Family

Orders in family proceedings - Financial provision - Cohabitees

Gow (FC) v Grant: Supreme Court (Lords Hope, DP, Wilson, Reed and Carnworth SCJJ, Lady Hale): 4 July 2012

Section 28 of the Family Law (Scotland) Act 2006 provides, so far as material: ‘... (2) On the application of a cohabitant (the ‘applicant’), the appropriate court may, after having regard to the matters mentioned in subsection (3) - (a) make an order requiring the other cohabitant (the ‘defender’) to pay a capital sum of an amount specified in the order to the applicant; … (3) Those matters are - (a) whether (and, if so, to what extent) the defender has derived economic advantage from contributions made by the applicant; and (b) whether (and, if so, to what extent) the applicant has suffered economic disadvantage in the interests of - (i) the defender... (4) In considering whether to make an order under subsection (2)(a), the appropriate court shall have regard to the matters mentioned in subsections (5) and (6); (5) The first matter is the extent to which any economic advantage derived by the defender from contributions made by the applicant is offset by any economic disadvantage suffered by the defender in the interests of - (a) the applicant... (6) The second matter is the extent to which any economic disadvantage suffered by the applicant in the interests of - (a) the defender... is offset by any economic advantage the applicant has derived from contributions made by the defender.’

In 2001, the appellant met the respondent. She was about 64 years old and he was about 58 years old. They entered into a relationship and the respondent asked the appellant to live with him at his home. The appellant agreed to do so on the basis that they became engaged to be married, which they then did. They lived together as husband and wife until January 2008, when the relationship came to an end. In consequence of the position in which the appellant found herself when the relationship ended, she brought an action against the respondent in the Sheriff Court (the action), in which she sought payment of a capital sum pursuant to section 28 of the Family Law (Scotland) Act 2006 (the 2006 act).

At the time the parties met, each owned their own home and they were both in employment. The respondent subsequently encouraged the appellant to sell her flat (the flat). Further to the bringing of the action, the sheriff held, inter alia, that there was no evidence that the appellant had been forced to sell the flat because she was in financial difficulties. The appellant had effectively sold the flat in the interests of furthering her relationship with the respondent. In June 2003, the flat had been sold and the proceeds of the sale had been used by the appellant partly for her own purposes and partly as a contribution towards the parties’ living expenses. The appellant had continued to live in the respondent’s home until she obtained rented accommodation in June 2009.

During the parties’ cohabitation, they purchased two time-share weeks in their joint names, each of which had cost £7,000 (the time-share assets). The appellant paid £1,500 towards the first week in addition to paying the whole price of the second week. The sheriff found, inter alia, that the value, in July 2009, of the flat which had formerly belonged to the appellant would have increased by £38,000 from the price at which it had been sold in June 2003. In delivering her judgment, the sheriff recognised, inter alia, that the language of section 28 of the 2006 act gave her a discretion to make an order and that a precise calculation of loss was not required.

Having regard to section 28(3)(a) of the 2006 act, the sheriff held that the appellant had contributed financially to the parties’ expenditure during the period of cohabitation and that the respondent had also derived an economic advantage from her non-financial contribution, inter alia, in looking after the house in which the parties cohabited. As to section 28(3)(b) of the 2006 act, the sheriff was satisfied that the appellant had suffered economic disadvantage in the interests of the respondent in the sum of £39,500 and that she should accordingly be compensated in that amount (the decision). That sum was made up of the difference between the sale proceeds of the flat and the flat’s value at the instant time, together with the sum of £1,500 in relation to the acquisition of the time-share assets.

The respondent’s appeal against the decision to the Second Division of the Inner House of the Court of Session was subsequently allowed. The court held, inter alia, that the sheriff’s award was not justified by her findings of fact. Further, that sections 8-10 of the Family Law (Scotland) Act 1985 (the 1985 act), which contained principles relating to financial provision on divorce, had no bearing on the construction of section 28 of the 2006 act and that that section was intended to enable the court to correct any clear and quantifiable economic imbalance that might have resulted from cohabitation. The appellant appealed to the Supreme Court.

The principal issues for determination were: (i) whether section 9(1)(b) of the 1985 act had any bearing on the way the matters referred to in section 28(3), (5) and (6) of the 2006 act ought to be approached; (ii) whether an intention to benefit the other cohabitant was a necessary element of the requirements of sections 28(3)(b) and (6) of the 2006 act; (iii) whether it was necessary (using the terminology of the 2006 act) for the applicant to establish that the defender derived actual economic benefit as a result of economic disadvantage suffered by the applicant and whether any benefit so conferred had to be in the interests of the defender alone, or whether it could be of benefit to both parties; and (iv) whether, if relevant economic disadvantage was established, which was not offset by relevant economic advantage, the court had a discretion as to the amount of any award, and the extent of any such discretion. Consideration was given, inter alia, to the 1985 act. The appeal would be allowed.

(1) Section 28 of the 2006 act did not seek to replicate the arrangements that were available for financial provision on divorce or the termination of a civil partnership. For that reason it would not be right to adopt the same approach to the application of that section as would be appropriate if the exercise was being conducted under section 9 of the 1985 act. The starting points of principle were significantly different. However, it was sufficiently clear from the background to the enactment of section 28 that, in its case too, the underlying principle was one of fairness and that it was designed to correct imbalances arising out of a non-commercial relationship where parties were quite likely to make contributions or sacrifices without counting the cost or bargaining for a return.

Accordingly, it would be wrong to approach section 28 on the basis that it was intended simply to enable the court to correct any clear and quantifiable economic imbalance that might have resulted from the cohabitation. That was too narrow an approach. Section 9(1)(b) of the 1985 act enabled fair compensation to be awarded, on a rough and ready valuation, in cases where otherwise none could be claimed. Section 28 was designed to achieve the same effect. Accordingly, it might be helpful to refer to cases decided under section 9(1)(b) when the court was considering what might be taken to be an economic advantage, disadvantage or contribution for that purpose, or how the economic burden of caring for a child was to be dealt with under s 28(2)(b) (see [33], [35], [36] of the judgment).

(2) To hold that an intention to benefit the other cohabitant was a necessary element of the requirements of sections 28(3)(b) and (6) of the 2006 act was to take too narrow a view of the effect of those provisions. The phrase ‘in the interests of the defender’ could be taken to mean ‘in a manner intended to benefit the defender’. However, it did not compel that interpretation and 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 (see [38] of the judgment).

(3) The reference to the defender at the end of the phrase ‘in the interests of the defender’ in sections 28(3)(b) and (6) of the 2006 act did require that the disadvantage which the applicant suffered was in his interests. However, it did not say that it must have been his interests only, or that the fact that it was in the applicant’s interests also means that it had to be left out of account. Still less did it say that ‘interests’ had to be equated with economic advantage or benefit. To adopt that interpretation did not fit easily with a relationship where many decisions were taken jointly in its interests without counting the cost or bargaining for a return. Provided that disadvantage had been suffered in the interests of the defender to some extent, the door was open to an award of a capital sum even though it might also have been suffered in the interests of the applicant(see [38] of the judgment). Mitchell v Gibson [2011] Fam LR 53 applied.

(4) Section 28 of the 2006 act left both the making of an award and the amount to be awarded to the discretion of the court. There had to be a basis in fact for the decision it took. However, as with all discretionary decisions, the scope for interference by the appellate court was constrained according to well-recognised principles. It was clear that it ought not to interfere with the decision of a judge in the exercise of his discretion unless it could be shown that he had misdirected himself in law or had failed to take account of a material factor or had reached a result which was manifestly inequitable or plainly wrong. The making of an award under section 28 was as much a matter of discretion as it was under section 9 of the 1985 act and the same principles applied in its case (see [42] of the judgment). Gray v Gray [1968] SC 185 applied; Little v Little 1990 SLT 785 applied; Mitchell v Gibson [2011] Fam LR 53 applied.

(5) On the facts of the instant case, the sheriff’s approach to the issues with which she had been faced could not be faulted. She had based her conclusions on a careful analysis of all the issues that she had been directed by section 28 of the 2006 act to consider and it had been well within the band of reasonable decisions that had been open to her. The Second Division’s discussion of the sheriff’s reasoning had not given effect to the true meaning and effect of sections 28(3)(b) and (6) of the 2006 act. The sheriff had been entitled to hold that the loss of the benefit of the increase in value of the flat was an economic disadvantage and that it had been suffered by the appellant in the interests of her relationship with the respondent.

Furthermore, the Second Division had not been able to demonstrate in its reasoning that it had had a proper basis for disturbing the part of the sheriff’s award relating to the time-share assets (see [39], [40], [42], [43] of the judgment). The appeal would be allowed. The sheriff’s finding in fact and law that the appellant had suffered economic disadvantage in the interests of the respondent to the extent of £39,500 would be affirmed (see [43], [44] of the judgment).

Per curiam: ‘... there is a need for some such remedy as this in England and Wales’ (see [45] of the judgment).

Per curiam: ‘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’ (see [56] of the judgment). Decision of Court of Session [2011] CSIH 2 reversed.

Janys M Scott QC and Kirsty Malcolm (instructed by Hughes Walker) for the appellant; Iain G Armstrong QC and Catherine Dowdalls (instructed by Allan McDougall) for the respondent.