Bernard v Josephs (1982) 3 ALL ER 162 CA

Full case:

LORD DENNING Master of the Rolls:

Brief History

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 thirty.  Unknown to her he was already a married man, not yet divorced.  They arranged to get a house to set up home together.  It was 177 Dunstan’s Road, London SE22.  It was conveyed to them on 21 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 London 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 installments.  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 quarreled.  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.

The law

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 the payment of the installments. Both go out to work.  They pay the outgoings out of their joint resources. One paying for the food and housekeeping while the other paying the mortgage installments.  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 Division a very wide discretion to deal with all these problems. It is contained in Section 23 to 25 of the Matrimonial Causes Act 1973.  But there is no such legislation for couples like these.

The legislative provision

The legal position is that they hold the house on trust for sale.  Section 36(1) of the Law of Property Act 1925 says: ‘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.’

That is followed by sub-section (2) which says: ‘…  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.

But that does not tell what those beneficial interests shall be. 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 [1982] CA Bound Transcript. But often there is, as here, no such declaration. In such a case it used to be thought that the shares would always be 165 equal shares.  That was the view of Russell LJ in Bedson v Bedson [1965] 3 All ER 307 at 318, [1965] 2 QB 666 at 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 laid down and established than if there had been a declaration of a beneficial tenancy in common in equal undivided shares.’ Russell LJ had previously said much the same in Wilson v Wilson [1963] 2 All ER 447 at 453, [1963] 1 WLR 601 at 609.

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 are 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 the 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 ascertained as 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 one-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] 3 All ER 345, [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 Pearson LJ ([1962] 3 All ER 345 at 350, [1962] 1 WLR 1124 at 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 that, 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, what should 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 [of the Married Women’s Property Act 1882].  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 ([1955] 2 All ER 696 at 699, [1955] 1 WLR 731 at 735)) “the course of conduct of husband and wife (including their respective contributions towards the purchase price) at the time when the home 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 s. 17, does not in the present case afford a just solution such as the parties can reasonably be taken to have intended.’  (My emphasis.)

In that passage Pearson LJ 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] 2 All ER 38, [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 ([1972] 2 All ER 38 at 41–42, [1972] 1 WLR 518 at 520–521):

‘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 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 realized, and say how it is to be divided between them.  Lord Diplock in Gissing v Gissing [1970] 2 All ER 780 at 793, [1971] AC 886 at 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 on the acquisition of the home but should be left to be determined when the mortgage was repaid or the property disposed of.”  Likewise with a mistress.’

That view was confirmed by this court recently in Hall v Hall (1981) Times, 4 April.  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 All ER 923, [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 Division can afterward 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.

Engaged couples

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 cases. 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 of the Law of Property Act 1925.  Under it, the court has ample power to postpone a sale.  I stated the modern approach in Williams v Williams [1977] 1 All ER 28 at 30, [1976] Ch 278 at 285:

‘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 realized for cash.  That was emphasized by this court in the recent case of Browne v Pritchard [1975] 3 All ER 721, [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’s Trust, Papps v Evers [1980] 3 All ER 399, [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 installments 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 installments 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] 2 All ER 632, [1981] 1 WLR 810; [1982] 1 All ER 590, [1982] 2 WLR 275.  No doubt, however, he has been paying the whole of the mortgage installments 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 installments (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’s behalf.  The allowance of £2,500 is made only 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.

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