Cohabiting Couples and Property Disputes: Where Are We Now, and Where Are We Going?

COHABITING COUPLES AND PROPERTY DISPUTES: WHERE ARE WE NOW, AND WHERE ARE WE GOING?

LECTURE TO THE PROPERTY BAR ASSOCIATION 13TH NOVEMBER 2007

MR JUSTICE MORGAN

1. The marriage rate has been declining. Marriage is being deferred until later in life. The number of cohabiting couples has increased dramatically since the 1970s and is expected to continue to rise. The 2001 census recorded some 2 million cohabiting couples in England and Wales. This figure was a 67% increase on the figure from 1991.

2. The number of children being born to cohabiting couples in England and Wales has also risen. In 2001, over 740,000 cohabiting couples had dependant children; they supported over 1.27 million children. The number of cohabiting couple households with dependant children more than doubled between 1991 and 2001. In 1970, fewer than 10% of births were to unmarried parents. By 2004, 42% of births fell into that category. In 2004, 76.4% of registrations of births where the parents were unmarried were to parents recorded as living at the same address, i.e., cohabitants.

3. Cohabitation is expected to become increasingly common and to spread across a wider range of the population in terms of age. The Government Actuary predicts that by 2031 the number of cohabiting couples in England and Wales will have increased to 3.8 million. By 2031, 16% of adults will be in cohabiting relationships and 41% of adults will be married. The elderly cohabiting population is expected to expand at a far greater rate than that of the cohabiting population as a whole. The number of children dependant upon a cohabiting couple will also increase as more couples have children outside marriage and fewer parents subsequently marry.

4. Cohabitation comes in many different shapes and sizes. People embarking on their first serious relationship more commonly cohabit than marry. Many of these relations may be quite short lived and childless. But these days most people cohabit before marriage. In 2003, 78% of spouses gave identical addresses before marriage. The figures are even higher for second marriages. Cohabitation is much more likely to end in separation than is marriage and cohabitations which end in separation tend to last for a shorter time than marriages which end in divorce.

5. Cohabitants and their children are not ignored by the law. There are specific statutory provisions which apply to the cases of cohabiting couples and their children. I will refer to these, in summary, later in this lecture. However, there

5. The title to this lecture asks two questions. The first is: Where are we now? The second is: Where are we going? The first question is obviously inspired by the decision (in April 2007) of the House of Lords in Stack v Dowden [2007] 2 WLR 831. The second question is obviously inspired by the publication (in July 2007) of the Law Commission Report (Law Com 307): “Cohabitation: the Financial Consequences of Relationship Breakdown”.

6. With these recent developments, the present is obviously a good time to take stock and to look ahead.

7. In relation to an area of law which depends upon the principles of the common law and of equity, it is not possible to answer the question: “Where are we now?” without knowing how we got where we are. I will therefore refer, briefly, to the history of the developments of the relevant principles and in the course of so doing will indicate the main milestones along the way.

8. I begin my collection of milestones by referring to the cases in the House of Lords which considered questions as to the ownership of the home in which a cohabitating couple resided. Although statute, today, makes an all important distinction between a married couple and an unmarried cohabiting couple, the non-statutory principles were first discussed and laid down in relation to husbands and wives.

9. The relevant decisions of the House of Lords are, as is very well known, Pettitt v Pettitt [1970] AC 777, Gissing v Gissing [1971] AC 886, Lloyds Bank Plc v Rosset [1991] 1 AC 107, and, now, Stack v Dowden [2007] 2 WLR 831. The latter case also drew upon two sentences in a decision of the Privy Council in Malayan Credit Limited v Jack Chia–MPH Limited [1986] AC 549 at 559.

10. Pettitt v Pettitt and Gissing v Gissing for many years have been treated as the source for the theoretical underpinning of this area of the law. However, whilst the speeches of their Lordships contain a great deal of relevant discussion, the cases decided comparatively little and left a great area undetermined. As was said in the Northern Ireland Court of Appeal in McFarlane v McFarlane [1972] NI 59, the facts in those cases “were not such as to facilitate or encourage a comprehensive statement of this vexed branch of the law” and that “much remain[ed] unsettled”.

11. Both Pettitt and Gissing concerned married couples. Pettitt finally killed off the idea that Section 17 of the Married Womens Property Act 1882 gave the court a power to vary the parties’ pre-existing beneficial interests to accord with the court’s view of what was fair. Section 17 of the 1882 Act was held

2 Pettitt and Gissing also rejected the idea of there being “family assets”, that is, assets which were used by the family and by reason of that fact were to be held to be owned in common by the family. Both Pettitt and Gissing discussed the law of resulting and constructive trusts. The discussion focused upon the existence of a common intention of the parties that the spouse who did not have legal title in his or her name would nonetheless have a beneficial interest in the property. In some cases the common intention might have been expressly agreed. In other cases the court would be able to infer the actual existence of such a common intention. More controversial was the idea that the court might “impute” such an intention to the parties when, on the facts, one could not make a finding that they ever had such an actual intention, whether expressly stated or found by inference.

12. In Stack v Dowden, Lord Walker of Gestingthorpe submitted Lord Diplock’s speech in Pettitt and Lord Diplock’s speech in Gissing to detailed analysis: see [18] to [20]. In Pettitt, Lord Diplock was in favour of the court taking on the role of imputing a common intention to the parties but his brethren did not support him. In Gissing, Lord Diplock accepted that it was not open to the court to impute an intention to the parties when all the express statements of the parties and all the inferences from their conduct did not support the existence of such an intention in fact. However, according to Lord Walker, Lord Diplock began to use the word “infer” so as to carry a meaning that was little different from the word “impute”.

13. Lloyds Bank Plc v Rosset was another husband and wife case. However, the dispute was not really between the spouses but between the spouses on the one hand and a bank on the other. This is a useful reminder that questions as to the property rights of spouses arise in cases that do not involve the ancillary relief principles which apply under the Matrimonial Causes Act 1973, on divorce. The property rights of individual spouses and other actual, or alleged, joint owners frequently arise in the Chancery Division when one is considering the position of third parties, such as a secured creditor or a trustee in bankruptcy.

14. In many respects, the decision in Lloyds Bank Plc v Rosset was a wasted opportunity. The case came some 20 years after Pettitt and Gissing . The case was argued over 4 days. The arguments of counsel take up more pages in the Law Reports than the single speech in the House of Lords given by Lord Bridge. He held that the wife’s case, on the facts, did not get off the ground. He contented himself with a short passage in which the relevant principles were heavily summarised. However, importantly, he distinguished between a party who was not the legal owner of the property making a direct contribution to the purchase price and such a party making contributions to family life in other ways.

15. In Stack v Dowden, Lord Walker suggested that the law had moved on from Lord Bridge’s comment in 1970 and that the House of Lords in Stack v Dowden “should move it a little more in the same direction”.

16. Although Pettitt, and Gissing and Rosset must be treated as milestones on the way, far more help was to be found in the myriad decisions of the Court of

3 Oxley v Hiscock [2005] Fam 211. The third comment is that the decisions of the Court of Appeal are not always easy to reconcile; they may be irreconcilable. But my fourth comment, with a view to being more positive, is to identify two cases which provide real help. They both involve cohabiting unmarried couples. The first is Grant v Edwards [1986] Ch 638 and the second is Oxley v Hiscock [2005] Fam 211.

17. The court in Grant v Edwards consisted of Sir Nicolas Browne-Wilkinson VC, and Mustill and Nourse LJJ. Each member of the court gave a judgment. The judgments are illuminating.

18. Oxley v Hiscock is useful because it is recent, it contains a detailed survey of many earlier cases and it was influential when Stack v Dowden was being considered and decided.

19. Finally, I go, in outline, to Stack v Dowden itself. This was not a case where the property was at law in the name of one cohabitant only and a claim was made by the other cohabitant. The property was in joint names at law. It was held that, on the facts, there had not been an express declaration as to the beneficial interest. So, what were the beneficial interests? The House of Lords held that where the property was conveyed into the joint names of cohabitants without any declaration of trust there was a prima facie case that both the legal and beneficial interests in the property were equal. Equity followed the law. But the contrary could be proved. The onus of proof lay upon a party seeking to establish that the equitable position did not accord with the legal position. Such a party had to prove that the parties had a common intention that their beneficial interests differed from their legal interests, and in what way. In order to discern the parties’ common intention the court should look at the parties’ whole course of conduct in relation to the property.

20. So far, in this lecture, I have described some of the steps on the way to the current state of the law but have offered only glimpses of what the current state of the law might be. Let me remedy that omission.

21. Where one is concerned with a property which, at law, is in the name of one cohabitant or both cohabitants and an issue arises as to the ownership of the beneficial interest in the property, the first question is: Was there an express declaration of trust or other express agreement?

22. Where the property is conveyed into the name of one registered proprietor, nothing in the Land Registration legislation requires there to be any statement as to the beneficial interests in the property. However, where the property is transferred into joint names, the Land Registry transfer forms TR1 and FR1 make provision for the joint legal owners to execute a declaration of trust so as to determine their beneficial interest in the property. Even though this is what the forms require, the forms are not always completed in this respect but yet the transfer will be registered by the Land Registry. Further, of course, many cases will continue to come before the courts where the relevant facts

23. The transfer in Stack v Dowden was in 1993. The form stated that the survivor of the joint proprietors could “give a valid receipt for capital money arising on a disposition of the land”. The House of Lords held that this did not amount to an express declaration of a beneficial joint tenancy.

24. Before leaving the topic of express agreements between cohabiting partners, I should refer to the decision of Hart J in Sutton v Mishcon de Reya [2004] 1 FLR 837. He held that, save for an exceptional case where the contract under review is for the purposes of prostitution, there is nothing contrary to public policy in a cohabitation agreement governing the property relationship between adults who intend to cohabit or who are cohabiting for the purposes of enjoying a sexual relationship.

25. The difficult cases which have arisen in the past, and which will undoubtedly arise in the future, have concerned the circumstances in which it is appropriate to find an implied trust whether a resulting trust or a constructive trust. The part played by the resulting trust in the case of the beneficial interests of cohabiting couples in domestic property has been greatly limited by the decision in Stack v Dowden, notwithstanding the strong dissenting judgement on that point from Lord Neuberger of Abbotsbury. Nonetheless, there can still be resulting trusts. Where the legal title to property vests in one party but another party is paid some or all of the purchase price, the presumption of resulting trust indicates that beneficial ownership “results” to the parties in proportion to the share of the purchase price that each provided. This presumption only arises where one has direct financial contributions. Indirect financial contribution, for example, where one party pays the household bill will simply not do for a resulting trust. Further, even where the resulting trust principles indicate a resulting equitable interest, that may be only a part of the total picture. The total picture may need to be analysed by using constructive trust principles which may result in a contributor to the purchase price obtaining a more substantial share than the pro rata value of the contribution.

26. The other type of trust which needs to be understood in this context is the common intention constructive trust. Two questions typically arise. Is there a common intention constructive trust in the first place? Secondly, if there is, what are the extents of the parties’ beneficial interests?

27. On the first question (is there a common intention constructive trust?), the topic subdivides again into two issues. The first issue is whether there is an express, albeit informal, agreement or arrangement or understanding between the parties on the topic and the second issue is whether such a common intention can be inferred where one party has engaged in conduct referable to the acquisition of an interest in the property.

28. On the first question (is there an express common intention of constructive trust?) the courts have been generous in their interpretation of this common intention requirement. Indeed, cases where one party has given the other party

29. On the second issue (the inference of a common intention constructive trust), it is long established that a direct financial contribution to the purchase of the property is clear conduct which is referable to the acquisition of an interest in the property from which a common intention constructive trust can be inferred. Lord Bridge doubted whether anything other than a direct financial contribution would support such an inference but Lord Walker in Stack v Dowden thought that the law had moved on.

30. There is a crucial conceptual question as to whether the task of the court is one of inference (as to the existence of an actual common intention) or one of imputation (where the court holds that there was no actual common intention but nonetheless imputes an intention to the parties). The courts feel comfortable speaking of “inference” and less comfortable speaking of “imputation”. However, it may be that what the court frequently does is to impute a common intention to parties and then describe the process as one of inference. If any of you wishes to explore this conceptual point in more detail, the required reading is Stack v Dowden per Lord Neuberger at [125] – [127] (where he defines what is meant by inferred and imputed intention and strongly opposes the idea of the court imputing intention), per Lord Walker at [17] – [23] (where he analyses the language used in Pettitt and Gissing ) and per Baroness Hale at [60] (where she simply refers to the intention being “actual, inferred or imputed” without more) and the more recent decision of the Privy Council in Abbott v Abbott [2007] UKPC 53 at [6] and [19].

31. It is important to note at this point that the existence of an expressed or inferred or imputed intention is not enough on its own. The party claiming the interest must show detrimental reliance on the common intention which makes it unconscionable for the legal owner to deny the other’s beneficial interest. After all, in the type of case considered, there will not have been an express declaration of trust which complied with section 53 of the Law of Property Act 1925. The rights of the claiming party have to be founded on equitable principles. Equity intervenes to prevent an unconscionable result coming about. This is why detrimental reliance is required. The detrimental reliance must be “referable to” the common intention. There is no detrimental reliance if the conduct prayed in aid is conduct which the relevant party would have engaged in anyway for other reasons.

32. If the claiming party gets over the first hurdle, of showing that there was a common intention constructive trust, then the question is what is the extent of each party’s interest. In the typical case, where the property is in the sole name of one legal owner, the courts look to all the circumstance in so far as they throw light on the question as to what the party intended as to the relevant shares. What the parties intended may be a matter of inference or, probably, a matter of imputation by the court. In Oxley v Hiscock [2005] Fam 211, Chadwick LJ was in no doubt that the process at this second stage involved, or included, imputation by the court. At paragraph [69], Chadwick LJ stated that the shares were to be determined by reference to what the court considered to

Stack v Dowden: see per Baroness Hale of Richmond at [61]. One should: “undertake a survey of the course of dealing between the parties and take account of all conduct which throws light on the question what shares were intended”. This reformulation was preferable for two reasons. First, it emphasises that the search is for the result which reflects what the parties must, in the light of their conduct, be taken to have intended. Secondly, it stresses that the court does not abandon that search in favour of the rather more simple question of determining what is fair.

33. In the past, there was a considerable movement towards coalescing the principles as to common intention constructive trusts and the principles relating to proprietary estoppel. I will not here attempt a detailed statement of the principles as to proprietary estoppel. One formulation of the principles concentrates upon three requirements, namely: (1) a representation or assurance that the claimant has or will have an interest in the property; (2) reliance by the claimant on that representation or assurance; and (3) a denial of any entitlement on the part of the claimant which results in unconscionable detriment to the claimant.

34. Recent decisions emphasise the need to take a broad approach looking at the matter in the round in deciding whether the necessary unconscionability is present. An important feature of the principles as to proprietary estoppel relates to the powers of the court to fashion a remedy to avoid unconscionability. Again, the courts adopt a broad approach. Recent decisions emphasise the need for the remedy to be proportionate by reference to the detriment suffered and/or the expectation encouraged. In some cases, the courts will give effect to the claimant’s expectation or will award a remedy which fulfils the expectation to some extent. In other cases, the court will be more influenced by the need to compensate for the detriment suffered by the claimant.

35. The ingredients of detrimental reliance and unconscionability appear to be common to proprietary estoppel and the common intention constructive trust. Thus, in a number of cases it was suggested that the two separate statements of principle were really attempting to describe the same thing: see, for example, Grant v Edwards [1986] Ch 638 at 656, Yaxley v Gotts [2000] Ch 162 at 177 and, most recently, Oxley v Hiscock [2005] Fam 211 at [71], where Chadwick LJ said: “I think that the time has come to accept that there is no difference in outcome, in cases of this nature, whether the true analysis lies in constructive trust or in proprietary estoppel.”

36. If the principles relating to common intention constructive trusts and those relating to proprietary estoppel were coalesced, life might become a lot easier. The principles relating to proprietary estoppel have been significantly developed in recent years by the decisions of the courts. It is now possible to be reasonably clear as to what the principles are. Conversely, there continues

37. The last word on this topic is that of Lord Walker in Stack v Dowden where he expressed himself “rather less enthusiastic” about this idea. He pointed out that a proprietary estoppel gives rise to a “mere equity” whereas a common intention constructive trust recognises the existence of a beneficial interest in the property. The relief given in a proprietary estoppel case is the minimum award necessary to do justice, which may be a monetary award. Successfully showing there is a common intention constructive trust results in what may be very much more worthwhile, namely, a beneficial interest in the property.

38. I will now refer, but in outline only, to certain statutory remedies which are available on relationship breakdown.

39. Part 4 of the Family Law Act 1996, entitled “Family Homes and Domestic Violence”, allows the court to make occupation orders in relation to a dwelling house in which cohabitants live, have lived or intended to live together. Whilst the jurisdiction is principally used in cases of domestic violence, it is not so restricted and may be employed to facilitate the separation of cohabitants by making orders for the short term exclusion of one party from the property. The provision deals with cases where the applicant for relief is “entitled to occupy” the property under the general law of property, trusts or contract, or by statute. Other provisions deal with the case of applicants who are not entitled to occupy. In those cases, the court must first decide whether to give that cohabitant the right to occupy against the wishes of the other entitled partner.

40. Under Schedule 7 to the Family Law Act 1996, the court may order the transfer of certain types of residential tenancy where cohabitants have “ceased to cohabit”. The legislation directs the court to have regard to all the circumstance including certain specified circumstances. The party to whom the transfer is made may be required to pay compensation to the other.

41. I will also refer briefly to the statutory provisions dealing with financial support for children who might be involved. Maintenance may fall to be dealt with under the Child Support Act 1991. In such a case income payments for the child’s maintenance will usually be exclusively a matter for the Child Support Agency and in such cases the courts are ordinarily unable to award periodical payments.

42. Schedule 1 to the Children Act 1989 gives the court exclusive jurisdiction to make orders against a child’s parent for lump sums, property transfers and settlements for the benefit of the child, regardless of the nature of the relationship between the parents. These powers are focused entirely on the child’s needs but are potentially of very great importance to all parents, even if they never cohabited. The legislation sets out a check list of factors to be considered. The factors are similar to those contained in the matrimonial legislation for the benefit of children of spouses. The principle that the welfare of the child is a paramount consideration (Children Act 1989, Section 1) does not apply to the jurisdiction but the welfare of the child is still an important

43. So far in this talk, I have focused on the legal problems which arise when cohabitants separate during their lifetimes. For completeness, I should mention the decision on the death of one cohabitant. The court has an important statutory discretion to make awards for reasonable financial provision to defined classes of applicant under the Inheritance (Provision for Family and Dependants) Act 1975. The effect of a court order is to vary, or even to overturn, a testator’s dispositions by will or the devolution of the deceased’s estate pursuant to the intestacy rules, as the case may be. When a cohabitant dies, the first task is to ask what property falls within the deceased’s estate. A pre-existing beneficial interest of the other partner will not fall within the deceased’s estate. In relation to the deceased’s estate, a cohabitant can, potentially, make a claim under the 1975 Act on one or both of two grounds. First, the cohabitant may claim as a dependant or may claim simply as a cohabitant. In either event, the applicant has to establish that the disposition of the deceased’s estate effected by his or her will or by the law relating to intestacy, or by a combination of these two, is not such as to make the applicant “reasonable financial provision”. If the court is satisfied of that matter then the court considers what if any order is required so as to make such “reasonable financial provision”.

44. Next we must lift our eyes from the present and the everyday and look towards the horizon. Where is the law going? It would be rashly optimistic to think that the law will be significantly developed by future decisions of the courts. One very solid reason for this not happening is the publication of the Law Commission Report on “Cohabitation: The Financial Consequences of Relationship Breakdown”. In Stack v Dowden Lord Neuberger at [101] to [106] listed the publication of the Law Commission Report as one reason for the courts not attempting a major shift in the current legal principles. He also cited an earlier discussion paper from the Law Commission: “Sharing Homes” (Law Com 278) which dealt potentially with a wider class of persons than cohabitants. That discussion paper did not contain even provisional, let alone final, proposals for reform. Its principal conclusion was that: “It is quite

45. The Law Commission Report dealing with cohabitation was published in July 2007. The Law Commission had been asked to consider this area of the law by the Department that became the Ministry of Justice but it was not asked to draft a bill. The report was the product of two years’ work building on a consultation paper published in May 2006. The report makes recommendations to Parliament on certain aspects of the law relating to cohabitants. Any change in the law requires legislation.

46. The project undertaken by the Law Commission examined the financial consequences of the termination of cohabiting relationships by separation or death. Other aspects of the law governing cohabitants such as tax, social security, insolvency, next of kin rights, child support and parental responsibility were excluded from the terms of reference. The project considered only couples who live together, that is cohabitants. The Law Commission was not asked to consider relationships between other home sharers such as relatives, carers and dependants nor was it asked to deal with commercial relationships.

47. The report contains a most helpful appendix (Appendix A) summarising the current law. It referred to a “patchwork of legal rules” which were stated to be unsatisfactory because they were complex, uncertain, expensive to rely upon and, because they were not always designed for family circumstances, often gave rise to outcomes that were unjust.

48. The Law Commission referred to Schedule 1 to the Children Act 1989 with its focus on making provision for the benefit of the child. It was not considered that amending the Children Act 1989 was the way forward to solve the problems that arose on separation of cohabitants. The law’s inadequacy for cohabitants on separation was said to produce hardship and great personal cost and involved a cost for the state in the form of claims to welfare benefits and social housing.

49. The report considered carefully a number of social policy arguments for and against reform. Although many consultees thought that cohabitants should have access to exactly the same remedies as married couples and civil partners, the Law Commission could not agree. Some cohabitants did have relationships that many would regard as being similar to the married state but there was a broad range of cohabiting relationships with different degrees of commitment and interdependence. Further, importantly, cohabitants did not make the distinctive legal and public commitment involved in marriage. Accordingly, the scheme devised by the Law Commission is to be entirely distinct from that which applies between spouses on divorce. Further, the proposals involve reform of the Inheritance (Provision for Family and Dependants) Act 1975 in the case of the death of a cohabitant.

50. The scheme identified by the Law Commission is described in detail. In this talk it must suffice to identify its key features. The first feature is that the couple must satisfy certain eligibility requirements. The eligibility requirements are that the cohabitants had a child together or had lived together for a specified number of years. The Law Commission did not itself select the period of years in question but suggested a period of between two years and five years.

51. The second feature is that the couple should be permitted to opt out of the statutory scheme. The opt out would mean that the scheme would not apply unless enforcement of the opt out agreement would be manifestly unfair given the circumstances when the agreement was made or any unforeseen change of circumstances which had thereafter arisen. Accordingly, the scheme is a default scheme. The couple do not have to opt in. They are automatically in, but they are permitted to opt out.

52. The third feature of the scheme relates to the contributions made to the relationship and the consequences of those contributions. In this area of the scheme, the Law Commission has created new concepts which do not directly draw on established concepts with a proven track record. In order to obtain a remedy, an applicant would have to prove that he or she had made a qualifying contribution to the relationship which had given rise to certain enduring consequences at the point of separation. The mere fact of cohabitation would not suffice. There is no presumed entitlement to share in any pool or property. Further, a remedy under the scheme was not to be granted simply on the basis of need following separation such as a need for maintenance or capital transfer.

53. The philosophy of this part of the scheme is that a remedy would seek to ensure that the pluses and minuses of the relationship were fairly shared between the couple. An applicant would have to show that the respondent retained a benefit, or that the applicant had a continuing economic disadvantage, as a result of contributions made to the relationship. Any award would be measured by the extent of the retained benefit or continuing economic disadvantage. The court would have a discretion to grant such financial relief as might be appropriate to deal with that matter and in doing so

54. The report identifies two examples designed to show the intended operation of the scheme. In Example One, a cohabiting party on separation would not expect to be granted a remedy by the court whereas in Example Two a party would potentially be able to obtain a remedy from the court.

55. Here is Example One. A and B who are both in their twenties and have been living together for two years in accommodation rented from a private landlord. They have both worked full time throughout the relationship and have kept their finances separate. They have shared all outgoings relating to the household equally and they are now separating.

56. In relation to Example One, the first question is whether A or B satisfy the eligibility requirements. They have not had a child together. They have lived together for two years and that will either be sufficient or insufficient depending upon the minimum period chosen by Parliament. In relation to the third factor referred to above, if A or B was eligible, a remedy would only be available if either party had made a qualifying contribution to the relationship giving rise to a retained benefit or economic disadvantage. On the facts of the example, that would appear not to be made out. The same result would apply even if A and b were not living in rented accommodation but were living in a property owned by A before the relationship began and where A had kept up the mortgage payments for himself or herself. The position might change if B had contributed to A’s mortgage payments so as to give rise to a retained benefit for A.

57. Here is Example Two. C and D, both in their thirties, had been living together for three years in C’s house when they started a family. C’s salary was sufficient to support the family and, as they both wanted the baby (E) to be looked after by D at home, they agreed that D should not return to work after E was born. Their relationship has now foundered and they are separating. E, now aged two, is going to live with D.

58. It is worth considering Example Two on the basis of the current law. It is unlikely that D could establish any share in the home. C has no obligation to provide for D. C and D share the obligation of meeting the basic cost of caring for E and C might be required to make child support payments. Depending on the resources available to C and D it is unlikely in practice that an order could be made under Schedule 1 to the Children Act 1989 to provide housing for E while E is dependant. The result of the current law is that most of the economic impact of D’s contribution in giving up work to care for E, in terms of future earnings loss, pension loss and career disadvantage, falls solely on D’s shoulders. This could lead to hardship for E who is closely affected by D’s financial circumstances.

12 59. So how does the Law Commission scheme deal with Example Two? C and D would be eligible to apply for relief because they had cohabited and had had a child together. C would be required to share the economic disadvantage caused by D’s contributions. C’s existing obligation to pay child support would be unaffected. The court would be more likely to be able to exercise its powers under the Children Act 1989 to make provision for the benefit of E.

60. Example Two is also revealing in this respect. D had lost earnings in the past by ceasing work during the relationship. But D is not able to claim against C for loss of past earnings. D’s claim must be based upon the continuing economic impact of having given up work to look after E and the need to care for E after the separation. The scheme does not require C to maintain D. It requires C to share D’s disadvantage. The court would make a capital award if necessary payable by instalments to meet D’s claim.

61. One part of the Law Commission report that does not wholly persuade me relates to the interrelation between a claim in equity to a share in the home and a claim under the proposed legislation. The Law Commission says that the result produced by the statutory provisions should prevail. It refers to the way the family courts approach a claim to ancillary relief under the Matrimonial Causes Act 1973. It acknowledges that if the cohabitants are not eligible under the statute, then, of course, their rights in equity will not be affected. It also acknowledges that the rights in equity may be material if a third party, such as a secured creditor or a trustee in bankruptcy, is involved.

62. The Law Commission’s approach makes sense where the entitlement under the statute exceeds the entitlement in equity. If the ex-cohabitant can show an entitlement to 20% of the house in equity but to 40% of the house under the statute, then it seems fair that he (or she) should be able to claim the statutory entitlement of 40%. The statute effectively produces the answer that a 20% entitlement is not enough in all the circumstances.

63. But let me test the Law Commission’s reasoning by taking the reverse case. Take a case where an ex-cohabitant can establish, say, a 40% interest in the home in equity but he does not have much of a case under the statute. Under the statute he would only get, say, a 20% share. Assume also that the other cohabitant has no worthwhile claim under the statute, so that the other ex- cohabitant could not hope to increase her share from 60% in equity to 80% under the statute. The Law Commission would say that the first co-habitant should not receive 40% (his share in equity) but only 20% because that is all the statute would give him. But why? I would want to give him 40% as being his pre-existing property right and dismiss his claim under the statute because that does not entitle him to more.

64. The Law Commission’s analogy with the Matrimonial Causes Act 1973 is not exact. Under the 1973 Act , the court is concerned to see what each ex-spouse ends up with. It matters less what each spouse separately owned under the general law before the court makes its decision. However, under the proposed legislation for cohabitants, the discretion to be exercised by the court is more

65. Lastly, will claims under the proposed legislation be capable of being heard in the Chancery Division? Claims under the Inheritance (Provision for Family and Dependants) Act 1975 may be brought in the Chancery Division or the Family Division. The Law Commission’s report argues strongly for the Family division having exclusive jurisdiction in relation to the proposed legislation but in the end leaves it to Parliament to decide.

66. So, to return to the title to this lecture: “Where are we going?” It looks to me as if members of the Property Bar Association should await the proposed legislation and get ready to argue these cases in the Family Division.