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Jointly Owned Properties - What Happens When One Party Puts in Everything?

View profile for Richard Busby
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Whereas married couples have a statutory regime for their property issues, disputes amongst former cohabitees are resolved by application of general property law principles, often said to be unsatisfactory and the resolution of these types of cases  between unmarried former couples still troubles the courts. 

In the recent case of Marr v. Collie [2017] UKPC 17, the Board of the Privy Council (the last route of appeal for some Commonwealth countries) has given an opinion which in some ways helps to clarify some discreet issues.

The case, originating in the Bahamas, reviews leading case law and considers the clash of certain presumptions, namely the conflict between the presumption from the leading 2007 English case of Stack v. Dowden;  that the starting point in cases where  properties are held in joint names is that the beneficial interest is also held jointly (‘equity follows the law’); and the presumption of resulting trust, where the co-owners will essentially receive back in the shares they initially invested.

These 2 presumptions are in opposition and are critical to the outcome. The cannot both apply at the same time. Marr v. Collie considers when these presumptions ought to apply when dealing with investment properties in the context of personal rather than business relationship.

Summary of Marr v. Collie

The parties involved had been in a same sex relationship for 17 years. Mr Marr was a Canadian citizen working in the banking industry in the Bahamas and the other a builder. The banker, not unexpectedly, seems to have been the wealthier partner.

Over the course of the relationship, multiple investment properties were purchased in the parties’ joint names but almost entirely funded by Mr Marr. He had paid all the deposits, legal costs of purchase and all the mortgage sums due under the property save for a tiny sum paid by the defendant, Mr Collie.

 

On 3 of these properties, Mr Collie claimed it had been agreed that he would carry out certain works to these properties but the evidence as to what he did was sketchy at best.

At the trial in the Bahamas, the judge found that the presumption from Stack v. Dowden that the starting point in ‘joint names’ cases was that the beneficial title was the same as the legal title was limited to situations in the ‘domestic’ rather than investment/commercial context and that it was;

“…not right to apply the so-called Stack v. Dowden presumption in cases where the primary purpose of the property purchase had been as an investment, even if there was a personal relationship between the parties.”  

Therefore even though the parties had been in a long intimate relationship, the judge placed reliance on the 2008 English case of  Laskar v. Laskar, in finding that this presumption did not apply to the investment properties - the resulting trust principles were to apply instead. This meant that there was presumed to be a resulting trust of all of the equity in favour of Mr Marr as he had put in all the initial money - unless Mr Collie could prove Mr Marr had intended to give him his shares in the properties.

The judge, who preferred Mr Marr’s evidence over that of Mr Collie’s found that he had fallen far short of being able to prove it was a gift and Mr Marr won handsomely.

Mr Collie appealed however, and the decision was effectively reversed, the Bahamian Court of Appeal finding that the presumption of resulting trust was wrongly applied and put the burden of proof back on Mr Marr to show the shares in the investment properties were owned other than in accordance with the legal titles, which he was not able to do.

Privy Council Opinion

After reviewing the leading decisions of Stack v. Dowden, Jones v. Kernott [2011] and Laskar [2008], the Privy Council gave the opinion that there is no reason to doubt that the starting presumption from Stack v. Dowden that equity follows the law can apply to property purchased by a couple in an enterprise reflecting their joint commercial as well as their personal commitment.

The Board considered the joint judgment of Lord Walker and Lady Hale in Jones v. Kernott that the classic resulting trust presumption would “be rare in a domestic context”. This is welcome clarification.

 

It was thought clear that when giving her opinion in Stack v. Dowden, Lady Hale had not intended that this principle should be confined exclusively to the domestic setting and the Privy Council firmly rejected the submission that the case of Laskar was authority for the proposition that the principle in Stack v. Dowden applies only in the ‘domestic context’.  The Board distinguished Laskar as having involved an investment property bought as a purely financial venture on which the parties had embarked  without any mutual commitment to each other for the future, albeit that case had also involved a property purchase between family members the relationship had been mother and daughter, not partners. It was the intention that was key, not the names on the title.

So when does the resulting trust presumption apply?

The Privy Council thought that it was entirely conceivable that partners in a relationship may jointly buy investment property with the intention that the equity would be held equally even though the parties had contributed unequally to the purchase.

That was not the case here but the Board considered that if what Lady Hale described as the starting point (that joint legal ownership should signify joint beneficial ownership), is to be regarded as a presumption, is it in conflict with the presumption of a resulting trust i,e where the parties have contributed unequally to the purchase of property in their joint names?

The Privy Council gave as a simplistic answer that if the property is bought in joint names by parties in a domestic relationship the presumption of joint beneficial ownership arises but if bought in a wholly non-domestic situation, it does not and then the presumption of resulting trust might apply.  

The Board concluded that unless there is no evidence from which the parties’ intentions can be identified, the answer is not to be provided by the triumph of one of these 2 presumptions over the other but that context is the key to divining the  parties’ common intention.

If that common intention is unambiguous in that that the parties should share equally despite unequal contributions to a joint purchase, then the Privy Council said that ought to be respected but if that is not their wish or if they have not formed any intention as to beneficial ownership, but had for instance accepted advice from solicitors that the property be acquired in joint names without being aware of the consequences, the resulting trust solution may provide the answer.

This is all nicely vague and so it has to be - the search remains to examine precisely what the parties intended to happen - either at the time if purchase or later on during the relationship.  This is often a detailed exercise requiring great care when taking instructions.

In the Marr v. Collie case, both parties were relying on common intention but could not agree on what it was and after having given guidance on the principles, the Privy Council referred the case back to the Bahamas for the courts to examine more closely the intentions of the parties at the time of acquisition. An unsatisfactory and costly outcome for the parties to have to relitigate the issues and it shows the unsatisfactory nature of the law in this area which is ripe for change.

If you are affected by any of the issues covered in this article please contact a member of the Family team on 020 7091 2700 for further discussion.

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