Kernott V Jones and The Family Home: Changing Intentions, Changing Law

Changing Intentions, Changing Law:
Kernott v Jones and the Family Home

SEMINAR T U E S D A Y 3 1 ST J A N U A R Y 2 0 1 2
www.familyproperty.org.uk
The Basic Position

Where there is no express declaration of trust: Sole name and joint name cases are to be dealt with under one unified scheme The starting points may be [very!] different, but the working principles are intended to be the same In either case, use the two questions formulated in Stack: (1) was there a common intention that this person was intended to have an interest? (2) If the answer to (1) is yes, what size is that interest?
The Basic Position Continued

The answer to (1) must be found either by discovering an express agreement or by inferring a 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 possible to impute a common intention about the size of the share by looking at the whole course of dealing
Definition
Per Neuberger LJ in Stack
An inferred intention is objectively deduced to be the subjective actual intention of the parties, in the light of their actions and statements. An imputed intention is one which is attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had no such intention ...
Definition
Per Neuberger LJ in Stack
... Imputation involves concluding what the parties would have intended, whereas inference involves concluding what they did intend.
The Facts of Kernott v Jones
The Facts of Kernott v Jones

1985: Badger Hall Avenue (BHA) acquired Purchase price 30,000 contributed unequally Conveyed into joint names with no express declaration of trust The equitable presumption of joint tenancy is operating at this point Two joint life insurance policies commenced
1985
Kernott v Jones timeline

1986: extension built Financed by joint loan of 2,000 Mr Kernott did most of the work on the extension Extension increased value of property from 30,ooo to about 44,000
1986
Kernott v Jones Timeline

1985 1993 4 children born Ms Jones pays all of the household outgoings including the mortgage payments out of joint resources
1985 --
1993

1993: Mr Jones leaves the property Ms Jones conceded at trial that at this point, there was nothing which could displace the presumption of equitable joint tenancy
1993

At an unknown date between Mr Kernott leaving BHA and him purchasing a new property in May 1996, one of the joint life insurance policies is cashed in and divided equally Property marketed in 1995 for 69,995 May 1996 Mr K uses life insurance money to buy new property (Stanley Road) in his sole name
There are no discussions between the parties about what effect these acts may have on their interests
?1993
--[1995]
?1996

1996 to approx 2006 Ms Jones lives with the children at BHA and Mr Kernott lives at Stanley Road Mr Kernott makes no contributions towards mortgage, endowment policy or maintenance of children
1996
2006

Important findings of fact
There was a finding of fact that Mr Kernott would not have been able to afford the mortgage on Stanley Road if he had had to pay part of the mortgage on Badger Hall Avenue [40] KvJ is NOT an imputed common intention case the trial judge inferred a common intention from the evidence and this finding was not overturned

At the outset, this was a beneficial joint tenancy By the close, it was a beneficial tenancy in common in unequal shares The transformation had taken place around about 1995 6 (or possibly slightly earlier) In this case the parties had had a real common intention which was inferred from their actions
1995-6
1985 1993 approx. : presumed common intention joint tenancy
2011: inferred common intention tenancy in common in unequal shares [90:10 by 2011]
1996
Mr Kernotts interest is frozen at its estimated cash value on that date (30,000)

At the point of change in 1996, the shares of the parties were equal The significance of the change of intentions was what happened thereafter
Her His share share in in 1996 1996

The effect of the freeze of Mr Kernotts share in 1996 was that Ms Jones made all of the gain reflected by payment of the mortgage and of the market rise over the ensuing 10 years Consider the effects if the property had been sold in 2005 The Judge inferred that this must have been their intention in 1996
Equity 2006
Ms Jones 1996 Mr Kernott 1996 Ms Jones (since 1996)
Re-Framing Kernott v Jones
The Stack questions re-framed
Of the key questions in Stack, question 1 was not in dispute: both parties agreed Mr Kernott had an interest and it was presumed by his appearance on the title The focus was Question 2: was his interest 50%, or less than that?
Kernott Reframed
Ms Jones argument was that the equitable presumption of joint tenancy in 1993 was not conclusive of the parties positions in 2006 She had the burden of proving that between 1996 2006 the parties had a common intention which displaced the previously valid equitable presumption She was arguing that the trust could change over time
Kernott v Jones Re-framed
It had always been possible for a trust to be varied by subsequent conduct: Neuberger LJ in Stack @ 138 147 sets out the traditional position Subsequent discussions, statements or actions from which a common understanding or agreement can be inferred [138] One party carries out significant improvements to the property [139] (Possibly) capital repayments to the mortgage [140]
The Leading Judgment in Kernott v Jones
Kernott Leading Judgment

Walker and Hale LLJ
The trial Judge concluded that Ms Jones had discharged her burden and was upheld by the Supreme Court Ms Jones had demonstrated that there was evidence from which the new common intention could be inferred The SC went further and said that a new common intention respecting the size of the share could also be imputed

Recall Neuberger LJ in Stack:
In other words, it is possible to replace a presumed common intention with a common intention that did not in fact exist
An inferred intention is objectively deduced to be the subjective actual intention of the parties, in the light of their actions and statements. An imputed intention is one which is attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had no such intention. Imputation involves concluding what the parties would have intended, whereas inference involves concluding what they did intend.

Walker and Hale LLJ
Guiding principles set out at paras 51(1) (5) p. 18 Imputation only applies to the question of the size or extent of the shares: 51(4) The whole course of dealing is to be given as broad a meaning as the course relevant to ascertaining 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) also apply to sole name cases: paragraph 52 It is affirmed that this is a new regime for family home cases The assumptions about human motivations which underlie the resulting trust concept are not appropriate in the family home context: para 53
Kernott v Jones
Leading judgment
The leading judgment contains an extended critique of the inadequacy of the resulting trust doctrine in family relationships: the judgment quotes a definition of them as a materially communal relationship ... One in which, in practical terms, [the parties] pool their material resources (including money, other assets, and labour) [21]
The reason people do not formulate agreements in this situation is precisely because they trust each other and they are not acting individualistically [see paras 20 22] Taking an equitable account in such circumstances is impractical In Kernott, there is no scope for an equitable 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 a person: Because you trusted a family member, the law of trusts will not help you In any event, the assumptions which underpinned the use of a purchase 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 an argument for unequal shares in a joint names case based on unequal contributions alone The whole of the context (ie the whole course of dealing) 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 had intended that Mr Ks interest would crystallise at that point It is clearly the intention which reasonable people would have had had they thought about it at the time [48]
Joint names
Kernott v Jones
Leading judgment
The court will try to deduce what their actual intentions were at the relevant time. It cannot impose a solution on them which is contrary to what the evidence shows they actually intended. But if it cannot deduce exactly which shares were intended, it may have no alternative but to ask what their intentions as reasonable and just people would have been had they thought about it at the time. This is a fallback position which some courts may not welcome, but the court has a duty to come to a conclusion on the dispute put before it. [para 47]
Kernott v Jones
The process of finding an answer to Question 2 re. the size of the interest
Step 1: Examine the evidence to see if there is an express common intention: if not --
Step 2: Examine the evidence to see if you can infer a common intention on the basis of the evidence available; if not -Step 3: Impute an intention using what evidence there is and doing the best you can within the context
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 meaningful difference: para 74: imputation involves the court deciding what is fair in light of the whole course of dealing
Kernott v Jones
The question of inference
On whether or not there was sufficient evidence for the trial Judge to infer an answer to Question 2: Kerr LJ thought not [para 76] but that imputation gave the same result Wilson LJ thought there was [para 84] Collins LJ thought the inference/imputation point was probably in practice a distinction without a difference [para 65]
Changing Intentions, Changing Law

A WORKED EXAMPLE : SAM AND SUSIE

Sam and Susie Timeline
1995 Property acquired in Sams sole name 1999 2008 Three children born Susie looks after children full-time 2010 Sam seeks 100% of sale proceeds of property
1995 1999 Parties pool their resources
1999 First child born Susie stops earning
2008 Susie extends the property and adds 25% to its value
Sam and Susie

Timeline
1995 : Property acquired In Sams sole name Equal cash contributions Agreement to share mortgage liability
Sam and Susie

Timeline
1995 -- 1999 Parties pool their resources One joint account from which all outgoings inc. mortgage are paid
Sam and Susie

Timeline
1999: First child born Susie gives up work to care for the child full-time Sam continues to work and his income is used to pay the mortgage
Sam and Susie

Timeline
1999 -- 2008 Two further children born: Susie works part-time from 2005 Sam continues to work and his income is used to pay the mortgage
Sam and Susie

Timeline
2008 Susie inherits 30,000 and pays for an extension to the property, adding 25% to its value Sam continues to work and his income is used to pay the mortgage
Sam and Susie

Timeline
2010 Parties separate Sam seeks a sale of the property and either 100% of equity or an amount equivalent to his cash contributions inc. mortgage
Sam and Susie
The starting point is that Sam is the sole beneficial owner Susie must bring evidence to show that she was intended to have a share She will almost certainly be able to do so in this context by proving her cash contribution The result is that there is an inferred common intention that she should have a share
Sam and Susie
We then turn to question 2 First exercise is to set up a chronology or timeline Secondly, identify which if any of the Stack para 69 factors are in play to establish the context It may be helpful at this stage to ask whether on balance the facts in the context indicate a materially communal relationship
Sam and Susie
Then progress through the facts in context to establish whether there has been an express common intention; if not Do the facts support an inferred common intention as to size of share? My view is that it might be difficult in the Susie/Sam scenario to infer a common intention
Sam and Susie
This is certainly a materially communal context The parties did not come to any express agreement about what happened when Susie stopped 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 Much will depend on what the parties themselves say about the arrangements: there is no hard and fast 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 did not keep their finances separate [or, perhaps, saw their finances as a joint venture], therefore a common intention as to equal shares can be imputed This is particularly likely where one party has ceased to contribute due to full-time child care or, for example, illness Note that Susies contribution to the extension is not likely, in my view, to change the balance of equality The more silent the parties are about their arrangements, the more likely it is that equal shares may be pronounced in this context
Sam and Susie
In practical terms in this case, there is no difference between inference and imputation The facts in context or the whole course of dealing indicate material communality or joint venture The difference between inference and imputation may be on apparently slight evidential matters that indicate this is what the parties must have intended A finding of fact by the court that the parties never gave any thought to the size of the shares will not defeat an equal-share result
Sam and Susie
Possible contra-indications of joint venture Buying to develop as well as to use as a home, or buying to let; anything with a commercial flavour The Stack situation, where the parties keep their finances distinct and there is no real notion of sharing
A Working Method

Kernott V Jones and The Family Home: Changing Intentions, Changing Law

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Changing Intentions, Changing Law:

Kernott v Jones and the Family Home

The Basic Position

The Basic Position Continued

The Facts of Kernott v Jones

The Facts of Kernott v Jones

Kernott v Jones timeline

Kernott v Jones Timeline

Kernott v Jones timeline

Kernott v Jones Timeline

Kernott v Jones timeline

Kernott v Jones Timeline

Kernott v Jones Timeline

1985 1993 approx. : presumed common intention joint tenancy

Kernott v Jones Timeline

Kernott v Jones Timeline

Her His share share in in 1996 1996

Kernott v Jones Timeline

Ms Jones 1996 Mr Kernott 1996 Ms Jones (since 1996)

Re-Framing Kernott v Jones

The Stack questions re-framed

Kernott v Jones Re-framed

The Leading Judgment in Kernott v Jones

Kernott Leading Judgment

Kernott Leading Judgment

Kernott Leading Judgment

Changing Intentions, Changing Law

Changing Intentions, Changing Law

1995 1999 Parties pool their resources

1999 First child born Susie stops earning

Sam and Susie

Sam and Susie

Sam and Susie

Sam and Susie

Sam and Susie

Sam and Susie

Sam and Susie

Sam and Susie

Sam and Susie

Sam and Susie

Sam and Susie

Sam and Susie

Sam and Susie

Changing Intentions, Changing Law

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