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Big money divorce cases have caught the public’s attention in
recent months, but the case of Stack -v- Dowden is of much greater
relevance to the increasing number of couples who decide not to
marry but to live together.
The case involved a couple who had co-habited for over 20 years,
but never married. They had four children together, but separated
in October 2002. The case went to the House of Lords because there
was a dispute as to how much each of them should get from the sale
proceeds of the house they had been living in together. When the
parties separated, Mr Stack moved out. They had been living in a
property (which I will call “the property at Chatsworth Road”)
which was owned by them jointly. The previous property they had
lived in, (which I will call “the property at Purves Road”), was
owned in the sole name of Ms Dowden.
Throughout the parties’ relationship both of them worked
full-time. Ms Dowden was an electrical engineer, who always earned
more than Mr Stack, who was a freelance builder and decorator. When
the Purves Road property was sold and Chatsworth Road purchased,
monies from the sale of Purves Road were put towards the purchase
price.
Mr Stack argued that he should be entitled to a half share of
the Chatsworth Road property, but Ms Dowden maintained that she
should have more than half because of her greater financial
contribution to the purchase price. The House of Lords decided to
uphold the earlier ruling given by the Court of Appeal that Mr
Stack should receive 35% of the sale proceeds and Ms Dowden
65%.
The Law Lords stated that the starting point is to look at the
legal ownership of the property. So, if a house is owned in one
party’s sole name, it is up to the other party to try to show that
he or she has an interest in the property even though he or she is
not on the deeds. He or she has to try to assert what is known as a
beneficial interest. Similarly, if the property is held in the
couple’s joint names, the onus will be on the party who wishes to
show that the beneficial interests should be divided other than
equally. Here, Ms Dowden was trying to argue that the beneficial
interest should be divided on an unequal basis because of her
greater financial contribution.
One of the Law Lords, Baroness Hale of Richmond, gave the
leading judgment. She decided that financial contributions to the
purchase price are not the only consideration. She felt that it
would also be right to take into account the reasons why a home was
acquired in joint or sole names; the purpose for which the home was
purchased; the nature of the relationship; whether the parties had
children; how the purchase was financed; how the couple arranged
their finances and how they discharged outgoings and household
expenses. She said: “in the cohabitation context, mercenary
considerations may be more to the fore than they would be in
marriage, but it should not be assumed that they will always take
price of place over natural love and affection”. However, she
concluded by saying: “cases in which the joint legal owners are to
be taken to have intended that their beneficial interest should be
different from their legal interests will be very unusual (my
emphasis)”.
The judges decided that in the case of Ms Dowden and Mr Stack
there were unusual circumstances in that, despite co-habiting for
such a long period of time, the couple had kept all their finances
separate apart from the house at Chatsworth Road. As Lord Hope said
in giving his judgment: “while they pooled their resources in the
running of the household, in larger matters they maintained their
financial independence from each other throughout their
relationship. It was partly this very unusual financial set up in
their relationship that led to the decision to award Ms Dowden a
greater share of the sale proceeds.
However Lord Neuberger of Abbotsbury felt that it was Ms
Dowden’s much greater financial provision which was the most
important consideration. He disagreed with Baroness Hale that other
circumstances are as important as the financial contributions to
the purchase price. He said: “particularly where the parties have
chosen not to marry, their close and loving relationship does not
(my emphasis) by any means necessarily imply an intention to share
all their assets equally. There is a large difference between
sharing outgoings and making a gift of a valuable share in
property…. I am similarly unconvinced that the ownership of the
beneficial interest in the home acquired in joint names is much
affected by whether the parties had children at the time of
acquisition……[this] says nothing on its own as to the intended
ownership of the beneficial interest”.
He did nonetheless agree that the starting point should be the
legal ownership of the property and that compelling evidence would
be needed to show that the parties intended to own the property in
different proportions after the date of acquisition. He gave the
example of one party carrying out significant improvements to the
property which may be evidence that the parties have changed their
minds as to how they intend to own the property. He felt, however,
that such improvements would have to involve a large capital
expenditure and that run of the mill decoration or repairs would
not do.
Unlike when married couples divorce, where the court applies the
principles of fairness and equality, fairness is not the guiding
principle in relation to unmarried couples. Lord Neuberger summed
this up when he said: “fairness is not the appropriate
yardstick”.
With the increase in the number of unmarried couples who
co-habit, the decision in this case is important for unmarried
couples to be aware of. Baroness Hale pointed out in her judgment
that there has been a 67% increase in the number of co-habiting
couples over the previous ten years and a doubling of the numbers
of such households with dependant children. She also revealed that
the Government Actuaries Department predicts that the proportion of
co-habiting couples will continue to grow, from the present 1 in 6
of all couples to 1 in 4 by 2031. She also points out that:
“co-habitation is much more likely to end in separation than in
marriage, and co-habitations which end in separation tend to last
for a shorter time than marriages which end in divorce”. The
potential for disputes in this area, therefore, is likely to
increase.
There are steps, though, that unmarried couples can take to
minimise the risk of a dispute and costly legal actions. When they
purchase a property they can enter into a Declaration of Trust
which is a document which clearly sets out the proportions of each
party’s ownership. This document will then generally be conclusive
as to how sale proceeds should be divided. In addition, co-habiting
couples can enter into a Cohabitation Agreement or Living Together
Agreement, which is a type of contract which sets out how they are
going to manage their financial affairs. In light of the
uncertainty and potential unfairness that could arise on the
separation of a co-habiting unmarried couple, it seems prudent to
spend some time at the outset of acquiring a property thinking
about these legal issues. It may be the last thing on your mind
when you and your partner are caught up with the romance and
excitement of buying a property, but a little prudence up front
could save a lot of heartache later.
Sarah
Wright is a solicitor in the Family team at Blake Lapthorn in
Winchester and can be contact on 01962 844440.
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