Common intention constructive trust: no imputation of agreement to vary beneficial interests.

In Barnes v Phillips ([2015] EWCA Civ 1056, CA (Eng)) B and P cohabited and had two children. They were beneficial joint tenants of the family home. They re-mortgaged the property in 2005 and B took almost the entire amount left after re-payment of the earlier mortgage for his own benefit. Soon after that, the relationship broke down and he left the family home. He continued to make mortgage payments for the next three years but P also made significant contributions to the mortgage payments during that time. From 2008 onwards, P made all of the mortgage payments and shouldered the financial responsibility for the two children. She was responsible for all of the work and expenditure in connection with the property from 2005.

The question was whether the original common intention that the property was held by the couple as beneficial joint tenants (leading to equality under a tenancy in common when the relationship broke up) had been varied. There was no evidence of an express agreement to vary. The judge at first instance had imputed a common intention that their shares should be 25% (B) and 75% (P). So he addressed the quantification question but failed to address the prior question as to whether there was an agreement to vary. This had to be an actual agreement and could not be imputed.

The Court of Appeal (Lloyd Jones LJ giving the judgment with which Hayden J. and Longmore LJ agreed) decided that since the first instance judge had not addressed this question, it was free to reach its own conclusion ([29] -[30]). The fact that  B had taken virtually all of the net proceeds of the re-mortgaging and that the relationship had ended soon afterwards was sufficient basis for an inferred common intention to vary the parties’ respective shares in the property ([31]). That B’s mortgage payments became sporadic and then ceased altogether reinforced this conclusion ([32]).

When it came to quantification, a common intention could be imputed. B’s actions in taking the fruits of the 2005 re-mortgage for himself, P’s payment of the mortgage installments and the cost of repairs confirmed the correctness of the first instance judge’e conclusion that the imputed intention was that B should have a 25% share and P’s share should be 75%. B’s failure to make all of the payments due for the maintenance of the children could also be taken into account ([37]). It was appropriate to bring the history of financial contributions for the maintenance of the children into the calculation ([41]).

The idea that the judicial development of this area of the law is a response to a failure to legislate is strengthened by this passage:

‘Finally, I note, as did Lord Walker and Baroness Hale in Jones v Kernott (at [35]) that in certain other Commonwealth jurisdictions legislation has conferred on the courts a limited power to vary or adjust proprietary rights in the home when an unmarried couple split up. Here, the Law Commission has made recommendations to a similar effect (Cohabitation: The Financial Consequences  of Relationship Breakdown (2007), Law Commission No. 307). The Government’s response to this report is, however, still pending.’ ([35]).

Michael Lower


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