District Judge Susan Spencer considers the Court of Appeal's latest ruling on property division when cohabitees separate

Applications by cohabitees for a share in the proceeds of the sale of a house that they called home, but did not own, are not new. They are made under the Trusts of Land and Appointment of Trustees Act 1996 (TLATA) section 14.


This allows the court to make orders relating to the trustees' functions (for example, to sell the property) and declare the nature and extent of any person's interest in the trust property.


The TLATA contains guidance in section 15 as to the matters that might be taken into account in deciding a section 14 application.


These include: the intentions of persons who created the trust, the purpose for which the trust property is held, the welfare of any minor who does or might well come to occupy the trust property, and the interests of any secured creditor of any beneficiary.


There is, frankly, far too long a list of decisions from both the Court of Appeal and the House of Lords on how the court might approach an application by a cohabitee under the TLATA and its predecessor, the Law of Property Act 1925 section 30, where what is sought is a sale and a division of the proceeds. The latest addition is the case of Oxley v Hiscock [2004] EWCA Civ 546, [2004] All ER (D) 48 (May).


These are the Oxley facts: Mr H and Ms O lived together, with Ms O's children, for more 12 years. Ms O was a council tenant and exercised her right to buy in 1987. The house was in her sole name. Mr H put in the full discounted price (£25,200) by selling his house. A charge for this amount was secured against the property.


When the former council house was sold, the property that was the subject of the dispute was bought for £127,000 by way of the money attributable to Mr H's charge (£25,200), the profit on the sale put in by Ms O (£36,300), a mortgage of £30,000 and another £35,500 from Mr H. The property was put in Mr H's sole name, despite clear legal advice to the contrary to Ms O.


Over the next ten years the mortgage was paid off, and the relationship came to an end. In 2001 the property Mr H and Ms O occupied together was sold for £232,000. Ms O bought her own house for £73,000 using £33,000 from the sale. Mr H bought himself a property, and kept (save for a small further payment to Ms O of between £5,000 and £8,200) the balance for himself.


Ms O sought half the proceeds of sale of the last shared property. At first instance she was awarded this (worth about £113,000). On appeal, this was reduced to 40% of the proceeds of sale (worth about £92,800).


The leading judgment was given by Lord Justice Chadwick. More than 20 authorities were examined, going back to the early 1970s. Nowhere in the judgment is there any mention made of TLATA section 15, nor are any of the factors directly adverted to. The judgment is an analysis and attempted amalgamation of the issues of constructive or resulting trusts and proprietary estoppel with concepts of 'fairness'.


Through examining the prior authorities, the Court of Appeal sought to show a conflict between a completely property-based approach and some intrusion of the concept of 'fairness' and, in consequence, now felt at liberty to introduce 'fairness', albeit not by then going on to exercise a quasi-matrimonial discretion.


So the approach so picturesquely condemned in Springette v Defoe [1992] 2 FLR 388 by Lord Justice Dillon is now at the forefront of decision making. He said: 'The court does not, as yet, sit, as if under a palm tree, to exercise a general discretion to do what the man in the street, on a general overview of the case, might regard as fair.'


The authority that repays study is that of Lloyds Bank plc v Rossett [1991] AC 107, and in particular the speech of Lord Bridge. He described two possible scenarios:


• Based on evidence of express discussions of some sort, there has been an 'agreement, arrangement or understanding' between the cohabitants plus reliance/acting to detriment.



• Or, there is no such evidence, but the conduct of the parties provides a basis from which 'to infer a common intention to share the property beneficially'. The conduct will be no less than contribution to the initial purchase price, or subsequently by payment of mortgage.


In Oxley the court said that, having decided as a result of a finding of fact that the case falls into one of Lord Bridge's two scenarios, the remaining question is: what are the shares?


This is where Oxley moves 'under the palm tree', and away from the property-based line of authorities. In an Oxley scenario at least, it will no longer be the case that the shares will necessarily be in direct proportion to the contribution to the price.


The scenario is summarised at paragraph 68 of Lord Justice Chadwick's Oxley judgment: Property bought as home for unmarried couple intending to live as man and wife; both make financial contribution to property; bought in one partner's sole name; no express declaration of trust.


To answer the question 'what is the extent of the parties' beneficial interests?' the court must look at the evidence of what the parties said and did. But if there is no evidence, then, according to paragraph 69, 'each is entitled to that share which the court considers fair, having regard to the whole course of dealing between them in relation to the property, including the arrangements which they make from time to time in order to meet the outgoings (for example, mortgage contributions, council tax, utilities, repairs, insurance, housekeeping) which have to be met if they are to live in the property as their home'.


Despite this passage, much weight was still given to the fact that Mr H's contribution to the price was 'substantially greater' than that of Ms O. The lower court found that the parties in Oxley regarded the property as their 'joint home', and therefore awarded equal shares. The Court of Appeal found that undue weight had been given to this evidence.


On a property basis, Ms O would have a 28.5% share. 'Fairness' netted her 11.5% more - at what cost is not recorded in the judgment.


This decision is a well intentioned, but not happy, one. It seeks to maintain the clarity of the Lloyds Bank plc v Rossett approach for the first step of establishing any interest at all, but then to introduce a discretion in calculating shares.


Should not the Court of Appeal be bold and make new rules for cohabitees? Oxley, arguably, simply adds to the uncertainty without giving opportunity to do full justice between parties.


District Judge Susan Spencer sits at Leeds Combined Court Centre