England v Scotland: the difference on divorce and cohabitation

People largely associate forum shopping in divorces with crossing foreign borders, rather than moving within the UK. The reality, however, is that the Scottish laws regulating financial provision upon divorce are very different from those in England. In many cases this difference has little impact on the eventual outcome. However, in 5-10% of cases the financial outcomes on divorce will be substantially different, depending on whether the divorce is under English or Scots law. 

Let’s take the fictional example of Toby and Gayle. Toby was born and brought up in Cambridge. Gayle was born in Edinburgh. She went to study in Cambridge, where she has lived ever since. Toby proposed to Gayle when they were both 21. Toby was a big fan of the Rolling Stones and was desperate to follow in Mick Jagger’s footsteps and marry Gayle in a Hindu wedding ceremony in Bali. There was something romantic about a wedding in Bali and Gayle happily agreed to Toby’s plan. They married a year later. At the time of their marriage Toby was working in his father’s business, a small IT company of modest value. Shortly after the marriage, Toby’s father died, leaving Toby his shares in the company. Toby worked hard during the marriage and transformed the business into a strong ongoing concern. His shares in the business are now worth £10m; it has a healthy cash balance and it gives him an annual income of £700,000. Other than the business, the only other substantial assets either of them own are a house in Cambridge worth £2m and a holiday house in Skye worth £200,000. The house in Cambridge was worth a fraction of its £2m value when it was bought in the early years of the marriage. At that time, Gayle had a small credit blacklisting problem and so title to the Cambridge house was taken in Toby’s sole name. The holiday home in Skye was purchased later on in the marriage. Title is in the joint names of Toby and Gayle. Both properties are now mortgage free.

After 21 years of marriage, Gayle feels that she and Toby have grown apart. The children have grown up and left school. Gayle has decided that it is time to tell Toby that she wants a divorce. Toby does not resist the notion of divorce. The real issue, however, is the level of the financial settlement that Gayle would receive.

Under English law, the court would look at the total value of the assets at the time of the divorce hearing. Toby may be given some credit for the fact that the shares were owned by him before the marriage but this is likely to be only a small factor in reducing the proportion of capital gain to Gayle, given that the court would likely consider the marriage to be a relatively long one. She could therefore expect to receive 45-50% of the assets, say £6m, subject to there being sufficient liquidity in the company to provide these sums without it being damaged. Assuming this is sufficient to meet Gayle’s housing and income needs, she would receive no further sums in respect of capital.

However, the Court must then check that the money Gayle receives is sufficient to meet her reasonable needs. It is a long marriage and the parties have enjoyed a high standard of living. They are used to living in a property in Cambridge worth £2m. Gayle will argue that she has to stay in such a property and also has income needs that must be met. If those income needs were about, say, £250,000 per annum, she would then argue that the lump sum she receives must be sufficient to provide that level of income for the rest of her life.

In the event that Toby could not raise sufficient capital to meet Gayle’s needs he may well be faced with paying half of the capital to Gayle and, on top of that, maintenance to her to meet her income needs.

But what about the consequences of the holiday home in Scotland? As the marriage has evolved they have both treated it more as a second home than a holiday house. During the gradual breakdown of the marriage Gayle has been spending more time in the home in Scotland while Toby visits Scotland on a frequent basis. Gayle has not abandoned her life in Cambridge and still stays there regularly. Finally Gayle takes the first step to divorce. Where do they divorce – Scotland or England?

The law provides rules to regulate situations where there are competing divorce proceedings. Very often the jurisdiction where the parties last resided together is conclusive in deciding whether the divorce is to be under English or Scots law. Did Gayle and Toby last reside together during the summer family get together in Scotland, or the family Christmas they shared in Cambridge? Sometimes people deliberately establish residence in one jurisdiction or another to ensure the divorce is under the laws most favourable to them, but more often than not they find themselves divorcing under either English law or Scots law by sheer chance.

So what would happen in the case of Toby and Gayle with a Scottish divorce? Scots law places a distinct emphasis on the fair sharing of matrimonial property. Matrimonial property is essentially all property acquired as a result of the efforts of the marriage. The emphasis is on the property acquired, which is quite distinct from the wealth created during the marriage. As Toby’s shares were inherited, the matrimonial property consists only of the equity in both houses. Fair sharing of matrimonial property is usually achieved by equal sharing. Thus, the starting point when looking at the question of financial provision upon divorce will be that Gayle and Toby are both entitled to half the equity in the houses, while Toby’s £10m shareholding remains untouched. Toby wants to retain the Cambridge house and so Gayle would receive a settlement worth £1.1m, comprising the Scottish holiday home and £900,000 cash.

Both Scottish and English law apply a clean break principle to financial provision upon divorce, but it is applied much more assiduously in Scotland. On one view, Gayle would be entitled to maintenance for up to three years post-divorce, to allow her to adjust to the loss of Toby’s support. However, she is only 42 years old. She is still young and capable of going out to work. More to the point, she has a house and £900,000 in the bank. Her chances of receiving ongoing maintenance in Scotland are slim.

Ordinarily, an English couple living in England can only be divorced under English Law. The same goes for a Scots couple in Scotland. However, people move around the UK for all sorts of reasons. There are a significant number of husbands who reside in Scotland with their wives but spend the working week living in London. If these marriages break down it is possible that divorce could be brought under either English law or Scots law.

Although it is important that anyone who thinks their marriage might be in difficulty takes early advice from a solicitor, this is even more so if there is the potential for the divorce to take place under either English law or Scots law. If there is a significant difference in the financial package they would receive between England and Scotland they need to understand how the rules of jurisdiction work. If their current jurisdiction is to their advantage, what steps do they need to take to preserve this? If it is to their disadvantage, how do they establish jurisdiction in the more favourable part of the UK? In Toby and Gayle’s case they last lived together in Scotland. Had Gayle consulted a solicitor before separation, she could have had the opportunity of establishing jurisdiction in Cambridge, raising the prospect of a settlement in excess of £6m, rather than the £1.1m she received under Scots law.

Had Gayle consulted a solicitor before the separation she might also have learned that her marriage to Toby, just like Mick Jagger’s to Jerry Hall, was not a valid one. As she and Toby are not married they cannot divorce and, more importantly, Gayle cannot seek any of the financial awards available to a divorcing spouse. Gayle can however, pursue a claim for cohabitant’s rights under Scots law. The rules of jurisdiction for cohabitants’ rights claims under Scots law are the same as the rules of jurisdiction for divorce, subject to one important exception – as English law has no competing provisions for cohabitants’ rights; the jurisdiction where Toby and Gayle last lived together is irrelevant. Given the fact that Gayle has a Scottish domicile, all she needs to establish jurisdiction to raise a claim for cohabitants’ rights under Scots law is a period of six months habitual residence in Scotland immediately before making her claim for cohabitants’ rights.

Under Scots law, there are two potential heads of claim for financial provision that a former cohabitant can pursue; for economic advantage and disadvantage, and for the economic burden of caring for children of the relationship under the age of 16. Both children are over the age of 16 years, but Gayle still has a potential claim against Toby for economic advantage and disadvantage. In order to have a successful claim under this head, Gayle must show that she has suffered an economic disadvantage in the interest of Toby or one or both of their children and that Toby has derived an economic advantage from the contribution she has made. She must be able to demonstrate that a clear and quantifiable economic imbalance has resulted from her cohabitation with Toby.

So, what level of award is Gayle likely to receive? Typically, the level of financial provision awarded to Scottish cohabitants is modest compared to those awarded on divorce. So far, there have been only 16 reported cases in Scotland on cohabitants’ rights claims upon separation. Two of these cases were dismissed because the application to the court was out of time (there is a strict one year deadline for raising a court action to make a cohabitants’ claim following separation). Of the remaining 14 cases, there were seven where no award for financial provision was made.

Gayle may have some difficulties pursuing her claim. She needs to demonstrate both her economic disadvantage as a result of the relationship and Toby’s financial advantage. On one view, she has enjoyed a very comfortable standard of living throughout the relationship. The reality however, is that in a case such as this, where a joint decision was made that Gayle should chose motherhood over a career, the court would recognise the fact that her contributions and sacrifices have allowed Toby to work long hours in the company to his considerable financial benefit. Despite the wealth that Toby has accumulated during the relationship, the largest award for a cohabitant’s claim in Scotland was £250,000 and it is unlikely that a responsible experienced family lawyer would advise Gayle to take the risk of a day in court to seek more.

Gayle comes away from the relationship with a sense of injustice; however, she at least knows that she would have come out of the relationship with even less, were it not for the first 18 years of her life growing up in Scotland. In England, the lack of cohabitants’ rights continues to mean that unmarried former partners have fewer rights to financial security than their counterparts north of the border