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You are here: BAILII >> Databases >> The Law Commission >> Cohabitation: The Financial Consequences of Relationship Breakdown (Consultation Paper) [2006] EWLC 179 (04 May 2006) URL: http://www.bailii.org/ew/other/EWLC/2006/179.html Cite as: [2006] EWLC 179

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The Law Commission was set up by section 1 of the Law Commissions Act 1965 for the purpose of promoting the reform of the law. The Law Commissioners are:

The Honourable Mr Justice Toulson, Chairman
Professor Hugh Beale QC, FBA
Mr Stuart Bridge
Dr Jeremy Horder
Mr Kenneth Parker QC
The Chief Executive of the Law Commission is Steve Humphreys and its offices are at Conquest House, 37-38 John Street, Theobalds Road, London WC1N 2BQ.

This consultation paper, completed on 4 May 2006, is circulated for comment and criticism only. It does not represent the final views of the Law Commission. The Law Commission would be grateful for comments on its proposals before 30 September 2006. Comments may be sent either –

By post to:

Daniel Robinson
Law Commission
Conquest House
37-38 John Street
Theobalds Road
London WC1N 2BQ
Tel: 020-7453-1289
Fax: 020-7453-1297

By email to:
[email protected]
It would be helpful if, where possible, comments sent by post could also be sent on disk or by email to the above address, in any commonly used format. All responses will be treated as public documents in accordance with the Freedom of Information Act 2000, and may be made available to third parties. This consultation paper is available free of charge on our website at: http://www.lawcom.gov.uk/cohabitation.htm

CONTENTS

OVERVIEW	OVERVIEW
PART 1: INTRODUCTION	PART 1
THIS CONSULTATION PAPER AND THE LAW COMMISSION	1
THE BACKGROUND TO THIS PROJECT	8
TERMS OF REFERENCE	14
GROUPS NOT COVERED BY THE PROJECT	19
WHO WILL WE BE CONSIDERING?	21
THE PROBLEM ON SEPARATION	24
DEVISING A SCHEME FOR FINANCIAL RELIEF ON SEPARATION	30
CONCLUSION	43
STRUCTURE OF THIS CONSULTATION PAPER	45
PART 2: THE SOCIAL CONTEXT	PART 2
INTRODUCTION	1
CHANGING SOCIAL TRENDS	5
The rise in cohabitation and parenthood by cohabitants: key figures	5
Changes in marriage and divorce rates	10
Same-sex couples	14
"Living apart together"	15
WHO COHABITS?	16
Age	17
Cohabitation by marital status	19
Cohabitation and parenthood	21
Socio-economic status	25
THE DURATION AND DESTINATION OF COHABITING RELATIONSHIPS	30
Pre-marital cohabitation	31
Duration of cohabitation ended by separation or death	35
Cohabitation as a first relationship	41
Cohabitation after marital breakdown	42
Long-term cohabitation instead of marriage	44
PUBLIC ATTITUDES TOWARDS COHABITATION	46
PROJECTIONS FOR THE FUTURE	48
CONCLUSION	52
PART 3: THE CURRENT LAW	PART 3
INTRODUCTION	1
EXPRESS REGULATION BY THE PARTIES	6
Express declarations of trust in respect of land	9
Express trusts of personal property	14
"Cohabitation contracts	15
IMPLIED TRUSTS AND PROPRIETARY ESTOPPEL	20
Resulting trusts	21
Constructive trusts	25
Common intention	26
Express common intention constructive trusts	27
Inferred common intention constructive trusts	28
Detrimental reliance or change of position	31
Quantifying the interest	33
Proprietary estoppel	20
The representation or assurance	35
Detrimental reliance	36
The remedy: "satisfying the equity"	37
Ownership of funds in bank accounts	38
RESOLVING DISPUTES OVER THE HOME CO-OWNED BY COHABITANTS	41
FAMILY LAW REMEDIES ON RELATIONSHIP BREAKDOWN	46
Protection of occupation	48
Applicants who are entitled to occupy	50
Applicants who are not entitled to occupy	51
Transfer of tenancies	55
Provision for children	62
Maintenance and the Child Support Act 1991	62
Capital provision under Schedule 1 to the Children Act 1989 61	63
PROPERTY ENTITLEMENT ON THE DEATH OF A COHABITANT	69
Property passing otherwise than by probate	72
Intestacy	76
Entitlement on intestacy	76
Bona vacantia	77
Family provision	82
Claim as a dependant	85
Claim as a cohabitant	89
Reasonable financial provision	90
CONCLUSION	96
PART 4: CRITICISMS OF THE CURRENT LAW ON SEPARATION OF COHABITANTS	PART 4
INTRODUCTION	4
UNFAIRNESS ON SEPARATION	4
Focus on intention to share ownership and direct financial contributions	7
Failure to recognise the value and impact of non-financial contributions and associated sacrifices	12
Evidence about the economic impact of parenting	14
The current law's lack of response to this problem	22
Lack of holistic view and flexible remedies	30
The apparently limited use of Schedule 1 to the Children Act 1989	34
The limits on the court's powers to make accommodation available	36
Delayed poverty for the primary carer	43
Substantive and procedural complexity	47
UNCERTAINTY ON SEPARATION	52
REMEDIES ON DEATH, BUT NOT ON SEPARATION: ILLOGICAL AND UNFAIR?	56
HUMAN RIGHTS LAW IMPLICATIONS?	59
Article 8 – the right to respect for family life and home	61
Article 14 – the right to be free from discrimination in the exercise of Convention rights	63
Different treatment of cohabitants and spouses	63
A right to different treatment in the exercise of Convention rights	68
Indirect discrimination against the children of cohabitants?	70
Article 1 to the First Protocol and Article 8 - respondents' property rights	72
CONCLUSION	75
PART 5: EVALUATING THE CASE FOR REFORM	PART 5
INTRODUCTION	1
ENCOURAGING COUPLES TO MARRY OR TO SELF-REGULATE	10
Would such an initiative alleviate the problems in practice?	16
Promoting stable relationships; dealing with relationship breakdown	30
Would reforming the law applying to cohabitants discourage marriage?	35
IS THERE ANY JUSTIFICATION FOR A NEW SCHEME FOR "COHABITANTS"?	41
Creation of a new opt-in scheme?	42
An "opt-out" scheme?	50
To whom ought any opt-out scheme apply?	57
The diversity of "cohabitation"	58
Determining which cohabiting relationships should be eligible for any new scheme	64
Cohabitants with children	65
Cohabitants without children	74
Conclusions and questions on the broad scope of any new scheme	87
WHAT COULD STATUTORY REFORM OFFER?	89
For whom might reform make a difference in practice?	90
Cases which would be unlikely to be affected	91
Pre-marital cohabitants	91
Economically independent cohabitants	92
Cohabitants with few assets and low household incomes	94
Cases likely to be affected	97
CAN WE NOT LEAVE IT TO THE JUDGES?	98
THE COST OF REFORM?	102
CONCLUSIONS	104
The current law	104
Is reform justified?	107
THE REMAINDER OF THIS CONSULTATION PAPER	115
PART 6: FINANCIAL RELIEF ON SEPARATION: A NEW SCHEME	PART 6
INTRODUCTION	1
Reform for cohabitants with children	1
Cohabitants without children	3
The structure of this Part	6
The rest of the paper	12
NOT EXTENDING MATRIMONIAL LAW TO COHABITANTS	15
KEY OBJECTIVES FOR REFORM: FAIRNESS AND CERTAINTY	24
FIXED RULES OR PRINCIPLED DISCRETION?	32
Fixed rules	34
Preference for discretion structured by principles	41
PRINCIPLES UNDERPINNING FINANCIAL RELIEF ON SEPARATION: AN OVERVIEW	46
Some key terms used	51
ALLEVIATING FINANCIAL HARDSHIP AND RELIEVING NEED	62
The fact of "hardship" or "need" as a basis for relief?	62
Locating the underlying cause of hardship or need: parties' contributions	67
The implications of basing financial relief on parties' contributions	73
CONTRIBUTIONS AND ASSOCIATED SACRIFICES	78
Introductory observations	78
Attaching positive value to contributions	83
Recognising economic sacrifices incurred through contributions	85
A combined scheme	88
ATTACHING POSITIVE VALUE TO PARTIES' CONTRIBUTIONS	90
Alternative approaches to the positive valuation of parties' contributions	91
Equal sharing and partnership regimes	92
Evaluation of the partnership approach for cohabitants	98
Cases in which partnership may not be appropriate	102
Cases in which partnership might be more desirable	106
Conclusions	111
Focusing on economic value: global accounting	115
Financial contributions	117
Non-financial contributions	120
Conclusions	111
Our preferred approach: the economic advantage principle	128
No full retrospective inquiry	130
Contributing to a retained benefit	134
The basic parameters of the claim	134
Valuing the claim	139
The requirement of causation and potential difficulties of proof	143
The assets from which relief would be granted	149
ECONOMIC DISADVANTAGE	150
Introductory observations	78
Basic questions for an economic disadvantage scheme	151
The character of the claim and its implications for relief granted	153
Shared responsibility	154
Aiming for fair apportionment, not substantive economic equality	156
Claim limited at the point of economic equality	159
Focus on economic disadvantage at the point of separation	161
A framework for giving a "fair account" to economic disadvantage	164
Causes and timing of economic disadvantage	169
What should not be the subject of an economic disadvantage claim?	169
What could be the subject of an economic disadvantage claim?	173
Proof and quantification of economic disadvantage	176
Formulaic approaches	181
Individualised approaches	185
Conclusion on quantification	191
The assets from which relief would be granted	149
Child-care costs	195
Cohabitants "with children": which children?	205
Joint legal parents	207
Cases where the parties are not joint legal parents	209
The respondent's child	210
The applicant's child 178	211
The child of neither party	212
Conclusions	111
OPERATING THE TWIN PRINCIPLES: ECONOMIC ADVANTAGE AND DISADVANTAGE	216
Respondents' claims: countervailing benefits	217
Applicants' claims: avoiding double-counting or over-compensation	221
Practical limitations on claims	222
Available resources and respondents' needs and obligations	223
A needs-based ceiling?	225
Transitional support and retraining costs?	229
A final filter on claims: substantial or manifest unfairness?	230
THE RELEVANCE OF CONDUCT	233
THE COURT'S ORDER	246
The menu of family law financial and property orders	248
Financial provision	249
Property adjustment	249
Order for sale of property	249
Pension sharing	249
What basis for each type of order?	251
Considerations relevant to the choice of order	255
The adult parties' needs	256
Children's needs and the interaction of a new scheme with Schedule 1 to the Children Act 1989	257
Periodical payments and the desirability of the clean break	265
Periodical payments and the effect of repartnering	273
INTERACTION OF NEW REMEDIES WITH THE MATRIMONIAL CAUSES ACT 1973	278
The relevance of post-marital cohabitation to periodical payments ordered on divorce	278
Pre-marital cohabitation by spouses who later divorce	281
INTERACTION OF ANY NEW REGIME WITH EXISTING REMEDIES BETWEEN THE COHABITANTS UNDER THE GENERAL LAW	284
REFORM OF EXISTING REMEDIES FOR THE BENEFIT OF CHILDREN	289
CASES INVOLVING LIMITED ASSETS AND DEBTS	298
PART 7: FINANCIAL RELIEF ON SEPARATION: HOW WOULD IT WORK?	PART 7
INTRODUCTION	1
COHABITANTS WITH CHILDREN	8
COHABITANTS WITHOUT CHILDREN	57
CONCLUSION	81
PART 8: REMEDIES ON DEATH	PART 8
INTRODUCTION	1
INTESTACY	5
Criticisms of the intestacy rules	5
Should cohabitants be included in the intestacy rules?	8
FAMILY PROVISION	18
Criticisms of the law of family provision	18
The implications for provision on death of a new claim on separation	23
Consistency of definition of eligible cohabitant	27
"Reasonable financial provision"	29
The maintenance standard	29
A separation analogy	32
Other considerations for the court	40
Former cohabitants	41
Impact of death on an existing claim for financial relief	42
Death after separation but before a claim has been made	43
Barring applications under the Inheritance (Provision for Family and Dependants) Act 1975	45
Opting out of the 1975 Act	46
Claims by children	52
RULES IN RELATION TO WILLS	62
The effect of marriage on a will	63
The effect of the separation of cohabitants on a will	67
PART 9: ELIGIBILITY TO APPLY	PART 9
INTRODUCTION	1
Eligibility under opt-in and opt-out schemes compared	7
Existing statutory recognition of cohabitants	14
ELIGIBILITY TO APPLY UNDER A NEW SCHEME: BASIC REQUIREMENTS	17
Basic description of the relationship	17
Marriage analogy	19
Other formulae for describing couple relationships	22
Descriptions and basic definitions used in other jurisdictions	26
Discussion	29
An express co-residence or joint household requirement	33
Identifying eligible relationships: the checklist approach	43
Checklists in other jurisdictions	47
Positive or negative use of the checklist	49
Exhaustive or inclusive checklists	51
The factors	52
Discussion	29
AUTOMATIC ELIGIBILITY FOR "COHABITANTS WITH CHILDREN"?	57
Joint parents	59
Other cohabitants with children	62
A MINIMUM DURATION REQUIREMENT FOR "COHABITANTS WITHOUT CHILDREN"?	69
Minimum duration requirements	70
Current English law	70
Reform proposals and other jurisdictions	73
Relating eligibility to the remedy: rule-based and discretionary schemes compared	76
Remedies on separation: the implications of different principles	81
Rule-based or partnership-based schemes	83
"Self-limiting" discretionary remedies	85
Implications of a minimum duration requirement	89
What period?	93
The relevance of breaks in cohabitation	97
Alternative triggers for short relationships?	99
Deeming relationships to be short	103
Remedies on death: building on the separation analogy	106
Intestacy rules	107
Provision under the 1975 Act	110
IDENTIFYING THE END OF THE RELATIONSHIP	116
Remedies on separation	120
Remedies on death	123
SPECIAL ISSUES	125
Eligibility to apply under a new scheme: basic exclusions	125
Relatives	127
Minors	130
Carers	136
Commercial relationships	137
Concurrent relationships	138
A "moribund" marriage and a concurrent cohabiting relationship	139
Concurrent "live" relationships	141
Current English law on concurrent relationships	142
The approach of other jurisdictions	146
Discussion	29
Concurrency and remedies on separation	154
Concurrency and remedies on death	158
Intestacy rules	107
Claims under the Inheritance (Provision for Family and Dependants) Act 1975	160
Non-marriage cases	162
PART 10: COHABITATION CONTRACTS AND OPT-OUT AGREEMENTS	PART 10
INTRODUCTION	1
THE VARIETY OF AGREEMENTS THAT MAY BE MADE BY COHABITANTS	6
Cohabitation contracts	7
Opt-out agreements	1
THE POTENTIAL SIGNIFICANCE OF AN OPT-OUT AGREEMENT	12
DESIGNING AN OPT-OUT	16
WHO SHOULD BE ABLE TO ENTER INTO AN OPT-OUT AGREEMENT?	20
SHOULD AN OPT-OUT AGREEMENT EXPLICITLY OUST THE OPERATION OF A NEW STATUTORY SCHEME?	28
THE SCOPE OF OPT-OUT AGREEMENTS	32
Agreements that simply oust the scheme	32
Agreements that also seek to make positive provision for the parties	33
Can positive provision be made?	34
Over what assets would the opt-out apply?	36
QUALIFYING CRITERIA AND GROUNDS FOR REVIEW	44
Qualifying criteria	48
Comparative survey	51
Possible qualifying criteria	55
Agreement between the parties	56
A requirement of writing	57
Should agreements be signed?	65
Should agreements be witnessed?	66
Should the parties make full disclosure of their assets?	68
Advice from an independent third party	70
General advice as to existence of the statutory scheme and the nature of what would be lost by opting out	71
General advice from an independent person as to the meaning of a proposed agreement	72
Advice as to whether an agreement was appropriate	73
Model opt-out agreements	80
Grounds for review	44
Contracts made between spouses (and civil partners)	86
Pre-nuptial contracts	87
Separation agreements	88
The position of cohabitants compared	90
Comparative survey	51
What grounds for review should we adopt?	97
Overturning on the grounds provided by the general law	101
Revocation by conduct	102
Failure to observe qualifying criteria	103
Supervening events	107
Birth of a child	109
Marriage of the parties to each other	111
Grave and unforeseen change of circumstances	112
Dealing with the effluxion of time: sunset clauses	113
An alternative or additional requirement of manifest injustice?	118
Result of an agreement being set aside	121
THE STATUS OF EXPRESS DECLARATIONS OF TRUST	124
The scope of any opt-out created by a trust	130
Different types of trust	133
Trusts of land	133
Arguments against treating express trusts of land as opt-outs	133
Arguments in favour of treating express trusts of land as opt-outs	138
Advising on trusts of land alongside a new scheme	142
Other express trusts	144
OPT-IN BY AGREEMENT?	149
PART 11: PROCEDURE, JURISDICTION AND OTHER ISSUES	PART 11
INTRODUCTION	1
PROCEDURAL ISSUES RELATING TO THE SEPARATION SCHEME	4
Family proceedings	4
The court	9
The process	17
Procedural rules	18
Case management	22
Valuation of assets	23
Mediation	24
Use of split trials or applications to strike out	25
Costs	30
Openness	34
Public funding	36
ANTI-AVOIDANCE	40
ENFORCEMENT	42
JURISDICTION AND APPLICABLE LAW	44
Jurisdiction in family law: a developing area	46
Current rules on jurisdiction in family law	48
Jurisdiction to order ancillary relief on divorce	49
Orders for "maintenance", including Schedule 1 to the Children Act 1989	54
Inheritance (Provision for Family and dependants) Act 1975	56
Jurisdiction under a new scheme for financial relief on separation	59
Applicable law	44
General rule	62
Cohabitation contracts, opt-out agreements and choice of law clauses	64
LIMITATION PERIOD FOR CLAIMS ON SEPARATION	72
RETROSPECTIVE OPERATION OF ANY NEW SCHEME	79
No full retrospectivity	80
Treatment of existing relationships	81
Impact on existing property and contractual rights	83
Existing implied trusts and estoppel equities	84
Express trusts and cohabitation contracts	85
Separate property holdings	88
Conclusions	89
Satisfying a minimum duration requirement	92
Early opportunity to opt out?	95
No retrospectivity at all?	98
IMPACT OF REFORM	100
PART 12: LIST OF PROVISIONAL PROPOSALS AND CONSULTATION QUESTIONS	PART 12
APPENDIX A: ENGLISH LEGISLATION	APPENDIX A
FINANCIAL PROVISION ON DIVORCE	
Matrimonial Causes Act 1973	
APPENDIX B: SCOTTISH LEGISLATION	APPENDIX B
FINANCIAL PROVISION ON DIVORCE	
Family Law (Scotland) Act 1985	
FINANCIAL PROVISION ON SEPARATION FOR COHABITANTS	
Family Law (Scotland) Act 2006	
APPENDIX C: SCHEMES FOR COHABITANTS IN OTHER JURISDICTIONS	APPENDIX C
APPENDIX D: "OPT-IN" REGIMES IN OTHER JURISDICTIONS	APPENDIX D
APPENDIX E: ACKNOWLEDGEMENTS	APPENDIX E


 


PART 1

INTRODUCTION

THIS CONSULTATION PAPER AND THE LAW COMMISSION

1.1      This is a consultation paper. It does not contain any final recommendations for reform of the law.
1.2      The paper is the work of the Law Commission. The Commission is an independent statutory body which has the duties of keeping the law of England and Wales under review and making proposals for its reform. It does not have power to make changes to the law. That is a matter for Parliament.
1.3      This consultation paper asks what people think about the way the law currently treats cohabitants' property and finance when their relationships end, whether by separation or by death. The Government has asked us to consider how any reform of this area of law could be carried out. This paper therefore puts forward a possible new scheme and seeks consultees' views. In this paper we do not reach any final decision on the questions of whether there should be reform or to whom any reform should apply.
1.4      We are producing two versions of the consultation paper. This paper is the full consultation paper which examines the issues more comprehensively and sets out in considerable detail a proposed scheme for cohabitants. We are also publishing a much shorter "overview" which summarises the issues under consideration. Both papers contain consultation questions and provisional proposals, but a larger number of consultation issues are discussed in this paper than in the overview. The overview consultation paper is available on our website.
1.5      The consultation process is open to all who wish to participate. It lasts from the date of publication of this paper until 30 September 2006. We invite readers to write to us with their views.
1.6      Following consultation, we shall analyse the responses we receive and consider what specific recommendations we should make. We shall then publish a final Report containing an account of the consultation process, explaining the policy we are proposing, and setting out any recommendations for reform.
1.7      We intend to publish our final Report by August 2007.

THE BACKGROUND TO THIS PROJECT

1.8      In July 2002, the Law Commission published a Discussion Paper on Sharing Homes.^[1] This was the culmination of a lengthy review of the law relating to the property rights of those who share a home, covering a broad range of people, including friends and relatives as well as both married and unmarried couples. The Discussion Paper focused on the complex principles contained in the law of trusts and proprietary estoppel which determine when, and to what extent, a person who is not on the legal title may claim an interest in the shared home.
1.9      The Sharing Homes project sought to formulate a scheme for ascertaining and quantifying property rights in the shared home which would be easier to operate and more certain in its outcomes than the principles which are currently applied. Ultimately, this objective proved impossible to realise. The Commission concluded that it was not feasible to devise a scheme, based upon an objective valuation of the contributions made, which could operate "fairly and evenly across the diversity of domestic circumstances which are now to be encountered".^[2]
1.10      The Commission recommended that those who are living together should be positively encouraged to investigate the legal consequences of doing so and to make express written arrangements setting out their intentions.^[3] A major problem in encouraging cohabiting couples to make agreements is the degree of public misunderstanding about the consequences of cohabitation. Many cohabiting couples apparently believe that they acquire the same rights as married couples once they have been together for a certain length of time.
1.11      In Sharing Homes, the Law Commission identified and publicised

a wider need for the law to recognise and to respond to the increasing diversity of living arrangements in this country. We believe that further consideration should be given to the adoption, necessarily by legislation, of new legal approaches to personal relationships outside marriage, following the lead given by other jurisdictions (such as France, Australia and New Zealand).

These approaches may include such mechanisms as the formal registration of civil partnerships, or, less formally, a power for the court to adjust the legal rights and obligations of individuals who are or have been living together for a defined period or in defined circumstances.^[4]

1.12      Registration of partnerships involves the parties "opting in". Since the publication of Sharing Homes, this model has been adopted by Parliament in offering to same-sex couples the opportunity to register their relationships as "civil partnerships" and thereby to obtain broadly equivalent rights and obligations to those applying to opposite-sex couples who marry. The Civil Partnership Act 2004 came into force on 5 December 2005, and the first civil partnerships were entered into shortly afterwards.
1.13      During the passage of the Civil Partnership Act through Parliament, debate highlighted the case for fundamental legal reform for those who lived together but who neither married nor (in the case of same-sex couples) registered a civil partnership. Concern was centred on the potential financial hardship suffered by cohabitants on the termination of their relationship and on the current lack of any coherent legal remedies to mitigate their position. In a letter of 12 May 2004, Lord Filkin, then Parliamentary Secretary at the Department for Constitutional Affairs, indicated to Peers that he had asked the Law Commission to consider a request to include a review of cohabitation law in its Ninth Programme of Law Reform.

TERMS OF REFERENCE

1.14      The terms of reference are set out in our Ninth Programme of Law Reform:^[5]

The project will focus on the financial hardship suffered by cohabitants or their children on the termination of the relationship by breakdown or death. It will only consider opposite-sex or same-sex couples in clearly defined relationships. Particular attention will be given to:

(1) Capital provision where there is a dependent child or children;

(2) Capital and income provision on relationship breakdown;

(3) Intestate succession and family provision on death; and

(4) The Inheritance (Provision for Family and Dependants) Act 1975.

The project will also consider the place of cohabitation contracts and the extent to which cohabitants should be free to make and to enforce agreements concerning their respective liabilities to provide and to maintain following separation.

1.15      The current project is not intended to be a comprehensive review of all the law as it applies to cohabiting couples. It is specifically confined to the financial consequences of the termination of cohabiting relationships, whether by separation or by death. It may be helpful to indicate at the outset that, while the terms of reference cover both remedies on separation and on death, the principal focus of this consultation paper is on the position at separation. Cohabitants do not fall within the scope of the intestacy rules. However, the Inheritance (Provision for Family and Dependants) Act 1975 provides a specific set of remedies for certain cohabitants whose relationships end by the death of the other party. Although the current law does not entirely ignore the position of cohabitants who separate, there is no equivalent scheme specifically designed to provide financial relief between cohabitants in such cases. The main focus of this paper (in particular Parts 4 to 7) is therefore on whether a new scheme providing remedies on separation should be introduced and, if so, what form it should take and to whom it should be available. However, in Part 8 we also address the position on death, and consider what reform might be warranted in relation to such cases.
1.16      A number of issues are specifically excluded from consideration. As the Law Commission's Ninth Programme of Law Reform makes clear, the project does not concern:

(1) parental responsibility for children;

(2) next of kin rights; or

(3) insolvency, tax and social security.

The operation of the child support legislation and the role of the Child Support Agency are also outside the scope of this project.

1.17      It is particularly important to emphasise that the Law Commission has not been asked to consider the way that the State generally deals with or recognises cohabitants. As will become clear, we are not proposing the creation of a new "status" of cohabitant conferring a broad range of rights and privileges. We are concentrating on the extent to which cohabiting couples should be able to claim financial remedies from each other following the termination of their relationship.
1.18      We will not be able to deal with consultation responses on any issues that fall outside the scope of the project.

GROUPS NOT COVERED BY THE PROJECT

1.19      "Cohabitant" is a wide term. The Ninth Programme makes clear that the project should not consider all those who live in the same home. It excludes:

(1) relationships between blood relatives or "caring" relationships; and

(2)"commercial" relationships (such as landlord and tenant or lodger).

1.20      We are aware that some would argue strongly that the law relating to these other categories of home-sharers may also be in need of reform. We express no view on the merits of such arguments. As these groups are outside our terms of reference we will not be able to deal with them during the course of this project. Arguments for wider changes to the law should not prevent us from considering reform for those within our current remit.

WHO WILL WE BE CONSIDERING?

1.21      This project concerns what are commonly referred to as "couples", either opposite-sex or same-sex, who live together in intimate relationships.
1.22      Although, as discussed, this group does not include all those who may share a home, it still comprises a highly diverse range of couples. At one extreme there are young couples who move in together to save rent, but who keep their finances entirely separate and have no longer term joint plans. At the other, there are established partners who have lived together for decades, bringing up children and intending to stay together forever. There are many different sorts of relationship in between.
1.23      We recognise that many consultees' views on reform will depend on what type of couple we are talking about. We will listen to the views of consultees about which relationships should fall within any new scheme.

THE PROBLEM ON SEPARATION

1.24      The law governing the division of income and capital when a cohabiting couple separates has been said, in particular, to be unfair and uncertain.
1.25      Although there are some statutory remedies that may be claimed on separation, they are of limited scope and utility. There is relatively short-term protection from domestic violence, and residential tenancies may be transferred from one cohabitant to another by order of the court. While the court does have extensive powers to make orders for capital provision for the benefit of children, they are surprisingly rarely used. But there is nothing else.
1.26      Most significantly, the court has no general power to make orders for financial relief on the termination of a relationship outside marriage^[6] by separation. This contrasts starkly with the remedies available on divorce where the court may order ancillary relief so as to ensure that a just and fair solution is obtained.
1.27      It follows that if a cohabiting couple separate, they are usually restricted to making claims under the general law based on their entitlements to particular items of property, usually the shared home. Unless a trust has been expressly declared by the parties, the success of any claim will depend upon the application of doctrines such as implied (that is resulting or constructive) trust or proprietary estoppel.
1.28      As we explained in Sharing Homes, following a detailed analysis of these doctrines, the rules contained in the general law have proved to be relatively rigid and extremely difficult to apply, and their application can lead to what many would regard as unfairness between the parties. The formulation of a claim based on these rules is time-consuming and expensive, and the nature of the inquiry before the court into the history of the relationship results in a protracted hearing for those disputes that are not compromised. The inherent uncertainty of the underlying principles makes effective bargaining difficult to achieve as parties will find it hard to predict the outcome of contested litigation.
1.29      The best advice for cohabiting couples remains that they should, if at all possible, agree the terms on which they are living together before they begin to do so. As far as their shared home is concerned, that will involve a declaration of trust. It is, however, often the case that cohabitants do not address their minds to this issue at all, or before it is too late. As far as other financial arrangements are concerned, while it is now highly probable that a court would enforce a contract regulating the financial affairs of a cohabiting couple, the position is not entirely clear-cut.

DEVISING A SCHEME FOR FINANCIAL RELIEF ON SEPARATION

1.30      It would be possible to reform the law by allowing cohabiting couples to "opt in" to a scheme imposing enforceable financial obligations on the parties in the event of their separation. An "opt-in" scheme does have the advantage that it applies only where the parties have consented to its application to their relationship and that it therefore respects the parties' autonomy.
1.31      In a sense, both marriage and civil partnership may be said to comprise opt-in schemes, although the range of the rights and obligations conferred covers a much wider area than the property and financial relations of the parties. We have noted that civil partnership confers rights and obligations broadly equivalent to those of married couples. Some have argued that opposite-sex couples who do not wish to marry should be entitled to register civil partnerships. We consider that advocating such reform misses the point. Opposite-sex couples can marry, whereas same-sex couples cannot. There is no pressing social need for opposite-sex couples to have a "marriage-alternative" which confers broadly equivalent rights and obligations to marriage.
1.32      In this paper, we consider the case for an opt-in scheme which is specifically restricted in its application to the property and financial relations of the parties. As will become clear, we have serious reservations about the utility of introducing such a reform. An opt-in scheme would apply only where the parties had complied with the relevant formal process of registration. It would therefore do nothing for those who, for whatever reason, failed to opt in. The objective of the current project is to provide effective remedies to alleviate the financial hardship of those who have not married (or, being same-sex, have not registered a civil partnership). It is difficult to see how that objective can be achieved by means of an opt-in system.
1.33      The emphasis of this paper is therefore on the formulation of a scheme of financial relief which would apply to cohabitants by default on their separation. In order to protect the autonomy of cohabitants, we provisionally propose that couples should be entitled to "opt out" of the operation of any such remedial scheme, provided that certain conditions were satisfied.
1.34      We realise that there may be concerns about the scale of any new jurisdiction which we may propose. It is important to be clear from the outset that we do not consider that all cohabiting couples falling within our terms of reference should have access to remedies merely because their relationship comes to an end. Simply having been in a cohabiting relationship should not be sufficient to give rise to a claim.
1.35      We also realise that there may be concerns that cohabiting couples should not be treated as if they were married. As we explain at paragraph 6.15 below we consider that there is a difference between relationships in which the partners have publicly made a legally binding commitment to each other and relationships in which they have not. In the course of this paper, we provisionally reject the suggestion made by some commentators that cohabitants should be treated identically to married couples and civil partners in terms of financial relief on termination of the relationship.
1.36      We have instead sought to devise a remedial scheme which is specifically designed for cohabitants on separation and based on principles different from those currently applicable between spouses on divorce.
1.37      Our provisionally proposed scheme of "financial relief on separation" is set out in Part 6. The scheme would confer jurisdiction on the court to make orders for financial relief in the exercise of its discretion, taking account of the contributions and economic sacrifices made by each party during the course of the relationship. The aim would be to share the economic advantages and economic disadvantages created by the relationship and experienced on separation more fairly between the couple than the current law is able to do.
1.38      We believe that the availability of remedies under such a scheme would need to be controlled in two ways:

(1) Eligibility to apply. We believe that many consultees will take the view that only some cohabitants should be able to apply for financial relief on separation. This could be achieved by limiting the availability of any new remedies to cohabiting couples who satisfy certain qualifying conditions. The scheme would set out which sorts of couple were eligible and those that fell outside the defined category would be excluded from the scheme. For example, it would be possible to restrict eligibility to those couples who have a child, or to those couples who have lived together for a certain length of time.

(2) The basis on which awards would be made. However, just being eligible to apply should not automatically mean that the applicant is given anything. As we explain in Part 6, we do not consider that cohabiting couples should be entitled to a share of each other's assets at the end of their relationship irrespective of the extent to which they shared their lives during the relationship. Rather, we think that a new scheme should only provide applicants with a remedy on separation if they can show that the effects of the contributions and associated economic sacrifices they made during the relationship would otherwise be unfairly shared following separation. In many cases, neither party would be able to establish this and no claim would therefore be tenable.

1.39      These two filters would work in tandem. In order to produce a remedy, both (1) and (2) would have to be satisfied. This would mean that only parties who were eligible to apply and who proved the necessary contributions or sacrifices could obtain anything by way of financial relief.
1.40      The remedial scheme we set out would, we believe, be capable of being adapted to whichever category of cohabiting relationships Parliament may consider appropriate. We therefore test the scheme against the whole range of cohabitants falling within our terms of reference, present the results that would be produced and invite consultees to give their views.
1.41      A number of other jurisdictions have already introduced statutory schemes providing for the adjustment of property rights or financial provision between cohabiting couples on separation and on death. All Australian states, and most Canadian provinces, have such legislation. New Zealand in 2001 extended its system of deferred community of property and associated remedies applicable to spouses to cohabitants of three years' standing and those with a child. Since the commencement of this project, the Scottish Parliament has enacted legislation which confers power on the court to make orders for financial provision following the ending of a cohabitation otherwise than by death, and which entitles a cohabitant to apply to the court for financial provision if their partner dies intestate. That legislation came into force on 4 May 2006.^[7]
1.42      In the course of this paper we make reference to the statutory schemes in these and other jurisdictions. We have not yet had the opportunity fully to review the operation of those schemes and to consider the practical and theoretical problems that have been encountered. We intend to carry out further research into the law and experience of other jurisdictions following publication of this Paper, and to report on our findings in the final Report. We would be very interested to hear the views of those with experience of other jurisdictions in the course of the consultation process.

CONCLUSION

1.43      As will emerge in this paper, the legal treatment of cohabitants is an extremely difficult area. It involves significant questions of social policy and engenders strong responses. It is complex in terms of law and social impact. Broad questions of social policy remain a matter for Parliament. As a law reform body, the Law Commission is best qualified to address any technical deficiencies of the law and to recommend ways in which reform could be effected. We hope that this paper will inform the debate on the public policy questions relating to cohabiting couples and that our consultation will put Parliament in a position to make the necessary decisions about whether (and if so what) reform should take place.
1.44      We have had productive meetings with and received valuable assistance from a large number of people in the course of preparing this paper. We gratefully acknowledge those individuals and organisations in the final appendix to this paper.

STRUCTURE OF THIS CONSULTATION PAPER

1.45      Part 2 of this paper describes the social context of cohabitation. It records the demographic data showing the decline in the rate of marriage and the growth in numbers of cohabitants and their children. It considers who is most likely to cohabit and the increasing duration of cohabiting relationships. It also reviews the reasons why couples cohabit, comparing those who cohabit before marriage, those who cohabit after one or both parties have been divorced and those who cohabit instead of marrying. It reports actuarial estimates for the future increase in numbers of cohabitants.
1.46      Part 3 of this paper provides a summary of the current law relating to the financial and property consequences of cohabitation.
1.47      Part 4 sets out the key criticisms that have been made of the law described in Part 3. It also examines what implications relevant human rights law might have for reform.
1.48      Part 5 evaluates the case for statutory reform, in light of the perceived shortcomings of the current law and research concerning cohabitation and marriage. It considers whether it would be a sufficient response to those criticisms to encourage parties to remove themselves from the scope of the law described in Part 3 by marrying or registering a civil partnership, or by making their own financial and property arrangements by means of cohabitation contracts and express trusts. It then examines the options for reform, if reform were thought desirable. It explains why we would prefer that any reform involved the enactment of a new scheme of remedies that would apply by default to couples falling within statutory eligibility criteria, but with the right for couples wishing to do so to opt out, rather than the creation of a new opt-in scheme for cohabitants. It considers what justifications, if any, there might be for applying a new opt-out scheme to various categories of cohabitant. It examines the likely impact of any reform on different situations involving cohabitants. It considers the potential costs of any reform to the public purse.
1.49      Part 6 explores the options for a new scheme of financial relief on separation. It argues for a scheme based on the exercise of judicial discretion rather than the application of fixed rules. That discretion should, however, be structured so that the principles on which relief is to be granted are clear. The paper analyses the underlying principles on which other jurisdictions have based their schemes. It rejects the adoption of a needs-based or partnership-based scheme of the sort reflected in many decisions on ancillary relief on divorce. It considers the case for basing relief on an evaluation of the parties' respective contributions to the relationship and the associated economic sacrifices made, and provisionally proposes the adoption of principles of "economic advantage" and "economic disadvantage", akin to those recently enacted in Scotland.
1.50      Part 7 seeks to demonstrate through a series of factual examples how it is envisaged that the principles underpinning the proposed scheme described in Part 6 would apply.
1.51      Part 8 reviews the financial remedies available to cohabitants on the death of their partner. It considers the case for reforming the law of intestacy so that a cohabitant is entitled as of right to a share of the deceased's estate. It focuses on applications for financial provision under the Inheritance (Provision for Family and Dependants) Act 1975 and argues that there should be compatibility between any new scheme applicable on the separation of cohabitants and the family provision legislation currently applicable on death.
1.52      Part 9 considers who should be eligible to apply for financial relief on separation. In our view, eligibility criteria should reflect the nature of the remedy on offer, and so we tie our discussion closely to the scheme set out in Part 6.
1.53      Part 10 analyses the circumstances in which cohabitants should be entitled to "opt out" of any new statutory scheme, and the extent to which opt-out agreements should be susceptible to review by the courts. It also suggests that, in order to dispel any lingering doubt, statute should provide that the courts may enforce cohabitation contracts dealing with property and finance.
1.54      Part 11 assesses the procedural consequences of our reform proposals. This Part also addresses issues relating to limitation periods, jurisdiction and anti-avoidance, and considers the retrospective effect of any new scheme and the need for transitional provisions.
1.55      Part 12 brings together the provisional proposals made and consultation questions asked in the course of the paper.
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Note 1    Sharing Homes: A Discussion Paper (2002) Law Com No 278.    [Back]

Note 2    Sharing Homes: A Discussion Paper (2002) Law Com No 278, para 1.31(1).    [Back]

Note 3    Sharing Homes: A Discussion Paper (2002) Law Com No 278, para 1.31(2).    [Back]

Note 4    Sharing Homes: A Discussion Paper (2002) Law Com No 278, Part VI, paras (7) and (8).    [Back]

Note 5    The Law Commission: Ninth Programme of Law Reform (2005) Law Com No 293, para 3.6, available at http://www.lawcom.gov.uk/docs/9th_Prog_Final(2).pdf.    [Back]

Note 6    Throughout this Paper, wherever reference is made to “marriage”, “spouse” and related matters, it should be taken to include reference to civil partnership, civil partner and so on, save where it is expressly stated otherwise.    [Back]

Note 7    See Appendix B.    [Back]