O'Kelly v Davies

The Court of Appeal dismissed the appellant's challenge to a county court judge's declaration that the respondent had an equal beneficial interest in the family home at 74 Lon Olchfa. The court upheld the judge's findings of fact that the parties continued to cohabit for many years, that the respondent provided the bulk of the family income and met mortgage and renovation costs, and that their conduct supported an objective inference of a common intention to share beneficial ownership. Although the transfer of title into the appellant's sole name had been carried out to facilitate benefit claims (an unlawful purpose), the court held that the respondent did not need to rely on that illegality to establish his equitable interest: Tinsley v Milligan applied and Jones v Kernott / Stack v Dowden provided the appropriate tests for inferring common intention and quantifying shares.

Background and parties:

• The respondent (Mr Davies) brought a Part 8 claim seeking a declaration that the appellant (Ms O'Kelly), who held legal title to 74 Lon Olchfa, held that property on trust for them in equal shares.
• The case was an appeal from Swansea County Court where His Honour Judge Vosper QC had made the declaration on 14 March 2013.

Material facts (as found by the judge):

• The parties met in the mid-1980s, cohabited and had a daughter in 1996. They purchased 42 William Street in joint names in 1987, which was transferred into the appellant's sole name in 1991. In 2006 the respondent bought back 42 William Street from the appellant while the appellant purchased 74 Lon Olchfa into her sole name. The respondent worked abroad for long periods but, when at home, lived with the family and met most mortgage and renovation costs.
• The judge found that the transfers into the appellant's sole name were effected to assist the appellant in claiming benefits and that both parties gave misleading information to authorities; that unlawful purpose was established on the facts.

Issues before the Court of Appeal:

1. Whether the county court judge was wrong to infer a common intention that the parties should share beneficial ownership of 74 Lon Olchfa.
2. Whether the respondent was barred by public policy (the maxim ex turpi causa) from enforcing any equitable interest because the factual findings required him to rely on an unlawful agreement.

Reasoning and outcome:

• The Court of Appeal reviewed the applicable principles from Stack v Dowden and Jones v Kernott for ascertaining common intention constructive trusts in domestic property. The court accepted the judge's detailed findings about the parties' course of dealing and contributions and concluded those facts supported an objective inference of a common intention to share the beneficial interest, with equality being a fair division in the circumstances.
• On illegality, the court applied the reasoning in Tinsley v Milligan: equity will refuse assistance where a claimant must rely on his own illegality, but will not refuse assistance where the claimant can establish his equitable interest without pleading the illegal purpose. The court concluded the respondent's claim did not depend on proving the unlawful purpose and so was not barred by public policy.
• The appeal was dismissed and the county court declaration was upheld.

Appeal dismissed. The Court of Appeal upheld the judge's factual findings that the parties' whole course of dealing supported an objective inference of a common intention that the respondent should have a beneficial interest in 74 Lon Olchfa and that, although the transfer into the appellant's name was for an unlawful purpose, the respondent did not need to rely on that illegality to establish his equitable interest (Tinsley v Milligan applied).

Appeal from Swansea County Court (His Honour Judge Vosper QC), decision dated 14 March 2013 (case ref: 2SA0014); now heard in the Court of Appeal, judgment delivered 11 December 2014 ([2014] EWCA Civ 1606).