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Hang on a Minute! (Or is Kernott the new White?)

Rebecca Bailey-Harris and John Wilson both of 1 Hare Court give a timely warning to all practitioners advising in TOLATA claims to be mindful of the possible implications of forthcoming Supreme Court appeal in Kernott v Jones.













Rebecca Bailey-Harris  and John Wilson, barristers, both of 1 Hare Court

The hearing of the appeal to the Supreme Court in Kernott –v- Jones [2010] EWCA Civ 578 will begin on 4th May 2011.  Over the years  following the landmark decision of the House of Lords in Stack –v- Dowden [2007] UKHL 17 the fault-lines in that ruling, inevitable given the considerable diversity of approach in the speeches and a powerful dissent from Lord Neuberger, have become increasingly apparent.

The most important of these divisions were apparent in the speeches in Stack itself.  In summary:

(i) Was it correct to categorise Stack an exceptional case on its facts, so as to displace the presumption of equal beneficial ownership where the disputed property is registered in joint names?

(ii) The traditional basis for the constructive trust in English law has been the parties' actual common intention as to shared ownership, such intention to be evidenced by express discussions or to be inferred from conduct. The majority in Stack went further and purported to claim that it is also permissible for the court to "impute" a common intention .This was trenchantly criticised by the majority of the Court of Appeal in Kernott v Jones (Wall LJ as he then was and Rimer LJ).

(iii) Should the conduct from which a common intention at the first-stage enquiry (i.e. whether the parties intended to share beneficial ownership at all) may be inferred under Rosset II be widened?   This was suggested obiter in the speeches in Stack and apparently followed by the Privy Council in Abbott –v- Abbott (Privy Council Appeal No. 142 of 2005)? 1

(iv) What test should the courts apply when considering the second stage of the enquiry directed by Lord Bridge in Lloyds Bank plc –v- Rosset  [1991] 1 AC 107 (i.e. the quantum of the parties' respective shares)?  There are differences between Chadwick LJ's formulation in Oxley –v- Hiscock [2004] EWCA Civ 546  (cited in Stack),   the modification of that formulation by the majority in Stack based upon the Law Commission Discussion Paper Sharing Homes, itself criticised in the dissent of Lord Neuberger. The Supreme Court may well address all these issues (albeit some by obiter dicta) in the forthcoming appeal in Kernott v Jones. In addition, the Supreme Court may take the opportunity to revisit the question of equitable accounting in light of the qualifications – in Re Barcham [2008] EWHC 1505 (Ch) and Amin –v- Amin & Others [2009] EWHC 3356 (Ch)  – to the broad general statements as to the application of ss.12 and 13 of TOLATA by the House of Lords in Stack.

These are complex issues of law. But they have significance beyond the arcane debates of the legal profession, in a society where many people reject the traditional notions of marriage for a variety of reasons.  A primary reason, perhaps, is that for the partner with the money, marriage has become an increasingly poor and unpredictable investment.  Society has changed so much in the last fifty years.  In the late 1950s there was a salary cap on footballers' wages of £20 per week.  Today, footballers earn enormous sums of money (as witness the absurd splurging of cash as the transfer window closed at the end of January this year).  The Professional Footballers' Association advises footballers not to get married for obvious reasons.  Instead they face the indignity and inconvenience of proceedings under Schedule One to the Children Act 1989.  The financial consequences of marriage – or rather, divorce - for wealthy men can be disastrous, particularly with the prospect of an obligation to meet lengthy and substantial post-divorce spousal maintenance, notwithstanding the statutory reforms of 1984 which were intended to encourage a clean break, without undue hardship, on divorce.

The common view (both expressed and inferred!) of the legal profession and the judiciary is that the law governing cohabitation disputes remains highly unsatisfactory, despite the well-intentioned efforts by the House of Lords in Stack to provide greater clarity and thereby deter unnecessary litigation at least in cases where the disputed property is registered in joint names but there is no express declaration of the trusts of the beneficial interests.  The current law is a Rubik's Cube of an enigma, which means that when one manages to get all the colours right on one of the six sides (there are many more sides in reality), the five other sides are speckled with inconsistent colours.

After the judgment of the Court of Appeal in Kernott –v- Jones, lawyers familiar with this area of the law welcomed a return to acceptable orthodoxy, whilst by contrast, the tabloid press fulminated at the apparent injustice of outcome to Ms. Jones.

Lawyers have no alternative but to advise their clients upon the law as it is and nod sympathetically when a client points to the unfairness of it all.   At the same time, lawyers must be acutely aware of advising clients upon a particular course of action when the law is in potentially violent flux.   For that reason, many matrimonial practitioners advised their clients not to settle ancillary relief cases whilst the decision in White –v- White [2001] AC 1 AC 596 was pending.  It is not clear how long it will take for the Supreme Court to deliver their judgment.  It may well be six months, bearing in mind the time-frame of Miller v Miller; McFarlane v McFarlane [2006] UKHL 24  and Radmacher v Granatino [2010] UKSC 42. We could be looking at November 2011.

The appeal in Kernott –v- Jones pending in the Supreme Court presents a very similar dilemma for practitioners attempting to advise cohabitees on the current state of the law affecting their homes.   It is probably unwise and may possibly, in certain circumstances, be negligent for lawyers to advise that a case should proceed to a final hearing when the law is "up for grabs" in this area. There may be cases where the issues raised by Kernott –v- Jones do not impact, but they are not easy to identify in advance of the delivery of the Supreme Court's judgment, the scope of which necessarily, remains unknown.  In cases where the disputed property is registered in joint names, the controversial notion of imputed intention is of significance at the second-stage enquiry as to quantification of the parties' respective beneficial interests. In cases where the disputed property is registered in a sole name, the controversy over the nature of the intention which it is legitimate to consider may well be relevant also at the first-stage enquiry as to whether there is an intention to share ownership at all.   The individual practitioner must consider his/her and the client's position with great care. We suggest that in many cases, the sensible advice will be: "hang on a minute, wait for the dust to settle and let's have another look at the legal landscape thereafter".

The appeal may also pose a dilemma for the Supreme Court itself. Should it, as the highest tribunal, take upon itself the task from which successive governments and the legislature have shied away, namely to take steps to cure the inherent injustices in the system, taking into account changing social conditions?  Should it attempt to develop the principles of equity in a radical way, perhaps to free the constructive trust in English law from the traditional shackles of the search for actual common intention and move towards the remedial constructive trust imposed – irrespective of actual intention – to prevent unconscionable conduct, as has occurred for instance in the Canadian and Australian jurisdictions?  But would it be constitutionally appropriate for the judiciary to undertake such a task, particularly where general public opinion does not appear to favour reform? It is interesting to note that the recent comments of the President of the Family Division, Sir Nicholas Wall, to the effect that legislative reform of the law is urgently needed were not accepted by 65% of readers of The Times in a recent survey This background may determine the scope of the judgments of the Supreme Court. We must simply wait and see.

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1 On a careful reading it is clear that Abbott was, in reality, concerned with the second stage of the enquiry: what was the extent of the woman's interest? In that case the husband as sole legal owner of the property conceded at first instance that his wife had an interest in the property by reason of her financial contribution to its acquisition.(Antigua has no equivalent of the Matrimonial Causes Act 1973 and ancillary relief cases are decided on trust principles)