JAMES JOSEPH MacDONNELL v. ELIZABETH THOMSON STOBO OR MacDONNELL
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION |
| Lord Prosser Lord Penrose Lord Cowie | XA188/00 OPINION OF THE COURT delivered by LORD PROSSER in APPEAL From the Sheriffdom of Tayside, Central and Fife at Perth in the cause JAMES JOSEPH MacDONNELL Pursuer and Respondent; against ELIZABETH THOMSON STOBO or MacDONNELL Defender and Appellant: _______ |
Act: Spiers; Aitken Nairn, W.S.
Alt: Hodge; Drummond Miller, W.S.
4 May 2001
[1]The parties in this action were married in December 1964. On 11 August 1983, decree was pronounced in the Court of Session divorcing Mr. MacDonnell from Mrs. MacDonnell and also, inter alia, ordaining payment by him to her of a periodical allowance of £454.29 per month payable until her death or remarriage. That order for payment of a periodical allowance was sought and made in terms of section 5(1) and (2) of the Divorce (Scotland) Act 1976. The order was accordingly one which, in terms of section 5(4), might, on an application by either party to the marriage, on a change of circumstances, be varied or recalled by a subsequent order. In the present action Mr. MacDonnell seeks a variation of the order for payment of a periodical allowance, in terms of section 5(4).
[2]The situation is, however, somewhat complicated. Before the divorce action, and in contemplation of it, the parties in 1981 entered into an Agreement which contained provisions relating to periodical allowance; and those provisions were themselves varied by a subsequent Agreement in 1982. The figure of £454.29 per month payable until death or remarriage derives from this pre-decree agreement, as varied. After the decree, in 1986, the parties entered into a further Agreement, in terms of which there was a provision for payment to Mrs. MacDonnell of £631.46 per month as periodical allowance. Against that background, what is sought in terms of the Crave is not merely a variation of the decree pronounced on 11 August 1983. What is sought is a decree, in terms of section 5(4),
"varying the order for payment of a periodical allowance by the Pursuer to the Defender pronounced by the Lords of Council and Session on 11 August 1983 as varied by the Supplementary Agreement between the parties dated 5 and 19 August 1986, and that by reducing the payments of periodical allowance to be made by the Pursuer to the Defender in terms of said Order from £631.46 per month to nil or to such other sum as the court considers appropriate with effect from such date as to the Court seems appropriate; and to grant variation ad interim..."
The sheriff dismissed the action, having concluded that it was incompetent. Mr. MacDonnell appealed to the sheriff principal, who recalled the sheriff's interlocutor, repelled Mrs. MacDonnell's plea to competency and reserving her plea to relevancy allowed a proof before answer. Mrs. MacDonnell now appeals against that interlocutor.
[3]In the context of divorce, parties will of course frequently enter into agreement prior to decree and perhaps prior to litigation, as to one or more of the matters which may be the subject of an order by the court. Speaking generally, the incorporation into the decree of, say, an agreed figure for periodical allowance will mean that in that respect the agreement has served its purpose, and has no continuing effect. The agreed amount of periodical allowance will be payable in terms of the decree. And the decree will be subject to variation or recall in terms of such statutory provisions as are applicable - in this case, section 5(4) of the 1976 Act. Nonetheless, the effect of any such pre-decree agreement must always be a matter of construction, and it may be that a particular agreement will be interpreted as having some continuing and binding contractual effect, after the date of the decree. At least to some extent, an issue of that type arises in the present case.
[4]Quite apart from any such pre-decree agreements, parties may enter into a contractual agreement after the date of decree, creating an obligation for payment by one spouse to the other of amounts different from those ordered as periodical allowance in the decree. Such post-decree agreements may make it plain that the parties' intention is to achieve, in practical terms and by contractual bargain, a variation of rights and obligations which could otherwise have been obtained by an actual variation of the decree itself, by the court, on an application under section 5(4) of the 1976 Act. In relation to the post-decree agreement in the present case, questions arise as to its nature and effect, and in particular as to the effect (if any) which it has upon the availability, to either party, of section 5(4) as a means of seeking variation or recall of the original order, either in its own terms or (as the Crave expresses it) "as varied" by the subsequent agreement, with a reduction from the figure actually ordered in the decree or (as the Crave puts it) from the figure introduced by the post-decree agreement.
[5]Having regard to the risk of confusion, it is plain that both pre-decree agreements and post-decree agreements should be drafted with great care, so as to show with the utmost clarity what relationship is intended between any contractual obligation and obligations imposed by the court. In the present case, that has not been achieved. Certain comments are necessary in relation to the 1981 pre-decree agreement, and the 1982 variation of that agreement, before one can usefully consider the effect of the post-decree 1986 agreement.
[6]It is clear, and not disputed, that the 1981 agreement is not a free-standing agreement for payments by Mr. MacDonnell to Mrs. MacDonnell. The agreement is not merely said to be "in contemplation of a divorce action", but it sets out eight agreed heads which are described as "terms and conditions of such a divorce action". These "terms and conditions" are thus not formulated as substantive obligations, capable of direct enforcement. And in relation to the payments by Mr. MacDonnell to Mrs. MacDonnell, they are expressly described as "Periodical Allowance", and it was accepted (rightly in our opinion) that this must be read as the periodical allowance provided for by statute, under the powers contained in section 5(1) and (2) of the 1976 Act, and subject to the provision contained in section 5(4). In these circumstances, we are satisfied that the agreement as to Periodical Allowance was intended to be incorporated in the decree, and not to have continuing effect, or effect as a substantive obligation independent of decree.
[7]We should note that head (8) of this agreement provides that Mr. MacDonnell agrees to increase the aforesaid Periodical Allowance "proportionally each year with the rise in his annual Salary". That provision plainly relates to a period after decree, when there is a Periodical Allowance being paid, and capable of such increase. We return to the question of this particular head later.
[8]The 1982 Agreement refers to the 1981 Agreement, narrates that the parties now wish to alter the terms of that agreement, and states that the parties agree that in place of clause 3 "the following shall be substituted" - and we are satisfied that the passage which follows must therefore be read as inserted into the 1981 Agreement, as clause 3. This substituted clause provides that Mr. MacDonnell will, with effect from 1 April 1982 (some four months prior to the date of the 1982 Agreement) pay Mrs. MacDonnell a specified figure per month, being £454.29 "aliment" for Mrs. MacDonnell, payable until her death or remarriage, and a further sum as aliment for the children of the marriage. Notwithstanding the use of the word "aliment" which would be appropriate in relation to the period from 1 April 1982 until decree of divorce, we are satisfied, and it was not really disputed, that this substituted clause 3, in the context of the 1981 Agreement as a whole, is to be read as an agreed "term and condition" of the divorce action, and in particular an agreement that Mr. MacDonnell, from the date of decree until Mrs. McDonnell's death or remarriage, will pay £454.29 monthly as Periodical Allowance, the intention being that the new figure be included in an order contained in the decree, with this provision, like its predecessor, being satisfied by the inclusion of such an order, and itself having no continuing contractual effect thereafter. When the decree was pronounced on 11 August 1983, ordaining payment of a periodical allowance of £454.29 per month, it was in our opinion that decree, and that alone, which became the basis for Mr. MacDonnell's actual obligation to pay periodical allowance. Head (8) was, however, apparently intended to have continuing contractual effect.
[9]We turn to the post-decree agreement executed in 1986. It contains no reference to the decree, or to the order which the decree contained, for periodical allowance. What it does refer to is the 1981 Agreement, and the variation of that agreement in 1982, going on to say that the parties "now wish to specify the obligations" of Mr. MacDonnell to Mrs. MacDonnell "as currently effective", and that it is agreed that with effect from 1 January 1986, Mr. MacDonnell will pay Mrs. MacDonnell a total specified sum per month "being £631.46 as periodical allowance" for her, and a further sum as aliment for the children. It may be that the figure of £631.46 represents the increase from the figure of £454.29 contained in the decree (and in the 1982 Agreement) which would result from the proportional annual increase agreed by Mr. MacDonnell, in relation to the rise in his annual salary, in terms of head (8) of the 1981 Agreement. At this stage and for present purposes, we are not informed as to the basis upon which the figure of £631.46 a periodical allowance was specified as the obligation "currently effective". But having regard to those words, and the absence of any indication that there has been any contractual agreement other than those which we have mentioned, it appears that the only basis for any currently effective obligation in relation to periodical allowance, at any figure higher than that specified in the decree, would have to be founded upon and derive from the 1981 and 1982 Agreements, and in particular the obligation in relation to increases, contained at head (8) of the original Agreement. While the absence of any reference to the decree seems both strange and unfortunate, we are satisfied that the nature and purpose of the post-decree agreement was to give express effect to Mr. MacDonnell's obligation under head (8) to pay increased amounts, by way of periodical allowance, over and above whatever figure might be contained in any decree currently regulating periodical allowance. We do not read the 1986 Agreement as treating the decree as non-existent, or as irrelevant; although it evidently treats head (8) as effectively increasing the periodical allowance due.
[10]As we have indicated, contractual agreements between parties for "variation" of figures contained in decrees for periodical allowance are familiar, and may take various forms. Where the contractually agreed sum is higher than that contained in the decree, the excess over the sum contained in the decree is not technically a "periodical allowance", not having been contained in an order by the court, unless and until an order for variation to the increased figure is obtained. Depending on the terms of the agreement, it might be capable of direct enforcement upon a contractual basis. Whether or not it was so enforceable in a particular case, the description of the increased figure as "periodical allowance" would suggest that the creditor in the increased obligation could ask the court for an appropriate variation, so that there would indeed be a true periodical allowance in the increased amount, capable of enforcement on the basis of decree rather than contract, and capable also of future variation by the court. (Where the parties enter into a post-decree agreement reducing the amount of periodical allowance to be paid, but leaving the decree unvaried in the full amount, the position is less satisfactory. But again, if the need arose, it appears to us that the debtor in the "reduced" periodical allowance would be entitled to seek a corresponding variation of the court order).
[11]It is clear that such post-decree agreements whereby parties agree to increase or reduce the amount of periodical allowance (or as in the present case, state the current position resulting from a pre-decree agreement for future increases) the contractual agreement cannot ipso facto alter the amount of periodical allowance, which is a matter for the court and the court alone. Correspondingly, the contractually agreed amount, unless and until incorporated in a varied order of the court, cannot be varied by the court, whose power is to vary its own orders, and not to vary the contracts of parties. But it will always be competent for a party to seek variation of any current decree for periodical allowance, although it will of course be necessary to demonstrate an appropriate change of circumstances justifying the variation sought. And while we do not think that it would be appropriate for the courts to encourage parties to have recourse to the formality of variation when matters can be dealt with amicably and by agreement, the fact that matters have been regulated amicably or by agreement, in such a way as to reflect a departure from the actual terms of the court's order for periodical allowance, will not as a matter of competency deprive a party of the right to seek variation of that decree, and will be a highly relevant fact (and in some cases no doubt the only relevant fact) providing grounds for variation. Correspondingly, if variation is sought by the obligant party, the fact of an agreed departure from the terms of the decree may constitute a ground for opposing variation, or seeking a different variation.
[12]On behalf of Mrs. MacDonnell, it was submitted that the 1986 Agreement could not and did not vary the decree which had been pronounced by the court. It stood as a separate contractual obligation, and the decree for a lower figure could not prevail over it or render it ineffectual. If Mrs. MacDonnell had sought to enforce payment of £631.46 per month, she would have had to rely upon contract, and not upon the decree which was for a lesser sum. Correspondingly, it was submitted, Mr. MacDonnell could not seek to vary the sum of £631.46, which was not contained in any decree. He was bound by contract to pay that sum - unless he could point to some ground upon which his contractual obligation could be said to have come to an end, or to be unenforceable. The post-decree agreement was merely updating the effect of the original agreements, and in particular of head (8). It was not merely impossible for the parties to alter the court's decree: that was not what they were trying to do or purporting to do in the 1986 Agreement. They were merely applying their own pre-decree agreement. The sheriff principal had seen the post-decree agreement as "simply a cumbersome way of varying the terms of the court decree" and had therefore held that Mr. MacDonnell was entitled to seek to vary the court decree as altered by the post-decree agreement. It was submitted that he had taken that view upon too broad a view of what was required by the justice of the matter, as he saw it. The correct view was that of the sheriff - that a subsequent agreement such as this was not a mere extension of the decree, capable of alteration as if it was itself such a decree. The sheriff had rightly pointed out that there was a fundamental distinction between agreements incorporated in a court decree, and agreements contained in a contractual agreement between parties. The former could be varied. The latter could not. The obligation to pay £631.46 per month was based upon the latter, and could not competently be varied.
[13]Both the sheriff and the sheriff principal refer to a number of cases and both parties made submissions to us in relation to these. In particular, our attention was directed to Dunbar v. Dunbar 1977 S.L.T. 169, Jenkinson v. Jenkinson 1981 S.L.T. 65, Mills v. Mills 1990 S.C.L.R. 213 and Drummond v. Drummond S.C.L.R. 428. Reference was also made to Clive Husband and Wife, fourth edition at 24.141 to 2. (McKenzie v. McKenzie 1987 S.C.L.R. 671 was also cited, in relation to pre-divorce agreements which could continue to have partial effect after decree of divorce).
[14]We have thought it preferable to discuss the relationship between agreements and decrees for periodical allowance in general terms, rather than approach the matter through reference to previous decisions. Every case will depend upon the terms of any agreements which are founded upon, and we are not persuaded that the particular cases mentioned, or particular words used in these cases, are in conflict with what we have said as to the general position, or the principles which must be applied in relation to contract and the powers of the court. We would emphasise the importance of context, when the "variation" or "alteration" of decrees by contractual agreement is under discussion. In purely legal terms, such variation or alteration plainly cannot occur, whereas in practical terms, and as a matter of practice, it plainly can. The words are being used differently, depending on which context is being discussed.
[15]In the present case, one may acknowledge that the post-decree agreement did not purport to vary the decree, in legal terms. And even in practical terms, one may accept that it was envisaged by the parties as a sequel to their original pre-decree agreements. But we are not persuaded that the pre-decree and post-decree agreements can be regarded as purely collateral to and separate from the order for periodical allowance contained in the decree. We see it as of crucial significance that the subject-matter of the pre-decree agreements, which remains the subject-matter of the post-decree agreement, is periodical allowance - that is to say a statutory form of allowance which can only be created by the court, and can competently be varied by the court. The crave in the present action is of course open to criticism, if one reads it as indicating that the order of 11 August 1983 was altered as a matter of law by the parties' agreement in 1986 and indicating that the sum of £631.46 is a periodical allowance in law, in terms of that order. But what is sought is variation of the original order for periodical allowance. The existence of the subsequent agreement cannot render variation of that order incompetent. The figure which would be varied, if variation were granted, would of course be the original figure contained in the decree. But it is sensible to bear in mind that the contractually agreed figure of £631.46 represents a figure agreed by the parties specifically as periodical allowance. And that being so, just as Mrs. MacDonnell might seek, or might have sought, to have a variation to that figure, so also, in our opinion, Mr. MacDonnell is entitled to rely upon the fact that periodical allowance of its nature is subject to variation. The essential question in any application for variation is whether there are grounds for adopting and ordering a new figure (or nil). If in 1986 or subsequently Mrs. MacDonnell had sought and obtained a variation to the figure of £631.46, reflecting the parties' agreement, Mr. MacDonnell could competently come to court now seeking a variation, from that substituted figure rather than from the original figure. In our opinion, although that variation was never made, he can still come to court, seeking variation of the original figure. The parties' agreement will no doubt play a part in the submissions of parties as to whether variation is justified. But their agreement as to what the periodical allowance should be, or is to be, does not determine it ipso facto. And the court will be entitled, and indeed bound, to vary the original figure if satisfied that consideration of all the relevant circumstances makes such variation appropriate.
[16]In the whole circumstances, we are satisfied that the sheriff principal reached the correct conclusion, and we refuse the appeal.