Coventry View

A litigation lawyer's perspective

Posts Tagged ‘Jones v Kernott

What’s in a Name? – the new Cohabitation Rights Bill

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There was an article in The Times the other day (that I can’t link you with because of their paywall) that reported that 47% of a recent YouGov survey thought that unmarried couples had the same rights when they split up as married couples. Indeed 51% of the women in the survey thought this (as against only 42% of the men). And this is wrong – very wrong. Because they have hardly any rights when they split up, and those they have are difficult to enforce in an effective way.

If a married couple split up then the courts have very wide powers under the Matrimonial Causes Act 1973 to transfer assets between them, order one party to pay the other maintenance or to transfer pension entitlement, and also make orders in respect of any children. If one of them dies there are provisions to allow the survivor to claim reasonable financial provision from the estate under the Inheritance (Provision for Family and Dependents) Act 1975. Insurance policies usually allow for a surviving spouse to receive payment, and they inherit the bulk of the estate and have the right to administer the estate of their late partner under the Administration of Estates Acts, if there is no will.

Very little of this applies to an unmarried partner. The courts can declare what the parties rights in any property are, but can’t alter them. So if Lucy lives in Alex’s house, she won’t normally have any rights to a share of it, even if she has lived there for many years. Nor does she have any rights to a share of his income, or his pension, and if he dies without leaving a will in her favour his estate will go to his children, or parents or siblings and she will get nothing, unless she can persuade the court to award her maintenance under the Inheritance etc Act – which is much more limited than a widow’s rights, and depends on her proving that she was financially dependant.

It is of course a bit more complicated that this if Lucy contributed to the purchase price of the house, or was formally on the title as a joint owner, although even then things aren’t that clear, as the Supreme Court showed in the case of Jones v Kernott (see my piece on this here). She will have to struggle through the provisions of the Trusts of Land and Appointment of Trustees Act 1996 (“Tolata”) where ss 14 and 15 give the courts powers to regulate the actions of the trustees and declare the rights of the beneficiaries. But note that the power is only to declare the rights, not to alter them.

If the couple have children then there will be rights to apply for maintenance for the children, and they will inherit from their father in the normal way. And it is possible for Lucy to make an application for a capital sum under the Children Act to benefit the children, although hardly any applications are made (only 141 applications in the Central London Family Court in 2014) which must mean that it is less than overwhemingly attractive. But Lucy will still have very limited rights herself, and may end up with sordid squabbles about who bought the toaster, and if Alex did, was it bought as a gift for her, or was it intended to remain his, or was it bought for both of them? And then they go on to the fridge…

In a marriage (or indeed a Civil Partnership, whch is the same for virtually all purposes) the court can just transfer the toaster to Lucy and have done with it. Or not, if appropriate.  Actual ownership isn’t decisive.

So parties who are married have much better legal rights and much more effective ways of resolving any disputes if they need to do so. These rights are not perfect, and many husbands have argued they are biased in favour of wives and mothers, but they work in practice, and get tweaked from time to time.

Cohabitation Rights Bill

Now that more and more couples are living together without marriage all these problems become more and more important, especially as a much greater proportion of unmarried couples split up than married couples. There is a lot of pressure to give cohabitees at least some rights, if not all the rights of married couples, and Lord Marks of Henley-on-Thames introduced the CRB in the last parliament, and has now re-introduced it following the election, and it is working its way slowly through the House of Lords at present. The current version is here.

The Bill covers “cohabitants” who are living together as a couple and either

  1. have a child or
  2. have been living together for two years

and are not married to each other, but could be because they are not within the prohibited degrees of relationship (ie parent, grandparent, brother or sister, aunt or uncle, plus some complicated relationships involving children of former civil partners etc).

In such cases, if the relationship breaks down one party will be able to apply to the court for a “financial settlement order”, asking for lump sums, transfers of property, sharing of pensions and so on, very similar to the courts’ powers for a marriage. However, one important difference is that the court’s powers can only be triggered if satisfied that one party has retained a benefit, or the other party has an economic disadvantage as a result of a “qualifying contribution” made by the applicant, and that it is just and equitable to make an order, taking into account a check-list of factors. These include

  • the welfare of any children
  • income and earning abilities, and financial status of the parties
  • financial needs of the parties
  • (in some circumstances) the conduct of the parties.

A further difference is that parties will be able to sign agreements to opt-out of financial settlement orders, but only if they are both separately legally advised. Even then the court can set such an agreement aside if it considers that the agreement is “manifestly unfair” either because of the circumstances in which it was made, or any subsequent unforseen change in circumstances.

There are also provisions dealing with the deaths of the parties, rights on intestacy and other matters.

A Gold-Diggers’ Charter?

I have my doubts about how all this would work in practice, and in all fairness this is based on the first draft version of the bill, which may well be improved as it goes on. It has already provoked strong feelings on both sides. Some feel that it reflects reality in modern societies, and that it should go further in equating cohabitation and marriage. Others feel, however, that any rights are either going to be too weak to be effective, or will be exploited by members of short-term relationships, especially if they have children from earlier relationships already. “A gold-diggers’ charter” some say.

My Solution

I think they have both got the wrong end of the stick, and have a proposal which would make a real difference to cohabitation in future.

Parties intending to live together permanently should enter into a “cohabitaton agreement” which would give them significant enhanced rights. The agreement would not be compulsory but should be encouraged by say tax benefits and social pressure. After a time I would expect it to become normal and for people who did not do so to be a small minority.

The agreement could be fairly short, and merely require the parties to live together and look after each other to the exclusion of third parties. In order to make it more attractive and romantic you could include phrases about “in sickness and in health” and “to love and to cherish”.

The parties should make the agreement by saying the words out loud before some state official and in the presence of at least two independent witnesses. This way there could be no argument about whether they consented to it or not. They may give each other small gifts such as a ring. Then they would all sign a register.  Clearly this will need to be set up beforehand, and they will no doubt get their families and friends to attend. There may be some singing or at any rate music, and everybody will no doubt go off for a few drinks or even a full-scale party afterwards.

The basics would only cost a couple of hundred pounds, although if you wanted to pay more then nobody would stop you. Your parents may well chip in, and of course everybody would dress up. It may become fashionable or indeed standard for the woman to wear a fancy dress of a distinctive colour, and the man would wear a very smart suit which he may have to hire.

Afterwards the parties would have all the rights and privileges of a married couple. As indeed they would be.

You cannot be serious!

Well perhaps not. But I think a lot of people have overlooked the distinction between a marriage and the wedding. You don’t need a vast multi-thousand pound celebration to be married, but you do need to enter into some basic commitments if you are going to live together for the long term. Societies have had marriage for thousands of years and they can’t all be wrong. Perhaps the problem today is that we have the solution to the difficulties of cohabitation right in front of us and can’t see it.

But I’m a lawyer, not a politician, so all I can do is point out the facts, and leave it to others to make the changes.

Written by Coventry Man

20/07/2015 at 15:01

How do we split the house? – Jones v Kernott

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I had hoped to write a crisp and erudite piece about how the Supreme Court had finally sorted out, once and for all, the tricky problem of how you divide up the interests in a house after an unmarried couple split up. After all, there was a judgment given on 9th November –  [2011] SCUK 53 – which should have done this. The court had waited for 5 months since hearing the argument in May, and the lead judgment was given by Lord Walker and Lady Hale, who were the leading players in the last big case on the subject  – Stack v Dowden. It was all very promising. But things didn’t work out as I had expected.

The problem is a very real one, and remarkably common. I won’t go into all the details because that isn’t the point, but broadly Ms Jones and Mr Kernott bought a house in joint names. After living there for a time and improving it, they split up and Mr K moved out, and a little time later bought another house to live in himself and stopped paying the mortgage on this one. 14 years later when the house had gone up vastly in value he came back asking for his 50% share.

The county court judge gave him 10% which more or less represented the value when he left. This was upheld by the High Court, but the CA held that as he had a 50% interest to start with this is what he retained. And so to the SC.

They upheld the county court decision, which was no real surprise, and objectively seemed fair to all concerned (if you disregard the cost of getting to that point). However, the case had been eagerly awaited as a chance to give real practical guidance to unmarried couples, and their lawyers, on how these things are decided, so as to avoid having to go through the courts themselves. And this is where things broke down.

Now the big difference between being a married and an unmarried couple (or rather the one that I want to concentrate on today) is that when things break up the courts have no power to transfer assets or award maintenance etc. All they can do in most cases (child maintenance besides) is declare who owns what, and in what shares, and if that is unfair or unreasonable there is nothing much that can be done.

This is especially so in the case of a jointly owned house, bought by the couple, usually with differing shares of the deposit, and subject to a joint mortgage, which they pay off unequally in practice. It is far and away most couples’ largest asset. How should it be split? Do you look at the contributions and divide it according to the amounts paid? What about the liability for the mortgage? What if one party pays the mortgage and the other pays the utility bills? Or stops work to bring up children? Or earns a lot less than the other? What if there are improvements carried out manually by the couple? How do you deal with inflation? Does it matter if they keep separate bank accounts? What if one moves out how do you deal with the benefit that the other one receives by living there? Does it matter if one moves out under pressure from the other?  The list of questions is long and they all need answers.

Because whatever you say, the couple are not going to enter into a formal declaration of trust setting out their rights and so on. They have decided that they aren’t going to get married, they love and trust one another, and the future is rosy. Or rose-tinted.

So one day, when it has gone wrong, and one or other of them comes in to my office to ask me the awkward questions set out in that paragraph above, it would be extremely handy to be able to have a set of rules that would answer them, and then everybody could go on their way if not happily then at least much better informed.

But it was not to be. First of all there were 4 judgments, all slightly different. And then the guidance in the main judgment, from Lord Walker and Lady Hale, was less than comprehensive. And there was a lot of talk about the deep significance of the difference between “imputed” intentions and “inferred” intentions which mean little to me and will mean a lot less to my clients. It was, with respect, a seriously missed chance.

What can we salvage from the wreckage?  Well there are a set of guidelines set out in the main judgment (at para 51) which say in essence:

  • If they own the house jointly then this would normally mean equally (“as equity follows the law”).
  • But this can be displaced by showing a different intention, either at the time of purchase, or a later common intention to vary things.
  • The common intention is to be deduced from conduct (presumably in the absence of an express agreement) using the guidelines in Stack v Dowden and elsewhere.
  • If it is clear that the parties did not intend equal shares from the start, or had changed their intention, but the court can’t work out exactly what they did mean, the court can decide things on the basis of what they consider fair, “having regard to the whole course of dealing between them in relation to the property.” (Whatever that means – the court said that this had to be given a broad meaning).
  • And each case will (of course) turn on its own facts. Financial contributions are relevant but there are many other factors.

And similar considerations apply if the property is in one name only, although the first question must be whether the other party was intended to have any beneficial interest in the property at all.

But there are more questions raised than answered. If the court had said that they had a complete discretion to award such shares as they thought just then we would know where we are. But they could hardly do that in the absence of legislation. What all this means I will leave to other commentators. But it is a missed chance to clarify thing, an an area which, given the marriage statistics, can only get bigger.

Written by Coventry Man

10/11/2011 at 18:47

Posted in Housing

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