STACK v Dowden [2007] UKHL 17, [2007] 2 A.C. 432 introduced significant changes to the law of trusts of family homes. Stack recognised that beneficial ownership presumptively mirrors legal ownership and discussed how, in cases where that presumption is rebutted, beneficial interests should be quantified. However, three questions remained.
First, when should the court depart from the starting point that beneficial ownership reflects legal title? Stack held that challenging that assumption in joint-names cases was “not a task to be lightly embarked upon” (Lady Hale at [68]), but offered little detail as to the type of facts which would succeed. Second, are sole-name and joint-names cases different, other than the starting points being, respectively, sole or equal joint beneficial ownership? Third, are judges permitted to impute intentions to the parties which they never actually had? Lady Hale in Stack had referred to “the parties' shared intentions, actual, inferred or imputed”, but also said that the court could not abandon the search for the parties' intentions “in favour of the result which the court itself considers fair” (at [60]–[61]).
Jones v Kernott [2011] UKSC 53, [2012] I.F.C. 45 had the potential to answer these questions. The parties started a relationship in 1980 and bought a house together in joint names in 1985. Ms. Jones paid the deposit and the bills; Mr. Kernott regularly gave money to Ms. Jones and made substantial improvements to the house. Their relationship ended in 1993, but an attempt to sell the house failed. Jones continued paying for the original house while Kernott started buying himself another home. There matters stayed until 2006 when Kernott initiated proceedings to claim an interest in the house. At trial, Kernott was declared to own 10% of the house; the High Court upheld that decision, but a majority of the Court of Appeal held that there was equal beneficial ownership. The Supreme Court reinstated the judge's order.
Regarding the third question, the Supreme Court was clear that it is sometimes permissible for the court to impute an intention to the parties at the quantification stage. The primary search is for the parties' actual intentions, whether expressed or implied. However, if the parties intend to own property in shares different from the legal title but it is impossible to find an express or inferred common intention as to the proportions, then when it comes to quantifying the beneficial interests “the court is driven to impute an intention to the parties which they may never have had” (Lord Walker and Lady Hale at [31]).
However, as clear as this discussion of imputation was, for a majority of the court the point was technically obiter. Lord Walker, Lady Hale and Lord Collins considered that the facts supported an inferred intention to share the house 90:10. Only on the minority approach of Lords Kerr and Wilson did imputing form part of the ratio: their Lordships considered it impossible to infer any common intentions on the facts, but imputed an intention to share in 90:10 proportions. The minority also thought it ambitious to use Stack as authority to justify “fair” outcomes which the parties never intended, given Stack's clear warning against imposing “the result which the court itself considers fair”. Indeed, it is noteworthy that the majority in Jones (at [32]) relied on the “fairness” approach of Oxley v Hiscock [2004] EWCA Civ 546, [2005] Fam. 211 which had been criticised in Stack. Nonetheless, the Justices unanimously agreed that quantifying beneficial interests by imputing intentions is permitted at the quantification stage if the search for expressed or inferred intentions fails. The only dispute was whether it was necessary to impute on the facts of Jones.
Also obiter to its decision, the Supreme Court addressed the second question, the relationship between sole-name and joint-names cases. Lord Walker and Lady Hale pointed out (at [17]) that “the starting point is different” in the two situations because beneficial ownership presumptively reflects legal title. However this factual difference need not imply any difference in the analytical process. In both cases, the court would seem to follow these steps:
(1) Assume that beneficial ownership mirrors legal ownership.
(2) Search for evidence of an expressed or implied common intention that the beneficial ownership is different from (1). If there is no such intention, the answer is as (1); if there is, go to (3). Note that imputed intention seems not to suffice at stage (2), though Lord Wilson wondered whether perhaps it should (at [84]).
(3) Ask whether the evidence in (2) is sufficient to justify departing from (1). If the evidence is not sufficient, the answer is as (1); if it is, go to (4).
(4) Ask whether the evidence, expressed or implied from the parties' whole course of dealing as regards the property, reveals a common intention as to the proportions in which the property is shared. If there is, give effect to that intention; if not, go to (5).
(5) Look at the whole course of dealing between the parties as regards the property and decide what proportions are fair in the light of that conduct.
The answer to (1) will, of course, be different in sole-name and joint-names cases. The level of the hurdle in (3) seems also to be different, perhaps explaining the Supreme Court's reluctance to equate sole-name and joint-names cases fully: in joint-names cases, only “very unusual” facts will satisfy the test (Lady Hale in Stack at [68]; Fowler v Barron [2008] EWCA Civ 377, [2008] 2 F.L.R. 830), whereas in sole-name cases the task seems easier (Midland Bank v Cooke [1995] 4 All E.R. 562). This difference at stage (3) suggests a bias towards finding (partial) shared ownership as the final outcome: it is easier to disprove sole ownership in a sole-name case than to escape (equal) joint ownership in a joint-names case (although in both Stack and Jones the presumption was rebutted).
However, the first question remains unresolved – when will beneficial ownership be different from legal title? Stack set the hurdle of stage (3) high in joint-names cases, but gave little guidance about the kinds of facts which might succeed in the task. While Jones helpfully clarifies the process of quantifying beneficial interests (stages (4) and (5)) if the presumption at stage (1) is rebutted, it fails to answer the crucial prior question of what evidence counts in rebutting that presumption (stages (2) and (3)). Jones tells us how the quantification process works, but not when it is needed, and without that information many difficulties arising from Stack are likely to remain.
