Whigham v Owen: A step forward in the law of cohabitation?

21/05/2013

The eagerly awaited case of Whigham v Owen [2013] CSOH 29, handed down today, represents the next instalment of guidance for family practitioners in the interpretation of section 28 of the Family Law (Scotland) Act 2006.

Section 28 provides cohabitants with the right to apply to the court for financial provision where their cohabitation ends “otherwise than by death”. This provision allows cohabitants, following separation, to ask the court to make an order for a capital sum in certain circumstances and sets out the factors which the court will take into account when assessing whether (and to what extent) to grant such an application. The factors can be found in s28(3)-(6), namely:-

“(3) (a) whether (and, if so, to what extent) the defender has derived economic advantage from contributions made by
           the applicant; and
      (b) whether (and, if so, to what extent) the applicant has suffered economic  disadvantage in the interests of 
                        (i) the defender; or
                        (ii) any relevant child.

(4) In considering whether to make an order under subsection (2)(a), the appropriate court shall have regard to the matters mentioned in subsections (5) and (6).

(5) The first matter is the extent to which any economic advantage derived by the defender from contributions made by the applicant is offset by any economic disadvantage suffered by the defender in the interests of --
                        (a) the applicant; or
                        (b) any relevant child. 

(6) The second matter is the extent to which any economic disadvantage suffered by the applicant in the interests of –
                        (a) the defender; or
                        (b) any relevant child,
is offset by any economic advantage the applicant has derived from contributions made by the defender …”

“Contributions” include indirect and non-financial contributions, and in particular any such contribution made by looking after a relevant child or any house in which the parties cohabited. “Economic advantage” includes gains in capital, income and earning capacity and “economic disadvantage” is to be construed accordingly. There has been only limited guidance in the case-law produced to date as to how the court will interpret the legislation, hence the anticipation surrounding the case of Whigham v Owen.

In this case, Ms Whigham and Mr Owen cohabited for more than 26 years. Ms Whigham sought a capital sum for the equivalent of one half of the parties’ net assets, namely £397,279 in terms of section 28 of the Family Law (Scotland) Act 2006.

Ms Whigham argued that virtually the whole of the parties’ wealth was created during their cohabitation. Mr Owen, on the other hand, argued that Ms Whigham had not established any contributions that resulted in a net economic advantage to Ms Whigham, nor any net economic disadvantage suffered in the interests of the parties or the children. In other words, he argued that Ms Whigham was no worse off at the end of the cohabitation than she was at the beginning. She had not lost any property or career and her contributions to Mr Owen’s business interests did not result in any increase in his capital, income or earning capacity.

In considering the legal basis of the claim, the court considered the approach taken by the supreme court in Gow v Grant [2012] UKSC29. Particular emphasis appears to have been placed on the statement within Gow v Grant that regard must be had to where parties were at the beginning of the cohabitation and where they were at the end, and that the overriding principle in decision making in such cases is one of fairness as opposed to a precise economic calculation.

At the start of the cohabitation, Ms Whigham had no qualifications and no assets. She gave up employment when the parties’ first of three children was born in 1984. Mr Owen was a plumber and ran his own businesses, many of which were with his brother. At the start of the co-habitation, he had assets worth £2,000. At the end of the cohabitation, the parties had substantial assets worth £758,000 with only £10,331 of that being attributable to Ms Whigham. After separation, Ms Whigham was living in rented local authority housing and provided accommodation to the parties’ son who suffered from depression and was unable to work. She was in receipt of state benefits. She had tried to work but had to give up due to her own depression. She wished to obtain funding for a deposit on a home and to run her own business. Mr Owen, on the other hand, was continuing with his business ventures and lived in the former family home.

The court accepted that Ms Whigham had made substantial financial and non financial contributions towards Mr Owen’s business enterprises and the family and awarded her £250,000.  This award represented almost two thirds of the parties’ totalled net assets at the cessation of their cohabitation.

Where does this judgment take the law on cohabitation in Scotland? It is difficult to say. The court took the view that it should carry out a rough and ready calculation when quantifying such cases and that when deciding what that calculation should be, it could look to divorce cases for guidance but only to the limited extent of identifying the type of economic advantage, disadvantage or contribution that might be relevant. Further, the court was clear that, generally speaking, awards in cohabitation cases should be lower than in cases of divorce. Unfortunately, however, the court gave little practical guidance as to how it had actually arrived at the figure of £250,000 awarded to Ms Whigham. On one view, this is a fairly extreme case when one looks at the respective financial positions of the parties at the conclusion of the period of cohabitation, taken with the length of the cohabitation and the fact that there were children of the relationship. Where the line is drawn between such cases and less ‘clear-cut’ cases is another matter.

Without specific guidance as to how the court will quantify such claims, will it now be the case that we see such cases being approached with a focus on the disparity in respective financial positions of the parties, with a reliance on divorce cases to assist with the interpretation of the concepts of economic advantage, disadvantage and contribution?  The suggestion is that it is not necessary to show a clear causal link between contributions on one hand and economic advantage or disadvantage on the other, although it is recognised that this can be difficult to evidence on a practical level. It is easy to foresee situations where such an approach will not result in ‘fairness’, such as was arguably in the thoughts of the legislators when the 2006 Act came into force. What is clear is that there remains a broad judicial discretion as to the interpretation of ‘fairness’. As such, practitioners will no doubt continue to find themselves in a difficult position when advising clients as to likelihood of success or otherwise of prospective claims.

For any information or guidance relating to this article please contact Karen Gibbons.