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Oxley v Hiscock Revisited: Part II - Quantifying The Interests

In the second part of his article on beneficial interests, Luke Barnes sets out how to quantify interests in the light of Oxley v Hiscock and Stack v Dowden.

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Luke Barnes, 3 Dr Johnson's Buildings

Part I of this article was published last month.

As Chadwick LJ said in Oxley, at [69], and as the Court of Appeal confirmed in Crossley v Crossley [2005] EWCA Civ 1581, evidence of what the parties said and did at the time of acquisition will often demonstrate their shared intention as to the amount of the beneficial interests, so that the court is not required to embark on a further inquiry. Crossley, per Sir Peter Gibson:

[32] the task of determining the fair share having regard to the whole course of dealing in accordance with Oxley v Hiscock need only be performed in the absence of an agreement, arrangement or understanding as to the nature and extent of the respective beneficial interests of the parties.

It was clear from the court's approach in Crossley that it saw the criteria for demonstrating an actual common intention as to quantum to be the same as those in relation to establishing a "first category" interest. The question for the court is whether there was an agreement, arrangement or understanding based on evidence of express discussions, however imperfectly remembered and however imprecise their terms.

The problem common to Oxley and Stack is: how is the court to quantify the parties' beneficial interests in the absence of evidence of discussions founding an agreement, arrangement or understanding ? I shall not deal in this article with the effect of an express declaration of trust, nor the possibility of varying the beneficial interests, but with the following five issues.

II (a) Whole course of dealing, fairness and intention.

II (b) Effect of joint legal ownership.

II (c) Interplay between constructive trust and proprietary estoppel.

II (d) Weight to be given to unequal contributions.

II (e) Homemaker versus breadwinner.

II (a) Whole course of dealing, fairness and intention


[69]. Where there is no evidence of any discussion between them as to the amount of the share which each was to have … it must now be accepted that (at least in this court and below) the answer is that 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. And, in that context, the "whole course of dealing …" includes the arrangements which they make from time to time in order to meet the outgoings (for example mortgage contributions, council tax and utilities, repairs, insurance and housekeeping) which have to be met if they are to live in the property as their home.

Chadwick LJ's use of fairness as the criterion was entirely deliberate, and was based upon his careful consideration (at [53 – 65]) of the basis of the Court of Appeal's decisions in Midland Bank v Cooke [1995] 4 AER 562 and Drake v Whipp [1996] 1 FLR 826.

Stack (CA)
Chadwick LJ ruled:

[26] There is no reason in principle why the approach to the … question - "what is the extent of the parties' respective beneficial interests in the property?" - should be different in a [joint names] case … from what it would be … in [a] sole name [case].

The cumulative effect of Oxley and Stack (CA) almost certainly represents the high water mark of "fairness" as a criterion and of the "whole course of dealing" approach to quantification. They would apply across the board in the absence of a common intention on quantum, based on evidence of express discussions (or expressed in a declaration of trust).

Stack (HL)

Lady Hale rejected "fairness" as the criterion of quantum.

[61] First … the search is still for the result which what the parties must, in the light of their conduct, be taken to have intended. Second … the court [may not] abandon that search in favour of the result which the court itself considers fair.

It would follow that shared intention (express or inferred), and not fairness, will define undefined shares in a 'sole name case' and in a 'joint names case', where the presumption of beneficial joint tenancy is rebutted.

As Lady Hale said:

[66] [The] questions in a joint names case are not simply "what is the extent of the parties' beneficial interests?" but "did the parties intend their beneficial interests to be different from their legal interests?" and "if they did, in what way and to what extent?"

What is more:

[62] .. at any one time [the co-owners'] interests must be the same for all purposes. They cannot at one and the same time intend, for example, a joint tenancy with survivorship should one of them die while they are still together, a tenancy in common in equal shares should they separate on amicable terms after the children have grown up, and a tenancy in common in unequal shares should they separate on acrimonious terms while the children are still with them.

Where Lady Hale and Chadwick LJ would agree is that, where the court's quantification is required, regard is to be had to their whole course of dealing in relation to the property. However, (see section II(d) below), it is notable that Lady Hale has very firmly asserted the primacy of financial contributions over wider, relationship-based ones.

II (b) Effect of joint legal ownership

Oxley and Stack (CA)
As set out above, the net effect of these two cases was to apply the criterion of fairness to sole and joint names cases, in the absence of evidence that the amount of the beneficial interests had been discussed. In Stack (CA) at [25-6], Chadwick LJ ruled that his Oxley approach would apply in a joint names case as well as a sole name case, although the fact of registration in joint names would

"plainly … be taken into account when having regard to the whole course of dealings between them in relation to the property".

Stack (HL)
Chadwick LJ's assimilation of sole and joint names cases was swept away. Per Lady Hale:

[58] [At] least in the domestic consumer context, a conveyance into joint names indicates both legal and beneficial joint tenancy, unless and until the contrary is proved.

It is very well-established law that the equitable interests of beneficial joint tenants are identical, being the same in extent, nature and duration (Goodman v Gallant [1986] Fam 106 at 119A). It is of the very nature of a beneficial joint tenancy that, upon a severance, each takes an equal aliquot share according to the number of joint tenants (ibid. at 118G).

Importantly, as considered in part I, the presumption of joint and equal beneficial interests ([58]) is very definitely rebuttable on the facts. But equal shares it is, unless the presumption is rebutted or the parties agree otherwise.

II (c) Interplay between constructive trust and proprietary estoppel

Oxley and Stack (CA)
For Chadwick LJ in Oxley:

[71] I think the time has come to accept that there is no difference in outcome, in cases of this nature, whether the true analysis lies in constructive trust or in proprietary estoppel.

Stack (HL)
Lord Walker of Gestingthorpe re-asserted an important distinction:

[37] Proprietary estoppel typically consists of asserting an equitable claim against the conscience of the "true" owner. The claim is a "mere equity". It is to be satisfied by the minimum award necessary to do justice (Crabb v Arun District Council [1976] Ch 179, 198), which may sometimes lead to no more that a monetary award. A "common intention" constructive trust, by contrast, is identifying the true beneficial owner or owners, and the size of their beneficial interests.

Proprietary estoppel and constructive trust will sometimes coincide to produce the same result on a given set of facts. Sometimes, however, they will not both arise on those facts. As Neuberger LJ said in Kinane v MacKie-Conteh [2005] EWCA Civ 45:

[51] the essential difference between a proprietary estoppel which does not also give rise to a constructive trust, and one that does, is the element of agreement, or at least expression of common understanding, exchanged between the parties, as to the existence, or intended existence, of a proprietary interest in the latter type of case.

In essence, where a first category common intention constructive trust is established on the facts, a proprietary estoppel in the "bargain category" will often arise. Where the required degree of common understanding is absent, a proprietary estoppel in the "non-bargain category" may nonetheless be present (Powell & or v Benney [2007] EWCA Civ 1283). In a case in the non-bargain category, it is well established that the judge has a wide discretion and should seek to make a just award, having regard to the assumption made by the claimant and the detriment which he has experienced (e.g. Sledmore v Dalby (1996) 72 P&CR 196, approved in Jennings v Rice [2002] EWCA 159, [2003] P&CR 8 at [56], per Robert Walker LJ (as he was)).

Nor did Robert Walker LJ rule that the judge's hands were tied in a bargain category proprietary estoppel case. Where the parties have "reached a mutual understanding which is in reasonably clear terms but does not amount to a contract … the court's natural response is to fulfil the claimant's expectations". Jennings v Rice ibid. at [50]. It was not suggested that was inevitable.

Furthermore, the passage cited above from Lord Walker's opinion in Stack (HL) (at [37]) does not suggest that the judge's discretion is fettered in any category of proprietary estoppel cases. It is submitted this is consistent with the court's role in granting relief, as the same judge had recognised in Jennings v Rice:

[56] The essence of the doctrine of proprietary estoppel is to do what is necessary to avoid an unconscionable result, and a disproportionate remedy cannot be the right way of going about that.

In contrast, where there was an agreement, understanding or arrangement as to the amount of the interests in a constructive trust case, this will be decisive. There is no discretion by which the judge may substitute his award for that which the parties intended. See Oxley and Crossley, considered above. Nor is there a requirement that the outcome should be proportionate to the detriment suffered by the claimant. This approach may (and does) lead to some manifestly unfair results.

I tentatively predict that the higher courts may soon be called upon to resolve the tension between common intention, on the one hand, and proportionality, on the other, in a cohabitants' case where both constructive trust and proprietary estoppel emerge on the facts.

II (d) Weight to be given to unequal contributions

Oxley and Stack (CA)
Both cases involved long term cohabitants. In each case the trial judge sought to survey the parties' whole course of dealing, in obedience to the authorities (especially Midland Bank v Cooke) and assessed the beneficial interests at 50:50.

In each case the Court of Appeal varied the judge's assessment: in Oxley to 60:40; in Stack (CA) to 65:35. In Oxley the only reason of fact given for the variation was that equal shares:

[74] Would give insufficient weight to the fact that [H's] direct contribution to the purchase price (£60,700) was substantially greater than [O's] (£36,300).

Giving the parties equal credit for the £30,000 balance of the purchase price (as the court did), the 60:40 split was almost exactly in line with their direct contributions to it.

In Stack (CA) the Court carefully analysed the source(s) of the purchase price of the property. Per Chadwick LJ:

[52] [If], on a true analysis, the whole of the purchase price … other than the mortgage advance was provided by Miss [D] from her own funds, then … it is impossible to reach the conclusion that it is fair, having regard to the whole course of dealing between the parties in relation to that property, that their beneficial interests should be equal. That conclusion fails to give proper weight to Miss [D]'s financial contribution to [its] acquisition.

The parties' financial contributions to the purchase were in the order of 80:20 in favour of Ms Dowden (although it is difficult to derive precise figures from the report). The Court of Appeal found that she was entitled to at least the 65% which she had pursued on appeal and which it awarded to her.

Stack (HL)
In considering whether Ms Dowden could show the common intention was to hold other than as joint tenants, Lady Hale expressed herself forthrightly in relation to the trial judge's conduct of the quantification exercise:

[87] He looked at their relationship rather than the matters which were particularly relevant to their intentions about this property. He founded his conclusion on the length and nature of their relationship, which he repeatedly referred to as a partnership, despite the fact that they had maintained separate finances throughout their time together. … this is not an adequate answer to the question. It amounts to little more than saying that these people were in a relationship for 27 years and had four children together. … Both co-operated in looking after the home and bringing up their children….

[89] The one thing that can clearly be said is that, when [the property] was bought, both parties knew that [D] had contributed far more to the cash paid towards it than had [S]. Furthermore, although they planned that [S] would pay the interest on the loan and premiums on the joint policy, they also planned to reduce the loan as quickly as they could. These are certainly factors which could, in context, support the inference of an intention to share otherwise than equally.

The context, she went on, was supplied by the fact that the parties did not pool their resources. The only things in their joint names were the property and the associated endowment policy. Everything else was kept strictly separate. Each made separate savings and investments. Each undertook separate responsibility for that part of the expenditure which each had agreed to pay. Therefore, this was a very unusual case. The context was strongly indicative that they did not intend their shares, even in a property put into both names, to be equal. Still less did they intend the right of survivorship to apply [there being no evidence that they understood it would do on the facts]. The presumption of beneficial joint tenancy was rebutted.

In Stack (HL), the disparity between the parties' direct contributions to the purchase was clearly the single most important factor in rebutting the presumption. On the one hand, Lady Hale's insistence on the importance of context (e.g. at [89] cited above and at [69], where she said "context is everything") suggests that the presumption will not readily be rebutted by the simple fact of unequal contributions. On the other, it seems to be an error to give significant weight to relationship-based factors.

II (e) Homemaker versus breadwinner

Surprisingly, the homemaker may well be in a position less advantageous than she was a decade ago. In Midland Bank v Cooke "the whole course of dealing" was brought centre stage by Lord Justice Waite. Mrs Cooke's share had been assessed at a mere 6.47% at first instance, on the basis of the arithmetical proportion of her contribution to the purchase price.

The Court of Appeal unanimously adjusted her beneficial interest to one half, expressly taking into account that the Cookes were married and that Mrs Cooke had raised three children, working full and part time as a teacher and paying out her earnings in relief of household bills. It is submitted that the cumulative effect of Oxley, Stack (CA) and Stack (HL) has been to worsen the homemaker's position considerably, unless the presumption of beneficial joint tenancy prevails in spite of her smaller direct contribution to the purchase.

Oxley (where no children were involved) made no reference to children as a factor, nor to the issue of how the court should approach its assessment of "the whole course of dealing" where the parties' respective contributions had been as homemaker and breadwinner. The trial judge in Oxley found that there was a classic pooling of resources, even though there was no joint bank account.

Stack (CA)
In his consideration of "the course of dealing" (at [27 – 36]), Chadwick LJ mentioned the length of the parties' relationship and that they were the parents to four children, aged from 7 to 2 at the time of the purchase. However, he gave such relationship-based factors no mention in the decisive paragraphs of his judgment.

Stack (HL)
A 27 year relationship and the raising of four children carried little or no weight in comparison with the disparity in the parties' capital contributions. Indeed, if Mr Stack had been a full-time carer and had made no direct financial contribution at all, it seems likely that Miss Dowden could successfully have argued his share down to well below 35%. This bodes ill for homemakers without capital to contribute to the purchase, unless and until the Law Commission's report no. 307 "Cohabitation: the Financial Consequences of Relationship Breakdown" leads to an Act of Parliament.

All emphases are added. Part I of this article and the author's articles on Stack (HL) (May 2007) and Oxley (July 2006) may be consulted on this website.

© Luke Barnes 2008