Cohabitant awards: do they add up?

The entitlement of cohabitants to make a claim in Scotland has existed since 4 May 2006. Since then, solicitors and also the judiciary have struggled with the quantification of claims, with the result that courts and practitioners have required to arrive at an award without any guidance in relation to interpretation or implementation of the legislation.

The courts have recently required to consider cohabitant claims in relation to the cases of Gow v Grant [2012] UKSC 29 and Whigham v Owen [2013] CSOH 29.

The Supreme Court in Gow v Grant provided some guidance, in that it indicated that s 9(1)(b) of the Family Law (Scotland) Act 1985 and cases under that provision would be helpful when the court is considering a cohabitation claim; nevertheless, it indicated that the section allowed compensation to be awarded on a rough and ready valuation. That approach was adopted by the court in Whigham v Owen.

While these decisions have widened the scope of circumstances of those who may apply for an award, they do not give clear guidance to practitioners when advising clients of their entitlement to a claim and quantifying a claim.

In Gow, Mrs Gow lived with Mr Grant for four and a half years. There were no children of the relationship. She received an award of £39,500, which equates to about £8,800 for each year of cohabitation. In Whigham v Owen, Jacqueline Whigham lived with Steven Owen for 261/2 years. There were three children of the relationship. She was awarded £250,000, which equates to about £9,400 for each year of cohabitation.

It is not suggested that any sort of yardstick per year of cohabitation should be applied, but surely the claim for what is effectively compensation following the ending of a human relationship is more than the broad brush approach that was adopted by the court in Whigham v Owen.

The purpose of this article is hopefully to provide guidance to practitioners as to how to advise clients in dealing with and assessing claims under the cohabitation legislation.

Entitlement to claim

In order to establish an entitlement to a claim, it is, perhaps, useful to look at a relatively common scenario of a couple who cohabit for 15 years. At the beginning of the relationship, the woman is employed full time with a gross income of £35,000 per annum, or £2,000 per month after tax. During the cohabitation, the couple have two children who, at the end of the relationship, are 10 and 12.

Following the birth of the first child, the woman moves from full to part-time employment. She becomes the primary carer. Working three days a week, the woman’s gross income reduces from £35,000 to £20,000 per annum, providing her with a net income of £1,200 per month.

Taking account of child benefit, tax credits and child support from the former partner, she receives a total income of £1,900 per month. Had she continued in full time employment, her total net income (from employment, child benefit, child support and tax credits) would have been about £3,000 per month. Her pension provision may have reduced. You could/should establish what her pension fund is worth, and then work out approximately what it would have been worth had she contributed more while working full time. Alternatively you could establish how much she requires to achieve the level of pension provision had she not moved to part-time employment. These are arguments. Do not be afraid of putting them forward.

All of this can be vouched. It can be established that the woman has been economically disadvantaged by reason of a reduction of earning capacity and non-financial contributions made by her looking after the children and the jointly owned home. The argument is reinforced by the definitions of both contributions and economic advantage in s 28(9).

As Lord Drummond Young said in Whigham v Owen, Mrs Whigham’s non-financial contributions to the household were significant. She was responsible for the great bulk of the work involved in keeping the house and looking after the children, which should be reflected in a substantial award. There is a principle of fairness that lies at the heart of the award. These are not my words: they are the words of Lord Hope in Gow v Grant.

Building the claim

How one constructs such a claim also needs to be determined.

Assume that the former partner’s gross income is £80,000 per annum, which equates to £4,000 net per month. During the cohabitation, his income is unaffected. At the end of the relationship his net income reduces by £450 per month, as the amount of child support he requires to pay. The former partner would counter the economic disadvantage of the female partner by the economic disadvantage suffered by him in the interests of the female partner and children, namely the reduction in his income.

The woman’s significant reduction in income, i.e. economic disadvantage, in his interest and the interest of his children continues beyond the period of cohabitation – it is ongoing.

The former partner with the greater income has greater choice. He has a more substantial income. The woman has less income and, as a result, has fewer choices. Accordingly, that economic disadvantage ought to be compensated.

In Miller v Miller; McFarlane v McFarlane [2006] UKHL 24, Lord Hope of Craighead (at para 120), in comparing the English to the Scottish divorce provisions, stated: “The career break which results from concentrating on motherhood and family in the middle years of their lives comes at a price which in most cases is irrecoverable.”

So we have established economic disadvantage (subs (6)) and economic advantage (subs (5)). Had the woman not worked part time, the male partner would have had either to look after his children or to pay for their care.

Quantification

On one level, there is no reason why a claim for compensation under the cohabitation provisions should be greater than can be awarded to someone in a married relationship. However, Lord Drummond Young indicated in Whigham v Owen that that is not a guide to the amount that should be payable. There does seem to be an acceptance that claims for cohabitants should be lower than claims for married persons.

In my view, there are three possible ways to quantify such a claim.

(1) One way is to look at Coyle v Coyle, OH, 25 April 2003. This relates to a claim by Mrs Coyle under s 9(1)(b) of the 1985 Act divorce provisions. Bearing in mind the Supreme Court’s views in Gow v Grant, decisions under this provision do provide guidance. In that case, Lady Smith said there was a clear imbalance arising from an economic disadvantage.

Mrs Coyle was 54 years old. She had given up her career with an airline to marry. She had stopped work altogether after the marriage. She ran the house and cared for the children whilst her husband worked long and unsociable hours.

What is relevant is that both parties in this case presented arguments for quantification of Mrs Coyle’s claim in accordance with principles of English law. Her agents advanced an argument that her economic disadvantage should be calculated as if she were pursuing a claim for future loss of earnings and pension in an action of damages for personal injury, using the Ogden Tables. The claim could be assessed using those tables at £480,000.

The economic disadvantage was not disputed by Mr Coyle’s legal advisers. However, they made reference to the Duxbury Tables, a set of calculations used regularly in England in assessing claims for ancillary relief, arguing that based on that assessment there should be an award of £309,000. Accordingly, the award for Mrs Coyle could be in the range of £309,000 to £480,000. In this case Mrs Coyle received an unequal sharing through the family home, which was transferred to her sole name, having significantly increased in value between the date of separation and the date of the award. Whilst Lady Smith indicated (had that not been adequate compensation) that it was not appropriate to consider any award as if it were a personal injury claim, in considering the award she referred to the Duxbury tables to give a broad indication of the amount of income that would be produced by an award of a capital sum.

Accordingly, taking the assessment of Mrs Coyle’s claim (who was not in employment) by the defender’s counsel of £309,000 and applying this to our example of the lady who is in part-time employment working three days a week that assessment would be reduced by three fifths to about £123,000.

(2) A second alternative method of calculating compensation would be to obtain a report from an employment rehabilitation consultant, who could assess wage loss, future earnings, job availability, return to work and a labour market analysis.

(3) A third alternative is to apply a multiplier to the reduction in income from full time to part-time employment over a period of time until the woman is able to move back into full-time employment. In this example the woman has suffered a reduction in income of £1,100 per month or £13,200 per annum after tax. Applying a multiplier of between five and 10, depending on the ages of the children, would arrive at quantification of a claim at between £66,000 and £132,000. The younger the children, the longer the period the woman is not able to move to full time employment (if she can obtain such) – and the higher the multiplier.

The former partner has also been economically disadvantaged. His income, as a result of child support, has reduced by £450 per month or £5,400 per annum. Applying a similar multiplier to his reduction in income would offset the compensatory award by between £27,000 and £54,000.

Consequently, looking at the worked example, the quantification of compensation in this case could be in the range of £39,000 (£66,000 less £27,000) to £78,000 (£132,000 less £54,000). Whilst this figure is significantly different from the figure using the Duxbury Tables, nevertheless, it is a constructed argument for quantifying loss. These three methods of quantifying a claim are surely preferable to the “broad brush approach” taken in Whigham v Owen. A claim for the economic burden of childcare under s 28(2)(b) should also be considered. In M v S 2008 SLT 871 Lord Matthews considered this issue. The case is a good example of how to quantify such a claim. In that case an award of £13,000 was made. Childcare costs can be significant.

Other relevant considerations

In putting forward an argument it is important to ensure that the claim is not inflated, is reasonable, and to provide evidence of the claim.

Assess the risks and costs involved in litigation, the resources of the couple, and non-financial matters such as preserving the relationship of the parties for the benefit of the children.

It is important to make an assessment of your client. In Whigham v Owen, the judge found the pursuer, Jacqueline Whigham, to be a credible and reliable witness but Steven Owen to be unsatisfactory. At times his evidence was contrived, exaggerated, vague and evasive. This could be a significant factor in assessing the extent of an award. Mr Owen had arranged his financial affairs during a long relationship with Ms Whigham to the extent that at that the end of the relationship he was financially secure whereas she was financially insecure. That simply was not fair. Ms Whigham was compensated to address that unfairness.

Supporting a claim

There is vagueness and uncertainty in the legislation and case law. In assessing an entitlement and the amount of a claim, practitioners should not be discouraged. The law is uncertain. The judiciary have altered their view in considering the appropriate award to a cohabitant. In July 2011, the Court of Session refused Mrs Gow’s claim for £39,500, whereas 18 months later, following the approach determined by the Supreme Court in Gow, Ms Whigham received an award of £250,000.

A needs-based approach can also be considered. Considering how much your client needs to buy a property, to care for her children, to rebuild her career and receive adequate pension provision can provide guidance to a court and an opposing practitioner as to the extent of a claim. The factors set out above are all options for quantifying a claim. A well constructed argument is more likely to succeed with a court and more likely to persuade an opponent to reach an agreement.

Like any claim, it is important to establish the entitlement to a claim and provide evidence of quantification.

However, the needs of individuals in human relationships also have to be considered. Cohabitation claims are not simply a spreadsheet exercise. It would be disappointing if the assessment of a claim of fairness, taking into consideration the complexities of a human relationship, were able to be reduced to a precise economic calculation.