The long awaited Judgment of the Supreme court in the case of Kernott v Jones was published today (9 November) and is no doubt being pounced on by family lawyers the length and breadth of the country.
The facts are this (and I’ll try and be brief):
In 1985 Mr Kernott (K) and Ms Jones (J) – who were not married – bought a home in joint names. The 20% deposit was paid by J and the balance funded by a joint mortgage. K did a lot of the work to build an extension in 2006 that increased the value of the house by around 50% to £44,000. They had 2 children, the second one born in 1986.
In 1993 K moved out of the house, thereafter making little or no contribution to the household bills or the maintenance of the children.
At some point thereafter a joint policy was cashed in and K’s share enabled him to buy a home. When K sought to asserts his interest in the property 12 years after separation J brought it to court.
The trial judge held that over the years the intentions of the parties had altered significantly to the extent that K had demonstrated that he had no intention (until recently) of realising his interest in the property. He awarded K 10% of the equity in the property. K appealed to the High Court.
The High Court judge agreed with the judge at first instance, and the decision stood. He said that by not contributing to the family home K had been able to buy another property on which there was almost as great a capital gain. The parties could not have, he held, intended that K should have the whole of the gain in the second property and half of the gain in the first. K then appealed again.
The Court of Appeal granted K half of the first property, saying there was nothing to indicate the parties had changed their intentions regarding ownership of the first property. The Court of Appeal felt they were not allowed to impute a change of intention “where none was not expressly uttered not inferentially formed”. It was accepted that the court has the power to infer an intention.
The distinction between these two words, in this context, is important:
Infer: to form an opinion that someone agreed something because of information that you have
Impute: to attribute or ascribe an intention because that was what they would have intended had they thought about it.
J appealed to the Supreme Court.
Their Lordships stated that the court must first look for evidence of actual intention. The court cannot impose a solution that is contrary to the evidence of what the parties intended from their words and actions.
Sometimes though it is impossible for the court to deduce exactly what shares were intended. In this case the trial judge had already found that the intentions of J and K had changed. This was an intention that some of the Supreme Court felt the trial judge was justified in inferring from K and J’s conduct.
The Supreme Court then went on to say that the doctrine of Resulting Trusts (under which someone who funds the purchase of a property in someone else’s name acquires an equitable interest in it) is not appropriate to the ascertainment of a beneficial interest in a family home.
Lords Walker and Lady Hale said that whilst it was desirable to make a finding of actual intention, if that is not possible the court should try and work out what a reasonable and just person would have intended (in other words, impute an intention). Lord Collins went on to say that it was the task of the Court to ascertain the shared intention of the parties, actual, inferred or imputed. It must end in a result that the parties must have intended.
Lord Kerr felt that it wasn’t possible to infer that K buying his second property meant he intended his interest in the first should crystallise, but he was more than happy to impute one.
So, can any useful guidance be drawn from this case (other than the fact that the distinction between imputing and inferring something is very fine indeed)?
Any cohabiting couple who separate should ensure that a full and proper record is made of their intention. The person who leaves (but who wants to preserve their interest in the property) should make it clear in a letter to the person who remains that they will eventually want paying in full for their interest. It is best to get a solicitor to write that letter, as a proper record of intention will thereby be made.
The one who remains, however, should do likewise if they think the other has agreed to relinquish or otherwise diminish their interest in the property.
To do otherwise will lead to potentially expensive and uncertain litigation, where the court has the power to, absent any evidence one way or the other, decide for itself what the fair outcome should be. And in doing that the court will decide what a fair and reasonable person would have intended. As family lawyers know only too well, the concept of fairness looks very different depending which side of the fence you’re standing on.
Andrew is a Collaborative Family Lawyer, and a Senior Associate Solicitor at Gregory AbramsDavidson. To contact: Tel 0151 236 5000/ 0151 330 0734: email@example.com