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Judgments -
Stack (Appellant) v. Dowden (Respondent)
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HOUSE OF LORDSOPINIONS OF THE LORDS OF APPEAL FOR JUDGMENTIN THE CAUSEStack (Appellant) v. Dowden (Respondent)[2007] UKHL 17LORD HOFFMANN My Lords, 1. I have had the advantage of reading in draft the opinion of my noble and learned friend Baroness Hale of Richmond, and for the reasons she gives I too would dismiss the appeal. LORD HOPE OF CRAIGHEAD My Lords, 2. As my noble and learned friend Baroness Hale of Richmond whose speech I have had the privilege of reading in draft indicates, this case is about the property rights of a cohabiting couple in a house which they occupied together as their home until the breakdown of their relationship. They have an obvious interest in the determination of their respective property rights in such a valuable asset. But the issue between them is a matter of general public interest too. It has become an increasingly pressing social problem, as house prices rise and more and more people are living together without getting married or entering into a civil partnership. The situation is complicated by the fact that there is no single, or paradigm, set of circumstances. The only feature which these cases have in common is that the problem has not been solved by legislation. The legislation which enables the court to reallocate beneficial interests in the home and other assets following a divorce does not apply to cohabiting couples. Otherwise the circumstances which define relationships between cohabiting couples and their property interests are infinitely various. 3. The key to simplifying the law in this area lies in the identification of the correct starting point. Each case will, of course, turn on its own facts. But law can, and should, provide the right framework. Traditionally, English law has always distinguished between legal ownership in land and its beneficial ownership. The trusts under which the land is held will determine the extent of each party's beneficial ownership. Where the parties have dealt with each other at arms length it makes sense to start from the position that there is a resulting trust according to how much each party contributed. Then there is the question whether the trust is truly a constructive trust. This may be helpful in their case but in others may seem to be a distinctly academic exercise, as my noble and learned friend Lord Walker of Gestingthorpe points out. But cohabiting couples are in a different kind of relationship. The place where they live together is their home. Living together is an exercise in give and take, mutual co-operation and compromise. Who pays for what in regard to the home has to be seen in the wider context of their overall relationship. A more practical, down-to-earth, fact-based approach is called for in their case. The framework which the law provides should be simple, and it should be accessible. 4. The cases can be broken down into those where there is a single legal ownership and those where there is joint legal ownership. There must be consistency of approach between these two cases a point to which my noble and learned friend Lord Neuberger of Abbotsbury has drawn our attention. I think that consistency is to be found by deciding where the onus lies if a party wishes to show that the beneficial ownership is different from the legal ownership. I agree with Baroness Hale that this is achieved by taking sole beneficial ownership as the starting point in the first case and by taking joint beneficial ownership as the starting point in the other. In this context joint beneficial ownership means that the shares are presumed to be divided between the beneficial owners equally. So in a case of sole legal ownership the onus is on the party who wishes to show that he has any beneficial interest at all, and if so what that interest is. In a case of joint legal ownership it is on the party who wishes to show that the beneficial interests are divided other than equally. 5. The advantage of this approach is that everyone will know where they stand with regard to the property when they enter into their relationship. Parties are, of course, free to enter into whatever bargain they wish and, so long as it is clearly expressed and can be proved, the court will give effect to it. But for the rest the state of the legal title will determine the right starting point. The onus is then on the party who contends that the beneficial interests are divided between them otherwise than as the title shows to demonstrate this on the facts. 6. It is worth noting how the solution which Baroness Hale proposes fits in with how the problem would be addressed in Scotland: had the dwelling which the parties purchased in joint names in 1993 been situated in, say, Eyemouth - a few miles north of Berwick-upon-Tweed. The social problems under which cohabiting couples live together in England and Wales are, in general, no different from those that exist in Scotland. Can it be said that the problem would be solved in much the same way both north and south of the border? I think that it can. The law of property in Scotland is, of course, different and so also are Scots family law and the Scots law of obligations. But in the case of cohabiting couples the facts would be examined from a similar starting point. 7. Scots family law does not provide the answer to how the value of the home of a cohabiting couple is to be divided between them when their relationship terminates. Section 27(3) of the Family Law (Scotland) Act 2006 excludes a residence used by cohabitants as the sole or main residence in which they live (or lived) together from the general rule which that section lays down that, subject to any agreement between them to the contrary, money derived from any allowance made by either cohabitant for their joint household expenses or for similar purposes or any property acquired out of such money is to be treated as belonging to each cohabitant in equal shares. So the solution in their case must, in the first instance, be found in Scots property law. Except in cases where it can be shown that a title was held in trust although it is ex facie absolute, Scots property law does not distinguish between the legal and the beneficial interests in heritable property. 8. Where the title to a dwelling house is taken in one name only, the presumption is that there is sole ownership in the named proprietor. Where it is taken in joint names those named are common owners and, if the grant does not indicate otherwise, there is a presumption of equality of shares: Kenneth G C Reid, The Law of Property in Scotland (1996), para 22. The rights that are thus divided from the outset between those named in the title in the Land Register are rights of ownership. There are no intervening equitable interests. The presumption that the common owners are entitled to share the value of the property equally is however capable of being displaced by evidence to the contrary. The analysis now moves from the law of property to the law of obligations. This opens the door to evidence of an agreement that the title was to be held in trust or to an examination of the contributions which each party made to the purchase of the house and to its upkeep and improvement during their relationship: Galloway v Galloway, 1929 SC 160; Wissenbruch v Wissenbruch, 1961 SC 340; Denvir v Denvir, 1969 SLT 301. Proof of these matters has been made easier by the abolition of the requirement of proof by writ or oath by section 11 of the Requirements of Writing (Scotland) Act 1995. But cases where this exercise is attempted are rare, in view of the weight that is attached to the state of the title as evidence of the beneficial ownership of the property. 9. More recently resort has been had to restitutionary remedies. In McKenzie v Nutter, 2007 SLT (Sh Ct) 17 the title was taken in joint names. The intention of the cohabiting couple was that they would live together as a couple in the property, and that they would both sell their own separate houses and apply the proceeds towards the purchase of their new home. In the event only one party contributed the proceeds of his house towards its purchase and paid the costs associated with maintaining and improving the property. The other party continued to reside in her own house, which due to her bad faith she did not sell. She then insisted on a division and sale of the property. Following the state of the title, the expectation was that when the property was sold the proceeds would be paid to the parties equally. But an order was made that the party who had contributed everything towards its purchase and upkeep was to be entitled to recover the other party's share of the proceeds. As Sheriff Principal Lockhart explained in his judgment, this was on the ground that she had been unjustly enriched because the condition on which the enrichment was given, due to her bad faith, did not materialise. 10. The law of unjust enrichment has also been invoked where the title was taken in the name of one of the co-habitants only and they subsequently separated. It was held that the other co-habitant was entitled to the return of sums which he contributed to the purchase of the house and its refurbishment while the parties were living there: Satchwell v McIntosh, 2006 SLT (Sh Ct) 117. The problems which these very unusual cases create are for the most part problems of fact. The law that is to be applied, now that the former restrictions on the mode of proof have been abolished, is relatively uncomplicated. 11. In a case such as this, where the parties had already been living together for about 18 years and had four children when 114 Chatsworth Road was purchased in joint names and payments on the mortgage secured on that property were in effect contributed to by each of them equally, there would have been much to be said for adhering to the presumption of English law that the beneficial interests were divided between them equally. But I do not think that it is possible to ignore the fact that the contributions which they made to the purchase of that property were not equal. The relative extent of those contributions provides the best guide as to where their beneficial interests lay, in the absence of compelling evidence that by the end of their relationship they did indeed intend to share the beneficial interests equally. The evidence does not go that far. On the contrary, while they pooled their resources in the running of the household, in larger matters they maintained their financial independence from each other throughout their relationship. 12. The result might have been different if greater weight could have been given to the inclusion in the transfer of the standard-form receipt clause. But English property law does not permit this, for the reasons explained in Mortgage Corporation v Shaire [2001] Ch 743, 753. I think that indirect contributions, such as making improvements which added significant value to the property, or a complete pooling of resources in both time and money so that it did not matter who paid for what during their relationship, ought to be taken into account as well as financial contributions made directly towards the purchase of the property. I would endorse Chadwick LJ's view in Oxley v Hiscock [2005] Fam 211, para 69 that regard should be had to the whole course of dealing between them in relation to the property. But the evidence in this case shows that there never was a stage when both parties intended that their beneficial interests in the property should be shared equally. Taking a broad view of the matter, therefore, I agree that the order that the Court of Appeal provides the fairest result that can be achieved in the circumstances. 13. For these reasons, and those given by Baroness Hale with which I am in full agreement, I would dismiss the appeal. LORD WALKER OF GESTINGTHORPE My Lords,
14. I have had the advantage of reading in draft the opinion of my noble and learned friend Baroness Hale of Richmond. Having done so I have set aside as redundant most of the opinion which I had prepared. I cannot usefully add to, still less improve upon, her account of the human and social issues involved, the practicalities of registered conveyancing, and the particular (and in some ways unusual) facts that have led to this appeal reaching your Lordships' House. I am in full agreement with the observation in paragraph 68 of Lady Hale's opinion, which I take to be of central importance to her reasoning and conclusions, that in cases where a house or flat has been registered in the joint names of a married or cohabiting couple (but with no express declaration of trust) there will be a considerable burden on whichever of them asserts that their beneficial interests are unequal, and do not follow the law. 15. I am not sure that I can usefully add anything at all to Lady Hale's opinion. But it may be worth saying something, as a sort of extended footnote, about the theoretical underpinning of this area of the law, and its development since those issues were considered by this House in Pettitt v Pettitt [1970] AC 777, Gissing v Gissing [1971] AC 886 and Lloyds Bank v Rosset [1991] 1 AC 107. Those cases shared three features not present in this case: the dispute was between a husband (or his secured creditor) and a wife; the property in question was in single legal ownership; and the matter relied on by the non-owner claimant was no more than relatively trivial work and expenditure on the property. This last feature made them (as Lord MacDermott LCJ said of the first two in McFarlane v McFarlane [1972] N1 59, 66) "not such as to facilitate or encourage a comprehensive statement of this vexed branch of the law." 16. Until the end of the 1960s most of the reported cases are concerned with disputes between married couples, and many of them focus on the issue of whether section 17 of the Married Women's Property Act 1882 was purely procedural, or gave the court a discretion to vary the parties' beneficial interests to accord with the court's view of what was fair. The controversy is well illustrated by Bedson v Bedson [1965] 2 QB 666, in which Russell LJ differed from Lord Denning MR. That section 17 is only procedural, and does not confer any wide discretion, was finally and unanimously settled by this House in Pettitt v Pettitt [1970] AC 777. The House was also unanimous in the view that the actual disposal of the appeal (absent a wide discretion under section 17) presented few difficulties. It was almost unanimous in rejecting any general doctrine of "family assets" and in the view that (at least as between husband and wife) the presumption of advancement was no longer appropriate for determining property disputes. 17. There was however little else on which the House agreed, either in Pettitt v Pettitt or in Gissing v Gissing. Revisiting these cases with hindsight derived from a further thirty-five years or so of reported decisions, we can discern that of all the questions to be asked about "common intention" trusts as they emerge from Pettitt v Pettitt and Gissing v Gissing, the most crucial is whether the court must find a real bargain between the parties, or whether it can (in the absence of any sufficient evidence as to their real intentions) infer or impute a bargain. 18. In seeking to answer that question we must, I think, focus on the two speeches of Lord Diplock, since these (and especially his later speech in Gissing v Gissing) have been hugely influential in the later development of the law. In Pettitt v Pettitt [1970] AC 777 Lord Diplock (at p 822E) saw the court's task as being to ascertain the "common intention" of the parties. He saw this as a task to be carried out, not by reference to the old presumptions of advancement and resulting trust, but by examining the facts and imputing an intention to the parties. He saw this as a "familiar legal technique," comparable to finding an implied term in a contract. Lord Diplock used the word "impute" (in various parts of speech) at least eight times in the crucial passage between pp 822H and 825E. 19. Pettitt v Pettitt was decided in April 1969. It was followed by Gissing v Gissing [1971] AC 886, decided in July 1970. Three of the Appellate CommitteeLord Reid, Lord Morris of Borth-y-Gest and Lord Diplockhad sat on Pettitt v Pettitt. In his speech Lord Diplock acknowledged (at p 904E-F) that he had been in a minority in Pettitt v Pettitt and that "I must now accept the majority decision that, put in this form at any rate, this is not the law." But then having in Pettitt v Pettitt dismissed the resulting trust as old-fashioned and inappropriate, in Gissing v Gissing Lord Diplock apparently equated it (at p 905B-C) to a constructive trust:
20. Lord Diplock then proceeded to explain the circumstances in which the Court would find a "resulting, implied or constructive trust", and in particular when the Court would "infer [the parties'] common intention from their conduct" ([1971] AC 886 at p 906B). The very important passage which follows (pp 906B-910A) uses the word "infer" (in various parts of speech) at least 23 times. But for the substitution of the word "infer" for "impute" the substance of the reasoning is, it seems to me, essentially the same (although worked out in a good deal more detail) as Lord Diplock's reasoning in Pettitt v Pettitt, when he was in the minority. 21. Since then Lord Diplock's speech in Gissing v Gissing has dominated this area of the law. It was seized on with particular enthusiasm by Lord Denning MR (see for instance his observations in Eves v Eves [1975] 1 WLR 1338, 1341: "Lord Diplock brought it into the world and we have nourished it"). Other judges have been less enthusiastic, being oppressed by the "air of unreality about the whole exercise" (Griffiths LJ in Bernard v Josephs [1982] Ch 391, 404). The whole problem is very helpfully discussed in chapter 10 of Gray & Gray, Elements of Land Law, 4th ed (2005), especially (as to the lack of reality of the bargain requirement) paras 10.92 to 10.99. Your Lordships may think that only a judge of Lord Diplock's stature could have achieved such a remarkable reversal of the tidal flow of authority as has followed on his speech in Gissing v Gissing. But it might have been better for the long-term development of the law if this House's rejection of "imputation" in Pettitt v Pettitt had been openly departed from (under the statement as to judicial precedent made by the Lord Chancellor in 1966) rather than being circumvented by the rather ambiguous (and perhaps deliberately ambiguous) language of "inference." 22. In Pettitt [1970] AC 777 there was a clear majority as to the need for an actual bargain, however imprecisely expressed: see Lord Morris of Borth-y-Gest at 804E-G, Lord Hodson at 810E-F and Lord Upjohn at 817G. Only Lord Reid, as I understand his speech (at 795D and 796D) showed some sympathy for Lord Diplock's views on "imputation." In Gissing [1971] AC 886 Lord Reid's opinion was again inconclusive, as I understand it but, paradoxically, Lord Reid (at 897F-G) seems to have found "imputation" a more readily acceptable solution than "inference" (which is the recurring theme of Lord Diplock's speech). Lord Morris (at 898C) and Viscount Dilhorne (at 900E-F) considered that the Court could not construct a bargain for the parties if they had not made one. Lord Pearson (at 902G-H), like Lord Reid, favoured imputation, apparently equating it with inference. 23. Lord Diplock's insouciant approach to legal taxonomy in the passage which I have quoted above has attracted a good deal of attention from legal scholars, but relatively little judicial comment. In Gissing itself Lord Reid (at 896F) Lord Morris (at 898B) and Viscount Dilhorne (at 901A) simply repeated the formula which appears in section 53(2) of the Law of Property Act 1925, "resulting, implied or constructive trust." Lord Pearson (at 902B) specified a resulting trust as the correct basis. (so had Lord Upjohn in Pettitt [1970] AC 777, with great emphasis and at some length, at 813G-815G; he had also referred to estoppel, but only to exclude it). In Pettitt Lord Reid had made a passing reference to unjust enrichment (at 795G-H), but found it unhelpful. The law of Scotland has developed the principle of unjust enrichment in this area, as my noble and learned friend Lord Hope of Craighead has explained. So have some Commonwealth jurisdictions. But neither side urged it on your Lordships, and I think it would be unwise for the House to make such a significant change of course in advance of the Law Commission's proposals. A significant judicial comment on the importance of taxonomy in this area was made by Peter Gibson LJ in Drake v Whipp [1996] 1 FLR 826, a case which was discussed at length by Chadwick LJ in Oxley v Hiscock [2005] Fam 211, 242-245. But before coming to that I must refer to the third of the trio of cases in this House, Lloyds Bank plc v Rosset [1991] 1 AC 107.
24. In Lloyds Bank plc v Rosset [1991] 1 AC 107 the Appellate Committee (no doubt conscious of the widely differing views expressed in Pettitt and Gissing) concurred in a single speech by the presiding Law Lord, Lord Bridge of Harwich. The wife claimed (against a bank which was her separated husband's secured creditor) an interest in the matrimonial home (which had been purchased ten years after the marriage and was held in the husband's sole name). She relied on a common understanding or intention arising out of her own efforts in arranging for extensive renovation works and herself carrying out some redecoration (the judge's findings on this are at [1991] 1 AC 107, 129F-131B). At first instance she succeeded on the issue of beneficial interest but failed on a conveyancing issue. She won her appeal ([1989] Ch 350; Purchas and Nicholls LJJ, Mustill LJ dissenting on a conveyancing issue). The House of Lords allowed the bank's appeal on the short ground expressed by Lord Bridge (at 131F):
25. Lord Bridge then asked himself whether it was worthwhile to add any general remarks by way of illumination of the law. He limited himself to drawing attention to one "critical distinction." If (at 132E-G) there is to be a finding of an actual "agreement, arrangement, or understanding" between the parties it must
Lord Bridge continued (132H-133B):
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