SHERIFFDOM OF TAYSIDE CENTRAL AND FIFE

 

A56/08

 

JUDGMENT

 

of

 

SHERIFF PRINCIPAL R A DUNLOP QC

 

in the cause

 

MARGARET ROSE KERR

Pursuer and Appellant

 

against

 

(FIRST) PAUL MANGAN; (SECOND) CHARLES MANGAN; (THIRD) ANTHONY JOSEPH MANGAN; (FOURTH) MARY THERESA MANGAN; (FIFTH) ELIZABETH GALLACHER

Defenders and Respondents

 

__________________________________________

 

 

Act: Ms Malcolm, Advocate instructed by Jameson & Mackay, Solicitors, Perth

Alt: Mr Leighton, Advocate, instructed by Elliot & Co, Solicitors, Perth

 

 

PERTH, 15 February 2013. The Sheriff Principal, having resumed consideration of the cause, (1) refuses the appeal of the pursuer and allows in part the cross appeal of the second defender; (2) varies the sheriff's interlocutor of 4 July 2011 as follows: (a) by deleting from finding in fact 11 the figure "5502" and substituting therefor "nil"; (b) by inserting a new finding in fact and law numbered 1 "That the value of the net intestate estate of the late Anthony Mangan within the meaning of section 29 of the Family Law (Scotland) Act 2006 is nil."; (c) by renumbering finding in fact and law 1 as 2 and inserting therein before the word "entitled" the word "not"; and (d) by deleting existing finding in fact and law 2; (3) recalls the said interlocutor insofar as it sustains the second plea in law for the pursuer, repels the fourth plea in law for the second defender and makes an order cognitionis causa tantum against the defenders for payment of a capital sum of £5502 out of the net intestate estate of the deceased Anthony Mangan; (4) repels the second plea in law for the pursuer; sustains the fourth plea in law for the second defender and refuses to grant an order in terms of the first crave of the initial writ; quoad ultra adheres to the sheriff's said interlocutor; (5) recalls the sheriff's interlocutor of 25 November 2011 and appoints parties to be heard further on the question of expenses in the court below on a date to be afterwards fixed; (6) certifies the appeal as suitable for the employment of junior counsel; finds the pursuer liable to the second defender in the expenses of the appeal; allows an account thereof to be given in and remits the same when lodged to the auditor of court to tax and report.

 

 

 

 

NOTE:

 

Background

[1] The pursuer is the former cohabitant of the deceased Anthony Mangan (hereinafter referred to as "the deceased"). She had lived with him for a period of twenty two years up until his death on 10 August 2007. They resided together at an address in Perth and at his death Anthony Mangan was domiciled in Scotland.

 

[2] The deceased died intestate. At the time of his death he owned heritable property in County Mayo in the Republic of Ireland having a value in January 2009 of not less than €200,000. He also owned moveable property partly in Scotland and partly in Ireland comprising an account with the Royal Bank of Scotland with a credit balance of £8552.05 and an account with the Ulster Bank with a credit balance of €4708.16. There were funeral expenses of £6052.23, a capital acquisition tax liability in Ireland amounting to £23067.23 and interest (which continues to accrue) on a further tax liability amounting to €9899. There was a further debt of €272.05 and fees for administering the estate in Ireland amounting to €5383.42.

 

[3] In the present action the pursuer seeks decree cognitionis causa tantum for payment of a capital sum from the estate of the deceased. She calls the next of kin of the deceased as defenders. Her claim is founded on the provisions of section 29 of the Family Law (Scotland) Act 2006 (hereinafter referred to as "the 2006 Act) which, so far as material, provides as follows:

(1) This section applies where-

(a) a cohabitant (the "deceased") dies intestate; and

(b) immediately before the death the deceased was-

(i) domiciled in Scotland; and

(ii) cohabiting with another cohabitant (the "survivor").

(2) Subject to subsection (4), on the application of the survivor, the court may-

(a) after having regard to the matters mentioned in subsection (3), make an order-

(i) for payment to the survivor out of the deceased's net intestate estate of a

capital sum of such amount as may be specified in the order;

(ii) for transfer to the survivor of such property (whether heritable or moveable) from that estate as may be so specified;

(b) make such interim order as it thinks fit.

(3) Those matters are-

(a) the size and nature of the deceased's net intestate estate;

(b) any benefit received, or to be received, by the survivor-

(i) on, or in consequence of, the deceased's death; and

(ii) from somewhere other than the deceased's net intestate estate;

(c) the nature and extent of any other rights against, or claims on, the deceased's net intestate estate; and

(d) any other matter the court considers appropriate.

(4) An order or interim order under subsection (2) shall not have the effect of awarding to the survivor an amount which would exceed the amount to which the survivor would have been entitled had the survivor been the spouse or civil partner of the deceased.

............

(10) In this section-

"intestate" shall be construed in accordance with section 36(1) of the Succession (Scotland) Act 1964 (c.41);

"legal rights" has the meaning given by section 36(1) of the Succession (Scotland) Act 1964 (c.41);

"net intestate estate" means so much of the intestate estate as remains after provision for the satisfaction of-

(a) inheritance tax;

(b) other liabilities of the estate having priority over legal rights and the prior rights of a surviving spouse or surviving civil partner; and

(c) the legal rights, and the prior rights, of any surviving spouse or surviving civil partner; and

"prior rights" has the meaning given by section 36(1) of the Succession (Scotland) Act 1964 (c.41).

 

Sheriff's Decision

[4] On his view of these provisions the sheriff made an order for payment of a capital sum of £5502. The key components of his decision were his view, firstly, that the right given a cohabitant in terms of section 29 was not a right of succession, secondly, that the heritable property in Ireland formed part of the "net intestate estate" of the deceased from which payment of a capital sum in terms of section 29 could be exacted and, thirdly, that the restriction in section 29(4) of any award so that it did not exceed the amount to which the survivor would have been entitled had the survivor been the spouse of the deceased should be read as meaning "entitled under Scots Law". The sheriff pointed out that, had the pursuer and deceased been married, the pursuer's prior rights would have been calculated by reference to the estate excluding the heritable property in Ireland. On that approach, having apportioned the debts, the sheriff concluded that the pursuer's claim to prior rights would not have exceeded £5502. That figure contrasts with the figure of £42,000 had succession to the whole estate of the deceased been governed by Scots Law.

 

[5] The pursuer has now appealed and the second defender has cross appealed. In the pursuer's note of appeal the principal contention is that the sheriff erred in his interpretation of section 29(4) and in particular erred in his conclusion that the amount of any sum which could be awarded under section 29 was restricted to the amount to which a surviving spouse would be entitled under Scots Law. It was further contended that this interpretation was inconsistent with the sheriff's conclusion that the "net intestate estate" against which a cohabitant could pursue a claim included the value of the deceased's estate wherever situated. In the second defender's note of appeal the principal contention is that the sheriff erred in his interpretation of the phrase "net intestate estate" and that that phrase ought to be construed as excluding heritable estate abroad.

 

Submissions for the pursuer and appellant

[6] In elaborating upon her note of appeal counsel for the pursuer submitted, firstly, that section 29 did not confer a right of succession nor a right akin to a claim for prior or legal rights but was a stand alone provision conferring a right to claim on the deceased's estate. In support of this submission reference was made to Simpson v Downie 2012 CSIH 74 which considered the provisions of section 28 of the 2006 Act. It was submitted that both sections 28 and 29 had the same genesis and the view of the Inner House that section 28 must be viewed as a "free-standing, self-contained statutory innovation" applied with equal force to section 29. This was consistent with the reports of the Scottish Law Commission, firstly, on Succession (No 124 of 1990) and, secondly, on Family Law (No 135 of 1992) which clearly distinguished between the cohabitant's right to claim on the estate of the deceased and a right of succession.

 

[7] Turning to the question of what was comprised within the "net intestate estate" of the deceased, counsel drew attention to the provisions of section 29(10) of the 2006 Act and the provisions of section 36(1) of the Succession (Scotland) Act 1964, noting that the definition of "net intestate estate" in the 1964 Act was different from the definition in section 29(10) of the 2006 Act. Thus, for present purposes, section 29 could be seen to draw on the provisions of the 1964 Act only insofar as it provided a definition of "intestate". Looking at these provisions together it was submitted that "net intestate estate" comprised the whole of the deceased's estate insofar as not disposed of by testamentary disposition and after provision has been made for the satisfaction of inheritance tax, other liabilities and legal and prior rights. It was submitted therefore that the sheriff had been well founded in concluding that the heritable property in Ireland formed part of the "net intestate estate" of the deceased for the purposes of section 29. Thus section 29(10) provided a definition of "the pot" from which cohabitants could claim so that an order under section 29 had the effect of constituting a debt against the estate of the deceased. The fact that, for the purposes of succession, heritable property devolved according to the lex situs (in this case the law of Ireland) did not alter that state of affairs.

 

[8] Against that background it was submitted that section 29(4) was not confined to a consideration of what a surviving spouse would have received by way of prior or legal rights according to Scots law of succession. The policy imperative behind section 29(4) was not to undermine the status of marriage and thus the purpose of section 29(4) was to ensure that a cohabitant could not receive more of the deceased's estate than had she been a spouse. Section 29(4) had to be read in the context that the "net intestate estate" comprised the whole undisposed of estate of the deceased and therefore the question raised by section 29(4) was what would a surviving spouse have been entitled to receive out of the whole intestate estate of the deceased. It was recognised that the answer to this question might require evidence about the law of Ireland but in the absence of such evidence one should assume that the law of Ireland was the same as the law of Scotland. It was submitted that the sheriff's interpretation of section 29(4) rendered irrelevant the definition of "net intestate estate" where that estate comprised foreign heritable property.

 

[9] Looking at the question of interpretation more broadly, counsel referred to the approach adopted by the Supreme Court in Gow v Grant 2012 UKSC 29 when considering the provisions of section 28 of the 2006 Act. Reference was made to the comments of the Deputy Minister for Justice on the provisions in the Bill which became the 2006 Act and against that background it was submitted that the mischief which section 29 sought to address was that a cohabitant would receive no benefit from the estate of the deceased according to the law of intestate succession whereas, depending on the circumstances, it would be fair that a cohabitant should benefit from the deceased's estate. It was submitted therefore that section 29 ought to be interpreted with the principle of fairness in mind.

 

Submissions for second defender and respondent

[10] In reply counsel for the respondent submitted that section 29 was a provision innovating on the law of succession. The long title of the 2006 Act supported that proposition as did the language used in the section itself. The right to claim only arose on death and any order made under section 29(2) was for payment out of the deceased's estate. It was submitted that it was a legal fiction to suggest that an order based on the value of the estate including the heritable property in Ireland did not affect the law of succession in Ireland and in reality an order for payment of a capital sum calculated by reference to the entirety of the net intestate estate was an order determining how that estate was to devolve.

 

[11] It was submitted that general principles of private international law would not recognise the right of a Scottish court to determine the succession to heritable property in Ireland and such a jurisdiction was excluded under the 1964 Act section 1(1). It was clear that precedence in these matters was given to the law of the place at which the heritable property was situated. In support of these submissions reference was made to Arab Bank plc v Mercantile Holdings Limited 1994 2 WLR 307 at 313, Anton on Private International Law 2^nd edition page 676 and Macdonald v Macdonald 1932 SC (HL) 79. Against that background it was submitted that it was inherently unlikely that section 29 was intended to alter the way in which foreign heritage should devolve and that, if that had been the intention, one would have expected a much clearer and specific provision to that effect. Furthermore it would be surprising if, in exercise of the power set out in section 29(2)(a)(ii), a Scottish court could authorise transfer of heritage abroad. It was submitted therefore that the phrase "net intestate estate" ought to be construed as qualified by the words "so far as it is estate which falls to be regulated by the law of Scotland" (reflecting the language used in section 1(1) of the 1964 Act). Such an interpretation would consist with the Scottish Law Commission Report on Succession (1990) at page 111 and on Family Law (1992) at paragraph 16.31 and also with the Scottish Law Commission Report on Succession (2009) which plainly envisaged the rules of private international law continuing to apply. In this latter regard it was submitted that the rules of private international law will apply unless expressly disapplied.

 

[12] Turning to the proper interpretation of section 29(4) counsel submitted that, if section 29 was a provision dealing with the law of succession, it could readily be seen that section 29(4) was directed to the question what a surviving spouse would receive according to the law of Scotland. In the circumstances of this case the sheriff was correct to refer only to prior rights because the estate was insufficient to support a claim for legal rights or to provide any free estate.

 

Discussion

[13] This appeal is concerned with the meaning and effect of section 29 of the 2006 Act. It is clear from the submissions on either side of the bar that there is more than one way of looking at these provisions and, consistent with the approach of the Supreme Court in Gow v Grant, it appeared to be common ground that one could legitimately have resort to the pre-legislative and parliamentary material to discover the mischief that section 29 was designed to address. Both parties made reference to that material and I have approached the issues in the appeal on the basis that it is legitimate to do so.

 

[14] The genesis of the 2006 Act was the 1992 Scottish Law Commission Report on Family Law (no 135) which, in relation to its proposals for discretionary provision on death for cohabitants, represented a development of thinking since its 1990 Report on Succession (no 124). In the consultative memorandum (no 69 of 1986) preceding the 1990 Report the Commission had expressed the view that there was a clear case for allowing a cohabitant to apply for provision out of the deceased's estate. In the 1990 Report consideration was given to the more general question whether a discretionary system of family provision should be introduced in place of a system of fixed legal rights for spouses and children. That suggestion was rejected but by the time of the 1992 Report there was at least support for a discretionary system of provision for cohabitants. It seems clear therefore that the focus of the Commission's discussion at the relevant part of this Report was the relative merits of a system of fixed rights and a system of discretionary provision, the main advantage claimed for the latter being that, in relation to cohabitants, it could "take account of the widely differing circumstances of different cases" (paragraph 16.29). While recommending a discriminating approach between spouses on the one hand and cohabitants on the other, nevertheless what the Commission was suggesting was in effect an enlargement of the class of persons for whom "family provision" should be made. On that approach it can be seen that the character of the claim of the surviving spouse and issue is not materially different to that of the surviving cohabitant, the only distinction being the means by which that claim is to be established and the priority that is given to one over the other - on the one hand the claim is fixed or formulaic and given priority and on the other the claim is variable and determined by a discretionary decision of the court and deferred to those of the spouse and issue. In both cases however what is being determined is the share of the deceased's estate to which spouse, issue or cohabitant as the case may be is entitled. On a fair reading of the Commission's 1992 Report therefore it seems to me that what was being proposed was an innovation on the law of succession so that a cohabitant might in appropriate circumstances be allowed to share to some extent the intestate estate of the deceased when he or she would not otherwise receive any benefit.

 

[15] The 2006 Act was enacted to give effect to the recommendations of the Scottish Law Commission in the 1992 Report (see Gow v Grant paragraph 6). The long title to the Act defines its scope as including the making of "provision conferring rights in relation to ... succession ... for persons living, or having lived, together as if husband and wife or civil partners". So far as I can see the only provision of the 2006 Act to which that description can be applied is section 29. In Gow v Grant reference was made (para.28) to the statement of the Deputy Minister for Justice, Hugh Henry, during the passage of the Bill which became the 2006 Act. Specifically reference was made to the executive's view that the law needed to provide a framework for a fair remedy when committed relationships founder or the parties to them are separated by death. When the Bill was debated in Parliament on 15 December 2005 the Deputy Minister for Justice reiterated that view specifically in relation to what is now section 29 - "In establishing a right for a cohabitant to apply to the court for a discretionary award when their partner dies intestate, we will introduce a degree of fairness into an unhappy situation, with provisions that are just and equitable. We have tried to ensure that any surviving spouse's or civil partner's position will remain intact and that the total award to a cohabitant will be limited to the amount to which they would have been entitled had they been a spouse or civil partner of the deceased. Beyond that, the courts will be expected to decide what is fair and reasonable in the circumstances of each case ..."

 

[16] When one looks at the provisions of section 29 in this context it seems to me that the mischief which it was intended to address was that a cohabitant would receive no benefit from the estate of a deceased according to the law of intestate succession when, depending on the circumstances, it would be fair that they should. The only provisos qualifying that objective are that the rights of the surviving spouse or civil partner are to remain intact and the cohabitant should be no better off than if they had been a spouse or civil partner.

 

[17] When one examines the language of section 29 against this background in my view it becomes apparent that section 29 is indeed a provision which is intended to confer rights on cohabitants in relation to the succession of a deceased as the long title to the Act suggests. As I have already indicated it seems to me that the character of the claim of the cohabitant is essentially the same as the character of the claim of the surviving spouse albeit each claim ranks differently. This is evidenced by the similarity of what is provided for in sections 8 and 9 of the 1964 Act on the one hand and what is achieved through the operation of section 29 of the 2006 Act on the other. In the former one finds reference to the words "the surviving spouse shall be entitled ... to receive out of the intestate estate" and in the latter the order made by the court will be the measure of what the cohabitant is entitled to receive out of the net intestate estate. Accordingly both provisions share this common character of defining what each of the spouse and cohabitant is entitled to receive out of the deceased's estate.

 

[18] While by analogy with section 28 I feel bound to accept that section 29 ought to be viewed as a "free-standing, self contained statutory innovation" (Simpson v Downie) in my respectful opinion that does not mean that one must ignore the context in which the innovation is intended to operate. In my view section 29 is a provision which innovates on the manner in which the estate of a deceased falls to be distributed and accordingly the proper context in which it ought to be set is the scheme set out in the 1964 Act. This is consistent with the references to that Act in section 29(10) of the 2006 Act and also with the principles of private international law. It follows in my view that section 29 ought not to be construed in a manner which is inconsistent with the scheme of the 1964 Act and the proper scope of the court's jurisdiction thereunder.

 

[19] As to the scope of the 1964 Act it is common ground that prior and legal rights cannot be taken out of immoveable estate abroad notwithstanding the definition of "estate" and "intestate estate" in section 36. This follows from an ordinary application of the lex situs to immoveable property (Anton on Private International Law 3^rd edn. para. 24.24 ff). If it be the case that the effect of section 29 is to give to a surviving cohabitant a claim on the deceased's estate which is at least analogous to that of a surviving spouse it is difficult to see why the same rule should not apply to claims brought under section 29. The provisions of section 29(2)(a)(ii) lend support to that view.

 

[20] A principal argument for the appellant against such a view was derived from the provisions of section 29(10), the contention being that section 29 only drew on the provisions of the 1964 Act for the definition of "intestate". It should be noted however that the terminology used in section 29(10) is not consistent throughout. On the one hand "legal rights" and "prior rights" have the "meaning" given by section 36(1) of the 1964 Act whereas "intestate" is to be "construed in accordance with" section 36(1) of the 1964 Act. In my view this latter manner of expression imports wider considerations than just the definition of the word "intestate" in section 36(1). Thus the definition of "intestate estate" in section 36 may be apt to include the intestate estate of a deceased wherever situated and yet the rules of private international law qualify the scope of the court's jurisdiction to deal with that estate. It seems to me that section 29 must be construed with that context clearly in mind.

 

[21] In my opinion the interpretation of section 29 offered by the pursuer and appellant gives the section an extra-territorial effect which is contrary to the general principles of private international law, since it seems clear that an order based on the value of the estate including the heritable property in Ireland is liable in practice to affect the manner in which that property devolves. The position is thus very similar to that in Macdonald v Macdonald sup.cit in which Lord Tomlin stated (at page 85): "Where a foreign asset is immoveable by nature or in the contemplation of the lex rei sitae, a claim to render it subject to the legitim of Scots law is really a claim that it should devolve contrary to the lex rei sitae, and cannot, I think, be supported consistently with the principles of private international law."

 

[22] In any event, even accepting that the words of section 29 are capable of bearing the meaning proposed by counsel for the appellant, in my view it is still open to the court to give them a more limited meaning where there is a proper ground for concluding that this was the intention of Parliament. As it was said in Arab Bank plc v Mercantile Holdings Limited (page 313E/F) - "The consideration that the more limited meaning is necessary in order to avoid the creation of a jurisdiction wider than that generally recognised by international law has often been recognised as such a ground."

 

[23] Bringing all these considerations together therefore, in my opinion the position adopted by the respondent as to the meaning and scope of section 29 is to be preferred. Thus references to the "net intestate estate" of the deceased in that section ought to be interpreted as meaning the net intestate estate that is to devolve according to Scots law including Scots private international law, with the result that it would not include the immoveable property in Ireland. In reaching this view I am re-assured by the knowledge that that is also the view of section 29 held by the Scottish Law Commission and set out in its Report on Succession (2009) at paragraph 4.87. Similarly it coincides with the view of the authors of the 3^rd edition of Anton on Private International Law (para. 24.115). Such an interpretation also gives section 29 internal consistency, specifically consistency between sections 29(2) and 29(4). The sheriff's approach to section 29(4) seems to me well founded and reflects many of the considerations which I have discussed. I would only differ from him in thinking that the same approach ought also to apply in identifying more generally the scope of the court's jurisdiction in terms of section 29(2). However, subject to some qualification, the outcome is essentially the same notwithstanding this difference.

 

[24] The qualification relates to the practical consequences which follow the conclusion which the sheriff reached and which I also have reached on wider grounds. Both parties were at one in submitting that the sheriff's approach in paragraphs 60 to 62 of his judgment was incorrect and that he ought not to have apportioned the debts as between the estate in Ireland and that in Scotland. The common position of parties at the appeal was that all the debt should be deducted from the moveable estate in Scotland with the result that there was no relevant estate from which a capital sum ordered under section 29 could be paid. It followed that on the hypothesis which has emerged decree should be refused. It will be seen from paragraph 61 of the sheriff's judgment that he was left in a state of uncertainty about what position was being adopted. It is unfortunate that this common position was not made clear to the sheriff at the time of the proof but given that that is the position now adopted it is clear that certain alterations require to be made to the sheriff's findings in fact and fact in law to reflect that understanding.

 

[25] A secondary issue in the appeal was the manner in which the sheriff had disposed of the question of expenses. Following a hearing on expenses on 11 November 2011 the sheriff continued consideration of the matter of expenses until 25 November 2011 on which date he pronounced an interlocutor finding "the Defender liable to the Pursuer in the expenses of the action." This manner of expression does not reflect the fact that there were three defenders who had participated in the action nor does it consist with the sheriff's narrative of the submissions advanced by parties in a note which he prepared in response to the note of appeal. So far as the sheriff's note is concerned parties were agreed that he had incorrectly recorded the pursuer's motion for expenses to have been directed against all three compearing defenders when in fact it was only made against the first and second defenders. Subject to correcting the interlocutor to reflect that position the only issue raised in the note of appeal for the second defender is whether he should be found personally liable for the expenses without a right of relief against the deceased's estate. Suffice it to say that in my opinion the sheriff's reasoning in paragraphs 11 and 12 of his note cannot be faulted. In any event I am not satisfied that it has been shown that the sheriff's decision falls outwith a proper exercise of discretion.

 

[26] That is sufficient for disposal of the third ground of appeal for the second defender. However it does occur to me that parties have overlooked the question of whether the liability for expenses needs to be reconsidered in light of my decision in relation to the principal issue in the appeal. I have no note of having been addressed by parties on that question and in these circumstances I consider it wise to allow parties an opportunity of doing so, particularly as the sheriff's interlocutor of 25 November 2011 has to be recalled in any event. It may be that parties will be able to adjust that matter between them without a further hearing but if not I will assign a hearing for that purpose.

 

[27] Parties were agreed that the expenses of the appeal should follow success and that the appeal should be certified as suitable for the employment of junior counsel.