Mr and Mrs Pavlou bought a house for andpound;12,500 with a mortgage of andpound;9,500. After the husband left, the wife remained in sole occupation, and paid the mortgage instalments as they fell due. Thirteen years after the marriage Mrs Pavlou obtained a decree nisi of divorce, and less than a year later the husband was made bankrupt. The joint tenancy was thereby severed, and they then owned the property as tenants in common in equal shares. It was agreed that there would have to be an order for sale and an equitable accounting.
Held: There would have to be an inquiry whether an occupation rent should be set-off against the mortgage interest payments. A court of equity will order an inquiry and payment of occupation rent, not only in the case where the co-owner in occupation has ousted the other, but in any other case in which it is necessary in order to do equity between the parties that an occupation rent should be paid. If a tenant in common leaves the property voluntarily, but would be welcome back and would be in a position to enjoy his or her right to occupy, it would normally not be fair or equitable to the remaining tenant in common to charge him or her with an occupation rent which he or she never expected to pay.
Millett J said: ‘The trustee in bankruptcy submits that there is no equitable accounting between beneficial joint tenants but only between tenants in common, on the ground that beneficial joint tenants own the entire property per mie et per tout, so that expenditure by one is expenditure on his or her own property, and cannot be described as laid out in part in the improvement of the share of the other co-owner. Accordingly, he submits, the wife is not entitled to be reimbursed for any expenditure by her before the date of the bankruptcy order.
In my judgment there is no distinction between a beneficial tenancy in common and a beneficial joint tenancy. In neither case could a co-owner obtain contribution from his or her co-owner; any reimbursement had to wait a suit for partition or an order by the court for sale of property. On a partition suit or an order for sale, adjustments could be made between the co-owners, the guiding principle being that neither party could take the benefit of an increase in the value of the property without making an allowance for what had been expended by the other in order to obtain it: see Leigh v Dickeson (1884) 15 QBD 60, [1881-5] All ER Rep 1099. That was a case of tenants in common, but in my judgment the same principle must apply as between joint tenants; the question only arose on a partition or on the division of the proceeds of sale, the very point of time at which severance occurred if there was a joint tenancy. The guiding principle for the court of equity is that the proportions in which the entirety should be divided between former co-owners must have regard to any increase in its value which has been brought about by means of expenditure by one of them.’
As to occupation rents, Millet J said: ‘I take the law to be to the following effect. First, a court of equity will order an inquiry and payment of occupation rent, not only in the case where the co-owner in occupation has ousted the other, but in any other case in which it is necessary in order to do equity between the parties that an occupation rent should be paid. The fact that there has not been an ouster or forceful exclusion therefore is far from conclusive. Secondly, where it is a matrimonial home and the marriage has broken down, the party who leaves the property will, in most cases, be regarded as excluded from the family home, so that an occupation rent should be paid by the co-owner who remains. But that is not a rule of law; that is merely a statement of the prima facie conclusion to be drawn from the facts. The true position is that if a tenant in common leaves the property voluntarily, but would be welcome back and would be in a position to enjoy his or her right to occupy, it would normally not be fair or equitable to the remaining tenant in common to charge him or her with an occupation rent which he or she never expected to pay.’
Judges:
Millett J
Citations:
Gazette 17-Mar-1993, [1993] 1 WLR 1046, [1993] 3 All ER 955
Jurisdiction:
England and Wales
Citing:
Cited – Leigh v Dickeson 1884
The principles of equitable accounting apply equally to beneficial tenancies in common and beneficial joint tenancies. The guiding principle is that neither party can take the benefit of an increase in the value of the property without making an . .
Cited by:
Cited – Byford v Butler; In re Byford deceased ChD 10-Jun-2003
The house was owned in joint names. The husband became bankrupt, and the wife continued to pay the mortgage as to interest and capital. The trustee sought a declaration as to the ownership of the interests in the house. After the husband died, the . .
Cited – Grimm v Newman and Another ChD 1-Nov-2001
Mr Grimm was given advice about the tax consequences of bring foreign investments into the country as a gift to his wife so that she could purchase property. He was advised that it would not have adverse tax consequences, but after the event he was . .
Cited – Clarke v Harlowe ChD 12-Aug-2005
The parties lived together. They acquired between them several properties of which the last was declared to be held as joint tenants. The relationship broke down. The parties now sought a declaration as to the destination of the proceeds of sale, . .
Cited – Murphy v Gooch CA 27-Jun-2007
The unmarried parties had sought an order from the court as to their respective interests in their former family home.
Held:The judge had been incorrect to make his decsion based on the principles of equitable accounting. He should have used . .
Lists of cited by and citing cases may be incomplete.
Insolvency, Land, Equity
Updated: 09 April 2022; Ref: scu.85852