Timed out? Alternative financial claims by cohabitants

The Family Law (Scotland) Act 2006, which introduced financial claims for former cohabitants, also applied strict time limits. Any claim must be brought, where cohabitation ends by death, within six months of the date of death (s 29(6)), or where it ends otherwise, within a year of separation: s 28(8).

It is clear from Simpson v Downie 2013 SLT 178 that the s 28 time limit leaves no room for manoeuvre. The issue is not one of strict time bar. Rather, “it is only compliance with the time limit which validates an application and clothes the court with the necessary jurisdiction. Failing such compliance, an essential qualifying component of the statutory scheme is missing”. Claiming in time is as essential and fundamental as is the establishment of economic advantage or disadvantage.

It is not unusual for a former cohabitant to seek legal advice after expiry of the time limit. The advice then has, until recently, been that there may be a remedy available in unjustified enrichment (which for the purposes of this article includes the remedies of recompense, restitution and repetition, assuming that they are simply the mechanisms by which unjustified enrichment is remedied).

Prior to the 2006 Act, romantic partners claiming unjustified enrichment had access to the same judicial remedies as platonic parties. Indeed, the pivotal case of Shilliday v Smith 1998 SC 725 was between former cohabitants. Shilliday had spent money on the house in which the parties had been living together but which was owned solely by Smith. She contended that this had been in expectation of marriage and that the house would become the matrimonial home. Their separation frustrated that expectation, giving rise to a remedy of recompense.

Subsequent to the 2006 Act, many family lawyers believed that a former cohabitant could still have recourse to the law of unjustified enrichment. One well known example is Esposito v Barile 2011 Fam LR 67. Critically, the pursuer in that case had no s 28 claim, the inequitable distribution of funds having occurred more than a year after separation. Such cases continue to be pled and negotiated based on unjustified enrichment when the strict requirements of s 28 cannot be met.

Limiting an equitable remedy

However, a recently published article by Michael Hughes, “The subsidiarity exclusion: cohabitation and unjustified enrichment,” 2016 SLT (News) 7, gave pause for thought. An agent in the unreported case of Jenkins v Gillespie recounts the outcome of a debate at Alloa Sheriff Court. The pursuer brought a claim outwith the one year limit, so pled only unjustified enrichment. A relevancy plea was sustained on the basis that unjustified enrichment is a subsidiary remedy, precluded by the existence of another remedy. That other remedy was s 28. Because the pursuer had missed his opportunity to make a s 28 claim, he could not have recourse to unjustified enrichment.

The principle of subsidiarity has long been a key tenet of the law of unjustified enrichment. The leading dictum comes from Varney Scotland Ltd v Lanark Town Council 1974 SC 245, in which the action failed. Lord Justice Clerk Wheatley said: “Recompense is an equitable doctrine. That being so, it becomes a sort of court of last resort, recourse to which can be had only when no other legal remedy is or has been available. If a legal remedy is available at the time when the action which gives rise to the claim for recompense has to be taken then normally that legal remedy should be pursued to the exclusion of a claim for recompense.” The relevance of that dictum was more recently confirmed in Transco plc v Glasgow City Council 2005 SLT 958, where Lord Hodge confirmed “the general rule that the remedy is not available where a pursuer had a legal remedy whether under the common law or under statute and had chosen not to exercise it”.

For family lawyers, the point is brought into sharp focus by the recent decision of Lord Beckett in Courtney’s Exrs v Campbell [2016] CSOH 136 (28 September 2016). The parties cohabited and Courtney paid £100,000 to Campbell to fund the purchase of their shared home which she owned. He contributed to renovations, paying for materials and contributing his own labour, a cost quantified in the pleadings at £50,000. The parties separated. Courtney did not seek legal advice with a view to recovering those sums until more than one year later. He died before recovering the sums and his executors brought an action of recompense.

The key question was whether the passage of time extinguished the possibility of application under s 28, meaning that there was no alternative remedy (and, accordingly, unjustified enrichment could come into play). Lord Beckett was persuaded that the subsidiarity principle applied in cases of unjustified enrichment between cohabitants and that an equitable remedy did not always remain open after expiry of the s 28 time limit. He dismissed the cause on the basis that there had been available to the deceased a remedy under s 28.

Any way out?

Does this mean that unjustified enrichment is no longer available to former cohabitants at all? No. It is evident from Courtney’s Exrs that three (limited) avenues remain open.

First, Lord Beckett did not regard the principle of subsidiarity as an absolute one. Had the pursuers been able to show “special and strong circumstances” why an equitable remedy should be open when a statutory remedy was not used timeously, the law would accommodate the claim. In this case Courtney’s reluctance to make demands of Campbell when her son was very ill, and his failure to take legal advice for more than one year, did not meet that high test.

Secondly, the judgment quotes the defender as pleading that “the relationship between the defender and the deceased was a friendship rather than a lifetime commitment… When the house was purchased they tried sharing a bedroom but the relationship did not develop in that way and the deceased… would have had no reasonable expectation that he would live there for the rest of his life”. Can it, therefore, truly be said that these parties fell within the definition of cohabitant (2006 Act, s 25(2))? If they did not, no s 28 remedy was available. The judgment acknowledges the possibility that a claim for unjustified enrichment might be pled alongside a statutory claim. Perversely, for a party in Courtney’s position to make a claim in unjustified enrichment, the pleadings will require to downplay the seriousness of the relationship to avoid falling foul of the subsidiarity principle. The corollary is that the defender will be emphasising the parties’ serious commitment to each other, to establish that s 28 would have applied. All this makes it inadvisable to plead a s 28 case with an esto case based in unjustified enrichment.

However, the third possibility outlined in Lord Beckett’s judgment is to pursue the primary remedy, and if that fails then unjustified enrichment does come into play: see, for instance Newton v Newton 1925 SC 715. A useful case study might be Gutcher v Butcher 2014 GWD 31-610. Butcher successfully defended Gutcher’s s 28 claim on the basis that they were a couple but never cohabited within the meaning of the 2006 Act, because they had kept what the sheriff called “critical parts of their lives” separate: Gutcher had her own property which she described as her “home” for employment purposes, their financial affairs were separate and she had refused Butcher’s proposal of marriage. Her s 28 claim was brought timeously but failed, which would allow her to satisfy the subsidiarity principle giving her theoretical access to a claim in unjustified enrichment.

A more radical approach would be to challenge Lord Beckett’s acceptance that the principle of subsidiarity does apply in full force in this kind of factual matrix. An analysis of Courtney’s Exrs within the jurisprudence of unjustified enrichment is beyond the scope of this article. However, in a case where unjustified enrichment is likely to be the only remedy for a worthy claimant, there may be available challenges to the underlying principles of the judgment.

Fairness fettered

From a risk management perspective, this judgment serves to illustrate the importance of raising proceedings prior to expiry of the one year limit. It makes it doubly important to explore with clients whether the date of separation is identifiable beyond doubt or whether other (inevitably earlier) dates might be preferred by a defending cohabitant.

From the practitioner’s perspective, this is an unwelcome addition to the canon of family law cases. The cohabitation cases in which recourse is had to unjustified enrichment are unusual, often those where, self-evidently, there is a considerable injustice. The high threshold and limited scope for recovery make unjustified enrichment a genuine remedy of last resort, relied on by only a small minority of separated individuals. As counsel for the pursuers argued, the purpose of s 28 was to introduce fairness between cohabitants and it would not serve that purpose if an action based on unjustified enrichment was thereby excluded. The Parliament’s intention in passing the 2006 Act remedies was surely not to restrict the ability of a financially vulnerable party to make a financial claim. For those people, the effective removal of their safety net is a backward step, however persuasive the legal technicalities may, or may not, have been.

Death and no one to sue

The approach in Courtney’s Exrs contrasts markedly with the sheriff’s approach in X v A, B, C and D [2016] SC EDIN 54 (12 November 2015). The action had been raised by a cohabitant within the six month time limit but prior to executors dative having been appointed to the estate. The likely principal beneficiaries, and likely executors, were identified when the action was raised against them cognitionis causa tantum. That is a mechanism for a creditor to raise an action against a deceased debtor for the purpose of constituting a debt against the estate.

There were two issues in dispute. The first point was procedural, namely that the writ, erroneously, did not refer to the fact that these individuals were being sued in their special capacity as executors. It was submitted that the court ought not to substitute one defender for another after expiry of the time limit for proceedings (by allowing a minute of amendment seeking to amend the instance to refer to special capacity). Notwithstanding the particular care which arguably ought to be taken in cases where a person is sued in a special capacity, the point did not find favour with Sheriff Holligan, who made this interesting observation: “Procedure is merely the mechanism for vindicating rights. Underlying the rules of procedure is, or ought to be, the principle of fairness. As the authorities to which I was referred make clear, over the decades the law has taken an increasingly relaxed attitude to rules of procedure.”

The second point was a substantive one in relation to the interaction between the strict limits of s 29 and the mechanics of confirmation to an intestate estate: that an action cognitionis causa tantum was not a competent procedure to satisfy the terms of the 2006 Act. A claim under s 29 could not be said to be a debt on the estate, and accordingly could not rely on a doctrine used to constitute debts. This did not find favour with the sheriff. He held that an action of constitution of a debt was flexible enough to comprehend s 29 claims, notwithstanding Lady Smith’s dicta in Kerr v Mangan 2015 SC 17 making it clear that a s 29 claim is not a debt.

The sheriff was particularly concerned that there was no obvious alternative procedure and, accordingly, in the event that the putative executors delayed in their appointment, a person in the pursuer’s position would be left with neither remedy nor right.

It does seem that a logically coherent argument was advanced that might have defeated the claim on a technical understanding of the concept of constitution of a debt. However, the sheriff adopted a truly purposive approach to interpretation to give effect to the presumed parliamentary intention that putative executors should not be able to defeat a claim simply by delaying in applying for their own appointment.

The judicial approach to this case contrasts with the approach taken in Courtney’s Exrs. Despite some persuasive legal technicalities, the sheriff was not prepared to leave worthy claimants without a judicial remedy, a much more welcome approach to the interpretation of arguably deficient legislation.