Governs Property and Financial Provision

‘The law that governs property and financial provision when cohabiting couples separate is now in an untenable position. The only possible solution is reform which would place separating cohabiting couples in the same position as those following divorce or dissolution.’

Discuss critically.

The present law governing cohabiting couples has been widely criticized; so much so that the Law Commission has characterised the existing rules as arbitrary, uncertain and unfair. There have been many attempts and various consultations to change and reform the law on property and financial provision when cohabiting couples separate to provide them with more rights and to put them in the same position as those following divorce or dissolution. The increase in cohabitation instigates the necessity an appropriate and timely response from the law to regulate this new tradition. Nevertheless, the government has acknowledged the insufficiency of the current Law; therefore the Law Commission has conducted research over a two year period that culminated in a report published in 2007.  The report sets out numerous issues the legislators face in regard to cohabitation and suggests for a possible reform. This assignment will be discussing whether reform is really necessarily the only possible solution in place separating cohabiting couples in the same position as those following divorce or dissolution.

The Family Law Act 1996 has defined ‘Cohabitation’ as “a man and woman who, even though never married, are living together as husband and wife”. This definition is however limited, as it lacks acknowledgment of different types of cohabiting couples (e.g. same-sex couples). There is an increase in the amount of cohabiting couples in recent years. The 2001 Census, confirmed that, in the last 10 years the number of cohabiting couples has increased by 67%, and according to the Law Commission Report, it stated that cohabitation is “expected to become more prevalent in the future”. It was also revealed in the report that according to the British Social Attitudes Survey 2000 that the public opinion on cohabitation is positive, with 67 per cent of respondents agreeing that it is “alright for a couple to live together without intending to get married”

Many cohabiting couples are under the perception that they will automatically succeed for some protection from the law if their relationship was terminated; but, as with gay couples (except civil partnership), their relationship is not recognised as having any legal significance, and they have no special status in the eyes of the English legal system. Many cohabiting couples live together without intending to getting married, despite the length of their relationship, the law still regards then an separate individuals with no rights or liabilities to each. This leads to major implications for such couples, particularly in relation to their home; especially with the fact that majority of couples fail to consider this until after the relationship has ended, causing them distress.

There are implicating differences between the legal positions of spouses or civil partners and unmarried couples. The beginning and end of a marriage or civil partnership is closely regulated by the law by setting out certain formalities. An unmarried cohabiting relationship can however, begin or end without any notification to any public body. While every marriage and civil partnership is centrally registered, there is no such record of cohabitation. In terms of financial support unmarried cohabitants cannot seek maintenance from one another; whereas married or civil partners can seek a court order requiring one to pay maintenance to the other (mainly in divorce). The most significant fact is that on divorce or dissolution the court had the power to redistribute property owned by either party. However, on the ending of an unmarried relationship the court only has power to declare who owns what and has no power to require one party to transfer to the other or to pay maintenance. The Matrimonial Causes Act enforces property division on divorce for the breakdown of a marriage, however as cohabitants cannot divorce this is yet another right they are not entitled to. The Financial Consequences of Relationship Breakdown Law Commission Report addresses the issue of the insufficiency of the law regarding the breakdown of cohabiting couples.

It can be argued that the courts are now trying to resolve property disputes with cohabitants in the same way as they would with married couples such as hearing the case under the Matrimonial Causes Act 1973. The courts have utilised various equitable doctrines such as constructive trusts which have in effect given the courts wide discretion in deciding the appropriate share of the equitable interest. The law governed by constructive trust can be drawn from the decision of the House of Lords in Lloyds Bank v Rosset, although it has been developed by Stack v Dowden and Abbott v Abbott.

On the other hand, the law had been described as complex, uncertain and likely to give rise to unfair outcomes; reasons being is that it does not take sufficient steps in relation to economic cost or contributions upheld by other parties, particularly when it comes to non-financial contributions such as one partner giving up their career to raise a child.  Further more, the Law Commission articulated disappointment with the role of constructive trusts as a solution for cohabiting couples who wish to separate.  In the 2007 report, the two main criticisms were, firstly, that constructive trusts cannot accommodate contingent intentions and secondly, due to the restrictive nature of constructive trusts, the court is incapable to substitute its views of what is fair, but must remain to the intentions of the parties. Nevertheless, one of the main aims of legislation to regulate financial provision for cohabitants on separation is to protect the vulnerable that are often unaware of the lack of protection.

The main key debate in relation to the possible extension of marriage-equivalent rights and responsibilities to informally cohabiting couples is whether this would undermine the institution of marriage. While some research suggests cohabitation law should reflect that cohabitation has become a socially accepted lifestyle choice. The central view is that if cohabiting couples can get all the benefits of marriage without actually formally marrying, this would in essence lead more people to cohabit in stead of marriage and the family stability will be undermined. No policy-maker or government would want to be responsible for in England and Wales, and perhaps accounts for the Law Commission’s avoidance of marriage equivalence in favor of novel proposals based on reparation for relationship generated economic disadvantage put forward in their recent consultation paper.

Whether treating couples in the same way as a married couple would undermine marriage is a matter for debate. A study conducted in Australia, where whose living together for two years or more are treated in the same was as married couples, suggested that reform had no effect on marriage rates.

The state has however traditionally favored marriage and sought to encourage people to marry, most explicitly by providing tax advantages to married couples which are not available to unmarried people. There are also other reasons why the Government, through public statements and policies, seek to encourage marriage and civil partnership. A former President of the Family Division, Sir George baker has argued that marriage provides the ‘building blocks’ of society and is ‘essential to the will-being of our society’ as we understand it. Nevertheless, Lord Hoffmann has declared that it would be discriminatory to assume a particular unmarried couple could never be as good as married couple. Another state benefit is that by managing the start of a relationship the state is able to regulate the relationship if it breaks. The state may wish to ensure that at the end of a relationship the arrangements for children will promote the child’s welfare, and that the spouse’s or civil partner’s property is divided between them in a way that is just and fair. However, this does not apply to cohabiting couples as the court may well not be involved at the end of the relationship, unless there is a dispute, and only then will the court intervene.

On the question of whether there should be reform at all, there are a wide range of different views. It is clearly not possible to achieve anything approaching a consensus, and there are many who oppose any reform in this area as a matter of principle. However, recent research conducted by the British Social Attitudes survey indicates that a substantial majority of people think cohabitants should have access to financial remedies on relationship breakdown.

As previously stated the current law on ownership of the family home has been heavily criticised. The law can especially lead to great injustice for unmarried cohabitants; this was revealed in the following dicta of Johnson J in T v S. In July 2007, the Law Commission published its report ‘Cohabitation: The Financial Consequences of Relationship Breakdown’. The Law Commission was then asked to consider this area of the law by the Government. The Commission consulted widely and the recommendations for reform made in the report build upon the provisional proposals made in its consultation paper published in May 2006. Nevertheless, the central recommendations are for the introduction of a statutory scheme of financial remedies which would be available between certain cohabiting couples in the event of their separation, referred to in the report as ‘financial relief on separation’.

The Law Commission proposed two grounds for eligibility for cohabiting couples under the new scheme; it would firstly only apply only to those cohabitants who have had children together; secondly, couples who have lived together for a specified minimum duration. However no specific recommendation is made on the length of this minimum duration requirement; but it does suggest that it should be no less than 2, and no more than 5, years. The scheme would enable the courts to address, more effectively than they currently can; the economic consequences of certain contributions made by the cohabitants during their relationship. It would be completely distinct from the regime which applies between spouses (and civil partners) in the event of divorce. The scheme would be open to cohabiting couples, subject to necessary protections, to opt out of the operation of the scheme by written agreement, and to make their own financial arrangements which would be enforceable should they separate. This legislative scheme would strike a fine balance between the need to alleviate hardship and the need to protect couples freedom of choice. The court would have a range of orders available; this would include property transfer orders, lump sum payments, property settlements and orders for sale and pension sharing orders.  However, it would not be able to make periodical payment orders, this is to ensure that the Law Commission achieves its aim of the clean break theory.

The Law Commission however, has rejected three main options for reform. Firstly, rejections in amending Schedule 1 of the Children Act 1989, this was regarded to be outside of its remit and would not help childless cohabitants. The Law Commission secondly, decided against applying the Matrimonial Causes Act 1973 to cohabitants for two reasons, the reluctance to treat parties who had never married as if they had and because the MCA 1973 is itself under judicial scrutiny.  Nevertheless, The Law Commission preferred remedies that would balance the relief currently available under the Children Act 1989.  Thirdly, the Law Commission considered whether reform should be left to the judges to develop the general law of trusts and estoppel.  However, this approach was rejected as it is Parliament’s role to make judgments of social policy not judges.

The Cohabitation Bill was introduced by Lord Lester, in partnership with Resolution in December 2008, however it had it second reading in March 2009. A consultation paper reforming the law for people, who live together, was issued and included two main options for reform. The first was basically the same as the Law Commission’s scheme whilst the second has been described as, “a more discretionary scheme, similar in form, if not identical in substance, to the Matrimonial Causes Act 1973”. It is however surprising that Lord Lester chose the second option, in spite of the lengthy research, and the inclusive report produced, by the Law Commission. The Bill describes cohabitants as “any two people (whether of the same sex or the opposite sex) who live together as a couple”.  The eligibility requirement it that, the parties must either be the legal parents of a minor child (or have a joint residence order in respect of a child) or have lived together for a continuous period of at least 2 years.  The Bill also envisages an opt-out scheme; in this sense and with respect to the eligibility requirements, the Bill generally reflects the Law Commission’s proposals.

One of the difference from the bill and the Law commission’s suggestion is that the Bill proposes that the court can make a financial settlement order if it is just and equitable to do so, this is significantly different from the ‘structured discretion’. The Bill also proposes that the degree of a commitment within a cohabiting relationship should be tested rather than simply assumed, as is the case with the Law Commission’s proposals. Nevertheless, it can be argued that The Bill is insufficient and pays too little consideration to the suggestions of the Law Commission.  Instead of satisfying its purpose by extenuating potential financial hardship for cohabitants, the Bill may perpetuate such hardship.

Other European and Commonwealth countries have considerably progressed and have had some form of legislation in place for several years. Some countries have adopted the idea of a civil union, whereby the law recognises defector partnerships between unmarried persons of the same or different sex and accords such civil unions protection from a financial perspective upon separation.  In New Zealand, the Civil Union Act has been in place since 2004 and this provides certain rights and obligations to cohabitants. The French government in 1999 introduced the pacte civil de solidarite (PACS) which has proved to be a popular substitute to marriage for cohabitating couples.  It contains fewer rights, imposes less responsibility than marriage and has become socially acceptable in France. In essence, France arguably has the most development of the civil union concept.

In conclusion, it is important to note that any reform should be set at a lower threshold regarding rights and obligations than that of marriage and the ancillary relief upon divorce. Despite the decrease in marriage rates, it is still considered as the traditional form of union in this country. The societal reasons for declining to align cohabitation with marriage are influential but the legal ones are significant too, as there is not a present need to create a replacement to marriage. The role of marriage should be preserved in society, especially that, reports have concluded that marriage is better for individuals and society. After the new Scottish legislation has been scrutinised by the Government, it is anticipated that a Bill will be introduced. On the whole in my opinion, the fact that the parties have not entered into the commitment of marriage should be respected by the law, and they should expect a lower level of jurisdiction by the court and State.

Bibliography

1. Law Commission Report 175 (1988:para 1.4)
2. Family Law Act 1996 s.62 (1)(a)
3. Cohabitation: The Financial Consequences of Relationship Breakdown Law Commission Report 307 (2007) 1.6
4. Park, A. Curtice, J. Thomson, K. Jarvis, L. and Bromley, C. British Social Attitudes: Public policy, social ties. The 18th Report (2001)
5. http://www.lawontheweb.co.uk/basics/cohabit.htm
6. Jonathan Herring, Family Law, 4th edition (2009)
7. Matrimonial Causes Act 1973 ss.22-25
8. S. Bridge, “Cohabitation: Why Legislative Reform is Necessary” [2007] Fam Law 911
9. Law Commission Report, “Cohabitation: The financial consequences of relationship breakdown”, Law Com No 307, 2007, Cm 7182 para 2.15.
10. C Martin and I Théry, ‘The Pacs and marriage and cohabitation in France’ (2001) 15(1) International Journal of Law, Policy and the Family 135 on France
11. A Barlow et al, Cohabitation, Marriage and the Law: Social Change and Legal Reform in the 21st Century (Hart Publishing, 2005)
12. Cohabitation: The Financial Consequences of Relationship Breakdown (TSO, 2006).
13. A Park et al (eds), British Social Attitudes: 24th Report (Sage, forthcoming: 2008)