Court orders sale of jointly owned property and equal division of proceeds between cohabiting partners.

RECORD NO: 27/2019

AN CHÚIRT CHUARDA THE CIRCUIT COURT

DUBLIN CIRCUIT COUNTY OF THE CITY OF DUBLIN IN THE MATTER OF THE LAND AND CONVEYANCING LAW REFORM ACT, 2009 AS AMENDED BETWEEN:

GERALDINE MCGRANE PLAINTIFF AND CIARAN O’FOGHLU DEFENDANT JUDGMENT OF His Honour Judge John O’Connor Delivered at Court 28, The Four Courts, Inns Quay, Dublin 7, on the 1st day of April 2020. The Facts

1. The plaintiff and the defendant were in a relationship together from 1995 to August 2015.

2. The premises, the subject matter of these proceedings is a dwellinghouse used as a family home during a cohabitation relationship. The title to the premises is registered in a Land Registry folio xxxxxxF of the register of freeholders for the County of Dublin. Both parties are registered owners as joint tenants. The premises has an estimated valuation of between €400,000 and €430,000 at the date of hearing in February, 2020.

3. The purchase price of the premises in 1996 was £83,000. The parties paid the deposit of £13,000 in roughly equal shares. However both parties acknowledged in oral evidence that it is possible the plaintiff paid the initial booking deposit of £2,000 and that the balance of the £11,000 deposit was paid by both parties in equal shares. However, nothing turns on this as both parties acknowledge that their intention at the time of the purchase was to own the premises as joint tenants. The balance of the purchase money amounting to £70,000 was funded by a mortgage in the parties joint names with a loan from a building society.

4. At the time of purchase, both parties made a will leaving their interest in the premises to each other. The parties did not enter into a co-ownership agreement.

5. Both parties worked as civil servants at the date of purchase of the premises and during their relationship, until the plaintiff retired in 2009. The plaintiff worked as an executive officer and the defendant worked as a clerical officer. The net effect of this difference is that the plaintiff’s salary was slightly higher while she worked as an executive officer.

6. Both parties had a daughter each from a previous relationship. The parties also have a son born during their relationship. In oral evidence to the court, both parties referred to themselves as “a family unit” during the relationship. The plaintiff stated “we just lived as a normal married couple”. During the period of their relationship the parties lived in Brussels together with their son and the plaintiff’s daughter for a period of 18 months. During this 18 month period, the defendant gave up his job in Ireland and in his words, in oral evidence to the court, acted as “a house husband”.

7. In or about 2001 the parties borrowed a sum of €15,000 to buy a car secured against the premises. In 2003 the parties borrowed €30,000 also secured against the premises to facilitate the move to Brussels and to facilitate the purchase of a car. In June 2005 the parties borrowed €130,000 to be repaid over a period of 11 years by way of a mortgage top up so as to fund the cost of a new extension to the premises. Repayments meant that all mortgages were fully discharged in October 2016. There is now no debt due on the house or mortgage registered against the premises.

8. The parties operated two bank accounts, both held in joint names. The mortgage repayments were paid from the first bank account “Account A”. The household and other joint living expenses and were paid from “Account B”. The defendant’s salary was paid into account A. The plaintiff’s salary was paid into Account B. Both parties had bank cards for each account.

The defendant stated in oral evidence; “I was never good at money, I let her do the financials”. He further stated that when the property was purchased, it was a joint enterprise and that they operated as a family unit.

9. Both parties received inheritance from deceased parents of approximately €80,000 each. Some of the inheritance received was used to discharge outstanding bills and loans and some of it used for personal circumstances. The plaintiff used a substantial sum of money to cover landscaping and other works to the premises. The plaintiff calculates that she spent approximately €24,000 in this regard. The plaintiff also spent approximately a sum of €25,000 on personal expenditure.

10. The plaintiff retired from working as a civil servant in 2009. She currently receives a pension of approximately €20,000 a year. The plaintiff also received a lump sum payment of almost €60,000, the majority of which was paid to her at a later date when she reached the age of 60 years.

11. After retirement from the civil service, the plaintiff set up a school uniform retail business. She purchased a substantial amount of stock for the business. However she has now ceased trading. The defendant continues to work as a civil servant.

Both parties provide maintenance for their teenage son who is now in third level education.

12. For a substantial number of years during the relationship the parties owned one car.

The defendant was the sole driver. The plaintiff learned to drive four years ago. She now owns a car. The defendant does not now own a car and stated he cannot afford it. He uses a bicycle as a means of transport.

13. The increase in the mortgage repayments was, (A) due to the additional loans obtained and (B) the increase in mortgage interest rates due to the financial crisis that affected Ireland in 2008. This resulted in all the defendant’s salary being used for the mortgage repayments for a number of years.

14. The plaintiff calculated that she spent a sum of €536,000 on household related matters including holidays and a sum of almost €53,000 in relation to fixtures and fittings. She calculated that between the deposit, enhancement works, mortgage repayments and household expenditure, she paid 64% of the total joint household and mortgage expenditure by the parties while they were a unit. The plaintiff claims that she is entitled to a 50% split in the net proceeds of sale of the premises.

15. In contrast the defendant calculated that the plaintiff made contributions in respect of the purchase / mortgage / enhancement of the premises in the region of 26% of the total amount paid by them in respect of the premises. In this regard he made an open offer in court to the plaintiff of 30% of the net proceeds of sale of the premises with the residue of 70% of the net proceeds to himself.

The Parties Legal Submissions

16. The plaintiff’s counsel referred the court to the case of Stack v Dowden [2007] UKHL 17 and specifically to the judgment of Baroness Hale of Richmond. The defendant’s counsel referred the court to the case of Jones v Kernott [2011] UKSC

53 and to the leading text book on Co-Ownership entitled “Co-Ownership of Land:

Partition Actions and Remedies, Heather Conway, (2nd edn, Bloomsbury Professional 2012) p.410-413.

The Question for the Court

17. The parties wish to determine their joint tenancy and therefore the court must determine what is the beneficial ownership held by each party as tenants in common.

Therefore the court is asked to determine the equitable interest of each of the cohabiting parties in the premises which was purchased in 1996 jointly but without an explicit declaration of the beneficial interest.

18. The defendant counsel has submitted that the court should carry out an analysis on the basis of the capital sums paid by each party. The plaintiff submitted that the premises was purchased jointly in 1996 and the common intention of the parties at the date of purchase up to the date of the separation was that the property was jointly owned. The plaintiff’s counsel also submitted that the contributions of the parties should be looked at on the basis that all payments were made as a family unit and not just capital and mortgage payments. Therefore, from the plaintiffs point of view, the starting point is that the common intention of the parties at the date of purchase was that the premises was to be held jointly, so that in the event of the death of one party, the surviving party would take advantage of the right to survivorship. If that anaylsis is accepted, the question arises, did that intention of equal ownership ever change so that the court should adjust the share of the ownership on the breakdown of their relationship?

The Law

19. The issue of cohabiting couples owning a property jointly without a declaration in writing of the respective beneficial interests in the property is a common occurrence.

Indeed it is unusal in practice that an express declaration of trust will be created by cohabiting couples when they purchase a property, though such practice was recommened by the Law Reform Commission in their Report in 2006.

20. The enactment of the Civil Partnership and Certain Rights and Obligations of Co- Habitants Act 2010 allows a court to calculate the range of contributions a party makes in determining property rights in a domestic relationship which has ended.

However neither party pleaded this Act and the court therefore assumes that they do not fulfill the criteria laid down for a cohabitee in the Act. In effect therefore the parties rely on the legal and equitable principles applicable.

21. In a domestic relationship such as this, the court therefore has to consider the issues of legal and beneficial ownership, and how if any do the equitable issues of estoppel, resulting trusts and constructive trusts impact on the parties ownership. In this mix the court has to also evaluate if the intention of the parties impacts on this analysis. Finally the court has to consider if the well know maxim of equity, “equity follows the law” impacts on a cohabitation relationship where the property is held legally as joint tenants.

22. A resulting trust according to Hilary Biehler's, Equity and the Law of Trusts in Ireland (7th edn, Round Hall 2019) at p.157 “can be said to arise by implication and is founded on the unexpressed but presumed intention of the settlor. This label is used to describe such trusts because the beneficial interest in the property in question comes back or results to the settlor, or, if he is dead, to those entitled to his estate, on the basis that the law presumes that this was the settlor’s intention.

They are also sometimes referred to as implied trusts because they are presumed to arise as a result of the settlor’s implied intention”.

In contrast Biehler describes at (p.257) a constructive trust as a form of trust which arises “by operation of law and which ordinarily comes into being as a result of conduct and irrespective of the intentions of the parties. In general terms it can be described as a trust which is imposed by equity in order to satisfy the demands of ‘justice and good conscience’ and to prevent a person deriving profit from fraudulent conduct or taking unfair advantage of a fiduciary position”.

23. The main distinction between resulting and constructive trusts is that in the case of the former, the court assumed that the creation of the trust was intended by the parties, whereas in the latter instance the trust is imposed by the court to satisfy the demands of ‘justice and good conscience’. This court imposition can be contrary to the intentions of the individuals concerned.

24. The basis “of proprietary estoppel is to prevent a person from insisting on his strict legal rights where to do so would be inequitable having regard to the dealings which have taken place between the parties. It developed as an exception to the formalities required for the creation of interests in land and the rationale behind the doctrine could be said to be the prevention of unconscionable behaviour” (Biehler, p.927).

25. The distinctions are clear in theory. However, in practice, the distinction between resulting trusts, constructive trusts and promissory estoppel can be less obvious. For example, what one party might regard as a resulting trust, another party might regard as a constructive trust.

The English Approach

26. Before Stack v Dowden Gordon, the default position for family homes was provided for in Lloyds Bank plc v Rosset [1990] UKHL; 144 [1991] 1 AC 107 and Pettitt v Pettitt [1970] AC 777. In those cases, the costs of running the household and improvements made to a property did not in itself create a beneficial interest in the property. This applied irrespective whether the property was a family home or not.

The net effect is that the presumption of a resulting trust would operate and that each parties beneficial interest was determined proportionately to their contribution to the purchase price.

27. In Stack v Dowden [2007] UKHL 17, [ 2007] 2 AC 432, the House of Lords held in a majority Judgement (per Baroness Hale of Richmond) that the presumption of a resulting trust is no longer conclusive as to the beneficial interest in a family property after the breakdown of a cohabitation relationship. In that case the court found (Lord Neuberger of Abbotsbury dissenting) that in the light of changing social and economic conditions, it was entitled to depart from apportionment rules which would apply to a resulting trust. Therefore, where there is evidence that the parties conduct in relation to property justified an inference of common intention, a court could hold that a constructive trust was created. As Baroness Hale observed ‘context is everything’. Therefore, each case is fact sensitive. Although Lord Neuberger took a resulting trust approach in his judgment to the facts, it resulted in a similar result in his ultimate finding as to most of the court.

28. In Jones v Kernott, the UK Supreme Court further clarified the law. The facts in this case are as follows. Ms Jones and Mr Kernott had cohabited for 10 years and had two children. They purchased a property in 1985 for £30,000 which reflected the fact that it had been bought from an acquaintance of Ms Jones. As in the case of Stack, the property was bought as joint tenants but there was no declaration made in respect of the beneficial interest. Ms Jones contributed £6,000 to the purchase price with the balance having been funded by an endowment mortgage in the joint names of Ms Jones and Mr Kernott. Ms Jones assumed the primary responsibility for paying the mortgage and other household bills. Mr Kernott built a substantial extension on the house which increased its value. A further joint loan was taken out to finance materials. Mr Kernott paid Ms Jones £100 per week which was put towards the household outgoings. Mr Kernott moved out in 1993. In 1996 with Ms Jones agreement, Mr Kernott cashed a life policy that they both owned to finance a deposit which was used for the purchase of another property. In the meantime, Ms Jones continued to reside in the house with her children and Mr Kernott stopped contributing financially both in respect of the dwellinghouse and the children. In 2006 Mr Kernott sought a declaration that he owned half of the property which was then valued at £245,000. In reply Ms Jones sought a declaration that she owned the entire beneficial interest in the property. The Supreme Court held that Ms Jones owned 90% of the property and that Mr Kernott owned 10%. The Supreme Court considered two questions: firstly, whether there was enough evidence to suggest that the beneficial interests were held other than in equal shares; and secondly, was it possible to infer or impute the proportion with which the shares were held.

The Court held (Lord Walker and Lady Hale provided the leading judgements ) that the parties intentions had changed at the point where the life policy was cashed in so that Mr Kernott could buy a new home for himself. While the court agreed on the overall 90:10 divisional shares, they were divided in the reasoning. For the majority there was enough evidence to infer a common intention that had crystallised at the point where the couple had developed their ‘new plan’.

29. Lord Walker and Lady Hale clarified the principles established in Stack at paragraph

51 and concluded as follows in relation to the principles applicable in a case, where a family home is bought in the joint names of a cohabiting couple who are both responsible for any mortgage, but without any express declaration of their beneficial interests.

‘(1) The starting point is that equity follows the law and they are joint tenants both in law and in equity.

(2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change.

(3) Their common intention is to be deduced objectively from their conduct: “the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party” (Lord Diplock in Gissing v Gissing [1971] AC 886, 906). Examples of the sort of evidence which might be relevant to drawing such inferences are given in Stack v Dowden, at para 69.

(4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, “the answer is that each 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”: Chadwick LJ in Oxley v Hiscock [2005] Fam 211, para 69. In our judgment, “the whole course of dealing … in relation to the property” should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties’ actual intentions."

(5) Financial contributions are relevant but other factors may influence the court in deciding shares.’

The Law in Ireland

30. I have not been able to find a recent Irish case which deals with this specific issue.

The Supreme Court in Stanley v Kieran [2011] IESC 19 Denham J [as she then was] considered the circumstances and whether a presumption of a resulting trust arose where the appellant had provided the entire consideration for the acquisition of a dwellinghouse but was used at the time of the action by the respondent. The case of Stack v Dowden was considered by the Supreme Court. Apart from the provenance of the purchase money, Ms Justice Denham also refers to the credibility of the evidence of the parties. Such factors do not apply to this case.

31. Professor Heather Conway in her leading text book Co-Ownership of Land: Partition Actions and Remedies (2nd edn, Bloomsbury Professional 2012) p.413, has pointed out that it is possible to “argue that the [UK] Supreme Court reached the correct

decision on the facts of the case, yet various aspects of the ruling are problematic.

For example, the possibility of imputing an intention which the parties never actually had and imparting notions of ‘fairness’ which will allow tailor-made though not universally approved solutions are both problematic, and will result in judges having significant amounts of discretion available to them”. Suggested Approach

32. However, it is possible to suggest a number of factors which this court can take into account in quantifying the shares of the co-owners in the absence of an express declaration of the nature of the co-ownership relationship.

1. First the courts must ask the question, is the legal ownership a joint legal ownership or a sole legal ownership? The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership. In general property held in joint names indicates both legal and beneficial joint ownership unless the contrary is proved. If the parties intended that their beneficial interest is to be different than the legal interest, what was that intention?

2. Therefore the court must firstly ascertain what was the intention of the parties when they purchased the property. In the absence of a written agreement there can not be a hybrid intention. As Baroness Hale succinctly put it in Stack:

“At any one time their interest must be the same for all purposes. They cannot at one and the same time intend, for example, a joint tenancy with survivorship should one of them die while they are still together, a tenancy in common in equal shares should they separate on amicable terms after the children have grown up, and a tenancy in common in unequal shares should they separate on acrimonious terms while the children are still with them”. [Para 62]

3. When a couple purchase a property in joint names, and are jointly liable for a mortgage, there is a presumption that the beneficial ownership is the same as the legal ownership. In this regard a court will not micro-manage household and daily living expenses. However the inference is, unless the contrary is proved, that the benefit and burden was to be shared equally.

4. Common intention can change. The parties themselves can decide this or the facts can dictate it. Financial contributions and the conduct of the parties are two examples of where facts can change. However the difficulty is in determining what financial contributions and conduct be taken into account by the court. A court is likely to consider the whole course of dealings in the property rather than just applying a simple global holistic approach.

5. To rebut the presumption of joint legal and beneficial ownership of a property where equity follows the law and then move to a position under which one party claims to be entitled to a larger share of that property as tenants in common, the claimant would have to establish a constructive trust in his or her favour first.

6. Where the parties have separated and one party continues to reside in the dwellinghouse, the provisions of 31(2) of the Land and Conveyancing Law Reform Act 2009 (Number 27 of 2009) are applicable particularly in regards to an order for accounting adjustments to be made between the parties or such other order relating to the land as appears to the court to be just and equitable in the circumstances of the case.

Applying the Law to the Facts

33. The starting point in this case is that there is a presumption that where the parties are joint tenants in law, they will also be in equity. There is no indication that the parties ever envisaged that it would be otherwise until the relationship ended in August 2015. In this regard the equitable maxim “Equity follows the law” applies.

34. Irrespective of whether one was to adopt an approach which focused on the intention of the parties or the contribution of the parties, the fact is they operated as a family unit during the period of purchase, mortgage and enhancement of the premises. The fact the salaries were paid into separate bank accounts (of which they both had access to) does not alter the situation. This was a property held at all times in law and equity in equal shares. The only matter that has changed, is that the court decrees that the property is now owned as tenants in common in equal shares and not as joint tenants.

35. In the courts view the defendant has not shown sufficient reason why he should be given a greater share in the premises.

36. While it is not necessary to consider the facts on the basis of a resulting trust, if I had, I would have come to the same conclusion as to equal ownership of the premises. It appears from the comprehensive evidence furnished to the court, that it was in effect an equal contribution by each of the parties.

36. After the relationship between the parties ended, they continued to reside in the dwellinghouse though they lived separately. However, the mortgage was repaid.

Accordingly it is not necessay to make any apportionment under 31 (2) of Land and Conveyancing Law Reform Act 2009.

37. Accordingly I make the following orders:

1. A declaration that the Plaintiff and the Defendant hold the premises, being the subject matter of a Folio xxxxxxF of the Register of Freeholders in the County of Dublin as tenants in common in equal shares.

2. An order for sale of the premises pursuant to section 31(2) (c) of the Land and Conveyancing Law Reform Act 2009 and distribution of the net proceeds of sale in equal shares.

3. In the event of the parties failing to agree on the terms of sale, either party has liberty to apply to the court for an order directing those terms.

4. Liberty for the plaintiff to re-apply for an order directing the County Registrar to execute such contracts, deeds or other instruments on behalf of the defendant as maybe necessary to give effect to the order for sale.

5. The court will hear counsel’s submission in regards to the plaintiff’s application for costs of the proceedings.