Family Law

On the 29 of March 2012 the Court of Appeal handed down its first judgment in an appeal concerning a financial settlement in a civil partnership (see Lawrence v Gallagher [2012] EWCA Civ 394).

The two parties were a 47 year old city analyst (Mr Lawrence) earning a significant income and a 54 year old actor (Mr Gallagher). The couple commenced cohabitation in 1997 for 11 years prior to entering into the civil partnership at the end of 2007. The civil partnership lasted less than a year.

At the time this matter was heard in court Mr Gallagher was appearing in a West End show earning an income of £100,000 pa. Mr Lawrence earned a high income and owned a flat (Clink Wharf) valued at roughly £650,000 at the time the parties entered into cohabitation. This was mortgaged to a level of just over £180,000. There were also some savings and a pension. Whilst the parties lived rather separate financial lives, there was an element of lending from Mr Lawrence to Mr Gallagher as and when needed.

The parties purchased a home together. The first property they purchased was later sold with the sale proceeds rolling into the purchase of Pine Cottage. As they were still cohabitants, a Declaration of Trust was drawn up to define their ownership. The couple spent their time between the two properties.

This matter was first heard by the court on November 2010 when the total assets where just in excess of £4,000,000. Clink Wharf had increased in value to £2,400,000. Pine cottage was worth £900,000. In line with the Declaration of Trust, Mr Gallagher's share of Pine Cottage was £230,000.

The first principle established by the court at trial was that there was to be no difference between the factors the court would apply to determine a financial settlement in a civil partnership case from a divorce.

An issue arose as to whether Clink Wharf was to be viewed as a property owned by both parties (a concept in divorce cases known as the sharing principle) or if some reflection in the financial award needed to be made to reflect the fact that the property was pre-owned by Mr Gallagher 

The Court of Appeal stated Clink Wharf, under the sharing principle, should be deemed to be owned by both parties, because the parties had used it as one of their homes, despite the fact that it was pre-owned by Mr Lawrence. This actually extends the position in divorce cases where the family home is deemed a shared asset even if preowned by one party. This case extends the principle to additional properties used as homes and it will now have to be seen if the Courts extend the principle, on a lower level to second homes preowned by one party.

The Court of Appeal also stated that this was not a ‘dual career' case, because the parties had intermingled and combined their available capital and income. This made clear that just because both parties worked outside the home and did not have children, it did not mean that the parties could be categorised as if they were a "dual career" couple so that their capital and income should be treated as being separate.

Whilst both parties had worked throughout the partnership and consciously pooled some assets for their joint benefit such as Pine Cottage, other assets such as Clink Wharf were never pooled. The Court of Appeal missed the opportunity to comment on this concept further and so it will have to be seen how the Court will finalise a settlement for a couple that have worked throughout the marriage and led largely separate financial lives.

What is clear is that the Courts dealing with an asset division on the dissolution of a civil partnership have as much difficulty providing a consistent approach as the divorce courts. The system clearly needs to be reviewed but it is unlikely that the Law Commission will be able to make recommendations for some time. Whilst pre-nuptial agreements and pre partnership agreements are not guaranteed to be legally binding it is inevitable that greater focus will have to be paid to the existence of these so that there is clarity over the party's intentions. It is hoped that further case law will clarify matters on these points.

Roopa Ahluwalia is a specialist Family Law senior solicitor and a member of the high net worth family team specialising in high-value divorce cases at IBB Solicitors.

The views expressed by contributing authors are not necessarily those of Family Law or Jordan Publishing and should not be considered as legal advice.