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Gow v Grant [2012] UKSC 29

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  • (Lord Hope (Deputy President), Lady Hale, Lord Wilson, Lord Reed and Lord Carnwath) 4 July 2012

    In a tweet: Lady Hale calls for reform of cohab law in England & Wales

    Summary: This appeal concerned the meaning and effect of s.28 Family Law (Scotland) Act 2006 which enables a cohabitant to apply to the court for financial provision when cohabitation comes to an end other than by reason of the death of one of the parties. The court has the power to make an order for a lump sum payment, having regard to whether the defendant (or defender in Scotland) has derived economic advantage from the contributions made by the applicant and whether the applicant has suffered economic disadvantage in the interests of the defendant or any child. The court takes into account the extent to which any economic advantage derived by one cohabitant is offset by the economic disadvantage suffered by the other.

    Here, Mrs Gow ("Mrs G") met Mr Grant ("Mr G") in 2001 when she was about 64 years old and he was about 58 years old. They formed a relationship and, at the end of 2002, Mr G asked Mrs G to move in with him. She agreed provided that they also became engaged. They did. They lived together as husband and wife until January 2008 when their relationship came to an end.

    When they had met, Mrs G had owned her own a flat in Edinburgh. After moving in together, Mr G strongly encouraged Mrs G to sell her flat which she did in 2003. There was no evidence that she had been forced to sell her property because of financial difficulties; rather, she sold it because she wanted to further her relationship with Mr G. The net sale proceeds had been used partly by Mrs G but had also been used to met the couple's living expenses. Mrs G continued to live in Mr G's home until she obtained rented accommodation in June 2009.

    At first instance, the sheriff had found that the value in July 2009 of Mrs G's former flat had been £88,000. The difference between that figure and the price at which the flat had been sold in 2003 was £38,000. The sheriff also heard evidence that during their cohabitation the parties had purchased two timeshare weeks in their joint names, each of which cost £7,000. Mrs G had paid £1,500 towards the first week and the whole price of the second week.

    The sheriff had recognised that s.28 allowed the court a discretion as to whether they an order should be made and that a precise calculation of loss was not required. The sheriff's conclusion was that Mrs G had suffered a net economic disadvantage and that she should be compensated in the sum of £39,500. Mr G's appeal was allowed and the Court of Session set aside the sheriff's award stating:

    "In our opinion it cannot be said that the sale and the application of the proceeds were carried out "in the interests of... [Mr G]"; they were rather carried out primarily in [Mrs G'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 [Mr G]; that contribution must be set in the context of the parties' general finances, and the sheriff's findings on that subject (findings in fact [9] and [10]) indicate that [Mr G] paid somewhat more towards joint expenses than [Mrs G] did....... To the extent that it might be said to be an economic disadvantage suffered by [Mrs G], it was plainly offset by the economic advantage that [Mrs G] derived from [Mr G's] contributions towards joint living expenses."

    The court made clear it preferred a narrow interpretation of the law.

    Mrs G appealed to the Supreme Court to have original award reinstated.

    Held: The Supreme Court unanimously allowed Mrs G's appeal and overturned the decision of the Court of Session and affirmed the sheriff's finding that Mrs G had suffered economic disadvantage in the sum of £39,500. The leading judgment was given by Lord Hope.

    At the outset, Lord Hope observed that s.28 did not seek to replicate the provisions for financial relief that are available for divorcing couples in Scotland (see s.9 Family Law (Scotland) Act 1985). Therefore, it would not be right to adopt the same approach in these circumstances as otherwise the court would be imposing a regime of property sharing and continuing financial support on cohabitants, people who may well have opted for cohabitation precisely to avoid these consequences.

    Nonetheless, the underlying principle of the provision was one of fairness; s.28 had been designed to enable the court to correct imbalances arising out of a non-commercial relationship where parties were likely to have made contributions or sacrifices without counting the cost or bargaining for a return. It would be too narrow an approach simply to limit s.28 to correcting those clear and quantifiable economic imbalances that may have resulted from the cohabitation.

    Lord Hope considered the fact that s.9(1)(b) Family Law (Scotland) Act 1985 enabled fair compensation to be awarded, on a rough and ready valuation, in cases where otherwise none could be claimed. He concluded that s.28 had been designed to achieve the same effect. An assessment of what was in the interests of any relevant child could not simply be reduced to purely financial factors. It was acknowledged that the phrase "in the interests of the defender" could be taken to mean "in a manner intended to benefit the defender" as the Court of Session had indicated. However, Lord Hope determined that it did not compel that interpretation, and in the present case, where the guiding principle was one of fairness, its more natural meaning was directed to the effect of the transaction rather than the intention with which it was entered into. Provided that disadvantage had been suffered in the interests of the defendant to some extent, the door was open to an award of a capital sum even though it may also have been suffered in the interests of the applicant.

    The sheriff had therefore been entitled to take the sale of the house into account, notwithstanding her findings that the proceeds had been used by Mrs G for her own purposes or to meet the parties' joint living expenses, that the sale of the flat had been encouraged by Mr G and that it had been sold in the interests of furthering their relationship. The sheriff had also been entitled to hold that the loss of the benefit of the increase in the value of the flat had been an economic disadvantage and that it had been suffered by Mrs G in the interests of her relationship with Mr G. When the cohabitation had ended, Mrs G had not had her own property whereas Mr G did, and his had increased in value. Mrs G was entitled to be compensated for that.

    Practitioners point

    Lord Hope states:

    "it may be helpful to refer to cases decided under section 9(1)(b) when the court is considering what might be taken to be an economic advantage, disadvantage or contribution for this purpose or how the economic burden of caring for a child is to be dealt with under section 28(2)(b)."

    Comment

    Scotland is the only part of the UK to have provisions catering for cohabitants in this way. Given the growth in couples preferring to cohabit rather than marry, s.28 is, at the very least, an attempt to move with the times. Lady Hale, in her concurring judgement stated:

    "The Act has undoubtedly achieved a lot for Scottish cohabitants and their children."

    For Scottish practitioners, the judgment will provide welcome guidance given the somewhat contradictory approaches in the lower courts. The legislation has not been easy to interpret which is perhaps best illustrated by the different approaches taken: a broader approach based on an overriding principle of fairness at the start, a narrowing of the scope of the provision and an emphasis on "precise wording" on the first appeal and then back to the broad approach which compares where the parties were at the beginning of their cohabitation and where they were at the end. Given the judgment also states that reference can be made to case law dealing with financial provision on divorce, perhaps the Supreme Court has gone further than many might have expected.

    For English and Welsh practitioners, the real point of interest comes in what Lady Hale says. Although she concurred with the leading judgment, she felt that had to add "a few words" of her own because "there are lesson to be learned from this case in England and Wales". In calling for law reform, she quite clearly recommends a similar remedy south of the border (and let's not forget that cohabitants have led to a great deal of litigation and the law has had to twice be clarified by the highest court in the land in the last five years). As many will remember, the Law Commission report calling for a similar a remedy to that in Scotland was published in July 2007 and it called for a principle of compensation for the economic advantages and disadvantages to be available to cohabitants. In 2008, the government announced that it would await the results of research into the Scottish scheme before deciding what to do. Jonathan Djanogly's announcement in 2011 that the research had not provided a sufficient basis on which to change the law in this jurisdiction was greeted with dismay.

    Lady Hale looked at the advantages of the Scottish system and its results and she even goes so far as to examine why a similar provision to the one in Scotland would be preferable to the proposals that were set out by the Law Commission. She comments that Gow v Grant "illustrates that it may be unwise to be too prescriptive":

    "In principle, if one party has derived a clear and quantifiable economic benefit from the economic contributions of the other, it may be fair to order what is, in effect, restitution of the value of that benefit. But sometimes the benefit will result from non-financial contributions or be very hard to quantify. Even more problematic are the cases where there is identifiable economic disadvantage, as here, without a corresponding economic advantage. In some cases, it may be entirely fair to expect the better-off partner to compensate the other in full for the losses she has sustained as a result of their relationship: as, for example, where a rich widower persuades a widow to give up her secure tenancy and widow's pension to move in with him and can well afford to put her back in the position in which she was before their cohabitation began. In others, this may be impossible or quite unfair. Thus, it seems to me, the flexibility inherent in the Scottish provisions is preferable to the Law Commission's proposal that the losses should be shared between them."

    So what can practitioners south of the border take from this case? As Lady Hale states:

    "The main lesson from this case, as also from the research so far, is that a remedy such as this is both practicable and fair. It does not impose upon unmarried couples the responsibilities of marriage but redresses the gains and losses flowing from their relationship. As the researchers comment, "The Act has undoubtedly achieved a lot for Scottish cohabitants and their children". English and Welsh cohabitants and their children deserve no less."

    Finally, the case demonstrates that cohabitation is not just about young, unmarried couples who may or may not have children. Here we have a mature couple, both of whom had been married before, each of whom had an income and their own home. Reform of this area of law will need to take into account the wide variety of cohabiting relationships that are formed.


Published: 12/07/2012

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