Financial Interests When Separating – ‘Make Your Intentions Known'

Senior associate Lucy Gould reviews the recent case of Davis v Jackson [2017] EWHC 698 (Ch), in which the court determined the beneficial interests a separated (but not divorced) married couple each held in a property. The property was owned in joint names but occupied only by the wife, who had solely financed its purchase and the mortgage.

Background

The husband (H) and wife (W) separated (although did not divorce) in 2001. In January 2003, W remortgaged a property in her name in order to purchase the property that became the subject of these proceedings. She then lived in this new property with the children of the family. The property was registered in W's sole name and subject to an interest only mortgage, the cost of which was met by her alone.

In April 2003, a declaration of trust was executed between H and W stating that the property was owned beneficially by them in equal shares, although the legal title remained in W's sole name. The trust deed provided that H would pay half of the mortgage. However, he made no financial contribution whatsoever.

In March 2007, the property was remortgaged. At the time, it appears that W was suffering some financial difficulties. The legal title to the property was conveyed into the joint names of H and W and specifically expressed on the transfer form to be held as joint tenants (rather than tenants in common in specified shares). Again, both parties were responsible for the new mortgage, albeit H never paid (indeed he never made any financial contribution to the purchase, mortgage or running costs of the property). It appears that he was included in this transaction so that W could secure the remortgage.

H's bankruptcy

In 2012, a bankruptcy petition was filed against H and trustees in bankruptcy were duly appointed. In 2013 and 2014, the trustees wrote to W inviting her (i) to provide evidence that she owned more than 50% of the property (the assumed share given its ownership as joint tenants); and (ii) whether she wanted to make an offer to buy out H's share.

Having received no response to those enquiries, in 2015 the trustees issued an application for (i) a finding that H owned 50% of the property; and (ii) an order for sale in order that the trustees may realise H's share. An order for sale was made, but suspended to allow W time to take proper legal advice.

At a subsequent hearing, the order for sale was upheld on the basis that the law should follow the ownership as recorded on the face of the...