Death and Disputes

The Scottish Law Commission’s recent Report on Cohabitation did not extend to claims following death. Tom Quail considers the limited guidance, statutory or judicial, under the present law, and calls for reform here also.

In November 2022 the Scottish Law Commission issued its report (Scot Law Com no 261) proposing reform of the law on cohabitation for couples whose relationship ends in separation. The reforms do not extend to the law where a cohabitant dies intestate and a survivor wishes to make a claim under the Family Law (Scotland) Act 2006, s 29. This article will consider the present law on such a claim, the case law, the information relevant to providing advice on a s 29 claim and also look at the present position regarding reform.

Before examining the law, it is perhaps important to understand the context of the legislation. Prior to the 2006 Act, a deceased’s cohabitant had no right to claim in an intestate estate. The principles of economic disadvantage and the economic burden of caring for a child, which presently apply in determining a claim in terms of s 28, do not apply to s 29.

Section 29 orders
Section 29 applies where a person dies intestate and, immediately prior to death, was domiciled in Scotland and cohabiting with another. In such circumstances, the court can order payment of a capital sum to the survivor from the deceased’s estate, or a transfer of property (heritable or moveable) from the estate. The court can also make an interim order.

In deciding whether to make an order, the court has to consider:
• the size and nature of the net intestate estate;
• any benefit received, or to be received, by the survivor as a consequence of the deceased’s death and from somewhere other than the net intestate estate;
• the nature and extent of any other rights against or claims on the intestate estate; and
• any other matter the court considers appropriate.

Any order a court can make (a capital sum or property transfer), cannot be greater than the amount the surviving cohabitant would have been entitled to had they been the spouse or civil partner of the deceased.

Court proceedings can be raised in either the Court of Session or the sheriffdom in which the deceased was habitually resident at date of death (or, if it is unclear which is the relevant sheriffdom, in Edinburgh Sheriff Court). An application to the court requires to be raised and served within six months of the date of death. This time limit is strict and cannot be overridden. This was set out in Simpson v Downie 2013 SLT 178. While that case concerned a claim under s 28(8), the wording of both s 28(10) and s 29(6) (“Any application under this section shall be made”) is the same. Court proceedings should be raised against the executor dative if one has been appointed. It is also recommended that proceedings should be raised against any other party who is entitled to be appointed as executor dative, as the executor has the powers, duties and liabilities in terms of the law of succession.

In making any orders, the court can specify the date the capital sum is to be paid, for the order to be paid in instalments and, in relation to any transfer of property, the date on which the transfer is to take place.

“Net intestate estate” is defined as estate which remains after payment of inheritance tax, other liabilities having priority over legal and prior rights, and the legal and prior rights of any surviving spouse or civil partner.

Uncertainty
Section 29 has given rise to much concern. The factors in s 25(2) of the 2006 Act, such as the length and nature of the relationship which are relevant as to whether or not an applicant is a cohabitant, are not specifically directed to be taken into consideration when the court is exercising its discretion to make an award under s 29. When exercising its discretion, the court appears to be overwhelmed by the number of potentially relevant factors so it is difficult, if not impossible, to focus on factors which are significant in the circumstances of a particular case. There is also a dearth of reported case law. Accordingly, it is difficult to advise a party on whether to proceed with a s 29 application. There has been an understandable tendency for parties to settle without resort to litigation.

With a view to offering some guidance on how to advise on a s 29 claim, it might be helpful initially to consider the two main reported cases, Savage v Purches 2009 GWD 9-157 and Kerr v Mangan [2014] CSIH 69.

Savage v Purches
In Savage, Mr Savage and Mr Voysey (the deceased) cohabited for less than two and a half years. The net estate was £198,000. The deceased had enjoyed a previous relationship of 15 years which led to a will being prepared (it was destroyed when the relationship ended) and an “expression of wish” in relation to a BT pension scheme. The net estate did not include a death benefit lump sum of £249,680, which the trustees decided should be divided equally between the pursuer (Savage) and the defender (the deceased’s half sister), nor did it include an index linked pension from BT which, at the time of the decision, was £9,500 per annum, which the trustees decided should be paid to the pursuer/cohabitant. An actuary valued the net replacement value of the pension rights received by Savage at almost £299,000.

There was no shared ownership of heritable or moveable property, mortgage or life assurance during the parties’ relationship.

At the beginning of the relationship, the cohabitant was a young man earning a modest income, living in tied accommodation. During cohabitation the parties enjoyed a fairly comfortable lifestyle (including a holiday in New York), funded by the deceased. The cohabitant owned his own property and had funds available of approximately £230,000, which derived predominantly from a payment following his father’s death in the Piper Alpha tragedy. He changed career during the relationship, moving into property letting and being supported by the deceased while his business was built up. The deceased kept financial details, and the closeness of his relationship with the defender, from the cohabitant.

The sheriff found Savage to be of limited credibility and reliability, describing him as giving the impression of exuding a sense of self entitlement, and found that while he was entitled to claim on the estate of the deceased, on considering the provisions of s 29 his claim should be assessed at nil.

Kerr v Mangan
In Kerr, the parties had cohabited for 22 years. The issue was whether a house and plots of land in Ireland, valued at not less than €200,000, formed part of the deceased’s net intestate estate. The sheriff at first instance awarded the pursuer £5,502. On appeal, it was determined that the Irish properties were not part of the net estate. This was upheld in the Inner House. Accordingly, the award was reduced to nil as the debts in the estate exceeded the assets.

The court set out its concern that s 29 provided little, if any, indication of underlying principle, that the factors in subs (3) were obvious, but limited, and that the ability to have regard to “any matter the court considers appropriate” gave no useful guidance at all. If clarity was to be achieved, s 29 needed to be replaced with a provision that gave a clear indication not only of the mischief which it sought to address but also of the underlying policy.

Proposed reforms
The Scottish Law Commission in its 2009 Report on Succession (Scot Law Com No 215) proposed the repeal of s 29. It recommended, in deciding whether a couple were living together in a cohabiting relationship, consideration of matters such as whether they were members of the same household; the stability of the relationship; whether they had a sexual relationship; whether they had children together or had accepted children as children of the family; and whether they appeared to family, friends and members of the public to be persons who were married to, in civil partnership or cohabitants.

The Commission also recommended that if the couple were cohabiting, the court should fix an appropriate percentage of entitlement to the estate, having considered:
(a) the length of the cohabitation;
(b) the interdependence, financial or otherwise, between the couple during their cohabitation; and
(c) the surviving cohabitant’s contribution (financial or otherwise) to their life together.

However, these recommendations have not been enacted.

In the Commission’s recent Report on Cohabitation, which was restricted to claims where a relationship ends on separation, the Commission proposed a new definition of cohabitants, being a couple who are or were living together as a couple in an enduring family relationship, aged 16 or over, not spouses or civil partners and not closely related to each other.

In deciding whether there has been an enduring family relationship, the court would have regard to all the circumstances of the relationship, including its duration; the extent to which the couple live or lived together in the same residence; the extent to which they are or were financially independent; and whether there is a child of whom they are parents or who was accepted by them as a child of the family.

These recommendations have only recently been proposed. If enacted, they would not apply to claims for cohabitants whose relationship ends on death.

Quantifying a claim
Having looked at the present legislation, relevant cases and the proposed reforms, what can we take as being the relevant factors in advising on and quantifying a claim under s 29?

The following matters appear to me to be of relevance.
• Any benefits received, or to be received, by the surviving cohabitant other than from the deceased’s net estate require to be taken into consideration in terms of s 29(3)(b), for example the pension lump sum death benefit in Savage v Purches. In valuing pension benefits, a replacement value/actuarial value should be obtained, as was done in Savage.
• It is important to consider all benefits to be paid out using the broader definition of the deceased’s estate, and not the narrow definition in s 29(10). Accordingly, life assurance, death in service benefits, pensions, share options etc are all relevant factors. The value of these and to whom the benefits are paid by the trustees are all factors in quantifying a claim.

In Kerr v Mangan, the court indicated that s 29(3) gave no useful guidance in that matters were not mentioned which might have been considered relevant, such as:
(i) the length of cohabitation;
(ii) the nature and extent of the surviving cohabitant’s own assets or marital status;
(iii) the terms of any prior agreement entered into by the cohabitants;
(iv) the interdependence of their finances;
(v) the needs of the surviving cohabitant;
(vi) the interests of children, and whether those interests should vary according to whether or not they are children of both cohabitants;
(vii) the quality of the cohabitation;
(viii) the nature and extent of any services provided by the surviving cohabitant;
(ix) whether or not there was an intention to marry; and
(x) to what extent it could be said that overall the surviving cohabitant deserves to have the benefit of being treated in the same way as a surviving spouse or civil partner.

However, a number of these factors are referred to in both the Scottish Law Commission’s Report on Succession in 2009 and its Report on Cohabitation in 2022. In addition, while Savage v Purches there were no children of the family, a number of these factors were taken into consideration by the sheriff. The sheriff was of the view that in the exercise of his discretion, he was entitled to take these matters into consideration in terms of s 29(3)(d), namely “any other matter the court considers appropriate”.

Accordingly, in giving advice and in quantifying a claim, the points mentioned above can be taken into consideration. It is very much a balancing exercise. However, taking account of all relevant factors will enhance the cogency of your argument in discussions and also in litigation, in the event that agreement is not able to be reached. As in Savage, an assessment should also be made of your client, otherwise the sheriff may do that.

The Scottish Law Commission indicated in its Report on Cohabitation that problems in this area were identified shortly after the 2006 Act came into force and reform was long overdue. Its proposed reforms in terms of s 28 are aimed at achieving fairer outcomes for cohabitants when their relationship breaks down, by clarifying and simplifying the law. Reforms aimed at achieving fairer outcomes when a relationship ends on death are equally deserving.

This article first appeared in the Law Society of Scotland Journal