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Quantifying beneficial interest in jointly-owned property

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Posted by Caroline Benfield on 10 April 2010

Caroline Benfield - Insolvency Lawyer
Caroline Benfield Partner

Case of Stack v Dowden

The House of Lords case of Stack v Dowden (2007) concerned the declaration of beneficial interests in relation to a property which was jointly owned by a co-habiting couple. It was established that in the event that such a property had to be divided and there was no expressed declaration as to the respective beneficial interests, the starting point would be that where there was joint legal ownership, the parties intended there would also be joint beneficial ownership in equal shares. If either party wished to show that they were entitled to a different share, the onus would be upon them to provide compelling evidence to support a claim for higher shares. 

Background

Mr Stack and Ms Dowden had co-habited for 20 years and had four children together. The relationship broke down in October 2002 and Mr Stack moved out of the jointly owned property. The parties consented to a court order which excluded Mr Stack from the property and required Ms Dowden to pay for the costs of his alternative accommodation. A dispute then arose as to how much they should receive from the sale of the property. Although the parties had purchased the property jointly, monies from the sale of a previous property, which was registered solely to Ms Dowden, was put towards the purchase price.

Mr Stack paid the mortgage interest and endowment policy premiums and they jointly paid the capital repayments although Ms Dowden paid a greater share of these repayments. Aside from the joint payments relating to the running costs of the property, they had consistently maintained financial independence from each other with respect to other larger matters.

Mr Stack had obtained a declaration from the court that the property was held upon trust by the couple as tenants in common in equal shares. However, Ms Dowden maintained that she was entitled to a greater share due to her greater financial contribution and appealed to the Court of Appeal who granted her the 65% share she was seeking on appeal. The Court of Appeal also overturned the judge’s decision that Ms Dowden had to pay Mr Stack in respect of his alternative accommodation. Mr Stack appealed this decision and the House of Lords had two issues to decide: 

  1. whether a joint ownership established a primary case of joint and equal beneficial interest;
  2. whether the Court of Appeal had been correct to overturn the judge’s decision that Ms Dowden should compensate Mr Stack for the costs of his accommodation.

The court held that the starting point in the case of a joint legal ownership is that there is also joint beneficial ownership. The onus is upon the person seeking to show that the intention with regard to beneficial interests is different from the expressed legal interests. In this instance, the Lords held that Ms Dowden had provided compelling evidence and made good her case for a higher share. 

Their Lordships were unanimous in holding that the criteria set out in sections 12 to 15 of the Trust of Land and Appointment of Trustees Act 1996 ("TLATA") were intending to replace the old doctrine of equitable accounting in determining the issue of occupation rent. Sections 12 to 14 of TLATA essentially provides that a person who is beneficially entitled to an interest in land has the right to occupy that land and that the trustees (of the trust of land) have the power to restrict that entitlement but this power must be exercised in a reasonable manner. The trustees also have the power to impose conditions on the occupier, eg paying compensation to the excluded party.

Section 15.1 of TLATA provides statutory principals on the matters to be considered with regard to the size of any credit to be given, eg the intentions as creators of the trust, the purposes for which the property is held, the interests of minors and interests of any secured creditors of any beneficiary.

Section 15.2 of TLATA provides that in cases such as this, the court must also have regard to the circumstances and wishes of each of the beneficiaries who would otherwise be entitled to occupy the property. In applying the statutory principals, their Lordships considered in particular how the purchase of the property was financed, how the parties organised their finances, (ie jointly or separately) and how the parties discharged their outgoings and expenses and paid attention to the impact upon the children of the relationship which Ms Dowden obligation to pay Mr Stack occupational rent would have entailed. The majority of the Lords held that the Court of Appeal had been right to overturn the judge’s decision on this point. Consequently both points of Mr Stack’s appeal were dismissed.

In summary

Stack v Dowden set out the criteria when considering beneficial entitlement which are:

  • any advice or discussions at the time of transfer which cast light on their intentions;
  • the reason why the home was acquired in joint names (or sole name);
  • the reason why the survivor was authorised to give receipt for capital monies;
  • the purpose for which the home was acquired;
  • the nature of the parties relationship;
  • whether they had children to whom they both had responsibility to provide a home;
  • how the purchase was financed, both initially and subsequently;
  • how the parties arranged their finances, were they separately or together or both; and
  • how they discharged the outgoings on the property and their other household expenses. 

Implications for insolvency practitioners

This judgment is relevant in cases where there was no expressed declaration of trust and the property is registered in joint names. Where a non-bankrupt asserts a greater share in the proceeds of sale of the property and there is no such record of any intentions with regard to beneficial interests, this case will be the leading authority relating to the division of beneficial interests in jointly owned property.

It’s more general application relates to the sort of cases where it is suggested that the starting point is that a long term relationship should give rise to equal shares where the parties have made an equal contribution.

There is also a fair amount of comment in the case of solely owned properties and in particular if a non-owning party claims a right of a beneficiary of a trust of land, then he/she must first overcome the evidential hurdle of proving they have any interest at all, ie that a trust of land exists in the first place.

There was also criticism heaped on the parties by the courts for having failed to resolve matters by negotiation such that the legal costs became grossly disproportionate to the property interest in dispute.

About the author

Caroline advises on all aspects of contentious and non-contentious personal and corporate insolvency matters.

Caroline Benfield

Caroline advises on all aspects of contentious and non-contentious personal and corporate insolvency matters.

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