New decision on civil partnership breakdown
The 2005 introduction of civil partnerships was a social and legal landmark. By allowing same sex couples to legally recognise their partnership, the Civil Partnerships Act 2004 provided similar legal rights and protections afforded to married couples, including the right to dissolve their relationship and claim financial relief.
Whether civil partners should be treated the same as heterosexual couples when divorcing has been the subject of much debate. Separate laws exist for civil partners, yet the principals for dividing their matrimonial assets upon dissolution are virtually the same as those for marriage.
Irrespective of whether it’s a marriage or civil partnership in question, the starting point when a partnership breaks down is usually an equal 50/50 split. But what if some of the assets are classed as ‘non-matrimonial’? Or put simply, where one spouse pre-owned an asset or acquired an asset through inheritance. This begs the question – how do you divide assets that were brought into the partnership by one of the party solely?
In March 2012, the Court of Appeal passed its first judgement on a civil partnership case in the UK. This was a landmark case, but easily overlooked.
Mr Lawrence, a financial analyst at JP Morgan, and Mr Gallagher, an actor, lived together for 11 years before entering into a civil partnership in 2007. Their assets totalled £4 million and included a London flat, worth £2 million and purchased by Mr Lawrence in 1995. Both parties also co-owned a cottage in West Sussex, worth just under £1 million.
Their civil partnership lasted 7 months and, in 2009, Mr Lawrence applied to the Court to dissolve their partnership.
In many cases, both parties are able to agree how to divide their assets with the help of legal advice. Mr Lawrence and Mr Gallagher failed to reach such an agreement however, and Mr Gallagher applied to the Court for ancillary relief order regarding the matrimonial assets.
The Court awarded Mr Lawrence the central London flat, as this was purchased prior to the start of the relationship. Mr Gallagher was awarded the Sussex cottage and a lump sum of £577,778, intended to address the discrepancy in value between the two properties.
Mr Lawrence appealed against this decision.
At the Court of Appeal, it was confirmed from the outset that there were no differences between the principles applied to divorce and those applied to the dissolution of a civil partnership. However the challenge remained about whether there should be a balancing payment to reflect the difference in value between the two properties. As a consequence of this challenge, Mr Gallagher’s sum was reduced to £350,000, taking his award from 42% to just over 31% of the couple’s assets.
Whilst this is a substantial departure from equality, the decision still seems to endorse that the family property can be treated as ‘matrimonial’, even if it was pre-owned by one party. In this case specifically, the London flat was included in the ‘matrimonial pot’ of assets to be shared as it has been used by both parties as their home.
So, given that the evidence suggests no difference in the approach between gay and heterosexual couples, what factors actually determine the division of matrimonial or ‘non-matrimonial’ assets?
Until the Law Commission’s report, due in 2013, addresses how ‘non-matrimonial’ property should be treated, Judges will continue to apply the current principals of ‘fairness’. This will include the income and earning capability, as well as financial needs and responsibilities, of each party; the standard of living enjoyed; the duration of the marriage and the age of each party.
There are, however, numerous other factors that provide the court with wide discretion to reach an outcome that is fair to both parties. And, as a result, it can be difficult to accurately predict the Court’s outcome.