Split decision

The long running saga of Jones v Kernott finally came to an end in November 2011, after some three years of litigation, appearances before four levels of courts and the opinions, indeed judgments, of some ten judges, ranging from the original trial judge at Southend-on-Sea County Court to judges sitting in the highest court in the land, the Supreme Court. Family lawyers have been poring over the judgment of Lord Walker and Lady Hale, Lord Collins, Lord Kerr and Sir Nicholas Wilson – who unanimously allowed the appeal of Ms Jones and restored the original decision reached in Essex – whereby Mr Kernott, a joint owner of the family home, retained a ten per cent interest after seeking 50 per cent. Neither Jones nor Kernott can possibly have foreseen the level of interest the disintegration of their relationship and subsequent property dispute would result in.

Muddy waters

The final judgment was intended to give much sought-after clarity to lawyers advising couples who own property jointly and then dispute exactly how much each of them should get when the relationship breaks down. I am not sure that absolute clarity has been achieved, though the waters are certainly not as muddy, and I am sure that within the next five years there will be another case heading for the Supreme Court that has arisen out of a cohabiting relationship gone sour. That is no criticism of the courts or those people who feel the need to knock on the doors of justice. Put simply, if you are married it matters not a jot who or how the family home is owned – it will fall into the pot for division regardless. The courts have a pretty free rein in how to distribute property to reach a ‘fair’ outcome – although of course I accept that one man’s ‘fair’ is another’s injustice.

However, if you are not married then you are thrust into the hugely complex arena of property law, express and implied trusts, and now even imputed trusts. This area of law has not been designed for the shift in social norms we see today. An estimated 2.2m people in England and Wales (one in six of all couples) are currently living with their partner and more children than ever are born outside of marriage. I am constantly shocked by the number of couples and individuals who continue to believe there is such a thing as the common law wife/husband despite the fact that it has not existed in English law since the 1700s.

As long ago as 2007, the Law Commission attempted to address this wholly unsatisfactory state of affairs and recommended the introduction of a law allowing separating couples to make financial claims against one another following ?the breakdown of that relationship. While many ?family lawyers would welcome this solution, I am ?not one of them.

Fair game

Though able to see the merits of legislation, I am concerned about the unintended consequences of introducing a system that would impose legal rights and obligations on couples after they have been living together – even without children. Many couples cohabit quite intentionally, aware that they do not have the legal protection or obligations akin to marriage. Further paternalistic legislation is not the answer.

While the decision of the Supreme Court does not solve the problem, it does clarify how we should be interpreting the law in relation to establishing how much each owner is entitled to when the house is owned jointly. The Supreme Court’s decision amounts to an approval of the increasing tendency of the courts to avoid the harsh results of a strict interpretation of property law, under which Jones and Kernott could have both received a 50 per cent share of the property’s equity, through the use of ‘inferred intentions’ as a means of getting around legally correct but morally unfair results. It seems that the court can now – in the absence of clear intention of the parties – impute an intention to achieve fairness.

The law now stands as follows:?

• There is a presumption that where a couple buy ?a family home in joint names, the couple own the property as joint tenants both in law and in equity.

• That presumption can be displaced by evidence that the couple’s intention was different, either when the property was purchased, or later.

• The couple’s common intention should be deduced objectively from their conduct – inferred common intention. In this particular case Lord Walker and Lady Hale deemed the cashing in ?of an endowment, purchase of a second property ?and lack of contributions towards the first property sufficient to infer an intention that Mr Kernott’s 50 per cent interest in the first property effectively crystallised then, and thereafter he had no ?further interest.

• If it is clear that the couple did intend the beneficial interest to be shared other than equally, but it was not possible to ascertain by evidence ?or inference what shares were intended, then ?the court can impute a common intention.

• Each case will turn on its own facts. Financial contributions are relevant but there may be ?other factors that will determine what shares ?were intended.

High price

The price of this approach is that cases will continue to come before the court that require an extensive examination of the history of a relationship and evidence from the parties as to who said and did what and when, before arriving at what was (or should have been) agreed as to property ownership. That has a high cost, both emotional and financial, for all concerned.

While good news for many, the decision is unwelcome for those who have taken a deliberate decision not to marry specifically because they do not wish to place themselves in a situation whereby their assets could come under attack on relationship breakdown. The decision of the Supreme Court ?means that these individuals would be well advised ?to enter into some form of written agreement, ?be that a deed of trust or cohabitation contract, ?sooner rather than later.

These should set down clearly intentions at ?points when a change in beneficial ownership is agreed or could be imputed by others; for example, relationship breakdown or an injection of capital from one person, rather than risk a protracted dispute within which a court would determine what it considers to have been the intention. The irony is couples seeking to avoid the paperwork of marriage are advised paperwork is needed to evidence their own private arrangements.

Katherine Kennedy is a senior solicitor at Mills & Reeve LLP