Allen v Webster

Beneficial interest involves financial contributions and common intention, and crystallises when the common intention changes.

Summary

Allen appealed a County Court decision to award him 8% beneficial interest in a property he had purchased jointly with Webster. This was based on the amount of payments Allen made during the mortgage term.

The High Court held that, when calculating beneficial interest in a property, the court must examine changes to the common intention of the parties and their financial contributions. A party's beneficial interest crystallises when the common intention changes.

Webster was given three months to pay Allen £37,000. Allen would be granted an order for sale if Webster failed to pay.

Background

Allen and Webster purchased a property as joint tenants in 1988 and began to cohabit.

Allen stopped contributing to the contractual mortgage payments and maintenance of the property in 1992. All payments from then were from Webster alone.

County Court decision

In March 2023, the County Court held that Allen's beneficial interest in the property was 8% and Webster's was 92%. This was based on Webster making 600 mortgage payments and Allen making 48.

The court did not make an order for sale.

Allen appealed to the High Court.

The court's decision

Allen and Webster purchased the property with the intention they would hold beneficial interest in the property jointly and equally.

Calculating beneficial interest

The High Court referred to Jones v Kernott and stated Allen's intention to continue with an equal share ended in 1992 when he stopped making mortgage and maintenance payments.

It held that the County Court was wrong to calculate Allen's beneficial interest based on the percentage of mortgage payments. Allen's beneficial interest crystallised in 1992. He was entitled to a 50% share of the property's value at that time, amounting to £37,000.

Order for sale

The High Court ruled it would be unfair for Allen to be 'kept out of his money' until Webster decided to sell the property. Allen's share will diminish in value over time.

The court gave Webster three months to pay Allen £37,000. If she did not, the court would enforce an order for sale.

Comment

The County Court awarded Allen 8% of the property's value at the time of the hearing, which was worth around £48,000 for Allen. The High Court's award of £37,000 is a lower amount, but Allen would receive the money more quickly than waiting for a sale. This protected the value of his share.

The order to raise funds within three months of face an order for sale might seem unfair to Webster, but the property's value had increased significantly since purchase. As Allen and Webster failed to deal with the property when they separated, the court had a duty to reach a fair conclusion for both parties.

This case confirms how the court should assess beneficial interest in a jointly owned property where payments are not equal. The key to advising clients is to explore their original intention and whether this has changed. Advisers should be mindful of this judgment when advising clients on beneficial interest in insolvency.

Find out more about equitable interest in property.