Making recoveries from judgment debtors owning property

24 January 2012

It is a well known maxim in litigation that you can only recover as much money from a judgment debtor as the total of their assets.

In the majority of cases where a debtor is an individual, their home will be their main asset. If the debtor is married or cohabiting with their partner, how can you tell how much of the property they own and whether it is worth pursuing them or not?

When a couple purchase a property together, the legal ownership of the property will be recorded in the Proprietorship Register at the Land Registry. The couple’s entitlement to the proceeds of sale of the property may, however differ from the legal ownership (this entitlement is known as beneficial ownership).

A couple may own the property as joint tenants. This will mean that they each own the entire asset and you will potentially be able to recover 50% of the property’s value from the debtor. Alternatively, the parties may complete a trust deed which sets out their respective shares in the proceeds of sale or provide this information on the document which transfers the property to them (Form TR1). These documents are filed at the Land Registry and copies can be obtained for a small fee.

There are occasions though when a couple may not have reached an agreement on how the proceeds of sale are to be shared.

In the case of Stack -v- Dowden HL [25 April 2007], it was held that in such cases there is a presumption that where there is a sole legal owner, the legal owner will be entitled to 100% of the beneficial interest. Where a property is jointly owned, the proceeds of sale will be split 50/50 between the parties.

This presumption is rebuttable and the Court will look at the entire course of the parties’ conduct relating to the property to try to ascertain their shared intentions. The factors which the Court will consider include whether there were any discussions at the time of the property’s purchase, the purpose for which the home was acquired and how the purchase of property was funded.

A recent case from November 2011 (Kernott -v- Jones [2011] UKSC 53, [2011] All ER (D) 64 (Nov)) has set out further guidance as to how the Court will work out the shares of the property when a couple is co-habiting and the property is in joint names.

There will again be a presumption that the parties will split the proceeds of sale 50/50, but this can be rebutted if there is any evidence that the parties had a different common intention either at the time of buying the property or at a later stage.

The Court will construe the intention of the parties from their conduct. If the parties did not originally intend to own the beneficial interest equally or their original intention changed, then the Court can impute intention in the absence of any evidence. In these cases, each party will be awarded a share which the Court considers to be fair with regard to the course of dealings between them.

Each case will depend upon its own facts. The uncertainty of the outcome has led to calls for legislation to clarify the position for cohabitees who split up and sell their property.

From a litigation perspective though, the moral of the story is that in cases where there is no transfer/trust deed at the Land Registry, a careful assessment will need to be made before incurring legal fees in pursuing a judgment debtor with property.

See also article in The Lawyer about the effects of the judgment, “Jones v Kernott - we need an overarching law of financial claims for unmarried couples”.

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