Splitting up: a fairer scheme

The Scottish Law Commission’s much anticipated Report on Cohabitation (Scot Law Com No 261, 2022) was published on 2 November. The report recommends reform of the law relating to financial provision on cessation of a cohabiting relationship. This article sets out its key proposals, implemented in a draft bill appended to the report, which will now be considered by the Scottish Government.

The Commission’s project

The Commission announced its review of aspects of family law in 2018. The first phase involved a review of the law relating to financial provision on cessation of cohabitation otherwise than by the death of one of the cohabitants, as contained in ss 25 to 28 of the Family Law (Scotland) Act 2006. A review of s 29, dealing with claims by surviving cohabitants on intestacy, was excluded from the scope of the project, as this forms part of the Scottish Government’s ongoing review of the law of succession.

A Discussion Paper on Cohabitation, seeking views on possible reform, was published on 26 February 2020. There was a high level of engagement from consultees, whose responses have helped form the basis of the proposed reforms. The report’s main recommendations are outlined below.

Who is a “cohabitant”?

The definition of the term “cohabitant”, contained in s 25, has long been criticised as vague, inconsistent with that used in other legislation, outdated and not reflective of modern relationships. Reliance on an analogy with marriage and civil partnership – both relationships characterised by formal registration, the lack of which is the defining feature of cohabitation – has been the subject of particular critique. The need to read the section alongside s 4 of the Marriage and Civil Partnership (Scotland) Act 2014, which preserves the analogy with marriage, albeit between both same and different sex spouses, has also been criticised.

In the report a more modern and inclusive approach is recommended, such that “cohabitant” is defined as a member of a couple living together in an enduring family relationship. In determining whether this definition has been met, the court is directed to have regard to all the circumstances of the case including, but not restricted to, the following matters:

• the duration of the relationship;
• the extent to which the persons live or lived together in the same residence;
• the extent to which the persons are or were financially interdependent; and
• whether there is a child of whom the persons are the parents or who was accepted by them as a child of the family.

Cohabitants must be aged 16 or over, not spouses or civil partners of each other, and not closely related to each other (as defined in the revised s 25).

Household money and property

Sections 26 and 27, dealing respectively with rights in certain household goods and with money and property, have not been the subject of particular criticism or academic comment. However the language of s 27, in particular, is generally regarded as in need of modernisation. Recommended reforms include clarification of the meaning of “property” for the purposes of s 27, and removal of the reference to an allowance for joint household expenses – almost universally interpreted as a “housekeeping allowance” – in favour of a more modern formulation, which refers to money designated for use to meet household or joint expenditure or for similar purposes.

Guiding principles and relevant factors

As regards financial claims following a separation, there was consensus among consultees that the policy objective of s 28 as currently framed is not clear from the legislation, that there is a lack of guidance as to how the court should determine a claim, and that the current test for financial provision is confusing and complicated, thus risking unfair outcomes. The Commission has therefore recommended the introduction of a principled approach to the making of orders for financial provision, whereby the court may only make such orders as are justified on the application of guiding principles and reasonable having regard to the resources of the parties.

The proposed guiding principles are:

• economic advantage derived by one cohabitant from the contributions of the other should be fairly distributed, and economic disadvantage suffered by one cohabitant in the interests of the other or of a relevant child should be fairly compensated;
• a cohabitant who seems likely to suffer serious financial hardship as a result of the ending of the cohabitation should be awarded such financial provision as is reasonable for the short term relief of that hardship; and
• the economic responsibility of caring, after the end of the cohabitation, for a child of whom the cohabitants are parents or who was accepted by them as a member of the family should be fairly shared between the cohabitants.

Lists of factors relevant to the application of each of the guiding principles, and a separate list of factors relevant to the application of all of the guiding principles are also provided; the court must have regard to the relevant factors when applying the principles.

Available remedies 

Currently, the range of orders available to the court on an application for financial provision under s 28 is restricted to an order for payment of a capital sum, an order for payment of an amount in respect of the economic burden of caring for a child, and interim orders. There was consensus among consultees that these remedies are inadequate. The Commission recommends extending the range of available remedies to include property transfer orders, orders for payments for up to six months for the short-term relief of serious financial hardship resulting from cessation of cohabitation, and incidental orders.

Challenges to agreements 

Currently, there is no provision in the 2006 Act for the variation or setting aside of agreements between cohabitants as to financial provision. Therefore, the court must give effect to the terms of a cohabitation agreement relating to financial provision unless it is reduced under the ordinary common law rules. Consultees supported the introduction of a provision similar to that available for spouses and civil partners under s 16 of the Family Law (Scotland) Act 1985.

The Commission has therefore recommended the introduction of a provision allowing the court to vary or set aside an agreement or any term of an agreement between cohabitants, which is wholly or partly concerned with financial provision after the end of the cohabitation, if the agreement or its term was not fair and reasonable at the time it was entered into. The Commission also recommends express provision prohibiting the making of an order for financial provision that is inconsistent with the terms of a cohabitation agreement, unless the agreement or a term of the agreement relating to financial provision is set aside or varied.

Time limit for claims

The broad consensus among consultees was that some flexibility should be introduced in relation to the time limit within which a claim for financial provision must be made. Currently, an application for financial provision under s 28 must be made within one year of the date of cessation of cohabitation. The Commission recommends that the one year time limit be retained, subject to judicial discretion to allow a late application to proceed on special cause shown, provided the application is made within a year of the expiry of the time limit. There would therefore be a two-year absolute deadline, beyond which the court would have no discretion to allow a late application to proceed.

Agreements to negotiate

During the consultation period, and in responses to the discussion paper, the view was expressed that a practical consequence of the rigidity of the current time limit for applications for financial provision is that parties are forced to raise actions, many of which will ultimately settle, in order to avoid the time bar. This, they said, amounts to a waste of court time and resources. Therefore, the introduction of a provision enabling parties to enter into a written agreement prior to raising an action, to continue negotiations for a limited period of six months with a view to settling claims for financial provision, has been recommended. Where an agreement to negotiate is entered into, the time limit for making a claim will be extended to 18 months from the date of cessation of cohabitation. The two-year backstop will continue to apply.

What now?

The report and draft bill have been laid before the Scottish Parliament. It now falls to the Scottish Government to determine whether to bring the reforms into effect. The Commission’s view is that the reforms, if implemented, will improve outcomes for cohabitants and their families by providing long overdue clarification of the policy aims of the legislation and the process for determining claims for financial provision, and will introduce flexibility, provide a wider range of remedies, and respect the autonomy of couples to make their own financial arrangements.