The Most Important Benefit of Marriage - Research Paper Example

 Recent reports demonstrate that it has become increasingly common for the family home to be registered in the name of one party usually due to ownership before marriage or cohabitation1. Furthermore, the changing dynamic the family nucleus coupled with socio-economic variances shaping property ownership can be problematic on the breakdown of a family relationship whether in the context of marriage or cohabitation. The increase in cohabitation has also fuelled debate regarding the law’s approach to determining rights on subsequent relationship breakdown, and the rising divorce rate2 has increased the importance of effective legal mechanisms in determining ancillary relief proceedings3. As such, academic discourse on the law’s distinction between cohabitation and marriage has led some commentators to posit that the significant benefit of marriage compared to cohabitants is the financial rights afforded to married applicants under divorce law on separation. The focus of this paper is to critically discuss this argument and to this end, I shall to evaluate the varying approach of the law to financial division of assets on relationship breakdown with a comparative analysis of the rights of married couples on divorce in contrast to cohabitees. Additionally, this paper will consider whether the current law needs to be improved in addressing rights of cohabitees on relationship breakdown. At the outset, it is submitted in this paper that comparison with the Australian and Canadian approach is relevant to the consideration of how to improve the current position of financial division on relationship breakdown particularly for cohabitees. To this end, I will also consider UK law in context of the Australian and Canadian approach to division of rights to the family home. Firstly, with regard to the financial protection afforded to married couples on divorce, the governing legislation is the Matrimonial Causes Act 1973 (MCA) and section 25 of the MCA provides courts with a very wide discretion of factors to take into account on division of assets, with the welfare of a child being paramount4. Moreover, when a court is making decisions with regard to property and financial claims, section 25 of the MCA provides a detailed checklist of factors to be taken into account to assist the court in making its decision. Additionally, as highlighted in the case of Cordle v Cordle5, section 25 of the Act applies to all the circumstances of the case subject to the rights and welfare of the child in order to achieve a “fair result”. However, Section 25 does not express any other obvious objective and the range of “all circumstances” which the court is required to consider does not give clear guidance, compounded by the uncertainty as to what amounts to a “fair result6”. Furthermore with regard to children, the courts address more weight to the interests of a child the younger they are and this in itself highlights the difficulty of legislating for social and emotional issues in an effective and inclusive manner7. The impact of divorce on any child is subjective however legal certainty dictates that some form of logical approach is applied. As such, it is evident that notwithstanding the greater legislative protection afforded to married couples on divorce, the applicability of these provisions are not without their faults. For example, Due to the section 25(1) requirement placing a child’s interests first, the usual approach regarding rights to the family home is to make a property adjustment order transferring the family home to the primary care giver until the children has reached majority8. However a degree of discretion is permitted in order to ensure that a “fair result” is achieved9. Additionally, under section 24(1) (a) of the MCA the courts can order a complete transfer or a partial transfer (in any proportion) under section 24(1) (d). They can also make an order for sale under section 24A (1), which is intended to release the equity tied up in the property and turn it into capital divided between the parties. However, this can be delayed until the youngest child is 16 and it is questionable whether such uncertainty meets to objectives of section 25 in aiming to preserve stability for dependant children10. Whilst the MCA expressly acknowledges the different purposes of the family home the problem is that the length of the orders that can be imposed and the potentially long delay in realising the value of the asset contradicts the underlying objective of the law in assisting a “clean break” on divorce11. Additionally, the powers under section 24 are quite wide and the courts can made an order a transfer of the property even if the other party has been paying the mortgage, which again can perpetuate bitterness and bad feeling between the couple12. Furthermore, in achieving “fairness” the property adjustment order can inadvertently create undesirable results. For example, if a property is transferred to the primary caregiver and the property is subject to a mortgage, the courts have the power to transfer the debt of the mortgage on the basis that the other party is relinquishing their rights to the home13. This could effectively result in the primary caregiver being forced to sell the home contradicting the primary purpose of the order in preserving stability for the immediate needs of the minor child, leaving the courts with a difficult balance to address14. Notwithstanding the shortcomings of the legislative protection for married couples on relationship breakdown, the position is clearly more beneficial than the contrasting position for cohabitees who are currently forced to rely on complex trust law principles in financial disputes pursuant to relationship breakdown. Conversely, the court does not have such wide ranging powers in relation to cohabitees and a sole owner will continue to own the property notwithstanding a relationship breakdown15. If a partner has made contributions to the property under cohabitation they currently have to rely on the complex principles of constructive and resulting trust with no equivalent statutory right of occupation as is applicable to marital relationships16. A cohabitee’s position may be strengthened if a dependant child is involved, as a court order can be obtained to prevent sale17. Again it is questionable whether such an order is really in the best interest of the child where a relationship has broken down. As such, it is submitted that a selective approach to protection of children based on whether they are a product of marriage or cohabitation is undesirable. Furthermore, with regard to relationship breakdown, the difficulties and uncertainties surrounding rights to a family home have been traditionally dealt with through resulting or constructive trusts18. However, many commentators have criticised the courts’ wide interpretation to of established trust law principles in contradicting the purpose of the trust19. The difficulty that has exercised the courts in particular is the concept of contributions and the need to balance this so as to not apply discriminatorily. Traditionally, cases have had to address the pattern whereby the women have been homemakers, (with property registered in their partners’ name) looking after the children only to face the possibility of no proprietary rights to a property on subsequent relationship breakdown20. Whilst clearly unfair (especially the longer the relationship), the common law does not provide any protection and in such cases equity has sought to address the balance through resulting trust or constructive trust21. Resulting trusts usually involve contribution to the initial cost of the family home, which is registered solely in the name of another person22. Equity does not presume an outright gift, but rather a presumption that the contributing party intended to retain a beneficial interest in the property23 (despite no evidence of actual intention). Whilst this approach has been criticised theoretically as the imposition of an “artificial presumption24”, it is arguably a necessary approach to protect third party interests. However, the resulting trust will not cover a situation where one party has foregone a career and been a full time home-maker and in this case the constructive trust is relied upon. The leading case of Lloyds Bank plc v Rosset25 highlighted the essential requirements for the imposition of a constructive trust asserting its foundation in the common intention of the parties to share the properties. Lord Bridge further asserted in this case that “intention” could be express or inferred from conduct26. In this case, in order to obtain a mortgage, the Defendant had convinced the Claimant to sign a disclaimer on the understanding that they would marry and occupy the property together. In reliance on this, the Claimant had paid £12,500 into the Defendant’s bank account and she had spent thousands on improvements to the property. It was held that there was clearly an intention to share the property, which resulted in the property being held on constructive trust. Furthermore, Lord Bridge highlighting the reasoning in Gissing v Gissing27 asserted the concept of detrimental reliance in order for there to be a constructive trust. A prime example of this is the case of Eves v Eves28, where the defendant told the claimant that the only reason the house was being put in his sole name was as she was under 21. In reliance on this promise, the claimant redecorated the house and undertook significant works to the house. As a result, she was awarded a quarter shares in the proceeds of sale. Notwithstanding the widening interpretations of trust law to accommodate relationship breakdown, the constructive trust is limited by reluctance to acknowledge indirect contribution, which has worked primarily against women in practice29. Moreover, the courts’ approach has been positively inconsistent in relation to indirect contributions. For example, in the case of Hussey v Palmer30, the wife had paid for an extension to the house and it was held to constitute a beneficial interest, however the court had great difficulty in deciding whether it was a resulting trust or constructive trust. Conversely, in the case of Thomas v Fuller-Brown, 31 where the claimant had carried out substantial works to the house registered in her husband’s name, she was held to have not beneficial interest. However in the case of Burns v Burns32, Fox LJ obiter suggested that if a woman makes a substantial contribution even indirectly it could result in an indirect interest. However, there is no consistent approach to what constitutes a “substantial contribution”, which is clearly evidenced in the approach to determining a beneficiary’s share in the proceeds of the sale under constructive trust33. The decisions of Gissing v Gissing34 and Midland Bank plc v Cooke35 suggest that the share can be inferred by conduct, which intrinsically lends itself to an ad hoc case by case basis determination, which contradicts legal certainty. Alternatively, the UK courts have been reluctant to extend the application of common intention constructive trust and “contribution” to cohabitation, with the result that cohabitees generally have had to rely on the resulting trust, which is limited to contribution at the time of purchase. However, it is submitted that this fails to address the modern reality of cohabitation and as asserted by Canadian legal academics “it is difficult to articulate a policy basis for distinguishing between married couples and common law couples36”. Indeed, if we consider the judicial approach of Canadian courts to financial disputes in cohabitation cases, in the case of Pettkus v Beckers37, although the Supreme Court was not considering property legislation, the Court suggested policy changes and in awarding a common law partner one half of her partner’s lands and business on the basis of constructive trust, Dickson J asserted that “I see no basis for any distinction, in dividing property and assets between marital relationships and those more informal relationships which subsist for a lengthy period38”. This debate was further ignited in the case of Peter v Beblow39, where the Supreme Court was dealing with a case where the couple had cohabited for 12 years, with the woman staying at home. Cory, J commented that “just as much as parties to a formal marriage, the partners in a long term common law relationship will base their actions on mutual love and trust. They too are entitled, in appropriate circumstances, to the relief provided by the remedy of constructive trust40”. Similarly, in the Australian case of Baumgartner v Baumgartner41, the High Court of Australia acknowledged that the common intention constructive trust was not always applicable and led to some undesirable results. The High Court asserted that even where the traditional concepts of common intention constructive trust were not satisfied, a constructive trust could still be imposed where failure to do so would be “so contrary to justice and good conscience42” that it could not have been permitted. The approach was justified as moving away from the contribution consideration and focusing on the trustee and whether it was unconscionable for the trustee to benefit. Whilst welcome in recognising the reality of modern relationship; the “unconscionable” test is still inherently limited by uncertainty of ad hoc judicial decisions. However, it is also arguable that the complex social dynamics of relationships and the reality of cohabitation as part of the contemporary family construct necessarily require such an approach. Moreover, it is submitted that both the Canadian and Australian authorities are to be commended in directly addressing the wide range of relationships covered by family breakdown, which in turn impact rights to the family home. Accordingly, it is recommended that the UK courts consider by analogy an open discussion and liberal approach to the division of rights to the family home in cohabitation in order to encourage consistency and ensure equality of arms before the law. Moreover, the comparative position of cohabitees would appear to support the proposition that the important advantage of marriage compared to cohabitation is the availability of legislation addressing the divorce process. However, from a family law perspective, it is reiterated that notwithstanding the strengthened legal position of married couples on relationship breakdown, the issue of rights to the family home in particular have continued to be problematic. For example, decisions in ancillary relief proceedings were addressed by the House of Lords’ decision in White v White43. This decision changed the approach to assessing financial settlements on divorce and introduced the “yardstick of equality” principle as a means to ensure fairness in the division of assets between divorcing couples. Whilst heralded as a welcome decision in introducing some much needed clarity to the division of assets on divorce44, it has been argued that such an approach is inherently dogmatic in failing to specifically address the division of rights to the family home particularly where children are involved45. Although the reasoning in White v White specified that there was no presumption of equality on divorce, if the court intended to depart drastically from an equal splitting of assets they should have satisfactory justification for doing so. Furthermore, as highlighted above, the governing legislative provision in this area of law is the MCA and section 25 of the MCA provides the court with a very wide discretion of factors to take into account on division of assets, with the welfare of a child being paramount46. The overriding statutory requirement to consider the interests of the child inherently limits the application of White v White to cases where children are not involved as the “yardstick of equality” is not appropriate to address delicate situations of relationship breakdown involving children. Moreover, as highlighted above, the section 25 criteria application can be problematic in practice. Moreover, academic commentary seems to suggest that outside the realms of marital relationships where children are involved, the absence of a definitive aim of section 25 has led to a width of discretion regarding rights to the family home and division of assets on divorce. Lord Scarman asserted in Trippass v Tripass that “the complete flexibility of approach that the act….emphasises all the circumstances of the case47”. Therefore, whilst it has been argued that the judicial formulation of section 25 implies a fair outcome and non-discrimination between husband and wife in evaluating their contributions to the family home, welfare in their respective roles. However, Lord Nicholls in White asserted the contradiction that “fairness like beauty is in the eyes of the beholder48”. For example, prior to the White case, courts had applied the “reasonable requirements” approach in ancillary relief proceedings, whereby a spouse should recover more than the bare minimum but not more than their “reasonable requirements”. However this approach ignored the wealth of a spouse and in the case of F v F49 for example, a wife who had been married to a man with an estimated worth of £150-200 million received only £9 million. This led to strong criticism of the “reasonable requirements” approach for resulting in injustice and inherently devaluing non-monetary contributions to a marriage, which invariably resulted in discrimination against women50. White v White51 involved the breakdown of a marriage of thirty-four years with combined assets of approximately 4.5million in farms that they had run together. At first instance, the “reasonable requirements” test was applied and Mrs White was awarded £1 million, which was increased by the Court of Appeal to £1.5 million. The case then went to the House of Lords where Lord Nicholls posed the following question: “Why should the assets built up during a marriage become immaterial once the reasonable requirements of the wife are assessed, and the surplus remains with the husband?” The House of Lords went on to emphasise the width of the section 25 discretion, asserting a principle of non-discrimination and equal value in respect of different contributions to the welfare of the family. Translating the concept of non-discrimination in this way culminated in the formulation of the yardstick of equal division of assets against which an award or rights to the family home should be considered. The decision resulted in academic and professional debate and was welcomed as a step towards recognition of marriage as an equal partnership52. It further signalled the end of the “reasonable requirements” ceiling on a wife’s award involving big money53. Whilst clearly a welcome approach to the changing shift of the balance within modern marriage of equality and further acknowledging the broader concepts of “contribution” within a marriage; the White principle still appears to be selective in applying to cases where big money is involved54. In turn, this begs the question as to whether White has actually clarified the approach regarding the division of assets on divorce. Herein lies the problem; every case involving relationship breakdown will intrinsically be unique and require a balance of complex and competing interests. This in itself lends itself to a discretionary approach and it is arguably impossible to adequately legislate for the wide range of circumstances covered by family breakdown. Nevertheless it is submitted that a review should take place specifically to address division of rights to the family home where children are involved with the aim of equal applicability to children of marriage or cohabitation. For example, if we consider Australian law55 by analogy, both parties can agree on how the property can be divided with mediation without any court involvement, which can then be formalised by a court order seeking consent by the Family Court56. If an application to the court is made, the relevant provisions are sections 79(4) and 75(2) of the Family Law Act 1975 which sets out the general principles that a court considers when deciding financial disputes after marriage breakdown: 1) Working out what the parties have got and what is owed, assets and debts and what they are worth; 2) Direct financial contributions; 3) Indirect financial contributions; 4) Caring and home making; and 5) Age health, care of children and ability to earn. All evidence is heard and there is no applicable formula used to divide the assets and each cased is decided on the unique facts of each case57. Whilst similar to the MCA considerations, the ability of the parties to agree to a formal agreement of division is a sensible approach. Although under UK law, both parties can enter into voluntary financial disclosure, a court is not bound by any such agreement and can override it with its far reaching powers under the MCA58. Canadian law regarding divorce59 is the governed by the constitutional Divorce Act, 1985 which does not deal with the division of property and each province or territory has its own rules for dividing assets60. However, the most common way of dealing with rights to property is through a formal agreement. It is common practice for lawyers to recommend and negotiate separation agreements which are written, involve full disclosure and are legally binding61. Whilst not necessarily appropriate for every case, an approach towards the formalisation of such negotiated agreements would be welcome as it would prevent further costs being incurred and go further towards ensuring a clean break. As such, it is more likely that the welfare and stability of any dependant child will be met by such an approach. Accordingly, it is submitted that the above analysis demonstrates that whilst the position of married couples is clearly strengthened in comparison to cohabitees on relationship breakdown a result of the legislative framework; the judicial approach to the section 25 formula has been inconsistent and presses the need for policy change in application. Moreover, whilst the decision in White was a landmark turning point for ancillary relief cases, in practice the adherence to the MCA checklist has enabled the judiciary to depart from the White rationale. Moreover, in practice, whilst the White decision was specifically determined not to be restricted to big money cases, in practice this is precisely the case. Moreover, the difficulty of the White decision is the definition of contribution outside a proprietary context. Additionally, the concept of “equal contribution” may not always be practically appropriate in cases where individual resources are restricted and the children’s housing needs are paramount. Accordingly, the reality of the impact of White is inherently dependent on the circumstances and the nature of the marital relationship. In turn this highlights the crucial issue that the significant benefit of being married compared to cohabitees on relationship breakdown is inherently dependent on judicial discretion. Alternatively, whilst the issue of reform for rights of cohabitees within family law in general is outside the scope of this analysis, it is submitted that a consultation and review of the law relating to division of rights in the family home is needed to address the needs of children in cohabitation, which is increasingly common. Moreover whilst clearly undesirable for the law to be selective in its protection of children, a review is also needed to ensure equality of arms before the law and compliance with the European Convention on Human Rights62. In any event, it is submitted that the above analysis demonstrates that the current law of trust is not entirely appropriate to address the complex issues created by family breakdown, in particular cohabitation, which is becoming increasingly common. The Canadian and Australian authorities have expressly acknowledged this and it is recommended that the UK courts follow suit. However, whilst the Canadian case law opens up the application of constructive trust to cohabitation relationships and the Australian law widens its applicability to considerations of “unconscionability;” it is submitted that a general overhaul of this area of law is needed in order to address rights to the family home outside the limited confines of established trust law. Such an approach would not only specifically address relationship breakdown, but would also promote legal certainty in avoiding ad hoc interpretation of existing trust law regardless of marital status. Bibliography Barlow., Duncan., & James (2005) Cohabitation, Marriage and the Law. Hart Publishing. Bird, R. (2007). Ancillary Relief Handbook. 6th Edition Jordan Publishing. Cretney’s Family Law (2006). 6th Revised Edition (2006) Sweet & Maxwell Fehlberg., B.(2007) Australian Family Law. Oxford University Press. Cooper, J. A. QC., (2001) “Opinion on Common Law Relationships”. Volume 1 – Final Report December 31 2001. Eekelaar, J. (2001). Asset distribution on divorce. Law Quarterly Review 552. Kronby, M. (2006) Canadian Family Law. 9th Edition John Wiley & Sons. Lowe, & Douglas., (2006). Bromley’s Family Law. 10th Revised Edition LexisNexis UK. McGlynn, C. (2006) Families and the European Union. Cambridge University Press. Mykituik Roxanne, Family Law: Cases and Materials, Osgoode Hall Law School, (2006) Walker, Janet, Divorce Reform and the Family Law Act 1996, available at www.dca.gov.uk/family/fla Megarry and Wade., (2007) The Law of Real Property. 7th Edition Sweet & Maxwell R J Smith., (2003) Property Law. 4th Edition, Longman Todd and Wilsons (2007). Textbook on Trusts 8th Edition. Oxford University Press Legislation Matrimonial Causes Act 1973 Statutes available at www.opsi.gov.uk Read More