Cohabitation: The Financial Consequences of Relationship Breakdown [2006] EWLC 179(12) (04 May 2006)

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The Law Commission

You are here: BAILII >> Databases >> The Law Commission >> Cohabitation: The Financial Consequences of Relationship Breakdown [2006] EWLC 179(12) (04 May 2006)
URL: http://www.bailii.org/ew/other/EWLC/2006/179(12).html
Cite as: [2006] EWLC 179(12)

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PART 12

LIST OF PROVISIONAL PROPOSALS AND CONSULTATION QUESTIONS

INTRODUCTION

We set out below a list of our provisional proposals and consultation questions on which we are inviting the views of consultees. We would be grateful for comments not only on the issues specifically listed below, but also on any other points raised in this paper. It would be helpful if, when responding, consultees could indicate either the paragraph of this list to which their response relates, or the paragraph of this paper in which the issue was raised.

PART 5: EVALUATING THE CASE FOR REFORM

We provisionally reject the view that any new remedies providing financial relief on separation should attach to a new legal status to which cohabiting couples can "opt in" by registration. Do consultees agree?

[Paragraph 5.111]

We provisionally propose that any new statutory scheme providing financial relief on separation should be available only between "eligible cohabitants", unless the parties have agreed that neither shall apply for those remedies by way of an "opt-out agreement". Do consultees agree?

[Paragraph 5.112]

We consider that, in cases where the couple have children, the current law governing the resolution of cohabitants' financial and property disputes on separation is uncertain and capable of producing unfair outcomes, and that reform for this category of case is justified. We provisionally propose that new statutory remedies should be devised to deal with such cases. Do consultees agree?

[Paragraph 5.113]

We invite the views of consultees on whether reform may also be warranted in any cases involving cohabitants without children.

[Paragraph 5.114]

PART 6: FINANCIAL RELIEF ON SEPARATION: A NEW SCHEME

We provisionally reject the view that any new scheme should take effect by reference to fixed rules for property division. Instead, we provisionally propose that the courts should exercise a discretion structured by principles which determine the basis on which relief, if any, is to be granted on separation. Do consultees agree?

[Paragraph 6.45]

We consider that the mere fact that one party has financial or other material needs should not in itself justify the grant of financial relief from the other party on separation. Do consultees agree?

[Paragraph 6.76]

We consider that the court's decision whether to grant financial relief and, if so, of what value, should be based on principles that focus on:

(1) the contributions which have been made by each party to the parties' joint household and to the welfare of the other party and other members of their family, in particular their children; and

(2) the contributions which each shall make to the welfare of their children following their separation.

Do consultees agree?

[Paragraph 6.77]

We invite the views of consultees on the question of which children should be "relevant" to the provision of financial relief between "cohabitants with children".

[Paragraph 6.215]

We invite the views of consultees on the principles which should justify and quantify awards of financial relief between cohabitants on separation.

[Paragraph 6.238]

We provisionally reject the view that the substantive law governing financial relief between spouses on divorce (Part II of the Matrimonial Causes Act 1973

[Paragraph 6.239]

We consider that, in determining whether to grant relief and, if so, what the relief should be, the court should have regard to whether, and to what extent, either party's economic position following separation (in terms of capital, income or earning capacity) was:

(1) improved by the retention of some economic benefit arising from contributions made by the other party during the relationship ("economic advantage"); or

(2) impaired by economic sacrifices made as a result of that party's contributions to the relationship, or as a result of continuing child-care responsibilities following separation ("economic disadvantage").

Do consultees agree?

[Paragraph 6.240]

We invite the views of consultees on the factors to which the court should have regard when considering the justification for, and quantum of, any financial relief to be granted in accordance with the principles of economic advantage and economic disadvantage.

[Paragraph 6.241]

We invite the views of consultees on whether awards should be limited to "transitional support", with particular reference to the costs of retraining that may be necessary to enable the applicant to re-enter the labour market.

[Paragraph 6.242]

We invite the views of consultees on whether any new scheme for financial relief between cohabitants should include a power to make awards in appropriate cases to assist the party with whom any relevant children will principally live following separation with the costs of child-care.

[Paragraph 6.243]

We invite the views of consultees on whether awards should only be made where it would be substantially or manifestly unfair not to do so.

[Paragraph 6.244]

We consider that parties' conduct should not be taken into account in considering claims for financial relief on separation, save where that conduct relates to litigation or financial misconduct, or where it would otherwise be inequitable to disregard it. Do consultees agree?

[Paragraph 6.245]

We provisionally propose that in granting financial relief to cohabitants on separation, the courts should have available to them the following menu of orders:

(1) periodical payments, secured and unsecured;

(2) lump sum payments, including by instalment;

(3) property adjustment;

(4) property settlement;

(5) orders for sale;

(6) pension sharing; and

(7) interim payments ordered on account pending a full trial or final settlement.

Do consultees agree?

[Paragraph 6.249]

We consider that all types of order should be available to the court on the same substantive basis. Do consultees agree?

[Paragraph 6.254]

We consider that, having determined that some remedy is justified and calculated its quantum in accordance with the principles outlined above, the court should have regard, in particular, to the following factors when deciding what order(s) to make:

(1) the needs of both parties and any children living with them; and

(2) the extent and nature of the financial resources which each party has or is likely to have in the foreseeable future.

Do consultees agree?

[Paragraph 6.263]

We invite the views of consultees on:

(1) generally, how the welfare of children ought to be taken into account in the provision of financial relief between cohabitants; and

(2) specifically, how existing remedies for children of the cohabitants should interact with any new statutory scheme for financial relief between cohabitants on separation.

[Paragraph 6.264]

We invite the views of consultees on the weight to be attached to the clean break principle between cohabitants. In particular, how should the clean break principle relate to the operation of the substantive principles otherwise determining the award that should be made?

[Paragraph 6.272]

We invite the views of consultees on the effect that subsequent marriage, civil partnership or cohabitation with a third party should have on a periodical payments order made in favour of a former cohabitant on separation.

[Paragraph 6.277]

We invite the views of consultees on the interaction of any new remedial scheme for cohabitants with the Matrimonial Causes Act 1973

(1) cohabitants who marry and subsequently divorce; and

(2) an ex-spouse in receipt of periodical payments who cohabits with a third party.

[Paragraph 6.283]

We invite the views of consultees on the interaction of any new scheme with the general law as it applies to cohabitants.

[Paragraph 6.288]

We invite the views of consultees on whether the liability of those who are not parents under Schedule 1 to the Children Act 1989 should be extended to include "cohabiting step-parents" and other non-parents in cohabiting families.

[Paragraph 6.297]

We invite the views of consultees regarding any matters specific to cases involving limited assets and debts.

[Paragraph 6.302]

PART 7: FINANCIAL RELIEF ON SEPARATION: HOW WOULD IT WORK?

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.

[Paragraph 7.83]

PART 8: REMEDIES ON DEATH

We provisionally reject the view that cohabitants should have an automatic entitlement to a share of their deceased cohabitant's estate on intestacy. Do consultees agree?

[Paragraph 8.17]

We consider that it would be appropriate for there to be some correlation between remedies available to eligible cohabitants on separation and on death. Do consultees agree?

[Paragraph 8.49]

We provisionally propose that, if a new scheme for financial relief for cohabitants on separation were enacted, then in relation to the Inheritance (Provision for Family and Dependants) Act 1975:

(1) the definition of cohabitants for the purposes of the 1975 Act should be amended to match the definition used under the new scheme;

(2) the definition of "reasonable financial provision" applied to cohabitants' claims under the 1975 Act should be reviewed to ensure consistency with the new scheme applying on separation;

(3) in determining a cohabitant's claim for provision under the 1975 Act, the court should be required to have regard to the provision that the applicant might reasonably have expected to receive in proceedings for financial relief on separation;

(4) the court should be entitled, on granting a cohabitant financial relief on separation, to direct that neither cohabitant should subsequently be entitled to make an application under the 1975 Act in the event of the other's death; and

(5) claims should be permitted under the 1975 Act on the same basis by those "former cohabitants" who cease to cohabit with the deceased in the twelve-month period immediately before the deceased's death.

Do consultees agree?

[Paragraph 8.50]

We invite the views of consultees as to whether cohabitants should be entitled to opt out of the right to claim financial provision under the 1975 Act against their partner's estate (whether as cohabitant or as dependant of their partner) in the event of their partner's death.

[Paragraph 8.51]

We invite the views of consultees on whether the definition of "child of the family" contained in the Inheritance (Provision for Family and Dependants) Act 1975 should be amended so that those treated as children of the family in relation to a cohabiting couple should also qualify as applicants.

[Paragraph 8.61]

We consider that there is no justification to amend the current law that (subject to exceptions) a will is revoked by the testator's subsequent marriage or civil partnership. Do consultees agree?

[Paragraph 8.66]

We consider that there should be no equivalent provision to sections 18A and 18C of the Wills Act 1837 applicable where, subsequent to the execution of a will, a testator separates from a person with whom he was cohabiting and whom he appointed as executor or trustee, or devised or bequeathed property, in the terms of the will. Do consultees agree?

[Paragraph 8.75]

PART 9: ELIGIBILITY TO APPLY

We invite the views of consultees on whether any legislative definition of those eligible to apply as cohabitants for financial relief on separation should be expressed by analogy to marriage and civil partnership, or in other terms.

[Paragraph 9.32]

We provisionally propose that any legislative definition of those eligible to apply should expressly require that the parties shared a joint household. Do consultees agree?

[Paragraph 9.42]

We provisionally propose that any legislative definition of those eligible to apply should include an express, non-exhaustive checklist of factors to which the court would have regard in determining whether a couple were cohabiting. Do consultees agree?

[Paragraph 9.55]

We invite the views of consultees on the factors that they consider should be included in such a statutory checklist.

[Paragraph 9.56]

We consider that cohabitants who are by law the parents of a child born before, during or following their cohabitation ought to be automatically eligible to apply for remedies under any new scheme on separation. Do consultees agree?

[Paragraph 9.67]

We invite the views of consultees on whether cohabitants with a child who is not the child by law of both parties ought to be eligible regardless of the length of their relationship, and, if so, in what circumstances.

[Paragraph 9.68]

We invite the views of consultees on:

(1) whether parties who do not have a relevant child should have lived together as cohabitants for a specified minimum duration before they are eligible to apply for financial relief on separation ("a minimum duration requirement");

(2 how any such minimum duration requirement should be selected;

(3) how long any such minimum duration requirement should be;

(4) whether the same period should apply to claims on separation and claims on death under the Inheritance (Provision for Family and Dependants) Act 1975;

(5) how any minimum duration requirement should deal with breaks in the continuity of the parties' cohabitation; and

(6) whether there are any circumstances (other than those already considered in relation to cohabitants with children) in which any minimum duration requirement should be waived, and if so what those circumstances should be.

[Paragraph 9.114]

We invite the views of consultees on whether the two-year minimum duration requirement currently applying to claims by cohabitants under the 1975 Act should be amended, particularly in relation to cohabitants with children.

[Paragraph 9.115]

We invite the views of consultees on how the separation of cohabitants should be identified for the jurisdictional purposes of:

(1) determining eligibility to apply; and

(2) application of the limitation period for financial relief.

[Paragraph 9.124]

We invite the views of consultees on whether relationships to which one or both parties is a minor at the time that the claim would be made or when the parties are relatives within the prohibited degrees should be eligible, in any circumstances, for the purposes of financial relief on separation.

[Paragraph 9.135]

We invite the views of consultees on whether a person should be eligible to apply as a cohabitant for financial relief on separation in respect of any period of cohabitation during which they or their partner was married to, or the civil partner of, or cohabiting with another person.

[Paragraph 9.161]

PART 10: COHABITATION CONTRACTS AND OPT-OUT AGREEMENTS

We provisionally propose that legislation should provide (for the avoidance of doubt) that, in so far as a cohabitation contract deals with the financial or property relationship of the parties, it is not contrary to public policy. Do consultees agree?

[Paragraph 10.9]

We provisionally propose that parties should be able to enter into an opt-out agreement regardless of whether their relationship is eligible under a new statutory scheme at the point of entering the agreement or subsequently. Do consultees agree?

[Paragraph 10.26]

We invite the views of consultees on whether minors should be entitled to enter into opt-out agreements, and if so, whether those agreements should be treated as contracts made by minors.

[Paragraph 10.27]

We invite the views of consultees as to whether an opt-out agreement should only be effective if it expressly states in specific or more general terms that neither party is to be entitled to apply for financial relief under any new statutory scheme.

[Paragraph 10.31]

We invite the views of consultees on whether, if an opt-out agreement relates only to part of a couple's financial affairs and does not exclude the parties from making any application to court:

(1) the couple should be bound by the terms of the agreement in respect of the assets or issues that the agreement covers; but

(2) the court should remain free to deal with the assets and issues not covered by the agreement.

[Paragraph 10.43]

We invite the views of consultees on what qualifying criteria, if any, should be necessary for an opt-out agreement to be binding.

[Paragraph 10.79]

We invite the views of consultees on the use of model agreements and how they should be drafted.

[Paragraph 10.84]

We invite the views of consultees on the significance, if any, to be attached to agreements which did not comply with the qualifying criteria required for agreements to be binding.

[Paragraph 10.106]

We invite the views of consultees on the potential role of "sunset clauses".

[Paragraph 10.117]

We invite the views of consultees as to what circumstances, if any, should permit the courts to set aside the terms of an otherwise binding opt-out agreement. In particular, we seek consultees' views on the following:

(1) whether the court's powers to set aside an agreement should be limited to the grounds for setting aside contracts under the general law and failure to comply with qualifying criteria;

(2) if other grounds should be included, whether these should relate to:

(a) events or circumstances at the time of the making of the agreement;

(b) subsequent, supervening events or circumstances;

(c) in either case, should legislation identify particular events having that effect and, if so, what should they be? Or should they be defined generically and, if so, how?

(d) in either case, ought the court to have the power to set aside terms of the agreement simply on the ground that a relevant event occurred? Or ought the court's power to intervene be limited, for example, to situations where, in light of the specified event, enforcement of the agreement would result in manifest injustice to either party?

(3) whether any formal distinction should be drawn between agreements made at the point of separation and those made earlier.

[Paragraph 10.120]

We invite the views of consultees on how the court should proceed where an otherwise binding opt-out agreement has been set aside:

(1) ought the court to have the power, where possible, to sever those terms affected by the vitiating circumstances, exercise its adjustive jurisdiction in relation to the issues covered in that area of the agreement, but otherwise enforce the agreement? or

(2) ought the agreement to fall entirely, leaving the court to exercise its jurisdiction without any limitation by the agreement, but having regard, where appropriate, to its terms?

[Paragraph 10.123]

We invite the views of consultees on whether an express trust declared by both cohabitants should be treated in any circumstances as an opt-out, or whether the court should have the power to override such trusts when providing financial relief on separation or death.

[Paragraph 10.146]

If consultees consider that an express trust itself ought not to be treated as an opt-out, we invite views on how the arrangement of property pursuant to such a trust could, if the parties desired, be transposed into an opt-out agreement that would apply on separation or death.

[Paragraph 10.147]

If consultees consider that an express trust ought to be treated as an opt-out, we invite views on whether those advising purchasers (whether they are solicitors, licensed conveyancers or other advisers) about express trusts of land should be able to advise both parties about the effect of the declaration of trust, and about any aspect of the statutory scheme and the right to opt out.

[Paragraph 10.148]

We invite the views of consultees on whether cohabitants who would otherwise not be eligible to apply, having not satisfied any minimum duration requirement or had children, should be entitled in any circumstances to opt in to the statutory scheme by agreement.

[Paragraph 10.151]

PART 11: PROCEDURE, JURISDICTION AND OTHER ISSUES

Subject to any reforms to the court structure as it applies to family cases, we provisionally propose that claims under a new scheme for financial relief on separation should be heard in the county court or the High Court. Do consultees agree?

[Paragraph 11.16]

We provisionally propose that claims by cohabitants under our proposed scheme for financial relief on separation should be treated as family proceedings, and the promulgation of rules should be referred to the Family Procedure Rule Committee. Do consultees agree?

[Paragraph 11.21]

We invite the views of consultees on the case management of cohabitants' claims under any new scheme, both generally and with particular reference to the issues of:

(1) valuation of assets;

(2) mediation and alternative dispute resolution; and

(3) the desirability of split trials.

[Paragraph 11.29]

We invite the views of consultees on whether steps should be taken to ensure consistency of approach on orders for costs as between ancillary relief claims and claims made by cohabitants under any new scheme on separation.

[Paragraph 11.33]

We invite the views of consultees as to the public funding of cohabitants' claims under any new scheme on separation and as to the ways in which the accessibility of the scheme to those acting without legal advice or representation could be maximised.

[Paragraph 11.39]

We provisionally propose that any new scheme should include anti-avoidance provisions modelled upon section 37 of the Matrimonial Causes Act 1973 to prevent the disposition of assets, and to set aside dispositions that have been made, in order to frustrate a claim for financial relief. Do consultees agree?

[Paragraph 11.41]

We provisionally propose that the machinery that is currently available to enforce family court orders should be available to enforce orders for financial relief made under any new scheme.

[Paragraph 11.43]

We invite the views of consultees on the private international law aspects of any new scheme for financial relief on separation, in particular:

(1) do consultees consider that Brussels II Bis provides a suitable analogy for jurisdictional rules for any new scheme for financial relief on separation of cohabitants?

(2) do consultees consider that the law of England and Wales should apply as the governing law in all cases arising in an English forum concerning:

(a) financial relief on separation;

(b) cohabitation contracts; and

(c) opt-out agreements; and

(3) do consultees consider that there are any other implications which cases with an international dimension may have for the development of any new scheme?

[Paragraph 11.71]

We provisionally propose that claims under a new statutory scheme should be brought within one year of the parties' separation. Do consultees agree?

[Paragraph 11.77]

We invite the views of consultees as to whether:

(1) the time period for making a claim under any new scheme should be extended to one year from the birth of a child of the cohabitants where, at the time of separation, the applicant is pregnant by the respondent;

(2) there should be a general discretion vested in the court to extend the time period for making a claim in exceptional circumstances;

(3 it should be specifically provided that a party who would be out of time for the purposes of making a claim under any new scheme ought to be permitted to invoke a claim under the scheme defensively to an action brought by the other party under the general law.

[Paragraph 11.78]

We invite the views of consultees on the proper way in which to balance the interests of putative applicants and respondents in relation to the retrospective operation of any new scheme, or whether any scheme should instead operate only prospectively.

[Paragraph 11.99]

We invite the views of consultees on the impact of the provisional proposals and reform options discussed in this paper, and would welcome any other information relevant to the assessment of the consequences of reform.

[Paragraph 11.105]

Note 1 And to civil partners under the Civil Partnership Act 2004, sch 5. [Back]

Note 2 And with equivalent provisions of the Civil Partnership Act 2004. [Back]

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