Jones v Kernott - Time to reflect

by Andy Osborne on

The legal world has now had time to reflect on the Judgment in Jones v Kernott which was handed down by the Supreme Court on 9 November 2011.

I found the 30 page judgment a little repetitive in that a large portion of it set out the facts and findings of the earlier landmark case of Stack v Dowden. The main judgment in Jones v Kernott came from the lead judges who has also sat on Stack v Dowden case so they spent time going over their previous decision and giving further explanation.

However they did set down some useful guidance for future cases:

  1. The principles in Jones v Kernott apply to cases where cohabiting couples purchase in joint names and both pay the mortgage.
  2. The starting point is a presumption of beneficial joint tenancy. This means that they would share any equity equally.
  3. The presumption is over turned if the evidence shows a common intention to hold other than as beneficial joint tenants: ‘the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party’. This is somewhat difficult for a layperson to understand. To summarise it does not necessarily need to be shown that the parties verbally communicated a change of position but that it could be ‘inferred’ by their conduct. In this case, the cashing in of an insurance policy and Mr Kernott purchasing his own home was the conduct from which a change of position was inferred.
  4. If the presumption is rebutted, but the evidence doesn’t show what shares are to be, then the Court can determine the beneficial shares on the basis that ‘each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property’. Therefore, if you can convince a Court that the shares should be other than equal then it is open to the Court to look at all aspects of how they dealt with the Property to determine what the shares should be. This can include things such as whether the parties pooled their finances, whether they had children, who paid what in respect of utilities and the mortgage, any works carried out on the property etc.

Moving forwards where does this leave us? To my mind, from the perspective of the general public no further forward. A layperson when considering whether they have an interest in a property will still be confused as to their legal rights and there is likely to be more scope for arguments between legal advisers as to what the parties intentions were at various times and what is ‘fair’. This will not change until the government intervenes and makes new law but there seems no chance of this in the near future.

My mind still goes back to part of the judgment in the Court of Appeal case and whilst the findings were overturned by the Supreme Court, the comment of Lord Justice Wall remains very sound advice.

“The purchase of residential accommodation is perhaps the single most important financial transaction which any individual transacts in a lifetime. It is therefore of the utmost importance, as it seems to me, that those who engage in these transactions, and those who advise them, should take the greatest care over such transactions, and must – particularly if they are unmarried or if their clients are unmarried – address their minds to the size and fate of the respective beneficial interests on acquisition, separation and thereafter. It is simply impossible for a court to analyse personal transactions over years between cohabitants, and the costs of so doing are likely to be disproportionate in any event. Cohabiting partners must, it seems to me, contemplate and address the unthinkable, namely that their relationship will break down and that they will fall out over what they do and do not own.”

Even though the result has changed, it is still imperative that anyone when purchasing a property jointly or having a new partner moving into their property addresses their mind to what they would want to happen with the property if they split. It has to be said that when most conveyancers advise about how to hold property on purchase much of the discussion is about what should happen if someone dies rather than if they split up. This in my view carries very different motivations. You are less likely to want to give your partner something if you are going through a bitter break up than if you had spent your whole life together and just passed away. Parties need to be advised to think about all possibilities. The intentions of the parties could be confirmed by way of a cohabitation agreement of Trust Deed if the parties are moving into together

If they do split up then they should again consider what needs to happen next with the property. Ideally the ownership of the property should be resolved immediately by way of a sale or transfer to one of the parties.   If that is not possible in the short term then a separation agreement could confirm intentions over a longer period, though in my view still subject to arguments should the parties conduct infer a change in position later.

These documents can be prepared for as little as £500. The difference for Mr Kernott and Ms Jones between 50/50% and 90/10% on the figures used at the original trial in 2008 was almost £100,000! An agreement like this is money well spent in the long run. I suspect the legal costs of pursuing the case to the Supreme Court were very substantial too, perhaps more than £100,000 between the parties. Mr Kernott may have come out a loser to the tune of £200,000 following the Supreme Court decision. All of this could have been avoided had an agreement been drawn up when they split.

I specialise in assisting all kinds of cohabitees with these issues. If you need any help then please contact me on 01942 774392 or grj@stephensons.co.uk

By cohabitation dispute solicitor, Gareth Jones

 


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