Stack v Dowden

Stack v Dowden [2007]

Mr Stack appealed against an order specifying the division of the net proceeds of sale of the home he had shared with his former partner (Ms Dowden) and their children. Ms Dowden and Mr Stack had purchased the house in their joint names using the then current land registry form, which contained no declaration of trust but contained a declaration that the survivor could give a good receipt for capital money arising from a disposition of the property. The purchase was funded by the sale of their previous property, which had been in Ms Dowden's sole name, plus savings in Ms Dowden's name, and a mortgage held in both names. Mr Stack paid the mortgage interest and endowment policy premiums, while together they paid off the capital, with Ms Dowden contributing a greater proportion. When they bought the house, Ms Dowden and Mr Stack had been cohabiting for 18 years and had four children. Nearly all aspects of their respective finances had been kept separate. Nine years after purchasing the house, their relationship broke down and they agreed a court order that excluded Mr Stack from the house and required Ms Dowden to pay Mr Stack for the cost of his alternative accommodation. Mr Stack then sought a declaration that the house was held upon trust by the couple as tenants in common in equal shares and an order for its sale. The High Court granted this. Ms Dowden appealed.

Judgement

Court of Appeal

The Court of Appeal ordered that the net proceeds be divided 65 per cent to her and 35 per cent to Mr Stack on the basis that the declaration as to the receipt for capital money in the transfer document could not be taken as an express declaration of trust, nor could it infer an intention that the beneficial ownership be equal, because there was no evidence that either of them had understood the declaration to carry such significance. The issues were whether a conveyance into joint names established a prima facie case of joint and equal beneficial interests and whether the Court of Appeal had been correct to overrule the judge's order that Ms Dowden compensate Mr Stack for the cost of his accommodation. Mr Stack appealed.

House of Lords

Lord Hope, departing from Lloyds Bank plc v Rosset, was of the opinion that, when deciding whether a constructive trust existed,

[I]ndirect contributions, such as making improvements which added significant value to the property, or a complete pooling of resources in both time and money so that it did not matter who paid for what during their relationship, ought to be taken into account as well as financial contributions made directly towards the purchase of the property.[2]

Therefore, because the couple had maintained their financial independence from each other throughout their relationship, Lord Hope reasoned that the appeal should be dismissed.

Lord Walker, agreeing with the reasons given by Baroness Hale and having examined the precedent in detail, was also of the opinion that the appeal should be dismissed.

Baroness Hale identified that the onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership[3] and that the key question in cases such as this is “did the parties intend their beneficial interests to be different from their legal interests?”,[4] although she acknowledged that cases of this type would be very unusual.[5]

Baroness Hale stated that, contrary to Lloyd's Bank plc v Rosset, many factors other than financial contributions may be relevant to divining the parties' true intentions, such as any discussions at the time of the transfer which cast light upon their intentions; the reasons why the home was acquired in their joint names; the nature of their relationship; whether they had children for whom they both had responsibility to provide a home; how the purchase was financed, both the initial purchase price and the subsequent mortgage payments; how the parties arranged their finances, whether separately or together or a bit of both; how they discharged their household expenses. Baroness Hale stated that these and other factors should be taken into account when deciding whether the parties' beneficial interests should be different from their legal interests and whether a constructive trust existed.[6]

Because the parties had kept their finances rigidly separate, Baroness Hale was of the opinion that, taking their entire course of conduct into account, the appeal by Mr Stack should be dismissed and the Court of Appeal's order of a 65/35 split in favour of Ms Dowden should stand.

There cannot be many unmarried couples who have lived together for as long as this, who have had four children together, and whose affairs have been kept as rigidly separate as this couple's affairs were kept. This is all strongly indicative that they did not intend their shares, even in the property which was put into both their names, to be equal.[7]

Lord Neuberger, in a dissenting opinion, advised against easy and frequent changes to law (especially by the judiciary rather than Parliament that might give rise to new and unforeseen uncertainties and unfairnesses.[8] He advocated the use of the resulting trust where evidence of factors other than direct financial contributions were absent[9] and expressed concern about imputing intentions to the parties rather than inferring their intentions in light of their actions and statements - the former involves concluding what the parties would have intended whereas the latter involves concluding what they did intend.[10]

Lord Neuberger held that there were no grounds for varying the 65/35 split which he believed originated on the acquisition of the property and the establishment of a resulting trust. He was of the opinion that nothing other than "subsequent discussions, statements or actions, which can fairly be said to imply a positive intention to depart from that apportionment, will do to justify a change in the way in which the beneficial interest is owned."[11] He thought that the facts that they lived together for a long time, have been in a loving relationship, have children, operated a joint bank account and shared the outgoings of the household could not of themselves indicate an intention to vary this unequal split, and that even payments on decoration, repairs, utilities and council tax did not suffice on their own without evidence of an express agreement to vary their shares.[12] He agreed that the appeal should be dismissed, though for different reasons than the majority.