Wed, 19 Mar 2014
By Ashley Wynne
The twin ‘seismic’ cases in the area of co-habitation disputes of Stack v. Dowden [2007] UKHL 17 and Jones v. Kernott [2011] UKSC 53 have come and gone and case-law in which those decisions have been applied has begun to filter through. The following is a brief summary of the major reported cases that have followed in the wake of Jones v. Kernott. It is difficult to extract a common thread from these cases as each has it’s own distinct factual make-up, but if there is any element of commonality of approach, it would seem to be the continued use of financial contributions as the basis upon which the quantification of beneficial entitlements under a constructive trust are calculated.
Geary v. Rankine [2012] EWCA Civ.555
The Facts:
The parties were in a relationship between 1990 and 2009 and lived together for the whole of that period. Their son was born in 1992. Mrs. Geary remained married to her former husband until 2002. In 1996 Mr. Rankine purchased a guesthouse in Hastings. The property was purchased for £61000, all of which was sourced from Mr. Rankine’s own savings. Initially a manager was employed but after only a short time Mr. Rankine moved from the parties’ home in London to Hastings in order to run the guesthouse himself. Mrs. Geary soon joined him and played an active role in running the business. Following the demise of the parties’ relationship, Mrs. Geary claimed:
i) An account on the basis that the business had been a partnership;
ii) A declaration that the guest house was held by Mr. Rankine by way of a constructive trust for the benefit of both parties.
First Instance:
The claims for a partnership account and a beneficial interest were rejected. There was no evidence, which could form the basis of a finding that the parties intended Mrs. Geary to obtain a beneficial interest in the guesthouse at the time of the purchase or that such an intention arose subsequently. There was also no evidence that Mrs. Geary had changed her position in reliance upon any assertion that she was to have an interest in the property. Her claim in relation to a business partnership was dismissed on the facts.
Held:
The partnership claim was rightly rejected on the evidence. The Court of Appeal upheld the initial finding that, amongst other matters:
· the accounts had always been prepared on the basis that Mr. Rankine was a sole trader;
· there was no formal sharing of profits or drawings – all of which were allocated to Mr. Rankine;
· there was no joint bank account.
· Mrs. Geary had never been presented to the outside world as a partner.
The beneficial interest argument was also rightly rejected. The business was initially a pure investment, to be run by a manager. It had not initially been intended that Mrs. Geary would play any part in running it. The Court of Appeal reiterated the Jones v. Kernott reasoning: Mrs. Geary must first establish a common intention that she was to have any interest in the property. If she succeeded on that point, the court must then attempt to discover the parties’ intentions regarding the extent of that interest and if that intention. Mr. Rankine’s evidence that he had no intention of providing Mrs. Geary with an interest in the business or the property from which it operated while she remained married was accepted. It would clearly have been possible for Mrs. Geary’s Husband to have launched a claim against her share. Mrs. Geary herself gave evidence that she had asked Mr. Rankine several times during the latter years of the relationship about the security that she an her son could expect to be provided with and that he had responded either that the business would remain in his sole name or that he was non-committal. This was inconsistent with any intention that Mrs. Geary should acquire a beneficial interest in the property.
Chapman v. Jaume [2012] EWCA Civ.476
The Facts:
The parties’ relationship began in 1997/1998 and they were effectively living together at Mrs. Jaume’s property by 2001. The property was transferred into Mrs. Jaume’s name in 2002, following the finalisation of her divorce and Mr. Chapman then funded extensive improvement work to the property (including an extension) which he claimed cost over £130000 in total. Mr. Chapman claimed that the basis of the work was to increase the sale price of the property in the event that they sold and acquired a new property in their joint names. If they did not stay together, it was agreed that Mrs. Jaume would repay the money spent by Mr. Chapman when the property was sold or when her youngest child attained the age of 18 if it were to be retained. Mrs. Jaume claimed the improvements were undertaken in lieu of any contribution by Mr. Chapman to the running costs of the property.
First Instance:
Although there probably had been some sort of agreement between the parties, Mr. Chapman’s evidence regarding the precise terms of the loan was rejected and the court was therefore unable to find that the funds expended were repayable.
Held:
The Judge at first instance was wrong to find that Mr. Chapman’s case should fail in its entirety merely because he could not be satisfied regarding the precise terms of the loan.
Prima facie, there was a presumption that the money provided should be repaid in the absence of anything in the nature of a presumption of advancement. Lady Hale had made clear in Stack v. Dowden that the presumption of advancement had never applied between unmarried co-habiting couples. The Judge should have drawn the inference that the money provided by Mr. Chapman would have been repayable within a reasonable time after demand. The property had already been sold by the time the case came to trial and the monies advanced by Mr. Chapman should now be repayable. The matter was remitted to the County Court in relation to the issue of Quantum. (Mrs. Jaume claimed Mr. Chapman had expended no more than £60000).
Gallarotti v. Sebastianelli [2012] EWCA Civ. 865
The Facts:
Two friends purchased a property for £188287. The purchase was undertaken in Mr. Sebastianelli’s sole name along with a mortgage of around £75000. Mr. Sebastianelli also contributed £88500 by way of a cash contribution and Mr. Gallarotti provided £26896. Both parties occupied the property and as neither had a regular income there was no formal agreement as to how the outgoings were to be funded. When their friendship soured, Mr. Gallarotti left the flat and claimed a 50% beneficial interest in the property on the basis of a common intention constructive trust.
First Instance:
The Recorder found an express oral agreement that the parties should each have a 50% beneficial interest in the property. She held that Mr. Sebastianelli held the property on trust for both parties in equal shares despite that fact that he also found that the oral agreement was subject to a rider that Mr. Gallarotti would make a larger contribution to the mortgage together but that he did not do so and that there was no evidence that he made a contribution to the other outgoings that was of such significance that it could be regarded as an indirect contribution to the mortgage.
Held:
The Recorder was correct to approach the case as a common intention constructive trust based upon an express oral agreement but she failed to take proper account of the fact that the disparity in the parties’ ongoing contributions had been much greater than the parties had envisaged. On that basis the initial agreement that they should hold the beneficial title in equal shares had come to an end. The only proper inference that could be drawn as to the extent of Mr. Gallarotti’s share was that it should reflect his financial contributions.
Aspden v. Elvy [2012] EWHC 1387 (Ch)
The Facts:
The parties met in 1985 and in 1986 Mr. Aspden purchased Outlaithe Farm in his sole name for £70000. The parties also began living together at the farm later in 1986 and they subsequently had two children. Ms. Elvy set up a cattery and dog kennel business, which she based at the farm. The parties separated in 1995/1996 when Ms. Elvy and the children left the farmhouse and went to live nearby – she continued to run her business.
In 2006, Mr. Aspden transferred ownership of the barn at Outlaithe Farm together with surrounding land, to Ms. Elvy and also executed a will in her favour. He claimed this was done in order to avoid a charge for the costs of an unsuccessful claim for professional negligence against solicitors who acted for him in proceedings against his former employers and to avoid IHT. He intended to retain the farmhouse and sufficient land in order to discharge the costs bill but did not want the entire farm to be encumbered with a charge. Mr. Aspden sold the farmhouse and adjacent land in 2008, retaining net proceeds of £188000 after paying his litigation creditors. He subsequently lived in a static caravan sited, with her permission, on Ms. Elvy’s land. Work began to convert the barn into a dwelling house and Mr. Aspden provided labour and funds of around £73000 on his case, or £39000 on Ms. Elvy’s. Mr. Aspden claimed that the payments were made and the work carried out on the basis that there was common intention that the parties would marry and that they would occupy the property as their home. Ms. Elvy contended that the payments were gifts in recognition of her contribution to the family and her interest in the part of the farm sold by Mr. Aspden.
Held:
There was insufficient evidence to establish an inferred common intention that Ms. Elvy was to have a beneficial interest in Outlaithe Farm when it was originally purchased. It was acquired in Mr. Aspden’s sole name and he paid all of the outgoings including the mortgage. The fact that they lived in it and referred to it as “our house” would not be sufficient.
In relation to the barn, there was nothing in the parties’ course of conduct that would allow the court to infer a joint intention that Mr. Aspden should retain a beneficial interest in the barn at the time that it was transferred to Mrs. Elvy. His subsequent contributions to the costs of the conversion works did. However allow such an inference to be drawn.
· The work had clearly contributed to a substantial increase in the value of the property.
· It was difficult to see how Mrs. Elvy would ever have been in a position to fund the work without Mr. Aspden’s contributions.
· Mr. Aspden had contributed a significant proportion of his remaining capital to funding the works while he remained living in a caravan.
It was clear that Mr. Aspden had made the payments on the basis that he was to move into the property and that the parties would occupy it as their home. There were no discussions as to the extent of their shares and the Judge therefore approached the matter on the basis of a fair result having regard to the entire course of dealing in relation to the property. Mr. Aspden was awarded a 25% share, which would take proper account of his initial financial contribution and the subsequent increase in the value of the property. The Judge described the figure as “somewhat arbitrary” but it was also “the best he could do in the circumstances”.
Thompson v Hurst [2012] EWCA Civ. 1752
The Facts:
The parties lived at the property as a couple from 1985 but Mrs. Hurst had been in occupation as a local authority tenant since 1983. In 2001, the property was purchased in Mrs. Hurst’s sole name under the ‘right to buy scheme’ with the benefit of a discount of almost 50%. The parties initially intended to undertake the purchase in joint names but their mortgage adviser did not consider Mr. Thompson as a suitable applicant due to his irregular income. The rent (initially) and the mortgage (latterly) were paid by Mrs. Hurst along with almost all the other household expenses (Mr. Thompson contributing a maximum of £100 per week during periods when he was actually in work).
First Instance:
The District Judge found that there had been a common intention that the parties held a common intention that Mr. Thompson should have a beneficial interest in the property at the time it was purchased as evidenced by the fact that the purchase was initially intended to be undertaken in their joint names. The parties had never formed any common intention regarding the size of their respective shares and the court was therefore charged with attributing to Mr. Thompson whatever share was fair having regard to the whole history of their relationship. The District Judge found that a 10% share for Mr. Thompson fairly reflected the “overwhelming” contribution that Mrs. Hurst had made to the equity that had accrued and the ongoing expenses in relation to the property.
Held:
The District Judge carried out her task in a “careful and exemplary fashion” and there was no basis upon which she could be said to have made any error of principle. Neither Stack v. Dowden nor Jones v. Kernott provided any authority for the proposition that there should be a presumption of joint beneficial ownership where the parties were not in fact legal owners but had evidenced an intention that they would like to have been, but (for whatever reason) this proved not to be possible. The Court of Appeal also emphasised the principle that the Appellate courts should be reluctant to overturn the trial judge’s findings in relation both to the primary facts and the inferences and conclusions in relation to ‘fairness’ that flow from those primary findings.
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