Nadine Martin: Division of assets still no open and shut case

Section 28 of the Family Law (Scotland) Act 2006 came into force on 4 May that year. Its purpose was to provide cohabiting couples in Scotland with rights which could be enforced should the relationship end.

The legislation is now ten years old and it remains unique within the UK.

From the outset, the provisions were criticised as contradictory and confusing. Lawyers found it difficult to advise clients what their entitlement to financial provision would be and hard to predict what a client might be ordered to pay.

A decade and a visit to the Supreme Court later, are matters any clearer?

Put briefly, under section 28, a cohabitant has the right to apply to the court for an order for payment of a capital sum upon separation.

In deciding whether or not to make an order, the court has to take account of the extent to which the defender has derived an economic advantage from the contributions of the applicant and whether the applicant has suffered an economic disadvantage in the interests of the defender and/or any child of the family.

The court then must balance any economic advantage or disadvantage gained or suffered by either party. ‘Economic advantage’ includes gains in capital, income and earning capacity and ‘economic disadvantage’ is to be construed accordingly.

The legislation was so tricky to navigate that a case eventually made its way to the Supreme Court in 2013 which affirmed that the purpose of the act is to provide compensation for contributions made or economic disadvantages suffered in the interests of the relationship on a broad, rather than a narrow assessment. It was emphasised that the purpose of the legislation was not for parties to keep a ‘running tally’ of who had paid what over the years.

A recent case shows that the courts are more comfortable dealing with disputes between cohabitants but also illustrates the difficulties which the law continues to cause.

Mr Melvin and Ms Christie lived together, unmarried, for 16 years. They had two children together. During the relationship, they bought and sold a number of houses.

The first home was purchased in joint names and each contributed £10,000 to the purchase price. When that was sold, subsequent houses were purchased in Ms Christie’s name alone, with the assistance of mortgages, also in her sole name.

When the relationship ended, Ms Christie had the house, title to which was in her name. Mr Melvin sought a capital sum from Ms Christie to redress the imbalance in their respective financial positions. He was originally awarded nothing by the sheriff.

Mr Melvin appealed, and was awarded £29,515 by the Sheriff Principal, broadly one half of the equity. Ms Christie then appealed to the Court of Session, who upheld the Sheriff Principal’s decision and awarded interest.

The number of appeals show that there is still much uncertainty about how the law should be applied, even in a relatively straightforward case.

Could Ms Christie and Mr Melvin have avoided a number of court hearings, including very costly appeals?

One option would have been to get married. The house in question would have then been matrimonial property. It would have formed part of the net value of matrimonial property which would then have been divided equally. It is likely that a similar result would have been achieved, without two appeal hearings.

Not everyone wants to get married however, and that was the whole point of the legislation. The difficulty is that it imposes often unintended consequences.

A practical option is to enter into a cohabitation agreement.

This can regulate how assets are divided and make clear provision for how contributions by either party during the relationship will be treated should it come to an end.

A clear agreement can allow couples to take back control of financial arrangements.

• Nadine Martin is an associate in the family law team at Gillespie Macandrew.