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The Supreme Court have recently handed down their much anticipated judgment in the case of Kernott v Jones [2011] UKSC 53. The case concerned an unmarried couple, with no particular great wealth, who purchased a property in the 1980’s in their joint names. However the couple separated in 1993 when Mr Kernott left the property and he made no further contributions towards the same, or to their two children, although the property remained in the parties’ joint names. When Mr Kernott left the property the parties agreed to surrender an endowment policy which enabled Mr Kernott to purchase another property.

In 2006 Mr Kernott looked to claim his 50% share in property, which while purchased for £30,000 was by then worth £245,000.  Following the case of Stack v Dowden it was concluded that if the parties did not declare their defined share in a property upon purchase then equity followed the law and those defined shares reflected their legal interest of 50:50.  The onus was on the party who sought to show that the beneficial ownership differed from the legal ownership to rebut that presumption.  The Court would then have to try to ascertain what the parties must have intended, in light of their conduct. The Court could not abandon that search in favour of what it considered to be fair.  This meant that Mr Kernott would be entitled to 50% of the property despite the fact that he had not been living in nor contributing to the disputed property for over 10 years. Indeed this was the decision that was reached by the Court of Appeal prior to the case reaching the Supreme Court.

However Lord Kerr in his judgment in the case states that, ‘the courts are courts of law, but they are also courts of justice’. This rather inspiring comment very much sets the tone for how the courts are now deal with cases. It would appear that the concept of fairness will again play a greater role in the delivery of justice.

The starting point in these disputes is that equity follows the law and that parties who own property as joint tenants do so both in law and equity. This is not to say that the courts will ignore what the parties intended, quite the contrary. The Supreme Court have held that this presumption can be displaced by showing that the parties had a different common intention at the time they acquired the property, or that they later formed the common intention that their respective shares would change.  The Court will consider a number of factors, in the absence of any express agreement, and will look to make an inference as to what were the parties’ common intentions. Those common intentions are to be deduced objectively from the parties conduct.  The Court will only decide as to the shares to which each party is entitled based on what is “fair” having had regard to the whole course of dealing between them in relation to the property in cases where it is not possible to ascertain by direct evidence or by inference what the parties’ actual intentions were as to the shares in which they own the property.

The Supreme Court unanimously decided in this case to restore the order of the County Court and Ms Jones was therefore awarded a 90% share in the property. The reasoning for the decision was that the presumption that equity follows the law had been displaced, as the parties had formed the common intention that their respective shares had changed. The Court found it impossible in this case to deduce the parties common intention as to their respective shares in the property and therefore awarded Ms Jones what the Court considered fair having regard to the whole course of dealing between the parties in the case, that being a 90% share in the property.

Does this mean that we must all be careful to ensure that we make our respective partners aware of how much of our home we intend to own? Is our partner able to unilaterally decide that they no longer intend to own our home equally? Most people will have believed that when they chose to purchase a property and had elected to hold that property as joint tenants that they will each have an equal share in the property. Indeed property Transfer Deeds were updated in 1998 to include a box enabling joint transferees to clarify beneficial ownership of the property. However Lord Walker and Lady Hale in their judgement in the Kernott case state that while that should help to avoid uncertainty in practice it does not always do so.  

Parties can however enter into a Declarations of Trust, a legal document which specifically states their beneficial ownership of the property. However many people now call for laws to be introduced by Parliament governing the relationships of unmarried couples and providing them with financial remedies should the couple separate. Scotland have already introduced such laws and is perhaps time that they government re-visited this issue.

However in reality and practice the position will generally always be that equity follows the law and that joint tenants own the property in equal shares, unless that presumption can be rebutted  Should this presumption be displaced then the parties’ common intention is, as referred to above, to be deduced objectively from their conduct. Lord Walker and Lady Hale in their judgment refer to the case of Gissing v Gissing which states that ‘the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s own words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party.’

While there remains uncertainty, the Kernott judgment finally allows the Court to consider ‘fairness’ if they are unable to establish the parties intentions. It does however raise the question of just how quickly will the Courts move from looking for the parties common intentions to deciding the case on their view of fairness.

For further information on this article, please contact Pitmans Matrimonial Team.

Matt Heyworth
Solicitor
T: +44 (0) 118 957 0233
E: mheyworth@pitmans.com

Owen Reynolds
Director
T: +44 (0) 118 957 0275
E: oreynolds@pitmans.com

It is a common myth that, once a couple obtain a Decree Absolute of divorce, this dismisses their financial claims against each other. While this would be correct if the parties had entered into a Consent Order to reflect the financial agreement they had reached upon divorce, or if the Court has made an Order after a Final Hearing, it is far from being a universal rule.

In the current economic climate, many people will be keen to end their marriage by what they term an “amicable divorce” when they agree how they will divide the matrimonial assets and thereafter agree that they will not make any claims against the other. In many such cases the parties do not feel the need to involve solicitors and will happily act in person in respect of the divorce and obtain the Decree Absolute, thinking that because this ends their marriage it must also end all claims against the other in respect of the marriage. This is not however the case as, if the parties do not have a suitably worded Court Order, their respective claims against the other will remain open even after the Decree Absolute, up until the point that such an Order is made.

Consequently if one party’s financial situation improves dramatically and the other party’s financial situation deteriorates after the Decree Absolute, then the party in the weaker position could apply to the Court for a financial remedy. This could be any Order available to them under the Matrimonial Causes Act 1973, including for a lump sum, property adjustment, maintenance or pension sharing. Even without a material change in circumstances, such applications can arise where one party is influenced by an unscrupulous third party or a new partner.

An amicable split is, of course, a sensible objective for both sides to have. Indeed, the field of Collaborative Law is based on that very principle. But it is in neither party’s interests to store up disputes for a later date. In an amicable divorce the way to avoid such a risk is to enter into a properly drafted Consent Order. This is a document which contains the appropriate terms and which both parties sign, agreeing that those terms are acceptable. It will also include clauses to dismiss any future claims that either party may have over the other under the applicable Matrimonial and Inheritance legislation, therefore giving a clean break if that is what the parties want to achieve. Once the Consent Order is agreed and signed by both parties, and the Decree Nisi has been pronounced, it is sent to the Court where a District Judge will approve the agreement and seal the document. It will then become an Order of the Court and if either party breaches that Order then the matter can be brought back before the Court to enforce the Order’s terms.

If the divorce is not an amicable one and no agreement can be reached, then an application would need to be made to the Court for a financial remedy. This will ultimately produce an Order whether made by consent at the door of the Court, or imposed by a Judge after hearing the case, but it is a process which is likely to be both more costly and more acrimonious than the amicable route.

Whether arrived at amicably or not, though, certainty (in the form of a final Order) is essential to protect a divorcing parties’ respective future interests, particularly if they intend to re-marry or if their financial situation could change significantly to their benefit.

If you would like to know more information about this article, then please contact either Marian Lynch or Owen Reynolds of our matrimonial team.

From 6th April 2011 anyone applying for a court order in relevant family proceedings needs to consider with a mediator whether their dispute is capable of resolution through mediation. It has been widely misquoted as being compulsory “divorce mediation” but is limited to:-

1. Children cases, EXCEPT to enforce an order, for financial compensation or in emergency proceedings
2. Financial cases, EXCEPT for an emergency financial order to prevent disposal of assets

There are many exemptions including:-

• One party to the dispute is unwilling to mediate.
• There has been domestic violence.
• The whereabouts of the other party is not known.
• The application is within existing proceedings.
• The application is an emergency made without notice.
• Urgency – risk to the life/safety, family/home of the applicant, or delay could result in harm to a child.
• Social Services are involved and there are child protection issues.
• The applicant contacts 3 mediators within a 15 mile radius of home and none can conduct mediation within 15 working days of the date of contact.

Most parties want to settle their case out of Court, but this is not always possible particularly if there is a power imbalance in their relationship when the weaker party feels intimidated and unable to say what they feel and for the reasons set out above.

If you need any advice about separation, divorce or children disputes or Alternative Dispute Resolution methods then please contact Marian Lynch or Owen Reynolds in our family team.