Navigating the unknown

It is often thought that co-ownership disputes arise only on the separation of cohabitants. It follows then, that such cases are solely the preserve of the specialist family lawyer. The recent case of Graham-York v Leeds Building Society [2015] EWCA Civ 72 illustrates that such disputes can just as readily involve an estate.

It is not uncommon for such disputes to arise where one cohabitant (or indeed spouse) becomes bankrupt. Some familiarity with this area of law is thus a necessary part of the toolkit of most private client advisers.

The background

Since Stack v Dowden [2007] 2 AC 432 and Kernott v Jones [2012] 1 AC 776, we have known that where property is purchased as a home and in the joint names of two persons, there is a strong presumption that it is to be owned in equal beneficial shares.

Of course, to muddy the waters,
the courts in both Stack and Kernott found little difficulty in departing from that presumption. Nonetheless in a 'joint names case', advisers have a pretty clear idea where the court starts and a strong steer as to where it will end up.

Far less easy to predict is where property is purchased in the sole name of one co-habitant ('A') but the other ('B') nonetheless claims an interest; a 'single name case'. In this type of case, once some agreement to share the beneficial interest has been shown or inferred, the court is often left inferring or imputing what shares the parties 'would have agreed'.

In doing so the court is entitled to look at both financial and non-financial contributions that the parties have made to their joint household. Graham-York illustrates the particular difficulties with evaluating these non-financial contributions.

The facts of Graham-York

Miss Graham-York and Mr York had been partners and co-habitants for some 33 years prior to Mr York's death. They lived in a property in West London, registered in the sole name of Mr York. The property had been purchased five years into the parties' co-habitation in late 1982, with the aid of a mortgage.

The couple lived at the property together from 1985 until Mr York's death in 2009; a period of some 24 years. The parties had had two children, one of whom had lived with them at the property. The relationship was characterised as being controlling and abusive on the part of Mr York.

After Mr York's death, Miss Graham-York carried on living at the property. She did not pay the mortgage and it fell into arrears. The mortgage lender brought possession proceeding in 2011 against Mr York's estate. Miss Graham-York played no role in administering Mr York's estate.

Mr York's son, from a previous relationship, was the sole personal representative. Miss Graham-York joined the possession proceedings, in her own right, asserting a 50 per cent beneficial interest in the property and further, and somewhat optimistically, claiming that such interest was to take priority to the mortgage lender.

First instance decision

At first instance, the judge was left to make bricks with straw in relation to the evidence of financial contributions. There was, it appears, no contemporaneous documentation. Mrs Graham-York's earnings had been sporadic and she had not had any remunerative employment since 1985.

However it was clear that Miss Graham-York had been working at the time of the purchase of the property, and from this alone, the judge was prepared to infer that she had contributed in some way to the purchase price.

From this contribution the judge was able to readily infer an agreement to share the beneficial interest in the property. This allowed Miss Graham-York to clear the first hurdle in a single name case - the finding of an express or inferred agreement to share the beneficial interest.

The judge then moved on to the second hurdle of trying to establish the extent of Mrs Graham-York's beneficial interest. She rejected the assertion by Mrs Graham-York that there had been an express agreement to share equally.
If this agreement could be found, it would have been definitive as to shares.

However in single name cases, such express agreements as to shares tend to be the exception. They are often alleged by B, usually denied by A, and due to absent contemporaneous evidence, courts tend to be sceptical.

The court was therefore left to infer or impute the shares the parties would have agreed. In doing so the judge referred to and applied the test from the seminal judgment of Chadwick LJ, in Oxley v Hiscock [2005] Fam 211, namely that the courts are left to decide the shares 'which the court considers fair, having regard to the whole course of dealing between...[the parties] … in relation to the property'.

In looking at the whole course of dealing, the judge found that Mr York had always been the main breadwinner. Miss Graham-York's financial contribution during the entirety of the co-habitation, even put at its highest, 'did not amount to much'.

However the judge found that Miss Graham-York had made non-financial contributions to the household by cooking meals and, jointly with Mr York, bringing up their daughter. Doing the best she could, and in her view being generous to Miss Graham-York,
the judge assessed Miss Graham-York's share in the property as 25 per cent, after deduction of the mortgage.

Clearly the judge arrived at this figure more by impression than arithmetic. Moreover this was a case where, given the evidence, the court was clearly imputing rather than inferring; a matter expressly noted, without any disapproval, by the Court of Appeal.

The view of the Court of Appeal

Miss Graham-York appealed, seeking equal shares. The basis of her case was that given the length of the co-habitation, the fact that the parties brought up a child together and that Miss Graham-York had financially contributed to the best of her ability, fairness demanded equal sharing.

Such an argument would have been unanswerable had the court been considering the division of the property on a divorce.

The Court of Appeal rejected this approach. Tomlinson LJ emphasised that when looking at the whole course of dealing, the court had to consider Miss Graham-York's 'contribution, both financial and non-financial, in relation to the property which was their family home for many years. He emphasised three features of a single name case:

1. Even where there were substantial contributions from B, there was no presumed starting point of equality of interests.

2. The suggestion that fairness required equality of interest was hopeless.

3. In respect of the judicial assessment of what is fair, there was no one right answer and thus, an appellate court should be reluctant to interfere.

Tomlinson LJ was keen to point out that one could be, as he saw it, 'led astray by the length of cohabitation'. However he added: 'It is obviously true that in the normal case the non-financial contribution is likely to be proportionately greater the longer the cohabitation'.

What he was not saying was that length of cohabitation was irrelevant, rather that lengthy co-habitation was insufficient, of itself, to overcome the paucity of Miss Graham-York's financial contribution.

Tomlinson LJ made it clear that it was not the function of the court to compensate Mrs Graham York for the abusive nature of the parties' relationship, and that the court was not engaged in 'redistributive justice'.

Ultimately Tomlinson LJ was not prepared to interfere with the first instance finding of a 25 per cent share. However he acknowledged that had the judge found a larger share of, say 33 per cent, this would have been equally unassailable. In his view, for the appellate court to increase the share to this extent would be unprincipled, lead to accusations of 'tinkering', and would simply encourage appeals in this sort
of case.

Discussion

While Tomlinson LJ's desire to discourage appeals is understandable, many clients will see the difference between a 25 per cent share and a 33 per cent share as more than a matter of mere tinkering. This is particularly so given the huge equity increases in many houses, especially in London and the South East.

Moreover the breadth of judicial discretion revealed emphasises how difficult it is to accurately predict the outcome of these cases. Understandably Tomlinson LJ does not attempt to define the full band of the discretion that was available to the first instance judge. However it does raise the question, would 20 per cent have been appealable? Would 40 per cent?

The case also illustrates how the law has moved on, albeit subtly, even from Oxley. There, Chadwick LJ had considered 'the whole course of dealings', essentially in terms of financial dealings, albeit in the broad sense.

He stated that the course of dealings included 'the arrangements which … [the parties]… 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'.

Indeed in allowing the appeal from the first instance judge (who had awarded Mrs Oxley 50 per cent), Chadwick LJ essentially carried out an arithmetic calculation of overall financial contributions, so as to substitute a 40 per cent share to Mrs Oxley as her fair share.

As expressly stated in Kernott by Baroness Hale and Lord Walker, financial contributions are relevant but are not the only means of deducing what the parties either intended, or what was fair. Thus purely arithmetic calculations become difficult, if not impossible. Yet the temptation for a court to at least start with some sort of arithmetic calculation is great, as it lends apparent objectivity to what otherwise looks increasingly like a subjective exercise.

Estates

In cases involving estates, it is worth noting the possible interplay with claims under the Inheritance (Provision for Family and Dependants) Act 1975. In Graham-York reference was made to Webster v Webster [2009] 1 FLR 1240.

In Webster (in contrast to Miss Graham-York) B had made regular financial contributions over a period of 27 years. Nonetheless her contributions were still significantly less than A. Judge Behrens in that case had thought a share for B in the range of 33 per cent to 40 per cent was likely to be fair. However this assessment was strictly obiter.

Judge Behrens did not feel it necessary to reach a firm conclusion on B's exact beneficial interest, in light of the award he was prepared to make on B's claim through the inheritance act. Despite Webster, it will often be the case that the beneficial interests will have to be established before the inheritance act claim is considered.

Where B is making claims both for a beneficial interest in property and an inheritance act claim, it is appropriate case management for these to be heard at the same time. A peculiar feature of Graham-York was that although inheritance act proceedings had been issued, these were proceeding separately.

This may be the result of the co-ownership dispute arising within possession proceedings brought by the mortgage lender. Separate proceedings are certainly not the usual (or sensible) course.

So where does the law now stand?

It is certainly not absolutely clear. Moreover, it is always dangerous to extrapolate too wide a principle from
the facts of one case.

Nonetheless this author would suggest that what follows is a useful, if tentative, summary (see below) of how courts will factor in non-financial contributions if required to infer or impute shares in a single name case.

 

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Where the law stands now

• The court will still always start by looking at financial contributions, in the broad Oxley sense, and if the evidence allows, is likely to attempt some form of arithmetic calculation of overall contribution at least as a starting point.

• Financial contributions are still likely to be given the greatest weight.

• Non­financial contributions can be important and the longer the co­habitation (particularly with joint responsibility for children) the more likely it is to be so.

• Where there are significant non­financial contributions, these are likely to enhance the share that a lesser contributor would otherwise get merely by reference to financial contributions.

• However that enhancement is unlikely to make up entirely for a marked difference in financial contributions. Even in cases of lengthy co­habitation, where the lesser contributor has nonetheless given all they had, this will not of itself lead to equality.

• The extent of any enhancement caused by non­financial contributions is very difficult to predict and will inevitably vary, possibly greatly, from judge to judge. Whatever the assessment of the trial judge, the appellate courts will be slow to interfere.

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Christopher Stirling is a barrister at Field Court Chambers