Cohabiting Couples - a cautionary tale

Basically, Mr Kernott and Miss Jones bought a property in 1985, whereby 20% was put down by deposit by Miss Jones and the balance price was paid by way of an endowment mortgage.  Mr Kernott took out a small loan the following year and built and extension which increased the value of the property.  The parties had two children.  They separated in 1993 and both believed at that point, they both had an equal share in the property.  The problem arose because of what occurred subsequently.

Whilst they were separated, Mr Kernott bought another property in 1996 and cashed in a joint life policy that he and Miss Jones had owned.  Miss Jones stayed in the house and paid the mortgage and the outgoings entirely herself, and also looked after the children with minimal, if any, help from Mr Kernott.

The matter came to the Court in 2008 as to whether the parties shares had changed after separation, because Miss Jones had paid all of the mortgage, had not received any child support, and Mr Kernott had since bought a separate property and did not make any contribution to his family.  The Judge at first instance found that there had been changes and increased Miss Jones’ share to 90% of the equity. Mr Kernott appealed arguing he had a 50% interest but the High Court Judge dismissed Mr Kernott’s appeal and said that the Court was free to impute a common intention to both parties, where the intention of the parties cannot be inferred.  The High Court said the Judge was quite right to impute that the parties intention was to change their beneficial interest because of the events and that “fair and just” was the appropriate criteria to quantify those interests.

Mr Kernott, appealed a second time to the Court of Appeal.  In a judgment where all the Judges did not agree, on a majority of two to one, the Court of Appeal allowed the Appeal by Mr Kernott and found that the Judge at first instance was wrong in assuming or imputing that the beneficial interests had changed from 50/50 to 90/10. The Judge commented that this was a very cautionary tale and all unmarried couples, and solicitors who advised them, should study this.  He said the difficult issue was where one party continues to live in the property and assumes sole responsibility for its maintenance and costs, and as in this case, not only supported herself, but also the parties children, paying the mortgage and all of the outgoings and all the repairs and improvements.  The question was is this sufficient for the Court to properly infer that there was an agreement post separation that the parties interests in the property should alter?  His basic answer to this was no. Those actions are not sufficient for a Court to infer that there was an agreement between the parties to change the basis upon which they held the property. 
The Judge clarified that where unmarried couples own a property together, the starting point as to who owns what, is to look at the transfer document.  The transfer document will set out the basis upon which the parties own the property and where there is joint legal ownership, anybody arguing against equal shares will have to prove the case.  The unusual matter in this case, was the long period of delay after the parties separated (at that point it was always agreed that they had equal shares), and the time when the Court was determining this application, which was over 12 years later.  However, even though Miss Jones had paid all the outgoings, the mortgage and looked after the children, this, in itself, was not evidence of the parties intentions.  The Judge found that despite this, there was a lack of evidence about what the parties really intended  They had not discussed the matter and just because Mr Kernott waited until the children were older, before he enforced his interest, was not evidence that he agreed that he should have less.  In fact, that was consistent with the approach that a lot of parents take, when they wait until the children are older, before getting their money from the family home.  Despite the actions by Miss Jones in this case, the Judge could not infer an intention from their conduct.  Passage of time in itself is not a sufficient argument as was the fact that Miss Jones paid all of the outgoings.

The moral is, therefore, that where couples have bought property, they have agreed their interest, but then things change, they really do need to take advice immediately.  Not doing anything, with one party paying all the bills, is not sufficient evidence to argue to a Court at a later stage, that it was intended that at that point that their interests should change or be varied.  The Judge said that it is very important that the parties and those who advise them, take the greatest care over the transactions and must consider when they are buying the property and what happens if the relationship breaks down.  What the parties have got to do is contemplate and address the unthinkable, namely that their relationship could break down.

In this sad case, whilst the Judge clearly had sympathy with Miss Jones, he found that he still had to allocate Mr Kernott his 50% interest, despite the fact that during the preceding 12 years, Miss Jones had brought up the children single handedly, paid the mortgage and single handedly maintained the home.
Therefore, for those parties that are unmarried, who own property, if there are any changes in your circumstances, or if you are worried at all in any way, do not delay seeking legal advice.  For those who are contemplating going out and buying property jointly, with the party other than in a marriage or civil partnership, again contemplate the unthinkable to avoid positions like this arising.

If you would like to discuss any issues raised in this Update or any other family related matter please do not hesitate to contact Lynn Cowley and our Family Team on 01279 755777 or email family@nockolds.co.uk

Lynn Cowley (profile) Thursday 17th February 2011
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