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Fair Outcomes as Common Intentions? The Debate in Kernott v Jones

In advance of the Supreme Court’s consideration of Kernott v Jones, Dr Robert H. George, Senior Law Tutor, Jesus College, University of Oxford considers the role of fairness in the resolution of Cohabitation Claims disputes.















Dr Robert H. George
1
Senior Law Tutor, Jesus College, University of Oxford

The Supreme Court is shortly to hear the appeal from Kernott v Jones [2010] EWCA Civ 578, a case about former cohabitants' property. The key question raised by that case is about when it is appropriate to depart from the presumption of a beneficial joint tenancy, and how the beneficial shares should be quantified when that presumption is rebutted. The crux of the debate is about the role of 'fairness' in answering those questions.

The House of Lords has clearly stated that the judge's job in these cases is not to find 'the result which the court itself considers fair', but is rather to find 'the result which reflects what the parties must, in the light of their conduct, be taken to have intended': Stack v Dowden [2007] UKHL 17, para [61]. However, this article suggests that 'fairness' might still have a role in such cases. Cohabitants' financial and other arrangements usually vary over time, and they often view their relationship and their property in terms of contributions (broadly conceived) and sharing. Given these facts, it is reasonable for cohabitants to think about owning property in 'fair shares'. In other words, they have a common intention that the outcome will be fair, and the court can and should give effect to that common intention.

The facts
The facts of Kernott v Jones can be stated shortly. Mr Kernott and Ms Jones bought a house together in joint names in 1985. The outgoings on that property (including the mortgage and other bills) were met by Ms Jones, with Mr Kernott contributing to the house by paying money to Ms Jones and doing substantial building work. They had two children before the relationship ended in 1993, whereupon Mr Kernott moved out. Ms Jones continued to pay the mortgage and bills, as she had before, but Mr Kernott no longer provided financial assistance. Indeed, he had almost nothing to do with the property, and focused instead on purchasing a new house with a new partner. This arrangement continued for more than 14 years until, in 2008, Mr Kernott issued a notice of severance. In response, Ms Jones initiated proceedings under TOLATA and, at trial, obtained a declaration that she owned 90% of the house. That decision was upheld by Deputy High Court Judge Nicholas Strauss QC (Jones v Kernott [2009] EWHC 1713 (Ch), but a majority of the Court of Appeal (Wall and Rimer LJJ, Jacob LJ dissenting) reversed the decision, holding the property to be owned in equal shares. 

Kernott v Jones raises important questions. However, despite some discussion in both the High Court and the Court of Appeal about the role of imputed intentions, it is suggested that this argument may be something of a red herring, masking a more interesting debate about the nature of 'common intentions' in constructive trust cases.

Express and Inferred Intentions
As a starting point, it is worth recalling the conventional understanding of the court's role in common intention constructive trust cases. The starting point is that 'equity follows the law', such that joint legal ownership gives an equitable joint tenancy, and sole legal ownership gives that owner the entire beneficial interest: Stack v Dowden, paras [33], [54] and [109].

Kernott was a joint ownership case, and Stack is clear that departing from the presumption of beneficial joint tenancy is 'not a task to be lightly embarked upon': Stack, para [68]. However, where the presumption is rebutted, that is done by 'ascertain[ing] 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': Stack, para [60]. Baroness Hale's reference here to 'actual, inferred or imputed' intentions was part of the main disagreement between the High Court and the majority of the Court of Appeal.

As to express or inferred intentions, there was broad agreement about the court's role. Rimer LJ explained his position at para [76]:

'The key feature of Stack is ... the task that the majority sets for trial judges, namely that of searching for the parties' shared intentions – "actual, inferred or imputed" – with respect the property. Since an inferred intention must also be an actual intention, I presume that Baroness Hale used the word "actual" as a synonym for "express", referring thereby to an intention that the parties had expressly uttered, either orally or in writing. Contested cases in which there is an issue as to whether there has been any such expression of intention are, I suspect, probably relatively rare. The likelihood is that in most contested joint purchase cases the parties will have remained silent as to whether they intended their beneficial shares to be other than joint. In such a case one exercise clearly set by Stack is to investigate whether there is any basis for inferring an intention that their shares were to be of particular proportions (an intention which, from the parties' standpoint, might perhaps more conventionally be regarded as an implied one). In most cases such a quest may well be elusive, because of the parties actually had any such intention, they would have voiced it; and if they did not voice it, that will probably be because they did not have one, with the consequence that there will be no basis for inferring otherwise.'

It is worth noting the limited interpretation of when intentions can be implied. His Lordship's argument seems to be this: the search is for express or implied intentions; however, if the parties had intentions they would have made them express, and their failure to express any intentions indicates that it is unlikely that there will be evidence from which the court can infer them.

The narrowness of this view may be thought slightly surprising, but Wall LJ makes a similar remark in para [62]:

'If this appellant and this respondent had truly intended that the appellant's beneficial interest in the property should reduce post separation, or if the property was to belong to the respondent when the appellant acquired his own house, they should have so decided and acted accordingly by adjusting their beneficial interests in the property. I cannot spell such an intention out of their actions.'

Respectfully, the whole point of implied intentions is that they are not express, and are inevitably to be spelt out of the parties' actions or indirect conversations. Baroness Hale gave a non-exhaustive list of relevant factors which would be used to infer intentions in her judgment in Stack v Dowden (para [69]), few of which involved any verbal discussion at all. The parties' failure to voice their intentions does not mean that there is no basis for inferring those intentions from their actions.

Imputed Common Intentions
It is conventionally thought that 'imputing' an intention means that the court makes up an intention which the parties never actually had. In Pettitt v Pettitt [1970] 1 AC 777 at 804-5, Lord Reid explained imputation as being impermissible in this way:

In reaching a decision the court does not find and, indeed, cannot find that there was some thought in the mind of a person which never was there at all. The court must find out exactly what was done or what said and must then reach conclusion as to what was the legal result. The court does not devise or invent a legal result. Nor is the court influenced by the circumstances that those concerned may never have had occasion to ponder or to decide as to the effect in law of whatever were their deliberate actions. ...  Nor is there power to decide what the court thinks that the parties would have agreed had they discussed the possible breakdown down or ending of their relationship. Nor is there power to decide on some general principle of what seems fair and reasonable how property rights are to be re-allocated.

However, the position after Stack is perhaps less clear. 2 In the High Court in Jones v Kernott, Deputy Judge Nicholas Strauss QC explained his understanding of the role of imputed intentions in paras [30] and [31] of his judgment:

'In my view, what the majority in Stack held was only that the court should not override the intentions of the parties, insofar as that appears from what they have said or from their conduct, in favour of what the court itself considers to be fair. They key words used by Baroness Hale are that the court must not "impose its own view of what is fair".

To the extent that the intentions of the parties cannot be inferred, the court is free ... to impute a common intention to the parties. Imputing an intention involves ... attributing to the parties an intention which they did not have, or at least did [not] express to each other. The intention is one which the parties "must be taken" to have had. It is difficult to see how this process can work without the court supplying, to the extent that the intention of the parties cannot be deduced from their words or conduct, what the court considers to be fair. In particular, in the present case, if there is evidence of conduct from which it is right to conclude that the parties intended their respective shares to alter following Mr Kernott's departure, but none to indicate how, the only available criterion by which to assess the extent of the alteration is what is objectively fair, and the only available judge of that is the court.' [The Deputy Judge's emphasis.]

Rimer and Wall LJJ disagreed with this approach. Rimer LJ confessed that he did not understand what Baroness Hale meant by the word 'impute' in this context (para [77]):

'It is possible that she was using it as a synonym for inferred ..., in which case it adds nothing. If not, it is possible that she was suggesting that the facts in any case might enable the court to ascribe to the parties an intention that they neither expressed nor inferentially had: in other words, that the court can invent an intention for them. That, however, appears unlikely, since it is inconsistent with Baroness Hale's repeated reference to the fact that the goal is to find the parties' intentions, which must mean their real intentions. Further, the court could and would presumably only consider so imputing an intention to them if it had drawn a blank in its search for an express or an inferred intention but wanted to impose upon the parties its own assessment of what would be a fair resolution of their differences. But Baroness Hale's rejection of that as an option at paragraph [61] must logically exclude that explanation.' [Rimer LJ's emphasis.]

Any form of imputing was therefore impermissible. Rimer LJ thought that there was no evidence to indicate that the parties had an actual intention to have unequal shares, let alone an intention as to what those shares would be (para [83]) – and evidence of both of those things would be required to rebut the presumption of equity following the law. Avoiding an outcome of equal shares would therefore require imputing an intention to the parties, and the majority judges were clear that that was not allowed.

Fair Outcomes as Common Intentions
This discussion of the meaning and appropriateness of imputing intentions was, perhaps unsurprisingly, the focus of the judgments in Kernott, and it would be helpful for the Supreme Court to resolve these questions. 3 However, it is suggested that this focus may have caused a second strand of the High Court's judgment to be overlooked.

After the discussion of imputation quoted above, Nicholas Strauss QC suggested five reasons why fairness was important in cases like Kernott. Although these reasons were expressed as supporting the Deputy Judge's views on imputing intentions, that may be a misconception – and they in fact reveal something potentially more interesting. The Deputy Judge's second, third and fourth reasons are worth considering in full (paras [33] to [35]):

'Second, in many cases ... the parties have not indicated in any way what their respective shares are to be, or how they are to be altered to take account of changing circumstances. In such cases, their actual or subconscious intention may well be that their respective shares, if they cannot reach agreement when circumstances change, should be whatever the court decides is fair in the new circumstances. If one were to ... ask ... "... what is to happen if you split up and one of you remains in [the house], and takes over complete responsibility for it, and the other leaves", many if not most couples would be unable to give a clear answer, because of the wide variety of considerations which might then arise. They might well say that they would try to reach agreement, but if this proved impossible they would leave it to the court to decide what was fair: that is what courts are for.

Third, to say that consideration of what is fair is impermissible suggests that fairness cannot be any part of what the parties intend or are to be taken to have intended. But the court can hardly assume that two parties, who have not fully clarified their intentions as to their respective beneficial interests, either initially or on the breakdown of the relationship, do not intend considerations of fairness to be relevant in determining their eventual interests.

Fourth, if considerations of fairness are to be wholly set aside in such cases, there will be practical difficulty in searching for a result which the parties must in the light of their conduct be taken to have intended ... when there is no evidence as to what they did intend as regards their respective shares. It is difficult to see what intention could then be imputed to the parties other than that each should have his or her fair share in the light of all the circumstances. If that were to be disregarded, there would be no way in many cases of resolving the issue.' [The Deputy Judge's emphasis.]

In other words, the Deputy Judge is saying that fairness may be relevant because that is what the evidence shows that the parties intended. The court's job in such a case will be to make that assessment of what is fair, based on the whole course of dealing between the two parties.

This approach, despite some indication by the Deputy Judge (and Jacob LJ) to the contrary, does not necessarily involve imputing any intention to the parties: their intentions (usually inferred, but perhaps they could be express) are that the outcome be fair in all the circumstances, and the court is merely adjudicating what is fair. 4 If this is an actual intention that the outcome be fair, then the parties' intentions have not been doctored in any way. The judge is not at liberty to 'override' the parties' intentions with a 'fair' outcome – but if the parties' intentions are that there be a fair outcome (and not anything more specific), is that something which the courts can legitimately use?

Empirical Research
In order to help answer this question, it may be useful to look at some of the research evidence about cohabitants' behaviour in relation to their property. It is clear that cohabitants are a varied and changing group of people. 5 Anne Barlow and colleagues point out that there is widespread misunderstanding about the law regarding cohabitants, with most believing that the law offers them considerably more protection than it does. 6 Couples in intimate relationships do not behave in a 'legally rational' way – even those who knew that they needed to take action to protect their position did not do so. 7

This situation is partly caused by the fact that few cohabitants seek legal advice about their situation, either before starting to cohabit or when they break up. 8 Gillian Douglas and colleagues conducted research with cohabitants who had sought legal advice, and still found that agreements about property ownership were rare, and where they existed tended to be informal. 9 Contrary to the weight given to them by the courts, 10 such agreements were often unhelpful:

'far from providing the definitive evidence envisaged, the existence of some form of agreement – albeit informal or unsigned – had as much potential to exacerbate as to clarify issues. For most couples, however, the idea of making an agreement seems never to have occurred to them.'  11

At the same time, this study demonstrates again that couples' financial arrangements are complicated and difficult to use as a basis for conclusions about their intentions. 12 While two thirds of the couples in Douglas et al's sample had separate bank accounts, the authors stress that:

'the day to day management of finances showed an entirely different picture, with little correspondence to the formal mode of ownership. Our sample was divided more or less equally between those couples who managed their finances together, and those where one partner had taken on that responsibility. ...

We could find no patterns of financial organisation to do justice to the myriad of facets which contribute to a full and meaningful picture of how finances are organised. Furthermore, the ways in which finances are organised are prone ... to change over time. Organisation of finances in partnerships appeared to be based far more on pragmatic and circumstantial factors of an individual and idiosyncratic nature, than on the "type" of relationship, formal modes of ownership or any notion of commitment.' 13

Cohabitants' financial arrangements are rarely static over time. As the authors say, their sample included 'many couples where financial organisation had clearly been of a dynamic nature, changing several times to accommodate new situations'. 14

In a different study, Rosalind Tennant and colleagues discussed cohabitants' ideas of 'fairness', which they point out to be a complex issue which can be addressed from many angles. They discuss several possible lenses through which the 'fairness' of outcomes could be assessed:

1. legal ownership
2. equality of contribution, impact, or outcome
3. needs after cohabitation
4. change in position compared to the start of cohabitation
5. outcomes under cohabitation law
6. outcomes under divorce law.  15

Participants made telling remarks about wanting outcomes which 'recognised the significance of their contribution' and which 'did not disadvantage either party significantly more than the other, suggesting a notion of equality of impact'. 16

Conclusions
Empirical studies tell us a number of important things about cohabitants. The key things, though, are these:

• cohabitants do not understand the law and do not protect themselves even when they do;
• like anyone else, cohabitants' financial affairs are complicated and dynamic;
• cohabitants see themselves as being in committed relationships which are often characterised by ideas of 'fairness' – but fairness is a complex idea, and since each party may have a different idea of what would be fair, court adjudication may be inevitable in the absence of agreement.

Given these facts, it seems entirely unsurprising that cohabitants who are buying property together (or who start to live together in a house being bought by one of them already) do not have clear, express discussions about property division. They think (hope) that it will never matter, and in any case are justified in thinking that circumstances are likely to change during the course of the relationship. In other words, Nicholas Strauss QC was quite right to suggest as a general point that '[cohabitants'] actual or subconscious intention may well be that their respective shares, if they cannot reach agreement when circumstances change, should be whatever the court decides is fair in the new circumstances' (para [33]).

Here, the Deputy Judge makes the point in general. Turning to the specifics, though, the question in each case is: did these cohabitants actually intended a fair outcome? In order for this approach to avoid imputing intentions to the parties, there needs to be evidence from which express or inferred intentions of fair outcomes can be discerned. This is a question for the trial judge.

However, if the evidence shows that these cohabitants' actual intentions (whether express or, more likely, inferred) were that the property should be held in fair shares, those intentions should be given effect by the court. There is no reason in principle not to allow this approach (though it might not sit comfortably with the general aim of avoiding litigation in these cases, 17 which may become increasingly significant as legal aid becomes scarcer). Nothing is imputed under this approach. The court's evident desire to reach a fair outcome in disputes about former cohabitants' property rights can be met by recognising that many cohabitants actually intended that the outcome be fair.

____________________________________

1 Thanks to Michael Ashdown, Professor Gillian Douglas and the participants at the Socio-Legal Studies Association conference at Sussex University for helpful comments on an earlier draft this paper. The views expressed and any errors are mine alone.

2 S Gardner and K Davidson, 'The Future of Stack v  Dowden' [2011] Law Quarterly Review 13

3 Ibid.

4 A purported express trust in shares which were fair would likely be void for uncertainty, but a constructive trust in fair shares ought still to be possible. The factors which Stack v Dowden points to in para [69] (in particular, things like 'the purpose for which the home was acquired' and 'the nature of the parties' relationship') are no more or less certain than 'fairness', prior to court adjudication.

5 A Barlow, S Duncan, G James and A Park, Cohabitation, Marriage and the Law: Social Change and Legal Reform in the 21st Century (Hart, 2005), p 65. See also M Maclean and J Eekelaar, 'The Obligations and Expectations of Couples Within Families' (2004) 26 Journal of Social Welfare and Family Law 117.

6 Ibid, pp 28-39.

7 Ibid, pp 95-98. See also Gardner and Davidson, n 2, pp 15-16: 'The context under discussion is one in which people will not normally formulate agreements, but (this is crucial) the very reason for this – the parties' familial trust in one another – also warrants the law's intervention nonetheless.'

8 G Douglas, J Pearce and H Woodward, 'A Failure of Trust: Resolving Property Disputes on Cohabitation Breakdown' (2007), online at www.law.cf.ac.uk/research/researchpapers/paper1.html.

9 Ibid, paras [5.5]-[5.7].

10 Goodman v Gallant [1986] Fam 106 (CA); Stack v Dowden [2007] UKHL 17, [2007] 1 FLR 1858, [49].

11 G Douglas, J Pearce and H Woodward, n 8, para [5.8].

12 This point was made by several people when considering the 'exceptional' nature of the financial arrangements in Stack: see eg R George 'Stack v Dowden: Do as We Say, Not as We Do?' [2008] Journal of Social Welfare and Family Law 49, pp 54-55.

13 G Douglas, J Pearce and H Woodward, n 8, paras [4.33] and [4.37].

14 Ibid, para [4.29].

15 R Tennant, J Taylor and J Lewis, 'Separating from Cohabitation: Making Arrangements for Finances and Parenting' (DCA Research Series 7/06, 2006), pp 85-86.

16 Ibid, pp 91 and 93.

17 Goodman v Gallant [1986] Fam 106 (CA); Stack v Dowden [2007] UKHL 17, [2007] 1 FLR 1858.