The Court of Appeal has just heard an appeal in a landmark case dealing with the dividing up of assets following the breakdown of a civil partnership between same-sex partners. Peter Lawrence and Donald Gallagher had been in a gay relationship for 11 years before entering into a formal civil partnership that unfortunately broke down after only seven months in 2008. The court’s decision will no doubt not be known for a while yet, but the case throws up some interesting issues.
The first point to note is that there is no difference in law between the way in which the family courts should deal with the financial consequences of gay (civil partnership) dissolutions and heterosexual divorces. The same orders for maintenance, property transfers and pension sharing are available and the discretionary criteria to be applied are identical. Mr Lawrence’s QC, Patrick Chamberlayne, said as much. However, Mr Gallagher’s QC, Tim Bishop, argued if Mr Gallagher had been a woman divorcing her husband, there was no way that she would get as little as Mr Lawrence was proposing. The actual settlement being suggested by Mr Lawrence clearly flew in the face of that non-discriminatory approach.
What were the basic facts? The Court of Appeal was told that when they started their relationship in 1997 Mr Gallagher had savings of about £40,000 after working for many years as an actor. Mr Lawrence already had a flat in Southwark that had equity of about £400,000. Quite a bit had been spent during the relationship on the property and it had also gone up hugely in value between then and now as a result of the hike in the property market generally. It was now worth about £2.4m, with an equity of around £1.8m. During their time together they also bought a property in West Sussex, now worth about £1m. The total assets were just short £4.2m. Mr Lawrence earns around £400,000 a year as an equity analyst with J P Morgan and Mr Gallagher about £100,000 a year through his acting.
The High Court judge awarded Mr Gallagher a total of £1.7m, comprising the West Sussex property, pensions of about £200,000 and a further £500,000. This was around 42% of the assets. Mr Lawrence appealed that order, saying that the London flat should have been excluded completely from consideration by the court and that Mr Gallagher’s settlement should have been restricted to half of the value of the Sussex property after expenses (about £420,000) and the £200,000 pension share.
So, having noted that there should be no difference in approach between gay and heterosexual couples, what are the actual factors determining the division of assets where one of the couple brings property into the relationship? Regrettably, as is the case with many other aspects of financial remedy proceedings, there is no simple answer. Instead, we have to grapple with far from clear principles derived from previous cases that often conflict with each other.
Mrs Justice Parker, who made the initial order in the High Court that Mr Peter Lawrence was appealing, took more than one route in reaching her decision. She considered it fair to give Mr Lawrence credit for the fact that he had brought the London flat into the relationship. However, she didn’t exclude its current value from the pot, but instead knocked off only the historical equity from 1997 when the couple got together. After that deduction she divided the rest equally. She then did a cross-check and concluded that the figure of £1.7m in total was the right amount to meet Donald Gallagher’s needs as well.
The High Court judge could easily have given Mr Lawrence further credit for the money spent on the property and could also have decided to uplift the original 1997 net value to take account of property price inflation. The fact that she did not, simply serves to emphasise the discretionary nature of this jurisdiction, rather than implying a differing approach between gay and heterosexual couples. It is the relatively wide ambit of that discretion which gives the courts in this country flexibility to do what is considered fair in the circumstances of each case. The flipside of this, of course, is that it is enormously difficult to advise with any certainty on likely outcomes.
Sir David Norgrove’s recent Family Justice Review picked up on what family lawyers and others have been saying for ages about this unpredictability and, as a result, the Law Commission is now looking at how greater certainty can be introduced into this area of law, without compromising the ability to do justice. I am grateful to Tim Bishop QC for his help in clarifying the anomalies in the initial reporting of this case, thereby making sense of the above analysis.
Nigel Shepherd is a Partner at Mills & Reeve