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The Bats of Law: Unmarried couples and property ownership

Unmarried couples who own their own home and split up face real difficulty in determining their shares in their property where they do not agree. The couple do not have the same legal statutory rights as a divorcing couple. It is important to remember that there is no legal concept of common law wife or, indeed, common law husband. The concept of the common law wife was abolished long ago in the mid 1750’s.

Parliament has declined to intervene despite the profound changes in the way that people order their lives. The Law Commission made recommendations in their report called “Cohabitation that the financial consequences of a relation breakdown 2007” which was not acted on. However, a bill has been introduced in the House of Lords, called the Cohabitation Rights Bill, which progressed to a second reading in the Lords on the 12th December 2014. It remains to be seen whether the bill becomes law. As a consequence of Parliament’s unwillingness to act, disputes about property between separating couples have to be resolved in Court.

The most recent case to go before the Supreme Court was Jones v Kernott (2011) UKSC 53, which was published in November 2011. The purpose of this article is to consider, briefly, that case and then to look at a number of subsequent cases and examine the approach the Courts have taken in those disputes.

In Jones v Kernott, Miss Jones worked as a mobile hairdresser and Mr Kernott as an ice cream salesman during the summer months although he was often unemployed during the winter. Miss Jones purchased a mobile home, in her sole name, in 1981. In 1983 Mr Kernott moved in with her. In 1985 Miss Jones sold her mobile home and she and Mr Kernott purchased a property in joint names. There was no written declaration as to their respective shares in this property. A year or so later an extension was built. They also had two children together but by 1993 the relationship had broken down and Mr Kernot left the property. However, he made no further contributions to the mortgage or maintenance of the home nor did he make any child maintenance payments. He purchased his own property in his sole name. The family home was marketed but didn’t sell and Mrs Jones and children remained living there. Some 14 years later the dispute started when Mr Kernott claimed his interest in the property. Miss Jones began Court proceedings to determine this issue. The case went to a trial where Miss Jones was awarded 90% of the family home and Mr Kernot the remaining 10%. He retained his own property. There were two appeals before the case arrived in the Supreme Court. The Court upheld the first trial Judge’s decision.

So, the Judges in the Supreme Court decided that Miss Jones should hold 90% of the property and Mr Kernot 10%. The Judges all emphasised that where a property is jointly owned “there is a presumption that the beneficial interest coincide with the legal estate”. Where a couple own a property in joint names and both are responsible for the mortgage then the starting presumption is that the property is owned equally, 50/50. The position is different if there is a written declaration of their shares in the property. The Court also directed that when a couple purchase a property in joint names and live there then there would not be a resulting trust. In a resulting trust the parties own the property in proportion to their respective financial contributions to the purchase price. So how was it that Mr Kernott was only awarded 10%? The Court looked back to the point when the parties separated 1993 and the subsequent failed attempts to sell the family home. They looked at the value of the property at that point. Subsequently, Mr Kernott did not make any contribution at all and was able, because he made no contribution, to purchase his own property.

Geary v Rankine (2012) EWCA Civ 555

This Court of Appeal case was heard quite shortly after Jones v Kernott with judgment on 29.03.12. Mrs Geary and Mr Rankine started a relationship in 1990 and had a child in 1992. They separated some 18 years later in 2009. The court proceedings concerned Mrs Geary’s claim to property which Mr Rankine purchased in his sole name in 1996 without the aid of a mortgage. There was also a claim to a business, run from that property, but I’ll ignore that for the purposes of this article. The Court of Appeal referred, of course, to Jones v Kernott.

So, the property was owned in Mr Rankine’s sole name. The Court approached the case using the same principles that apply with regard to jointly owned property. Mrs Geary had the burden of trying to establish that there was a common intention constructive trust: that is that she had an agreement or understanding with Mr Rankine that she had a share in the property. This was all the more difficult for her because the property was primarily a business rather than a home. The Court has to establish the parties’ actual shared intentions whether those are expressed orally or in some written form. Alternatively the shared intentions have to be inferred from their conduct. Where the Court finds the parties had a common intention that the property would be shared, the Court cannot decide, on the basis that information, the proportions of ownership. The Court will have to decide those proportions looking at “the whole course of dealing” regarding the property. Mrs Geary failed. There was no common intention with Mr Rankine at the time the property was purchased that she should have an interest. The Court went on to consider whether there was a later change leading to a common intention that Mrs Geary should have an interest. Mr Rankine continued to assert that the business, and therefore the property, would remain in his sole name and he did not answer when Mrs Geary asked what security she had.

Gallarotti v Sebastianelli (2012) EWCA Civ 865

On 09.05.12 the case of Gallarotti v Sebastianelli (2012) EWCA Civ 865 was before the Court of Appeal. This was another case where the property was owned in one party’s sole name, in this instance Mr Sebastianelli. He was friends with Mr Gallorotti; they were not in any form of intimate relationship. The lower Court had found that the 2 were entitled to the flat, in Holland Park Avenue, in equal shares. The flat was purchased in 1997 with the help of a mortgage, with both men making cash contributions. Mr Sebastianelli’s cash contribution to the purchase price was greater than Mr Gallarotti and so they went on to agree that Mr Gallorotti would pay a larger proportion of the mortgage repayments. Importantly, their agreement did not constitute a written declaration of trust which would bind them as to the proportions of ownership in the flat. The Court treated the claim as a common intention constructive trust case and, importantly, looked at the conduct of the parties throughout their relationship. As with many of these cases, the evidence was far from complete. Mr Gallarotti claimed that he’d made contributions in terms of paying outgoings, renovations and repairs, but again the records were extremely poor. In the first instance the Judge found that, on the balance on probabilities there was an oral express agreement that each man would have an equal share despite the unequal contributions. Unsurprisingly Mr Sebastianelli appealed. He asserted that his former friend did not have any interest in the property at all. The Court of Appeal looked at the terms of the express agreement. The Court of Appeal overturned the court of the first instance and inferred that the parties intended that their financial contributions should be taken into account. Mr Gallorotti had not followed the agreement, which was that he would make greater contributions to the mortgage than his friend. The Court of Appeal found that the parties intended their shares should reflect their contributions, rather than Mr Sebastianelli giving Mr Gallorotti a gift and a substantial gift at that. The Court of Appeal overturned the first Court and gave Mr Sebastianelli 75% and Mr Gallorotti 25%.

Quaintance v Tanden (2012) EWHC 4416 (Ch)

In Jones, on considering what principles apply to the case, it is made clear that “each case will turn on its own facts”. In Quaintance v Tanden (2012) EWHC 4416 (Ch) the Court found that Ms Tanden was entitled to the entire sale proceeds of a jointly owned property. This couple began living together in 1992 and purchased a property in South East London in April 1999. The property was registered in joint names but Ms Tanden paid the deposit and all the costs of purchase. A written declaration was prepared stating that they owned the property in equal shares, but that was never signed. Within 12 weeks Mr Quaintance had left the property and he disappeared. Ms Tanden struggled to meet the mortgage repayments and eventually the property was repossessed and sold by the mortgage company. It would appear that it was the solicitors for the mortgage company who traced Mr Quaintance. He then made a claim. His claim failed. He failed after trial and then appealed. The Appeal Judge agreed with the finding of the trial Judge that when the property was purchased they had a common intention to own it jointly. That changed when Mr Quaintance abandoned the property, as well as his partner. There were no written documents between this couple after the abandonment and so the Court was entitled to deduce objectively from the parties respective behaviour, the common intention or in this case the changed common intention. It was clear that the purpose of the trust, to provide a common home, had failed.

Smith v Bottomley (2013) EWCA Civ 953

On 29.07.13 the Court of Appeal gave judgment in favour of Mr Bottomley following his appeal against judgment given in December 2012. Mr Bottomley and Ms Smith began living together in 1992 and had a daughter in 1994. They separated a year or so later but then got back together in late 2001 or early 2002 at which point they got engaged. The dates are important because shortly after, in April 2002, Mr Bottomley established a company, and he was the sole owner. Later that year the couple bought a property, in joint names but with a detailed declaration setting out how the monies would be applied on sale. That property, called Cropready was sold in 2007. Ms Smith received £20,000.00. After trial the Judge found that she should have received another £21,000.00 and ordered that to be paid. Mr Bottomley appealed that decision and was successful. The reason was a procedural one. Ms Smith’s lawyers had never actually claimed the sum was due in their applications to the court. So Mr Bottomley did not have the opportunity to put his case or produce evidence to support his case, which was this £21,000.00 had been spent supporting the family.

At trial the Judge also found that Ms Smith was entitled to a half share of a property called the Barn, which is in Mytholmroyd. Mr Bottomley had started the purchase but not having the funds the purchase had been completed by his company, which did have the funds following the sale of another property. It is Ms Smith’s case that the property was to be the family home and that Mr Bottomley had assured her that he would “do right by her”. Ms Smith argued that there was either common intention between her and the company that she was a joint owner or she had relied on the company’s assurance and the failure to honour it had caused her detriment or loss. The Court of Appeal found that since the purchase of the property was sometime after any promise given and so the company could not be bound. The property had only been briefly occupied as a family home mostly it had been let and so Ms Smith’s argument that she had suffered a detriment was not sustainable because the family had lived in other accommodation after the property had been purchased. The court did not examine in great detail whether Ms Smith’s second argument, that her agreement to marry was a detriment, could in principle constitute a claim to a constructive trust. That would depend on the circumstances of each case and the court suggested that if, for example, Ms Smith had turned down another suitor there may be an argument but that was not the case here.

Pankhania v Chandegra (2012) EWCA Civ1483

This is another case concerning a jointly owned property, this time in Cossington Street, Leicester. Judgment was delivered in the Court of Appeal on 09.11.12. The claimant, Mr Pankhania, was the nephew of Mrs Chandegra. They purchased the property jointly in July 1987 for £18,500.00 with a mortgage of £17,500.00. The purchase transfer deed contained an express declaration that they owned the property jointly, in equal shares. At the time of the purchase the nephew was only 19 years of old and he was on the title because his Aunt and Uncle were not eligible for a mortgage although his Uncle was able to pay the entire deposit and purchase costs. The Aunt, the Uncle’s sister, moved there with her husband and lived there thereafter. It is unclear what mortgage payments the nephew paid although it appeared that he paid about £2,650.00. Plainly there was a falling out even though the nephew had never lived at the property. He applied for an order for sale and that half the net proceeds be paid to him. The Aunt alleged that his presence on the title was really nothing more than an expedient sham.

After the trial the Judge found that the nephew had never acquired any interest in the property and there was not an intention that he would have such an interest. This was overturned on appeal. The Court of Appeal found that the nephew and his Aunt were bound by the declaration of trust signed by both parties when the property was purchased. The court referred to an old case called Pettitt v Pettitt (1970) AC 777 when the court stated that if a document declares he was the owner or owners “that necessarily concludes the question of title as between the spouses for all time, and in the absence of fraud or mistake at the time of the transaction the parties cannot go behind it at any time thereafter even on death or the breakup of the marriage”. That was the case even though Mr Pankhania became an owner really from convenience, to enable his Aunt to obtain a mortgage. There was no deception of the building society nor was the building society concerned about who were the owners. The Aunt and nephew never took any steps to change their shares in the property. So the Aunt lost. The court would not insert a common intention constructive trust in place of a written express trust.

Bhura v Bhura & Others (2014) EWHC727

This was not a case concerning an unmarried couple but rather it was a dispute that arose following a very bitter divorce. The wife obtained judgment on divorce, in the USA, for £1.25m. She wanted to secure those monies against two properties in London which she claimed were both beneficially owned by her former husband. The trial was heard by a leading family Judge, Judge Mostyn, concluding in March 2014. The Judge had to decide who were the real beneficial, owners of two properties one in Mayfield Avenue, London N12 and another in Pembroke Road, Wembley, HA9. In doing so he reviewed the basic legal principles as applied in Jones v Kernott, which he thought were “tolerably clear”. What legal principles did he identify?

  1. An express written declaration will almost always be decisive unless they are shams;
  2. In the absence of such an express agreement there is likely to be a “tacit understanding”. In deciding what that understanding was the court will look at all of the evidence and the entire course of the parties conduct in relation to the property;
  3. Where there is no evidence of a tacit understanding the court will have to rely on presumptions and the most obvious is that the beneficial title follows the legal title;
  4. He doubted whether the presumption of a resulting trust, which is that ownership is determined by the percentage of each parties financial contribution to the purchase, would apply;
  5. But, he went on to say, presumptions are only just that; presumptions. He quoted Judge Lamm in the case of Mackowick v Kansas City (1906), “presumptions may be looked on as the bats of law, flitting in the twilight, but disappearing in the sunshine of actual facts”.

So actual facts can override presumptions where those presumptions are unfair. The courts will not override express written agreements and only reluctantly any tacit understandings. Where the court cannot find any understandings it will have to try and determine the facts and then find a result which the court considers fair. In the absence of written agreements the court will look at the “whole course of dealings”.

This article is for information purposes only and is not legal advice. It should not be acted or relied upon and legal advice should be sought before applying any of the information in this article to any facts or circumstances.

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