COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE CHANCERY DIVISION (GROUP A)
(HIS HONOUR JUDGE MERVYN DAVIES , Q.C.,
sitting as a Deputy High Court Judge).
B e f o r e :
LORD JUSTICE GRIFFITHS
LORD JUSTICE KERR
| MARIA TERESA BERNARD
|DION EMMANUEL JOSEPHS
MR. JOHN SPEED (instructed by Messrs. Moss Beachley) appeared on behalf of the Appellant.
Crown Copyright ©
THE MASTER OF THE ROLLS: This is all about a young lady, Maria Teresa Bernard. In August 1973 it was her 21st birthday. On that very day she became engaged to be married. It was to Dion Emmanuel Josephs. He was 30. Unknown to her he was already a married man, not yet divorced. They arranged to get a house and set up home together. It was 177 Dunstans Road, S.E.22. It was conveyed to them on the 21st October, 1974 in their joint names. It was a simple transfer by the vendor as beneficial owner "to Dion Emmanuel Josephs and Maria Teresa Bernard", without more, no declaration of trust, or anything.
The purchase price was £11,750. The whole of it was raised on mortgage from the Southwark Borough Council. They both signed the legal charge to secure it. They each paid some of the incidental expenses. She paid £200 of her own money. He paid £250 and £400 which he borrowed. They went into occupation and lived there together as man and wife. The house was quite large. So they let off much of it to tenants. This helped greatly towards the mortgage instalments. Both went out to work. Their earnings enabled them to pay the rest of the outgoings and food, and so forth. Then after a year or two they quarrelled. She says that he was violent to her. So in July 1976 she left. He stayed on in the house. She applied for the house to be sold and for one-half of the proceeds. Meanwhile, in June 1975, he had got a divorce from his lawful wife. In April 1978 he married another woman. He took her to live with him in the house. They are childless.
In our time the concept of marriage – I am sorry to say - is being eroded. Nowadays many couples live together as if they were husband and wife, but they are not married. They hope and expect that their relationship will be permanent. They acquire a house in their joint names. Most of the purchase price is obtained on mortgage in both their names. They are both responsible for payment of the instalments. Both go out to work. They pay the outgoings out &f their joint resources. One paying for the food and housekeeping. The other paying the mortgage instalments. And so forth. Just as husband and wife do. But later on, for some reason or other, they fall out. They go their own separate ways. One or other leaves the house. The other stays behind in it. There is no need to divorce. They just separate. What is to happen to the house? Is it to be sold? If so, are the proceeds to be divided? And, if so, in what proportion? Or is one of them to be allowed to stay in it? If so, on what terms? If they had been husband and wife, our matrimonial property legislation would give the Family Court a very wide discretion to deal with all these problems. It is contained in sections 23 to 25 of the Matrimonial Causes Act 1973- But there is no such legislation for couples like these.
THE LEGISLATIVE PROVISION
"Where a legal estate ... is beneficially limited to or held in trust for any persons as joint tenants, the same shall be held on trust for sale, in like manner as if the persons beneficially entitled were tenants in common, but not so as to sever their joint tenancy in equity".
"... under the trust for sale affecting the land the net proceeds of sale, and the net rents and profits until sale, shall be held upon the trusts which would have been requisite for giving effect to the beneficial interests if there had been an actual severance".
When there is a dispute as to the shares in the house, the parties can apply to the court for a declaration. After they separate, the appropriate machinery is for one or other to apply to the court under section 30 of the Law of Property Act 1925. He or she can apply to the court "for an order directing the trustees for sale to give effect thereto, and the court may make such order as it thinks fit".
WHAT ARE THEIR SHARES?
When the house is conveyed into joint names, the question often arises: What are the shares of the two parties in the house? And at what date are those shares to be ascertained? If the conveyance contains an express declaration of the shares, that is decisive, as we held recently in Godwin v. Bedwell, 4th March, 1982 (not yet reported). But often there is, as here, no such declaration. In such a case it used to be thought that the shares would always be equal shares. That was the view of Lord Justice Russell in Bedson v. Bedson (1965) 2 Queen's Bench 666 at page 689, when he said:
"If there be two beneficial joint tenants, severance produces a beneficial tenancy in common in two equal shares ... by declaration of the beneficial joint tenancy between A and B, their respective rights and titles are no less clearly laid down and established than if' there had been a declaration of a beneficial tenancy in common in equal undivided shares".
But that view has not prevailed. It is because a conveyance into joint names does not necessarily mean equal shares. It is often required by the local council or by the building society when they grant a mortgage - so that they have both responsible for repayment. It is sometimes done on the suggestion of lawyers, without taking into account all the factors, such as their contributions to the purchase money, and so forth.
As between husband and wife, when the house is in joint names and there is no declaration of trust, the shares are usually to be ascertained by reference to their respective contributions - just as when it is in the name of one or other only. The share of each depends on all the circumstances of the case, taking into account their contributions at the time of acquisition of the house: and, in addition, their contributions in cash, or in kind, or in services - up to the time of separation. In most cases the shares should be as ascertained/at that time. But there may be some cases where later events can be considered. The departing party may only be entitled to one-half, one-quarter, or even a fifth, depending on the contributions made by each and, I would add, all the circumstances of the case. That was the view of this court in Hine v. Hine (1962) 1 WLR 1124. The facts of that case show clearly that justice requires that the courts should have a discretion to apportion the shares: and that there should not be a rigid rule of equal shares. I would adopt, in particular, the words of Lord Justice Pearson at page 1132:
"In my judgment, however, the fact that the husband and wife took the property in joint tenancy does not necessarily mean that the husband should have a half interest in the proceeds of the sale now in contemplation. The parties agreed, expressly or by implication from the creation of the joint tenancy, that the house should be the matrimonial home and should belong to both of them (technically to each of them in its entirety) and on the death of one it would belong to the other by right of survivorship. They did not, however, make any agreement, or have any common intention, as to what would happen in the event of the marriage breaking up and the property then being sold. That event was outside the contemplation of the parties. The proper division of the proceeds of sale in that event is left to be decided by the court in this application under section 17. The court has to do this by attributing artificially to the parties a reasonable intention at the time of the transaction in the year 1950, and for this purpose has to take into account not only the nature and form of the transaction, but also (as stated by Romer L.J. in Cobb v. Cobb) 'the course of conduct of husband and wife (including their respective contributions towards the purchase price) at the time when the house was purchased and subsequently. '
"In my judgment the principle, which is shortly stated in the maxim 'equality is equity', though it affords a just solution in many cases under section 17, does not in the present case afford a just solution such as the parties can reasonably be taken to have intended".
In that passage Lord Justice Pearson refers to husband and wife, but his reasoning applies also to persons living together, as if husband and wife. We applied it in such a case. In Cooke v. Head (1972) 1 WLR 518, the house was in the man's name only, but the woman made such substantial contributions that she was awarded a one-third share. I said (at page 520):
"The legal owner is bound to hold the property on trust for them both. This trust does not need any writing. It can be enforced by an order for sale, but in a proper case the sale can be postponed indefinitely. It applies to husband and wife, to engaged couples, and to man and mistress, and maybe to other relationships too".
"In the light of recent developments, I do not think it is right to approach this case by looking at the money contributions of each and dividing up the beneficial interest according to those contributions. The matter should be looked at more broadly, just as we do in husband and wife cases. We look to see what the equity is worth at the time when the parties separate. We assess the shares as at that time. If the property has been sold, we look at the amount which it has realised, and say how it is to be divided between them. Lord Diplock in Gissing v. Gissing (1971) AC 886 at page 909 intimated that it is quite legitimate to infer that:
'The wife should be entitled to a share which was not to be quantified immediately upon the acquisition of the home but should be left to be determined when the mortgage was repaid or the property disposed of'".
That view was confirmed by this court recently in the unreported case of Hall v. Hall, 1st April, 1981. A man and woman lived together for seven years without being married. The house was in the man's name alone. They separated. The woman left. The court ascertained the shares at the date of separation and held that her share was one-fifth. I notice that in that case we referred to cases between husband and wife, and said that the shares are ascertained at the date of divorce. But I do not think that is correct. Their shares should normally be ascertained at the time of separation -not at the date when they acquired the house, but at the date of separation, see Hazell v. Hazell (1972) 1 WLR 301. That is the proper date, for only then can the respective contributions be fairly assessed. But later events can be taken into account. And, of course, under the matrimonial legislation, the Family Court can afterwards vary those shares by appropriate transfers.
In my opinion in ascertaining the respective shares, the courts should normally apply the same considerations to couples living together (as if married) as they do to couples who are truly married. The shares may be half-and-half, or any such other proportion as in the circumstances of the case appears to be fair and just.
As it happened Parliament had in 1970 passed an Act which put engaged couples on the same footing as husband and wife, see section 2 of the Law Reform (Miscellaneous Provisions) Act 1970. Our decision in Cooke v. Head does the same for couples living together as if they were husband and wife, even though they have not made any agreement to marry. This is very desirable. There is no good reason for making any difference between the two kinds of case. Especially when their relationship of "engaged" or "not engaged" to be married is so often undetermined and indeterminable.
SHOULD THERE BE AN ORDER FOR SALE?
When the parties separate, each wants to know what is to be done with the house? One or other then makes an application under section 30. Under it the court has ample power to postpone a sale. I stated the modern approach in Williams v. Williams (1976) Chancery at page 285E-F:
"When judges are dealing with the matrimonial home, they nowadays have great regard to the fact that the house is bought as a home in which the family is to be brought up. It is not treated as property to be sold nor as an investment to be realised for cash. That was emphasised by this court in the recent case of Browne (formerly Pritchard) v. Pritchard (1975) 1 WLR 1366. The court, in executing the trust should regard the primary object as being to provide a home and not a sale. Steps should be taken to preserve it as a home for the remaining partner and children, but giving the outgoing partner such compensation, by way of a charge or being bought out, as is reasonable in the circumstances".
The same approach should be adopted to cases where a man and woman are living together but not married, see Re Evers' Trust (1980) 1 WLR 1327. Also when, as here, there are no children. The court can refuse to order a sale at the instance of the outgoing party, even after they separate, if it would be unduly harsh to require the remaining party to vacate, or it can make an order for sale but suspending it on terms. #
TURNING INTO MONEY
After ascertaining the shares, the next problem arises when it is to be turned into money. Usually one of the parties stays in the house, paying the mortgage instalments and the rates and other outgoings. .The house also increases in value greatly owing to inflation. None of that alters the shares of the parties in the house itself. But it does mean that when the house is sold - or the one buys the other out - there have to be many adjustments made. The value of the house itself is taken at the value at the time of sale or buying out. There must be deducted from it all the money needed to redeem the mortgage. Then the one in possession must be given credit for paying the other's share of the mortgage instalments and be debited with an occupation rent for using the other's share of the house. Other adjustments may be needed for other outgoings. Then the net amount must be divided according to the shares.
APPLIED TO THIS CASE
The judge assessed the shares in the house as half-and-half. He took it at the date of acquisition. But I think on the facts it would be the same - half-and-half - at the date of separation. Mr. Josephs and his present wife have been in the house for over three years now. Miss Bernard has not been in it for five years. It would be unduly harsh to turn Mr. Josephs and his wife out of this house - simply in order to provide funds for Miss Bernard. But, seeing that he has the use of her share, it would only be fair that he should pay an occupation rent in respect of it, see Dennis v. McDonald (1981) 1 WLR at page 811; (1982) 2 WLR at page 278. No doubt, however, he has been paying the whole of the mortgage instalments and this should be taken into account as well. It may relieve him of paying any occupation rent for her half-share.
The problem is to calculate the sum which Mr. Josephs should pay to Miss Bernard to buy her out. This is to be done by taking the price obtainable for the house if it were sold now with vacant possession. Then deduct the sum payable to redeem the mortgage. Then deduct one-half of the amount paid by Mr. Josephs since the separation for mortgage instalments (deducting, of course, the amount received from the tenants). He should only get credit for one-half, because he has had the benefit of her half-share. Then make any other special adjustments.
It is undesirable to spend money on inquiries. On the information given to us, we calculate that the sum payable by Mr. Josephs to Miss Bernard is £6,000. An order for sale should be made, but not to be enforced if Mr. Josephs pays £6,000 to Miss Bernard within four months. On his paying her that sum, she should transfer all her share in the house to him.
We are told that both sides are legally-aided. -It looks as if the Law Society will have a charge on Miss Bernard's £6,000 for their costs on her behalf: and a charge on the house for their costs on Mr. Josephs' behalf. The allowance of £2,500 is only made to married persons, not to unmarried ones. Each charge will reduce the amounts considerably. But this case will, we hope, be a precedent for others of like nature: so that they can be settled by agreement without recourse to the courts.
One last word: These cases about the home of couples living together are so similar to those of husband and wife that I think they should be started in the Family Division or transferred to it, rather than the Chancery Division.
LORD JUSTICE GRIFFITHS: This appeal presents a problem with which the courts are becoming very familiar. Today more and more people live together without getting married. They acquire a house in their joint names and then, when their relationship breaks down and they part, they cannot agree who owns the house so they turn to the courts to solve the question of ownership.. In my view the legal principles by which the court must solve the problem are now well-settled and are to be found in two decisions of the House of Lords - Pettitt v. Pettitt (1970) AC 777 and Gissing v. Gissing (1971) AC 886.
Before Parliament enacted the Matrimonial Causes Act 1973 which now gives the court a wide discretion to adjust rights of property on the breakdown of a marriage, the question of the ownership of the matrimonial home was generally settled upon an application to the court under section 17 of the Married Women's Property Act. In the case of an unmarried couple the appropriate machinery is to make an application under section 30 of the Law of Property Act 1925 as was done in this case. Both sections are essentially procedural, neither gives the judge a wide discretion to decide the question of ownership of the house in accordance with his idea what would be "fair" in all the circumstances. The respective interests of the parties must be determined by the application of the law relating to trusts. This is of course far easier to say than to do.
The task of the judge is to look at all the evidence placed before him and decide whether it indicates an intention by the parties that the beneficial ownership of the house should be held in other than equal shares. It is only in the somewhat unlikely event that nothing in the evidence provides a pointer to the intention of the parties that the judge should decide the case upon the basis that the equitable title follows the legal title or to use another maxim that equality is equity.
"In the absence of all other evidence if the property is conveyed into the name of one spouse at law that will operate to convey also the beneficial interest and if conveyed to the spouses jointly that operates to convey the beneficial interest to the spouses jointly i.e. with benefit of survivorship, but it is seldom that this will be determinative". See also Crisp and Mullins (1976) EGR 119.
The cases that have been decided in the last thirty years provided valuable pointers to the matters that the courts should or should not take into consideration when assessing the proportions in which the beneficial interest in the house should be divided. But here I would like to sound a note of caution. Most of the decided cases have been dealing with married people. The legal principles to be applied are the same whether the dispute is between married or unmarried couples, but the nature of the relationship between the parties is a very important factor when considering what inferences should be drawn from the way they have conducted their affairs. There are many reasons why a man and a woman may decide to live together without marrying, and one of them is that each values his independence and does not wish to make the commitment of marriage; in such a case it will be misleading to make the same assumptions and to draw the same inferences from their behaviour as in the case of a married couple. The judge must look most carefully at the nature of the relationship, and only if satisfied that it was intended to involve the same degree of commitment as marriage will it be legitimate to regard them as no different from a married couple. Parliament itself has recognised this and has made specific provision for it by providing in section 2 of the Law Reform (Miscellaneous Provision) Act 1970 that in the case of engaged couples where the agreement to marry is terminated "any rule of law relating to the rights of husbands and wives in relation to property in which either or both has or have a beneficial interest ... shall apply".
Although Miss Bernard claimed that she was officially engaged to Mr. Josephs at the time they bought the house, she did not rely upon this section, and accordingly, although there was some discussion about the effect of the section, its full scope was not examined and does not fall to be decided in this case - in particular whether it empowers the court to use all the powers of the Matrimonial Causes Act 1973 to adjust the rights of property between engaged couples, which it certainly does not possess in the case of couples living together who have not become engaged to marry. There will of course be many cases of couples living together with every intention that the relationship should be permanent and with the same degree of commitment as marriage; they may be unable to marry because one or other cannot obtain a divorce, and in such cases it may be legitimate to regard them in the same way as a married couple. Each case will depend on its own facts, and I only warn against a blithe assumption that all couples living together are to be regarded as no different from a married couple.
The starting point of any enquiry into the beneficial ownership of a house in joint names must be the conveyance. I: the conveyance deals with the beneficial ownership and defines the shares, it is conclusive, see Pettitt v. Pettitt (1970) AC, Lord Upjohn, page 813. He put it thus:
"If the property in question is land there must be some lease or conveyance which shows how it was acquired. If that document declares not merely in whom the legal title is to vest but in whom the beneficial title is to vest that necessarily concludes the question of title as between the spouses for all time, and in the absence of fraud or mistake at the time of the transaction the parties cannot go behind it at any time thereafter even on death or the break-up of the marriage".
I wish more heed had been paid to the advice to solicitors given by Mr. Justice Bagnall in Coucher v. Coucher in which he pointed out the wisdom of making an express declaration of the beneficial interests in the property at the time it is bought. The home is usually the most valuabe asset of any couple living together and if, when they separate, a legal battle is waged with the aid of legal aid over the ownership of their shares in the house the result is that both of them see a large part of their share of the equity disappear in costs into the maw of the legal aid fund, as indeed will happen in this case.
In the absence of any express declaration as to the beneficial interest, the judge must look to see the respective contributions made towards the purchase price. In the unlikely event that the house was bought without a mortgage, their respective contributions to the purchase price will determine their share in the equity.
If the house has been bought on a mortgage, the enquiry is more difficult. The fact that one party paid the mortgage may indicate that it was recognised by the couple that that party was solely responsible for providing the purchase price and therefore to be regarded as the sole beneficial owner. But often where a couple are living together and both are working and pooling their resources, which one of them pays the mortgage may be no more than a matter of internal accounting between them. In such a case the judge must look at the contributions of each to the "family" finances and determine as best he may what contribution each was making towards the purchase of the house. This is not to be carried out as a strictly mathematical exercise; for instance, if the man was ill for a time and out of work so that the woman temporarily contributed more, that temporary state of affairs should not increase her share, nor should her share be decreased if she was temporarily unable to work whilst having a baby. The contributions must be viewed broadly by the judge to guide him to the parties' unexpressed and probably unconsidered intentions as to 'the beneficial ownership of the house. There is of course an air of unreality about the whole exercise, but the judge must do his best and only as a last resort abandon the attempt in favour of applying the presumption of equality, which may so often give an unfair result.
It emerges clearly from the speeches in Pettitt v. Pettitt and Gissing v. Gissing that it is the intention as to the beneficial ownership at the time the house is bought that is crucial, and the contributions made by the parties to the acquisition are examined to establish that intention, see Pettitt v. Pettitt, Lord Morris at page 800, Lord Hodson at page 807, Lord Upjohn at page 816, and see also Gissing v. Gissing, Lord Morris at page 898, Lord Dilhorne at page 900 and Lord Pearson at page 902.
It might in exceptional circumstances be inferred that the parties agreed to alter their beneficial interests after the house was bought; an example would be if the man bought the house in the first place and the woman years later used a legacy to build an extra floor to make more room for the children. In such circumstances the obvious inference would be that the parties agreed that the woman should acquire a share in the greatly increased value of the house produced by her money. But this depends upon the court being able to infer an intention to alter the share in which the beneficial interest was previously held; the mere fact that one party has spent time and money on improving the property will not normally be sufficient to draw such an inference, see Pettitt v. Pettitt. In the absence of any special circumstances I agree with the judge in this case that the time at which the beneficial interest crystalises is the time of the acquisition, but to ascertain this he must look at all the evidence including all the contributions made by the parties. As a general rule the only relevant contributions will be those up to the date of the separation, but it does not necessarily follow that what happens after the separation will in every case be irrelevant. In my opinion the judge should examine all the evidence placed before him and not regard the date of separation as a cut off point. The task imposed upon the judge is so difficult that every scrap of evidence may be of value, and should be available to him.
On the facts of this case I have no doubt that the judge was right to hold that the beneficial ownership was held in equal shares. The house was bought to provide a home for the couple and they lived in it together; it was bought in joint names, the mortgage was in joint names; the intention was to pay the mortgage by taking in tenants and using their rent; they pooled their joint income; the girl worked all the time, but the man was for a period unemployed.' They both contributed small sums to the expenses involved in the purchase; she provided £200 of her own money; he borrowed £650.
When they parted she left the house and he continued living there and is still living in the house. He married another woman in 1978 and the mortgage repayments are up to date. It appears that the rent of tenants has continued to contribute to the cost of the mortgage.
The judge concluded that the evidence showed that this couple must be regarded as providing the purchase money in equal shares and that accordingly the beneficial ownership of the house must be declared to be held in equal shares, and I agree with him.
The fact that Mr. Joseph paid the mortgage after Miss Barnard left the house was in this case clearly done for his own convenience and provides no clue to their intentions at the time they bought the house. I agree that in this case none of the evidence of the behaviour of the parties after the separation throws any light on the question of the beneficial ownership of the house.
Now comes the problem as to the form of order that a judge has power to make upon an application under section 30. This was recently considered by the Court of Appeal in Re Evers Trust (1980) 1 WLR 1327.
The court should look at the purpose for which the house was bought in joint names and which resulted in it being held on trust for sale. If the purpose of that trust is exhausted, then the court should make an order directing the sale of the house. This house was bought to provide a home in which Miss Barnard and Mr. Joseph could live together. Now that they have separated, the purpose of the trust is exhausted, and if Miss Barnard insisted upon sale I can see no legitimate ground upon which the court could refuse to make an order for sale although it could of course postpone sale for a few months to give Mr. Joseph a reasonable chance to make other arrangements for his accommodation. I can see no ground for criticising the judge's order that Mr. Joseph should have four months to vacate the property and that there should then be a sale with vacant possession.
When the proceeds of sale are realised there will have to be equitable accounting between the parties before the money is distributed. If the woman has left, she is entitled to receive an occupation rent, but if the man has kept up all the mortgage payments, he is entitled to credit for her share of the payments; if he has spent money on recent redecoration which results in a much better sale price, he should have credit for that, not as an altered share, but by repayment of the whole or a part of the money he has spent. These are but examples of the way in which the balance is to be struck. The judge did it in this case; I see nothing wrong in his approach.
Now, it would be a great hardship on Mr. and Mrs. Josephs if they were to be forced to leave their home to enable it to be sold with vacant possession. Miss Barnard does not wish this misery to be inflicted upon them, but she does want a fair sum of money for her share in the value of the house. There is agreement as to the present market value of the house and this court has all the material available to calculate the sum that would represent the present value of her equity in the house after taking into account the equitable accounting to which I have referred. This being so, and because Miss Barnard through her counsel sensibly and compassionately agrees to this course, I accordingly agree with the orders proposed by the Master of the Rolls, which will give Mr. Joseph the chance to buy Miss Barnard's share for £6,000; but, if he does not pay the money within four months, the house must then be sold with vacant possession and the proceeds distributed as directed by the learned judge.
LORD JUSTICE KERR: The facts of this case have already been stated in the judgment of Lord Denning, M.R., but I think that it is necessary to mention some of them in detail, as well as the way in which these were dealt with in the decision of His Honour Judge Mervyn Davies, Q.C. (as he then was), in order to illustrate the problems raised by this appeal.
As frequently happens, the parties decided to buy a house for their joint occupation with the possibility of ultimate marriage in mind, but with no clear agreement or common fixed intention concerning their future. Accordingly, the machinery of adjustment under section 2 of the Law Reform (Miscellaneous Provisions) Act 1970 is unavailable. The house was conveyed to the parties in 197^ under a council transfer as joint owners without any express declaration of trust, and they assumed joint liability under a council mortgage for 100 per cent of the purchase price of £11,750. The plaintiff, Miss Bernard, then contributed £200, and the defendant, Mr. Josephs, £650 to the costs incidental to the purchase, the mortgage and the expenses of moving in. Mr. Josephs thereafter spent £2,000 on decorations and repairs to enable part of the premises to be let, and the resulting rents were used for the mortgage payments, which were made by him throughout. These were their respective contributions to the acquisition of the property and to its improvement during their co-habitation. They also both contributed to their living expenses during this period. Miss Bernard paid for their food and household necessities, and mention the latter Mr. Josephs paid the electricity and other bills. I only mention the latter contributions in passing, since the judge rightly took no account of these domestic arrangements, which might apply equally to any people living together in - for instance -rented accommodation, and which throw no light on what should be their shares in the property in which they live. This relationship continued for about 18 months until Miss Bernard left against her will, following a serious disagreement in which Mr. Josephs appears to have behaved with violence towards her. She was accordingly in the position of having been ousted from the jointly owned property, similarly to the facts in Dennis v. McDonald (1981) 1 WLR 810 and (1982) 2 WLR 275 (C.A.) to which I refer further hereafter. Mr. Josephs continued to live in the property and, for some time at any rate, to rent out parts of it. He fell into arrears with the mortgage, but successfully resisted a claim for possession by the council by bringing the mortgage payments up to date, as they evidently now are. I will return to the resulting figures in a moment in the context of the judgment given below.
In February 1978 Miss Bernard then issued proceedings in the Chancery Division by originating summons under sections 30 and 203(5) of the Law of Property Act 1925 and section 57 of the Trustee Act 1925 for an order for sale and a declaration that she was entitled to a half share of the proceeds after deduction of the outstanding mortgage. In this connection it was common ground before us that the balance of the equity value of the house, in view of the rise in property prices since 1974, would now be about £1,000. Shortly after the proceedings began Mr. Josephs re-married, having meanwhile obtained his divorce from a former marriage, and he and his wife are now still living in the house. No children are involved as the result of either relationship.
Although the action had been commenced by originating summons followed by (conflicting) affidavits on both sides, it was ordered (pursuant to order 28, rule 8) that the proceedings be continued as if they had been commenced by writ. Pleadings were served and there was an oral hearing in which all the circumstances were enquired into. Accordingly, I turn to the judge's decision from which Mr. Josephs now appeals on two main grounds, viz. that (i) he should have been awarded the major share of the equity, and (ii) no order for sale should have been made.
First, in the light of the circumstances concerning the acquisition of the property, the judge concluded on the evidence that he would not be justified in imputing to the parties any common intention as to their then respective ownership rights; but that, having regard to the facts that the property was conveyed to them jointly and that both assumed joint liability under the mortgage, the house belonged to the parties in equal shares. He accordingly made a declaration to this effect.
Pausing at this point, although it was strongly contended on behalf of Mr. Josephs that this was an inequitable result, I have no doubt, in agreement with the judgments which have already been delivered, that no other conclusion could possibly have been reached in the circumstances. But I would add two comments, although for the reasons mentioned hereafter neither affects the outcome of this appeal.
First, if the parties' contributions towards the acquisition of the house had been substantially unequal, then this would no doubt have been reflected in their respective shares in equity, since the absence of any express declaration of trust as to their respective shares would permit this result. The judge clearly accepted this in principle, as did the parties on the appeal to this court.
Secondly, while I agree that the parties' contributions on acquisition necessarily provide the starting point for the declaration as to what their respective shares should be, I also respectfully agree with Lord Denning, M.R. that on the authorities as they now stand the court should consider the ultimate position concerning the parties' rights in the property by reference to the time of separation, when one of the parties moves out and the common purpose of the implied trust thereby generally, but not always, comes to an end; and further, that for the purposes of equitable accounting, it is also permissible to have regard to the events concerning the property which have occurred thereafter. In my view these principles clearly follow from a number of decisions, most of them in this court, in which Gissing v. Gissing (1971) AC 886, following upon Pettitt v. Pettitt (1970) AC 777, has been considered. In relation to married couples these are in particular Farquharson v. Farquharson (1971) 115 Solicitors Journal 444 (C.A.), Hazell v. Hazell (1972) 1 WLR 301 (C.A.) and Williams v. Williams (1976) 1 Ch 278 (C.A.). In relation to unmarried couples the main decisions are Cooke v. Head (1972) 1 WLR 518 (C.A.), Richards v. Dove (1974) 1 All R 888 at page 894, Crisp v. Mullins (1975) 233 EGR 511, reversed on the facts in (1976) 239 EGR 111 (C.A.), Robinson v. Robinson (1977) 241 EGR 153, In re Evers' Trust (1980) 1 WLR 1327 (C.A.) and Hall v. Hall (1981) Law Society Gazette, 6th May, 1981 (C.A.).
It follows, in my view, that in principle there should be no difference, as between married and unmarried persons, in seeking to ascertain their common intention (if any) as to their respective rights to the property in which they live; and that in both cases it is appropriate for this purpose to have regard to their respective contributions up to the time of separation, and perhaps thereafter, and not merely as at the time of acquisition. However, in agreement with Lord Justice Griffiths I also consider that co-habitation in marriage, in contrast to a less permanently intended relationship, may of course have an important bearing on the ascertainment of their common intention and on the determination of an appropriate apportionment of their respective rights to the property in which they live.
I then return to the judgment given in this case. Although the judge concentrated primarily on the rights of the parties as derived from their position as at the time of acquisition, he did not in fact disregard the subsequent events, and in my view it would have been wrong had he done so. Thus, although the parties clearly started on a 50:50 basis in their acquisition of the property, subject to the small disparity in their respective contributions at that time, the judge rightly also took account of their contributions to the property up to the time of their separation. In this regard it was irrelevant that Mr. Josephs made the mortgage payments, since these were financed out of the rents received for their joint benefit. However, the judge rightly gave credit to Mr. Josephs for the £2,000 which he spent on improvements. In respect of the period of co-habitation up to separation, he accordingly gave credit to Miss Bernard for her initial contribution of £200, and to Mr. Josephs for his initial contribution of £650 plus the subsequent expenditure on the property of £2,000. However, notwithstanding this relatively small disparity in their respective contributions, he concluded - in effect - that, subject to giving the appropriate credit to each of the parties, their basic share in the equity remained equal. In my view he was clearly correct 'in this conclusion, both as at the time of acquisition and at the time of separation. It follows that Mr. Josephs' appeal on the first ground must fail.
Next, it is necessary to mention what the judge decided in relation to the events subsequent to the separation. Again, he rightly did not disregard these. Miss Bernard had been ousted from the house against her will, but Mr. Josephs continued to make the mortgage payments for which both of them remained liable. On the other hand, Mr. Josephs also continued to receive some rents from letting part of the premises. His mortgage payments between the dates of separation and the trial were £4,7^3, and the amount received by way of rent was £2,080, leaving a balance of £2,663 which Mr. Josephs paid out of his own pocket during this period. The judge accordingly gave further credit to Mr. Josephs for £1,331.50, one-half of this balance, by way of a further adjustment to the parties' equal shares. In my view this was again clearly correct. By allowing only half of this balance to Mr. Josephs, the judge in effect made him pay an "occupation rent": cf. Dennis v. McDonald. Conversely, and in my view equally correctly, by holding that Miss Bernard must give credit for half, but only half, of this balance, the judge treated her as being still entitled to an equal share in the property, but also liable to contribute equally towards the expenses referable to it.
None of these adjustments as such were challenged on the appeal to this court, but it was faintly argued on behalf of Mr. Josephs that his post-separation expenditure could also be taken into account in determining what should be the parties' basic equitable shares in the property. In my judgment this is untenable in the present case; since everything which occurred after the separation took place against Miss Bernard's will, the subsequent events could not possibly have any bearing on their common intention as to what should be their respective rights in the property; in the present case any common intention in this regard clearly came to an end with their separation.
There then remains the important question concerning the order for sale which was made by the judge. This was the second ground of appeal by Mr. Josephs and it raises the second issue of principle. Again it is important to note what happened, both below and in this court. The judge said:
"The plaintiff asks for an order for sale. The purpose for which the house was bought in co-ownership is at an end and I see no special reason why the defendant should continue to enjoy the house to the exclusion of the plaintiff. There was no offer made of any rent or periodic payment or other compensation for the defendant's sole occupation. Accordingly, I will order that the property be sold with vacant possession. The defendant is to vacate the property within four months so that vacant possession may be given by 1 November next".
Pausing there, I agree that the purpose for which the house was bought in co-ownership came to an end when Miss Bernard moved out. She could obviously never have intended that it should continue to provide a home for Mr. Josephs with his new wife. Nor could it be said ever to have been their common intention that, if their relationship should break down and one of them should move out, let alone unwillingly, the house should remain available as a home for the other. Accordingly, decisions such as In re Evers' Trust have no application, and section 30 of the Law of Property Act 1925 must inevitably come into operation.
In order to follow what happened on the appeal to this court, it is necessary to see how section 30 would have operated under the order made by the judge. The house would have been sold and, before dividing the net proceeds of sale into equal shares, Miss Bernard would have had to give credit for £3,781.50 against her share. This sum is arrived at as already explained. Up to the time of the separation, Mr. Josephs was given credit for £2,450, i.e. the £650 which he provided at the time of acquisition, plus the £2,000 which he spent on improvements, less the £200 which Miss Bernard provided at the time of acquisition. Then, for the period after Miss Bernard had moved out, Mr. Josephs was given credit for half the mortgage payments made by him less half the rents received, i.e. £1,331.50; making a total credit of £3,781.50 or, say, £3,800, in favour of Mr. Josephs.
In my view this result would have been wholly correct in applying section 30 and ordering a sale. However, a sale pursuant to section 30 may well entail consequences which neither party really wants, if some other solution can be found, A forced sale at short notice may fail to realise the best price obtainable for both parties in the long term, and it will inevitably involve immediate expense. Moreover, and above all, in these times of housing shortage, a sale has the disadvantage that the property ceases to be available as a home for either of the parties. This is likely to inflict hardship on the occupant and may also not be desired by the non-occupant if some other equitable financial adjustment can be made. Upon the present appeal, all these undesired consequences of a sale in fact ultimately became common ground between the parties. However, before turning to what happened, I think that it is necessary to consider the position in principle as to the extent to which an application under section 30 may allow some latitude to the court.
As to this, I think it is clear that the concluding words of section 30, "and the court may make such order as it thinks fit" confer no powers on the court unless an order for sale is in fact made.. This was the view expressed by Mr. Justice Purchas in Dennis v. McDonald (1981) 1 WLR 810 at pages 819, 820, and nothing to the contrary was said in this court, when an appeal against his award of an "occupation rent" was dismissed. He said:
"I now turn to consider section 30 of the Law of Property Act 1925. Mr. Walker submitted that I can make appropriate orders by virtue of the provision in section 30. After considering the wording of this section I have come to the conclusion that it does not confer any power upon the court to this effect. As was said in argument, the section was really passed for conveyancing purposes to help to deal with the flood of equitable tenants in common holding under trusts for sale which resulted from the passing into law of the Law of Property Act 1925. I do not think that this section enables the court to make orders where an order for sale is not made. Only orders ancillary to an order for sale which are necessary to implement the sale are envisaged by the words of the section. The words are 'and the court may make such order as it thinks fit' and not 'or the court may make such other orders' etc. As is explained in Megarry and Wade, The Law of Real Property, 4th ed. (1975), p. 427, section 30 of the Law of Property Act 1925 is the successor to the old Partition Acts and in particular the power of sale granted under the Partition Act 1868. In Turner v. Morgan (1803) 8 Ves.Jun. 143,145 Lord Eldon L.C. held the threat of making a partition order over the parties in order to bring them to terms. Although section 30 does not grant a power to the court to order the payment of an occupation rent it certainly could be used in a manner similar to that adopted by Lord Eldon, by means of indicating that unless an undertaking to pay an occupation rent was forthcoming from the defendant then the order for sale would be made".
This passage also demonstrates that the threat of making an order for sale under section 30 can be used against the occupant in order to seek to compel him to make an equitable financial adjustment in favour of the party who is out of occupation if the latter does not insist on a sale. However, could the threat of refusing to make an order for sale, or postponing a sale indefinitely, also be used against the non-occupant, unless he agrees, in effect, to allow his interest in the property to be bought out on reasonable terms? As at present advised, I am driven to the conclusion that this would not be possible. Once the purpose of the trust has come to an end, it seems clear that a sale can be insisted upon by any of the beneficiaries unless the court considers that it is inequitable for him to want to realise his investment: see the decisions of the majority of this court in Jones v. Challenger (1961) 1 QB 176 and Rawlings v. Rawlings (1964) Probate 398 (albeit under section 17 of the Married Women's property Act 1882), and Bedson v. Bedson (1965) 2 QB 666 per Lord Denning, M.R. at page 678G. The fact that these were cases between married couples does not appear to me to make any difference; on the contrary, when property is bought otherwise than as a matrimonial or family, home, it seems to me even more difficult to find grounds for refusing an order for sale. It is also interesting to note that in Turner v. Morgan, the case cited by Mr. Justice Purchas, Lord Eldon ended his judgment by saying: "Out of mercy to the parties I will let it [an order for sale] stand over: but I have no doubt what is to be done, if they will have a Decree". Finally in this connection the decision of Mr. Justice Luxmore in Re Ball, Jones v. Jones (1930) Weekly Notes 111 must also be borne in mind, that the power to postpone a sale under section 25 of the Law of Property Act 1925 cannot prevail when the right to insist upon a sale under section 30 has arisen.
However, ultimately these issues did not arise for decision on the present appeal; we heard no full argument on them; and I only venture into this territory with diffidence. The reason why this issue did not arise was that, with the assistance of the court, the parties effectively came to terms to a large extent, and it is to be hoped that the same result may follow in other cases. Miss Bernard very sensibly decided not to insist upon a sale, in consideration of being bought out; but there was some argument about the terms. As already mentioned, the equity value of the house was about £15,000 after allowing for the mortgage. On the basis of the financial adjustment made by the judge, Miss Bernard would accordingly have got about £5,600, taking round figures, viz. £15,000 less £3,800 = £11,200, of which ore half is £5,600. We were told that Mr. Josephs had previously offered £5,000, and before us his counsel raised this offer to £5,500. In effect the parties left it to us to determine what would be a fair sum for Mr. Josephs to pay, also having regard to the passage of time since the proceedings began. We indicated that in our view £5,000 would produce an equitable result, and Mr. Josephs' counsel did not object to this sum if this would avoid the necessity of an order for the sale of the house in any event. We accordingly arrived at the order mentioned by Lord Denning, M.R. on the basis that both parties should regard this as a reasonably satisfactory outcome in all the circumstances. It is to be hoped that this approach may provide an acceptable basis for the resolution of similar cases in the future.
Accordingly, I would dismiss this appeal subject to the substitution of the order mentioned above, not as a matter of law but in view of the course which was taken by both parties on the appeal to this court.
(Order: Appeal dismissed.
No order as to costs save legal aid taxation)