Land purchased by family members for business purposes not subject to Stack v Dowden presumption

Case comment on Williams v Williams [2024] EWCA Civ 42

In the recent case of Williams v Williams the Court of Appeal looked at the question of whether the presumption laid down in Stack v Dowden [2007] UKHL 17 (namely that property purchased in joint names is also held as joint tenants in equity) applies more broadly than simply where that property is purchased by cohabitants or persons in the “domestic consumer context”.

Nugee LJ giving the judgment on behalf of the court, held that whilst it may apply more broadly it is absolutely clear it does not apply to properties bought for business purposes, even where the co owners are family members. This is because there is a clear and historic presumption that where property is bought for business purposes (whether by a partnership or not) the parties do not intend survivorship to operate, and therefore necessarily they must intend to hold as tenants in common.

Notably, the court commented there might be “strong arguments” in favour of the Stack presumption applying where property is purchased for business purposes by a couple in an intimate relationship, given the inevitable interplay of “mutual affection and sharing of both financial and other resources rather than commercial considerations” (para 54). Arguably, this simply reflects the likelihood that the nature of the relationship itself will amount to an effective rebuttal of the presumption against survivorship in those circumstances.

It is of assistance that the court reiterated that the Stack presumption of joint beneficial tenancy in the absence of an express declaration of trust to the contrary, is not simply a result of the operation of the mantra of ‘equity follows the law’ but based on two much more fundamental justifications arising from context, as was made clear in Jones v Kernott:

1. “The first is implicit in the nature of the enterprise. If a couple in an intimate relationship (whether married or unmarried) decide to buy a house or flat in which to live together, almost always with the help of a mortgage for which they are jointly and severally liable, that is on the face of things a strong indication of emotional and economic commitment to a joint enterprise.” (Jones at para 19)
2. Secondly, that not only do parties in “a trusting personal relationship” generally not hold each other to account financially, but in many cases it is of great practical difficulty to attempt to do so. (Jones  para 22)

The facts in Williams v Williams

In Williams, the business property in question comprised a two-part family farm, Crythan Farm and Cefn Coed Farm. Both purchased in the joint names of Mr and Mrs Williams and their son Dorian who ran the farm as a partnership of equal shares formed by deed. This was an unusual case in that the parties agreed that the intention was for all three to own equally (they all having contributed equally including by virtue of a mortgage in joint names). The issue was as to mechanism and whether Mrs Williams’ beneficial share had, following her death, accrued to the others by virtue of survivorship, or whether it passed according to the terms of her will.

The Court noted the long standing presumption that those acquiring property for business purposes do not intend survivorship to operate and concluded that where property is owned by a couple and a third party, particularly where there is evidence of accounting between the parties (such as by way of partnership management accounts or the taking of rents) the appropriate starting point is that the property is owned as tenants in common.

Fundamentally, in Williams, the context was “very different” to that in Stack in that whilst it in part provided a home for Mr and Mrs Williams it was “primarily a business which provided their livelihood” (para 54).

Key takeaways

This is a particularly important decision for the many disputes involving family businesses which extend beyond simply cohabitants or husband and wife and incorporate co-ownership of land with other family members. These are very often property holdings which have the added complexity of encompassing dual-use land such as farmland incorporating a family home (such as in Williams) or where the family home is located above business premises below.

It is now beyond doubt that outside of the pure cohabitation context (unless an express declaration of beneficial interest is made) the court will very likely assume that co-owners of business or mixed business/domestic property intended to hold as beneficial tenants in common rather than joint tenants.

It also raises the knotty question of whether in a different case (one in which parties did dispute the quantum of beneficial shares), whether the starting-point of common intention constructive trust reasoning would also give way in favour of the more commercially focused resulting trust analysis.

In short, in cases where property is co-owned by more than just the couple themselves, will the law now also presume their intention was to own in shares proportionate to their financial contributions – even as between the couple themselves?

This also poses potentially very significant difficulties in terms of inheritance planning for families who may well be operating on the assumption that their partner and later children will acquire by way of survivorship on their death, thus avoiding otherwise potentially onerous inheritance tax implications.

Consideration should particularly be given as to whether this issue applies where purchases predate the introduction of the TR1, which now prompts parties to declare at purchase their intentions as to beneficial ownership, as it did in Williams.

Harriet is a specialist family finance practitioner regularly undertaking instructions in TLATA 1996 claims. Harriet also has a breadth of experience in financial remedies cases involving family businesses and issues arising where property is owned jointly by one or both of the couple at the heart of the matter and third parties.