Supreme Court clarifies financial entitlement of cohabitants
11 November 2011
An important Supreme Court ruling in an English case regarding cohabitant’s rights to property after separation highlights the difference in law on either side of the border.
The story begins in 1985 when a couple, Ms Jones and Mr Kernott, purchased a house together, a bungalow in Essex. The deposit was paid by Ms Jones alone from the proceeds of her previous home, and mortgage payments were made jointly. The couple also had two children together. However, in 1993 they separated, at which point Ms Jones paid the mortgage and all household costs alone. Rather than sorting out the issue of finances at this stage, the couple continued in this informal arrangement for years. As they owned the house jointly, the usual presumption is that there will be equal equity in the property.
Initially, the county court and High Court ruled that Mr Kernott was entitled to 10% of the value of the house based on the financial arrangements that occurred after separation. However, the Court of Appeal ordered an equal split of the value of the property. It was on that basis that Ms Jones appealed to the Supreme Court. She was successful at having her husband’s share reduced back down to 10%.
This case shows that under changing circumstances, parties need to make their intentions clear on separation. Of course, there may be no evidence that both parties’ intentions as to the ownership of the property would change, and this is where the courts will have to look at all the circumstances to reach the fairest decision. Here, the fact that Mr Kernott and Ms Jones cashed in a joint insurance policy in order for Mr Kernott to purchase a house for himself (Ms Jones retained her share) was a key factor in showing that their positions had changed. He then ceased to make any contribution to his former family home, and also made no significant contribution to support his children.
In Scotland, this case could have been disposed of much quicker without needing to be heard in such a high court. The Family Law (Scotland) Act 2006 has specific provisions for financial settlement when cohabitation ends, in section 28. Under this section, either party can claim against the other if they can show they suffered economic disadvantage during the cohabitation for the good of the family, but also if they can show any gain the other party has made at their expense. The aim is to protect the weaker party following separation. However, this is a fairly subjective test and unlike in a divorce action, the outcome of a case is hard to predict. Many practitioners have also commented that the sums awarded in these types of cases can be less that might be expected.
While here in Scotland the Family Law (Scotland) Act 2006 attempts to make provision, there is no equivalent statute in England. On both sides of the border it seems that when a cohabiting couple’s intentions change on separation regarding their residence ownership, this will need to be recorded formally in case any future dispute arises, in order for both parties to achieve the outcome they would like.
If you need advice on cohabitation claims in Scotland, contact Inksters’ Gus Macaulay on 0141 229 0880 or send Gus an e-mail.
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