Cohabitants, unjustified enrichment, contract and subsidiarity: Pert v McCaffrey

One cheer

The decision of a Court of Five Judges in Pert v McCaffrey [2020] CSIH 5 will raise one cheer from family lawyers.  It over-rules the previous Outer House holding in Courtney’s Executors v Campbell [2016] CSOH 136, 2017 SCLR 387, that the “subsidiarity” of unjustified enrichment entails its non-availability to an ex-cohabitant who has failed at least to seek the remedy available to him or her against their former and still living partner under section 28 of the Family Law (Scotland) Act 2006.  (The ending of cohabitation by death is dealt with under section 29 and is not treated here.)

The section 28 remedy must be sought within one year of the end of the cohabitation; a time limit that in practice frequently causes insuperable difficulty for the party financially disadvantaged by the breakdown of the relationship.  The Court of Five Judges held that this statutory remedy was one at the discretion of the court and thus not in any way an alternative to the common law claim of unjustified enrichment, where the impoverished party has, within the scope of the law, a right to recovery from the enriched party not dependent upon any judicial discretion.

The Court might have added that, as the statutory remedy has evolved through judicial decision over the last decade and more, it has essentially become a claim for the pursuer’s loss arising from the cohabitation rather than for recovery of the defender’s gain from the relationship.  Statute and common law thus provide, not mutually exclusive alternatives, but rather remedies different in kind.  Presumably, therefore, in appropriate cases where the statutory time limit has not yet expired, at the very least family lawyers should henceforth be advising clients to bring alternative claims under each head.

No cheers

Enrichment lawyers will however keep their hands tucked behind their backs in responding to Pert v McCaffrey.  The opinion of Lord President Carloway, with which three of the other judges agree without reservation, leaves in place the general doctrine of “subsidiarity”, under which a party who has or had another remedy available may not make a claim in unjustified enrichment.  In Lord Carloway’s opinion, the finding that the pursuer had a claim in contract against the defender means that she should have pursued that rather than the one in unjustified enrichment.  Enrichment is subsidiary to contract.  Unfortunately this is a mis-understanding of the general position, which is rather that an enrichment which results from a contract between the parties is a justified enrichment.  There is no need to invoke a supposed doctrine of enrichment’s “subsidiarity” to reach this result.

But in any event the Court’s analysis of this point is much less sophisticated than it needed to be to decide the case properly.  The contract between the parties which the Court found to exist was an informal one made when they purchased a house in joint names with the proceeds of the sales of their respective previous, individually owned properties.  The agreement was an “undertaking” by the male partner and subsequent defender that in the event of the cohabitation breaking down, he would “walk away with nothing”, i.e. would make no claim to a share of the jointly owned house or of the proceeds from its subsequent sale.  Thus, if anyone was to be enriched under this contract, it would be the female partner (and subsequent pursuer).

The male partner was however enriched, not by the contract, but by the post-breakdown decision of the female partner’s trustee in sequestration (seemingly in ignorance of the male partner’s undertaking) to pay him half the proceeds of the sale of the jointly owned house.  It was this payment by the trustee which the female ex-partner sought to reverse in the action which was the subject of the appeal in Pert v McCaffrey.

A moment’s reflection on this scenario is surely sufficient to suggest that if the male ex-partner was enriched, it was at the expense, not of his female ex-partner, but of the trustee in sequestration and the female’s creditors in that sequestration.  Contract had nothing to do with the enrichment save that its existence meant that the trustee had made a liability error in law about the male ex-partner’s entitlement to half the proceeds of the sale of the house.  It was the trustee, not the female ex-partner, who had an enrichment claim in which the existence of a contract between the ex-partners was the explanation of why the payment made by the trustee was an indebitum, i.e. one not due, and therefore liable to be restored by the recipient.  The female ex-partner had no claim at all; the ultimately loss-making parties were her general creditors, whose losses in her sequestration would have been reduced at least to some extent had there been no payment to the male ex-partner.

An additional point affected by this analysis is the Court’s decision that, whether the female ex-partner’s claim arose in enrichment or contract, it had prescribed because the male ex-partner’s obligation arose when the cohabitation broke down in April 2012 and the female’s action was raised over five years later, in June 2017.  If however the enrichment claim was the trustee’s, it arose only after the payment was made to the male ex-partner, i.e. in or around January 2017.  In other words, the trustee’s claim is still alive at the time of writing (February 2020).  The creditors in the female’s sequestration may take an interest in this point.

Half a cheer?

Where the enrichment lawyers may raise a muffled cheer is in relation to Lord Brodie’s opinion.  Concurring in the result reached by the rest of the Court, it is nonetheless the first judicial statement in Scotland recognising in terms the need to begin consideration of enrichment cases with analysis of whether the enrichment in question arises as a matter of fact from a transfer between the parties, an imposition by one of them on the other, or a taking or interference by one of them with the rights of the other by which the former enriches itself.  Consistently with recent academic analysis, Lord Brodie argues that only in the imposition class of case does any question of subsidiarity arise.  There was no question of the female in Pert v McCaffrey imposing any enrichment upon the male; his enrichment arose from the voluntary but mistaken transfer to him by the female’s trustee in sequestration.  Accordingly no issue of subsidiarity arose.

Questions remain

Overall, therefore, the verdict on Pert v McCaffrey must be one and a half cheers at best.  There is still a long way to go before the “enrichment revolution” triggered by the great trilogy of 1990s cases (Morgan Guaranty Trust Co of New York v Lothian Regional Council 1995 SC 150, Shilliday v Smith 1998 SC 725, and Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd 1998 SC (HL) 90) can be regarded as fully bedded in.  And those who would reform the law relating to cohabitation still have complex policy questions to resolve.  Should section 28 of the 2006 Act be reformed to give ex-cohabitants rights rather than awards under the section being a matter of judicial discretion?  Should the one-year time limit be extended, or abolished altogether?  And should it continue to be possible for cohabitants’ relations to be governed by contract (surely, yes, subject perhaps to carefully drawn public policy limitations) and, on breakdown, by unjustified enrichment (possibly no, provided that the statutory regime is sufficiently open and flexible)?

 

Hector MacQueen, Professor of Private Law, University of Edinburgh

 

Further reading:

Hector MacQueen, ‘Cohabitants in the Scottish Law of Unjustified Enrichment’, [2019] Acta Juridica 419

Hector MacQueen, ‘Cohabitants, Unjustified Enrichment and Law Reform’, [2019] Green’s Family Law Bulletin, July (p 1) and September (p 1)

G Black and D J Carr, ‘Cohabitants’ Rights in Conflict: the Family Law (Scotland) Act 2006 vs Unjustified Enrichment in Courtney’s Executors v Campbell’ (2017) 21 Edinburgh Law Review 293