28 December 2018

The number of cohabiting families in the UK has almost doubled in the last twenty years. This may be explained by an increasing trend to cohabit rather than marry or cohabit for a period before marrying. Scotland led the way within the UK by introducing certain legal protections for cohabitants in 2006. This legislation was designed to protect cohabitants from unfair situations arising both in the event of separation or death.

Since 2006, cohabitants have had the ability to seek financial compensation at the end of their relationship. A claim upon separation is broadly based on one party demonstrating economic disadvantage as a result of the relationship, including contributions in the interests of a child and the other party having a corresponding advantage, or vice versa. 

However, the legislation allows the courts a high degree of discretion when assessing claims and consequently, many commentators in Scotland and beyond have watched with interest as a variety of cases have been considered by the courts. The Supreme Court decision in Gow v Grant [2012] UKSC 29 is the leading authority on cohabitation claims and provided important clarification on the interpretation of the 2006 Act. In particular, it focussed consideration on where parties were at the start of the relationship, compared to their respective circumstances at the end. A detailed arithmetical assessment of who spent what and when during the relationship should not be undertaken. The overarching message from Gow v Grant is that the purpose of the legislation is to achieve broad fairness between the parties.

The more recent case of M v S [2017] CSOH 151 showed, if there had ever been any doubt, that the courts were willing to grant large capital settlements to cohabitants. This was a case where a capital sum in excess of £900,000 was awarded. Both parties had progressed their careers and business interests during their relationship. They also incurred joint expenses for living and childcare costs. What was interesting about this case was that the Pursuer did not ask for an award based on the financial position overall, but rather restricted to two specific disadvantages. The first was in relation to contributions made to a farm. The Pursuer in the case made payments of £600 per month into the parties’ joint bank account as a contribution towards the mortgage. Initially, £600 was half of the monthly mortgage. When the mortgage rate reduced the Pursuer continued to pay £600 per month. Ultimately, her £600 per month contribution ended up being double the monthly mortgage payment. The Pursuer sought half of the increase in value of the farm during the period of cohabitation, after deduction for certain renovations carried out by the Defender. The court agreed that was a fair and appropriate way to quantify her claim.

Secondly, the Pursuer sought redress for the economic disadvantage she had suffered in the interests of the parties’ two children. She had reduced her working hours and her claim was in respect of the difference of working full time and part time. Again, she sought one half of the income loss thereby recognising that it should be shared between her and the Defender. The court again agreed that it was a fair and appropriate way to quantify her claim.

We recently acted in a complex cohabitation claim in the Court of Session which resulted in the highest capital sum to date in a cohabitation case in Scotland. A payment in excess of £2million was granted. Our case was similar to M v S as it was based on very specific advantages and disadvantages. Our position was that the Defender had benefitted to the extent of one half of the value of two properties purchased in joint names, but paid for entirely using the Pursuer’s pre relationship assets. In addition, that the Defender had benefitted as a consequence of receiving sums from the sale of the Pursuer’s business. A complicated structure had been put in place which saw the Defender becoming involved in the business to facilitate a tax efficient sale. The capital sum repaid corrected the resulting unfairness.

It is encouraging that we are seeing a move away from a “broad brush” approach, as greater certainty in cohabitation cases can only be a good thing for the many cohabiting families in Scotland today. However, the arguments in such cases will undoubtedly continue to be nuanced and require careful consideration.

The Scottish Law Commission will soon be looking again at the legislation governing claims by cohabitants and we may see some aspects of the regime modernised. There is a suggestion that the Family Law (Scotland) Act 1985, which provides a regime for financial provision following the breakdown of a marriage or civil partnership, may provide a useful model for considering a new scheme for financial provision on the breakdown of cohabitation. That would certainly provide greater certainty over the current cohabitation regime and we await such developments with interest.

Contact: Lesley Gordon, Partner and Head of BTO's Family Law Team, lxg@bto.co.uk T: 0131 222 2939 

Visit our dedicated family law website here: www.btofamilylaw.co.uk