Posts Tagged ‘imputed intention’

Common intention constructive trust: the intention to create the trust cannot be imputed

December 9, 2015

In Capehorn v Harris ([2015] EWCA Civ 955, CA (Eng)) C and H had been unmarried cohabitees but the relationship had come to an end. The question was whether H had a beneficial interest in property which was in C’s sole name. The first instance judge found that there was no actual agreement to this effect but that one should be imputed to the parties.

The Court of Appeal overturned this decision. Imputation is relevant only to the question of quantification and not to the prior question in sole name cases as to whether or not there is a common intention constructive trust ([16] and [17] per Sales LJ). As there was no actual agreement, there was no common intention constructive trust.

Michael Lower

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

November 11, 2015

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

Common intention constructive trust: valuation in sole name cases where there is no actual agreement as to how ownership is shared

February 17, 2015

In Graham-York v York ([2015] EWCA Civ 72, CA (Eng)) the English Court of Appeal looked at the approach to be taken to the valuation of an interest under a common intention constructive trust where title was in the sole name of one of the parties and there was no evidence of a common intention as to how the beneficial ownership was to be divided between the parties. Here a couple had co-habited for over forty years and had two children (one of whom was brought up by them and another by a relative). The man had provided nearly all of the family’s financial resources from the various businesses that he ran.

At first instance, the court found that there was evidence of a common intention that his partner (Miss Graham-York) should have an interest in the family home given her financial contribution to the family income before and at the time of the purchase of the property. The court also found that there was no express agreement as to the share that Miss Graham-York should have and that a 25% interest in the property would be a fair reflection of her financial and non-financial contributions over the years.

Miss Graham-York appealed against this finding. She argued that where there was no evidence as to a common intention concerning the size of her share, the court should take fairness as the guide to what they must reasonably be taken to have intended. Her initial and ongoing financial contributions, the length of the co-habitation and her contribution to the bringing-up of her daughter were each, she argued, factors pointing towards equal beneficial ownership ([18]).

Tomlinson LJ gave the principal judgment. He pointed to the joint judgment of Lord Walker and Lady Hale in Jones v Kernott as ‘the most authoritative modern guidance as to the proper approach in cases of this sort’ ([20]). While the search was primarily for the parties’ actual shared intentions, there were two situations in which this was not the case. The first of these was the situation in which the presumed resulting trust operated. The second, relevant here, involved cases, ‘where it is clear that the beneficial interests are to be shared, but it is impossible to divine a common intention as to the proportions in which they are to be shared.’ Here, ‘the court is driven to impute an intention to the parties which they may never have had.’ (Jones v Kernott, [31]).

Tomlinson LJ went on to comment on the scope of the enquiry as to fairness in these circumstances. The court must do what is fair having regard to the whole course of dealing in relation to the property (Jones v Kernott, [51]). The court ‘is not concerned with some form of redistributive justice’; so, here, the abuse that Miss Graham-York had suffered during her long relationship was not a relevant factor (Graham-York v York, [22]).

There is no presumption of equality of interests in sole name cases, even where the other party has made a substantial contribution. (Graham-York v York [25]).The first instance judge had identified the appropriate legal principles and applied them correctly. Miss Graham-York’s appeal was dismissed.

Michael Lower

Common intention constructive trust: imputed intention in a sole name case

July 4, 2012

In Aspden v Elvy ([2012] EWHC 1387) A and E had cohabited and had two children. Long after the relationship broke down A transferred the ownership of a barn with planning permission for conversion to a dwelling-house to E. He may have hoped that they would resume their relationship. A also provided between GBP65,000 to GBP70,000 towards the cost of the conversion works. They had a further dispute and there was a question as to whether A had an interest in the barn under either a common intention constructive trust or proprietary estoppel. The judge found that A had intended an outright gift of the title but had not intended to make a gift of the money needed for the conversion works. He intended to acquire an interest in the barn and E knew this. As a result, he was entitled to a 25% interest in the barn (it had a market value of GBP400,000 so this would give him GBP100,00 which the judge thought was a reasonable return on his investment). The judge said that the elements of a proprietary estoppel were also present and would have led to the same outcome.

On the question of the valuation, HH Judge Behrens said that there had been no express discussion as to how the beneficial ownership was to be shared and the only available evidence was the market value of the property. In these circumstances,

‘I have to impute an intention by reference to what is fair having regard to the whole course of dealing between the parties.’ ([123]).

Jones v Kernott in the Supreme Court

November 11, 2011

In England (where co-ownership of land gives rise to a statutory trust), when a co-habiting couple buy a family home in joint names but do not declare the nature of the co-ownership there is a presumption of a beneficial joint tenancy (thus, equal shares following severance (Stack v Dowden)). The presumption can be departed from if there is evidence to show either that they had a different common intention at the time of acquisition or that they subsequently reached a different common intention. The common intention is to be deduced objectively from the parties’ conduct (‘the whole course of dealing’). If (a) it is clear that the parties formed a different common intention either at the time of acquisition or subsequently, and (b) it is not possible to find an express or inferred agreeement (common intention) then the parties are entitled to the ‘share which the court considers just having regard to the whole course of dealing between them in relation to the property.’

In Jones v Kernott ([2011] UKSC 53, SC)  K and J cohabited and had two children together. K abandoned J in 1993. J then met all mortgage and other payments concerning the family home and got very little financial help from K. In 2007 J sought a declaration that she was the sole beneficial owner of the family home. She accepted that in 1993 at the time of the separation, K was entitled to a one half beneficial interest in the property. She contended that the events of the next 14 years (the fact that she made all payments) showed that in the light of the whole course of conduct, the parties’ intentions had changed so that J’s share had increased at the expense of K. K succeeded at first instance and the court found that she had a 90% beneficial interest. This was reversed in the English Court of Appeal (see Kernott v Jones). J’s appeal to the Supreme Court was successful and the first instance decision was restored.

While all of their Lordships concurred in the result, there are differences between them (for example as to whether or not the distinction between inferred and imputed intentions has practical significance). It seems clear that the imputed intention has been given a place in this area of the law.

Lord Walker and Lady Hale gave a joint judgment. They relied on the finding at first instance that there was evidence of an actual change in the parties’ intentions. They summarised the law thus: when a co-habiting couple buy a family home in joint names but do not declare the nature of the co-ownership there is a presumption of a beneficial joint tenancy (thus, equal shares following severance (Stack v Dowden)). The presumption can be departed from if there is evidence to show either that they had a different common intention at the time of acquisition or that they subsequently reached a different common intention. The common intention is to be deduced objectively from the parties’ conduct (‘the whole course of dealing’). If (a) it is clear that the parties formed a different common intention either at the time of acquisition or subsequently, and (b) it is not possible to find an express or inferred agreeement (common intention) then the parties are entitled to the ‘share which the court considers just having regard to the whole course of dealing between them in relation to the property.’ (para. 51)

The court engaged in quantifying the beneficial interests is primarily seeking the parties’ actual shared intentions:

‘However, there are at least two exceptions. The first, which is not this case, is where the classic resulting trust presumption applies. Indeed, this would be rare in a domestic context, but might perhaps arise where domestic partners were also business partners: see Stack v Dowden, para 32. The second, which for reasons which will appear later is in our view also not this case but will arise much more frequently, is where it is clear that the beneficial interests are to be shared, but it is impossible to divine a common intention as to the proportions in which they are to be shared. In those two situations, the court is driven to impute an intention to the parties which they may never have had.’ ([31])

Michael Lower