(back to preceding text)

    112.  By contrast, while Lord Reid's suggestion in Gissing at 897B that the notion that equality is equity is no more than a "high-sounding brocard" may be a little extreme, the invocation of such a notion as between cohabitants, who have contributed unequally to the acquisition of a home, appears to me to be inconsistent with principle. It is almost a resurrection of the "family assets" hypothesis disposed of in Pettitt - see at 795B, 809H-810H, and 816G-817H. It involves invoking a presumption of advancement between unmarried cohabitants, where such a presumption has never applied, and at a time when, as I have mentioned, the court is increasingly unenthusiastic about the presumption, even in relationships where it does apply.

    113.  There are also practical reasons for rejecting equality and supporting the resulting trust solution. The property may be bought in joint names for reasons which cast no light on the parties' intentions with regard to beneficial ownership. It may be the solicitor's decision or assumption, the lender's preference for the security of two borrowers, or the happenstance of how the initial contact with the solicitor was made. As the survey mentioned by Baroness Hale in paragraph 45 of her opinion indicates, parties in a loving relationship are often not anxious to discuss how they should divide the beneficial interest in the home they are about to buy. They would have to debate what should happen if their relationship broke down (the most likely circumstance, albeit not the only one, in which the question would arise). While in some cases they may assume equal ownership, in others they may not. In many cases the point may not even occur to them, and if it does, they may be happy to rely on the law to provide the answer if the need arises. If they are happy with an equal split at the beginning, one might expect them to say so. The fact that they do not do so may be more consistent with the view that they (or at any rate the bigger contributor) would not be happy with that outcome for the very reason that their contributions differed.

    114.  There is also an important point about consistency of approach with a case where the purchase of a home is in the name of one of the parties. As Baroness Hale observes, where there is no evidence of contributions, joint legal ownership is reflected in a presumption of joint beneficial ownership just as sole legal ownership is reflected in a presumption of sole beneficial ownership. Where there is evidence of the parties' respective contributions to the purchase price (and no other relevant evidence) and one of the parties has contributed X%, the fact that the purchase is in the sole name of the other does not prevent the former owning X% of the beneficial interest on a resulting trust basis. Indeed, it is because of the resulting trust presumption that such ownership arises. It seems to me that consistency suggests that the party who contributed X% of the purchase price should be entitled to X% (no more and no less) of the beneficial interest in the same way if he is a co-purchaser. The resulting trust presumption arises because it is assumed that neither party intended a gift of any part of his own contribution to the other party. That would seem to me to apply to contributions irrespective of the name or names in which the property concerned is acquired and held, as a matter of both principle and logic.

    115.  It may be asked why the bigger contributor agreed to the property being taken in joint names, unless he intended joint beneficial ownership. There are four answers to that. The first is that the question sets out to justify what it assumes, namely that, in the absence of any discussion, the parties must have assumed an equal split. Secondly, if the other party was a contributor, he would often want to be a co-owner, and the only way real property can be held in law by two persons is as joint owners. Thirdly, the converse point can be made where a property is acquired in the name of one party: if the other party has contributed to the purchase, his absence from the title is not evidence that he was not intended to have an interest. (In this connection, it seems to me that, where a home is taken in the name of only one party, this is almost as likely to have been a conscious decision as where it is acquired in joint names: where both have contributed to the purchase, it is unlikely that either will have been unaware of the fact that the home was being acquired in the name of only one of them). Fourthly, there are the practical considerations to which I have already alluded.

    116.  Having said that, the fact that a property is taken in joint names is some evidence that both parties were intended to have some beneficial interest. In that connection, the facts of the present case are not without interest. The parties' previous home in Purves Road was acquired in Ms Dowden's name alone. On the face of it at least, Purves Road was acquired solely with money from Ms Dowden's account or borrowed by her alone (although a small amount may have come indirectly from Mr Stack), so it is not surprising that it was acquired in her sole name. When the house at Chatsworth Road was acquired, Mr Stack directly (and through liability for the mortgage) contributed to its purchase, and it is therefore unsurprising that his name was included on the title. However, for reasons already discussed, as he contributed far less to the purchase than Ms Dowden, it seems wrong to deduce from those bare facts that the parties intended that he should have 50% of the beneficial interest.

    117.  There are two other aspects of the resulting trust analysis which I should like to mention. First, there is the effect of liability under a mortgage. This will normally be a relevant, often a very important, factor, because, as Lord Walker points out, the overwhelming majority of houses and flats are acquired with the assistance of secured borrowing. There is attraction in the notion that liability under a mortgage should be equivalent to a cash contribution. On that basis, if a property is acquired for £300,000, which is made up of one party's contribution of £100,000, and both parties taking on joint liability for a £200,000 mortgage, the beneficial interest would be two-thirds owned by the party who made the contribution, and one-third by the other. If one party then repays more of the mortgage advance, equitable accounting might be invoked to adjust the beneficial ownerships at least in a suitable case. Such an adjustment would be consistent with the resulting trust analysis, as repayments of mortgage capital may be seen as retrospective contributions towards the cost of acquisition, or as payments which increase the value of the equity of redemption.

    118.  However, there is an argument that taking on liability under a mortgage should not be equivalent to a cash payment. The cash contribution is effectively equity, whereas the mortgage liability arises in relation to a secured loan. If the value of the property in the example just given had fallen by 25% when it came to be sold, the party who made the cash contribution would lose £75,000 of his £100,000, whereas the other party would lose nothing (unless he would be liable to pay £25,000 to the former, which seems intuitively improbable).

    119.  In Ulrich v Ulrich and Felton [1968] 1 WLR 180, an engaged couple (who subsequently married) had bought a house, she paying one-sixth of the acquisition cost in cash, and he raising the balance by a mortgage in his name. In passages at 186 and 189 (approved in Pettitt at 816A), Lord Denning MR and Diplock LJ held it was wrong to treat a mortgage contribution as equivalent to a cash contribution.

    120.  Desirable though it is to give as much guidance as possible, this is not an appropriate case in which to express a view as to whether liability under a mortgage should be treated as the equivalent of a cash contribution for the purpose of assessing the shares in which the beneficial interest is held. Certainty, simplicity and first impression suggest a positive answer, perhaps particularly where a home is bought almost exclusively by means of a mortgage. More sophisticated economic and legal analysis may suggest otherwise, especially where the cash contributions are very different and, at least in the case of one party, substantial. The point has not been fully canvassed here, because, however one treats the mortgage, the outcome of the appeal is the same.

    121.  The final aspect I wish to deal with in relation to the resulting trust analysis is where the evidence is so unsatisfactory that it is impossible to reach a clear conclusion as to the parties' respective contributions to the purchase price. In many such cases, the evidence may be so hopeless or may suggest contributions of the same sort of order, and equality would be the appropriate outcome (as in Rimmer v Rimmer [1953] 1 QB 63 at 72, approved in Pettitt at 804A-B, 810H and 815H). However, in other cases (as here, in my opinion), the court may conclude that, while it is impossible to be precise as to the relative contributions, one party cannot have contributed more (or less) than Y%. In such cases, where Y is clearly below (or above) 50, to decide that the party concerned had more (or less) than Y% of the beneficial interest would be wrong.

    122.  So, in the absence of any relevant evidence other than the parties' respective contributions, I would favour the resulting trust solution as at the date of acquisition (in agreement with Chadwick LJ as quoted in paragraph 65 of Baroness Hale's opinion). Application of the resulting trust approach in the present case would justify Mr Stack's appeal being dismissed. On the figures summarised by Baroness Hale, Mr Stack could not possibly establish more than a 36% interest in the house as a result of all his contributions. Indeed, on the basis of the evidence, I would put his contribution at around 30%, but, as Ms Dowden is prepared to concede 35%, it is unnecessary to consider that aspect further. Thus, on a resulting trust basis, Mr Stack had no more than a 35% share of the beneficial interest at the date of acquisition.

    123.  Accordingly, in my judgment, where there are unequal contributions, the resulting trust solution is the one to be adopted. However, it is no more than a presumption, albeit an important one. Lord Nicholls of Birkenhead said in Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773 at paragraph 16 that the "use of the term 'presumption' is descriptive of a shift in the evidential onus on a question of fact", and that the "use … of the forensic tool of a shift in the evidential burden of proof should not be permitted to obscure the overall position". Although said in the context of undue influence, those words apply equally to the resulting trust presumption, in my opinion.

    124.  In many cases, there will, in addition to the contributions, be other relevant evidence as at the time of acquisition. Such evidence would often enable the court to deduce an agreement or understanding amounting to an intention as to the basis on which the beneficial interests would be held. Such an intention may be express (although not complying with the requisite formalities) or inferred, and must normally be supported by some detriment, to justify intervention by equity. It would be in this way that the resulting trust would become rebutted and replaced, or (conceivably) supplemented, by a constructive trust.

    125.  While an intention may be inferred as well as express, it may not, at least in my opinion, be imputed. That appears to me to be consistent both with normal principles and with the majority view of this House in Pettitt, as accepted by all but Lord Reid in Gissing (see at 897H, 898B-D, 900E-G, 901B-D, and 904E-F), and reiterated by the Court of Appeal in Grant v Edwards [1986] Ch 638 at 651F-653A. The distinction between inference and imputation may appear a fine one (and in Gissing at 902G-H, Lord Pearson, who, on a fair reading I think rejected imputation, seems to have equated it with inference), but it is important.

    126.  An inferred intention is one which is objectively deduced to be the subjective actual intention of the parties, in the light of their actions and statements. An imputed intention is one which is attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had no such intention. Imputation involves concluding what the parties would have intended, whereas inference involves concluding what they did intend.

    127.  To impute an intention would not only be wrong in principle and a departure from two decisions of your Lordships' House in this very area, but it also would involve a judge in an exercise which was difficult, subjective and uncertain. (Hence the advantage of the resulting trust presumption). It would be difficult because the judge would be constructing an intention where none existed at the time, and where the parties may well not have been able to agree. It would be subjective for obvious reasons. It would be uncertain because it is unclear whether one considers a hypothetical negotiation between the actual parties, or what reasonable parties would have agreed. The former is more logical, but would redound to the advantage of an unreasonable party. The latter is more attractive, but is inconsistent with the principle, identified by Baroness Hale at paragraph 61, that the court's view of fairness is not the correct yardstick for determining the parties' shares (and see Pettitt at 801C-F, 809C-G and 826C).

    128.  A constructive trust does not only arise from an express or implied agreement or understanding. It can also arise in a number of circumstances in which it can be said that the conscience of the legal owner is affected. For instance, it may well be that facts which justified a proprietary estoppel against one of the parties in favour of the other would give rise to a constructive trust. However, in agreement with Lord Walker, I do not consider it necessary or appropriate to discuss proprietary estoppel further in this case.

    129.  It is hard to identify, particularly in the abstract, the factors which can be taken into account to infer an agreement or understanding, and the effect of such factors. Each case will be highly fact-sensitive, and what is relevant, and how, may be contentious, whether one is considering actions, discussions or statements, even where there is no dispute as to what was done or said.

    130.  In the present case, for instance, there is a disagreement as to the effect of the declaration in the transfer of the house to the parties that the survivor "can give a valid receipt for capital money arising on the disposition of the land". At any rate in the absence of any evidence that the effect of this provision was explained to the parties, I would reject the contention that it has the effect of operating as a declaration of joint beneficial ownership. That contention is based on inference, and the legal basis of that inference is open to argument. Indeed, at the time the home was acquired, any well-informed solicitor would have advised that the law was that such a declaration probably would not give rise to such an inference, in the light of the Court of Appeal's decision in Huntingford v Hobbs [1993] 1 FLR 736. Quite apart from that, it seems to me that, in the absence of any evidence of contemporaneous advice to the parties as to the effect of the declaration, the alleged inference would simply be too technical, sophisticated, and subtle to be sustainable, at least in the context of the purchase of a home by two lay people.

    131.  Any assessment of the parties' intentions with regard to the ownership of the beneficial interest by reference to what they said and did must take into account all the circumstances of their relationship, in the same way as the interpretation of a contract must be effected by reference to all the surrounding circumstances. However, that does not mean that all the circumstances of the relationship are of primary or equal relevance to the issue.

    132.  I am unimpressed, for instance, by the argument that, merely because they have already lived together for a long time sharing all regular outgoings, including those in respect of the previous property they occupied, the parties must intend that the beneficial interest in the home they are acquiring, with differently sized contributions, should be held in equal shares. Particularly where the parties have chosen not to marry, their close and loving relationship does not by any means necessarily imply an intention to share all their assets equally. There is a large difference between sharing outgoings and making a gift of a valuable share in property; outgoings are relatively small regular sums arising out of day-to-day living, but an interest in the home is a capital asset, with a substantial value. I am similarly unconvinced that the ownership of the beneficial interest in a home acquired in joint names is much affected by whether the parties have children at the time of acquisition. While it justifies the obvious inference that it is to be used for the children as well as the parties, it says nothing on its own as to the intended ownership of the beneficial interest.

    133.  The fact that the parties operated their day-to-day financial affairs through a joint bank account, into which both their wages were paid and from which all family outgoings were paid, could fairly be said to be strong evidence that they intended the sums in that account to be owned equally. Accordingly, it would normally be easy to justify the contention that a home acquired with money from that account (often together with a mortgage in joint names) should be treated as acquired with jointly owned money and therefore as beneficially owned jointly. However, I am unhappy with the suggestion that, because parties share or pool their regular income and outgoings, it can be assumed that they intended that the beneficial interest in their home, acquired in joint names but with significantly different contributions, should be shared equally. There is a substantial difference, in law, in commercial terms, in practice, and almost always in terms of value and importance, between the ownership of a home and the ownership of a bank account or, indeed, furniture, furnishings and other chattels.

    134.  The fact that the parties keep assets such as bank accounts and financial investments separate and in separate names could be said to indicate that the parties do not intend to pool their resources. But it could equally be said that the fact that they choose, exceptionally, to acquire the home in joint names indicates that it is to be treated differently from their other assets, namely that it is to be jointly owned beneficially. In my view, however, such evidence is again of little value on its own, as it relates to a very different category of assets, in terms of nature and value, from the home they are buying.

    135.  The factors I have been discussing in the previous three paragraphs will often, however, have some significance. If there is other, possibly contested, evidence which is said to support the contention that the parties intended a different result from that indicated by a resulting trust analysis, those factors may make it easier for the court to accept, or even to interpret, that evidence as justifying such a different result.

    136.  For instance, the fact that the parties are in a close and loving relationship would render it easier, than in a normal contractual context, to displace the resulting trust solution with, say, an equal division of the beneficial ownership. That is because a departure from the resulting trust solution normally involves a gratuitous transfer of value from one party to the other. Thus, in the present case, if the outcome for which Mr Stack contends applied at the date of acquisition of the property, it would have involved an effectively gratuitous transfer of value equal to at least 15% of the purchase price of the house to him from Ms Dowden. Such a transfer is less unlikely between two parties in a long-term loving relationship than between two commercial entities or even two friends, but that does not mean that the nature of the relationship of itself justifies the inference of such a transfer.

    137.  In the present case, I consider that there was simply no evidence to justify departing in Mr Stack's favour from the apportionment of the beneficial interest in the house at the date of acquisition indicated by the resulting trust presumption. None of the facts recited in the opinion of Baroness Hale justify such a departure. It is fair to record that Mr Stack did appear to suggest at one point in his evidence that there was some discussion as to the ownership of the house at the time it was acquired, but the Judge expressly made no finding in his favour about that, and the Court of Appeal was not invited to do so or to remit it for the Judge to make such a finding.

    138.  The fact that the ownership of the beneficial interest in a home is determined at the date of acquisition does not mean that it cannot alter thereafter. My noble and learned friend Lord Hoffmann suggested during argument that the trust which arises at the date of acquisition, whether resulting or constructive, is of an ambulatory nature. That elegant characterisation does not justify a departure from the application of established legal principles any more than such a departure is justified at the time of acquisition. It seems to me that "compelling evidence", to use Lord Hope's expression in paragraph 11, is required before one can infer that, subsequent to the acquisition of the home, the parties intended a change in the shares in which the beneficial ownership is held. Such evidence would normally involve discussions, statements or actions, subsequent to the acquisition, from which an agreement or common understanding as to such a change can properly be inferred. I have already discussed some of the issues arising in this connection, partly because Ms Dowden and Mr Stack had lived together in Purves Road before they acquired the house at Chatsworth Road.

    139.  There are, however, one or two aspects I should like to mention. I agree with Lord Walker that, subject of course to other relevant facts justifying a different conclusion, the fact that one party carries out significant improvements to the home will justify an adjustment of the apportionment of the beneficial interest in his favour. In such a case, the cost could be seen as capital expenditure which differs from regular outgoings relating to the use of the home, and is not dissimilar in financial effect, from the cost of acquiring the home in the first place. To qualify, any work must be substantial: decoration or repairs (at least unless they were very significant) would not do.

    140.  There is also the question of repayments of the mortgage, and payments of other outgoings. I have already discussed the effect of the parties taking a mortgage in joint names, and suggested that, in some cases, repayments of capital could have the effect of adjusting the shares in the beneficial interest. (It is conceivable that that could apply to payments of interest as well). In many cases, the repayments of capital, even if effected wholly by one party, should not be interpreted as indicating an intention to alter the way in which the beneficial interest is apportioned. Thus, the fact that one party is the home-maker (and, often, child-carer) and the other is the wage-earner would probably not justify the former having his share decreased simply because the other party repays the mortgage by instalments, but it may be different where both parties earn and share the home-making, but one of them repays the mortgage by a single capital sum.

    141.  Consistently with what has already been discussed, I am unconvinced that the original ownership of the beneficial interest could normally be altered merely by the way in which the parties conduct their personal and day-to-day financial affairs. I do not see how the facts that they have lived together for a long time, have been in a loving relationship, have children, operated a joint bank account, and shared the outgoings of the household, including in respect of use and occupation of the home, can, of themselves, indicate an intention to equalise their originally unequal shares any more than they would indicate an intention to equalise their shares on acquisition, as discussed earlier. So, too, the facts that they both earn and share the home-making, or that one party has a well-paid job and the other is the home-maker, seem to me to be irrelevant at least on their own. Even the fact that one party pays all the outgoings and the other does nothing would not seem to me to justify any adjustment to the original ownership of the beneficial interest (subject to the possible exception of mortgage repayments).

    142.  In many cases, these points may result in an outcome which would seem unfair at least to some people. However (unless and until the legislature decides otherwise) fairness is not the guiding principle as Baroness Hale says, and, at least without legislative directions, it would be a very subjective and uncertain guide. Further, it is always important to bear in mind the need for clarity and certainty.

    143.  It is worth repeating that one is concerned with the ownership of what will normally be the most important and valuable asset of the parties, and the way they conduct their day-to-day living and finances is, in my view, at least of itself, not a reliable guide to their intentions in relation to that ownership. Even payments on decoration, repairs, utilities and Council tax, although related to the home, are concerned with its use and enjoyment, as opposed to its ownership as a capital asset. It is also worth repeating that these factors are not irrelevant to the issue of whether there has been a change in the shares in which the beneficial interest in the home is held. They provide part of the vital background against which any alleged discussion, statement or action said to give rise to a change in the beneficial ownership is to be assessed, in relation to both whether it occurred and what its effect was.

    144.  I am unhappy with the formulation of Chadwick LJ in Oxley at paragraph 69, quoted by Baroness Hale at paragraph 61 of her opinion, namely that the beneficial ownership should be apportioned by reference to what is "fair having regard to the whole course of dealing between [the parties] in relation to the property". First, fairness is not the appropriate yardstick. Secondly, the formulation appears to contemplate an imputed intention. Thirdly, "the whole course of dealing … in relation to the property" is too imprecise, as it gives insufficient guidance as to what is primarily relevant, namely dealings which cast light on the beneficial ownership of the property, and too limited, as all aspects of the relationship could be relevant in providing the context .by reference to which any alleged discussion, statement and actions must be assessed. As already explained, I also disagree with Chadwick LJ's implicit suggestion in the same paragraph that "the arrangements which [the parties] make with regard to the outgoings" (other than mortgage repayments) are likely to be of primary relevance to the issue of the ownership of the beneficial interest in the home.