Stack v Dowden [2007] 2 AC 432

Key point

This case laid down the doctrine of common intention constructive trust.

Facts

  • Mr Stack (C) and Ms Dowden (D) had home in their joint names, they were not married but cohabited as a couple with their children in the home
  • C and D had contributed unequally to the purchase price of the home, with D contributing 65%
  • Later on, C and D separated and C left the property while D remained there with the children
  • C sought an order for sale of house and equal division of proceeds amongst him and D, while D argued that beneficial interest should be divided by the relative contribution of the parties
  • The High Court granted the order for equal division but D appealed and subsequently the Court of Appeal allowed D’s appeal and ordered net proceeds to be divided 65% to 35% in D’s favour
  • C thus appealed to the House of Lords

Held (House of Lords)

  • Appeal dismissed; the property was in held beneficially in unequal shares
  • The presumption that where there is a joint tenancy in law there is a joint tenancy in equity is rebutted by the fact that the couple kept their finances completely separate

Baroness Hale (Majority)

Presumption that equity follows the law

  • The starting point where there is sole legal ownership is sole beneficial ownership: [56]
  • In the domestic consumer context, a conveyance into joint names indicates both legal and beneficial joint tenancy, unless and until the contrary is proved: [58]

Rebutting the presumption

  • Courts cannot impose the result that they want on fairness: [61]
  • The party seeking to rebut the presumption has to prove that the parties had held a common intention that their beneficial interests be different from their legal interests
  • Common intention can change over time resulting in a ‘ambulatory’ constructive trust: [62]
  • In law, context is everything and the domestic context is very different from the commercial world, many more factors other than the parties respective financial contributions might be relevant to divining their true intentions: [69]
  • These factors include include (at [69]):
    • Advice or discussions at the time of the transfer
    • The reasons why the home was acquired in their joint names
    • The reasons why (if it be the case) the survivor was authorised to give a receipt for the capital moneys
    • The purpose for which the home was acquired; the nature of the parties’ relationship
    • Whether they had children for whom they both had responsibility to provide a home
    • How the purchase was financed, both initially and subsequently
    • How the parties arranged their finances, whether separately or together or a bit of both
    • How they discharged the outgoings on the property and their other household expenses

Current case

  • The parties had never pooled their separate financial resources for the common good and everything
  • The case was, therefore, highly unusual as there could not be many unmarried couples in the parties’ situation who had kept their affairs so rigidly separate
  • This is strongly indicative that the parties had not intended their shares in the property to be equal

Lord Neuberger (Dissenting)

Argument based on precedent

  • The presumed resulting is the answer which equity has always favoured historically and recently in the family home context: [111]

“Practical” problems of the common intention constructive trust

  • The common intention constructive trust involves invoking a presumption of advancement between unmarried cohabitants, where such a presumption has never applied, and at a time when, as I have mentioned, the court is increasingly unenthusiastic about the presumption, even in relationships where it does apply: [112]
  • The property might be registered in joint names for reasons that cast no light on the parties’ intentions: [113]
    • It may be the solicitor’s decision, the mortgagee’s preference
    • Couples often do not discuss the division of beneficial interest and it might not even occur to them
  • It leads to greater consistency since a presumed resulting trust applies where there is unequal contribution in sole name cases: [114]

Commentary

Lord Neuberger’s concern of inconsistency in joint names and sole names cases was rebutted by the judgment of the court in Jones v Kernott, where it was clarified that the presumed resulting trust will not apply in sole name cases where there is an unequal contribution of funds.

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