Update: family

Will there be any changes for family lawyers to anticipate under the coalition? Historically, the Liberal Democrats and the Conservatives have had a very different approach to 'the family'. This difference may now result in a period of very limited change for family practitioners and any change to help protect separating cohabitees has already been shelved by the coalition.

However, a review of the family justice system has been commissioned by the Ministry of Justice, the Department of Education and the Welsh Assembly government with the aim of improving the system so that it is quicker, simpler and more cost effective. A call for evidence was launched in June 2010 with a final report anticipated in 2011.

No intention to vary

The Court of Appeal has recently endorsed a decision based explicitly on 'fairness' in Kernott v Jones [2010] EWCA Civ 578 for unmarried couples (see solicitorsjournal.com, 4 June 2010, and see next week's issue for more detailed commentary). In this case, the parties purchased a property in joint names in 1985. The purchase price was £30,000 and Ms Jones contributed a deposit of £6,000 with the balance being raised by way of a joint endowment mortgage. Further borrowing of £2,000 was subsequently taken out for an extension which was built and largely paid for by Mr Kernott, and which work enhanced the value of the house by approximately £14,000.

The parties had a child at the time of purchase, and had a second child a year later. During the relationship, Jones and Kernott shared the cost of household bills, including meeting their mortgage repayments.

The relationship broke down, and they separated in 1993 with Jones remaining in the property where she lived with the two children. She took on responsibility for meeting the entire outgoings on the property, including the mortgage repayments, and providing financially for the two children. They did not discuss at the time of their separation the possibility of changing their beneficial interest in the property.

Kernott subsequently bought another property, raising the deposit monies with Jones' agreement by cashing in a joint life policy which they owned and dividing the proceeds equally between them.

The trial judge ruled that Jones' contribution towards the purchase of the property by way of deposit, and her significant contribution since the parties' separation had ensured an entitlement to a greater share in the equity than Kernott. He also took into account the failure on the part of Kernott to contribute much towards maintenance for the children. He felt that Kernott's view of the property had altered at the time of their separation and that he had then demonstrated no intention of availing himself of his beneficial ownership, having ignored this completely and having made no further investment in the property. The judge altered the parties' interests on the basis of what he felt was fair and just and fixed the beneficial interest so that Jones would be entitled to 90 per cent and Kernott ten per cent.

Nicholas Strauss QC dismissed Kernott's appeal and held that if a worthy intention of the parties could not be inferred the court would be free to impute a common intention to them and indicated that the judge had been right to impute the parties' intention to change their beneficial interests at the date of their separation. He felt that what was 'fair and just' was the appropriate criteria to quantify the interests of the parties following the imputation.

Kernott appealed to the Court of Appeal and, by a majority of 2:1 with Jacob LJ dissenting, the court held that without evidence they could not properly infer a common intention to alter the beneficial interests held at the time of separation. Therefore, the parties' beneficial interests were equal.

The upshot of this decision for practitioners is that to succeed in overturning an equal beneficial interest the court will not accept an inferred or imputed intention to vary the terms. To prove that there should be a shift from equality of division, therefore, and in the absence of any express intention, the requirement must be for cogent evidence to be presented sufficient to justify the inference of an intention to vary.

Post-separation income

In B v B [2010] EWHC 193 the wife proposed that her financial claims should be assessed on the basis of all of the family wealth, which included a substantial sum which had accrued from bonuses earned by her husband, after the parties separated in July 2007.

The relationship had been a long one, with the parties beginning cohabitation in the early '90s and marrying in 1996. They have three children. The husband had a successful career, and was established as a trader in 1998, taking on a senior role in 2001 and even more responsibility in 2008. Although his income was relatively modest in terms of basic salary, he earned significant sums from discretionary performance-related bonuses paid in cash and in instalments in cash and shares.

The judge at first instance held the total resources to be £12.3m. However, around £3.6m of this was the cash element of the husband's 2008 bonus. He was due to receive £2.7m in March 2010 being the deferred instalments for the 2006-08 period and 50 per cent of his likely bonus for 2009.

The judge held that this was not a case which warranted the wife being awarded an equal share of the total wealth existing at the time of trial because such a result would not give sufficient weight to the fact that a substantial part of the wealth had been built up by the husband directly as a result of his endeavours after the parties separated.

As there was a degree of uncertainty about the amounts the husband would receive by way of deferred instalments from 2011 onwards, the judge determined the award on the basis of total assets of £15m and awarded the wife just over £7m (£1m of which was for capital needs and approximately £6m for income needs). With regard to the future instalments which the husband might receive and which were likely to total in excess of £3.5m, the judge awarded the wife a further sum, which was expressed as a percentage of the total due of 15 per cent of all net sums received in respect of the years up to and including 2009 (i.e. prior to the parties' separation).

Maintenance and jurisdiction

In Moore v Moore [2009] EWCA Civ 1427, the Court of Appeal had to decide whether arrears under a maintenance pending suit order were still enforceable when the wife, who had the benefit of the order, had chosen to withdraw her petition accepting that there was no jurisdiction for her to proceed.

The appellant husband was Nigerian and was born in Nigeria, and the wife was of Nigerian origin but was born in London. They married in Lagos in 1994 and separated in 2002. Initially the wife filed a petition in Lagos but subsequently withdrew that petition and petitioned in England. The husband cross-petitioned in Nigeria and challenged the English jurisdiction, but at first hearing the wife was awarded maintenance pending suit. The sum was reversed in the High Court but a lesser sum reinstated soon after of £10,000. This order was again challenged by the husband as to jurisdiction and he failed to pay any maintenance during the period of his challenge.

When the matter eventually came to be heard, the wife withdrew her petition and, therefore, Bodey J who heard the application had to consider whether the husband was bound to pay the arrears which had accrued or whether the order should be discharged as a result of the wife withdrawing her petition. He concluded that as a matter of law the husband remained liable for the arrears and that it would be wrong to remit any arrears despite the withdrawal of the petition. On behalf of the husband, counsel argued that the foundation for the jurisdiction of the maintenance order was withdrawn when the wife withdrew her petition and any liabilities, future or historic, were as a result discharged.

Thorpe LJ rejected the argument supporting Body J's judgment. In quoting from Bodey J it was stated: 'Where maintenance pending suit has been paid prior to the payee's failure at the trial, there is no question of a refund to the payer; and by parity of reasoning'¦ where, as here, maintenance pending suit has been unpaid in breach of an order, there is no question of it becoming unenforceable, nor of the order being discharged ab initio so as to eliminate the arrears.'

He also noted that the husband made no application to vary the order downwards and rejected any arguments that the level was too high. The appeal was dismissed.

Clean break?

In D v D [2010] EWHC 138 (Fam), consideration was given to whether a clean break can be achieved where that outcome would be funded through a family company.

The husband was a farmer who had inherited part of the business which he ran with his brother and father. The husband and the wife had lived together from 1985, marrying in 1986. They had two children in tertiary education. During the course of the marriage the farming business had grown and developed with the help of a significant windfall from the sale of land under compulsory purchase. When the parties began living together the turnover was £350,000 but by 2009 this had increased to £6.8m.

At a time when the husband knew of the prospect of a separation, he and his father invested £3m in a new processing plant.

At the date of the trial, this business had been a loss-making venture and it significantly reduced the company's liquidity.

At trial the husband argued that the land was inherited and as this was a farming case he should retain 100 per cent of the assets and there should be a clean break.

The judge, however, rejected the notion that the case should be treated differently simply because it involved a farm and also rejected the clean break as the funds within the company could not sustain a payment that would be fair to the wife who he decided should have an income between £80,000 and 90,000 per annum to match the standard of living that she had enjoyed at the time of separation.

A significant amount of time and detail in the judgment considers the fair means of extracting funds from within the company and concluded that the husband should retain the day-to-day control of the business and, on the basis that the investment in the processing plant would be successful in the longer term, the award should reflect the reality.

He awarded the wife the matrimonial home and ordered that the husband pay a lump sum of £1.5m to be funded by a dividend and a further cushion of £500,000 with periodical payments of £44,000 per annum.

At the time of going to print we are still waiting for the decision in the Radmacher case.