Changing Intentions

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Changing Intentions,

Changing Law: Kernott v Jones and the Family Home

S E M I N A R

T U E S D A Y 3 1 S T J A N U AR Y 2 01 2

www.familyproperty.org.uk





The Basic Position Continued

The answer to (1) must be found either by

common intention from the evidence

Note that it is not at present possible to find an

answer to (1) by imputing a common intention Having found an affirmative answer to (1), it is then

ossible to im ute a common intention about the


size of the share by looking at the whole course of dealing



Definition

Per Neuberger LJ in

“An inferred intention isobjectively deduced to be thesubjective actual intention of the

Stack

actions and statements. Animputed intention is one which isattributed to the parties, eventhough no such actual intentioncan be deduced from their actions

an s a emen s, an even ougthey had no such intention ...”




Definition

Per Neuberger LJ in

“ ... Imputation involvesconcluding what the parties would have intended, whereas

Stack

what they did intend.”




The Facts of Kernott v Jones




The Facts of Kernott v

Jones

1985: Badger Hall

Avenue (BHA) acquired

Purchase price £30,000contributed unequally

Conveyed into jointnames with no expressdeclaration of trust

The equitable

1985presumpt on o o nt

tenancy is operating atthis point

Two joint life insurancepolicies commenced




Kernott v Jones timeline

1986: extension built

Financed by joint loanof £2,000

Mr Kernott did most of the work on theextension

Extension increased value of property from

1986

30,ooo to a out

£44,000




Kernott v JonesTimeline

1985 – 1993

4 children born

Ms Jones pays all of thehousehold outgoingsincluding the mortgagepayments out of jointresources 1985 -- 1993





1993: Mr Jones leaves

the property

Ms Jones concededat trial that at thispoint, there was

nothing which coulddisplace thepresumption of equitable joint

1993





At an unknown date

There are no discussions between the parties about whateffect these acts may have ontheir interests

between Mr Kernottleaving BHA and himpurchasing a new property in May 1996,one of the joint life

insurance policies iscashed in and dividedequally

?1996

---

[1995]?1993

1995 for £69,995

May 1996 Mr K uses lifeinsurance money to buy new property (Stanley Road) in his sole name





1996 to approx 2006

Ms Jones lives with thechildren at BHA and MrKernott lives at Stanley Road

Mr Kernott makes nocontributions towardsmortgage, endowmentpolicy or maintenance

1996 2006of children





Important findings of

There was a finding of fact that

Mr Kernott would not have beenable to afford the mortgage on

fact

part of the mortgage on BadgerHall Avenue [40]

KvJ is NOT an “imputed commonintention” case – the trial judgeinferred a common intention

from the evidence and thisfinding was not overturned





At the outset, this was a

1995-6

ene c a o nt tenancy By the close, it was a beneficial tenancy incommon in unequalshares

The transformation hadtaken place aroundabout 1995 – 6 (orpossibly slightly earlier)

1985 – 1993 approx. :presumed common

intention joint

tenancy

2011: inferredcommon intention

tenancy in common

in unequal shares[90:10 by 2011]

In this case the partieshad had a real commonintention which wasinferred from theiractions





1996

Mr Kernott’s interest isfrozen at its estimatedcash value on that date£ 0 000





At the point of change

in 1996, the shares of the parties were equal

The significance of thechange of intentions

was what happenedthereafter

sshare

in1 6

ershare

in1 6





The effect of the freeze

Equity 2006

of Mr Kernott’s share in1996 was that Ms Jonesmade all of the gainreflected by payment of the mortgage and of the

market rise over theensuing 10 years

Consider the effects if

Ms Jones 1996

Mr Kernott

1996

Ms Jones (since1996)

sold in 2005The Judge inferred thatthis must have beentheir intention in 1996




Re-Framing Kernott v Jones




The Stackquestionsre-framed

Of the key questions in Stack, question1 was not in dispute: both partiesagreed Mr Kernott had an interest andit was presumed by his appearance on


t e t t e

The focus was Question 2: was hisinterest 50%, or less than that?



Kernott Re-framed

Ms Jones’ argument was that the

equitable presumption of jointtenancy in 1993 was not

’

positions in 2006

She had the burden of proving

that between 1996 – 2006 theparties had a common intention which displaced the previously

valid equitable presumption She was arguing that the trust

could change over time




Kernott v

JonesRe-framed

It had always been possible for a

trust to be varied by subsequentconduct: Neuberger LJ in Stack @138 – 147 sets out the traditional

position Subsequent discussions, statements

or actions from which a common

understanding or agreement can beinferred [138]

improvements to the property [139] (Possibly) capital repayments to the

mortgage [140]




The Leading Judgment in Kernott v Jones




Kernott

LeadingJudgment

Walker and Hale LLJ

The trial Judge concluded that Ms

Jones had discharged her burdenand was upheld by the Supreme

Ms Jones had demonstrated thatthere was evidence from which

the new common intention could be inferred

The SC went further and said that

a new common intentionrespecting the size of the sharecould also be imputed






Kernott

LeadingJudgment

Walker and Hale LLJ

Guiding principles set out at

paras 51(1) – (5) p. 18

Imputation only applies to the

the shares: 51(4)

“The whole course of dealing” is

to be given as broad a meaning asthe course relevant toascertainin actual intentions [ie

para 69 of Stack] It is not limited to financial

contributions alone




Kernott v Jones

Leading Judgment

We are expressly told that

principles 51(4) and 51(5) alsoapply to “sole name” cases:

It is affirmed that this is a new regime for “family home” cases

The assumptions about humanmotivations which underlie theresultin trust conce t are not

appropriate in the family homecontext: para 53




Kernott v Jones

Leading judgment

The leading judgment contains an

extended critique of theinadequacy of the resulting trust

the judgment quotes a definitionof them as

“a materially communalrelationship ... One in which, inpractical terms, [the parties] pool

their material resources(including money, other assets,and labour)” [21]




The reason people do not

formulate agreements in thissituation is precisely because they trust each other and they are not

act ng n v ua st ca y seeparas 20 – 22]

Taking an equitable account in

such circumstances is impractical In Kernott , there is “no scope” for

an e uitable account once the

interests have been defined Effort would be

“disproportionate” [50]




Kernott v Jones

Leading judgment

In these circumstances it is

inadequate to respond to such aperson: “Because you trusted a

will not help you”

In any event, the assumptions which underpinned the use of apurchase money resulting trust were already out of date by the

time Pettit was decided in 1970[para 24]




Kernott v Jones

Leading judgment

PMRT has therefore now been

displaced from its primary position in family home cases

It is almost certainly now

insufficient to advance anargument for unequal shares in a joint names case based on

unequal contributions alone The whole of the context (ie “the

whole course of dealin ”) must be

looked at How was this worked out in

Kernott ?




Kernott v Jones

Leading judgment

The facts up to 1996 were clear

The facts of 1995-6 justified the“logical” inference that the parties

’ would “crystallise” at that point

“It is clearly the intention which

reasonable people would havehad had they thought about it atthe time” [48]




Kernott v Jones

Leading judgment

Joint names

“The court will try to deduce whattheir actual intentions were at therelevant time. It cannot impose a

contrary to what the evidenceshows they actually intended. Butif it cannot deduce exactly whichshares were intended, it may haveno alternative but to ask whattheir intentions as reasonable and just people would have been hadthey thought about it at the time.

some courts may not welcome, butthe court has a duty to come to aconclusion on the dispute put before it.” [para 47]




Kernott v Jones

The process of finding

Step 1: Examine theevidence to see if there isan express commonintention: if not --

an answer to Question 2re. the size of theinterest Step 2: Examine the

evidence to see if you caninfer a common intention

on the basis of theevidence available; if not --

Step 3: Impute anintention using whatevidence there is and doingthe best you can within thecontext




Kernott v Jones

“Minority” judgments

What are we actually doing when

we impute an intention? Imputation is a process of [quasi-

] invention, inference is a process

of deduction In what way is imputation

different from simply deciding

what is a fair share? Kerr LJ thought there was no

imputation “involves the courtdeciding what is fair in light of the whole course of dealing”




Kernott v Jones

The question of

On whether or not there was

sufficient evidence for the trialJudge to infer an answer toQuestion 2:

inference Kerr LJ thought not [para 76] butthat imputation gave the sameresult

Wilson LJ thought there was[para 84]

inference/imputation point wasprobably in practice a distinction without a difference [para 65]




Changing Intentions,Changing Law

A W O R K E D E X A M P L E : S A M A N D S U S I E


Ch i I t ti Ch i L



Changing Intentions, Changing Law

Sam and Susie Timeline

Property acquired inSam’s sole

name1995 – 1999

Parties pool theirresources

2010Sam seeks 100% of

sale proceeds of property

1999 – 2008Three children born

Susie looks after childrenfull-time


1999First child born

Susie stopsearning

2008Susie extends theproperty and adds

25% to its value



Sam and Susie

Timeline

1995 : Property acquired

In Sam’s sole name

Equal cash contributions

Agreement to share mortgageliability




Sam and Susie

Timeline

1995 -- 1999

Parties pool their resources

One joint account from which all

ou go ngs nc. mor gage are pa




Sam and Susie

Timeline

1999: First child born

Susie gives up work to care for thechild full-time

am con nues o wor an sincome is used to pay themortgage




Sam and Susie

Timeline

1999 -- 2008

Two further children born: Susie works part-time from 2005

am con nues o wor an sincome is used to pay themortgage




Sam and Susie

Timeline

2008

Susie inherits £30,000 and paysfor an extension to the property,

Sam continues to work and hisincome is used to pay the

mortgage




Sam and Susie

Timeline

2010

Parties separate

Sam seeks a sale of the property

an e er o e u y or anamount equivalent to his cashcontributions inc. mortgage




Sam and Susie

The starting point is that Sam is

the sole beneficial owner Susie must bring evidence to

have a share

She will almost certainly be able

to do so in this context by provingher cash contribution

inferred common intention thatshe should have a share




Sam and Susie

We then turn to question 2

First exercise is to set up achronology or timeline

econ y, en y w c any othe Stack para 69 factors are inplay to establish the context

It may be helpful at this stage toask whether on balance the facts

“materially communal”relationship




Sam and Susie

Then progress through the facts

in context to establish whetherthere has been an express

Do the facts support an inferredcommon intention as to size of share?

My view is that it might bedifficult in the Susie Sam

scenario to infer a commonintention


Thi i t i l “ t i ll



Sam and Susie

This is certainly a “materially communal” context

The parties did not come to any express agreement about whatha ened when Susie sto ed

paying the mortgage If the parties had kept their financial

affairs separate, eg separate bank accounts, inference is problematic

If the parties operated a joint bank account, inference is easier

parties themselves say about thearrangements: there is no hard andfast rule




Sam and Susie However, if the court cannot infer a common

intention, it is now free to impute one The court can now say, “This was a materially

communal relationship in which the parties didnot keep their finances separate [or, perhaps,saw their finances as a joint venture], thereforea common intention as to equal shares can beimputed”

This is particularly likely where one party hasceased to contribute due to full-time child careor, for example, illness

Note that Susie’s contribution to the extension isnot likely, in my view, to change the balance of

The more silent the parties are about theirarrangements, the more likely it is that equalshares may be pronounced in this context




Sam and Susie In practical terms in this case, there is

no difference between inference andimputation

e ac s n con ex or e w o e courseof dealing indicate materialcommunality or joint venture

The difference between inference andimputation may be on apparently slightevidential matters that indicate “this is what the parties must have intended”

A findin of fact b the court that theparties never gave any thought to the

size of the shares will not defeat anequal-share result




Sam and Susie Possible contra-indications of

joint venture

Buying to develop as well as touse as a home, or buying to let;anything with a commercial

flavour The Stack situation, where the

distinct and there is no realnotion of “sharing”


Changing Intentions, Changing Law



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Changing Intentions