• In the case of Barnes v Phillips [2016] HLR, the court can impute intentions to parties that effectively adjust their shares of beneficial interests in a property in order to create an equitable account, despite there being no specific agreement to vary these proportions.

Facts of the Case

  • D and C were an unmarried couple, and the joint tenants of a property, for which a joint repayment mortgage was obtained. D later came into financial difficulties, and the property was remortgaged.
  • The remortgage funds were effectively used in their entirety to first repay the original mortgage, and then to pay off D’s debts. The parties separated shortly afterwards, and both D and C continued to make payments towards the mortgage, with D making some child support contributions.
  • After some time, D stopped making contributions to the mortgage and did not make regular child support contributions, effectively leaving C financially responsible for the mortgage and expenditure of the property, as well as the two children the couple had together.
  • The county court judge ruled that it was possible to find an imputed intention of the parties following the remortgage and separation. As D had received funds to repay his debts at the time, he therefore held beneficial shares of 25% of the property, whilst C held beneficial shares of 75%.
  • An adjustment was made to this distribution in order to account for mortgage payments, contributions towards the children, as well as payments for repairs to the property and the court found that D and C held 15% and 85% of the shares respectively.
  • D appealed on the grounds that the judge should not have found an imputed common intention of the parties, having ascertained that there was no specific agreement by the parties to vary their shares of the beneficial interests.

Issues in the case of Barnes v Phillips [2016] HLR 24

  • Could a common intention to vary the distribution of the beneficial shares be imputed to the parties by the courts when there was no possibility of inferring their actual intention at the time?
  • Could the court adjust the quantification of beneficial shares in order to account for child support contributions or lack thereof?

Held by Court of Appeal

  • Appeal dismissed.

Lloyd Jones LJ

“Where nearly 25 per cent of the equity in the property had been paid to the appellant for his own purposes and the relationship ended almost immediately thereafter, there is to be inferred a common intention at that point to vary their interests in the property.” para 31.

  • There was evidence to suggest that following the remortgaging of the property and the use of the resulting funds for D’s own use, a common intention had been formed by the parties to vary their respective shares.
  • There was further evidence of this varying of interests when C became solely responsible for the mortgage repayments in the years following the separation. Whilst D made the majority of the mortgage repayments for 3 years after the separation, he failed to make any payments for 6 years after this.
  • The judge was therefore right to impute a common intention of the parties as to the variance of their shares.
  • “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.” para 41.
  • The judge had also been correct to account for subsequent events in his imputation of intentions to the parties, including any contributions to child support.