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A de-facto problem

Date:31 AUG 2021

Should cohabiting couples be permitted to bring more comprehensive financial applications to court upon separation? This longstanding discussion amongst family lawyers in England continues and will continue afresh in the wake of the recent House of Commons Briefing Paper “Common law marriage” and Cohabitation published on 4 May 2021.

There are strong and well-known arguments on each side. Couples that choose not to marry may have conscientiously chosen to not have their assets joined and therefore should not be subjected to the same rules as married couples. On the other side, proponents point toward the change in societal attitudes toward marriage with fewer couples are marrying and being left with limited protection on relationship breakdown.

The briefing paper provided a background to the current law on cohabitation (or lack thereof) and touched on the Law Commission Report of 2007 which called for reform. The paper also highlights the responses from various Members of Parliament to the implementation of a new codified system of law for cohabiting couples. 

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In an international context, the lack of any codified cohabitation law in England can produce uncertain consequences for couples who have links to countries with which England has close ties, Australia, and New Zealand in particular. For international couples, the unchanged landscape of the law following the UK’s exit from the EU in relation to claims under TOLATA is troubling and in need of further examination.

Scenario: Sally was born in England. Harry was born in Australia. Sally met Harry in England when Harry moved to England to conduct a doctorate in January 2005. Sally bought a house in London in 2003. In September 2005, Sally and Harry begin to live together at Sally’s London property. They live there for 11 years before moving to Ontario, Canada in October 2016. Sally buys a second property in Canada in which she and Harry live.

Sally and Harry then move to Australia in February 2019. Sally purchases a third property in Australia, in her sole name in which she and Harry live.  Harry contributes to mortgage repayments and maintenance of the property in Australia.

Sally and Harry separate in March 2021. They did not have any children. Under Australian law, Harry is able to bring a claim under Part VIII of the (Australian) Family Law Act 1975 for capital and income division following the breakdown of the relationship on the basis that there was a de-facto relationship.

Can Sally protect herself to pre-emptively defeat the claim in Australia by taking action in England? Is her English property protected? Is her Canadian property protected?

Under S.4AA of the Australian Family Law Act 1975:

(1)   A person is in a de facto relationship with another person if:

  1. The persons are not legally married to each other; and
  2. The persons are not related by family (see subsection (6)); and
  3. Having regard to all the circumstances of their relationship, they have a relationship as a coupe living together on a genuine domestic basis.

In relation to the English property, Sally could bring a pre-emptive claim in England under TOLATA. Sally could protect the English property against the effects of any claim in Australia by seeking appropriate TOLATA orders in England. Harry has no beneficial interest in the London property and is unlikely to be able to establish even a constructive trust on the basis of the above.

However, the lacuna in the law means that Sally is potentially in difficulty in relation to the Canadian and Australian properties.

The jurisdiction of the English courts to deal with an application under TOLATA in relation to properties in England & Wales belonging to couples who are not habitually resident in the jurisdiction was previously conferred to the English courts by the Brussels I Regulation (Recast), hereafter Brussels I. Following exit day, 31 December 2020; Brussels I was subsumed into English law via S.2-4 of the European Union Withdrawal Act 2018.

Under the now subsumed Brussels I, England has jurisdiction to deal with the English property without issue – the proceedings are in rem. However, the respondent domicile requirement of what was Articles 4 and 62 of Brussels I leaves Sally in some difficulty in relation to the Canadian and Australian properties. Presuming Harry remains domiciled in Australia, there can be no TOLATA claims on either property. And any financial order in Australia could of course take into account the fact that Sally has effectively barricaded the English property by pre-emptive TOLATA action. The financial outcome can effectively take into account that it would be untouchable.

This is a couple who has spent the majority of their relationship in England, only a small amount of time in Canada and Australia, but who can only have their financial relationship regulated by the Courts of Australia owing to the fact that England does not have a codified cohabitation law. If Sally and Harry were married, there would be options available to Sally to issue divorce proceedings in England to potentially seek more beneficial orders or to at least have the opportunity to contest financial outcomes in the country with which this couple arguably has the closest connection.

But the current law leaves Sally with only bit-part options to act as a shield to Australian de facto proceedings. Even if Sally were to move back to England, she would have no locus to apply to her local court for anything other than orders in relation to the English property.

An argument against a codified cohabitation law is that it opens the door for unintended consequences for couples who choose to live together but who otherwise do not intend to create a financial relationship akin to marriage. But there are unintended consequences that arise for international couples such as Sally and Harry; the only difference is that Sally is left bereft of any options to litigate in her home court, the court with which the couple have arguably the closest connection.

Despite years of negotiations, regulatory debate, and academic commentary, and in a world where couples can, and do, have properties across several jurisdictions, the law does not yet assist certain international couples. There is no shield afforded to couples with links to Australia, or indeed New Zealand (and other jurisdictions), to protect themselves against the de-facto regime of those jurisdictions or to avail them of options in the court with which they might have closest connection.

Any pre-emptive TOLATA protection in England would likely be taken into account by Courts with de-facto regimes, but the English Court cannot then make orders in relation to overseas properties unless domicile hurdles are met. It means that the Sallies of the word are put in unenviable positions when faced with cross-border cohabitation claims.

The wider argument in favour of a change to the law is that English family law should perhaps reflect the reality of English families and that may couples do not wish to marry or enter a civil partnership. Families are changing and will continue to change and that the law has not yet adapted. Couples choosing to not marry is ever on the rise and it is arguable that the law should change to reflect this trend.

An eye must of course be kept on protecting the status of marriage and civil partnerships and on preventing against the unintended consequences of bringing unassuming couples within the new law. Any new law must have caveats and opt-outs. But the over-arching point remains that a partner who has been in a committed and financially co-dependent relationship for 25 years has fewer financial rights and remedies than someone who has been married for 2 years. Education to cohabiting couples unaware of this issue can and has assisted. But it may not be enough, and a codified regime will at the very least provide certainty.

In the international context, a change would assist couples with links to countries such as Australia and New Zealand; countries with whom we see a lot of international matrimonial work. It would assist the Sallies of this world or would at the very least give Sally the option to litigate in their home court and in the court with which their relationship is most closely linked, putting her on an even keel with Harry.

We await to see whether the latest briefing paper is the start of a change or another false dawn.