The Reform of Property Law and the Land

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Electronic copy available at: http://ssrn.com/abstract=2543674

Conveyancer and Property Lawyer

2012

T

he

still

not

ended,

never-ending

story

Martin Dixon

Subject: Real property. Other related subjects: Family law. Trusts

Keywords: Beneficial interests; Cohabitation; Express declarations; Family home; Intention; Joint

tenancies; Quantification of interests; Relationship breakdown; Severance; Unmarried couples

Cases: Crown Prosecution Service v Piper [2011] EWHC 3570 (Admin) (QBD (Admin))

Jones v Kernott [2011] UKSC 53 (SC)

*CONVPL 83 A good soap opera is hard to resist and despite the suspicion that everything has been

said that should be said about co-ownership and implied trusts, Jones v Kernott 1is irresistible. This issue of The Conveyancer offers three perspectives on the Supreme Court's judgment in that case, and this Editorial considers some of the case's wider implications, as well as noting the High Court's follow-on decision in Crown Prosecution Service v Piper.2

The facts of Kernott are dealt with in the ensuing casenotes, and for present purposes we need note only a few salient points of interest. First, strictly, Kernott is not concerned with the acquisition of interests in property, but their quantification, as was Stack v Dowden. 3 It is plausible, perhaps for some desirable, that a lower court might confine the Stack-Kernott ratio to cases where the property is jointly-owned at law where there is no doubt that the person relying on the implied trust already enjoys some equitable interest. Secondly, on acquisition, the parties in Kernott were joint-tenants in equity as well as at law. This must be true, although never stated explicitly in the case, because “equity follows the law” and at the moment of acquisition there were no facts, no conduct and hence no common intention to displace this presumption. As Kernott makes clear, the parties' common intention can change over time, thus the equitable interests of the parties can vary over time both in size and type. Thirdly, the parties' failure to declare expressly the size and type of their equitable interest at the moment of acquisition had unforeseen,4 and financially disastrous consequences,5 irrespective of the emotional burden that the parties must have borne. One wonders whether, while Mr Kernott certainly “lost”, did Ms Jones actually “win”? Fourthly, in the light of Stack-Kernott, what advice can one offer clients in the position, or comparable position, of Mr Kernott and Ms Jones should they walk through the office door?

First, is Stack-Kernott confined to quantification disputes, or does it apply to acquisition cases? If the former, it means that the rather more strict approach of Lloyds Bank Plc v Rosset 6 applies in acquisition cases and a common intention constructive trust may be triggered only by express promises or payments to the*CONVPL 84 purchase price. For critics, this fails to reflect the reality of modern life and penalises those who have made a certain type of life choice,7as well as simply being “unfair”. Conversely, if Stack-Kernott applies to acquisition cases, it permits the inference--possibly even imputation8

--of a common intention as to ownership in a much wider range of circumstances.9

As noted above, it is entirely possible to distinguish Stack and Kernott and hold them to quantification disputes. Indeed, in Kernott, Lord Walker and Lady Hale recognise this limitation, noting that this “case is not concerned with a family home which is put into the name of one party only. The starting point is different”.10Likewise, although Stack was applied in the acquisition cases of Abbott v Abbott11 and Hapeshi v Allnatt, 12the former can be sidelined as a decision of the Privy Council,13and in the latter High Court decision the point appears not to have been fully argued. More difficult to dismiss, however, is Piper,14decided just one month after Kernott. In that case, a wife sought to limit the effect of a confiscation order made against her husband where the house was in his sole name.15

In deciding that the wife held 50 per cent of the equitable interest, Holman J. considered that we must presume that equity follows the law even in sole name cases, so that the legal owner presumptively is absolutely entitled. This, it is submitted, is absolutely correct and well worth saying. We need to remember that registration as sole proprietor is not mere camouflage for some other way of owning property. We need to take formality seriously. However, like joint-name cases, Holman J. accepts that the presumption can be displaced in sole name cases by a common intention deduced objectively

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Electronic copy available at: http://ssrn.com/abstract=2543674

from the parties conduct, based squarely on an application of Kernott.16In Piper, the conduct was the payment of money--which no doubt will be seized on as weakening the argument--but the size of the share was not related to that payment17and Kernott is treated as the applicable authority. Of course, we can still argue, but it is difficult to see a return to the Rosset approach now that the genie is out of the bottle.

Secondly, one lingering and unremarked issue in both Stack and Kernott is when, and how, did the parties' joint-tenancy in equity become severed. This must have occurred in order to yield the unequal shares that resulted, but some explanation of the mechanics, or recognition of the fact, would have been helpful. Of course, given that both parties in both cases were still alive, the issue was moot, but are we to presume that the conduct that generates the common intention which varies the share, also severs the joint-tenancy to those shares? Or, is the *CONVPL 85 joint-tenancy in equity which is presumed to “follow the law” severed to equality, and then there is a “transfer” of share from one party to the other? Indeed, if--as it appears--the common intention can continue to change over time, it must also be possible for the parties to own severed shares in one proportion, only to see that proportion change as the common intention develops and changes. As such, it matters crucially when the claimant brings the action--for if the facts are on your side, the longer you wait, the more you own. Thirdly, had the parties declared expressly their equitable interests in the property, much pain could have been avoided. Such a declaration would have been conclusive and unchallengeable, save perhaps in exceptional cases where estoppel might be available--Clarke v Meadus. 18 In such circumstances, the reluctance to make such a declaration compulsory for the parties when registering a title jointly is difficult to fathom. Such a declaration would not bring equitable interests on to the register--they would appear in the TR1 not on the register--and surely professional advisers and conveyancers can find a way to have such a conversation with their clients. If express declaration were compulsory, the parties can be advised of that fact, and a discussion held. The parties do not need to be alerted to the certainty that this declaration will govern their affairs if their relationship breaks down--a pointless, fruitless and probably offensive conversation at the time of acquisition. It is enough if they know it has to be done, and what it means. Moreover, a neutral discussion would also help explain why it is important to determine whether the parties should be joint-tenants or tenants in common. An issue too little discussed with clients. Indeed, perhaps we are guilty of underestimating property owners and misinterpreting their intentions. Were we to have asked Mr Kernott and Ms Jones immediately after they had acquired the property, “who owned it”, they would have been able to tell us. It might indeed have been “equally” or “fifty/fifty”, or in some other proportion, but it is not a difficult question and would not have surprised them. After all, they had just purchased it. Conversely, had they been told at that time that it was possible, some years later, that one might own a much greater share than the other, which was made possible because, technically, they held it on trust for each other, it is a fair bet that that would have surprised them! I do wonder whether we have become so immersed in the doctrine of trusts and co-ownership that we have forgotten how easy it is to do simple things.

Fourthly, and for me a matter of some anxiety, is what can we advise people in the future in the position of Stack and Dowden or Jones and Kernott? When a relationship breaks down, it is a difficult and sensitive time. If one is advising another Mr Kernott, should we say that he should force a sale of the former family home immediately on relationship breakdown, for (presumably) at that point he does still own 50 per cent. Is Mr Kernott the absent father who does not deserve more than 10 per cent, or is he the father who declined to force a sale of the home and put his family on the street? What is in Mr Kernott's best interests? Likewise for Ms Jones. If she comes as joint-legal owner to talk about the former shared home, are we to say that she might be able to claim a bigger share, but only if she

*CONVPL 86 litigates and then on a basis and for a size of share that, in truth, we cannot predict? How do we know whether a claim will be successful, or worth it?

There is then much that can be said about the shape of the law after Stack and Kernott and perhaps the only certainty is that opinions will be divided. How do we prove common intention? Is there a difference between inference and imputation? Is the resulting trust really otiose in residential cases? Is there a difference between acquisition and quantification? What about detrimental reliance? What about the need for certainty, through formality, in land transactions? Yet, is this really the point? To put it another way, one reason why Stack and Kernott raise so many property law questions, and fail to answer them, could be that the cases are not really about property law at all. Not any more. If we look for an explanation of the role and impact of these cases within the jurisprudence of property law, we will not find it. Is this just poor analysis in the Supreme Court, or is it that the Supreme Court has recognised what commentators have not: that what we need, and what we now have, is a reasonably structured judicial discretion to vary the property rights of cohabitants and other property sharers that

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is not based on property law at all. It is something else: call it family law, call it an exercise of the court's inherent equitable jurisdiction, but, maybe, do not call it property law.

Martin Dixon

Excuse the oxymoron. See M. Dixon, “The never-ending story--co-ownership after Stack v Dowden” [2007] 71 Conv. 456.

Conv. 2012, 2, 83-86

1. Jones v Kernott [2011] UKSC 53; [2011] 3 W.L.R. 1121.

2. Crown Prosecution Service v Piper [2011] EWHC 3570 (Admin).

3. Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432.

4. But maybe not unforeseeable.

5. At least for Mr Kernott. And what of costs?

6. Lloyds Bank Plc v Rosset [1991] 1 A.C. 107; [1990] 2 W.L.R. 867 HL.

7. For example, the stable unmarried couple who do not talk about ownership of the family home and who have decided that one should not work in order to raise a family. See the much criticised Burns v Burns [1984] Ch. 317; [1984] 2 W.L.R. 582 CA (Civ Div).

8. See, C. Harpum, S. Bridge and M. Dixon (eds), Megarry & Wade: The Law of Real Property, 8th edn (London: Sweet & Maxwell, 2012), paras 11-25 et seq.; and J. Mee, “Jones v Kernott: inferring and imputing in Essex” [2012] 76 Conv. 166.

9. Stack [2007] UKHL 17; [2007] 2 A.C. 432 at [69]. Approved in Kernott [2011] UKSC 53; [2011] 3 W.L.R. 1121 at [51].

10. Kernott [2011] UKSC 53; [2011] 3 W.L.R. 1121 at [52], and see [51].

11. Abbott v Abbott [2007] UKPC 53; [2008] F.L.R. 1451.

12. Hapeshi v Allnatt [2010] EWHC 392 (Ch); [2010] W.T.L.R. 987.

13. Though it is evident from the opinion of Lady Hale in Abbott that the Privy Council believed that the law had moved on from Rosset.

14. Crown Prosecution Service v Piper [2011] EWHC 3570 (Admin).

15. Illustrating that it is not only unmarried owners who might have to rely on Stack and Kernott.

16. Kernott [2011] UKSC 53; [2011] 3 W.L.R. 1121 at [8]-[10].

17. That would, of course, resemble a resulting trust and such is not to be used in a residential context, Kernott [2011] UKSC 53; [2011] 3 W.L.R. 1121 at [25] (at least for joint-name cases).

18. Clarke v Meadus [2010] EWHC 3117 (Ch); [2011] 1 P. & C.R. DG18. See also M. Pawlowski, “Informal variation of

express trusts” [2011] 75 Conv. 245.

© 2013 Sweet & Maxwell and its Contributors

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