The recent case of Geary v Rankine  EWCA Civ 555 involved a relationship that lasted from 1990 to 2009. The relationship with Mr Rankine began while Mrs Geary was still married. She did not divorce her husband until 2002. Mr Rankine and Mrs Geary had a son together in 1992.
Geary v Rankine is of interest to cohabiting couples, or those whose cohabiting relationships have broken down, because it demonstrates (once again) the complexities involved in trying to establish an interest in property – which would be a far easier task had the parties been married.
Readers will recall the tortuous exercise that was involved in the recent Supreme Court case of Jones v Kernott. There, the court had to establish the couple’s intentions for the sharing of the beneficial interest and decide whether that interest had altered and if so, on what basis. The court found that it was possible to impute an intention to the parties based on the facts, even though the parties had never formally agreed such a change.
But what about the situation where a business and the property it trades from is not jointly owned, but owned just by one party? When the other party has worked hard in the business over many years, while cohabiting with the owner? If they had been married and the marriage had broken down, the value of the business and the property would be taken into account in determining her settlement. But in a cohabitation case, things are very, very, different – as Mrs Geary found. Did she have a beneficial interest in the property? Was she a partner in the business? She argued yes to both, and the burden of proof fell squarely upon her. She failed to impress the circuit judge and appealed to the Court of Appeal.
Mr Rankine’s case was based upon his having received a redundancy payment prior to the commencement of the relationship and owned his own businesses. In 1996 he purchased a guest house called Castle View (‘the property’) for £61,000. He purchased this property outright with his own money and held it in his sole name. He did not intend to reside at the property or to run the business himself – it was viewed purely as an investment. The couple remained in London while a manager was employed to run the business.
Things went awry with regard to the running of the business. Mr Rankine moved to the property to run the business himself. When he was unable to cope, Mrs Geary left her job in London to assist him. She did not receive a salary from Mr Rankine and she admitted she considered Mr Rankine to be very controlling with regard to her expenditure.
Mr Rankine refused his partner and their son any security by way of provision in his will or making her a partner in the business. He felt that he should not do so until such time at least as Mrs Geary obtained a divorce. Even when she did so, Mr Rankine remained non-committal regarding her requests for security.
Only Mr Rankine made drawings from the business and received the profits. The business accounts and bank accounts were in his name alone.
Mrs Geary’s position
Mrs Geary, on the other hand, claimed a beneficial interest in the business and the property from which the business was run. She argued that she had acquired a beneficial interest in the property because a ‘resulting trust’ had arisen, based upon the actual intention of the parties. She maintained that there was objective evidence as to this intention. By leaving her job and London to work jointly in the business, argued Mrs Geary, she had altered her position to her detriment. She agreed that while initially there was no common intention for the beneficial interest in the property to be shared, it having been acquired as an investment by Mr Rankine, their common intention in relation to the property altered at a later stage, and that Mr Rankine had intended her to have a share in the property. A major plank of her argument rested on the fact that she had given up and moved.
Secondly, Mrs Geary claimed that she had also been a partner in the business with Mr Rankine. She argued that such a partnership should be inferred from the parties’ course of dealing in relation to the business. Mrs Geary was heavily involved in the running of the business but was not paid a wage which, she claimed, pointed to the fact that she was not an employee and was therefore a factor in favour of there being a partnership. The property was asserted to be a partnership asset and, as such, available for distribution between the parties.
It was also submitted that because Mrs Geary and Mr Rankine lived on the proceeds of business, they shared the profits of the business. Counsel for Mrs Geary submitted that this was sufficient to indicate that a partnership could be inferred.
Lord Justice Lewison’s findings
A resulting trust?
Lord Justice Lewison found against Mrs Geary. In relation to the property and her argument there was a resulting trust, he found that the property was only ever intended as an investment and was never intended to be shared jointly.
In reaching this decision. Lord Justice Lewison separated the business from the property from which the business was run, stating that:
“In my judgment it is an impermissible leap to go from a common intention that the parties would run a business together to a conclusion that it was their common intention that the property in which the business was run, and which was bought entirely with money provided by one of them, would belong to both of them.”
The judge further stated that Mr Rankine’s intention had been clear. Mr Rankine had clearly stated that he did not intend to give Mrs Geary an interest in the property and he never did so. There was never any type of trust created, even one of common intention constructive trust, since there was no express statement or conduct by which a trust could be inferred. In fact, Mr Rankine’s fear, that while Mrs Geary remained married her ex-husband could claim an interest in her part of the property, was a rational one.
A business partnership?
The judge also found that there was no business partnership. His reasons for this were as follows:
i. The business accounts were drawn on the basis that Mr Rankine was a sole trader;
ii. There were no joint bank accounts;
iii. The drawings were all made by Mr Rankine;
iv. There was no sharing of the business profits;
v. Mrs Geary was protected from all liabilities relating to the business;
vi. There was no evidence that Mrs Geary had been held out as a partner to the outside world;
vii. The couple had separated for a period of many months and the business had continued to run in her absence.
The outcome: cohabitation v marriage
Mr Rankine and Mrs Geary lived as husband and wife for 19 years. This was a lengthy relationship, during which the couple seemed to have shared most aspects of their lives. In relation to their income, both parties would seem to have played relatively equal parts in sustaining their lifestyle. If these circumstances had arisen in the context of a marriage, Mrs Geary would have been entitled to a share of the guest house in an exercise that would have considered her reasonable needs for the rest of her life, irrespective that the business and property had not been bought by her. That is the safety net that a marriage certificate offers.
So: once again we must make the point that readers should always, however difficult it may be, seek to legally regulate the nature of their cohabitation relationship and not simply rely on hopes or aspirations for the future.
Relationships can and do change. Anyone who enters a cohabitation relationship without fully appreciating the dangers of failing to protect themselves, would be well advised to give the most serious consideration to the facts of this case. It is not easy taking legal advice and entering into the necessary legally binding agreements, but may ultimately prove well worth it. Had Mrs Geary insisted on a partnership agreement for the business or even a salary and become a regulated employee, the outcome may have been different. Had she insisted that the property was transferred into joint names, or if not, she would have refused to move and give up her job, she would no doubt have been in a very different position today.
As it is, Mrs Geary seems to have left a 19-year relationship, having worked very hard throughout and had a child, with nothing.