A former cohabitee's failure to claim financial provision under s 28 of the Family Law (Scotland) Act 2006 is not a bar to an action based on unjustified enrichment at common law; but the claim in question was irrelevant being based on an alleged prior agreement, and further was founded on a right which had prescribed, a bench of five Court of Session judges has held.
The court upheld a sheriff's decision, in an appeal remitted from the Sheriff Appeal Court, in favour of John McCaffrey, defender in an action brought by Christine Pert, but on a different ground, substituting decree of absolvitor in place of dismissal on the basis that any claim by the pursuer had prescribed.
The parties had begun cohabiting in 2004. Each then owned a flat; the defender sold his the following year and used some of the proceeds to construct a workshop at the pursuer's flat. The pursuer avered that the defender stopped working and did not contribute to the household; the defender that he helped pay off the pursuer's debts and renovate her flat, increasing its value. In 2008 the parties bought a house, funded entirely from the sale proceeds of the flat.
For the pursuer it was averred that, following advice and discussion, they agreed title would be taken in joint names because they expected their relationship to continue, and "the defender undertook that in the event the relationship ended he would walk away with nothing in view of the source of funds that facilitated the purchase of the property".
Their relationship ended in April 2012. In 2015 the pursuer was sequestrated; in 2017 her trustee sold the house, using half the proceeds to pay her creditors and paying the other half to the defender. The pursuer averred that he received this sum "contrary to the undertaking" he gave at the time of purchase, and sought its recovery on the basis of unjustified enrichment. She further stated that she did not apply for an order under s 28 within the 12 month limit from the date of separation, because she had no reason to believe the defender would not honour his undertaking.
The sheriff held that despite later developments, the case of Varney (Scotland) v Lanark Town Council (1974) was still good law and excluded a remedy based on unjustified enrichment where the pursuer had chosen not to exercise a statutory right.
Giving the leading judgment, Lord President Carloway, with whom Lord Justice Clerk Lady Dorrian, Lady Paton and Lord Menzies agreed, said the court endorsed the view that the redefinition of the law of unjustified enrichment in cases since Varney "has not superseded the old rules relating to the law of recompense such as the general rule that the remedy is not available where a pursuer has a legal remedy whether under the common law or under statute and had chosen not to exercise it".
Considering whether the pursuer in fact had an alternative remedy, the court's power under s 28 was one of "weighing up the various economic advantages and disadvantages and making a judgment, essentially of a discretionary nature, on whether a capital sum ought to be awarded". Lord Carloway continued: "In making that assessment, it must be assumed that the ordinary legal remedies open to the parties, such as to secure particular property which is owned by them, have been, or can be, exercised. Put another way, the court must presuppose that the pursuer cannot obtain payment from the defender other than by utilising the statutory provisions of the 2006 Act. Seen in that light, s 28 is not a remedy which is alternative to an action for recompense but one which is additional to any common law remedy otherwise available. The failure to exercise the right to make an application under s 28 timeously does not bar the use of such remedies. In this respect the court must disagree with Courtney’s Exrs v Campbell (2017)".
However the "fundamental problem" for the pursuer was not the existence of a remedy under the 2006 Act, but the availability of an alternative remedy at common law. Her averment of the defender's undertaking had to be taken to mean that the parties had agreed that, in the event of the breakdown of the relationship, the defender would convey his share to the pursuer. On that basis her most obvious remedy was to seek specific implement of the agreement or, given that the house had been sold, damages as a consequence of the defender’s breach of the agreement. "It may be that the pursuer would have run into difficulties of proof (Requirements of Writing (Scotland) Act 1995, s 1(2)), but that was not advanced as a reason for not pursuing that remedy. It is this alternative remedy that is fatal to the pursuer’s claim upon the basis of the principle set out in Varney".
For either remedy, the pursuer's claim was extinguished by prescription, the action having been raised in June 2017, more than five years after the separation, which was the point at which the defender had become bound to implement the agreement averred. There were no relevant averments which might justify any extension to the five year period.
Lord Brodie, who also agreed, added some observations in order "to avoid unnecessarily placing any impediment in the way of further development of the law by appearing to accept counsel [for the defender]’s unnecessarily general submissions on what the Sheriff Appeal Court described as 'the principle of subsidiarity'" – the rule in Varney. He concluded by reserving his opinion on whether there was indeed a generally applicable principle of subsidiarity, observing on the way:
"Generally speaking, and leaving aside recompense in respect of imposition, whatever their historical origins, claims for reversal of unjustified enrichment could be said to be common law remedies subject to an equitable defence. In a given case that equitable defence might, where it was material, be to the effect that an alternative remedy was available but not resorted to, but that is different from saying that no claim for reversal of unjustified enrichment can ever be made if there is or if there was an alternative way of proceeding."