Title to land – Joint ownership – Beneficial interests – House purchased in joint names of appellant and respondent – Property remortgaged to pay off appellant’s debts – Parties’ relationship then ending – Appellant moving out and ceasing to pay mortgage – Determination of parties’ respective beneficial interests in property – Judge imputing intention to vary beneficial shares from original equal entitlement – Whether permissible to find common intention to vary interests – Proportions in which beneficial interest to be held having regard to dealings between parties – Appeal dismissed
The appellant and the respondent began a relationship in 1983 and later moved in together, first in rented accommodation and later, from 1996, in a property in London SE12 which they purchased in joint names. The purchase was funded partly from the parties’ savings and partly by a joint repayment mortgage. Both parties worked full-time and contributed to the household bills and to the cost of works to the property. The couple had two children together.
The appellant purchased other properties in his sole name as a business investment and rented them out. However, he fell into financial difficulties and in May 2005 the parties remortgaged their home to pay off his debts. At that time, the property was valued at £350,000 and the remortgage was for £145,000, nearly £79,000 of which went to redeem the existing mortgage and the rest of which was used to pay off the appellant’s debts.
In June 2005, the relationship between the parties broke down and the appellant left to move into one of his other properties. He made some mortgage payments thereafter, but from 2008 onwards the respondent had sole financial responsibility for all mortgage payments as well as for the children, although the respondent made some contributions to child support.
The respondent applied to the county court for a declaration, under section 14 of the Trusts of Land and Appointment of Trustees Ac 1996, as to the parties’ respective beneficial interests in the property. At that time, the property was worth a little under £500,000, with an equity of redemption worth just over £369,000. The judge found that: (i) the parties had held the property as joint tenants in law and equity on first acquiring it; (ii) there was no specific agreement as to a variation of their respective shares when they split up and no evidence that they formed an actual common intention that their shares would change; but (iii) the court could impute an intention as to their respective shares based on what was fair having regard to the whole course of dealing between the parties. After taking into account the use of part of the remortgage funds to pay off the appellant’s debts and other matters including the parties’ respective contributions to childcare costs, the judge declared that the parties’ respective beneficial shares were 15% for the appellant and 85% for the respondent.
The appellant appealed, contending that the judge should have found that the parties had remained beneficial joint tenants entitled to equal shares on severance.
Held: The appeal was allowed in part.
(1) The presumption that joint tenants in law were also joint tenants in equity could be displaced by showing that they had later formed a common intention that their respective shares should change. Where there was a change in the basis on which the parties’ beneficial interests were held, but it impossible to divine a common intention as to the intended proportions, then it was permissible for the court to impute to the parties an intention which they might not actually have had. There could be no imputation at the first stage of determining whether there had been a common change of intention; it was permissible only at the second stage of determining the share of each party in circumstances where their actual intention could not be inferred. The court could therefore impute an intention only at the stage of ascertaining the shares in which the property was held following the demonstration of an actual intention to vary the shares: Jones v Kernott [2011] UKSC 53; [2012] 1 AC 776; [2011] PLSCS 264 applied.
The county court judge had therefore missed out a critical stage of reasoning from his judgment when he had moved straight from his conclusion that there was no specific agreement to vary the shares to considering what intention should be imputed as to the shares. While it was arguable that he must have found a common intention to exist, since there would otherwise be no point in discussing the shares in which the property was held following variation, that stage of the reasoning was absent from his judgment.
However, it was open to the appeal court to infer the necessary common intention in the circumstances of the case. The scope for inference in that context was every extensive: Jones applied. The weight of the evidence supported the inference that at June 2005 the parties had shared a common intention to vary their beneficial interests in the property. It was relevant that the remortgage of the parties’ home was entered into for the sole benefit of the appellant, in order to pay off debts which he had incurred in his personal capacity, and that virtually all of the funds from the remortgage, after repayment of the original mortgage, had gone to the appellant for his personal use. In those circumstances, where nearly 25% of the equity in the property had been paid to the appellant for his own purposes and the relationship had ended almost immediately thereafter, it was appropriate to infer a common intention at that point to vary the parties’ interests in the property. That inference was supported by the appellant’s later conduct in ceasing to contribute to the mortgage. The appellant could only legitimately have acted in that way if there had been a change in the beneficial interests in the property. Moreover, text messages between the parties, although fragmentary, provided some evidence that, in 2008, the parties were discussing what their shares should be.
(2) When deciding what intention should be imputed to the parties as to their respective shares following variation, the fact that the appellant had received 25% of the equity for his own use shortly before the parties split up warranted an adjustment of the beneficial shares which reflected that change of position. It was appropriate to make a further adjustment to reflect subsequent events, taking account of the respective positions of the parties and the payments they had made in respect of the mortgage and repairs. Payments made or not made in respect of the children could also be taken into account. The whole course of dealing in relation to the property was relevant and that concept should be given a broad meaning, which could encompass a wide range of circumstances including responsibility for children: Stack v Dowden [2007] UKHL 17; [2007] 2 AC 432; [2007] PLSCS 82 applied. The court could take account of financial contributions to the maintenance of children, or the lack of them, as part of the financial history of the parties, save where that would result in double counting. There was no danger of double counting in the instant case. Overall, the proportions declared by the judge properly reflected the relevant circumstances.
Michael Horton (instructed by direct access) appeared for the appellant; Mark Simeon Jones (instructed by Dodd Lewis, of Blackheath) appeared for the respondent.
Sally Dobson, barrister
Click here to read the transcript of Phillips v Barnes
