Marilyn Stowe Blog

Kernott v Jones in the Supreme Court: what you need to know

The long-awaited judgment in the case of Kernott v Jones is to be handed down by the Supreme Court tomorrow. In the case itself, not a lot of money was ever involved.  However the legal principles have taxed some of the most brilliant legal brains in the country. I am going to try and simplify it as best I can, so that you will be ready for what is going to happen!

Kernott v Jones is a case arising from a family break-up, but because the parents cohabited and never married, it is being dealt with in the Chancery Court where “touchy feely family law” and “reasonable needs” have no place. (That is one reason why I continue to argue for specific legislation for cohabiting couples. It would avoid any more cases such as Kernott v Jones. Instead, such cases would be returned to the Family Division, where they properly belong.)

The facts of the case are as follows:

 

• Mr Kernott and Ms Jones began living together in 1983 and had two children.
• In 1985 they jointly bought a home together for £30,000. Ms Jones paid the £6,000 deposit, and the rest was obtained with a mortgage. At that stage she should have protected herself by having a declaration of trust drawn up, and perhaps
  that would have avoided the subsequent legal battle, but it didn’t happen.
• Mr Kernott paid for a property extension, which increased the value of the property by £10,000. The couple added a further £2,000 to the mortgage.
• Mr Kernott and Ms Jones split up in 1993. At that point both parties beneficially owned the property in equal shares. They
  also shared the proceeds of an endowment policy equally.
• Fourteen years passed. Mr Kernott bought another home
  for himself. Ms Jones, who remained living in the original property, paid all of the outgoings on the property. She also raised the
  couple’s two children without any contribution from Mr Jones.
• In 2007, Mr Kernott sought to obtain his 50 per cent share of the original property.

 

• The questions for the court: has Mr Kernott and Ms Jones’ beneficial interest in the property altered since their separation – and if so, when did this happen and how?

In two lower courts, Ms Jones’ share of the property was adjusted to 90 per cent. Mr Kernott’s share was reduced  to 10 per cent, in line with the House of Lords decision in the case of Stack v Dowden.

In Stack v Dowden, a home was owned jointly by an unmarried couple but their beneficial interests in the property were not stated in the conveyance when the property was purchased. The House of Lords had to decide whether or not the parties’ interests were 50:50. In that case the interests were held to be 65:35.

Lady Hale – now a Supreme Court justice, of course – was generally agreed to have given the leading judgment with which all the other judges concurred. She referred to the common intention to vary their beneficial ownership.

But if there is nothing in writing, how does such a variation come to be? The answer: it is to be inferred…

Kernott v Jones in the Court of Appeal

However the Court of Appeal, took a more conservative view, criticised Stack v Dowden and with reference to a judgment of their own called Oxley v Hiscock, held there was no evidence of any common intention to alter the 50:50 ownership of the property in the case of Kernott v Jones.

All that was left to do was an exercise called equitable accounting, to offset relevant payments by Ms Jones to relevant entitlements of Mr Kernott, such as rent, for the occupation of “his” property.

It was at this point that Ms Jones appealed to the Supreme Court.

Kernott v Jones in the Supreme Court

Firstly, it is worth noting that when Kernott v Jones was heard by the Court of Appeal, the leading judgment was trenchantly handed down by Sir Nicholas Wall, who is now the President of the Family Division. For this reason, the Supreme Court may also follow the conservative line that there was no “common intention” to alter beneficial ownership from anything
other than 50:50.

However it is also worth noting that the Court of Appeal’s decision in Kernott  v Jones was not unanimous. So let’s take a look at the dissenting judgment of the Court of Appeal’s Lord Justice Jacob, who argued against the majority view, and consider what the Supreme Court may make of his opinion.

In the case of Kernott v Jones, the law was stated and applied by Lord Justice Jacob in the following  steps, quoting Lady Hale in the case of Stack v Dowden (my explanatory notes below):

(1) Whether property is held legally by one party or the other or is held jointly, the presumption is that the beneficial interest corresponds to the legal interest.

-          This means that the parties own the property equally.

 

(2) In particular: “In the domestic consumer context a conveyance into joint names indicates both legal and beneficial joint tenancy, unless and until the contrary is proved”

-          So remember: if you are cohabiting, you buy a property jointly with your partner and you don’t want the presumption of 50:50 to apply, you MUST do something about it at the time of purchase. Get your solicitor to prepare a simple Declaration of Trust, which will mean you won’t end up in this type of litigation nightmare.

 

(3) The burden lies “on the person seeking to show that the parties did intend their beneficial interests to be different from their legal interests and in what way”

-          If you want to argue that there was an intention to alter the 50:50 split, then it is up to you to prove it.

 

(4) Moreover the onus is heavy.  ”At the end of the day, having taken all this (including the host of factors mentioned by Lady Hale in cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual

-          And it won’t be easy!

 

(5) The legal test can be stated shortly: “The search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it”

-          The court will look at everything that happened to decide if how and why it altered.

 

(6) The exercise of finding whether there were shared intentions and if so what they were is not easy.  It involves a multifactorial examination of the circumstances.

-          This is what the court will do.

Lord Justice Jacob went on to quote a lengthy excerpt from Lady Hale’s leading judgment in Stack v Dowden, which I have copied here in full for reasons that will become clear:

In law, “context is everything” and the domestic context is very different from the commercial world. Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties’ true intentions. These include: any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the home was acquired in their joint names; the reasons why (if it be the case) the survivor was authorised to give a receipt for the capital moneys; the purpose for which the home was acquired; the nature of the parties’ relationship; whether they had children for whom they both had responsibility to provide a home; how the purchase was financed, both initially and subsequently; how the parties arranged their finances, whether separately or together or a bit of both; how they discharged the outgoings on the property and their other household expenses. When a couple are joint owners of the home and jointly liable for the mortgage, the inferences to be drawn from who pays for what may be very different from the inferences to be drawn when only one is owner of the home. The arithmetical calculation of how much was paid by each is also likely to be less important. It will be easier to draw the inference that they intended that each should contribute as much to the household as they reasonably could and that they would share the eventual benefit or burden equally. The parties’ individual characters and personalities may also be a factor in deciding where their true intentions lay. In the cohabitation context, mercenary considerations may be more to the fore than they would be in marriage, but it should not be assumed that they always take pride of place over natural love and affection. At the end of the day, having taken all this into account, cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual.

But here’s the crux…

Lord Justice Jacob also pointed out that intentions can change over the years.

This possibility was also acknowledged by Lady Hale in Stack v Dowden, when she stated:

There may also be reason to conclude that, whatever the parties’ intentions at the outset, these have now changed. An example might be where one party has financed (or constructed himself) an extension or substantial improvement to the property, so that what they have now is significantly different from what they had then.

Therefore when Kernott v Jones was heard in the Court of Appeal, Lord Justice Jacob found that the county court judge who had previously ruled on the case had not made an error in law.

The county court judge had stated:

Having established that principle I have to consider what is fair and just between the parties bearing in mind what I have found with regard to the whole course of dealing between them

Lord Justice Jacob commented (emphasis mine):

If this were a free-standing passage it might be arguable that the Judge was applying the wrong test – one of just deciding what was “fair and just”. Such an approach would be inconsistent with the “parties shared intentions” test of Lady Hale and, incidentally also inconsistent with a resulting trust analysis.   But the passage is not free-standing.  It follows repeated references to Stack and the need to discern the parties’ intentions.    So I do not think the Judge was at this point simply abandoning Stack.  What he is saying in context is that the parties’ shared intentions must be taken to be (they can be “inferred or imputed”) is that they should each have a fair and just share.   That is what the Deputy Judge also thought.
Accordingly I conclude that the Judge made no error of law.

Therefore it was on the facts, and in accordance with the law, that Lord Justice Jacob found the original judge was “rightly and in accordance with Stack, still focussing on the parties’ intentions.   He is saying they have changed over the years.   That is just what Lady Hale contemplates as a possibility [in Stack v Dowden].”

Lord Justice Jacob concluded (again, emphasis mine):

If one asks oneself how did these matters come to be, it is not impossible to conclude that they did so by a shared intention that the parties’ interests in the house were to vary over time, rather than that his interest as a proportion of the value of the house should remain fixed and immutable.   It is possible to infer or impute such a shared intention. And the Judge, having seen and heard the parties was in a better position to decide the matter – and particularly the intentions of the parties – than we are.

Accordingly I would not interfere with Judge’s conclusion.   It is not necessary or correct for this court to consider the matter afresh.   I would dismiss this appeal.

So what can we conclude about Kernott v Jones?

In law, can Mr Kernott and Ms Jones have started out intending to own the property 50:50 legally and beneficially, but intended their beneficial ownership to change following their separation? And if so, how?

I will leave you to make up your own mind, while pointing out that in the absence of an express Declaration of Trust, four courts have gone through the tortuous process of analysing in detail what actually happened between the two parties with regard to the ownership of their house. The answer is not cut and dried, but I hope that I have provided some food for thought.

To date two courts – the county court and the high court – have found for Ms Jones, notwithstanding the fact that nothing was in writing. One court, the Court of Appeal, has found for Mr Kernott. All three courts purported to apply the same law to the same facts.

And now for the fourth court, the most important court of them all. What will the Supreme Court decide? We cannot know, but it is to be hoped that the judgment will clarify the law, and apply it to the facts.

When you read all about it tomorrow, I hope this background proves useful. Perhaps the Supreme Court will concur with the Court of Appeal, in which case the decision will be described as all too predictable. But don’t be taken aback if there are surprises in store…