MAXWELL MACLAURIN

March 2008

MAXWELL MACLAURIN
INFORMATION ON DISSOLUTION OF CIVIL PARTNERSHIPS AND FINANCIAL PROVISION

1. Division of Property and Payment of Aliment

Special rules apply to “partnership property” accumulated by civil partners during the course of their civil partnership. When the civil partners separate, the property, which they accumulated together is apportioned between them according to the rules contained in the Family Law (Scotland) Act 1985, as amended by the Civil Partnership Act 2004 and the Family Law (Scotland) Act 2006. The first point to bear in mind here is that these rules only apply where the partnership has been formally registered. In order for the provisions of the legislation to be effective, the property must be divided either prior to or at the point of dissolution, while the couple remain civil partners. It is not possible, after dissolution to go back to the question of property and seek financial orders from the court at that time.

The principle of the legislation is that partnership property should be divided fairly between the civil partners. That appears simple, but there is complexity in the definitions of these terms.

“Partnership property” is defined as the property accumulated by the civil partners between the date of registration and the date of separation. The date of registration is obvious. The date of separation can be a question for argument. For example, it is possible that a couple may be separated in the eyes of the law despite the fact that they continue to live under the same roof. To return to the question of partnership property, there are three exceptions to the above definition, which are as follows:

(a) Any house acquired prior to the date of registration but with the intention of it being used as a family home for the parties is included as partnership property.

(b) Gifts which have been given to either one of the civil partners by a third party during the civil partnership remain the property of the party to whom they were given and do not fall within the definition of partnership property.

(c) If a third party bequeathed a sum of money or an item of property to one of the civil partners, that also remains the property of the party to whom it was bequeathed and is not partnership property.

The question of gifts and bequests becomes somewhat less straightforward if the party to whom the gift or bequest has been made subsequently used the gift or bequest for a joint purpose and used it for the general benefit of the family. For instance, a civil partner may receive a bequest of money and then use this for joint purposes such as going on holiday or improving the family home. In those circumstances, the gift or bequest is viewed as having been converted into partnership property. Despite this, the party to whom the gift or bequest was made does not lose all the benefit. This is further explained below.

Partnership property is property of every description comprising houses, land, moveable items such as cars, furniture and so on, investments of every nature, policies and pensions. The starting point is for partnership property to be listed and valued. Liabilities, such as mortgages as well as loan balances, credit card balances and other debts such as overdrafts should also be ascertained and subtracted from the assets to arrive at the figure representing net partnership property.

A most important point to note is that in Scottish Law, assets and liabilities are determined as at the date when the civil partners separated. This rule is peculiar to Scottish Law and leads to a number of misunderstandings. However, there is one exception, in that a current value may be used in respect of property which is to be transferred to one party in order to effect fair division of property. This would, for example, allow the court to take account of the increase in value of a house since the date of separation, so that the overall settlement should more accurately reflect a fair division of property.

As described above, the legislation states that property should be divided “fairly”. This involves a further complex definition. In the first place, “fairly” generally means equally. However, the legislation goes on to describe a number of situations which could justify one party receiving a greater share of the partnership property than the other. If one party has derived an economic benefit from the civil partnership, and the other party has suffered an economic loss, this can be recognised by an unequal division of property. This might apply if one party has given up a career for the civil partnership and find themselves at the end of the partneship with restricted earning power and reduced pension contributions. If one party has wasted or dissipated funds during the civil partnership, this may also be taken into account. Where one of the parties will be looking after any children following separation, perhaps without substantial financial assistance from the other party, that too can be taken into account. Finally, if one of the civil partners will find themselves facing a very difficult financial future as the result of the separation and is facing a substantial drop in his standard of living, that may also be taken into account. If one party brought a substantial amount of his own property into the civil partnership, and used it for the benefit of both parties, the law can recognise this and allow this to be taken account of to an extent, when property is divided. This is the “source of funds” argument and is the kind of argument, which might apply if one party has brought a substantial amount of capital or property into the civil partnership at the outset, or indeed has received a gift, or bequest which has been used for a common purpose as referred to above.

A separate but related issue is that of aliment. Aliment for a civil partner is distinct and separate from child aliment although some of the principles are very similar. One of the consequences of civil partnership is that partners must support one another in material terms. This applies even if the parties separate and it pertains until dissolution or death cause the couple to cease to be civil partners. With the couple separated, the obligation of material support will sometimes require one party to pay aliment to the other. Whether aliment should be paid, and if so, how much, is determined by comparing the needs and resources of the separated civil partners. If one of the parties has outstanding needs that he or she cannot meet, and conversely, the other has resources to spare, then the civil partner with the extra resources may require to pay aliment to assist the other.

In certain circumstances where one of the separated civil partners is in a particularly difficult financial position, it is possible for a form of financial support called “periodical allowance” to be paid after dissolution, usually for no more than three years.

2. Dissolution Proceedings

There are two grounds of dissolution in Scotland. Again, the law in this area has been amended by recent legislation. The first ground is that an interim transgender recognition certificate has been issued to one of the civil partners. The second ground is that the civil partnership has broken down irretrievably. In the case of an irretrievable breakdown, the law has outlined three circumstances which can satisfy the court that the civil partnership has indeed broken down irretrievably. Within the first year of separation, a civil partner may apply for dissolution based on the other partner’s behaviour. The applicant will require to demonstrate that the other civil partner behaved in such a way that he or she could not reasonably be expected to live with that person.

Once the parties have lived apart for a period of one year, a further ground might be used to establish irretrievable breakdown, namely that the couple have been separated for that period, and the other civil partner consents to the dissolution. Finally, if a couple have been separated for two years, either of them may apply for dissolution on the basis of the length of their separation. In this case the consent of the other party is not required.

In many cases, despite separating, the couple find it possible to negotiate in a reasonable manner and agree what should happen for the future. It is common for a “Separation Agreement” to be framed, dealing with division of property, and making arrangements for any children. The Separation Agreement also contains a number of standard clauses to protect the parties. For instance, it is common in a Separation Agreement for the parties to waive their rights over the other’s estate, and to give guidance on interpretation of the agreement in the event of any dispute in the future. This allows the dissolution to proceed immediately following the requisite period of separation without any implication of blame and with a minimum amount of difficulty and expense. In many cases today such a Separation Agreement can be negotiated between the parties if a solution to all of the issues arising from separation can be arrived at without court proceedings. Unfortunately, if there is a breakdown in negotiation, or one party refuses to engage in negotiation, the matter may require to be determined by a court.