Cohabitation: The Financial Consequences of Relationship

Breakdown

Law Com No 307

Stuart Bridge

Chronology

• Referred by Government to the Commission.

• Consultation Paper (with Overview) May 2006.

• Report (no Bill, as none requested) published 31 July 2007.

Terms of reference

• Project to focus on financial hardship suffered by cohabitants or the children on termination of relationship by breakdown or death.

• To consider only opposite-sex or same-sex couples in clearly defined relationships.

• Particular attention to be paid to:– Capital provision where dependent child/ren– Capital and income provision on relationship

breakdown– Intestacy and family provision on death– Cohabitation contracts and separation agreements

between cohabitants.

Problems of the current law

• Patchwork of statutory rights– Children Act 1989, Sch 1 (capital provision for children)– Child Support Acts 1991 and 1995 (income provision for children)– Family Law Act 1996, Part 4 (protection from domestic violence)– Family Law Act 1996, Sch 7 (transfer of certain tenancies)

• But no personal remedy at end of relationship (outside marriage or civil partnership).

• Reliance therefore placed on property rights (beneficial entitlement under the law of trusts) in the shared home.

• Widespread misconception as to true legal position: “the common law marriage myth”.

We do not recommend

• That there should be an “opt-in” remedial scheme available to cohabitants who register their relationship.

• That amending Schedule 1 to the Children Act 1989 provides an adequate response.

• That the divorce regime contained in the MCA should be applied to or adapted for cohabiting couples.

Financial relief for cohabitants

• A scheme of general application whereby cohabiting couples may apply for financial relief on separation

– Provided they satisfy eligibility criteria– But not where they have reached an opt-out

agreement disapplying the scheme (in which case their own financial arrangements would apply)

The definition of cohabitants

• Persons should be cohabitants for these purposes where

– They are living as a couple in a joint household

– They are neither married to each other nor civil partners of each other

Eligibility criteria

• Cohabitants who are by law the parents of a child (born before, during or after cohabitation) should be eligible to apply.

• Other cohabitants should not be eligible unless they have lived as a couple in a joint household for a specified duration, to be set by statute within a range of 2 to 5 years.

The nature of the financial relief claim

• The courts should be given a discretion structured by principles which determine the basis on which financial relief is to be granted.

• Claims should be brought within 2 years of the parties’ separation, subject to a general discretion to extend (to be exercised in exceptional circumstances only).

The ingredients of a claim

• An eligible cohabitant must prove that– The respondent has a retained benefit; or– The applicant has an economic disadvantage

as a result of qualifying contributions the applicant has made.

• A qualifying contribution is any contribution arising from the relationship to the parties’ shared lives or to the welfare of their families.– Not limited to financial contributions.– Future contributions are included.

Definitions

• Retained benefit may take the form of capital, income or earning capacity that has been acquired, retained or enhanced.

• Economic disadvantage is a present or future loss, including– Lost future earnings– The future cost of paid child-care– Diminution in savings as result of expenditure or

as result of earnings lost prior to separation.

The operation of the scheme

• The court may make an order to adjust the retained benefit (if any) by reversing it in so far as reasonable and practicable.

• If, after reversal of any retained benefit, the applicant would still bear an economic disadvantage, the court may make an order sharing that loss equally between the parties, in so far as reasonable and practicable.

• The court should be entitled to make orders similar to those available on divorce, with the exception of periodical payments orders.

Opt-out agreements

• An opt-out agreement should be enforceable in place of the scheme of financial relief– Where it is in writing, is signed by the parties, and

makes clear their intention to disapply the statute.

• The court should be entitled to set aside an opt-out agreement if its enforcement would cause manifest unfairness having regard to– The circumstances at the time it was made; or– Circumstances at the time the agreement comes

to be enforced which were unforeseen when it was made.

Succession

• No reform of intestacy rules

• But consequential reforms of Inheritance (Provision for Family and Dependants) Act 1975

– Definition of cohabitants

– Apply separation analogy

– Power to bar future application under 1975 Act on making order for financial relief on separation