Much ado about nothing?

LAWRENCE V GALLAGHER [2012] 1 FCR 557

The case of Lawrence v Gallagher [2012] 1 FCR 557 is the first substantial appeal concerning the financial orders made following the dissolution of a civil partnership. Mr Lawrence was appealing Lady Justice Parker’s order that his ex-civil partner, Mr Gallagher, be awarded £1.69million out of a total asset pot of £4.17million.  The case itself was relatively simple in its facts.

Background

At the time of the judgment, Mr Lawrence, the appellant was aged 47, an equity analyst at JP Morgan. Mr Gallagher, the Respondent, was aged 54, an actor, his most notable role being his performance as the fantastic Bernadette in the West End version of Priscilla Queen of the Desert. The couple commenced cohabitation in 1997 prior to entering into the civil partnership at the end of 2007. The civil partnership lasted for less than a year.

Mr Lawrence was a successful city worker earning approximately £200,000 net per annum with a pension CE of approximately £580,000. Mr Gallagher’s income was much more difficult to predict with the associated ups and downs which comes in the entertainment industry and very little by way of pension provision.

In 1995, and prior to the relationship starting, Mr Lawrence had purchased a flat in London’s Clink Wharf. In July 1996, Mr Gallagher bought a property in Victoria Park for £75,000.  In February 1997, the parties began cohabiting in Clink Wharf.

In July 1998 the Victoria Park property was sold and the net proceeds invested in a property in Nutbourne. Their contributions were 21% from Mr Lawrence and 79% from Mr Gallagher. Nutbourne was then sold in May 2002 with the net proceeds invested in the purchase of Pine Cottage, Amberley for £618,000. The net proceeds were augmented by a portion of the mortgage rolled over and a contribution from Mr Lawrence. A subsequent deed of trust declared their respective interests to be 62% to Mr Lawrence and 38% to Mr Gallagher. Mr Lawrence spent approximately £300,000 refurbishing the property.

At the time of the judgment the parties’ assets were just in excess of £4,000,000. Clink Wharf had increased in value for from £650,000 to £2,400,000. Pine cottage was valued at £822,000.

Mr Gallagher’s case invoked the sharing approach and discounted 5% from equality. Thus he sought 45% of the agreed schedule of assets.

Mr Lawrence’s case rejected the sharing approach, arguing that the Clink Wharf flat was not a partnership asset and further that the relationship should be characterised as a dual career relationship. Mr Lawrence contended for a ‘needs’ assessment pursuant to which Mr Gallagher would receive a lump sum of £420,000 to re-house plus a pension share of £183,000.

At trial Lady Justice Parker, unsurprisingly, confirmed that on the breakdown of a civil partnership, civil partners should be treated the same as divorcing spouses. She broadly adopted Mr Gallagher’s case, holding that the Clink Wharf flat was partnership property and that there was no evidence to support the submission that she should adopt a dual career categorisation.

She awarded Mr Gallagher £1,690,000 out of assets totalling £4,175,000 (40% of the total pool). This figure comprised of £200,000 by way of pension share, retention of Pine Cottage which was valued at £822,000, a lump sum of £577,778 and 45% of the deferred bonus schemes when they came into payment which could achieve a further £90,000. Not taking into account the deferred schemes or chattels, this represented just under 42% of the asset pot.

The lump sum awarded to Mr Gallagher to ease the “financial anxiety” had not been rationalised by Parker J.

The Appeal

Mr Lawrence appealed the decision.  At appeal, Thorpe LJ observed that just because both partners work outside the home and do not have children, it does not mean that the partners can be categorised as if they were a “dual career” couple so that their capital and income should be treated as being separate. This is in particular if they had inter-mingled assets and combined their capital and income to enjoy a high standard of living.

Thorpe J commented that the most significant feature of the case was that the value of Clink Wharf had increased from £650,000 to £2.4million. Parker J had not explained why such a division of the assets was fair given Mr Lawrence’s vital contribution of Clink Wharf.  Thorpe LJ concluded that rather than a global quantification that then produced a lump sum, the judge should have assessed the fair lump sum from the basis that Mr Gallagher would have Pine Cottage and his pension share. Had the case been approached in that way, the lump sum would have been lower and Thorpe LJ proposed a reduced lump sum of £350,000.

Insofar as Mr Lawrence’s bonuses were concerned, the bonuses were not vested and half of them had been acquired post-separation. They were also annual bonuses’ deferred in collection and conditional on performance. They were not capital assets but formed part of his income stream and, on that basis, there was no basis on which Mr Gallagher should be awarded 45% of them and this part of the award was removed.

The total reduction from the original award was approximately £320,000.

Non-matrimonial property…where to now?

The case itself was not about the principles of civil partnership per se, but about how to divide assets which were largely brought into the relationship by one party

It was argued on behalf of Mr Lawrence that in homosexual relationships it is more likely that the couple will not have children and will therefore continue to pursue their careers throughout the partnership, as they did before. He argued that it is of particular importance for civil partners that the “dual career” concept is recognised and applied by the Court where appropriate.

The concept of a dual career marriage was first introduced in the case of Miller (reported as Miller v Miller; McFarlane v McFarlane [2006] UKHL 24; [2006] 1 FLR 1186). Baroness Hale commented that there may be cases of genuine dual career families where “each party has worked throughout the marriage and certain assets have been pooled but others have not and once the family assets have been divided equally it might be fair to leave undisturbed whatever additional surplus each has accumulated during his or her working life”. 

The issue of dual career marriage was again raised in the case of Charman v Charman (No4) [2007] FLR 1246 where the President commented that the application of the concept of “dual-career” marriage should be closely confined.

The dual-career argument was not accepted by the Court in this case (as the parties had intermingled and combined their resources although the way in which the parties intermingled some resources (Pine Cottage) and not others (Clink Wharf) appears to be consistent with Baroness Hale’s description of what constitutes a dual career marriage) nor was it explored in any great detail.

It is disappointing that the Court did not expand further on this area of law. The judgment referred to a Law Commission review which will be considering how “non-matrimonial” property should be treated when a relationship ends. Although this will hopefully result in greater clarity in this area of law the report is not due until 2013.

Thorpe LJ commented that the case had been made unnecessarily complicated by each party attempting to use one judicial creation or another and until such time as the Report is published trial judges should consistently apply the s.25 criteria to the facts of the individual case wherever possible avoiding the over complication of the resulting judgment.

Some commentators have claimed that the departure from equality (to 31%) would not have been so drastic had this been a heterosexual relationship. Although it is arguable that the Court of Appeal was too eager to interfere with a first instance decision rather than being indicative of a judicial disposition to draw a distinction between homosexual and heterosexual relationships it is perhaps an example of the huge amount of discretion which judges are afforded in this area of law and the lack of a uniform approach to issues such as non-matrimonial property and dual-career marriages.

Case comment

Many would say that the most interesting aspect of this case is not a legal one but rather the furore it created in the press which in itself is indicative of the polarised views about the way civil partnerships should be treated.  A formal consultation on same-sex marriage in England and Wales began earlier this year and it has proved to be a controversial issue among politicians. It is interesting to note that the judiciary appear to have no qualms applying the same legal principles to the dissolution of civil partnerships as to divorce so why are these couples not afforded the same rights at inception?

The tension between the proponents of traditional heterosexual marriage and those who adopt a more modern approach is becoming increasingly apparent. Readers may recall that Mr Coleridge Justice has recently established the “Marriage Foundation.” This is an independent charity set up to promote the sanctity of marriage and to champion long-lasting, stable relationships. Regrettably, its name appears to rule out civil partnerships from the outset (Coleridge J recently withdrew from speaking at a Christian pro-marriage debate entitled “One Woman, One Man”).

Although at its very core the Marriage Foundation is a noble concept many would perhaps be more supportive of an inclusive Foundation which focuses on the welfare of children and how to raise them in a secure, safe and loving environment regardless of whether you are heterosexual, homosexual, married, unmarried or divorced.  Sadly there are many cases where divorce has become the only option for the parties involved to ensure that children grow up in an environment in which they will thrive emotionally and physically.  We live in a society where people are increasingly recognising that the traditional family model is not always the best one and we need to move forward with this rather than fight against it.

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