Co-ownership and Cohabitation: the legal implications of relationship breakdown

The current law which applies on the breakdown of a relationship between cohabitees in England and Wales has been the reason for much debate and for the release of a Law Commission report urging legal reform on the matter in 2007. Despite this, there is currently no legislation to prevent potentially harsh results on asset distribution for cohabiting couples whose relationships dissolve.

THE CURRENT LAW

Asset distribution on the separation of cohabiting couples is now based on intricate case law and on a combination of Equity, Land and Trust law. Thus, for the claimant – and often, even for the claimant’s legal representative – simply deciding whether a case has merit can be a burdensome task. In the absence of a cohabitation agreement, and in the absence of engagement – the legal position of engaged cohabitees does provide some support – it is too often that one of the parties will end up at a severe disadvantage. The current legal position on relationship breakdown is summarised below.

1. In a relationship between two cohabitees (“A” and “B”), if both partners are the legal owners of the property they inhabit, then there is a presumption of jointly shared beneficial ownership, unless there is an express declaration to the contrary (Goodman v Gallant [1986]).

2. If A is the legal owner, then there is a presumption that the beneficial ownership belongs solely to A.

In both situations, it is possible for the non-owning party, B, to rebut the presumption and to establish a (different) beneficial interest, by using one of the following methods: the establishment of a resulting trust, the establishment of a common intention constructive trust or via proprietary estoppel. This article is concerned mainly with the establishment of common intention constructive trusts.

A common intention constructive trust (CICT) will be established by considering the common intention of the parties as to the ownership of the property and whether there has been detriment on the part of B. The common intention can be either express or inferred. The evidence of express common intention is to be found in the discussions between the parties.

The concept of inferred common intention can be substantially more elusive. The landmark case of Lloyds Bank v Rosset [1991] emphasises that it is unlikely that anything other than financial contributions to the property will serve to indicate a common intention inferred from conduct.

It is to be noted that despite more recent cases like Stack v Dowden and Jones v Kernott – which start taking into account non-financial contributions by B – the position remains entirely unclear as to how these contributions would be weighted and the issue of comparing “caring responsibilities” to “earning responsibilities” remains an extremely difficult task for the courts.

The courts have two tasks in CICT cases: first, to decide whether a beneficial interest exists in favour of B – the onus is on B to prove its existence – and, if a CICT is found, to then quantify B’s share in the property.

Jones v Kernott [2011] explains that there are two ways of rebutting the presumptions: “by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change”. The common intention is to be “deduced objectively from their conduct”. In Kernott, it was deemed that the intentions as to the shares of beneficial ownership of the parties had altered with the passing of time.

The House of Lords case of Stack v Dowden [2007], explains the quantification of beneficial interests, in the absence of an express agreement between the parties. The Court of Appeal case of Oxley v Hiscock [2004] is considered in the judgment. This latter case highlighted the importance of examining the “course of dealing” between the parties, in the quantification of shares. In Stack, Lady Hale concluded, affirming Oxley, that “a survey” of the course of dealing would be necessary and that account would be taken of “all conduct which throws light on the question of what shares were intended."

Conduct and course of dealing, seem, then, important factors in establishing both whether there is a beneficial interest in B’s favour, and in establishing the extent of the beneficial interest.

It is to be noted, however, that recent cases have not shown a tendency to consider anything other than financial contributions when quantifying B’s beneficial interest.

It is not difficult to imagine situations where this approach will lead to harsh results. In cases where financial contributions cannot be established, it is possible to arrive at results where over 15 years of caring responsibilities are not recognised and B walks away with nothing post separation. (as per the Court of Appeal case of Burns v Burns [1984])

More recently, the case of Aspden v Elvy [2012] did find a CICT in favour of the claimant, however, the quantification of the beneficial interest seems to have been solely determined based on the claimant’s initial financial contribution to the property. After a contribution of £70,000 to the conversion of a barn into a dwelling house which later became worth £400,000, the claimant established a CICT in his favour, worth 25% of the latter value of the dwelling.

WHAT CAN BE DONE?

1. The Law Commission in Scotland proposed reforms to be done in relation to the rights of cohabitees; the report prompted the enactment of the Family Law (Scotland) Act 2006.

Sections 25 to 29 of the Act allow B to make applications to the court after separation from A, or upon A’s death. The courts are given the power to order a lump sum payment or financial provision by instalments, according to what they see fit. While this can provide grounds for some uncertainty, it does allow for courts to recognise a much wider variety of contributions by B before arriving at a decision on equitable interests.

The new law has been applied by the Supreme Court in the Scottish case of Gow v Grant [2012]. The reform to the Scottish law on cohabitation was viewed positively by Lady Hale, who praised its “practicability and fairness”. An economic disadvantage of £39,500 on the part of the claimant was established, on the application of section 28 of the Family Law (Scotland) Act 2006.

2. An improved approach may be provided by The Cohabitation Rights Bill 2016. Upon coming into force, this bill would make a range of remedies available to B upon relationship breakdown. Several provisions in the bill mirror the Law Commission’s approach in the 2007 report, and the “economic disadvantage” criterion seems to echo the Scottish Act. The bill allows for an application to the court to be made by B for suitable financial provision in various forms – including property transfer, the sale of property or the payment of a lump sum. The bill considers “retained benefits” on part of A and “economic disadvantage” suffered by B, in assessing whether there needs to be financial provision made for B after separation.

The lens of unjust enrichment has been commended at length in the 2009 paper, Cohabitants, Property and the Law: A Study of Injustice (2009). It is advised in the study that the law currently omits to recognise both genuine sacrifice and the lack of it – when it comes to both parties. The bill, then, could provide long-awaited improvements in this sense. In addition to this, cohabiting couples would still need to satisfy certain criteria in order to be able to access the remedies proposed by the bill, and the suggested changes in the law apply to very specific situations, so concerns over it “undermining marriage” seem unfounded.

3. Following from 2, one of the most often-quoted issues in establishing a CICT is giving value to “caring responsibilities”. In the 2016 bill, these would presumably be covered by the “qualifying contributions” in section 8(2)(c). The bill also suggests that the court should inquire into the facts as presented by the claimant in as much detail as possible. It is suggested, then, that perhaps a points-based system may be of assistance to courts when determining the weight of such contributions. While it is admittedly difficult to assign points to the variety of responsibilities which come with childcare and house maintenance, it is suggested that an inquisitorial court approach – similar to the one adopted in social security cases – may bring to light the value of B’s contributions when they are of this particular nature. Headings such as “Caring for the children” could encompass “taking the child to and from school”, “helping with homework”, “speaking to the child”, while headings such as house maintenance could comprise “cleaning”, “cooking” and others. This additional piece of guidance would aid in the interpretation of what constitutes “qualifying contributions” in s 8 (2) (c).

Alternatively, these criteria – even if they are not assigned points – could still act as guidelines for the courts, since the more criteria satisfied, the more weight can be given by the judge to the claimant’s potentially earned equitable interest. It is suggested that, at least in the more straightforward cases, where the claimant is an extremely dedicated parent (and, conversely, in the cases where the claimant does not undertake any “caring responsibilities” at all), the inquisitorial system will be quick to identify the value of these contributions.

Lord Wilson stated in Kernott that “in the light of the continued failure of Parliament to confer upon the courts limited redistributive powers in relation to the property of each party upon the breakdown of a non-marital relationship”, the developments in Stack v Dowden were to be “warmly applauded”. The calls for reform from the judiciary have been ongoing in cases of cohabitation, and it is submitted that the implementation of the Cohabitation Rights Bill would be a welcome change to the law. Additional guidance on qualifying contributions might also be of use, in the form of a points-based system.

Finally, the definition of a cohabitant, present in the bill, could also be exchanged for a definition of the cohabiting couple, akin to the method of defining a de facto relationship under Australian law, in the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008. Cohabitation law in England and Wales does not appear prone to changes as drastic as those in Australian law – satisfying the list of criteria of the de facto couple allows cohabitees to access the same remedies as those available upon marriage – however, the availability of a court order at the end of a relationship seems long overdue and awaited by both courts and practitioners.

The author of this article has found of great benefit attending the National Cohabitation Debate on the 10th November 2016, which has added great value to the content of this piece