Judgment of the Supreme Court in Jones v Kernott 2011

15 December, 2011

This decision establishes that a co-habitant’s beneficial interest in a property can change without their explicit intention and was a unanimous decision of the Supreme Court.  The decision is highly controversial and has attracted a large amount of commentary.  This decision is also interesting, especially as the government recently declined to consider altering the law in relation to co-habitation.

  
When you buy a property there are two ways in which joint owners can own a property (1) joint tenants (2) tenants in common.  If you own a property as joint tenants you each own the whole and therefore the equity in the property (i.e. the value in the property in financial terms less the amount repayable on a mortgage) will be deemed to be owned equally between you.  If you own the property as tenants in common, the equity can be owned equally between you or in specific shares.

 

The case involved two former co-habitants, Patricia Jones and Leonard Kernott, who bought a house in Essex in 1985.  In this case the couple held the property as joint tenants and they did not make any declaration as to how the beneficial interest was to be apportioned.  Strictly speaking, in law, this means that at both law and equity the proceeds of sale of the property will usually be split 50:50.

 

They remained living there together and shared their expenses for the next 8 years.  When the relationship ended in 1993 Leonard Kernott moved out and Patricia Jones remained there with the couple’s two children and continued to pay the mortgage from her own income.

 

In 2006, Leonard Kernott demanded a half share in the house.  Patricia Jones sought a County Court Declaration that she was entitled to the whole of the equity under Section 14 of the Trusts and Land (Apportionment of Trustees) Act 1996 (TOLATA).  At this time, the court awarded her 90% of the equity, basing its decision on the House of Lords ruling in Stack v Dowden 2007 that a presumption of joint beneficial ownership could be overturned by the subsequent actions indicating the parties had changed their intentions. 

 

Leonard Kernott appealed in the High Court, and failed.  He then went on to appeal in the Court of Appeal which upheld his right to a half share.  They stated that Stack v Dowden did not enable the courts to infer from the parties’ conduct an intention to change the beneficial interests and decided there was nothing to indicate that they had changed their intentions.

 

The Supreme Court unanimously overturned this decision.  They  stated that an initial presumption of a joint tenancy can be displaced if the parties both change their intentions and a court can deduce their common intention from the parties’ conduct.

 

In the lead judgments by Lord Walker and Lady Hale, they set down principles they applied when assessing the beneficial interest of co-habiting couples who own property in joint names:

A   The presumption is that the parties are joint tenants. This is the case even if the parties contribute to the purchase price in unequal shares.

B   The presumption of joint beneficial ownership can be rebutted by showing either:

     a.   a different common intention at the time of purchase of the property;

     b.   a different common intention was subsequently formed by the parties;

C   The court should look to the parties’ conduct to try and deduce what the objective common intention was;

D   If the court concludes that it was commonly intended that the property would be held other than equally, but it is not possible to ascertain either actually or by inference what share of the property each was intended to have, the court may have to impute an intention;

E   The court will impute an intention that the beneficial interest should be divided in a manner that is fair having regard to the whole course of dealing between the parties.

 

Many commentators have commented that this case makes the law on co-habitation for joint owners “as clear as mud” as it effectively overrules the existing law.  Co-habitants should consider entering into co-habitation agreements as well as obtaining advice on how to hold a property so as to give effect to their intentions in the event of a split. 

Reviewed in 2015