Financial Settlement in Civil Partnership Split

July 13, 2012

Financial Settlement in Civil Partnership Split

The Court of Appeal has recently heard the first substantial appeal concerning a claim for ancillary financial relief (a financial settlement on the break-up of a marriage or civil partnership) following the breakdown of a civil partnership. The case involved total assets of £4.175 million and followed the breakdown of the relationship between Peter Lawrence, 47, an equity analyst at JP Morgan, and his partner Donald Gallagher, 54, an actor who has appeared in the West End.

In 1997, Donald moved into the London flat that had been bought by Peter two years previously. They remained in a committed relationship, which was sealed by entering into a civil partnership in December 2007, but the relationship broke down some seven months later.

Donald’s earnings as an actor were less than Peter’s and far less secure. He supplemented his earnings with income from a bed and breakfast business run from the couple’s country home. At the first hearing, Donald was awarded £1.69 million, comprising the country cottage, a share of Peter’s pension, a lump sum of £577,778 and an additional £90,000 representing a share of deferred bonuses to be paid to Peter by his employer. This was much higher than the £603,000 offered by Peter, who subsequently appealed the decision.

On appeal, Lord Justice Thorpe confirmed that the legal framework to be applied when deciding cases of civil partnership breakdown is identical to that which is applied on the breakdown of a marriage.

He rejected Peter’s argument that the London flat in which the couple had lived should be treated as pre-acquired property and not brought into the reckoning. It was, effectively, equivalent to the matrimonial home, which is normally treated as matrimonial property even if it was brought into the relationship by one of the parties.

Nevertheless, the appeal was upheld by the Court of Appeal, which pointed out several technical errors in the first judgment. The Court ruled that the lump sum awarded to Donald to reflect the disparity in values between the London flat and the country home was too high. Consequently, the lump sum was reduced to £350,000 and the decision to award £90,000 in relation to the deferred bonuses was overturned.

Practitioners have commented that the case illustrates the uncertainty of outcome in any financial relief case, whether following a marriage or civil partnership breakdown. In his judgment, Lord Justice Thorpe made reference to the Law Commission’s recently announced review of the law in this area, which it is hoped will bring greater clarity for all involved.