THE Supreme Court in Gow v Grant [2012] UKSC 29 heard its first appeal concerning the Family Law (Scotland) Act 2006's financial remedies between cohabitants on separation. Scottish developments have interested lawyers and policy makers in England and Wales since the Labour Government's decision in 2008 to defer any decision on implementation of recommendations by the Law Commission for England and Wales for reform in this jurisdiction (Cohabitation: The Financial Consequences of Relationship Breakdown, Law Com. 307) pending empirical research on the new Scots law. Following the first such research (Wasoff, Miles and Mordaunt, Legal Practitioners' Perspectives on the Cohabitation Provisions of the Family Law (Scotland) Act 2006 (Edinburgh 2011)), and despite its positive findings, the Coalition Government postponed any reform to the next Parliament.
English and Welsh cohabitants, and courts, continue to struggle with claims offered by property and trusts law, in particular the common intention constructive trust, whose contours have arguably become no easier to discern following Stack v Dowden [2007] UKSC 37, [2007] 2 A.C. 432 and Jones v Kernott [2011] UKSC 53, [2012] 1 A.C. 776. Whether trusts law can secure “fair” outcomes in these cases is debatable, and whether it does so might be said to depend on somewhat fortuitous factors unrelated to the true justice of the case. The predicament of the totemic Mrs Burns (Burns v Burns [1984] Ch. 317), who made “only” domestic contributions to the life shared with a partner who owned their home in his sole name, would be the same today as it was 30 years ago.
Meanwhile, Scottish cohabitants enjoy a tailor-made statutory jurisdiction for the grant of financial relief following separation. Scots law deliberately does not equate separating cohabitants with divorcing spouses. The latter have access to a remedial scheme based on five principles (enshrined in the Family Law (Scotland) Act 1985, ss. 8–11) which may be categorised by reference to the three strands rather more loosely identified for English divorcees in Miller v Miller, McFarlane v McFarlane [2006] UKHL 24: sharing, needs and compensation. The first calls for the fair (ordinarily equal) sharing of “matrimonial property”, the scope of which (unlike its judicially-created English counterpart) is closely defined by statute. Two others focus on needs, justifying relief to facilitate the recipient's adjustment (over no more than three years) to substantial financial dependence on the other spouse and/or to alleviate over a reasonable period serious financial hardship resulting from the divorce. On the recommendation of the Scottish Law Commission (Report on Family Law, Scot Law Com. No 135), none of these principles was adopted in the 2006 Act. Instead, section 28 of that Act (which is less than happily drafted) adopts the essence of the two principles based on compensatory ideas: the first recognises the economic burden of caring for a child of the cohabitants following separation; the second responds to economic advantage derived by one party from the other's contributions (direct, indirect and domestic as well as financial) and to economic disadvantage suffered by one party “in the interests of” the other party or any relevant child. The last of these was at stake in Gow v Grant.
When Mrs Gow and Mr Grant met, she was aged 64 and he 58. He asked her to live with him. She agreed on condition that they became engaged to be married. They then cohabited from June 2003 for over four and a half years in a mortgage-free home worth £200,000 owned by Mr Grant. When they met, Mrs Gow owned a flat worth £50,000 subject to a small mortgage which she sold in order to further her relationship with Mr Grant, who was adamant that she should sell. When her employment contract ended shortly before moving in, at Mr Grant's request she did not take up further work. Mrs Gow used the net proceeds of the sale of her flat (£36,559) to pay various personal debts, initially invested £10,000 and loaned £4,000 to her son. The balance (£8,425) went on the parties' living expenses. During the relationship, the £10,000 investments matured or were surrendered, and the proceeds spent on a time-share in the parties' joint names, paintings (two of which she gave to him), a holiday and again on joint living expenses. This dissipation of the capital from her flat, in part for her own benefit, left Mrs Gow in a precarious position when the relationship ended: while Mr Grant retained his mortgage-free home, Mrs Gow had no home, no capital with which to rehouse, half of a two-week time-share (to which she had made the larger financial contribution) and a monthly pension income of just £640. Meanwhile, her erstwhile flat had increased in value by £38,000. It was this lost opportunity to benefit from that rise in value which formed the principal basis of her remedy, the sheriff's original award (reported at [2010] Fam. L.R. 21) being reinstated by the Supreme Court.
Viewed through English eyes, Mrs Gow would have had no claim. The home was solely owned by Mr Grant and mortgage-free before the relationship began, so Mrs Gow made no financial contribution to its acquisition, nor did she fund any substantial improvement to or extension of it; there was no evidence from which an implied common intention constructive trust could be asserted. Whilst Mr Grant had promised marriage, there was no evidence of an assurance or acquiescence relating to property ownership of the sort necessary to sustain a claim in proprietary estoppel or to ground an express common intention constructive trust.
As it was, the Scottish legislation permitted the Supreme Court, led by Lord Hope, to identify an economic disadvantage suffered by Mrs Gow “in the interests of the defender” (s. 28(3)(b)) which could underpin her remedy. Mr Grant had contended for a narrow reading of the legislation (adopted by the first appeal court, the Inner House of the Court of Session [2011] CSIH 25), arguing that in order to fulfil s. 28(3)(b) Mrs Gow must have suffered that disadvantage with the intention of benefiting him economically, and that it was not sufficient that she had done what she did merely to further their relationship. The Supreme Court rejected these arguments. On examining the legislative history, it discerned an underlying (if unstated) core principle of “fairness to both parties” ([2012] UKSC 29 at [31]). The statute should be read broadly, given the social context: cohabitants tend not to keep strict accounts during their relationships; the cost of attempting such an exercise retrospectively would be disproportionate (at [33]); precise valuations being impossible, a “rough and ready valuation” (at [36]) having regard to the effect of the parties' interactions rather than their intentions is apposite; and it is necessary to demonstrate neither a specifically economic benefit arising from the claimed economic disadvantage nor one enjoyed exclusively by the defender (at [38]). Indeed, it was clear during argument before the Court that a narrow approach could have the effect of precluding any remedy in the classic case of career sacrifice by one cohabitant to care for the parties' children, that decision commonly not being intended or likely to confer any economic benefit on the other party. Thus, provided the applicant's economic disadvantage had been suffered to some extent in the defender's interests broadly construed (even if also in hers), the court enjoyed a discretion to make an award. And here the sheriff had been entitled to find on the facts that Mrs Gow should be fully compensated for the lost increase in the value of her flat. She received a further £1,500 in relation to the additional funding she had provided in relation to the jointly-owned time-share.
In a judgment with which her English colleagues (Lords Wilson and Carnwath) concurred, Lady Hale set out the lessons for England and Wales from this case and from the empirical research. Reform is needed. It must cater for a wide range of cohabitants, not just parents. It may be unnecessary on practical grounds to curtail eligibility to apply for remedies with a requirement that the relationship lasted a minimum duration (as the Law Commission has recommended): the Scottish research indicates that the lack of such requirement has not been problematic. Scottish experience of operating (theoretically attractive) compensation-based principles has not been straightforward; aspects of the Law Commission's recommendations for delineating entitlement to a remedy are clearer and its range of remedial tools more helpful (Scots are confined to capital awards). But the greater flexibility of the Scottish legislation in shaping the quantum of the remedy is beneficial.
As Lady Hale remarked, there was in fact never any need to evaluate the Scottish experience to justify reform south of the border. But sadly it seems that the judges' increasingly compelling calls for a statutory rescue of Mrs Burns and her ilk from the uncertainty and unfairness of the law of trusts, and to replace that with a fairness-based regime directly focused on the demands and realities of the family context, will remain unanswered for some time yet.
