Family Law Hub

Bhura v Bhura [2014] EWHC 727 (Fam)

In a tweet: Distillation of Jones v Kernott

  • Summary: You may remember, about a year ago, we covered this case when it was before Mr Justice Mostyn on enforcement issues. At that time, the husband ("H") had received a suspended prison sentence of six weeks, the suspension being that he should a debt due under an American judgment (the parties having divorced in the US), interest and costs in the total sum of £1.2million by 18 March 2013. H's interest in a property known as Mayfield Avenue was also charged to the tune of £1.2million.  

    H had failed to comply with Mostyn J's order and the wife ("W") applied for a warrant of execution. H served three weeks at Her Majesty's pleasure at HMP Pentonville. W sought assets in the UK on which to recover what was owed to her.  

    The issue before Mr Justice Mostyn was whether or not the court should declare that two properties (one was the Mayfield Avenue property, the other was known as Pembroke Road), ostensibly owned by H's relatives, were in fact wholly or mainly beneficially owned by H: 

    • Mayfield Avenue – the legal title was held in the names of H, his father, his mother and his brother; and 
    • Pembroke Road – the legal title was held in H's brother's sole name 

    In the previous proceedings, W had alleged that H had a 25% interest in Mayfield Avenue but had not mentioned Pembroke Road at all. It was her case now that she had been the victim of a conspiracy between H and his family concerning the ownership of these properties. 

    Held: W's applications were dismissed.  

    Firstly, Mostyn J considered Jones v Kernott and distilled the following principles: 

    • If there is an express declaration of beneficial interests then that is, almost invariably, the end of the matter. Such an express declaration can only be displaced if it has been procured by fraudulent conduct. In this case it is said by the wife that the signed TR1 for Mayfield Avenue is a sham. A sham is of course a species of fraud. It involves the parties entering into a dishonest compact, i.e. a conspiracy, to express the true state of affairs falsely in the written agreement. I will analyse the law relating to sham transactions a little later. 
    • If there is no express agreement about the beneficial interests then there is likely to be (at least) a tacit understanding. This is hardly surprising as one would expect that when people enter into what may very well be the most important economic transaction in their lives - buying a home - they would have a pretty clear understanding of who owned what share of it. In determining whether there was such a tacit understanding, and if so what it was, the court will look at all the evidence holistically and will examine the whole course of the parties' conduct in relation to the property. 
    • In the rare case where the evidence does not reveal a tacit understanding about ownership the court can reach for the presumptions. An obvious presumption is that beneficial ownership is the same as legal title (see Jones v Kernott at paras 17 and 51(1)). 
    • Another is the presumption of the resulting trust. In Pettitt v Pettitt [1970] AC 777 at 824 Lord Diplock doubted that it was of much relevance in the modern era. In his view it would be "an abuse of the legal technique for ascertaining or imputing intention to apply to transactions between the post-war generation of married couples 'presumptions' which are based upon inferences of fact which an earlier generation of judges drew as to the most likely intentions of earlier generations of spouses belonging to the propertied classes of a different social era." Some commentators believe that the doctrine has a medieval origin. The principle problem with it is that that it allows the "solid tug of money" (as Woodhouse J evocatively put it (echoing George Eliot) in Hofman v Hofman [1965] NZLR 795 at 800) "to submerge any faint suggestion that other [non-financial] contributions play a valuable part in the acquisition of family assets".
    • A further presumption is the presumption of advancement but this can be regarded as being on its death-bed given that it is abolished by s199 Equality Act 2010, which is awaiting implementation. 
    • But presumptions are only presumptions. In a memorable dictum Lamm J in Mackowick v Kansas City St. J. & C.B. Ry., 196 Mo. 550, 571, 94 S.W. 256, 262 (1906) stated that "presumptions may be looked on as the bats of the law, flitting in the twilight, but disappearing in the sunshine of actual facts".
    • "Actual facts" are those which suggest that a result steered by a presumption is unfair. Although there are different degrees of emphasis and nuance all of the Justices in Jones v Kernott accepted that where a tacit agreement could not be found by a process of inference the court could impute to the parties a fair agreement which they never in fact made but which they should "be taken" as having made (see paras 45, 60, 72, 85(2))). Of course, as Woodhouse J pointed out, this involves a "fictional attribution of intention", but the process has a long pedigree. One only needs to remind oneself of Lord Denning MR's statement in Appleton v Appleton [1965] 1 WLR 25 at 28 to see how the wheel has turned full circle. There he said "A judge can only do what is fair and reasonable in the circumstances. Sometimes this test has been put in the cases: What term is to be implied? What would the parties have stipulated had they thought about it? That is one way of putting it. But, as they never did think about it at all, I prefer to take the simple test: What is reasonable and fair in the circumstances as they have developed, seeing that they are circumstances which no one contemplated before?" I cannot see any difference between that statement and that of Lord Wilson in para 87 where he rhetorically asked "where equity is driven to impute the common intention, how can it do so other than by search for the result which the court itself considers fair?" 

    In total the court had heard from 12 witnesses. Reflecting on the evidence presented to him, Mostyn J found that although there was some suspicious behaviour that conceivably justified W's doubts as to the true ownership, in respect of the Mayfield Avenue property, he said that the TR1 was a fair reflection of the state of affairs on the ground. He found that the property had been bought as an investment for the family with money deriving from H's father and had been intended to provide a pension for H's parents when they retired. W had been unable to rebut the presumption that the TR1 was a true bill and therefore her claim to Mayfield Avenue was dismissed. Her only recourse was to H's 25% interest which had already been charged in her favour.  

    As far as Pembroke Road was concerned, Mostyn J found that W's oral evidence and written evidence were in complete contradiction to each other. And her father's evidence, that he had a conversation concerning the purchase of the property with H's father, was rejected. On the evidence, the court was satisfied that H's brother had formed no common intention with either H or his father to share the beneficial interest in Pembroke Road property. Further, iIt was reasonable to suppose that H's father had wanted to treat the brother similarly to H and to extend a loan to him for his own separate property investment. W's application concerning the second property was also dismissed.

    Comment 

    Just as a footnote, it is interesting to be aware that, in terms of credit and credibility, H had started a long way behind W. Mostyn J had already found him to be an unscrupulous husband and a dishonest litigant. Findings had been made against him that he had spirited away a large amount of valuable jewellery (a whole shop full of jewellery) so as to defeat W's claims.

Case note, published: 28/04/2014

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See also

  • The wife sought declarations in relation to 2 properties which she argued were wholly or mainly beneficially owned by the husband, notwithstanding that (i) the legal title to Property 1 was held in the four names of the husband and his family, and there was a signed TR1 declaring that they hold it as tenants in common in equal shares, and (ii) the legal title to Property 2 was in the sole name of the husband's brother. The wife's applications were dismissed. Judgment, 18/03/2014, free

Published: 28/04/2014

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