Cohabitation property law: a short introduction

Cohabitants: money, children and domestic abuse

 

If the process of family breakdown can be characterised, from a legal point of view, as dealing with children (including child financial support), money, any domestic abuse and (in the case of marriage) divorce, then in all of these the law does not distinguish between married and unmarried couples. Divorce does not apply to unmarried couples, obviously; but the fat of not being married is fundamental to financial and property issues between married and unmarried couples; and that is the main thrust of what follows.

 

On the fortieth anniversary of the Court of Appeal judgment in Davis v Johnson [1978] UKHL 1, [1979] AC 264 (27 November 2017: the case went on to House of Lords) it is worth comparing the law in 1977 with now to show that things have moved a little; but they have not moved in the area of property law and other financial support between cohabitants. This article looks at the present law for those who live together, and who may have children and share property.

 

The law in 2017 does not discriminate when it comes to cohabitants in respect of their children, child support and domestic abuse; though, as explained in Davis v Johnson in 1977 the law moved forward in a way which, at the time, was regarded as truly radical.

 

Domestic Violence and Matrimonial Proceedings Act 1976

 

In the Court of Appeal Lord Denning MR (who sat with four other judges including Sir George Baker P) described the background to Domestic Violence and Matrimonial Proceedings Act 1976 as:

 

‘Battered wives’ are now a matter of public concern. The House of Commons in 1975 set up a Select Committee of its members to report on violence in marriage. This committee heard much evidence on the problem. They presented a report calling for steps to be taken urgently to protect women who were subjected to violence. These steps included legislation. This took place and is now to be found in the [1976 Act]. This Act came into force in June of last year. Soon afterwards many a woman sought the aid of the county courts for protection under the Act….

 

In the House of Lords Lord Scarman (at 347) described the operative part of the 1976 Act as providing a ‘new remedy’, and that also for unmarried partners, as follows:

 

Subsection (2) enables an unmarried woman (or man) who is living with a man (or woman) in the same household as husband and wife to apply to the county court under subsection (1) and expressly provides that reference in subsection (1) to the matrimonial home shall be construed as a reference to the household in which they are living together. This reference indicates to my mind that those provisions of subsection (1), which make available to married people an injunction excluding the other party from the matrimonial home and an injunction requiring the other party to permit the applicant to enter and remain in the matrimonial home, are intended to be available also to unmarried partners.

 

In particular the Act was designed to restrain a party to a marriage from ‘molesting the applicant’ or ‘a child living with her’ (s 1(1)(a) and (b)); and declares that the remedy in s 1(1) shall –

 

(2) … apply to a man and a woman who are living with each other in the same household as husband and wife as it applies to the parties to a marriage and any reference to the matrimonial home shall be construed accordingly.

 

This was the radical extension under the 1976 Act and was succeeded in 1995/6 by what became Family Law Act 1996 1996 Part 4, which preserves (as FLA 1996 s 42) the terminology, undefined, of ‘molestation’ used – as it had been in civil proceedings injunctions – up to then. I considered this more fully in Lord Scarman and a definition of domestic abuse.

 

Discrimination and cohabitation law

 

In contrast to the modern law on domestic abuse, property law (including from income – ie maintenance as between partners) is entirely discriminatory as between couples where they are married or not married. There is, generally, no discrimination in children law (eg under Children Act 1989) or where child support maintenance is concerned (Child Support Act 1991) according to whether parents are married or not. This is also the case in respect of domestic violence or of exclusion orders (the sop to the Daily Mail and assorted Tory MPs in Family Law Act 1996 s 41 (which said that if a couple were not married then where ‘the court [should] have regard to the fact that they have not given each other the commitment involved in marriage’ has been repealed).

 

The law does not differentiate according to gender, sexual orientation or religion. In one of the leading cases, Stack v Dowden [2007] UKHL 17, [2007] 1 FLR 1858, Barry Stack was the non-owning partner and claimant; and an important case on proprietary estoppel (Wayling v Jones [1995] 2 FLR 1029) concerned a same sex couple. That said, it is most likely to be the carer mother who is affected by the unfairness in the law.

 

If a couple is married there is a very clear divide between between the statute law which governs them (Matrimonial Causes Act 1973 ss 22-25A (mostly)), which depends on the discretion of the judges as to how their capital is distributed on relationship breakdown (divorce) and if they are not married, but jointly occupy freehold property. Where couples cohabit, and whether they own property jointly or only one owns, there is tangle between common law (mostly equity) with little scope for judicial discretion. For example, in the recent Liden v Burton [2016] EWCA Civ 275 (proprietary estoppel: see later) Hamblen LJ characterised the issues on appeal as: ‘(1) whether the judge wrongly applied the law to the facts as found; (2) whether the judge erred in the exercise of his discretion in giving effect to the equity’ in the particular case.

 

Cohabitation and co-ownership

 

Two particular sets of circumstances arise: first, where an unmarried couple – hetero-sexual or same sex – live together and jointly own property; or, secondly, where they live together in property which is in the name of one only (A) but the other (B) asserts a claim over that property. The question then is to what extent B may able successfully to pursue a claim against the property in A’s name. If they were married B would have a share unquestionably (the amount would depend on ‘all the circumstances’ of the case: Matrimonial Causes Act 1973 s 25). If they are unmarried (whether with or without children), all sorts of arguments may be needed if B is to secure a share.

 

The starting point is legal title. What is recorded at the Land Registry? What was said at the time when the property was purchased? Equity follows the law. Thus, for example, the law says that if two people own property jointly they have an equal interest in that property, unless the documents say something different. If a property is owned by one of them only, no-one else has a share (save as explained in trust interests below). Lady Hale explained this in Stack v Dowden [2007] UKHL 17, [2007] 1 FLR 1858 as follows:

 

[56] Just as the starting point where there is sole legal ownership is sole beneficial ownership, the starting point where there is joint legal ownership is joint beneficial ownership. The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership. So in sole ownership cases it is upon the non-owner to show that he has any interest at all. In joint ownership cases, it is upon the joint owner who claims to have other than a joint beneficial interest.

 

If B claims a different share from what appears on the title then it is for B to prove it. Equitable principles apply. In practice these are more akin to contract principles than to the discretionary rules which apply on marriage breakdown. It remains the case that equity may be able to adjust the shares which appear on the title documents; but it is for the claimant to say why this adjustment should happen.

 

Implied trusts: resulting or constructive

 

The differential ownership – the ‘beneficial interests’ – which equity allows for is to imply a trust:

 

  • A resulting trust – Equity says that two (or more) owners share land in the proportions in which they put money up to buy it even though on the face of the title ownership is different; or
  • A constructive trust – The court imposes on A the requirement to hold property in some way other than required by law.

 

The purchase of property, where another person (A) makes a contribution, generally sets up a resulting trust in favour of the contributor proportionate to any cash contribution. Thus where A gives money to B to buy property, and B does so then a trust results to A for the value of his or her contribution (Dyer v Dyer (1788) 2 Cox Eq Cas 92). B is a trustee for himself and A. A can then enforce the trust as trustee under Trusts of Land and Appointment of Trustees Act 1996 (as explained in Pt 3) not eg as a mortgagee or unsecured lender.

 

The resulting trust is no more than an equitable presumption. It must yield to other evidence that demonstrates that no such interest was intended eg that a loan or a charge were intended; or that (say) a gift was intended (see discussion in Marr v Collie (Bahamas) [2017] UKPC 17, [2017] 2 FLR 674).

 

Constructive trust

 

The more common trust as between cohabitants is where A buys, or (at the relevant time in the relationship) already owns, property in A’s sole name; or that A and B jointly own property, but one of them wishes to say that they own it in shares which are other than equal. The issue then is whether the court will adjust the shares shown on the legal title or will grant a share at all; though as Lady Hale made clear in Stack v Dowden: ‘[69] …. cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual.’

 

A trust may be constructed first where the court finds there is an agreement between A and B for differential holding and in addition the court finds that there has been ‘detrimental reliance’ by B on that agreement (Lloyds Bank plc v Rosset [1991] 1 AC 107, [1990] 2 WLR 867, [1990] 2 FLR 155). Thus whilst the resulting trust arises from contributions, the constructive trust is concerned with an agreement, understanding or other bargain relating to property.

 

Thus (say) a man (A) owns property, and agrees with B that she will come and live with him. B gives up her house to live with A (Grant v Edwards [1987] 1 FLR 87, CA); or she puts up money to be used towards the refurbishment of property (Drake v Whipp [1996] 1 FLR 826, CA). Conduct on the part of the claimant may be evidence of an agreement: in Eves v Eves [1975] 1 WLR 1338, CA Janet Eves did a variety of work there, including wielding a 14lb sledge hammer to break up concrete which covered the front.

 

Indeed, Eves v Eves includes the following from Lord Denning MR (at 1431). He describes an unmarried couple:

 

… They get a house; but it is put in his name alone. Then, before they get married, the relationship breaks down. In strict law she has no claim on him whatever. She is not his wife. He is not bound to provide a roof over her head. He can turn her into the street. She is not entitled to any maintenance from him for herself. All she can do is to go to the magistrates and ask for an affiliation order against him on the footing that she is a “single woman”: and get an order for him to pay maintenance for the children. If he does not pay, she may have great difficulty in getting any money out of him, even for the children. Such is the strict law. And a few years ago even equity would not have helped her. But things have altered now. Equity is not past the age of child bearing.

 

Little has changed in property law since then. Affiliation orders have gone and are largely replaced by orders under Children Act 1989 and by child support maintenance under Child Support Act 1991. Family Law Act 1996 has developed the law in relation to occupation and non-molestation orders. Equity may be able to bear children, as Lord Denning asserts; but the cohabitation cases considered in this article have hardly taken the law any further forward when it comes to adjustment of property owned by unmarried cohabitants.

 

Adjusting shares in jointly owned property

 

Secondly, a trust may be constructed which alters the legal entitlement where parties own property jointly, but one seeks a differential share. There the court can construct a trust which alters the legal entitlement. Thus in Stack v Dowden a property was held in the parties joint names, which had been bought by them from the proceeds of sale of a property originally owned solely by Ms Dowden. They had brought up their four children in the house. This and other factors lead the Court of Appeal to award Mr Stack 35%, a division upheld by the House of Lords (for reasons explained further later).

 

The constructive trust must be contrasted from proprietary estoppel (with which it shares certain features: eg detrimental reliance). Proprietary estoppel enables the court to hold that, where there has been a promise upon which a party has acted to their detriment, then the promissor should be estopped from denying the existence of the promise and from denying the benefit that was promised by it. The constructive trust vests a beneficial interest in the claimant, that is to say a trust interest in property which can be enforced by an order for sale under TLATA 1996 s 14. Proprietary estoppel will not necessarily result in any proprietary interest, but may result in a damages claim (akin to breach of contract), depending on the nature of the promise and the extent of the detriment.

 

Defining the shares

 

Where the court declares a constructive trust but determines that it should be in shares other than equal, how are the shares defined? Jones v Kernott [2011] UKSC 53 [2012] 1 FLR 45 the Supreme Court attempted to explain their earlier Stack v Dowden.

 

The main factor in a convoluted background in Jones v Kernott was that the couple’s jointly owned property provided a home for J and two children of the relationship; and that liquidation of a life policy belonging to both of them had enabled K to buy his own separate property. These facts enabled the court to infer an intention to alter the legal title to a trust which reduced K’s share to 10% of the property. Lord Kerr summarised their common ground between the justices as, first, that a the common intention may be inferred objectively from the parties’ conduct; or, failing that, that each of the couple is entitled to such share as the court considers fair; and in considering fairness the court must consider the ‘whole course of dealing between the parties’.

 

Lady Hale and Lord Walker explained these propositions as:

 

[47] In a case such as this, where the parties already share the beneficial interest, and the question is what their interests are and whether their interests have changed, the court will try to deduce what their actual intentions were at the relevant time. It cannot impose a solution upon them which is contrary to what the evidence shows that they actually intended. But if it cannot deduce exactly what shares were intended, it may have no alternative but to ask what their intentions as reasonable and just people would have been had they thought about it at the time. This is a fallback position which some courts may not welcome, but the court has a duty to come to a conclusion on the dispute put before it.

 

Need for law reform

 

In truth, property law for cohabitants has only moved fractionally since Lord Denning’s comments in Eves v Eves. Some of the more depressing aspects of this area of law include

 

  • The failure of political parties to recognise the fundamental need for thoroughgoing reform to recognise the modern attitude to unmarried families and their children;
  • The law’s failure to recognise that the fact that one partner reposes trust in the other must be recognised fully by the law; and
  • That couples do not necessarily sit down before marriage or before starting their relationship and meticulously plan their financial futures as was recognised by the very human words of that human Chancery judge Waite LJ in Midland Bank plc v Cooke [1995] 2 FLR 915, CA – over twenty years ago – when he said (at 927):

 

Equity has traditionally been a system which matches established principle to the demands of social change. The mass diffusion of home ownership has been one of the most striking social changes of our own time. The present case is typical of hundreds, perhaps even thousands, of others. When people, especially young people, agree to share their lives in joint homes they do so on a basis of mutual trust and in the expectation that their relationship will endure. Despite the efforts that have been made by many responsible bodies to counsel prospective cohabitants as to the risks of taking shared interests in property without legal advice, it is unrealistic to expect that advice to be followed on a universal scale. For a couple embarking on a serious relationship, discussion of the terms to apply at parting is almost a contradiction of the shared hopes that have brought them together….

 

Urgent law reform is needed to make cohabitation property law fair, especially – but not only – where couples have children and where one (generally the mother) gives up a career or time at work to look after the couples’ children.

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