March 2012 – Financial Provision on Lifetime Termination of Cohabitation

Author: scott
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  • For couples who are married, or for same-sex couples in civil partnerships, the law provides a fairly comprehensive scheme governing property matters on dissolution of the relationship. For couples simply living together (whether opposite sex or same sex) the law used to take a generally “hands off” approach and leave it up to such couples to make their own private arrangements about such things.
  • Quite often such couples made no such private arrangements. So, when the relationship ended, one or other party lost out and could feel badly done by: the law did not provide any property safety net for them.
  • The Family Law (Scotland) Act 2006 (‘the Act’) has done something about that and introduced a scheme for regulating certain property matters between couples who live together (both same and opposite sex). This scheme does not go so far as it does for married couples and civil partners. But it goes some of the way.
  • In doing so however there is no detailed comprehensive system of financial provision as there is for married couples or those in civil partnerships. Whilst some guidelines are given in the Act there is still quite a bit of room for the court’s discretion in the matter.
  • This Note focuses on one recent important case – Gow v Grant – decided in March last year. It considered what financial provision there may be where cohabitation comes to an end other than on death – and where there were no children of the cohabitants. Such an application must (generally) be made within a year of a couple’s ceasing to cohabit.

Outline summary of what the Act says about such financial provision

  • Before turning to the facts of Gow v Grant something is said about the guidelines which the Act lays down for a court.
  • In broad terms a cohabitant may apply to the court for the award of a capital sum. In fixing the amount of any such sum the court is to have regard to a range of matters including:
    • whether and to what extent each party may have gained an ‘economic advantage’ from ‘contributions’ made by the other; and
    • conversely, whether and to what extent each party may have suffered ‘economic disadvantage’ in the interests of the other.
  • The Act fleshes things out a little more than that outline suggests: in particular it makes it clear that ‘contributions’ may include indirect and non-financial contributions. Nevertheless the court still has quite a lot of room for manoeuvre in deciding what – if anything – to award. By way of an illustration we turn next to see how the court approached things in Gow v Grant.

Gow v Grant – the basic outline of facts

  • Ms Gow and Mr Grant met in 2001.
  • In about December 2002 Mr Grant asked Ms Gow to live with him in his house, and she agreed to do so if they became engaged to be married.
  • They became engaged, and in about June 2003 the two of them began to cohabit in Mr Grant’s house Ms Gow having sold her own flat for £50,000.
  • Ms Gow received about £37,000 after repaying the loan on her flat and used most of the proceeds to repay some of her debts (about £8,000); buy a new kitchen (about £6,000); lend money to her son (£4,000); and invest £10,000.
  • Whilst they were cohabiting Ms Gow paid for a range of things for Mr Grant’s house to the tune of about £4,500; she contributed to some of the ongoing running costs; and paid £1,500 for a joint holiday.
  • Subject to that, Mr Grant largely paid council tax, insurance, utility bills, petrol, and food.
  • Around July 2005 Ms Gow cashed in one of her investments (about £5,000) and the couple jointly bought a holiday time-share.
  • Around 2006 Ms Gow’s other investment matured releasing about £6,0000. Ms Gow used the proceeds to buy paintings (about £2,000) two of which she gave to Mr Grant; spent £1,000 on a joint holiday; and used the balance on day to day joint expenses of the parties.
  • The relationship terminated in about January 2008 (without the couple having married).
  • Ms Gow’s former flat (which she had sold in 2003 for £50,000 when she moved in with Mr Grant) was worth £88,000 in 2009 when she made her application to the court.
  • Following the termination of the cohabitation Ms Gow raised proceedings under the Act against Mr Grant for a ‘capital sum’.

What the court had to say about it

  • The case by Ms Gow against Mr Grant was long-fought. It started off in the sheriff court. The sheriff included in her award for Ms Gow the sum of £38,000 being the difference in the then current (i.e. 2009) value of her former flat which she had sold in 2003 to move in with Mr Grant. In 2009 the flat was worth £88,000. She had sold it in 2003 for £50,000. So the sheriff decided the relative compensation due to Ms Gow was £38,000.
  • Mr Grant did not like that result and appealed. At the end of the day he won: the appeal court decided that Ms Gow was to get nothing. A flavour of the appeal court’s approach is as follows:
    • ‘…the matter to be taken into account by the court in deciding whether to award a capital sum is ‘whether (and, if so, what extent) [Ms Gow] has suffered economic disadvantage in the interests of … [Mr Grant]’.
    • The phrase ‘in the interests of’ is important: what is required is that the applicant should suffer economic disadvantage in a manner intended to benefit the defender. In the present case…[Ms Gow] was encouraged by [Mr Grant] to sell her house. The proceeds were then used either for [Ms Gow’s] own purposes or to meet the parties’ joint living expenses… it cannot be said that the sale and the application of the proceeds were carried out ‘in the interests of … [Mr Grant]’; they were rather carried out primarily in [Ms Gow’s] interests, in that she paid a number of existing debts and made a loan to her son.
    • The fact that the proceeds were used to some extent to meet joint living expenses is not in our opinion sufficient to justify the conclusion that the sale of the house was in the interests of the defender; that contribution must be set in the context of the parties’ general finances, and…[Mr Grant] paid somewhat more towards joint expenses than [Ms Gow] did…
    • The fact that the sale [of Ms Gow’s flat] was encouraged by [Mr Grant] is in our view clearly insufficient to draw the inference that the transaction was in his interests. Likewise, the fact that the sale was intended to further the parties’ relationship is insufficient to justify the conclusion that it was in [Mr Grant’s] interests…’
  • It may not be that easy to draw out any pithy general rules from that extract which can then be generally applied. But the nub of the lesson from Gow v Grant may be that:
    • The court viewed it as a natural consequence of cohabitation that both parties will to some extent fund their joint lifestyle;
    • To establish a claim there would have to have been a clear and significant shortfall for Ms Gow between her ‘economic advantages and disadvantages gained and suffered’ by her on the one hand as compared with Mr Grant’s ‘economic advantages and disadvantages gained and suffered’ by him on the other hand before her claim would have succeeded; and
    • To establish a claim there would have to have been an identifiable link between any such disadvantage to Ms Gow and advantage to Mr Grant.

Note: This material is for information purposes only and does not constitute any form of advice or recommendation by us. You should not rely upon it in making any decisions or taking or refraining from taking any action. If you would like us to advise you on any of the matters covered in this material, please contact Fiona Wayman: fhw@mitchells-roberton.co.uk

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