Cohabitants And Constructive Trusts After 'Jones v Kernott'

Lyndsey West explains how a seminal case has influenced property rights for cohabitants.

On the breakdown of a marriage the courts have a wide statutory jurisdiction under the Matrimonial Causes Act 1973 (MCA) to re-order property rights. However, there is no equivalent statutory jurisdiction enabling the court to deal with the property rights of unmarried couples who have shared a home together and who subsequently decide to go their separate ways. Instead, a claim by a former cohabitant to a beneficial interest in any joint home must be substantiated by establishing an entitlement based on property law principles as formulated in case law. Constrained by this narrow focus, the courts have often struggled to produce outcomes that seem fair.

As cohabitation becomes more common and lasts for longer, and as property price inflation has continued over the last two decades or so, the need for a more flexible approach has become pressing. Parliament's failure to legislate in this area has been widely criticised, including recently by Lady Hale in Gow v Grant [2012] UKSC 29. However, despite the recommendations of the Law Commission in 2007, no such reforms are on the horizon at present (see Law Com 307 Cm 7182).

Whereas earlier case law relied on the concept of the resulting trust in order to determine beneficial entitlements in the home on relationship breakdown, more recently such an approach has been seen as inappropriate to the 'domestic consumer context' of intimate relationships. Instead, notably in Oxley v Hiscock [2004] EWCA Civ 546, Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53, the courts have moved to a more holistic approach based on constructive trusts which takes account of the parties' 'common intention'. In Jones, moreover, the judges held that the parties' common intention could change so as to effect alterations in their respective beneficial entitlements in the family home, giving rise to the so-called 'ambulatory constructive trust'.

In this article I aim to indicate where the law stands in relation to constructive trusts and cohabitants following Jones. I also examine some of the cases that have been reported since Jones, which show how it has been applied in practice by the courts.

Facts in Jones

In Jones itself, the unmarried couple had bought a house in their joint names in 1985, the price being met from a deposit paid by Ms Jones and a mortgage in the couples' joint names. They each paid outgoings. There was no express declaration of their beneficial interests.

They had two children but in 1993 the relationship broke down. Ms Jones and the children stayed in the property after Mr Kernott moved out, Ms Jones paying all outgoings with no financial contribution from Mr Kernott towards the house or the children's upbringing. The couple subsequently cashed in a life policy enabling Mr Kernott to pay the deposit on a separate house.

It was not until 2006 that Mr Kernott claimed a beneficial interest in the first property which, by the time of the hearing before the judge in 2008, was valued at £245,000. The parties were in agreement for the purposes of the hearing that, at the time when Mr Kernott had moved out of the first property in 1993 (at which point the property was valued at about £70,000), they had held the beneficial interests in that property in equal shares. However, Ms Jones maintained that Mr Kernott's subsequent purchase of a separate property for himself (along with other events since their separation) constituted evidence that their intentions regarding the beneficial ownership of the first property had changed, effecting an alteration in their respective beneficial interests in the property. This was the issue to be addressed by the court.

Previous case law

In Oxley the property had been transferred into Mr Hiscock's sole name with no discussion of beneficial ownership. However, based on the parties' joint contributions to the purchase and to subsequent outgoings, the Court of Appeal had readily inferred the parties' common intention to share beneficial ownership. As to quantifying the parties' respective shares, in the absence of evidence from which the parties' common intention could be inferred, "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" (para. 69). On this basis, the beneficial entitlement in Oxley was to be split 60/40 in Mr Hiscock's favour, partly because of the larger financial contribution that he had made.

In Stack the property had been transferred into joint names. Applying the presumption that beneficial ownership follows legal ownership prima facie resulting in equal beneficial shares, the court had said that it was for Ms Stack to establish her entitlement to the 65% share claimed by her. Lady Hale in the House of Lords had said that...