The Future of Stack v Dowden PDF - 2011 A 13-19

The future of Stack v Dowden, L.Q.R. 2011, 127(Jan), 13-19 For educational use only The future of Stack v Dowden Simon Gardner Lincoln College, University of Oxford Katharine M. Davidson Barrister, London Table of Contents [there is no table of contents for this document] Journal Article...

The future of Stack v Dowden, L.Q.R. 2011, 127(Jan), 13-19 For educational use only The future of Stack v Dowden Simon Gardner Lincoln College, University of Oxford Katharine M. Davidson Barrister, London Table of Contents [there is no table of contents for this document] Journal Article Law Quarterly Review L.Q.R. 2011, 127(Jan), 13-19 Subject Family law Other related subjects Real property Keywords Beneficial interests; Co-ownership Cases cited Jones v Kernott EWCA Civ 578; 1 W.L.R. 2401; 5 WLUK 682 (CA (Civ Div)) Stack v Dowden UKHL 17; 2 A.C. 432; 4 WLUK 407 (HL) *L.Q.R. 13 It is hard to read the decision of the House of Lords in Stack v Dowden UKHL 17; 2 A.C. 432 without concluding that it has certain difficulties. It was only a matter of time before those difficulties came to the fore in the courts. That time has now arrived. In 1984 Ms Jones and Mr Kernott bought a house ("the Badger Hall Avenue house") in their joint names; so although there was no declaration of their beneficial interests, these were prima facie equal: Stack v Dowden at. They lived in the house as a couple until 1993, when Mr Kernott moved out, subsequently buying another house ("the Stanley Road house") for himself. In 2008, Ms Jones claimed a larger share in the Badger Hall Avenue house. H.H. Judge Dedman, in the Southend on Sea County Court, held her to have a 90 per cent interest, Mr Kernott only a 10 per cent interest. The judge's decision was upheld on appeal by Nicholas Strauss Q.C., sitting as a Deputy Judge of the Chancery Division ( EWHC *L.Q.R. 14 1713 (Ch); 1 All E.R. 947), but overturned by the Court of Appeal (Wall and Rimer L.JJ., Jacob L.J. dissenting), finding the parties to have equal shares after all: Jones v Kernott EWCA Civ 578; 1 W.L.R. 2401. It is understood, however, that a further appeal is to be made to the Supreme Court, by leave of the Court of Appeal. It was common ground that the parties' interests were indeed equal until Mr Kernott's departure in 1993 (at , ). The contentious issue was whether, between 1993 and 2008, this 50:50 division had turned into the 90:10 one found by the lower © 2024 Thomson Reuters. 1 The future of Stack v Dowden, L.Q.R. 2011, 127(Jan), 13-19 courts. It seems to have been agreed on all sides that such a change was possible in principle. Where a property is held in joint names, the quantum of the parties' shares is determined by their relevant "common intention" (Stack v Dowden at ); and it is clear that an original "common intention" can be replaced by a later one to different effect (at , ). The question that turned out to decide the present case was whether this had in fact happened. Disagreeing with the judges in the lower courts and with Jacob L.J., the majority in the Court of Appeal held that it had not. This disagreement sprang in turn from a difference in view over the meaning of "common intention". For guidance on this, all concerned naturally turned above all to the opinion of Baroness Hale of Richmond in Stack v Dowden. Unfortunately, here they ran into a difficulty that has all along troubled students of that decision. It is unclear whether Baroness Hale's view was that a "common intention" has to be genuine, even if not necessarily expressly evinced; or was that it can be invented by the court on the parties' behalf. Hence the quotation marks within which this note encloses the expression. The labels usually employed to denote these rival possible visions of a "common intention" are "inferred" and "imputed", respectively. Although Baroness Hale herself used both words (passim), however, one cannot be sure that she gave them these distinct meanings; it is not impossible to read "imputed" as a synonym for "inferred", so that both terms denote a genuine agreement by the parties, rather than one imposed by the court. The principally important passage in her opinion (at ) was that dealing with Oxley v Hiscock Fam. 211 CA, where Chadwick L.J. had said (at ) that "each [party] 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." In the passage in question, Baroness Hale certainly expressed a preference for proceeding in terms of a "common intention", but the crucial question is how she saw the contrast between "common intention" and fairness. The question is susceptible of no confident answer. She may have seen the contrast as sharp, implying an understanding of a "common intention" as a genuine agreement. Or she may have seen fairness and "common intention" as substantively more or less synonymous, implying that a "common intention" can be "imputed" by the court, the formulation in terms of "common intention" being preferred only perhaps so as to remind a judge, setting out to do what is fair, to root that idea in the earth of the parties' individual circumstances, or (as suggested by Deputy Judge Nicholas Strauss Q.C., EWHC 1713 (Ch); 1 All E.R. 947 at ) to give precedence to any genuine agreement the parties may have reached. *L.Q.R. 15 There remained, therefore, everything to play for. Rimer L.J. was doubtless right to comment, in the present appeal ( EWCA Civ 578; 3 All E.R. 423 at ), "I suspect that Stack may be regarded by trial judges as presenting something of a challenge". Until now, that challenge had not been met head-on. Commendably, the various judgments in the present litigation set out to rise to it. They differed, however, in their conclusions. H.H. Judge Dedman at first instance, Deputy Judge Nicholas Strauss Q.C. on the first appeal, and Jacob L.J. on the second all considered that it was proper to impose an outcome, i.e. to invent a "common intention". But the opposite view--that a "common intention" has to be genuine--commended itself to the majority on the second appeal, Wall and Rimer L.JJ. The latter view currently represents the law, for its adoption was crucial to the appeal's outcome. It meant that if there was to be any departure from the original 50:50 division after Mr Kernott's departure, it had to be the product of a genuine agreement between the parties; there was no evidence of such a genuine agreement; so the division remained 50:50. Given the undoubted ambiguity of Baroness Hale's opinion, there is little profit in discussing in this note the rival merits of the two views as readings of it. Suffice it to say that they could hardly have been put more thoughtfully and eloquently than they were, respectively, by especially Nicholas Strauss Q.C. ( EWHC 1713 (Ch); 1 All E.R. 947 at -) and Rimer L.J. ( EWCA Civ 578; 3 All E.R. 423 at -). The real question, especially as the Supreme Court will now have the opportunity not merely to interpret but to move on from the problematic passages in Stack v Dowden, is which approach is to be preferred as a matter of principle. (It is to be hoped, incidentally, that the Supreme Court will also make clear that constructive trusts of family homes are governed by a single regime, dispelling any impression that different rules apply to "joint names" and "single name" cases, and to the "establishment" and the "quantum" of the constructive trust.) The attraction of referring only to a genuine agreement is easily stated: it accords the parties control over their own affairs. There is a technical problem, however. An express trust of land cannot be recognised on the basis of a settlor's unwritten declaration alone, by reason of s.53(1)(b) of the Law of Property Act 1925. It is hard to accept that this rule can simply be sidestepped if the beneficiary concurs with the declaration (why would he not?) and the trust is labelled "constructive". To meet this problem, it would be necessary to reinstate the old requirement, conspicuous by its absence from Stack v Dowden, of detrimental reliance on the agreement, thereby generating a constructive trust worthy of the name--though not readily explaining why the size of the interest(s) under that trust should reflect the agreement, rather than the reliance loss. The more fundamental disadvantage of referring only to a genuine agreement, however, is that which has been noticed many times, and was alluded to by Jacob L.J. in the present decision itself ( EWCA Civ 578; 3 All E.R. 423 at ). The © 2024 Thomson Reuters. 2 The future of Stack v Dowden, L.Q.R. 2011, 127(Jan), 13-19 context under discussion is one in which people will not normally formulate agreements, but (this is crucial) the very reason for this--the parties' familial trust in one another--also warrants the law's intervention nonetheless. Unless the law reacts to such trust as much as to more individualistic forms of interaction, those who put their faith in the former rather than the latter will find *L.Q.R. 16 their interests thereby exposed. The law would thus discourage their choice (or, one might more sensitively say, their assumptions about family life), and so commit itself to a vision of human existence antithetical to that which we surely recognise and approve. It is therefore unsurprising that, although the classic statements of the rules prior to Stack v Dowden certainly required a genuine agreement, and the same approach has now been taken also by Wall and Rimer L.JJ. in Jones v Kernott, the rival view has never been substantively suppressed. The latter is in a limited sense visible in the resort that was sometimes had, until it was disapproved in Stack v Dowden, to the expedient of a resulting trust. "Limited", however, because although this expedient means relief not having to wait upon the parties' genuine agreement, it takes its cue not from the totality of the parties' familial dealings, but only from those constituting contributions to the acquisition of the property, and indeed probably only from a restricted spectrum of these. This was never satisfactory, and the more promising vehicle for this project has thus always been the constructive trust. To see the latter being deployed without reference to the parties' genuine agreement, we may look to the optimistic discovery of such an agreement in decisions such as Eves v Eves 1 W.L.R. 1338 CA; Grant v Edwards Ch. 638 CA; Hammond v Mitchell 1 W.L.R. 1127 Fam D; and Stokes v Anderson 1 F.L.R. 391 CA; to the promulgation of non-traditional legal accounts in especially Midland Bank Plc v Cooke 4 All E.R. 562 CA; and Oxley v Hiscock Fam. 211 CA; and by most of the judges who have so far heard Jones v Kernott; and surely also to Baroness Hale's failure clearly to require a genuine agreement in Stack v Dowden itself. If the Supreme Court now affirms that a genuine agreement is required, it is predictable, indeed near enough certain, that such back-sliding will continue. And, to repeat, rightly so. Indeed, in Jones v Kernott itself, the decision of Wall and Rimer L.JJ. to insist on a genuine agreement was surely eased by the fact that the outcome this led to, a 50:50 division, happened not to be an outrageous one from the rival point of view. If, on the other hand, the decision of the Supreme Court is that an outcome can be imposed, this had best be said explicitly, rather than via the coded, and so confusing, language of "imputed common intention". A rule allowing the outcome to be imposed can still be glossed with caveats about the need for sensitivity to the parties' own circumstances and about the supremacy of any actual agreement they may have reached. But it will mean ascribing the constructive trust instead directly to the driver(s) truly concerned. And that in turn will require clarity as to the identity and cogency of those drivers. It is fair to say that the judges who have taken this approach to date have never provided such clarity. Chadwick L.J.'s invocation of fairness, referred to above, represents the high, rather than the low, point of the canon. And those judges who took this approach in Jones v Kernott, arriving thereby at a 90:10 split, did no better than their precursors. In particular, on the second appeal, the matter was submerged under deference to the trial judge's primacy in finding the facts and, albeit to a lesser extent, in drawing inferences from them (see ( EWCA Civ 578; 1 W.L.R 2401 at -; also at ); when in reality the problem is one not of fact-finding, but of establishing the normative lens through which the facts are to be viewed. *L.Q.R. 17 But one of the present writers has previously argued, in this Review, that it is possible to discern the drivers actually in play, and broadly speaking to defend these: S. Gardner, "Family Property Today" (2008) 124 L.Q.R. 422 (see too, more recently and perhaps more clearly, S. Gardner, An Introduction to Land Law, 2nd edn (2009), at §§ 8.3.6-8.3.8). The argument is that where the parties' relationship is not materially communal, the outcome does, and reasonably might, reflect their respective contributions to the property's value--as in Stack v Dowden itself. Where their relationship is materially communal, however, it is that the outcome does, and reasonably might, reflect the apparent implication of this, that the property should belong to them equally--as in Abbott v Abbott UKPC 53; 1 F.L.R. 1451. Now at first sight, it may appear difficult to fit this analysis with the 90:10 split arrived at by the judges minded to impose an outcome in Jones v Kernott. It is reasonably clear that the parties' relationship was a materially communal one (or at any rate that it was perceived thus by the courts: see especially per Nicholas Strauss Q.C., EWHC 1713 (Ch); 1 All E.R. 947 at ). On that basis, however, we might have expected not a 90:10 but a 50:50 split. But on examination and reflection, a fit can be found after all. Such examination and reflection does, however, throw up a new and intriguing vision of the implications of communality. Remember that, unlike the usual run of cases in which the claim is made alongside the separation itself and there is only one property at stake, in Jones v Kernott there was a delay of 15 years between separation and claim, during which Mr Kernott acquired the Stanley Road house for himself. We know that Nicholas Strauss Q.C. on the first appeal decided to uphold the trial judge's 90:10 split upon noticing that Mr Kernott was entitled to the whole of the capital appreciation on this property: "it would not be reasonable for Mr Kernott to have, and the parties cannot be taken to have intended that he should have," a simultaneous entitlement to half the appreciation on the Badger Hall Avenue house, as he would have done if the parties' original shares in © 2024 Thomson Reuters. 3 The future of Stack v Dowden, L.Q.R. 2011, 127(Jan), 13-19 the latter had remained unchanged. This made it right for Mr Kernott to retain only a "small" interest in that house ( EWHC 1713 (Ch); 1 All E.R. 947 at ). We also know that at the time of the action, in 2008, the Badger Hall Avenue house had a net worth (clear of outstanding mortgage liabilities) of £218,000, while the net worth of the Stanley Road house was £167,000 (at ). The two properties' combined net worth was thus £385,000. By finding that the Badger Hall Avenue house belonged to Ms Jones and Mr Kernott in the ratio 90:10, therefore, the trial judge achieved something very close to a 50:50 division--not, however, of the Badger Hall Avenue house alone, but of the combined value of the two houses. This reckoning thus reconciles the 90:10 split with the apparent equality implication of the material communality driver, but only if we accept that that implication can apply not merely to the parties' shared home alone, but also to property acquired by one of them post-separation. Should we do so? To apply the driver in this way is in fact to handle the case as it would have been handled if the parties had been married, and Ms Jones's claim had been one for ancillary relief upon their divorce, under s.24 of the Matrimonial Causes Act 1973. To be sure, ancillary relief will yield equal division of the asset pool in this way only where the parties' circumstances are quite uncomplicated; where they *L.Q.R. 18 have infant children, for example, ancillary relief may well involve unequal division of the pool so as to address the children's needs. But the circumstances in Jones v Kernott appear to have been quite uncomplicated, the parties being, at any rate by the time of the litigation, financially independent of one another, and their children having grown up and left home; meaning that ancillary relief could indeed have been expected to produce an equal division of the overall asset pool and so the 90:10 split of the Badger Hall Avenue house arrived at by the trial judge. (Notice that, if Mr Kernott's Stanley Road house had been the more valuable of the two properties, ancillary relief might in theory even have given Ms Jones a fractional interest in that house. Interestingly, she initially claimed such an interest, though soon abandoned the claim: see EWCA Civ 578 at -.) It is thus possible to understand those judges in Jones v Kernott who were inclined to impose an outcome as indeed applying the material communality driver, but as reading its apparent implication of "equality" in a more sophisticated way than hitherto suspected: one aligned with the precepts of ancillary relief, so as to extend beyond the parties' shared home to their overall asset pool at the time of the litigation. If correct, however, this understanding suggests a further step. As already noted, where the parties' circumstances are more complicated than they were in Jones v Kernott, ancillary relief may well involve an unequal division even of the overall asset pool. Where, for example, the parties have dependent children who now reside with only one of them, the split should reflect the difference that now exists between the parties' roles in meeting the children's needs. If the content of the material communality driver is indeed to be informed by the precepts of ancillary relief, one would expect the same pattern. The driver's theme of equality between the parties will not have been abandoned, however. Rather, it will have been shifted to a more fundamental level in the discourse. The parties are seen as having equal responsibilities for their children's upbringing, their assets being deployed as appropriate in the overall discharge of these responsibilities. This vision of the material communality driver has a clear attraction. After all, marriage and civil partnership are the paradigm cases of a materially communal relationship, and ancillary relief, especially in the shape given it by Miller v Miller; McFarlane v McFarlane UKHL 24; 2 A.C. 618, is essentially a statutory vehicle for eliciting the implications of that. There is obvious logic in following the same approach in analogous cases--though the (as yet) more limited remedial possibilities of a constructive trust may (for the moment) restrict the extent to which this can in practice be done. Though in principle attractive, however, there is no denying that the idea of operating the Stack v Dowden jurisdiction in this way is controversial, since by definition it is aimed at a context not involving marriage or civil partnership. It is likely, though not necessarily rightly, to be perceived as "undermining the institution of marriage": cf. Law Commission, Cohabitation: the Financial Consequences of Relationship Breakdown (2006), Consultation Paper No.179, at paras 5.35-5.40. More importantly, it assumes that materially communal relationships are in the relevant respects normatively identical with marriage and civil partnership. The Law Commission seems to have disagreed with this assumption in its consultation paper on this area (at paras 6.23, 6.48-6.49, 6.62-6.66, 6.92-6.114), leading to its eventual recommendation of a less holistic *L.Q.R. 19 regime (Law Commission, Cohabitation: the Financial Consequences of Relationship Breakdown (2007), Law Com. No.307). A principal reason for the Commission's position, however, was the difficulty of separating out those relationships which can fairly be seen as matrimonial analogues (Consultation Paper No.179, at paras 6.111 and 6.113), and one can see the force of that, if the point needs to be covered by a statutory definition. But the difficulty may be less at common law, where circularity is possible; the instruction can reasonably be "apply this treatment to those relationships which merit it". So while it may be tempting for the Supreme Court to take a less controversial course (such as to require a genuine agreement, or to allow outcomes to be imposed but only using more conventional drivers), and to leave more radical expedients to the legislature, to do so might well be to miss an opportunity open uniquely to that court. 1 © 2024 Thomson Reuters. 4 The future of Stack v Dowden, L.Q.R. 2011, 127(Jan), 13-19 Simon Gardner Lincoln College, University of Oxford Katharine M. Davidson Barrister, London Footnotes 1 Beneficial interests; Co-ownership © 2024 Thomson Reuters. 5