The Privy Council has given judgement in the case of Marr v Collie (Bahamas)  UKPC 17 clarifying how the courts should decide the shares held in investment property by parties where they initially had an informal relationship and did not expressly declare their interests at the time of purchase.
A copy of the judgement, and video of the hearing can be found here.
Mr Marr and Mr Collie were a banker and building contractor respectively based in the Bahama’s and started a relationship in 1991. Over the years they purchased in their joint names several investment properties, a truck, boat and artworks. Mr Marr paid the deposits and most of the mortgage payments.
When the assets were purchased (as is often the case given their relationship) Mr Marr and Mr Collie did not have any formal declaration drawn up to express in what shares the properties were held, or what should happen to the proceeds from any sale in the future.
When Mr Marr and Mr Collie’s relationship came to an end a dispute erupted over who really owned the properties.
At first instance the court agreed with Mr Marr and declared he owned the properties as a result of the fact he paid for them, and the presumption in those circumstances that property is to be held by the owners in shares to match their financial contributions. The court found insufficient evidence to rebut that presumption. Mr Collie appealed.
The Bahamian Court of Appeal found (in relation to most of the assets) that there was evidence (based on a single email not discussed at the initial trial) that the parties intended to share the properties equally, such that the presumption in favour of the financial contributions could be rebutted.
The case was appealed further to the Privy Council.
The board of the Privy Council considered a different test needed to be considered that the earlier courts failed to apply properly, one that was ruled out by the first Judge as only applying to domestic property cases (as opposed to investment properties).
In those cases, the law has moved on from the presumption that unless expressly declared in writing, ownership should follow financial input, but instead presumes an equal share between the owners unless a party can prove it was the parties’ common intention for a different share.
In such a case the court should determine what the parties’ common intention was in consideration of the whole history of the parties’ dealings with the property. If it was impossible to find a common intention, even by inference, then the court could fall back in appropriate cases on using the financial contributions (potentially where the owners are business partners), or more commonly in the domestic context, assign, or impute an intention to the parties that they may not have actually had.
Lord Kerr said in relation to this case that:-
“In this, as in so many areas of law, context counts for, if not everything, a lot. Context here is set by the parties’ common intention – or by the lack of it.”
“Of course the initial intention (or lack of it) at the time of the purchase may change… examination of the course of conduct of the parties over the years in which they dealt with the property is relevant. And it is why an intense examination is warranted of why the properties acquired in this case were purchased in joint names.”
As no “intense examination” of the parties intentions over the years had taken place in the earlier hearings the Privy Council remitted the case for a new trial to ensure the common intention of the parties was properly focused on.
Although technically this case was heard under Bahamian law, the Judges sitting on the Privy Council are the same as sit in the Supreme Court, and so their reasoning will no doubt be followed in England and Wales.
In the absence of properly prepared Declarations of Trust there may be precious little evidence available to show what co-owners of a property intend with regards to who should own what shares, which if the relationship sours can cause huge problems, particularly where the parties are making different contributions to the property. This is the case not just for domestic partners, but business partners and investors, as made clear by this judgement.
Given the guidance for an intense examination of what happened regarding the property, potentially over many years, the time and costs involved in arguing such a case will be substantial and the risks to all concerned obvious.
To avoid any such problems, co-owners should if at all possible set out their shares in property in specific Declarations of Trust, after obtaining legal advice, and update this accordingly when any changes to their intentions take effect. This may not be easy during a breakdown of a personal relationship, or even in the case of business partners but it is certainly better than having the problem resolved by often lengthy and expensive litigation.
If court action is inevitable however we will be able to help focus a claim properly and seek a suitable cost effective resolution based on the available evidence (or lack of it).
Lewis Addison is an Associate at Nelsons specialising in property, trusts and probate litigation and dispute resolution. To discuss our fixed fees for this area of work, please contact Lewis on 0800 024 1976 or email email@example.com