Jones v Kernott [2012] WTLR 125

Analysis

Patricia Jones and Leonard Kernott bought a property together (Badger Hall Avenue) in May 1985 and lived there until their relationship ended in October 1993. The legal title to Badger Hall Avenue was held by them jointly. Ms Jones had contributed £6,000 of the £30,000 purchase price with the balance funded by an interest-only mortgage. An extension had been built and funded by Mr Kernott and had increased the value of Badger Hall Avenue to £44,000. Ms Jones and Mr Kernott had a daughter (born 1984) and a son (born 1986) together.

It was common ground that, until October 1993, the parties held Badger Hall Avenue beneficially in equal shares. When Mr Kernott left, he stopped contributing to the mortgage and other outgoings. Badger Hall Avenue was placed on the market in October 1995 but was not sold. Ms Jones and Mr Kernott cashed in a joint life insurance policy and divided the proceeds at some point. Mr Kernott bought himself another property at 114 Stanley Road, Benfleet (Stanley Road) in May 1996 and took no further interest in Badger Hall Avenue. There was no evidence at all as to the parties’ subsequent intentions as to beneficial ownership.

At first instance, HHJ Peter Dedman had found that Badger Hall Avenue should be divided as to 90% for Ms Jones and 10% for Mr Kernott on the basis of what was just and fair having regard to Ms Jones’s payment of the deposit and her disproportionate contribution of 81.5% of the total mortgage interest payments together with the lack of assistance provided by Mr Kernott with the care of their children. HHJ Dedman found that the joint life insurance policy was cashed in and divided to enable Mr Kernott to purchase Stanley Road. The judge observed that Mr Kernott was able to afford Stanley Road because he was not making any contribution towards Badger Hall Avenue.

A first appeal to Mr Nicholas Strauss QC (sitting as a deputy judge of the High Court) was dismissed (see [2009] WTLR 1771). Mr Nicholas Strauss QC held that Mr Kernott’s argument that consideration of what is fair is not permitted suggested that fairness cannot have been part of the parties’ intentions. This would lead to a practical difficulty in establishing what the parties must be taken in light of their conduct to have intended. Where there is no evidence it is difficult to impute any intention to the parties other than that they intended that each should have a fair share, which could be ambulatory in that the shares could be quantified at any given point but changed over time.

The Court of Appeal allowed Mr Kernott’s appeal by a majority (Rimer LJ and Wall P; Jacob LJ dissenting) on the basis that imputation of intention was not permitted in the absence of an intention either express or inferred (see [2010] WTLR 1583).

Held (allowing the appeal and restoring the order of HHJ Dedman)

Per Baroness Hale and Lord Walker

1. 1. The presumption of resulting trust made more sense when it was tempered by the presumption of advancement. Abandoning the latter while retaining the former would be too narrow an emphasis. In the case of a purchase in joint names for joint occupation by a married or unmarried couple where both are responsible for paying the mortgatge, there is no presumption of resulting trust. The presumption is that the parties intended a joint tenancy both in law and equity. That presumption can be rebutted by evidence of a contrary intention (paras [24-25]).
2. 2. The search is primarily to ascertain the parties’ actual shared intentions, either express or inferred. Two exceptions are, firstly, where a resulting trust applies (which is rare in a domestic context but might arise where domestic partners are also business partners); and, secondly, where it is clear that beneficial ownership is to be shared but it is impossible to divine a common intention as to the proportions. In these cases, the court is driven to impute an intention that the parties may never have had (para [31]).
3. 3. Where the parties already share the beneficial interest and the question is what their interests are and whether these interests have changed, the court will try to determine their actual intentions. If the court cannot deduce what shares were intended, it may have to ask what their intentions as reasonable and just people would have been if they had thought about it at the time (para [47]).
4. 4. In this case, there is no need to impute an intention that the parties’ beneficial interests would change because the judge made a finding that their intentions did in fact change. Such inferences are not difficult to draw. The logical inference is that Mr Kernott intended his interest in Badger Hall Avenue to crystallise around the time he bought Stanley Road. Mr Kernott would get the sole benefit of any capital gain in Stanley Road and Ms Jones would get the sole benefit of any further capital gain in Badger Hall Avenue (para [48]).

Per Lord Collins

At the first stage of the enquiry (namely whether there was a common intention that the property be beneficially owned other than in line with the legal title), the presumption of equality can, in the absence of express agreement, be inferred (rather than imputed). In the present context, the difference between inference and imputation will hardly ever matter (paras [64-65]).

Per Lord Kerr

1. 1. A strong demarcation should remain between inference and imputation. An imputed intention is one attributed to parties, even though no such actual intention could be deduced and even though they had no such intention. The exercise is unrelated to ascertainment of the parties’ views and is concerned with the court deciding what is fair. As soon as it is clear that inferring an intention is not possible, the focus of the court’s attention should be on what is fair (paras [73-75]).
2. 2. It is difficult to infer that Mr Kernott actually intended that his interest in Badger Hall Avenue should crystallise. However, it was eminently fair that Badger Hall Avenue should be divided as HHJ Dedman had divided it. It is impossible to infer that this is what was intended but such an intention should be imputed to them (paras [76-77]).

Per Lord Wilson

1. 1. There are two questions. The first question is whether there was a common intention (albeit not necessarily at the outset) that the beneficial shares of Ms Jones and Mr Kernott should be other than equal. The second (arising only on an affirmative answer to the first question) is to determine in what proportions the beneficial interests are held (para [82]).
2. 2. The court may supply or impute a common intention as to the parties’ respective shares, ie the answer to the second question. HHJ Dedman had found that the common intention required by the first question could be inferred. This case does not therefore require consideration whether equity allows the intention required by the first question to be imputed. That question will merit careful thought (paras [83]-[84]).
3. 3. The suggestion that the distinction between inference and imputation may not be great goes too far. In this case, there is insufficient evidence to infer an answer to the second question and it is more realistic to impute to the parties an intention that Badger Hall Avenue should be held in the proportions 90% to Ms Jones and 10% to Mr Kernott (para [89]).

JUDGMENT LORD WALKER AND LADY HALE: [1] This appeal gives the Supreme Court the opportunity to revisit the decision of the House of Lords in Stack v Dowden [2007] WTLR 1053. That case, like this, was concerned with the determination of the beneficial interests in a house acquired in joint names by an unmarried couple …

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