties make a declaration as to their interests in the TR1 then, in the absence of fraud or mistake at the time of the transaction, they are bound it. If, as now seems to be the position where a couple does not declare a trust on the TR1, the courts will give effect to a change in intention as to their respective shares as their relationship evolves, why should a couple who do take the time to record their intentions at the time of purchase not be able to agree to change their minds later, safe in the knowledge that the courts will give effect to it?

Importantly however, in a dispute where the property was valued at £245,000 at the time of the trial, the Supreme Court repeated the warning given by Lady Hale in Stack v Dowden to those who seek to show that the beneficial interests differ from the legal interests: “This is not a task to be lightly embarked upon. In family disputes, strong feelings are aroused when couples split up. These often lead the parties, honestly but mistakenly, to reinterpret the past in self-exculpatory or vengeful terms. They also lead people to spend far more on the legal battle than is warranted by the sums actually at stake. A full examination of the facts is likely to involve disproportionate costs.”

19.08.2012