In the recent case of AB v CB [2014] EWHC 2998 (Fam), [2014] All ER (D) 152 (Sep), a husband and wife had lived together in a farmhouse held by the husband’s parents. A trust was later executed over the farmhouse, with the husband as the principal beneficiary. Both the husband and wife had contributed joint money to the farmhouse. The wife claimed for ancillary relief following divorce. The family court held, among other things, that the trust would be varied to create a wife’s fund, of which £23,000 would be outright and £134,000 would be on the life tenancy in respect of the farmhouse.

WHAT ISSUES DID THIS CASE RAISE?

This case deals with three interesting issues: 

  • the question of what is to be considered as a ‘nuptial settlement’ which is capable of variation by the court under the Matrimonial Causes Act 1973, s 24(1)(c) 
  • the relevance of any new relationship embarked on by a party to proceedings to the appropriate level of settlement, and 
  • the correct procedure for the appealing of first instance decisions and the rationale behind this procedure.

TO WHAT EXTENT IS THE JUDGMENT USEFUL IN CLARIFYING HOW THE COURT WILL APPROACH THIS TYPE OF CASE?

The judgment helpfully sets out a summary of cases dealing with what comprises a nuptial settlement and reiterates the test in this regard as being ‘any arrangement which makes some form of continuing provision for both or either of the parties to a marriage’.

Mostyn J’s decision is useful for practitioners and clients in providing further clarification on what will be considered by the court as a nuptial settlement capable of variation under statute. It is also useful in its indication as to the way in which new relationships formed during ongoing divorce proceedings may impact on the eventual award. Specifically, it seems that, following Mostyn J’s judgment, judges may feel more comfortable ordering less provision where it appears that a party has a ‘strong’ relationship with a new partner, even if they are not cohabiting or intending to cohabit, and even if that award may not meet needs if the relationship ended. As this is very much a departure from previous thinking, it is important that clients are made aware of this. However, it remains to be seen whether this is an outcome which was influenced heavily by the facts of the particular case.

TO WHAT EXTENT IS THE JUDGMENT HELPFUL IN CLARIFYING THE CORRECT APPROACH TO SEEKING PERMISSION TO APPEAL?

The judgment also deals with an appeal against the original award by the trustees. It makes clear that an application for permission to appeal (at least in the area of financial remedy) should always be made to the judge at first instance before any approach is made to the Court of Appeal. Mostyn J helpfully sets out the five reasons given for this in the Civil Procedure Rules 1998, SI 1998/3132, 52.3.4:

  • the judge below is fully seised of the matter and so the application will take minimal time—indeed the judge may have already decided that the case raises questions fit for appeal 
  • an application at this stage involves neither party in additional cost 
  • no harm is done if the application fails—the litigant enjoys two bites at the cherry
  • if the application succeeds and the litigant subsequently decides to appeal, they avoid the expensive and time-consuming permission stage in the Court of Appeal
  • no harm is done if the application succeeds but the litigant subsequently decides not to appeal.

Further, he goes on to explain the rationale for this procedure—namely that the judge at first instance may very well be a specialist in the particular field in question, and that judges in the Court of Appeal often find the rulings made by judges at first instance to be helpful in identifying the merits or otherwise of an application for permission to appeal.

WHAT DOES ALL THIS MEAN FOR FAMILY LAWYERS AND THEIR CLIENTS? WHAT SHOULD THEY DO NEXT?

On a practical level, clients should now be made aware that the details of a new relationship, and the resources of any new partner, may be subject to much greater scrutiny than in the past. Parties are currently required to disclose details of a new partner’s income, assets and liabilities only where they have subsequently married, formed a civil partnership (or intend to) or are living with another person (or intend to) at section 4.6 of Form E. This decision indicates that judges may be willing to go beyond the wording of Form E in conducting an assessment of the assets and income of a partner, even one who a party does not intend to live with.

Practitioners should give careful thought to the treatment of any new relationship entered into by their clients while proceedings are ongoing and advise clients that a new relationship may impact on the level of an award and the assessment of a party’s needs.

HOW DOES ALL THIS FIT IN WITH OTHER DEVELOPMENTS IN THIS AREA?

The courts of England and Wales have had a long-standing reputation for being some of the most generous in the world in their financial awards upon divorce. However, most practitioners agree that there has been a sustained move away from courts providing a ‘meal-ticket for life’, as shown, for example, by a move away from the award of joint lives maintenance orders to term orders in appropriate cases. This judgment may be indicative of further judicial encouragement and expectation that parties should strive for financial independence and that awards will be more needs-based rather than simply striving for equality for equality’s sake.

The Law Commission Report published in February 2014 on matrimonial property, needs and agreements did not recommend any change in the law relating to financial needs - on the basis that the courts have operated the law in a way that generally yields the most practicable outcomes in the circumstances. However, the report did recommend that the Family Justice Council clarify the meaning of ‘financial needs’ in accessible guidance, to provide transparency and clarity.

Perhaps movement in case law in relation to a new relationship will also bring back into focus the issue of rights of cohabitants. The Government’s stated intention not to take forward the Family Justice Council’s recommendations for reform in this area during the current parliamentary term was seen as a very disappointing decision by many practitioners, and cases of this nature could now lead to further calls for reform.

This article was published by LexisNexis in October 2014.