Barnes v Phillips [2015] EWCA Civ 1056 – Imputation and Constructive Trusts of the Family Home: Child Maintenance Payments and Constructive Trusts

In Barnes v Phillips [2015] EWCA Civ 1056, the Court of Appeal confirms the now familiar approach to constructive trusts of the family home by examining when, and how, an intention as to how property is shared can be imputed.

The facts are relatively straightforward. An unmarried couple purchased, in joint names, a property which was to be used as their family home for themselves and their children. The house was purchased with a deposit to which they both contributed and with the aid of a mortgage for which they were jointly responsible. The property was purchased in 1996. There were three further properties which were registered in the name of Mr Barnes only. In 2005, due to Mr Barnes’ financial problems, he persuaded Ms Phillips to execute a remortgage of their family home in order to allow him to discharge debts relating to the properties registered in his sole name. This mortgage was executed and the debts discharged.

In 2005 the relationship broke down and the parties separated. At first Mr Barnes continued to support Ms Phillips by making mortgage payments, but from 2008 onwards Ms Phillips had sole financial responsibility for the property and indeed was having some difficulty in securing the child support owed by Mr Barnes. She had also paid for renovation works to the property. Ms Philips then brought a claim under setion 14 of TOLATA in relation to the property.

The judge at first instance concluded that the initial starting point that the parties held as joint tenants in equity had been rebutted by the existence of a common intention, and, through imputation as to the size of the relevant share, he concluded that Mr Barnes was entitled to 15% and Ms Philips 85%, taking account of the dealings with the property and the difficulties in relation to child maintenance payments.

The grounds of appeal related to (a) whether there was a common intention sufficient to justify the change in the beneficial interests; (b) whether the shares which the judge accorded to the parties were wrong; and (c) whether the judge ought not to have taken account of the child maintenance payments when calculating the shares, [19].

In relation to the first ground, the question for the court was whether the judge, having concluded that there was no express agreement that the beneficial interests not be joint, could impute an intention to that effect. On reviewing the judge’s approach, and the relevant authorities – Jones v Kernott [2011] UKSC 53 in particular – Lloyd Jones LJ giving judgment concluded that the judge had not in fact attempted to impute an intention at the “first” stage in the process. Rather, the judge had firstly inferred a common intention for a change in the shares, and he had then imputed an intention at what is referred to as the “quantification” stage. This, in his lordship’s opinion, was an entirely correct approach.

He confirmed that: 

The majority in Jones v Kernott held that imputation of intention was permissible only at the stage of ascertaining the shares in which property was held following the demonstration of an actual intention to vary shares in the property.
— Barnes v Phillips [2015] EWCA Civ 1056, [26].

However, the Court acknowledged that in reaching this conclusion, the judge at first instance had compressed his reasoning in such a way to have made it unclear, notwithstanding his demonstrated understanding of the approach to be adopted following the decisions in Stack v Dowden [2007] 2 AC 432 and in Kernott. This lack of clarity meant that the Court of Appeal was able to determine for itself whether a common intention to vary the shares could, on the facts, be inferred. Lloyd Jones LJ concluded that this was possible. The dealings with the property post-separation, and the use to which the money derived from the remortgage was put, supported this. In addition, from 2008 onwards Ms Philips paid the mortgage on her own. As the court states, “[Mr Barnes] could only legitimately have taken this stance and acted in this way if there had been a change in the beneficial interests in the property”, [32].

On the second point, the court was required to consider whether the division 15%/ 85% was inappropriate. The Court of Appeal held that this was an appropriate division, taking into account in particular the fact that Mr Barnes had “taken” 25% of the value of the property with the remortgage and when he used that money for his sole benefit. Furthermore, the developments after 2008 and the child benefit payments justified the final shares awarded by the judge, [37].

The third ground of appeal was whether the judge was wrong as a matter of law to take account of the child benefit payments in calculating the shares. The Court of Appeal concluded that he was not, and this is perhaps the most controversial aspect of this judgment. The court is aware that Stack v Dowden gives courts a wide discretion in taking into account a potentially unlimited range of factors when considering the “whole course of dealing in relation to the property” [39]. However, it could be argued, and the Court recognises this at [41], that penalizing Mr Barnes for failing to make these payments, but with the possibility of the Child Support Agency making further claims against him, introduces a form of double liability in relation to these payments. However, the Court concluded that in this particular case, given the precise facts, this was not an issue here. It is noteworthy however that the Court suggests that in some cases it may well be inappropriate to take these sorts of issues into account. As Lloyd Jones LJ reasons:

I consider that, in principle, it should be open to a court to take account of financial contributions to the maintenance of children (or lack of them) as part of the financial history of the parties save in circumstances where it is clear that to do so would result in double liability.
— Barnes v Phillips [2015] EWCA Civ 1056, [41]

For those who are wary of an “anything goes” approach to the calculation of shares in this sort of case, potential reliance on matters unrelated to the property itself could be somewhat alarming. The uncertainty in outcome generated by such an approach, although potentially offset by the “fairness” of the result, cannot be said to be producing the best possible overall outcome. It has been ten years since Stack v Dowden was handed down, and the rules ought to have been relatively settled since Kernott, and yet despite two trips to the House of Lords/ Supreme Court, and multiple outings before the Court of Appeal, the now relatively settled rules are still proving difficult for first instance judges to apply in practice. It seems likely that academic and judicial focus will shift now from “when” can intentions be imputed (answer: at the quantification stage) to “how” do we impute such an intention and how do we calculate the parties’ shares. Some certainty on these matters would certainly be helpful.

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