Margaret Hatwood, Partner
Lecture Notes from Advanced Family Law Conference, 4th February 2011
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Introduction
Nowadays, spousal maintenance is often for ‘joint lives’ especially where there are young children. However, this has not always been so. Historically, maintenance could be until remarriage or until the wife committed an act of “unchastity”. However, cohabitation is not a factor that is taken into account in the Matrimonial Causes Act, not even on variation applications. Perhaps this was because cohabitation was relatively unusual in 1973.
So at best, cohabitation comes within ‘all the circumstances of the case…’ or “a change of circumstance” in variation cases.
Section 25(1) of the Matrimonial Causes Act provides: “It shall be the duty of the court in deciding whether to exercise its powers under sections 23, 24, 24A or 24B above and, if so, in what manner, to have regard to all the circumstances of the case…”
Section 31 the Matrimonial Causes Act deals with variation and discharge etc of certain orders for financial relief. Section 31(7) provides:-
“In exercising the powers conferred by this section, the court shall have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of 18 and the circumstances of the case shall include any change in any of the matters to which the court was required to have regard when making the order to which the application relates.”
Furthermore, section 25A of the Matrimonial Causes Act, which was introduced by the Matrimonial & Family Proceedings Act 1984, encouraged the court to consider a clean break. “It shall be the duty of the court to consider whether it would be appropriate so as to exercise those powers that the financial obligations of each party towards the other will be terminated as soon after the grant of the decree as the court considers just and reasonable.” In particular, section 25A(2) requires the court to consider “whether it would be appropriate to require those payments to be made... for such term as would in the opinion of the court be sufficient to enable the party in whose favour the order is made to adjust without undue hardship to the termination of his or her financial dependence on the other party.”
At what stage does the issue of cohabitation (and now association) arise?
(a) Prospective cohabitation, i.e. where the wife may have a settled relationship that is not cohabiting.
(b) Actual cohabitation where the wife cohabits after the initial maintenance order was made and the husband applies to vary the application.
(c) On appeal, when the wife cohabits within a short time of an ancillary relief order being made
Actual cohabitation: How much should the new partner contribute?
Ancient history
MH v. MH [1982] 3 FLR 429 - Wood J
A wife aged 46 lived with a man aged 30, an accountant who went into business. W and C had cohabited for four years. A notional earning capacity was attributed to the cohabitee and a “fair, just and reasonable approach” was applied, reducing the spousal maintenance from £3,900 per annum to £500 per annum.
Suter v. Suter and Jones [1987] FAM 111
By this time the 1984 Act enabling the court to impose a clean break was in force. The wife was 31 and had two school-age children. Mrs. Suter cohabited with a docker (who went home to his mother’s for breakfast!). The Court of Appeal considered that the fact that the wife was cohabiting justified reducing the maintenance of £1,200 per annum to a nominal order. It was reasonable to expect the cohabitee to make a reasonable financial contribution to the wife’s outgoings. The ten-year term order was not altered.
Atkinson v. Atkinson [1988] 2 FLR 353
Here the Court of Appeal took a more traditional approach. The wife had received a capital settlement and maintenance. Within a few months of financial matters being resolved, the wife lived with a man who ran a garden nursery. By the appeal hearing, there had been cohabitation for four or five years. The husband argued that to all intents and purposes his ex-wife had remarried but she had held back from doing so as she did not want to lose her maintenance. The husband also argued that if the court was not prepared to terminate the order, the court should impose a phased reduction to a nominal order. The court rejected his arguments and decided that cohabitation was relevant only insofar as it reduced the wife’s needs. There was a reduction in maintenance from £6,000 to £4,500 per annum to reflect what the cohabitee should have been contributing.
The Court of Appeal said there was no statutory requirement that a court should give decisive weight to the fact of cohabitation. If the court were to do so, it would impose an unjustified fetter on the freedom of a former wife to lead her own life as she chose following a divorce.
More recent history
Atkinson v. Atkinson (No 2) [1995] 2 FLR 356 (Court of Appeal) – ‘ a cougar case’
Here, a former wife aged 55 cohabited with a 33-year-old man just four months after the ancillary relief hearing. The maintenance was reduced from a maintenance order of £30,000 per annum to £18,000 per annum. A year later, when more favourable information about the cohabitee’s business had emerged, the order was reduced to £10,000 per annum. Thorpe J (as he then was) said:
“In assessing the relevance of the cohabitation factor, it seems to me as much – if not more – weight must be given not to the presence of the cohabitee as to his financial circumstances, and his capacity to make a reasonable contribution in return for the benefits of the provision of a home.”
Extension of a term maintenance order
Fleming v. Fleming [2004] 1 FLR 667 – Court of Appeal
This was a case where the wife sought to extend a term maintenance order in a case where she had been cohabiting for five years. Thorpe LJ said at paragraph 9:
“Nor do I think that the decision of this court in Atkinson calls for re-litigation in the light of whatever social changes may have been over the course of the last 15 years or so… Cohabitation is not to be equated with marriage. Equally, it seems to me that the direction that the court, in assessing the impact of cohabitation, should have regard to the overall circumstances, including financial circumstances, remains the proper course to be followed. Of course, in a case such as this where the length of cohabitation is greater than many a marriage that comes before a court for assessment, the range of discretion given to the judge enables him or her to place considerable weight on that circumstance... The statutory distinction between remarriage, which terminates financial obligation (by virtue of section 28 of the Matrimonial Causes Act 1973) and cohabitation, which does not, would fall for parliamentary consideration if the government’s present plan to legislate rights and responsibilities for same-sex partners were extended to cohabitees.”
Of course this has not happened. The Court of Appeal allowed the husband’s appeal against the extension due to inconsistency in the trial judge’s approach to the question of the extension of term and not because of Mrs Fleming’s cohabitation.
Capitalisation cases – K v. K [2006] 2 FLR 468 – The “heretical” approach
In 1988, an order was made for maintenance to the wife at the rate of £16,000 per annum which was index-linked during joint lives or until the wife’s remarriage. When this application came before Coleridge J the wife had been cohabiting for three years. The husband, a former city accountant, applied for a downward variation of the payments by then worth £18,955 per annum, not only because of his imminent 40 per cent reduction in income but also because of the wife’s cohabitation. The husband argued the order should be varied to a nominal order with immediate effect. The wife accepted that a small reduction to £15,000 would be appropriate but argued that her cohabitation was irrelevant. However in this case the wife had purchased a holiday lettings business with her cohabitee. After the reduction the net income of the two households would be broadly similar. Coleridge J said:
“In the 35 years since the enactment, a social revolution has taken place. The concept of cohabitation is now as normal, commonplace and acceptable as marriage. At every level of society and amongst all adult age groups, people cohabit with a second thought. It carries no social stigma whatever… In the circumstances, should not the financial consequences of cohabitation (following a previous divorce) be the same as the financial consequences of a further marriage; namely that any then existing order be discharged… The court cannot shrug off the point by saying it is a matter for parliament. It is too important and too commonplace in these cases, especially ‘variation cases’. There is no sign whatsoever that parliament is proposing in the foreseeable future to confront the need for a thorough reconsideration of the principles underlying this area of law… There is no prospect of statutory change within five years and this issue will not go away. So I suggest the court must nowadays grapple with this point and factor into its analysis and calculations, not only numerically but in principle, the existence of a lengthy and settled period of cohabitation and the likelihood of it continuing indefinitely.”
In this case, the judge produced an orthodox outcome by reducing the periodical payments commensurately with the 47 per cent drop in the husband’s income. He reduced the wife’s maintenance from £16,000 to £12,000. This was then capitalised to £100,000 (had the order not been varied, the capitalisation would have been £175,000). However, Coleridge J suggested that had he not been bound by authority in the Court of Appeal, he might have reached different conclusions.
Counsel for the husband, Miss Ann Hussey, submitted that the wife and her partner were in a quasi-marriage. She advanced an argument that the old rule excluding pre-marital cohabitation when assessing ancillary relief applications after divorce had gone in consequence of the decision of Mr Mostyn QC in GW v. RW [2003] 2 FLR 108. His approach had been followed in subsequent cases, culminating in the observation of Baroness Hale in Miller and McFarlane [2006] 2 AC 618: “…the marriage (which should probably include periods of pre-marital cohabitation and engagement).”
Thus, in K v. K, Miss Hussey argued: “If cohabitation equates with marriage in the context of an assessment of ‘contribution’, why should it not also, in a decision about the continuation of periodical payments order? It is quite simply unfair to the husband to ignore the cohabitation of the wife and Mr B.”
W v. W [2009] EWHC 3076 (FAM)
This case involved in a very short marriage. The parties started cohabiting in 1997/8. They were married in 1999. A child was born in 2000 and the parties separated in late 2001. An ancillary relief consent order was made on 6 April 2004. When the parties met, the wife was working as a veterinary nurse and the husband as a solicitor. In 1996, the husband formed a company and ceased working as a solicitor in 1997. The wife left her job shortly before the child was born and had not worked since.
The parties’ assets at the date of the consent order were the net equity in the former matrimonial home of £130,000, the husband’s interest in the company which had been valued at approximately £3.65m and a small pension fund. The husband’s shares were unrealisable. The husband’s net income was £127,000 per annum. Under the consent order the wife received a housing fund of £478,000 by borrowing £378,000 funded by the husband. In addition, the husband was liable to pay maintenance for the wife at £18,000 per annum, as well as child maintenance. The wife began a relationship with a Mr N in October 2004 and they started living together in January 2005. Mr N had two children who spent just under half their time with their father and Mrs W. In 2006, the husband’s company was sold for a total of £11.4m net which was paid as to £9.1m in December 2006 and the balance of £2.3m a year later. The husband was required to redeem the mortgage if he disposed of the bulk of his shares in the company or ceased to reside in the jurisdiction. The husband later claimed he had forgotten about his undertaking which was unfortunate as it gave Mrs W the impression that the husband was trying to hide the sale of the company.
The wife became aware of the sale in 2007. Her solicitors wrote asking for an increase in maintenance for herself and the child and seeking capitalisation. The husband, predictably, applied for a decrease in the level of periodical payments. The wife and Mr N had kept their finances separate so that Mr N had made a contribution to the household expenses by paying a sum into the joint account on a monthly basis. In July 2009, this was £1,000 per month.
The husband sought capitalisation of the wife’s claims in the sum of £250,000. The judge rejected this, saying he did not believe this would enable the wife to adjust without undue hardship. The wife, who was represented by Mr Cohen QC, succeeded in obtaining a lump sum of £625,000. A straight Duxbury calculation would have produced a figure of £930,000 Moylan J said:
“Nor do I consider that the sum proposed by Mr Cohen, namely £800,000, is appropriate. This would not give proper weight to the matters referred to Ms Boyd, including the length of the marriage, the wife’s future earning capacity, the manner in which the husband’s wealth had accrued and the wife’s cohabitation with Mr N. In respect of the cohabitation with Mr N, it is clear to me from both Atkinson and Fleming that the court must take into account and give due weight to the overall circumstances of the cohabitation including as an element its financial consequences.”
Very recent case law
H v. H [2009] EWHC 494 – Singer J
The original ancillary relief order provided for a largely equal division of capital which amounted to some £3m. However, somewhat more controversially, the judge set the wife’s maintenance at £125,000 per annum.
The development of the relationship between the wife and her new partner became apparent to the husband by virtue of the fact the wife’s house was, conveniently for him, in the same street as his parents’ home. Enquiries were made about the status of the wife’s cohabitee, Mr Liam Thompson, in correspondence. The wife’s solicitor was instructed to reply that: “Liam is not her boyfriend; he is a friend.” Six weeks before the trial, she said in answer to more questions that her client was not cohabiting with Liam and he was making no financial contribution to the household.
The husband’s father observed the wife’s property before the hearing. A detailed diary was made between 22 December and 28 January which demonstrated that Mr Thompson was clearly living with the wife throughout that five-week period. An enquiry agent came to a similar conclusion. The wife’s explained she needed a bit of extra company in the run-up to the ancillary relief proceedings. She denied that she had any intention to live with Mr Thompson. It emerged in cross-examination that the wife was pregnant by Mr Thompson. She did admit that she was in a fixed, committed relationship with Mr Thompson. On appeal the case became reported as:
Grey v. Grey [2009] EWCA 1424 - Court of Appeal decision
The husband inevitably appealed the issue of spousal maintenance. The husband’s counsel’s submissions were:
- that the judge had failed to make proper findings of fact regarding the relationship between the wife and her new partner;
- the judge misdirected himself in law, failing to apply established authority and rejecting a submission that a new approach had emerged based on a proper recognition of the inter-relationship between pre-marital and post-marital cohabitation.
The Court of Appeal took the view that the judge’s finding of fact on the cohabitation issue was inadequate. It was not good enough for the judge to resolve the issue by saying: “They may or may not cohabit – an unsatisfactory word and concept in my long-tailed view, vaguest equality and duration and not a reliable indicator of anything long term.” Thorpe LJ said the trial judge should have approached the question in the following way:
- The unchallenged evidence established actual cohabitation during the five weeks of surveillance and the commencement in November 2006 of a situation in which Mr Thompson was a regular household member.
- The wife had presented a false case, both in preparation for trial and at the trial itself.
- The wife’s motive for her false case was to protect her periodical payment claims from reduction to reflect the arrival of Mr Thompson in her life.
- The explanation for Mr Thompson’s presence was fundamentally implausible.
- The judge should not have accepted the wife’s evidence on this topic without corroboration and if any inferences were to be drawn they should drawn against her. Thorpe LJ concluded:
“The above route would have led the judge to a clear finding that whatever the future might hold for them, the wife and Mr Thompson were a couple and the financial consequences of that development had to be investigated and assessed.”
One point that appears not to have been made at any stage of this litigation is that the wife would have claims against Mr Thompson under Schedule 1 to the Children Act 1989.
The Court of Appeal made it clear that in ancillary relief proceedings, the judge is not confined in the search for fairness by the nature of counsel’s submissions nor is he bound by the evidence that the parties choose to adduce. Perhaps oddly, the highly experienced QC appearing on behalf of the husband did not ask any questions as to Mr Thompson’s remuneration or financial circumstances.
The Court of Appeal said the judge could not be fair to the husband as the payer without investigating whether Mr Thompson was making any financial contribution to the household and, if not, what was his capacity to make contributions. The husband’s counsel said that Mr Thompson who was resident within the Irish Republic, was not a compellable witness. However the Court of Appeal felt that circumstance did not prevent investigation. The judge had only to require the wife, as applicant, to produce evidence of Mr Thompson’s means or risk the drawing of adverse inferences.
The Court of Appeal considered at some length, at the request of counsel for the husband, the submissions made by Miss Ann Hussey (as she then was) in the case of K v. K. In Grey, the Court of Appeal said that there was some support for elevating the consequences of post-marital cohabitation on the simple ground that the court now brings pre-marital contributions into the reckoning in the current edition of Jackson on Matrimonial Finance and Taxation.
“Now it is established that pre-marital cohabitation normally does count as part of the duration of the marriage; it may be the post-divorce/dissolution cohabitation will be treated likewise.”
The Court of Appeal went on to find that it was open to Singer J to discount the periodical payments claim to reflect the relationship between the wife and Mr Thompson, even applying the orthodox line of authority culminating in Fleming. Thorpe LJ concluded the appeal should be allowed and the case remitted for hearing on the cohabitation issue to Singer J, the husband had already lodged an application for a variation of the continuing periodical payments order.
Grey v. Grey [2010] EWHC 1055 – The High Court re-hearing and husband’s application for variation
At the re-hearing, Singer J made the following findings:
From November 2007, which was when Mr Thompson discovered that the wife was expecting his child, the quality of the relationship was such as to require an assessment of what the Mr Thompson should contribute to her domestic economy. It was not, however, a fully cohabiting relationship and it should not be assumed that the partner would cease to maintain his separate residence. However, the new partner should be able to contribute £16,000 per annum. There was no justification for reducing the husband’s spousal maintenance to a nominal sum. The significant increase in the husband’s earnings in 2008 and 2009 was a relevant circumstance but did not in the circumstances of this case lead to an upward variation of periodical payments. So what the judge did was to increase the child maintenance payments from €16,500 to €27,500 (which would not bear Irish tax). The wife’s spousal maintenance was reduced by a similar amount.
The learned commentator, Rebecca Bailey-Harris, commented in Family Law wisely: “Ultimately, therefore, this case illustrates the breadth of judicial discretion and the fact-specific nature of cases on variation of periodical payments.”
The husband was in some respects fortunate. At the original hearing the judge found his gross income to be £725,000 pa (£435,000 net). In 2008 H was paid £945,000 “at least”. From 2009 he received £1.3m gross plus a £1m advance of loyalty bonus.
It emerges from the latest chapter in the saga that the husband was not a very reliable witness either in the earlier stages of this case. The judge said at paragraph 4 of the re- hearing that the husband understated his gross income for the year to end March 2007 by some £750,000. This is not apparent from the Court of Appeal decision. The husband’s appeal against this order was refused on 28 January 2011.
A reading of the full Grey saga is helpful for it contains guidance on how to run such cases.
Cohabitation (or remarriage) within a short time of the order
This has always been a difficult area. In Livesey v. Jenkins [1985] 2 WLR 47 the fact the wife failed to disclose to the husband her intention to remarry undermined the basis on which the order was made and was sufficient in that case to enable the court to set aside the order. That is not always the case. However, in B v. B (Financial Provision: Leave to Appeal) [1994] 1 FLR 219, where the wife had remarried since the order, it was held that the fact of her remarriage did not affect her entitlement to capital and this would have been the case even if she had been remarried at the time of the order. In order to succeed in such an appeal, one would have to show that the entire basis upon which the order was made had been falsified.
Williams v. Lindley [2005] EWCA CIV 103
A consent order 70/30 in favour of the wife had been made after the wife had denied a relationship with another man. Shortly after, she married the man in question. A circuit judge refused the husband’s application for a re-hearing but his application was allowed by the Court of Appeal. It was held that the main foundation of the wife’s case had been undermined and Thorpe LJ added that, when approaching the “supervening event”, greater flexibility was required. The court should reconsider all the section 25 matters.
Dixon v. Marchant [2008] 1 FLR 665 (Court of Appeal)
A husband claimed he had been led to enter into a consent order capitalising the wife’s periodical payments by her assertion that she was not cohabiting and did not intend to do so. However, seven months later, she remarried. The husband’s appeal was dismissed. The court said that they had to find on an objective test that there was a common assumption made by the parties – and shared by the court – that for an indefinite period, to be measured in years rather than weeks or months, the wife would not remarry.
It is quite difficult to reconcile these two decisions. At first sight the Dixon v. Marchant appears harsh to the husband. However this was a capitalisation case. The original order had been made in 1993 whereby the husband had to pay maintenance at the rate of £15,000 PA. It was a second marriage for both the husband and wife. In August 2005 the husband asked for a downward variation of maintenance as at that time he was about to draw down his pension from Ernst and Young and his income would be reduced. He asked for details of his wife’s financial circumstances and asked if she was still cohabiting? Her reply was that she was not cohabiting and did not intend to cohabit. The husband said that when the original order was made wife was having a relationship with a Mr Marchant and that was still the case. The wife admitted to continuing her relationship but said neither she nor Mr Marchant wished to cohabit. A straight Duxbury calculation would have produced a lump sum of £200,000. The husband was asking for capitalisation of £75,000. The parties compromised on £125,000 and a consent order was made in April 2006. On the M1, the wife said she had no present intention of cohabitation or remarriage. On 3 November, the wife married Mr Marchant. The wife’s evidence was that the engagement was sudden. She and Mr Marchant had visited a mutual friend who had terminal cancer. They were somewhat glum after the visit and decided to have a meal out. A bottle of wine was consumed and out of the blue Mr Marchant, who had himself been seriously ill, proposed. The wife accepted.
The decision was a majority decision with Ward LJ and Collins finding in favour of the wife and Wall LJ dissenting not being able to distinguish the case from Williams v. Lindley. Ward LJ said that there was nothing in the consent order requiring the wife to repay any of the lump sum if she remarried soon after payment made:
“I am satisfied that there was no basis or fundamental assumption, even a tacit one, that the deal would founder if the wife remarried within a short period of time after the agreement. The risk of marriage was one the husband had to accept.”
Some tactical points
If acting for a payer:
- in a capitalisation case include a recital that the part of the lump sum has to be repaid if the wife cohabits;
- engineer a situation where the cohabitee will have to give evidence;
- issue a witness summons asking the cohabitee to produce documents; or
- an inspection appointment (NB: the court must be satisfied that there is prima facie evidence that the documents relate to a relevant issue in the proceedings and that the evidence cannot be obtained in any other way).
Some tentative conclusions
The courts are seeking to strike a balance between, on the one hand, the unfairness caused to a husband if a wife does remarry and the hardship to a wife if she does not. Particularly if a cohabiting relationship breaks down.
On a variation application, the court will look at the financial impact of any cohabitation on the needs of a wife. A cohabitee is expected to pay his way. If a cohabitee can more than pay his way then this will be taken into account.
On capitalisation, the court will take a different view. The analysis in Dixon v. Marchant is helpful. It is also clear now that a relationship that does not amount to cohabitation will also be taken into account, as in the Grey case.
Margaret Hatwood is a Partner in Anthony Gold's Family Law department. For further information email Margaret or call 020 7940 4000.
