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This piece was originally posted on the Marilyn Stowe Blog and is reposted here with thanks.

I first wrote about the Scottish case of Gow v Grant in a post for the Times’ Experts blog, in September 2011. At the time, I was deeply concerned by the Government’s decision not to take forward the Law Commission’s recommendations for reform of cohabitation law.

Regular readers will already be familiar with my views on this subject – perhaps even weary of them!

In short, I believe that the lack of legislation for the millions of families in cohabiting relationships is a serious injustice within our family law system. The volume of phone calls, emails, Facebook updates and tweets before and after my most recent appearance on ITV’s This Morning to discuss unmarried couples’ rights demonstrated how much new law is required. Too many cohabiting couples haven’t a clue about the potential implications.

In Scotland, however, this injustice does not exist. There, cohabitation law was introduced in 2006. I think it is important to set out the relevant Scottish law.

Section 28 of the Family Law (Scotland) Act 2006 provides as follows:

“(1) Subsection (2) applies where cohabitants cease to cohabit otherwise than by reason of the death of one (or both) of them.

(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.

…

(9) In this section –

…

“economic advantage” includes gains in –

(a) capital;

(b) income; and

(c) earning capacity;

and “economic disadvantage” shall be construed accordingly.”

Scottish law does not equate cohabitation with marriage. Rather it gives a limited form of remedy for economic imbalance arising out of the breakdown of a relationship between cohabiting partners. Its impact has been narrowly interpreted by the Scottish courts, and the case of Gow v Grant provides a perfect illustration.

Gow v Grant

Mrs Gow went to live with Mr Grant in 2002, when she was 64 and he was 58. The couple became engaged. Mr Grant encouraged Mrs Gow to sell her home, which she did in 2003. The proceeds of the sale were used partly for the couple’s living expenses. Mr Grant was a college lecturer and Mrs Gow was an audio typist. At Mr Grant’s request, when her contract ended in 2003 she did not seek further work.

The relationship ended in 2008. Mrs Gow lived in Mr Grant’s home until 2009, when she moved out of his home and into a rented property. By the date the case came to court, the value of Mrs Gow’s former property had risen by about £38,000. She had also contributed towards the cost of two timeshares.

Because of the position in which Mrs Gow found herself after she moved out of Mr Grant’s house, she brought an action against him in the Sheriff Court in Edinburgh under Section 28 of the Family Law (Scotland) Act 2006. She sought payment of a capital sum.

At first instance, applying the Scottish law, Mrs Gow (the Pursuer) was awarded £39,500. When Mr Grant appealed, however, the Second Division (Court of Sessions) set aside the order. The court stated as follows:

“In our opinion it cannot be said that the sale and the application of the proceeds were carried out “in the interests of… the defender”; they were rather carried out primarily in the pursuer’s interests, in that she paid a number of existing debts and made a loan to her son. The fact that the proceeds were used to some extent to meet joint living expenses is not in our opinion sufficient to justify the conclusion that the sale of the house was in the interests of (Mr Grant) the defender; that contribution must be set in the context of the parties’ general finances, and the sheriff’s findings on that subject (findings in fact [9] and [10]) indicate that the defender paid somewhat more towards joint expenses than the pursuer did……. To the extent that it might be said to be an economic disadvantage suffered by the pursuer, it was plainly offset by the economic advantage that the pursuer derived from the defender’s contributions towards joint living expenses.”

The court made it clear that, in arriving at its decision, it preferred a narrow interpretation of the law. Given that Scottish law is not based on the same principles as our own law, and follows a strict division of matrimonial property with very limited spousal support thereafter, this narrow interpretation seems to fit the general Scottish approach. There is no question that wives fare better in England.

In the UK, the Supreme Court is the final arbiter of Scottish law. So Mrs Gow appealed to the Supreme Court for reinstatement of her award of £39,500. This relatively tiny case has caused waves amongst family lawyers in Scotland – rather like Jones v Kernott did in England and Wales in 2011. I know that the outcome has been eagerly awaited.

The Supreme Court decides

Which direction would the Supreme Court take? The narrow view of the court below, which seemed to have done the sums and found the parties coming out equal? Or a wider approach, focusing on the inability of Mrs Gow to rehouse herself? The latter would bring into play the concepts with which we in England are very familiar: fair and reasonable, even though these words are not to be found in the Scottish Statute?

In its judgment, the Supreme Court set out the issues as follows:

(i) Is an intention to benefit the other cohabitant a necessary element of the requirements of section 28(3)(b) and (6)?

(ii) Is it necessary for the applicant to establish that the defender derived actual economic benefit as a result of economic disadvantage suffered by the applicant?

(iii) Must any benefit so conferred be in the interests of the defender alone, or may it be of benefit to both parties?

(iv) Whether, if relevant economic disadvantage is established which is not offset by relevant economic advantage, the court has a discretion as to the amount of any award, and the extent of any such discretion.   

Their Lordships have now handed down their decision and set aside the judgment of the Court of Sessions. The leading judgment was given by the most senior Scottish judge in the court, Lord Hope. The Supreme Court’s Deputy President, he made reference to two, pertinent parliamentary statements that had been made by Cathy Jamieson, the Scottish Executive’s Minister for Justice in 2005, when the Bill had been debated in the Parliament:

First, that any financial award that the courts make to an applicant addresses the net economic disadvantage that the person may face as a direct result of joint decisions that were made by the couple during the relationship.

Referring to what is now section 28 of the Act, the Minister had said:

“Cohabitants are under no legal obligation to aliment each other during their relationship, so there is no reason that we should seek to ensure that they do so when the relationship is over.  However, it is important to achieve fairness. That is why we have adopted the provisions set out in section 21. Those provisions will ensure that one partner compensates the other for any net economic disadvantage that has resulted from the relationship that they formed together and that they will share the cost of caring for their children. We believe that that offers fairness to both parties, while respecting their rights to live as they choose without the Government imposing other financial obligations.”

It was clearly the intention of the Scottish Parliament for the legislation to provide fair and reasonable awards.

Lord Hope set out the reasons why Mr Grant’s appeal should not have been upheld. The Second Division had erred by approaching Section 28 on the basis that it was “intended simply to enable the court to correct any clear and quantifiable economic imbalance that may have resulted from the cohabitation”, because family law deals with contributions and sacrifices that in many cases, cannot be valued precisely. Section 9(1)(b) of the 2006 Act allows “fair compensation” to be awarded, on a “rough and ready valuation.”

It was noted that the Second Division appeared to “have overlooked the sheriff’s finding that the economic disadvantage that Mrs Gow suffered in the interests of Mr Grant was her loss of the benefit of the increase in value of her principal capital asset”:

“The sheriff, for her part, accepted that Mrs Gow had had the benefit of a substantial amount of the sale proceeds. So she left the proceeds out of account in her assessment. But she had a discretion as to what order she should make. The overriding principle was  one of fairness, rather than precise  economic calculation… [The Sheriff] was entitled to hold that the loss of the benefit of the increase in value was an economic disadvantage, and that it was suffered by Mrs Gow in the interests of her relationship with Mr Grant. As she noted in para 66 of her note, when the cohabitation ended Mrs Gow did not have a home whereas Mr Grant still had a home which had increased in value. I do not think that her conclusion that Mrs Gow should be compensated for that disadvantage can reasonably be criticised.”

In the view of the Supreme Court, therefore, it was inappropriate to concentrate solely on who paid what during the relationship. The unfairness and and resulting economic imbalance at the end of the relationship between Mr Grant and Mrs Gow, which saw Mr Grant being left with a house and Mrs Gow with nothing, was clear to see. Mrs Gow’s award of £39,500 was reinstated.

Lady Hale

Lady Hale has established herself as one of the most outspoken of the Supreme Court justices. She concurred with the decision, as did the rest of the court (Lord Wilson, Lord Reed and Lord Carnwath). However she also added “a few words” of her own, because she felt “there are lessons to be learned from this case in England and Wales.”

She then went on to call for law reform, and I was pleased to see that she made the point I have made on umpteen occasions in the past: that cohabitation legislation is likely to produce a fairer, quicker and much cheaper access to the law.

Lady Hale considered the wide numbers and types of cohabitating couples, and the advantages of the Scottish law and its results. She also listed reasons why the Scottish law was preferable to the proposals set out by the Law Commission and rejected by the Government in 2011. In her words, the Gow v Grant case “illustrates that it may be unwise to be too prescriptive”. As she explained:

“In principle, if one party has derived a clear and quantifiable economic benefit from the economic contributions of the other, it may be fair to order what is, in effect, restitution of the value of that benefit. But sometimes the benefit will result from non-financial contributions or be very hard to quantify. Even more problematic are the cases where there is identifiable economic disadvantage, as here, without a corresponding economic advantage. In some cases, it may be entirely fair to expect the better-off partner to compensate the other in full for the losses she has sustained as a result of their relationship: as, for example, where a rich widower persuades a widow to give up her secure tenancy and widow’s pension to move in with him and can well afford to put her back in the position in which she was before their cohabitation began. In others, this may be impossible or quite unfair. Thus, it seems to me, the flexibility inherent in the Scottish provisions is preferable to the Law Commission’s proposal that the losses should be shared between them.”

Lady Hale concluded:

“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.”

Indeed.

What is most interesting about this approach, is the emphasis by the Supreme Court on providing what is fair and reasonable even for cohabiting couples. This, despite all the dark mutterings by those who would protect the richer spouses (who are usually, but not always husbands), and who seem to be agitating for the strict division of matrimonial assets only. So reading the judgment, I breathed a huge sigh of relief.

But that’s another post for another time!