Family case briefing

Family law is one of those disciplines in which lawyers often have to give particularly unpalatable advice to their clients. Advice to husbands about the impact of cohabitation on periodical payments for a former wife is a case in point. The husband is usually outraged and incredulous when told that his maintenance obligation to his former wife will not automatically cease if she cohabits with another man.

In K v K (Periodical Payment: Cohabitation) [2005] EWHC 2886 (Fam); July [2] Fam Law 518, Coleridge J considered the current state of the law on this issue. He expressed some very firm views about how the court should now approach these cases, notwithstanding the Court of Appeal's refusal in Fleming [2004] 1 FLR 667 to consider the impact of cohabitation on periodical payments as an issue of principle, instead confining itself to saying that in assessing the impact of cohabitation the court should have regard to the overall circumstances, including financial circumstances.

Coleridge J also took the opportunity to make some helpful comments about how the court should approach financial provision for adult children in tertiary education.

Living arrangements

At the time of the hearing in November 2005 Mr K was 58 and Mrs K was 53. Mr K had remarried; his second wife was 57. Mrs K was cohabiting; her cohabitee was 54.

Mr and Mrs K were married in 1982. Mrs K gave up work shortly before the birth of their first child who was born in July 1983. Their second child was born in February 1985. During the marriage, Mr K became a partner with a firm of City accountants. Mrs K worked part-time when the children were older. They bought a second home in France in 1988 and moved to their final matrimonial home in 1992.

Mrs K petitioned for divorce in 1996 and decree absolute was pronounced in August 1998. A financial consent order provided that Mr K should pay Mrs K index-linked periodical payments of £16,000 per annum, so by the time of the November 2005 hearing he was paying her £18,955 per annum. The capital assets were divided broadly equally. Mrs K kept the net proceeds of sale of the family home, Mr K kept the French property and his partnership capital.

Mr K had a substantial pension valued at £568,000. Pension-sharing was not possible at that time, but he was ordered to pay Mrs K 20 per cent of his tax-free pension lump sum on his retirement and his solicitors wrote to Mrs K's solicitors indicating that they expected her to look to Mr K's pension for her maintenance on his retirement. Mr K also purchased an annuity for Mrs K, which would provide her with an income of £15,000 per annum on his death.

In June 2002, Mr K retired because of ill health. In December 2002, having sold the former matrimonial home, Mrs K bought a property in the joint names of herself and her cohabitee.

In June 2004 Mrs K and her cohabitee bought a second property as a holiday letting business. This prompted Mr K's solicitors to write to her telling her that Mr K had, for the first time, discovered that she was cohabiting. They suggested that she agree to her periodical payments being reduced to a nominal order. She declined.

Mr K issued proceedings for variation of the periodical payments order, asking the court either to reduce it to a nominal order, or in the alternative, to reduce it very significantly, on the bases: (i) that Mrs K was living with another man in circumstances identical to marriage and had been doing so since at least 2002; and (ii) that his financial circumstances would dramatically reduce from the middle of 2006 so he could not afford to continue to pay at the current level and should not be required to do so.

Mrs K accepted that there should be a reduction in her periodical payments to £15,000 per annum from the time when Mr K's income dropped. She argued that, although she was living with another man and had been doing so for the last three years, as the law currently stands that fact of itself should not lead to the reduction of the order to a nominal figure. She asked the court to capitalise her continuing maintenance with a payment of £300,000.

Earnings and property

Mr K and his second wife were living in a jointly owned property and still had the French property which had been transferred to Mr K at the time of the divorce. Mr K's second wife had also bought a property in Greece. Mr K was hoping to earn a modest income from clock restoring and his second wife was working in an organisation dealing with museums and libraries.

Mrs K was earning a modest income. She was living with her cohabitee in their jointly owned home. Her cohabitee was employed and also had freelance income from giving investment advice. They had the jointly owned holiday cottage, the purchase of which had triggered Mr K's variation application, and the cohabitee owned two other cottages in the same village.

Coleridge J commented that, as always with applications to vary, it had been necessary to look in detail both at the circumstances that existed at the time of the original order and the circumstances that existed when the case came before him and which would exist in the foreseeable future. There could not possibly be any question but that the way in which the finances were divided up at the time of the divorce was 'a fair and proper split'.

It was conceded that Mrs K and her cohabitee had cohabited since December 2002 and that there was a considerable intermingling of their finances. Both of them denied any intention to remarry. The cohabitee said he had been married before and 'he did not want to go through it all again'. He said he regarded cohabitation as being a different state of living to marriage. Coleridge J said he accepted the cohabitee's evidence but:

'The question the court has to grapple with is whether it is indeed 'a different state of living', which should attract different consequences legally in the context of applications such as this.'

Mr K had rebuilt his capital base and was in a much stronger position than at the time when the original order was made, but his income position was due to diminish from June 2006. Mrs K's capital position was pretty much as it had been immediately following the making of the order. She was still dependent on the periodical payments she was receiving from Mr K. Without those payments, she would be unable to make her current contribution to the household she shared with her cohabitee or support herself fully. She would need her cohabitee's assistance. The question for the court was whether the cohabitee should be pressurised into assisting her by the reduction or extinguishment of the periodical payments order.

The husband's counsel argued that if cohabitation equates with marriage in the context of an assessment of 'contribution' (see GW v RW [2003] 2 FLR, M v M [2004] EWHC 688 (Fam) ), why should it not also in a decision about the continuation of periodical payments? It would be unfair to the husband to ignore Mrs K's cohabitation.

Mrs K's counsel stressed the legal distinction between marriage and cohabitation and pointed out that Mrs K's cohabitee would have no financial responsibility towards her if their relationship ended in the future. Moreover, the order for periodical payments was the best that could be achieved for Mrs K to enable her to continue to benefit from the pension funds accumulated by the husband during the marriage. The assumption was that she would continue to benefit during the husband's retirement.

The judgment

Having commented on the inadequacy of the current legislation, Coleridge J posed the question, how far can the court go to redress the inadequacies of the legislation by applying it now in the contemporary context?

'The man on the Clapham omnibusº regards it as wholly anomalous and unfair for a cohabiting ex-wife in the circumstances of this wife to continue to receive income provision from a husband indefinitely.'

However, if a wife in Mrs K's position had generated an entitlement to ongoing income provision, was she not entitled to avoid the consequences of its cessation by refusing to take the step of remarriage?

The court cannot simply say 'it is a matter for Parliament'. The court must factor into its analysis not only numerically, but also in principle, the existence of a lengthy, settled period of cohabitation and the likelihood of its continuing indefinitely.

The court must be careful to avoid allowing the wife in these cases 'a second bite of the cherry'. On a variation/capitalisation claim, the court should not try to right a past wrong or look again at the relative wealth of the couple concerned.

The starting point should be the correct level of periodical payments from now on. Even if it had been appropriate to do so, which it was not in this case, the court was not able to go as far as an immediate reduction to a nominal order in the light of the present Court of Appeal authority. The current level of periodical payments should continue until Mr K's income dropped in June 2006. From then on, Mrs K's periodical payments order should be reduced to £12,000 per year which on a Duxbury basis would require a lump sum of £175,000 for capitalisation. However, Mrs K's cohabitation must impact on any capitalisation process by reducing the period of dependency on Mr K. It must amount to a circumstance and/or a change in circumstance as envisaged by s 31(7)(b) of the Matrimonial Causes Act. If the court was not capitalising, it would be considering closely the length of any ongoing term.

Mr K was ordered to pay Mrs K £100,000 in June 2006 to discharge her periodical payments order. The reduction was to reflect the shorter period for which he should be expected to support her but also took into account her underlying 'pension entitlement' element from the old order. But for the pension entitlement element, the capital sum would have been reduced further.

It remains to be seen whether a court will be brave enough to order a termination of periodical payments on 'cohabitation' after a certain period, under s 28(b) of the Matrimonial Causes Act. Coleridge J said he could see no reason why a court should not, but I suspect that old habits die hard and it will be some time yet before a court takes such decisive action.

Disclosure about the means of the second wife and cohabitee was an issue in the case. The court held that if the court is to achieve fairness in these cases it must be in possession of the whole financial picture of both households, ie, including the financial circumstances of second spouses and cohabitees.

Provision for adult children

There was a dispute about the financial contribution which Mr K should pay for the two adult children of the family, who were now at university. Mrs K made an application to the court for an order because Mr K was not paying as much as he had promised to pay in 2001 before his retirement.

Coleridge J held that the court should be very slow to interfere with financial arrangements made by parents with their adult student children. He was not prepared to make an order on the wife's application as there had been no requirement for an order in the past and Mr K was making provision. However, he obtained Mr K's agreement to be guided by the court on the amount he should pay as the court had carried out a full survey of his financial position.

The question of what should be paid after the children have left school is often very contentious, so this guidance from the court is welcome

Jane Craig is a partner in Manches