A detrimental decision on ownership of the family home?

In Hudson v Hathway [2022] EWHC 631 (QB), Kerr J potentially made it easier for a cohabiting partner to claim a share greater than 50% in a jointly owned home. He held that in ‘joint names’ cases where there is no express declaration of trust but there is (at least) an express agreement about beneficial ownership such a partner need not prove that she acted to her detriment in reliance on a common intention to alter the initial presumption of joint beneficial ownership recognised by Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53. The decision, however, will excite considerable doctrinal controversy.

Mr Hudson and Ms Hathway became a couple in 1990 and went on to have two sons. They bought Picnic House in 2007, and both became registered proprietors but without an express declaration of trust. They never married, and Mr Hudson left the home in 2009 having formed a relationship with another woman. Ms Hathway and both sons remained living at Picnic House. Between 2007 and 2015, the mortgage on the property was paid from Mr Hudson and Ms Hathway’s joint account, albeit that in practice he contributed more because of a higher salary. The parties’ prospects of selling the property were severely blighted by an oil spill from a neighbouring property in 2011, whose consequences took years to resolve. Over 20 months, the parties discussed financial arrangements over email. In August 2013, Ms Hathway accepted an arrangement whereby Mr Hudson retained beneficial ownership of some shares and a pension, while she would have the equity in Picnic House, its contents, savings and income from endowments. She committed to readying the house for sale as soon as the oil spill issue was resolved. By mid 2014 Mr Hudson was becoming impatient with the lack of progress and referred to the time that had passed since the parties ‘reached a deal’. He stopped contributing to the mortgage in January 2015, and Ms Hathway assumed sole responsibility for it. It was not until October 2019 that Mr Hudson sought an order for sale of Picnic House under the Trusts of Land and Appointment of Trustees Act 1996, with equal division of the proceeds. Ms Hathway agreed to sale but argued that she was entitled to all of the sale proceeds on the basis of a common intention on which she had detrimentally relied.

At first instance, Judge Ralton found a clear agreement that Ms Hathway was beneficially entitled to all of the equity in Picnic House. He analysed it in the context of a constructive trust: the possibility that an email exchange might satisfy section 53(1)(b) of the Law of Property Act 1925 and thus evidence an enforceable express trust by analogy with Neocleus v Rees [2019] EWHC 2462 (Ch) was not apparently considered. He accepted that she had detrimentally relied on the agreement, but only by giving up her claims to assets in Mr Hudson’s sole name, even if those claims (under a constructive trust) might have been weak. The judge specifically rejected the alternative submissions that no detrimental reliance was necessary in a case such as this, and that she had otherwise detrimentally relied by paying the mortgage and maintaining and redecorating the property from 2015, by adjusting her lifestyle in reliance and living frugally in order to afford the maintenance and upkeep, by managing the oil spill and related insurance claim herself, and by desisting from claiming child support.

Mr Hudson appealed on the basis that the judge was wrong to find detrimental reliance. By respondent’s notice, Ms Hathway countered that it was unnecessary to find such reliance in a ‘joint names’ case such as the present, and that in any event the judge was correct to find detrimental reliance and should have upheld the alternative forms pleaded. Kerr J seemingly agreed with Ms Hudson that proof of detriment was not required in a ‘joint names’ case. He considered it ‘striking’ that ‘no mention is made of detriment in [the] statement of the principles that apply’ in joint names cases contained in paragraph [51] of Jones v Kernott, ‘nor elsewhere in either Stack v. Dowden or Jones’, except in Lord Neurberger’s dissenting judgment in Stack (para. 58). He thought it more likely that the Supreme Court ‘omitted mentioning for completeness that [detrimental reliance] did not need to be proved in the case before them’, rather than that they ‘omitted to mention a crucial element of the relevant principles to be applied’ (para. 61). Significantly, Kerr J did not deny that unconscionability was a necessary ingredient, but held that unconscionability was meant ‘in the broadest sense’ (para. 67). In a ‘joint names’ case where there is a clear express agreement, he thought it ‘otiose to superadd a detriment requirement where the common intention – and unconscionability if the agreement is broken – is already shown by the existence of the agreement; at any rate if the agreement is more than a gratuitous promise’ (para. 67). In a difficult paragraph, he asserted that:

In the domestic consumer context, an express agreement as to beneficial shares, provided it is not a unilateral oral declaration of trust … can itself supply the necessary detriment or, as [he] prefer[red] to put it in the light of the formulation in Jones …, satisfy the requirement of unconscionability without the need to establish separately that the beneficiary has acted in detrimental reliance on or changed her position in reliance on the promise (para. 79).

He then said that, on the facts, ‘the deal was sufficient to establish the common intention and the common intention was sufficient to establish the constructive trust’ (para. 80), and the appeal was dismissed.

If he was wrong that no proof of detrimental reliance was required, Kerr J held that the judge had been entitled to find detriment by Ms Hathway’s forgoing of claims to assets of which Mr Hudson was legal owner. Conversely, while he ‘might have viewed with more favour’ the other detriments pleaded (para. 101), it was open to him to find that they were insufficient.

The analysis in Hudson will be disputed by many. Part of the difficulty is the ambiguity over whether its implication is (for example) that detrimental reliance is unnecessary in a joint names case, or alternatively that it is necessary but always supplied where there is an express agreement and need not be separately proved. That aside, while Kerr J agreed with the need to find unconscionability, it is questionable whether equity’s intervention can be justified on that basis without detrimental reliance (see Sloan 2015, p. 228 with regard to ‘sole name’ cases). In the joint names context, however, it is arguable that equity has already intervened because of the trust that inevitably exists where land is transferred to joint tenants by virtue of section 36 of the Law of Property Act 1925, even where there is no express trust. Much may depend on the precise nature of the non-express section 36 trust. Mee (2012, p. 502) has suggested that it should be seen as an implied statutory trust. If that is correct, it seems logical to regard the rebuttal of the initial presumption of a beneficial joint tenancy in the ‘domestic consumer context’ as equivalent to establishing a constructive trust in a sole name case. That category of case still carries a requirement to show detrimental reliance: O’Neill v Holland [2020] EWCA Civ 1583. It would thus be problematic to deny such a requirement in a joint names claim, and its omission from Jones would have to be deemed an oversight.

Jones itself, however, regards even the initial Stack trust as a constructive one, however much that may complicate the relationship between parliamentary and judicial functions. On that basis, a constructive trust exists at the outset, whether because no detrimental reliance is required or because it is inherently present where property is held by legal joint tenants without an express declaration. In displacing the initial presumption, then, Ms Hathway merely sought adjustment of beneficial entitlement at the quantification stage and did not therefore need to establish detrimental reliance. This shows that, whatever the difficulties of detail, the overall analysis in Hudson may be entirely consistent with, and perhaps required by, that in Jones.

In any event, debates about the appropriateness of a detrimental reliance requirement, and its role in upholding formality requirements and their functions, will continue. It is clear, moreover, that the implications of Jones v Kernott are still being worked out over a decade after the Supreme Court handed down judgment. If Hudson is indeed a defensible or necessary consequence of Jones, then (with respect) it is the Supreme Court Justices, and not Kerr J, who must be considered responsible for the ensuing controversy.

Acknowledgments

I am grateful to Susan Bright, Juliet Brook, Martin Dixon, Alexander Georgiou, John Mee, Joanna Miles and Luke Rostill for helpful discussions on the subject of this note.

Disclosure Statement

No potential conflict of interest was reported by the authors.