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You are here: BAILII >> Databases >> The Law Commission >> Cohabitation: The Financial Consequences of Relationship Breakdown [2006] EWLC 179(7) (04 May 2006)
URL: http://www.bailii.org/ew/other/EWLC/2006/179(7).html
Cite as: [2006] EWLC 179(7)

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PART 7

FINANCIAL RELIEF ON SEPARATION: HOW WOULD IT WORK?

INTRODUCTION

In Part 6, we outlined the principles that we provisionally consider should govern claims for financial relief brought by eligible cohabitants on separation. In this Part, we explore in more detail how those principles might operate in some specific factual situations, illustrating a cross-section of different claims that might arise. This gives us the opportunity to examine some of the more difficult questions that arise about the scope of each principle and the proper approach to the quantification of claims under them. In relation to each case, we outline how we consider the issues would be disposed of under the current law and then examine how our principles might be expected to operate.

Inevitably, the examples are simplified, and not all variables or different categories of claim that might arise are tested by the examples given here.

Which of these cases were ultimately included in any new scheme would depend on the scope of the relevant eligibility criteria, as we have discussed in Part 5 and examine in detail in Part 9. Some of the cases discussed here might therefore not fall within the scheme at all.

We welcome consultees' views about these examples and the practical and theoretical issues to which they give rise. Responses to individual examples might be affected by various factors, but principally:

(1) the length or other characteristics of the relationship, such as whether there are children: should this relationship be included in the scheme at all, whatever the nature of the claim might be?

(2) the principles on which the claim is made: is it appropriate to allow a claim to be made in relation to this sort of contribution or sacrifice at all, whatever sort of cohabiting relationship it is?

(3) the way in which the court should approach the proof and quantification of the claim in each case.

We would be greatly assisted in analysing consultees' responses if they could, as far as possible, indicate their views about the examples specifically by reference to those issues. Consultees should of course feel free to discuss other issues and to offer examples of their own to test points that are not covered by any of the examples given here.

We should make two other important preliminary points. First, our discussion of "what the court may do" should not suggest that we anticipate that parties will be resorting to litigation in every case. We would hope that the majority of cases could be settled by private negotiation, with the assistance, where appropriate, of mediation or some other method of dispute resolution. However, parties to all types of dispute, civil and family, "bargain in the shadow of the law" and so what the court might be expected to do in the event of contested litigation would form the backdrop to private negotiations.

Secondly, we must stress that our examples can only be broadly indicative. Current family law (including the law governing financial relief on divorce and on the dissolution of civil partnerships) does not generally provide hard and fast rules that can be applied mechanically to individual cases to provide a certain outcome. Instead, cases are dealt with on their facts relying on the discretion of the court. We have provisionally proposed that this type of approach is the most suitable for any new scheme between cohabitants, with a strong principled basis which would structure the exercise of the court's discretion. It is in the nature of a discretionary regime that the courts are able to take account of the particular features of individual cases in fashioning a fair outcome. Consequently, it would be misleading to suggest precise outcomes in any of the following factual examples. Our purpose here is to indicate in broad terms what we think the outcome would be in each situation.

COHABITANTS WITH CHILDREN

We have stated above that we consider there to be a strong case for a new scheme on separation where cohabitants have children. We intend to illustrate this by reference to three core examples (1, 2 and 3) where the cohabiting relationships are of differing duration. In Example 4, we explore the difficult issue of which children should be relevant for these purposes, in particular, the issue of whether a child who is not the child of both cohabitants should be relevant to a potential claim for financial relief on separation. Example 5 illustrates a case where, despite the presence of children, it may not be appropriate to order any financial relief.

Example 1

A and B have been living together for fifteen years in a house solely owned by A, bought before the relationship began. They have two children. A and B were originally both working in information technology jobs. A paid the mortgage instalments on the house as they fell due, while B paid other bills; both were contributing to pensions. After the first child was born, they decided that B would work part-time. A had recently been promoted so the household expenses could be met by his earnings. After the second child was born, they decided that B would not go back to work. It was becoming increasingly difficult to fit taking the children to and from child-care around work commitments and they decided that the children would benefit from B staying at home. B has been out of paid employment now for five years, and is not able to return to a job similar to the one she had before. The younger child has just started school on short days. A and B have recently separated, and they have agreed that the children will live principally with B.

Under the current law, A would be liable to pay child support in relation to the two children at least until they reached 16. Where the Child Support Agency has jurisdiction, the courts are ordinarily unable to make periodical payments orders for the children's benefit. However, B could apply for an order in relation to the parties' home under Schedule 1 to the Children Act 1989 for the benefit of the children, for example requiring A as the owner of the house to allow the children to occupy it until they complete their education. B would benefit indirectly from such an order as she is the children's primary carer. Whether it is practicable for the court to make such an order would depend entirely on whether the parties had sufficient resources both to retain the family home and to pay for alternative accommodation for A. If they do not, then the court cannot in practice make such an order.

However, the court currently has no power to require A to make any kind of financial order for B's benefit, either while the children are still with her or after they leave home.

In the absence of family law remedies, B would currently have to formulate a claim for a share in the house by reference to the law of implied trusts or proprietary estoppel. There was no express "common intention" to share ownership or any assurance that B would acquire such a share, nor has B made a direct financial contribution to the acquisition of the house. It is unclear on the current state of the law whether B's contributions to the household expenses might give rise to a share. It would be costly for her to bring proceedings in order to establish a share, and her prospects of success are far from certain.

Under our proposed scheme, it would become possible for B to apply to the family court in her own right for financial relief following the parties' separation. B would be required to base her claim on the contributions that she had made to the relationship and to the family, and on any sacrifices associated with those contributions. In assessing the claim, the court would be required to consider the parties' respective financial positions at the point of separation.

At the point of separation, A remains the owner of the house, has a good income, a healthy earning capacity and adequate pension provision; he is financially secure. B, by contrast, is financially vulnerable. She has no current income, her earning capacity and pension entitlements have been impaired by her time out of the labour market and it is unclear under the current law whether she has any share in the home.

Let us first consider claims for economic advantage. The parties each made a number of positive contributions during the course of the relationship which are unlikely to have given rise to any retained benefit in the hands of the other party on separation. These include B's substantial domestic contributions (looking after the home and raising the children). Although A has avoided the need to incur the expense of hiring domestic assistance or childcare, it would be difficult for B to establish that her contributions in these areas have enabled A to generate any additional retained wealth. Similarly A would be unlikely to succeed in a claim based on his provision to B of rent-free accommodation during the relationship or his financial support of the family since B gave up work, as these contributions will not usually give rise to lasting gains on separation. A's payment of the mortgage during the relationship will also not give rise to a claim as he owns the house in any event so he retains the benefit of those payments.

The only claim based on economic advantage which might succeed relates to B's financial contributions to the household expenses while she was working. B would be able to make an economic advantage claim based on these financial contributions to the extent that she could prove that they were necessary to enable A to pay the mortgage; at the point of separation, A would retain the benefit of those payments as the sole owner of the property unless an order for financial relief were made.

The more substantial part of B's claim would rest on the lasting economic disadvantage that she is likely to have sustained as a result of the contributions that she has made to her shared life with A. B has made a substantial economic sacrifice during the relationship for the sake of the family by giving up her job in order to raise the children.

Under our proposed scheme, B would not be able to make any claim against A in respect of past earnings lost during the course of the relationship as a result of her giving up paid work to look after the children; the scheme concentrates on the position of the parties at the end of the relationship.

However, B is likely to have incurred losses during the relationship which are continuing at the point of separation. The fact that B has been out of the employment market for a number of years may have significant lasting impact on her future earning capacity and perhaps, in the longer-term, her pension entitlements. It is unlikely that B will be unable to work at all. The court would require her to limit her loss so far as possible by seeking suitable employment, and now that the younger child has started school, she can reasonably be expected to return to work (at least part-time).

B would therefore be able to make a strong case for financial relief based on:

(1) the ongoing economic disadvantage created by the parties' joint decision that she should give up work;

(2) (if a new scheme included provision relating to this) any ongoing child-care costs (to the extent that B's tax credit entitlements do not cover them and A could afford to contribute towards them); and

(3) (possibly) the financial contributions she made to the household expenses while she was working.

In exercising its discretion to grant any remedy, the court would consider making orders designed to ensure that the parties more fairly share any benefit retained by A and the disadvantage sustained by B. The particular type of order the court would make would depend on a number of factors such as the extent of the assets available and the needs of both parties for suitable accommodation (in B's case, in particular, with the children).

This case raises the issue of how any new scheme would interact with existing remedies for the benefit of the children under Schedule 1 to the Children Act 1989. Whether the issue of the children's accommodation is determined under Schedule 1 or as part of its wider deliberations under a new scheme for financial relief between the parties, the outcome on that point should be the same.

In view of B's reduced pension entitlement, the court might consider whether it should make an order for some limited sharing of A's pension, having regard to the potential for B to return to full-time employment in the future and so to continue to pay in to her pension fund.

The court might also consider making an order for periodical payments against A. It would take account of the fact that A is already paying child support and may not be able to afford additional periodical payments for B, whether specifically to cover child-care costs (if that formed part of any new scheme) or more generally to help alleviate her economic disadvantage. The desirability of a "clean break" between the parties would militate against imposing any long-term continuing financial obligation on A towards B (as opposed to the children). That concern might have less weight in relation to the sharing of any child-care costs than in relation to other payments for B's benefit. In deciding whether a periodical payments order should be made at all, and, if so, for what purpose, for how much and for how long, the court would take these factors into account.

Example 1A

Let us now consider how a court might respond if A and B separated at a time when their children had become independent of their parents. Fifteen years on, the children have left home. A and B have been living together for 30 years. B has worked only intermittently, and part-time, since the younger child was born. The mortgage has been paid off.

Under current law, there would be no child support liability, and there would be no possibility of any provision being made under Schedule 1 to the Children Act 1989, as the children are now adults. B may seek to formulate a claim to a share in the house by reference to the law of implied trusts or proprietary estoppel, but her prospects of success are no clearer than they were in Example 1, 15 years earlier in the relationship.

Yet the degree of economic imbalance between the parties on separation is, if anything, more extreme. A as the owner of the house, free of mortgage, still has a substantial income and a generous pension entitlement on his retirement. B is still unlikely to be able to establish any share in the house, and although she has a small income from her part-time employment, she has (now in her fifties) little prospect of improving her earning capacity significantly by re-training. Let us also suppose that her pension provision is only very modest, as a result of her employment history.

Under our proposed scheme, B would be able to present a strong claim for financial relief. Her economic advantage claim based on her indirect financial contributions to the mortgage, though modest in size, would remain as before. Since A was clearly able to cover both mortgage and bills after B gave up work, it would be hard for her to prove the required link between any later contributions that she makes to household running costs and the repayment of the mortgage. But her substantial domestic contributions towards the couple's shared life have given rise to significant economic disadvantage.

In determining the quantum of B's claim, the court would take account of the difficulty that she now faces in terms of her future employment prospects and pension-saving capacity in view of her age and the time that she has been absent from the labour market. However, given the length of the relationship and of B's absence from the labour market, and her limited prospects for acquiring substantial employment at this point, it would be impossible to quantify in any meaningful way the precise quantum of those sacrifices, and impractical to attempt to do so. It would not be plausible for B to claim that she would have reached the top of whatever career ladder she had started on. But nor would it be plausible for A to suggest that B would have entirely failed to retain or progress in employment at all. We envisage that, assuming that the available assets are of an "ordinary" scale, the court in such a case would adopt a pragmatic approach, more or less evenly splitting the parties' resources between them.

Example 1B

Suppose the same facts as in Example 1A, but that the house had been B's rather than A's and that A had, nevertheless, paid most of the mortgage instalments over the years, once B gave up work.

In deciding this case, the court would clearly have to balance the parties' respective claims. To the extent that B retains the home on separation (putting to one side A's claim under the law of trusts), her economic disadvantage claim is to that extent already remedied. Depending on the value of the respective claims, this may be a situation in which no relief would in fairness be required, as B has the security of the home, and A, albeit deprived of a share in the property, is regarded as thereby satisfying B's claim.

This case raises very clearly the issue of how any new scheme would interact with the general law. If A asserted a claim under the law of resulting trust, B could respond by invoking the new scheme, which we envisage would take priority where the parties fall within its scope and it were invoked by one of them. The net result would be that A's claim would be treated as one of economic advantage under the scheme (which, certainly if framed originally in terms of resulting trust, would have the same value as it would under the general law) and the court would balance the parties' respective claims as just described.

Example 2

C and D have been together for 12 years and have two children. After the birth of each child, D went back to work full-time after maternity leave. They both have well-paid and relatively flexible jobs, with room for home-working, and so have been able to share the tasks of taking the children to and from child-care, school, and holiday activity schemes, and of working at home while looking after the children during holidays. They are joint owners of their home, which is expressly held in equal shares, and each contributed equally to the mortgage repayments. They are now separating, and are planning to share child-care responsibilities.

Under current law, the express declaration of trust dictates that C and D are entitled to equal shares in the value of the property. Child support is payable by the non-resident parent, but would be reduced to reflect their shared care arrangements. The parties might be in dispute about whether the family home should be sold immediately or should be retained, at least during the children's minority, so that the children can live there with one of them. That dispute would be addressed by the court principally under Schedule 1 to the Children Act 1989.

In this case, there would be little doubt that C and D would be eligible to claim on separation. They have lived together for a considerable time but, more importantly, they have two children. The presence of the children should, in our view, render the parties eligible to make a claim on separation.

However, when we examine the nature of the parties' economic relationship, we think it unlikely that the principles we have provisionally proposed would lead the court to make an order for financial relief. We think that such an outcome would be entirely fair.

This is because neither party is likely to be able to establish that the other has obtained an economic advantage by the retention of some economic benefit or that they have themselves sustained an economic disadvantage on separation. During the relationship, both parties have continued in full-time employment and contributed equally to paying the mortgage and other household costs on their jointly-owned home. Moreover, both have an earning capacity which is intact on separation and they plan to share their child-care responsibilities following separation. As a result, neither party's economic position is more vulnerable than the other's in consequence of the relationship and its termination.

The court may be required to resolve any dispute about the future of the parties' home, as discussed above.

Example 2A

In Part 10, we discuss a difficult question relating to the future treatment of express trusts of land by any new scheme, in particular, whether they ought in themselves to be treated as opt-outs with respect to the trust property, so that that property is immune from the exercise of the court's discretion to grant financial relief. Suppose that in Example 2, although the parties expressly held the property in equal shares, D had in fact made a far larger proportion of the mortgage payments than C. Under the general law, it is not open to that party to go behind the express trust and seek a larger share on the basis of those payments.

Example 3

E and F had been living together for about three months in E's house when they discovered that F had become pregnant. E was happy to support the family so F did not return to work after the baby was born and her maternity leave ended. Unfortunately, their relationship foundered soon afterwards, and they are now separating, after less than two years together.

In this case, the current law would require E to pay child support and F would be able to claim capital orders under Schedule 1 to the Children Act 1989 for the benefit of the child. Whether any such order could be made, in particular regarding the occupation of E's house, would depend on whether the parties could afford to maintain not only that property but also new accommodation for E. F would have no claim against E in her own right: a general promise by E to support F would not give rise to any claim.

F is in a vulnerable financial position. Although the couple did not live together for very long, the case for F obtaining some relief may be thought to be strong. The birth of the child (and the child's continuing need for care) has a significant effect, at least in the short term, on F's ability to go to work. The court would therefore have to examine the extent of the economic disadvantage sustained by F. In doing so, it would be required to assess the viability of F returning to work. Unlike B in Example 1, F has not been out of employment for very long, and it may be that she can return to at least part-time work fairly soon without any significant effect on her earning potential in the longer term.

But each case will depend very much on its own facts. Although it may be reasonable to expect F to take steps to obtain employment and thereby to limit the extent of her future losses, she may need to pay for professional child-care in order to be able to work at all. If a new scheme included provision for child-care payments, there would be a case for E to assist with F's child-care costs in addition to his child support payments, to the extent that the costs of that care are not covered by F's tax credit entitlements, and if E can afford to do so.

The size of F's claim for economic disadvantage would depend on the court's view of the effect of the relationship on her financial position. If F can return to employment without serious impact on her future earning potential, then her claim would be considerably smaller than it would be if any return to employment would be at a significantly lower level. If F is able to recover well-paid employment now, she may be able to meet her accommodation costs and necessary child-care costs, alone if necessary, without great difficulty. If not, her claim for financial relief would be that much stronger. In principle, the claim would arise only where the difficulty were caused by her absence from the labour market rather than a change in that market.

Claims for the benefit of the child under Schedule 1 to the Children Act 1989 would still be available.

Example 3A

Alternatively, E and F might only have been going out with each other when F became pregnant, decide to cohabit as a result of that unplanned pregnancy, but subsequently separate. F's claim in such circumstances would basically be the same as that in Example 3. The issue that particularly arises from these facts is whether the fact that the parties were not cohabiting when the female partner became pregnant should affect F's eligibility to apply for financial relief if they do cohabit but then separate. The pregnancy itself was not the result of the parties' cohabitation, but F's decision not to return to work after the birth might well have been affected by the fact of E's support.

Example 3B

Suppose that E and F were living in social housing and that both had very low incomes and no significant assets. In such a situation, the courts already have the power to transfer tenancies between the parties under Schedule 7 to the Family Law Act 1996 and might, depending on the facts, do so in favour of F, who might be eligible for housing benefit to help pay the rent. E would be liable for child support, and F would have other benefits and tax credit entitlements to help support her and the child.

It would probably not be worthwhile for either party to make a claim under any new scheme, simply because of the limited nature of the assets and income available. E would be unable to afford to make any payments to F in addition to those he is already liable to make under the child support legislation, and the existing remedy of tenancy transfer provides F and the child with a means of securing accommodation.

Example 4

Many cohabiting households are step-families. Example 4 highlights some aspects of the difficult question of how a new scheme should respond to cases involving children who are not the children of both cohabitants. This issue is relevant to two aspects of the scheme. First, should the presence only of "children of the family" who are not children of both cohabitants make that couple eligible under a new scheme?

G has a young son, X, from a previous relationship. That relationship ended soon after the couple discovered that G was pregnant, and the father cannot be traced. G and H's relationship began shortly after X was born, and H has always treated X as if he were his own son. When G returned to work after maternity leave, she found it difficult to balance work, home and child-care commitments, and H often helped by looking after X. When X was one year old, H moved in with G and X, and they decided that H would reduce his working hours so that he could look after X before and after nursery (and, later, school) and during holidays. It made most sense financially for H to work less as G's job was less flexible and better paid. G and H have recently separated, and X will remain with G.

We may loosely refer to children such as X as "children of the family". G is X's legal parent, H is not, but X has been treated by them as a child of their family.

Any claim that H might want to make on his own behalf under the current law would have to be under the general law of implied trusts and estoppel. But it is not at all clear that such a claim would have any prospect of success, in the absence of any relevant agreement or assurance that H would have a share in G's property.

Under our proposed new scheme, the question arising from these facts is whether H might have a claim against G for economic disadvantage. The application of the economic advantage and disadvantage principles, relating to care provided for children such as X raises some difficult questions. In a case like this, where the non-parent, H, is the one who provided the care and sustained economic disadvantage as a result, there is a strong case to allow a claim to be made. It is clear that H cared for X because of the relationship with G, and would not otherwise have done so. If X will be living with G following the separation, H would probably now be able to return to full-time work and so minimise the extent of the disadvantage suffered. To the extent that H was unable to do this, there may remain some disadvantage in relation to which G could be expected to provide some relief. This may or may not be realistic in practical terms, as it will be necessary to ensure that G has sufficient resources available to support both herself and X.

More difficult issues may be felt to arise where the children who live with the couple were from the applicant's previous relationship, but it is the applicant-parent who cared for them during the relationship, rather than the non-parent. Cases where the couple are raising children who are not the children in law of either party also require special consideration.

Under the current law, H is not liable to pay child support in respect of X. Only the legal parents of children are so liable. Moreover, where the parties cohabit rather than marry or form a civil partnership, the court's powers to make orders under Schedule 1 to the Children Act 1989 against step-parents and others do not currently apply.

Example 5

It should not be assumed, as we saw in Example 2, that simply because cohabitants have children living with them, an order for financial relief would be appropriate on separation.

J has recently moved in with K and L, K's child from her previous relationship. K owns the property and works full-time, with the support of good quality, affordable child-care facilities. J has always found it hard to hold down a job and has been unemployed for most of their relationship. K therefore pays the mortgage and the vast majority of the bills, J making small financial contributions occasionally and taking on some of the housework. They are now separating after two years together.

Neither party would have a claim against the other under the current law on these facts, and nor do we think they should under any new scheme.

Even if this couple were eligible to apply (whether by virtue of the presence of L or because of the length of the relationship), this is a case in which we take the firm view that no remedy would or should arise in any event. The second filter, the principles governing the basis on which relief would be granted, would not be satisfied. There would be no need even to rely on the possible third filter (of "substantial" or "manifest" unfairness) to preclude the claim.

J, the economically weaker party, has conferred no economic advantage on K that K retains on separation. Nor has J sustained any economic disadvantage as a result of contributions to the parties' relationship. J may be in need at the point of separation, but that is simply a consequence of J's unemployment and not something for which K should bear any responsibility, however long their relationship had lasted.

K might feel aggrieved at having supported J throughout the relationship without any significant economic recompense from J at any point. But the requirement that K prove some retained benefit in J's hands on separation would not be satisfied here and so K would not have a claim either, even assuming that J could afford to meet it. We think this is the right outcome.

COHABITANTS WITHOUT CHILDREN

We now turn to examples of how the proposed scheme might work if it extended to cohabitants without children.

Example 6

M and N have been living together for over ten years in a house bought by N before their relationship began. N's elderly mother, O, became unable to live alone as a result of growing dementia. M and N could not face putting O in residential accommodation, so they decided that O should come to live with them. M and N were both in full-time work, but they decided that M would give up work in order to care for O. After five years, the stress of this situation on M and N's relationship is too much, and they separate. O remains with N.

Under the current law, M's only conceivable claim would be based on implied trusts or proprietary estoppel, neither of which looks likely to succeed on the facts in the absence of some agreement or assurance that M would acquire a share in N's property, or any financial contribution by M to its acquisition.

Under our proposed scheme, M's claim would be based on economic disadvantage.

It might be wondered whether M should be able to make a claim against N in relation to economic disadvantage sustained in consequence of care provided by O if (in the absence of a claim under the general law of implied trusts or estoppel) neither M (nor N, if N had cared for O) would have an equivalent claim against O, who might be regarded as the more immediate beneficiary of M's contribution. The possibility of claims against O fall outside the scope of this project. However, consideration would also need to be given here to whether N should be able to claim financial relief from M if N had been the one to care for O, in view of the blood relationship between N and O.

The issue on these facts is whether there should be a claim between M and N, designed to share fairly between them an economic disadvantage (effectively a reliance loss) which had arisen from their relationship and its termination. If the care given by either party to O might not have been provided, at least in that way or to that extent, had it not been for the support provided by the other party to the relationship, then it would seem appropriate for relief to be available in principle to share the resulting reliance loss when the relationship ends.

We acknowledge that this might be felt to be a rather difficult area, and would welcome consultees' views.

Example 7

P is a self-employed builder. His partner Q inherits a large house from her parents which is all-but derelict. P and Q move in, and P spends a year working on re-building the property. However, as soon as it is fully refurbished the relationship breaks down. P and Q never discussed the ownership of the house.

Under the current law, P would be restricted to a claim against the house based on implied trust or proprietary estoppel. However, the parties' failure ever to discuss the issue of the ownership of the house, and P not having financially contributed to its acquisition, are likely to doom such a claim to failure.

Under our proposed scheme, there is no question of economic disadvantage, but P would be able to argue that as a result of his extensive contributions to the renovation and refurbishment of the property, Q has obtained a substantial benefit in terms of an increase in the value of her property. That is a benefit which Q retains on separation to the exclusion of P. It might be thought to be fair that Q should to some extent share that benefit with P.

As for quantification of P's claim, to give P an award based on the value of the work undertaken (rather than a share in the value of the property, consequent on P's work and any rise in market value) may be felt to leave Q with a windfall (to the extent of any rise in value over and above the cost of P's labour) which it would be unfair for Q to retain to the exclusion of P.

Example 7A

Suppose alternatively that P worked unpaid throughout a ten year relationship in Q's private limited liability company, that the parties' home and other assets were in Q's name, and that the company had prospered as a result of P and Q's combined, extensive efforts.

As in the previous example, P's contribution may not have given rise to any significant economic disadvantage. Having worked throughout the relationship, albeit for no pay, P may be able to find similar, paid employment elsewhere when the relationship ends. There might, however, be an argument that P had lost opportunities to make any pension or other savings during the relationship as a result of being unpaid. The value of the financial support provided to P by Q during the relationship arguably ought not preclude that claim, as such support would not give rise to any retained benefit in P's hands on separation.

However, P might also have a claim for economic advantage, in so far as Q retained economic benefits, in the form of a prospering business, at the point of separation. Again, consideration needs to be given to the appropriate measure for valuing P's claim. Should it relate to the unpaid wages (assessed on a commercial basis), and so to the basic value of the work done, or to some potentially larger share in the value of the business?

Example 8

R and S, who are both in their twenties, have been living together for two years in a flat that they rented together from a private landlord. They have both worked full-time throughout the relationship and have kept their finances separate. They have shared the cooking and cleaning, and shared the rent and all household bills equally. They are now separating.

This is an example of a case which many may consider should fall outside a new scheme. Whilst there may be pragmatic reasons why couples such as this should not be eligible to apply to court at all, the scheme would not in any event provide them with a remedy.

The partners have contributed equally to all their bills, neither has retained any benefit in the property as it is rented, and the relationship has been economically neutral for each of them in terms of earnings and earning capacity. These would appear to be circumstances where the gains and losses, if any, should lie as they fall, and the court would not consider any need to make an order for financial relief on separation.

It should be noted that under current law, the court has power under Schedule 7 to the Family Law 1996 to transfer the tenancy between the parties. But there may be no point in making an application for such an order if R and S's lease is an assured shorthold tenancy which confers little by way of security of tenure.

Example 8A

Alternatively, the same couple might have been living in property bought by R before the relationship began. Suppose that during the relationship, R had been paying the mortgage and S all the other household bills.

In this case, there might be potential for an economic advantage claim to be made by S on the basis that R has retained a benefit, S would have to prove that the payment of the household bills enabled R to pay the mortgage and so accrue equity in the property. However, there are reasons to be sceptical about whether such a claim should succeed. First, the amount of equity actually acquired by R's mortgage payments over a period is likely to be minimal; this might be a situation where a third filter of "substantial" or "manifest" unfairness would provide a useful role in preventing a relatively low value claim from proceeding.

Difficult questions might be thought to arise in circumstances where the housing market had increased dramatically in value over the period of the parties' relationship. However, we would not consider it appropriate for R to be allowed to make up for the lack of economic advantage claim by making a speculative argument for economic disadvantage based on having devoted resources to paying bills for the shared household with S, rather than investing in property.

Example 9

T was very keen on his girlfriend U, with whom he had been conducting a long-distance relationship for some time. He wanted to force the pace. She was not so sure. He gave up his job to move across the country to live with her in the house which her parents had bought for her outright. U had not suggested this, but she did not object. She supported T financially during their relationship, T making little effort to find a new job. The relationship did not prosper and they split up within a year of T moving in.

Under the current law, T's only conceivable claim would be based on implied trusts or proprietary estoppel, neither of which looks likely to succeed on the facts in the absence of some agreement or assurance that T would acquire a share in U's property, or any financial contributions by T to its acquisition. Although T may have suffered economic disadvantage as a result of giving up his employment and going to live with U, this is a case where it might well be thought that no relief should be awarded under a new scheme.

It may be argued that, by imposing a minimum duration requirement as a condition of eligibility, the right to bring a claim in such circumstances would be effectively denied. However, that may not be an entirely satisfactory answer. Views about the fairness of such a claim might differ depending on how long the minimum duration requirement would be.

There is in any event an important reason why T's claim should not succeed on these facts. An applicant should only be able to succeed in a claim of economic disadvantage where it is a consequence of the parties' joint decision. If the court takes the view that T effectively imposed himself and his economic sacrifice upon U, and apparently made no efforts to obtain further employment during the relationship, it would not make any order in favour of T, however long the relationship endured. This could be viewed as a case in which the possible third filter would have a role to play in excluding the claim. But we consider that the economic disadvantage principle itself would not be satisfied in such facts.

Example 10

W and V have been living together since 1975, when he was 30 and she was 28. When they decided to set up home together, V was a primary school teacher and W a surgeon. Only a few months after the couple began to live together, W became a consultant. The couple moved from rented accommodation to a house bought in W's sole name. At the same time, they agreed that V should give up work as W's income was more than sufficient to maintain them both. This arrangement allowed them to spend more time together when W was not working and freed V to look after the house and garden. The parties had hoped to have children but this proved impossible.

W has recently asked V to leave the house as he has become involved with a younger colleague. At the time of separation the house is free of any mortgage. In addition to the house, W has substantial assets in his name. He is nearing retirement when he will enjoy a significant pension income. V has no income, very limited pension entitlements from her contributions while a teacher and few assets.

Under the current law, V's only conceivable claim would be based on implied trusts or proprietary estoppel, neither of which looks likely to succeed on the facts in the absence of some agreement or assurance that V would acquire a share in W's property, or any financial contribution by V to its acquisition.

Under our proposed scheme, V would be unlikely to be able to make an economic advantage claim in relation to her domestic contributions to the couple's shared household during the relationship.

In determining the quantum of V's claim, the court would take account of the difficulty she now faces in finding employment. The court would also consider her position on reaching the age of retirement given her limited pension entitlements. There are likely to be sufficient assets available to W (especially the house free of mortgage) to make a capital award which, in combination with pension-sharing, would enable a clean break.

CONCLUSION

We have sought in this Part to give some impression, through worked examples, of how the substantive principles which we are provisionally proposing might be expected to operate in particular factual situations. We invite consultees to give us further examples which they think usefully bring out some of the practical and theoretical issues to which our provisionally proposed scheme might give rise.

It is important, our view, to bear in mind in all this that the scheme would be operated by way of judicial discretion, which would to some extent deal with the individual features of particular cases. However, we nevertheless consider it essential that the principles themselves should be sufficiently well-developed that they provide answers to the basic questions necessary to give a clear structure to the exercise of the judge's discretion, and to give parties who do not take their cases to court a clear basis on which to negotiate their own settlements.

83 We invite the views of consultees on the Examples set out in Part 7. In particular, we invite consultees to indicate in which of the Examples they consider that financial relief should or should not be available, and why.

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Note 1    See para 6.128.    [Back]

Note 2    See paras 6.135 and 6.141.    [Back]

Note 3    See para 6.150.    [Back]

Note 4    See paras 6.131 and 6.172.    [Back]

Note 5    See para 6.155.    [Back]

Note 6    See para 6.255.    [Back]

Note 7    See para 6.259.    [Back]

Note 8    See para 6.265.    [Back]

Note 9    See paras 6.191 and 6.255.    [Back]

Note 10    See para 6.217.    [Back]

Note 11    See para 11.76.    [Back]

Note 12    See Parts 5 and 9.    [Back]

Note 13    Goodman v Gallant [1986] Fam 106, although a remedy in equitable accounting might in some circumstances be available: see 10.131.    [Back]

Note 14    See para 6.176.    [Back]

Note 15    See para 5.94.    [Back]

Note 16    See Part 9.    [Back]

Note 17    See para 6.209.    [Back]

Note 18    But see para 6.289 above, where we invite views on a possible extension of Children Act 1989, sch 1.    [Back]

Note 19    See para 6.169.    [Back]

Note 20    See para 6.130.    [Back]

Note 21    See para 6.150.    [Back]

Note 22    See paras 6.173 and 6.178.    [Back]

Note 23    See para 6.139.    [Back]

Note 24    See para 6.139.    [Back]

Note 25    See para 3.60.     [Back]

Note 26    See para 6.230.    [Back]

Note 27    See para 6.170.    [Back]

Note 28    See para 6.178.    [Back]

Note 29    See para 6.150.    [Back]

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