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Uncertain outcome for civil partners

Boodle Hatfield's James Ferguson asks whether Mr Gallagher would have been left with such a small share of the partnership assets if the facts of this case were transposed to a heterosexual marriage.

The Court of Appeal last week made the first ruling of its kind to deal with the division of civil partners' assets on the breakdown of their civil partnership.

Peter Lawrence, 49, and Don Gallagher, 56, were together for over 11 years.  In December 2007, they entered into a civil partnership but separated nine months later. During the relationship, the couple divided their time between a London apartment worth £2.4m and a Sussex cottage worth just under £900,000.

In the first High Court ruling relating to civil partnerships, actor Don was awarded 42% of the total assets of £4.175m.  This was made up of the cottage, a pension of £200,000, a lump sum of £577,778 and £90,000 of deferred compensation awards from Mr Lawrence's employment.

Equity analyst Peter Lawrence appealed to the Court of Appeal which yesterday ordered that Don's award should be altered to reduce the lump sum to £350,000 and remove his entitlement to the deferred compensation awards, which reduces Don's share from 42% to 33%.  Mr Lawrence had been seeking to reduce the award to 13% which the appeal judges described as "quite unrealistic" and "so far from achievable as to be almost fanciful."

It is established law that on the breakdown of a civil partnership, civil partners should be treated the same as divorcing spouses. This was reiterated by the Court of Appeal.

The judgment confirmed that if a civil partner owned a property before the civil partnership ceremony, the fact that it is or has subsequently become the partnership home means that it is available for sharing.  This is already an established concept in divorce cases.  It also made clear 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, particularly if they had intermingled assets.

The case highlights that an outcome for civil partners at trial can be just as uncertain and inconsistent as it can be for divorcing spouses. One judge's idea of a fair outcome is very different from another's. The Court of Appeal expressed the view that the arguments have become overly complicated, which some may consider to be as a result of the voluminous case law which sets precedents which lower courts are bound to follow.  

The judgment referred to a Law Commission review which will be considering the extent to which one party should be required to meet the other's needs and how "non-matrimonial" property should be treated when a relationship ends.  Although this may eventually result in greater clarity, there is no prospect of change in the foreseeable future as the report is not due until 2013. To try and minimise uncertainty in the meantime, it is advisable for civil partners, as for spouses with pre-nuptial agreements, to explore making a pre-civil partnership agreement to try to determine how the available assets should be divided in the event that the relationship breaks down.

The start point in these bigger asset cases is or ought to be 50:50, irrespective of whether it is a marriage or a civil partnership. There are established reasons to depart from this. However, there was no apparent rationale in this judgment for such a substantial departure from equality which has left Mr Gallagher with 33% and his former partner with 67%. It is debatable whether Mr Gallagher would have been left with such a small share of the partnership assets if the facts of this case were transposed to a nearly 12 year heterosexual marriage.

This article by James Ferguson first appeared on the Money Observer website on 5 April 2012. Learn more about our high net worth divorce services.

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