UK: Cohabitants And Constructive Trusts After "Jones v Kernott"

Last Updated: 21 February 2013
Article by Lyndsey L.M. West

Lyndsey West explains how a seminal case has influenced property rights for cohabitants.

On the breakdown of a marriage the courts have a wide statutory jurisdiction under the Matrimonial Causes Act 1973 (MCA) to re-order property rights. However, there is no equivalent statutory jurisdiction enabling the court to deal with the property rights of unmarried couples who have shared a home together and who subsequently decide to go their separate ways. Instead, a claim by a former cohabitant to a beneficial interest in any joint home must be substantiated by establishing an entitlement based on property law principles as formulated in case law. Constrained by this narrow focus, the courts have often struggled to produce outcomes that seem fair.

As cohabitation becomes more common and lasts for longer, and as property price inflation has continued over the last two decades or so, the need for a more flexible approach has become pressing. Parliament's failure to legislate in this area has been widely criticised, including recently by Lady Hale in Gow v Grant [2012] UKSC 29. However, despite the recommendations of the Law Commission in 2007, no such reforms are on the horizon at present (see Law Com 307 Cm 7182).

Whereas earlier case law relied on the concept of the resulting trust in order to determine beneficial entitlements in the home on relationship breakdown, more recently such an approach has been seen as inappropriate to the 'domestic consumer context' of intimate relationships. Instead, notably in Oxley v Hiscock [2004] EWCA Civ 546, Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53, the courts have moved to a more holistic approach based on constructive trusts which takes account of the parties' 'common intention'. In Jones, moreover, the judges held that the parties' common intention could change so as to effect alterations in their respective beneficial entitlements in the family home, giving rise to the so-called 'ambulatory constructive trust'.

In this article I aim to indicate where the law stands in relation to constructive trusts and cohabitants following Jones. I also examine some of the cases that have been reported since Jones, which show how it has been applied in practice by the courts.

Facts in Jones

In Jones itself, the unmarried couple had bought a house in their joint names in 1985, the price being met from a deposit paid by Ms Jones and a mortgage in the couples' joint names. They each paid outgoings. There was no express declaration of their beneficial interests.

They had two children but in 1993 the relationship broke down. Ms Jones and the children stayed in the property after Mr Kernott moved out, Ms Jones paying all outgoings with no financial contribution from Mr Kernott towards the house or the children's upbringing. The couple subsequently cashed in a life policy enabling Mr Kernott to pay the deposit on a separate house.

It was not until 2006 that Mr Kernott claimed a beneficial interest in the first property which, by the time of the hearing before the judge in 2008, was valued at £245,000. The parties were in agreement for the purposes of the hearing that, at the time when Mr Kernott had moved out of the first property in 1993 (at which point the property was valued at about £70,000), they had held the beneficial interests in that property in equal shares. However, Ms Jones maintained that Mr Kernott's subsequent purchase of a separate property for himself (along with other events since their separation) constituted evidence that their intentions regarding the beneficial ownership of the first property had changed, effecting an alteration in their respective beneficial interests in the property. This was the issue to be addressed by the court.

Previous case law

In Oxley the property had been transferred into Mr Hiscock's sole name with no discussion of beneficial ownership. However, based on the parties' joint contributions to the purchase and to subsequent outgoings, the Court of Appeal had readily inferred the parties' common intention to share beneficial ownership. As to quantifying the parties' respective shares, in the absence of evidence from which the parties' common intention could be inferred, "each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property" (para. 69). On this basis, the beneficial entitlement in Oxley was to be split 60/40 in Mr Hiscock's favour, partly because of the larger financial contribution that he had made.

In Stack the property had been transferred into joint names. Applying the presumption that beneficial ownership follows legal ownership prima facie resulting in equal beneficial shares, the court had said that it was for Ms Stack to establish her entitlement to the 65% share claimed by her. Lady Hale in the House of Lords had said that the court must ascertain the parties' shared intentions, "actual, inferred or imputed" in the light of the parties' whole course of conduct in relation to the property (para. 60). Ms Stack's greater financial contribution could, in context, support the inference of an intention to share otherwise than equally. Here the relevant context, making this case "exceptional", included the parties' strict division of their finances, enabling the court to find in favour of Ms Stack. Although the decision in Stack was based on inferred intention, Lady Hale appeared to cast doubt on the fairness criterion espoused by Chadwick LJ in Oxley for imputed intention, saying that it was not open to the court to impose its own view of fairness. Lady Hale moreover indicated that the court could, in appropriate circumstances, find that the parties' intentions as to their respective proportionate shares had changed over time, resulting in a variation of their beneficial entitlements. Lord Hoffman, Lord Hope and Lord Walker agreed with Lady Hale. However, Lord Neuberger, while agreeing with the result, based his conclusion on a resulting trust. He also thought it unlikely that, at least in the absence of express agreement, there could be any change in the parties' proportionate entitlements.

The decision in Jones

In the Supreme Court, the decision at first instance and in the High Court resulting in a 90/10 division in Ms Jones favour was unanimously upheld, although the Supreme Court judges' reasoning was not consistent.

Lady Hale and Lord Walker in a joint judgment said that there was no need to impute an intention that the parties' interests had changed because the trial judge had made a finding that the parties' intentions did in fact change. And this was, moreover, "an intention which he could and should have inferred from their conduct" (para. 48). As to quantification of the parties' beneficial entitlements, Lady Hale and Lord Walker held that if the court cannot deduce intention, it may have to ask what the parties' intention would have been "as reasonable and just people" if they had thought about it at the time (para. 47). On the question of fairness they said that it was not open to the court to impose a solution on the parties in contradiction to their actual intentions, merely because the court considered it fair to do so (para. 46). In the circumstances of Jones, however, there was no need to impute intention because it could be inferred that the parties had intended to crystallise Mr Kernott's share in the property in 1993 when he moved out, thus producing the 90/10 split.

Lord Collins agreed with "the conceptual approach" of Lady Hale and Lord Walker, including their view that the difference between inference and imputation would not usually matter (para. 65). Lord Wilson on the other hand, preferring a more rigorous approach to the task of inference, thought the distinction important. On the facts of Jones he considered that "inference is impossible" but was able to impute a common intention to divide the property 90/10 on the basis of fairness. Lord Kerr too thought that the distinction between inferring and imputing intention was important; each involved "a markedly and obviously different mode of analysis..." from the other (para. 67). Thus, imputing an intention "involves the court deciding what is fair in light of the whole course of dealing with the property" which is "wholly unrelated to ascertainment of the parties' views..." (para. 74). Like Lord Wilson, Lord Kerr could not infer an intention as to a 90/10 division of the property, but he was able to impute a common intention as to such beneficial interests.

Thus, although the judges were unanimous in holding that the property should be divided 90/10 in Ms Jones' favour, their reasoning varied, leaving unanswered questions about the scope of inferred and imputed intention. Significant though is the conclusion of the majority that the parties' respective beneficial entitlements are not fixed, but can change with alterations in their common intention.

Case law after Jones

Issues addressed in a clutch of cases following the Supreme Court's decision in Jones, include the scope of the domestic consumer context and the application of common intention constructive trusts to sole name cases.

Delineating the domestic consumer context

In Gallarotti v Sebastianelli [2012] EWCA Civ 865, two male friends – not a couple – bought a flat together as their home. They also engaged in business ventures together. The parties agreed orally to share beneficial ownership equally, subject to contributing broadly equally to the purchase. There was no written declaration of trust. (Although the flat was registered in Mr Sebastianelli's sole name, Arden LJ in the Court of Appeal said that nothing turned on the reasons for this). In the event, Mr Sebastianelli paid much more than Mr Gallarotti. In determining their respective beneficial entitlements, the Recorder had applied the principles of common intention constructive trust to find that the parties were beneficially entitled in equal shares, the larger contributions by Mr Sebastianelli having been, in the Recorder's view, gratuitous transfers.

Arden LJ (with whom Tomlinson LJ and Davis LJ concurred) in the Court of Appeal agreed with the Recorder that "the principles to be applied to a constructive trust were the same whether the parties were in a relationship such as that of husband and wife or were business associates, although the court might draw different inferences as to their conduct in the latter case" (para. 6). In the present case the analysis "was to be seen more in the domestic than in the commercial context". Arden LJ, however, parted company from the Recorder holding that, since the parties' oral agreement as to their respective contributions to the flat had not been adhered to, the only inference to be drawn from their conduct (including the now defunct agreement) was that their beneficial entitlements should reflect their respective financial contributions. Moreover, although this was a domestic consumer context in which it was appropriate to apply the principles of a common intention constructive trust, since the parties were not a couple, the inferences to be drawn from their behaviour in ascertaining their common intention were not the same as they would have been in a family situation. Thus it was inappropriate in the context of flat-sharers who were not a couple for the larger contributions to the flat by Mr Sebastianelli to be seen as gifts to Mr Gallarotti in the absence of any apparent reason. In view of these considerations it was decided that Mr Sebastianelli was entitled to a 75% beneficial interest.

Geary v Rankine [2012] EWCA Civ 555 concerned a dispute over a property acquired not as a home but for investment and business purposes. The property was purchased by Mr Rankine in his own name and using his own funds to be run as a guesthouse. He initially intended that it would be run by a manager but this did not work out. Instead he had to run it himself with help from his cohabitant Ms Geary. Ms Geary argued that a common intention constructive trust had arisen following acquisition, as the result of her work in the business, giving her a beneficial interest in the property. Lewison LJ in the Court of Appeal pointed out that the burden of establishing such a trust was "all the more difficult to discharge where, as here, the property was bought as an investment rather than as a home" and that the presumption of a resulting trust "may arise where the partners are business partners as well as domestic partners" (para. 18).

In the event, Ms Geary's claim failed. There was no evidence of any common intention shared by both parties that Ms Geary should attain a beneficial interest in the property. For example, the business accounts were drawn on the basis that Mr Rankine was a sole trader. As Lewison LJ put it, " is an impermissible leap to go from a common intention that the parties would run a business together to a conclusion that it was their common intention that the property in which the business was run, and which was bought entirely with money provided by one of them, would belong to both of them" (para. 22).

Sole name cases

In Aspden v Elvy [2012] EWHC 1387 (Ch), decided a few months after Jones, the court considered how the principles in Jones apply in a sole name case. A reading of Aspden also suggests that identifying the "course of dealings between the parties" for the purpose of inferring or imputing common intention might sometimes be problematical.

Mr Aspden bought a farm in his sole name in 1986, meeting all of the costs and outgoings himself. Ms Elvy moved in with him more or less simultaneously. Behrens LJ found that, at this point, Mr Aspden was entitled legally and beneficially to the entirety of the farm. The couple had two children, in 1988 and 1990. Ms Elvy carried out work at the farm which could arguably have given rise to an inference that the parties' intentions had changed so as to give her an interest in the property, although the judge did not in the event find it necessary to make a finding on this point. In the meantime, Mr Aspden was made redundant in 1988, receiving substantial compensation. In 1996 the parties separated.

In 2003 Mr Aspden commenced negligence proceedings against the advisers who had negotiated the settlement claim against his former employer but by early 2006 Mr Aspden knew there was the risk of an adverse order for costs against him. In January 2006 he transferred the land and barn at the farm to Ms Elvy, retaining the farmhouse, which was sold to meet his litigation debts. Mr Aspden's evidence referred to discussions with Ms Elvy about proposals to defeat creditors and about inheritance tax spouse exemption. However, the judge preferred Ms Elvy's evidence that there was no question of marriage and he concluded that the transfer was an outright gift of the barn to her such that she became the absolute legal and beneficial owner. Over the next two years Mr Aspden nevertheless carried out improvement and development work on the barn which substantially increased its value and, in view of this, the judge found that Mr Aspden hoped and expected to be able to live at the barn and have an interest in it, points of which Ms Elvy was fully aware.

Behrens LJ, referring to the judgment of Baroness Hale in Stack and to the joint judgment of Lady Hale and Lord Walker in Jones about the applicability of common intention constructive trust principles to sole name cases, inferred an intention from the parties' "whole course of dealing" (para. 125) that Mr Aspden should have some interest in the barn as a result of the substantial work he had done. And in the absence of express discussion between the parties as to quantification, the judge imputed an intention "by reference to what is fair having regard to the whole course of dealing between the parties" that Mr Aspden should be entitled to a 25% share of the barn, and on the basis that this represented "a fair return for the investment of £65,000 to £70,000 and the work carried out by Mr Aspden..." (para. 128).

The outcome for Mr Aspden seems harsh. In particular, in determining Mr Aspden's beneficial interest Behrens LJ limited his consideration to the parties' dealings since the transfer to Ms Elvy in 2006, thus leaving out of his account their longer course of dealings relating to the property going back to 1986. For this reason and given the unusual facts the case seems anomalous.

In CPS v Piper [2011] EWHL 3570 (Admin) the parties' home was vested in Mr Piper as sole legal owner, although Mrs Piper had contributed to its acquisition. The question was whether Mrs Piper had a beneficial interest so as to limit the effect of a confiscation order against her husband. Holman LJ first asked whether there was any common intention that Mrs Piper should have any beneficial interest at all. This could be inferred from their conduct, in particular from the wife's financial contribution. Then, as "a separate and distinct question" (para. 80), Holman LJ addressed the question of quantifying Mrs Piper's share. If a common intention as to the size of the share could be deduced "by direct evidence or by inference" then that should be given effect by the court (para. 12). Otherwise the size of the interest should be that which the court considers fair having regard to the whole course of dealing between husband and wife in relation to the home (para. 13). In this case Holman LJ was able to infer a common intention in the light of the parties' dealings in relation to the property that Mrs Piper was entitled to a beneficial half share.

The law after Jones

The law of common intention constructive trusts and cohabitants is likely to remain a rapidly developing area. In due course it is to be hoped that the case law will be superseded by legislation. In the meantime it is worth trying to draw out some tentative pointers from the recent cases. Except as otherwise indicated, the following is based on paragraphs 51 and 52 of Lord Walker and Lady Hale's judgment in Jones and assumes that there is no express declaration of trust of beneficial entitlements.

  1. Legal joint tenants are presumed to be beneficial joint tenants (with equal beneficial entitlements). This may be rebutted by evidence of the parties' "actual shared intentions whether expressed or to be inferred from their conduct" (Jones para. 31). However, in the absence of sufficient evidence, it is not clear that a common intention to take otherwise than equally may be imputed.
  2. In a sole name case the presumption is that the entire beneficial entitlement is vested in the legal owner so that the onus is on the claimant to establish any beneficial entitlement at all. Common intention as to sharing beneficial ownership, if not express, may be inferred from the parties' conduct and is likely to be readily inferred from financial contributions (CPS v Piper para. 11). It seems, however, that an intention to share beneficial ownership may not be imputed (Geary v Rankine para. 19). If the claimant is successful in establishing entitlement to some beneficial interest, there is no presumption of equality (by contrast to the joint names cases).
  3. In both joint names and sole names cases, the parties' common intention as to the extent of their respective shares may be inferred from their conduct in relation to the property. If quantification cannot be established in this way then the court may impute a common intention to the parties on the basis of what is fair, taking account of their whole course of dealing and conduct in relation to the property. Lord Neuberger has explained that inferred intention is the intention which the parties actually had, whereas imputed intention is ascribed to the parties without it necessarily being an intention that they actually held (Stack para. 126). However, at present the distinction in practice between inferred and imputed intention is unclear and may be difficult to apply. Nor is it clear how far the courts must go in attempting to infer intention before they give up and impute. The boundary between the two may be blurred.
  4. Following Jones it is clear that, in a joint names case, the court may infer from the parties' conduct a common intention that their beneficial interests have changed [and likewise in sole name cases (Aspden)] although it is not clear that such common intention may be imputed. However, the quantification of the parties' altered entitlements may be imputed in the absence of sufficient evidence from which it can be inferred.
  5. As between sole name and joint names cases, different inferences may be drawn as to the parties' common intention from their conduct in relation to the property. For example, "the inferences to be drawn from who pays for what may be very different from the inference to be drawn when only one is owner of the home" (Stack para. 69).
  6. The common intention constructive trust has been developed in relation to the "domestic consumer context". This can include the situation of cohabitants who simply live together for convenience, without being a couple, although different inferences as to their intentions may be drawn from their conduct in relation to the property (Gallarotti v Sebastianelli para. 26). However, cohabitants who live together as a family might find it difficult to establish any common intention constructive trust in relation to investment or business property acquired by them or one or other of them. In such a scenario, a resulting trust analysis may remain applicable (Jones para. 31 and Geary v Rankine para. 18).
  7. Since Jones there has been debate as to the extent to which subsequent conduct and dealings in relation to a property may permit inferred and/or imputed intentions to alter the earlier provisions of an express written declaration of trust in relation to beneficial shares. Some point out that this is a logical possibility following the principles and methodology espoused in Jones; others point out that this is the floodgate beyond which lies chaos for English property law, and that as a result the judges simply cannot have intended the principles in Jones to extend that far. The decisions since Jones have not provided an answer to this question. It seems likely that only a further decision of the Supreme Court could.


The Supreme Court in Jones could have gone further to provide clarity. It is likely that litigation will continue to be necessary in this area. What is really needed is legislation. In the meantime, cohabitants can minimise the risks of future litigation by executing a declaration of trust at the outset and reviewing it whenever seems appropriate in the future; for example, when their intentions do expressly change or when financial contributions to the asset in question begin to change. Nevertheless, following Jones the courts have wider scope for taking account of changes in the parties' common intention as their arrangements regarding their property evolve.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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