10 November 2011

I am not going to regurgitate the facts of Jones v Kernott [2011] UKSC 53 which, although unusual, are now well known and a summary can be found here. The judgment of the Supreme Court was handed down on 9 November, the Court unanimously allowing Ms Jones' appeal and restoring the trial judge's order.

The Court was in agreement as to the principles to apply:

1. Where a couple jointly owns a property the starting point is that they are beneficial joint tenants in the absence of any express declaration of trust to the contrary.

2. This presumption of equal shares can be displaced if it can be shown that the parties had a different common intention at the time of purchase, or if their intention subsequently changed.

3. That common intention is to be deduced objectively from the parties' conduct.

4. If it is clear that the parties did not intend beneficial joint tenancy or that their intention has changed, but it is not possible to deduce from the evidence what shares the parties intended to hold the property in, the parties will be entitled to the shares which the court thinks fair having regard to the whole course of dealing in relation to the property. The court will impute an intention to them accordingly.

The majority - Lady Hale and Lords Walker and Collins - held that it could be inferred from the parties' conduct that they intended a 90% - 10% division of the jointly owned property in Ms Jones' favour, which was what the trial judge had ordered. Lords Kerr and Wilson however thought that it was not possible to infer such an intention on the evidence, but that did not impact on the result because they considered it was fair to impute that intention to the parties. So what's the difference? At what point does inferring intention stop and imputing an intention/imposing what is fair start?

The majority expressed the view that there was no real practical difference between inferring and imputing. Lord Collins said "one person's inference will be another person's imputation" and it would be difficult to imagine a scenario where in the absence of express agreement the court would infer a common intention which is unfair. The minority disagreed. Lord Kerr points out that it is somewhat artificial to say an intention is being imputed when what the court is actually doing is deciding what is fair, which is wholly unrelated to ascertainment of the parties' views. The parties will almost certainly never have had that intention at all. He thought it would be better to say that if an intention cannot be deduced from the parties' conduct, then the court will divide the beneficial interests to achieve a fair result, without elliptical reference to what the parties intended or would/should have intended. However he concedes that the "language of imputing intention has entered the lexicon of this area of law and it is probably impossible to discard it now." [para 74]

Lord Kerr was also concerned that the concept of inferring intention should not be strained. The court "should not be reluctant to recognize when it is appropriate to do so that inference of an intention is not possible and that imputation of an intention is the only course to follow." [para 72] "As soon as it is clear that inferring an intention is not possible, the focus of the court's attention should be squarely on what is fair and, as I have said, that is an obviously different examination than is involved in deciding what the parties actually intended." [para 75]

I am inclined to agree. Can you really say that in 1995 with just a small deposit on a property raised from cashing in his share of an insurance policy, Mr Kernott intended to walk away from his £30,000 interest (albeit subject to some mortgage) in the jointly owned property? With hindsight looking at the growth in equity in his own property and his lack of contribution to the outgoings on the joint property etc, you could say (as the minority did) that that was the fair result, but could anyone reasonably have been expected to have had the intention that was in the event inferred by the majority? Most couples do not have any specific intentions about the shares in which they hold property - they only think about it when they separate and lawyers start analysing their behaviour to try to establish the necessary intention to found a bigger share.

But where I am really struggling in relation to imputing intention is this: can the court impute at stage 2, or only at stage 4? Once you have established your change of intention, if you can't identify what shares the parties intended, it is clear that you can impute an intention and impose a fair division (at stage 4). But can the court impute a change of intention because it is fair to do so, such that it displaces the presumption of equal beneficial ownership (at stage 2)? Or can the court only infer a change of intention based on the evidence?

The wording of the judgment at stage 2 says it must be "clear" that the parties had a different intention or changed their intention. This suggests to me that there needs to be a finding of fact on the evidence - ie on the balance of probabilities. Based on the comments in this judgment [para 19] and in earlier caselaw about the strength of the presumption in favour of equity following the law, you would think there would need to be significant evidence of an initial different or subsequent change of intention. So evidence from which you could clearly infer an intention would, I would have thought, be the minimum required to clear that hurdle. Lord Wilson points out [para 84] that in Kernott the trial judge had found that the common intention required at stage 2 could be inferred (which he was entitled to do), so it was not necessary for the Supreme Court to consider whether that intention could also be imputed. "That question will merit careful thought." Yes. I'm still thinking.

Another question is how far will the court go to achieve "fairness"? In Kernott the departure from equal ownership was substantial, but the effect was broadly to equalise the parties' equity across both properties. If Mr Kernott had not had another property, the result would almost certainly have been quite different. Will the court's interpretation of fairness be informed by the law of financial provision on divorce? The Supreme Court kept the concept of fairness referable to the "whole course of dealing in relation to the property," but we are told that this notion is to be interpreted broadly and many factors, not just financial contribution can be taken into account. In the absence of legislation, will judicial sympathy creep in to support the economically weaker party in the name of fairness? How will factors such as the length of the relationship, the birth of children, or one of the parties becoming disabled affect outcomes? If the court senses injustice, will it be more ready to find that the intention of the parties cannot be ascertained to allow it to reach a fair result?

If it can be argued that the existence of a change of intention can be imputed to the parties, then fairness comes in at an earlier stage - ie the court would determine if it is fair for the beneficial shares to be other than equal as well as what the shares should be.

So, some difficult issues still to think about. Of course each case is to be decided on its own facts (and the facts of Kernott were unusual) and I wonder how many judgments we will now see saying "I infer from the parties' conduct that they intended that they would share the property in these shares. And in the alternative, even if it is not possible to infer such an intention, it is fair having regard to the whole course of dealing in relation to the property to impute such an intention to them." Probably quite a few.

Hayley Trim is a Family Law PSL at Jordan Publishing and was formerly a family solicitor practising in London.

She works on the Family Law online major works providing updating notes on cases and other relevant developments as they happen for The Family Court Practice, Children Law and Practice and Matrimonial Property and Finance online.

Contact Hayley on Twitter: @HayleyTrim

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