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Teresa Maria Middleton against Allan Alexander Middleton (Sheriff Court Civil) [2025] SCPHD 28 (23 May 2025)
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[2025] SCPHD 28
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SHERIFFDOM OF GRAMPIAN, HIGHLAND, AND ISLANDS AT PETERHEAD
[2025] SC PHD 28
PHD-F63-23
JUDGMENT OF SHERIFF FINDLATER
in the cause
TERESA MARIA WALSH OR PRESTON OR MIDDLETON (Assisted Person)
Pursuer
against
ALLAN ALEXANDER MIDDLETON
Defender
Pursuer: McKilligin; Brown & McRae LLP
Defender: Mackey; Masson & Glennie LLP
Peterhead, 23 May 2025
The sheriff, having resumed consideration of the cause, makes the following findings in fact:
1.
The parties are husband and wife, having married on 26 June 1998.
2.
There are no children of the marriage under the age of 16 years.
3.
The pursuer was habitually resident in Scotland throughout the period of one year
immediately preceding the raising of the action. The pursuer was resident within the
Sheriffdom of Grampian, Highland, and Islands for a period exceeding 40 days immediately
preceding the raising of the action for divorce. There are no proceedings in Scotland or
elsewhere in respect of the marriage or capable of affecting its validity or subsistence.
4.
Throughout their marriage the parties lived together as man and wife. For the
majority of their marriage they lived together at the matrimonial home in Cruden Bay. The
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pursuer still resides at the matrimonial home in Cruden Bay. The defender also still resides
at the matrimonial home in Cruden Bay. The parties have not, however, lived together as
man and wife since 3 December 2020. They have lived separately since 3 December 2020.
There is no prospect of reconciliation.
5.
As at the relevant date the matrimonial property of the parties consisted of the
following assets with the values shown as at the relevant date unless otherwise specified:
(a)
The matrimonial home at Cruden Bay which is valued at £330,000, both at the
relevant date and as at today's date, held in joint names;
(b)
The defender's pension with St James's Place worth £258,210;
(c)
The defender's pension from Baker Hughes worth £176,291.37;
(d)
The pursuer's pension with Nest worth £2,619.98;
(e)
The pursuer's pension with SPPA worth £59,216.02 as at November 2021;
(f)
The pursuer's Legal & General (ReAssure) pension worth £24,408.62 as at
February 2020;
(g)
The defender's Legal & General (ReAssure) pension worth £4,705.53 as at
September 2020;
(h)
The parties' joint Virgin Money bank account with a balance of £8,741.56;
(i)
The pursuer's personal TSB bank account with a balance of £13,154.97;
(j)
The defender's personal Virgin Money bank account with a balance
of £97,654.71.
6.
Although not all assets were valued as at the relevant date, parties were agreed that I
could treat these closest date valuations as relevant date valuations.
7.
As at the relevant date there were two mortgages outstanding on the matrimonial
property:
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(a)
A mortgage with the Clydesdale Bank with an outstanding balance
of £36,842.81 which has subsequently been paid off in full;
(b)
A mortgage with Virgin Money whose outstanding balance as at the date of
separation was approximately £11,000, and as at July 2024 was £8,796.99.
8.
Both parties serviced the mortgages through the marriage. Both parties continued to
service the mortgages post separation. Parties have continued to meet joint living expenses
post separation.
9.
Prior to the marriage, the pursuer owned a property at Serald Street in Cruden Bay.
This property was sold during the marriage. Prior to that property being sold, it was rented
out. The rental income went towards matrimonial expenses. The net free proceeds from the
sale of that property came to approximately £47,000. That was paid into an offset account
for the mortgage against the matrimonial home. That sum was then used on matrimonial
expenses.
10.
Prior to the marriage, the defender owned a property in Aberdeen. The net free
proceeds from the sale of that property came to approximately £14,000. £7,000 of that went
towards the mortgage on the pursuer's Serald Street property. The remaining balance went
on improvements to the Serald Street property and otherwise on matrimonial expenses.
11.
Both parties worked throughout the marriage. The defender earned more money
from employment than did the pursuer. The defender contributed more to pension
arrangements than did the pursuer. His earnings could be as much as three times as high as
the pursuer's at any given time. Both contributed to matrimonial accounts and their
incomes were spent on matrimonial expenses. Their wages went into the joint account.
12.
Prior to the marriage, the defender had two jobs from which he accrued pensions.
4
13.
The first of those jobs was with Cleveland, part of Combustion Engineering Ltd.
This employment commenced in 1977. The defender was in this employment for
approximately four years. He left this employment in the early 1980s. He did not contribute
to the Combustion Engineering pension after he left that employment.
14.
The defender had been unaware of the Combustion Engineering pension, or had
forgotten about it, until he instructed Mr McAulay, a friend and a financial advisor, to
investigate his financial assets in the late 2010s.
15.
The defender suffered a heart attack during the currency of the marriage. The
defender was, in the late 2010s, due to have major heart surgery. This prompted the
defender to investigate his financial assets and to make financial arrangements for his
family, including his wife.
16.
The defender was pleasantly surprised by the value of the Combustion Engineering
Ltd pension discovered by Mr McAulay. The defender was also concerned, however, that
the majority of the value of the pension would be lost in the event that he died early. This
was a particular concern for the defender because of the major heart surgery that he was due
to undertake and the previous heart attack. The defender and the pursuer discussed
together what should be done, if anything, with the Combustion Engineering Ltd pension
upon its discovery.
17.
The defender instructed, in the days prior to the major heart surgery, that the
Combustion Engineering Pension be transferred into a pension managed by St James's
Place. The defender did this so that a greater value of the pension would be available to his
family should he die early. The defender was not advised that this transfer may have any
impact on whether the pension, or any part of it, was viewed as matrimonial property, but
even if he had been so advised he would still have instructed this transfer.
5
18.
The only contribution made to the St James's Place pension was the transfer of the
value of the Combustion Engineering pension. No other contributions have ever been made
to the St James's Place pension. The change in value of the pension, as with changes in the
value of the Combustion Engineering pension before it, are all explicable by reference to the
changes in the underlying investments by those managing the pensions. The relevant date
value of the St James's Place pension was £258,210.
19.
The defender's other pre-marriage employment resulted in the defender's Legal &
General or ReAssure pension. That pension had a value of £4,705.53 as at the relevant date.
The defender contributed to this pension scheme in the late 1980s into the year 1990. The
defender made no contributions to this pension after leaving that employment in 1990.
20.
During the marriage the pursuer received a number of gifts and inheritances from
family members. The pursuer received £9,000 from her mother and at least £15,345.72 from
an uncle or uncles. These gifts and inheritances were used on matrimonial expenses.
21.
In October 2020 the defender made an extra payment into one of the mortgages
of £20,000. The defender was gifted £25,000 from his father, shortly before his father's death,
by cheque. There was a delay in cashing that cheque caused by the death of the defender's
father and also the COVID-19 pandemic. When the cheque was cashed, the defender
paid £20,000 into the mortgage. The remaining £5,000 was gifted by the defender to family.
22.
The defender's father passed away in March 2020. As at October 2020 the estate was
ready to be paid to the beneficiaries. The defender received £97,559.61 on 26 November 2020
which was his share of his father's moveable estate.
23.
The defender's inheritance from his father of £97,559.61 was paid into his personal
Virgin Money account. The value of the defender's personal Virgin Money bank account as
at the relevant date was £97,654.71. The difference, being £94.10, was explicable by a very
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small sum of interest lying in the account and also the balance of a pair of transactions
where the defender was recompensed from his father's estate for funeral costs.
24.
Across December 2022 and January 2023, the defender made additional payments
into one of the mortgages totalling £21,043.60, paying that mortgage off in full. Although
post-separation, these are payments which represent an economic advantage derived by the
pursuer and an economic disadvantage suffered by the defender during the marriage.
25.
The Virgin Money joint account, which had a value at the relevant date of £8,471.56,
now has a functional nil balance. The account has been used to meet joint liabilities since the
parties have separated, and both parties have withdrawn from the account what they
consider to be their fair share, the pursuer first.
26.
Post separation, the defender purchased a property in Cruden Bay with a value of
approximately £85,000. The defender purchased this property with the inheritance he
received post separation from the sale of his late father's heritable property. The defender
received approximately £115,000 from the sale of his late father's heritable property.
27.
The property which the defender has purchased is not habitable at this time, still
requiring work to be done on it. That work will cost tens of thousands of pounds.
28.
Post separation the defender has seen the residue of the inheritance from his father
reduce to approximately £30,000 or £31,000 as at the date of proof.
29.
The defender has limited income. He is not yet claiming any pension. He makes
very small amounts of money from working occasionally as a caddy at a local golf course.
He is living on his inheritance from his late father's estate until he is due to collect his
pensions in a few years' time.
30.
The pursuer has passed what would have been expected to have been her retirement
age. She has remained in full time employment. She has borrowed money to maintain her
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half of the matrimonial home expenses since the date of separation. She received a lump
sum from one of her pensions on it maturing. She had not made particular plans for
retirement as a single person.
31.
The parties are in agreement that the matrimonial home should be sold and the net
free proceeds shared equally between them.
Findings in fact and law:
1.
This court has jurisdiction.
2.
The parties' marriage has broken down irretrievably, evidenced by their non-
cohabitation for a period of more than two years.
3.
The date of separation, the relevant date for the purposes of the Family Law
(Scotland) Act 1985, is 3 December 2020.
4.
The parties' joint Virgin Money bank account now having a functional nil balance,
having been dissipated by both parties, and parties having withdrawn from the account
what they considered to be their fair share, the pursuer first, there are special circumstances
justifying leaving that bank account out of account when totalling the matrimonial property.
5.
The defender's personal Virgin Money bank account balance as at the relevant date
substantially derives from the defender's inheritance from his father's moveable estate and,
as such, is not matrimonial property.
6.
There are special circumstances justifying a fair share being other than an equal share
in relation to the defender's St James's Place pension. The Combustion Engineering pension,
which is the sole source of contributions made by the parties to the St James's Place pension,
was solely derived from income or efforts of the defender prior to the marriage and was not
derived in any way from income or efforts of the parties during the marriage. The defender,
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though, converted the Combustion Engineering pension into matrimonial property by
transferring the balance to St James's Place. He did so in consultation with the pursuer and
in order to make provision for his family. Taking account of the source of funds, but also the
conversion of the asset to deliberately create a matrimonial asset, a fair division of that asset
is 90% retained by the defender, with 10% of the value due to the pursuer.
7.
There are special circumstances justifying removing entirely from consideration as
matrimonial property the defender's Legal & General or ReAssure pension, as this pension
is solely derived from income or efforts of the defender prior to the marriage and was not
derived in any way from income or efforts of the parties during the marriage.
8.
The pursuer has benefited to the value of £10,521.50 by the defender's extra
payments in December 2022 and January 2023 into the mortgage over the matrimonial home
totalling £21,043. It is appropriate that allowance should be made for that in the division of
the matrimonial property.
9.
The various other payments into the matrimonial `pot' from inheritances and gifts
and pre-marital property, when considered with the relative income of the parties during
the marriage and the duration of the marriage, do not lead to the conclusion, in this case,
that a division other than an equal division is a fair division for the remaining matrimonial
property by reference to economic advantage and disadvantage.
10.
The parties having agreed that the matrimonial property should be sold and the net
free proceeds divided equally, it is appropriate that this asset, and the remaining mortgage
over that asset, be left out of account when totalling and dividing the matrimonial property.
11.
Taking account of all of the above, the matrimonial assets and their values are as
follows:
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Asset
Pursuer
Defender
St James's Place Pension
£258,210.00
Baker Hughes Pension
£176,291.37
Nest Pension
£2,619.98
SPPA Pension
£59,216.02
L&G (ReAssure) Pension
£24,408.62
Pursuer's TSB Bank
Account
£13,154.97
Running Totals
£99,399.59
£434,501.37
12.
The pursuer is entitled to £25,821.00 in respect of the defender's St James's Place
pension.
13.
The rest of the remaining matrimonial assets require to be totalled and divided
equally, to achieve a fair division. The total of the remaining assets, less the St James's Place
pension from the above, is £275,690.96, half of which is £137,845.48. The addition of the
£25,821.00 from the pursuer's fair share of the St James's Place pension, less the £10,521.50
from the defender's additional mortgage payments, gives a total of £153,144.98. When the
pursuer's retained assets are set off against that value, the balance is £53,745.39.
14.
The pursuer is, therefore, entitled to a capital sum from the defender of £53,745.39.
This will be in addition to her half share of the net free proceeds from the sale of the
matrimonial home as the parties have agreed themselves.
15.
Such a payment is beyond the defender's means and resources at this time but will
be payable by him when the matrimonial home is sold because of the considerable equity in
the matrimonial home.
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Therefore:
1.
Sustains the pursuer's first plea in law and grants the pursuer's first crave and
divorces the defender from the pursuer.
2.
Sustains in part the pursuer's third plea in law; sustains in part the pursuer's fourth
plea in law; repels the pursuer's fifth plea in law; sustains in part the defender's first plea in
law, sustains the defender's second plea in law; repels the defender's third plea in law;
sustains the defender's fourth plea in law; and grants in part the pursuer's second crave and
grants in part the defender's first, second, and third craves and makes an order for the
parties to jointly appoint agents to sell the marital home by private bargain; ordains both
parties to fully cooperate with the selling agents in all aspects of the marketing and sale of
the property; ordains the parties within seven days of being requested to do so by the selling
agents to execute and to deliver to the purchaser(s) of the matrimonial home such
disposition and other deed as shall be necessary for constituted full rights thereto; failing
which to dispense with such execution and delivery and to authorise the Sheriff Clerk of
Peterhead to execute such disposition and other deeds all as adjusted at their sight shall be
necessary as aforesaid; finds and declares that the net free proceeds of the sale of the
matrimonial home under redemption of any outstanding mortgage account balance and the
deduction of marketing and conveyancing costs should following its sale be divided with
the pursuer receiving a one half share plus, in addition, FIFTY THREE THOUSAND, SEVEN
HUNDRED AND FOURTY FIVE POUNDS AND THIRTY NINE PENCE (£53,745.39)
STERLING, and the defender receiving a one half share less that FIFTY THREE
THOUSAND, SEVEN HUNDRED AND FOURTY FIVE POUNDS AND THIRTY NINE
PENCE (£53,745.39) STERLING which is payable to the pursuer.
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3.
Repels all other remaining pleas in law and dismisses all other remaining craves save
on expenses.
4.
Reserves meantime the question of expenses and directs the sheriff clerk to fix a
hearing on expenses no sooner than four weeks after the date of issue of this judgment.
NOTE
Introduction
[1]
This case concerns the divorce of the parties and disputed financial matters arising
from that divorce. Evidence was led across three days of in-person proof on 4 September
2024, 22 January 2025, and 19 February 2025, with a hearing on submissions conducted over
WebEx on 22 April 2025. Written submissions and authorities were lodged by parties in
advance of that hearing.
[2]
On the morning of 4 September 2024 the pursuer's position changed from that on
record. She no longer insisted on the transfer of the matrimonial property at Cruden Bay
into her sole name. Instead, I was advised that parties were agreed that the property should
be sold and the net free proceeds divided between them, as the defender had craved. For
want of insistence, the pursuer's second crave was therefore repelled prior to the proof
commencing.
[3]
So far as remained to be determined at proof, the pursuer craved the court firstly for
divorce from the defender on the basis of non-cohabitation for a continuous period of
two years or more and, in her fourth crave, for a capital sum payment of £200,000 payable
on such terms as the court deemed appropriate.
[4]
The defender craved the court, firstly, for sale of the property at Cruden Bay;
secondly for a capital sum payment of £20,000, again with the terms of that to be determined
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by the court, and thirdly to make any other expedient order in terms of section 14(2)(k) of
the Family Law (Scotland) Act 1985.
[5]
Both parties, on record, also craved expenses although parties were agreed at
submissions stage that the question of expenses should be reserved meantime.
Proof
Pursuer
[6]
The pursuer lives at the matrimonial home at Cruden Bay. She was 67 years old at
the time of giving evidence. She is past her expected retirement age. The pursuer has
remained in full time employment for financial reasons.
[7]
She married the defender on 26 June 1998. She confirmed there are no children of the
marriage under the age of 16 years.
[8]
She accepted that the defender lives at the same address as her, the matrimonial
property. She explained that she considers that they separated on 3 December 2020 with
that being the date at which a number of issues in the relationship "came to a head".
[9]
The pursuer half owns the matrimonial property. There is a mortgage over the
property in joint names. She has continued to service the mortgage, as has the defender.
Having to service the mortgage is one of the main reasons why she had not retired over a
year previously when she became eligible to.
[10]
The pursuer explained that she previously owned a property at Serald Street in
Cruden Bay. This was a property which she owned prior to meeting the defender. It was a
former council property which she got the "full discount" on, having been a council tenant
for a number of years prior to the purchase. The free proceeds received from the sale of
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Serald Street was approximately £47,000. This was paid into an offset account to reduce the
interest on the mortgage for the present Cruden Bay property.
[11]
The pursuer further explained that she and her siblings had each received a £4,000
gift from her elderly mother a number of years ago, and more recently £5,000 each. All of
that money went into the offset, joint account.
[12]
The pursuer, by reference to banking records, indicated a number of sums received
from her uncle as firstly gifts and then, as I understood her evidence, as an inheritance. In
the documentation lodged as part of the pursuer's fifth inventory of productions she was
able to identify five transfers from and on behalf of her uncle which totalled £15,345.72. She
thought that the total received from her uncle was approximately £35,000. This included an
inheritance of approximately £25,000 which was paid into an account, the documentation for
which was not before the court. This inheritance had, through the relationship, been "used
by us", by which I understood her to be referring to herself and the defender.
[13]
The pursuer indicated that she was aware, either side of the relevant date, of
additional payments made by the defender into the mortgage. He paid around £20,000 in
October 2020, prior to the relevant date, and he also made additional payments in
December 2022 and January 2023, after the relevant date. The first time that she became
aware of these additional payments by her husband was when she was "in this process",
which I understood to be a reference to these divorce proceedings.
[14]
The pursuer explained that, since the date of separation, the defender has purchased
a different property with a valuation of approximately £85,000. The defender has retired
from working because he could afford to. By way of contrast, she could not afford to retire.
[15]
The pursuer understands that a fair market valuation of the matrimonial property
is £330,000, being the valuation provided by a set of surveyors relatively recently. That is a
14
fair estimate of the value of the property both at the relevant date and as at today's date,
with the proviso that there is still an outstanding mortgage in place.
[16]
She confirmed that her husband has a pension held with St James's Place which had
a valuation of £258,210 as at the relevant date. She accepted the valuation of a Baker Hughes
pension at £176,291.37, relating to another employer of her husband's. There is a pension
with SSPA which has been accrued by the pursuer through her employment which had a
value as at 2021 of £59,216.02 and she was content that valuation be used for relevant date
purposes. There was a further Legal & General or ReAssure pension of £24,408.62 from
early 2020 but which valuation, again, could be used for relevant date purposes. There was
a Nest pension in her name with a value of £2,619.98 as at the relevant date.
[17]
Away from pensions, the pursuer confirmed that the balance of a joint account held
with the defender with Virgin Money had a balance of £8,741.56 as at the relevant date and
that there was a TSB account in her sole name with a value of £13,154.97 as at the relevant
date. She explained that this was an old account into which she had paid a lump sum from
her NHS pension.
[18]
By reference to pursuer's production 33 she confirmed that there was, as at the date
of her giving evidence, approximately £8,796.99 outstanding on the remaining mortgage on
the matrimonial property, although at least one further payment would have been made
towards that mortgage since that production was lodged.
[19]
In cross examination, she accepted that when she met the defender he had owned a
property in Aberdeen and that it was sold. She denied, however, that some of the free
proceeds from that sale went towards her own property at Serald Street. When it was
suggested to her that £7,000 was paid from the sale of the defender's property to her
mortgage on Serald Street she denied that under the explanation that the mortgage sat
15
at £7,000 when she met the defender and that was the value of the mortgage as at the date
she sold Serald Street. She accepted, however, that he paid for central heating to be installed
at Serald Street to the value of £2,000, and also a shower, although it was unclear to me if
the £2,000 was said to be inclusive of the shower or otherwise.
[20]
By reference to productions, she was able to confirm that Serald Street was sold in
2002 although, in the time that it was marketed, the property was rented out so that it
covered its own expenses.
[21]
By reference to banking records, she accepted that a number of the inheritances and
gifts she received went into joint accounts held by the parties. The free proceeds from the
sale of Serald Street, which amounted to £47,000, were paid into a joint account and then
used for matrimonial purposes.
[22]
Under cross-examination she accepted that production 25 for the pursuer showed a
number of transfers between two joint accounts held by the parties. This chapter of
evidence was difficult to follow. The production showed a number of payments, almost
balancing, between the two accounts. It was unclear to me what the purpose of these
transfers back and fore was.
[23]
She accepted by reference to production 6/1/3-1 that the defender paid £20,000 into
one of the mortgages in October 2020. The pursuer further accepted that there was a
substantial inheritance received from the defender from his father's estate in November
2020. By reference to 6/1/4 that inheritance in November 2020 was £97,559.61. The
outstanding balance on the mortgage as at the date of separation was £36,842.81.
Overpayments were then made in December 2022 into January 2023 of £5,000, £5,000, £5,000,
£5,000, £750 and £293.60 which was the balancing payment. There was also a payment
of £783.04 between the £750 and £293.60 which was the normal mortgage payment at that
16
time. Production 6/1/2, the pursuer accepted, showed the payments of £5,000, £5,000, £5,000,
£5,000, £750 and £293.60 coming from the accused's personal Virgin Money account. When
it was suggested to her that this had the effect of increasing the equity in the property she
disputed that as "he took a loan against equity". She was not aware that he used sums
inherited from his father to pay the mortgage
[24]
Moving on to pensions, the pursuer firstly accepted that the St James's Place pension
can be traced directly back to employment that the defender had with Combustion
Engineering Ltd. The pension had originally been administered or managed by Legal &
General but was transferred into St James's Place during the currency of the marriage prior
to the relevant date. She was slightly unclear on which company it was that the defender
had worked for in order to accrue this pension, but she was entirely clear that it was
employment which predated the marriage and that, during the marriage, neither she nor the
defender made any form of contribution or efforts towards this pension scheme. She
accepted that the value of £244,564.01, which was the proposed transfer value from Legal &
General to St James's Place, all referred to pre-marriage employment. This pension had
come as a "bit of a bolt from the blue".
Mr Walsh, pursuer's brother
[25]
Edward Walsh, the brother of the pursuer was clear that the parties had separated
over two years previously because it is "pretty apparent" from the ways in which they act
around and to each other. From his knowledge he was aware they were "living separate in
the house". He was clear the marriage is at an end. It had been a happy marriage for a
number of years, but then it had gone downhill.
17
[26]
He was able to confirm, so far as he knew, that the proceeds from Serald Street went
towards the purchase of the matrimonial property in Cruden Bay. He was also able to
confirm that there was money that came from "uncle Jim" and also from "uncle Charlie"
and that the pursuer would have received some of those sums. He thought some of those
sums may also have come via their mother, rather than directly.
[27]
Mr Walsh confirmed that the defender had a property in Aberdeen when the parties
met, and that the property was sold, but he did not know what happened with the proceeds
of that sale. He was unsure if the defender had contributed to works done on Serald Street,
financially or physically.
Ms Paterson, pursuer's sister
[28]
The pursuer's sister gave evidence on 22 January 2025. She was clear that the parties
had separated from one another in late 2020. She is a close confidante of her sister and was
aware that there had been problems in the marriage prior to the end of 2020. She knew that
the parties still lived at the matrimonial home but that they live there separately with the
marriage "definitely" at an end.
[29]
She is aware that her sister, the pursuer, has financial concerns arising from the
separation because she was now having to make plans for accommodation and for
retirement which differed to what she would have anticipated when in the marriage.
[30]
Her sister also was aware that the property at Serald Street had been in the pursuer's
sole name and that the defender had moved into the property before they had purchased the
matrimonial property. The property at Serald Street had been retained for a time and rented
out after the matrimonial property had been purchased. She understood that the sale
proceeds from Serald Street had gone towards the matrimonial home.
18
[31]
The sister also confirmed that their mother had gifted money to all of her children,
including the pursuer. Ms Paterson was also aware of inheritances from an uncle. She was
aware that there were two mortgages on the matrimonial property and also improvements
made to the property, so the inheritances and gifts would have gone towards servicing those
mortgages or paying for those improvements, or some combination thereof.
[32]
She was also aware that the defender had inherited from his father, but she was not
aware of the specifics of that inheritance.
[33]
The sister was not aware of the defender paying any of the mortgage at Serald Street
from proceeds from the sale of his Aberdeen property at the early stages of the parties'
relationship.
[34]
She was unable to assist with the relative incomes of the parties through the
marriage. She was aware, however, that the parties did share their money during the
marriage, with money received going into joint accounts.
[35]
The sister was aware of a payment of £20,000 by the defender towards the mortgage
"just before" the parties separated but she was not aware of further payments by the
defender made in late 2022 and early 2023.
Defender
[36]
The defender is 64 years old. He lives at the matrimonial home. He agreed,
however, that the marriage has irretrievably broken down and that he had not lived as man
and wife with the pursuer for a number of years the date of separation being 3 December
2020. He was able to confirm that the relationship started in 1995 and that he spent time
moving back and fore at first between his property in Aberdeen and the pursuer's property
in Cruden Bay. The defender's parents also lived in Cruden Bay.
19
[37]
He confirmed that there was a £14,000 profit realised from the sale of his property in
Aberdeen. He stated that £7,000 went towards paying the mortgage on Serald Street and
that the balancing £7,000 went towards home improvements at Serald Street. The £7,000
payment towards the mortgage paid off half of what was outstanding at that time. The
defender stated that the pursuer had been the one who had arranged the sale of his property
in Aberdeen because he would be "pretty useless" at organising that.
[38]
The parties purchased the matrimonial property and tried to sell Serald Street, but
there were difficulties with that sale. Serald Street was rented out for a number of years.
When Serald Street was eventually sold the free net proceeds went into "extensive
renovations" for the matrimonial property, turning it into a "substantial house".
[39]
The defender confirmed that his only income during the marriage was his salary. He
had a larger income than the pursuer during the marriage, but everything just went into a
joint bank account and was used for matrimonial purposes. His income, at times, could be
as high as three times as much as his wife's once account was taken of overtime.
[40]
The defender was able to confirm that he had worked at Baker Hughes from 1990
until 2021. By reference to production 4 from the pursuer's first schedule of productions he
was able to confirm that the transfer value of this pension as at the relevant date
was £176,291.37.
[41]
By reference to productions 6 and 7 of the same schedule the defender was able to
confirm the valuation of £59,216.02 as at a date in 2021 (after the relevant date) for his wife's
SPPA pension as well as her ReAssure pension with a valuation of £24,408.62 as at February
2020 (before the relevant date).
20
[42]
The defender confirmed that he had contributed more to pensions through the
currency of the marriage at least in part because of his higher earnings when compared to
the earnings of his wife.
[43]
When referred to production 17 from the pursuer's fourth inventory of productions
he confirmed that he has a further pension with ReAssure which had, as at September 2020
(shortly prior to the relevant date), a value of £4,705.53. He explained that this was a
pension which referred to a period of employment prior to joining Baker Hughes. The
defender described this as the "worst job I ever had and the worst pension scheme ever".
He worked at this job for approximately four years but had only contributed to the pension
scheme for around two years before leaving to join Baker Hughes in 1990. No contributions
have been made to this pension since he ended that employment in 1990.
[44]
By reference to production 8 from the pursuer's first inventory of productions he
confirmed that the Virgin Money account shown had a balance of approximately £9,000 as at
the date of separation. This was the joint account into which his wages were paid and from
which matrimonial expenses were paid. He stated that the pursuer has taken her half of the
funds from it over the years subsequent to the date of separation and that the account has
whittled down although some bills are still paid out from it. By reference to defender's
production 6/2/6 as at a date in 2024 the balance on this account had reduced to £97.73 and
the balance in the account as at the date of his giving evidence would be "similar". The
defender stated that the parties never had much by way of savings through their marriage.
[45]
By reference to the pursuer's production 10 from their first inventory, the defender
was able to confirm that he received the sum of £97,559.61 from his father's estate.
[46]
In the weeks prior to his father's death in early 2020 his father had gifted the
defender £25,000 by cheque. Nothing happened with the cheque initially because of the
21
intervention of COVID and his father's passing. In due course the defender, having
discussed this with the solicitors involved with his late father's estate, cashed the cheque.
[47]
The defender thought that the £20,000 paid into a Virgin Money account in his own
name in September 2020 was some of the £25,000 cheque. This in turn led to £20,000 paid
into the mortgage in October 2020. The other £5,000 was gifted to family.
[48]
The defender was able to explain the terms of defender's production 6/1/4. Where
there was a payment in of just over £5,000 followed by a transfer out of £5,000, that was the
solicitors paying back the costs of his father's funeral and he then transferring that money
into another account. He then explained that the payment in of £97,559.61 in
November 2020 was his share of his father's estate being paid in.
[49]
The defender was able to confirm, by reference to productions 6/4/1 and 6/4/2 that he
paid the £20,000 into the mortgage over the matrimonial home in October 2020 and also that
he paid off that mortgage in around the Christmas of 2022. He explained the slightly
unusual nature of the transfers, containing four transfers of £5,000, was as a result of his own
"inefficiency" resulting in statements which were "untidy, even for me". His wife has
benefited from this by not having to pay her half of the mortgage payments.
[50]
The defender went on to explain that there were two mortgage accounts in place at
the point of separation. By reference to production 6/2/6 there was a mortgage with a value
of £8,941 as at a date in 2024. It was explained this was what was left of the two mortgages
that had been in place for the matrimonial property. The second mortgage had been taken
out to complete renovations on the matrimonial home which had gone beyond the value of
the first mortgage. He explained that the value of that second mortgage was
approximately £11,000 as at the date of separation and had then reduced over the years
since.
22
[51]
The defender did not think that his wife knew anything about the extra payments he
made towards the mortgage until after he had made them.
[52]
The defender then gave evidence about the St James's Place pension. He confirmed
the valuation as at date of separation was £258,210. He confirmed that this retirement
account was opened in May 2019. The source of the funds for the St James's Place
retirement account was a works pension from when he worked for a company called
Cleveland who, themselves, were owned by Combustion Engineering Ltd, an American
company. He worked for them for four years through his late teens, starting work with
them in 1977. By reference to defender's production 6/1/1 the value of the Combustion
Engineering Ltd Retirement Scheme was £244,564.01 in March 2018. The defender had been
unaware of this pension and of his ReAssure pension mentioned earlier until his friend
Mr McAulay, a financial advisor, found them for him, on the defender's instructions.
Mr McAulay then arranged for the Combustion Engineering Ltd retirement fund to be
transferred into St James's Place's management.
[53]
The defender explained that he had had a heart attack previously and was due to
have major heart surgery shortly before the transfer to St James's Place. There were
concerns that the Combustion Engineering Ltd pension required that the defender was
"there to collect it... breathing" as he phrased it. The death benefits were minimal by
comparison.
[54]
The defender confirmed that he made no contributions to the Combustion
Engineering Ltd policy through the currency of the marriage.
[55]
There were delays in the transfer actually taking place. Ultimately, the figure that
was transferred was around £238,000. With the oil crisis in the late 2010s the value of the
pension had decreased in line, he presumed, with the underlying investments.
23
[56]
The defender was fairly uncertain of the details of the pension, in terms of explaining
what role Legal & General had, finding it all "a bit high finance for me to be honest". He
was able to confirm, however, that the St James's Place pension was paid entirely from the
Combustion Engineering Ltd pension with no other contributions.
[57]
The defender explained that he had opened bank accounts subsequent to the date of
separation, but that through the marriage he had only had the account in his own name into
which the inheritance from his father was paid and the joint account which was maintained
and serviced with his wife.
[58]
He explained that, post separation, he has purchased an "old cottage" in Cruden
Bay. From photographs, defender's production 6/2/2, the property is a shell at this time. It
has been valued at £85,000 by surveyors. The source of funds used to purchase this property
was from the sale of his father's house, the net free proceeds of which were divided equally
between he and his sister.
[59]
The defender explained that he makes a little money from caddying but that he has
stopped working otherwise. He is not claiming any pension as yet. He thinks that his Baker
Hughes pension will begin to pay out in 2026. It had a valuation of around £201,000 in 2023,
and the St James's Place pension a value of around £280,000 in December 2023.
[60]
His savings, the residue of his inheritance from his father, lie at around £30,000
or £31,000 as at February 2025.
[61]
The defender was clear that he did not dispute what his wife had to say about
inheritances from family members. He knew that there were some funds paid in by her
mother and inheritances from an uncle. These inheritances and gifts, as far as he was aware,
went into the joint account and then were simply spent on matrimonial matters: "I am sure
it came in handy".
24
[62]
He explained that the end of operating the joint account as a joint account came
about because he paid for golf lessons from it and, in reaction to that, his wife withdrew the
funds from it that she considered she was entitled to. She viewed his golf lessons as not a
shared expense and so removed what she saw as her funds from the joint account.
[63]
In cross-examination he refuted that he kept the majority of the proceeds from the
sale of his Aberdeen property and reiterated his position that he paid £7,000 towards the
mortgage on Serald Street, leaving a balance of £7,000, and that around £2,000 was paid
towards improving Serald Street and that the rest was saved. He confirmed that the
property was rented out after they had moved out into the matrimonial property. He was
prepared to accept that there were four separate groups of tenants, although he could only
remember two in particular at this stage. He confirmed that there was a family that went
into the property at one stage paid for by an insurance company because their house had
flooded. They paid rent at a higher rate than was paid by other tenants, but he was clear
they were not in the property for very long, and certainly not 6 months. His position was
that the rental income simply went into the joint account because there were issues that
arose from Serald Street not selling and from the pursuer not being in work because she had
recently given birth. He confirmed, though, the rental income and the net free proceeds
from Serald Street benefited him as well as his wife.
[64]
The defender was able to confirm that his share of the sale of his father's address was
approximately £115,000.
[65]
The defender confirmed that he made the payments to clear off the mortgage on the
matrimonial property in late 2022. He indicated that he did this as, however "foolish" it
was, he felt that it was correct to do so. His solicitor had reacted with incredulity when he
told him what he had done. His wife had been thankful.
25
[66]
The defender recalled that various discussions took place with his wife and the
financial advisor about putting the money from the Combustion Engineering pension
towards something the advisor had suggested that it would be possible to take out 25% of
the value of the pension to go towards whatever they wished, which could include paying
off the mortgages on the matrimonial property. The defender explained that ultimately the
decision was taken to transfer the full value of the Combustion Engineering Ltd pension into
St James's Place. The management at St James's Place, initially, would only accept a pension
pot transfer of in excess of £300,000, he thought. Efforts were made to consolidate the two
large pensions Combustion Engineering and Baker Hughes but Aviva, managing the
Baker Hughes pension, would not allow that. The defender understood that the
Combustion Engineering pension, in the event that he died before collecting it, would be
worth approximately £5,000. He then arranged with Mr McAulay for the transfer to take
place just of the Combustion Engineering pension very quickly prior to his major operation
"to keep the money safe for the family". In response to a question about whether the
financial advisor had explained that this would make the pension matrimonial property, the
defender indicated that he was not given that advice "but at that time I would still have
transferred it over... I thought, then, we were a family."
[67]
The defender explained that he regretted his decision to stop working, and while he
understood that his wife had not been able to give up work he was not hugely sympathetic:
"I didn't start the divorce." He had around £30,000 or £31,000 in savings at this time, and he
felt that his property in Cruden Bay would take around about that figure to be completed to
a habitable standard.
26
Mr McAulay, financial advisor
[68]
Mr McAulay the financial advisor was the last witness called upon. He confirmed
the value of the St James's Place retirement account, as at the date of separation,
was £258,210. He recalled that he had advised the defender to consolidate his various
separate pensions into one pension with St James's Place. He confirmed that he got a work
history from the defender and then wrote to various parties to investigate the values of any
pensions. He recalled that when he told the defender about the value of the Combustion
Engineering pension the defender was "pleasantly surprised". He confirmed that any
changes in the value of the pension came about from changes in the underlying investments,
there being no contributions made by the defender. He could not recall any discussions in
particular about drawing down any of the value of the pension, and it would not have been
within his remit to give advice on what any drawn down monies could be spent on.
Pursuer's Submissions
[69]
On behalf of the pursuer, I was invited to sustain their first, third, fourth, fifth, and
sixth pleas in law; dismiss the defender's first, second, third, fifth, and sixth pleas in law;
and to repel the defender's fourth plea in law as unnecessary, the pursuer's second plea
having already been repelled through want of insistence.
[70]
It was confirmed that the test for granting decree of divorce is the irretrievable
breakdown of the marriage in terms of section 1(1) of the Divorce (Scotland) Act 1976. The
pursuer relied upon the parties having been separated for in excess of two years, with the
parties not having been living together "as man and wife" since December 2020. Living at
the same address was "generally important" but "not conclusive".
27
[71]
I was referred to the provisions of the Family Law (Scotland) Act 1985 dealing with
financial provision on divorce with an emphasis on the test in section 8(2) that a court shall
make an order for financial provision if justified by the principles and if reasonable having
regard to the resources of the parties.
[72]
The terms of section 10(5) were referred to, as well as the Divorce etc (Pensions)
(Scotland) Regulations 2000 in relation to the valuation of pensions.
[73]
It was emphasised that, sections 9(1)(a) and 10(1) taken together, the net value of the
matrimonial property is to be shared fairly between the parties and that will mean equally
or in such other proportions as are justified by "special circumstances". Reference in this
regard was made to Adams v Adams (No 1) 1997 SLT 144 and Jacques v Jacques 1997 SC 20.
[74]
The defender was characterised as a witness who saw the pursuer's assets as
matrimonial but saw his assets as his own. This, it was submitted, was the basis for his
position that the St James's Place pension policy should not be counted as matrimonial
property. It was highlighted that no evidence was led to show the value of the predecessor
policy as at the date of marriage or any effort to show what value of the predecessor policy
was attributable to the marriage. The defender was further criticised for giving evidence
that was he `living frugally' when he had inherited substantial sums in recent years.
[75]
By way of contrast, I was invited to find the pursuer as someone who, while nervous,
had given her evidence in a clear and straightforward manner. It was submitted that she
was open, honest, and consistent in her position. She was said to be clearly devastated by
the breakdown of the marriage and the effect that this had on her now having to plan for a
very different retirement to the one she had previously envisaged. She had given clear
evidence of the contributions she had made to the matrimonial coffers, including by
28
reference to the sale of her previous property at Serald Street and from subsequent
inheritances and gifts from family members. The defender had "grudgingly" conceded this.
[76]
I was invited to "disregard" the defender's evidence that he had paid towards Serald
Street from the sale of his property in Aberdeen as this was not accepted by the pursuer and
not vouched in any documentation. By way of contrast, the pursuer had vouched, it was
said, all of her economic disadvantages by reference to the sale of Serald Street and of
monies received from her family.
[77]
Mr McAulay was criticised as being a personal friend of the defender's but otherwise
his role in proceedings, namely finding the Combustion Engineering Ltd pension, was said
to be limited. He had noted, however, that the defender was `pleasantly surprised' by the
discovery of that pension.
[78]
The siblings of the pursuer were said to be both credible and reliable, the pursuer's
sister confirming the pursuer's contributions to the matrimonial coffers from her Serald
Street property sale as well as the gifts and inheritances from family members in more recent
years. It was submitted that there was `no slant' to the sister's evidence.
[79]
It was submitted that decree of divorce should be granted because the parties have
not lived as husband and wife, despite sharing an address, since 3 December 2020. The
assets as at the relevant date consisted of the following:
·
The matrimonial home worth an estimated £330,000 (at 3 July 2024)
·
The defender's St James's Place pension worth £258,210
·
The defender's Baker Hughes pension worth £176,291.37
·
The pursuer's Nest pension worth £2,619.98
·
The pursuer's SPPA pension worth £59,216.02
29
·
The pursuer's Legal & General (ReAssure) pension worth £24,408.62 (at 24
February 2020)
·
The defender's Legal & General (ReAssure) pension worth £4,705.53 (at 16
September 2020)
·
The parties' Virgin Money bank account with a balance of £8,741.56
·
The pursuer's personal TSB bank account with a balance of £13,145.97
·
The defender's personal Virgin Money bank account with a balance of
£97,654.71
·
The outstanding mortgage on the matrimonial home was, as present, £7,594
[80]
It was accepted that the defender has made extra contributions to a mortgage over
the matrimonial property since the end of the relationship.
[81]
It was confirmed that parties agree that the matrimonial property should be sold.
[82]
It was submitted that the free proceeds of the Serald Street property owned by the
pursuer prior to her marriage to the defender had been approximately £47,000 which had
then gone towards matrimonial property. The matrimonial coffers had also benefitted from
payments in of the inheritances and gifts from the pursuer's family over the years.
[83]
It was submitted that the defender had been unaware of the Combustion
Engineering Ltd pension until it was discovered by Mr McAulay. Ultimately a decision was
made by the defender to transfer the pension into St James's Place.
[84]
Jacques in relation to the now St James's Place pension. It was submitted that the whole
value of the St James's Place pension fell to be considered as matrimonial property. The
defender's agent was criticised for not having carried out any CETV calculations in relation
to the Combustion Engineering pension, with the defender's primary position that the entire
30
pension should be left out of account being described as "neither fair nor equitable",
depriving the pursuer of an asset "to which she is clearly entitled to at least some share".
The "source of funds" argument was said not to justify a "complete disregard" of the asset
as a matrimonial asset.
[85]
The defender was said to have given evidence that he made no active contribution to
the pension during the marriage which, it was argued, should result in that asset being left
out of account. This, it was submitted, "is wrong in law". It was submitted that "nothing"
had been said as to why excluding the entire asset from consideration as matrimonial
property would be fair in the whole circumstances. It was accepted that the pension had
nothing to do with any economic efforts of the parties during the marriage, but that was
"fairly common" and not a sufficiently "special" circumstance that would allow exclusion of
that asset from the matrimonial pot. It was submitted that apportionment had no relevance
in this case because the St James's Place policy had been created during the marriage. The
cases of F v R 2018 Fam LR 146 and Douglas v Douglas 2019 Fam LR 12 were distinguishable
as not being analogous in any way to the factual matrix before this court. It was submitted
that "at best" for the defender, a 60/40 split may be realistic, but the primary position
strongly advanced was that an equal split of the St James's Place pension was appropriate.
[86]
The pursuer was noted to have had non-matrimonial property, namely her property
at Serald Street and her family gifts and inheritances totalling tens of thousands of pounds.
It was submitted that some recognition of these sums should be given in any overall division
of the matrimonial pot. It was acknowledged that some of these sums had gone towards the
matrimonial property in Cruden Bay and so the pursuer gained some benefit from them in
any event reflected in her share of the free net proceeds from the anticipated, eventual, sale
31
of that property. M v M 2014 Fam LR 116 and Galloway v Galloway 2003 Fam LR 10 were
referred to on this point.
[87]
The defender was criticised for seeking £20,000 for the payments to the mortgage
post relevant date when he had benefited personally from those payments by at least half of
that value in the consequential increase of the net value of the matrimonial property. It was
submitted that the extra payments he made prior to the relevant date were not recoverable
in these proceedings. I was asked, effectively, to offset his extra payments to the mortgage
with the inheritances and the Serald Street free proceeds paid into matrimonial coffers by
the pursuer through the marriage.
[88]
It was accepted that the defender's Virgin Money account effectively reflected some
of the inheritance from his father's estate and so was not properly to be considered
matrimonial property but was still to be considered a resource available to the defender.
[89]
The pursuer invited me to allow parties to deal with the division and sale of the
matrimonial property on their own with an equal split between parties of that asset, the
court not requiring to make any order in that regard. Leaving the matrimonial home out of
account, the total value of the matrimonial pot was said to be £547,339.05. Half of that
was £273,669.53, and the pursuer could expect to receive no less than that figure. She
had £103,761.37 of her own assets as at the relevant date, so she required a balance
of £169,908.16 to be transferred to her. It was noted that the defender has retired
"comfortably" while the pursuer has "not had that luxury".
32
Defender's Submissions
[90]
The defender was not opposed to the granting of divorce but moved the court to
order the sale of the matrimonial property at Cruden Bay and to order payment by the
pursuer to the defender of £20,000.
[91]
It was submitted that the Family Law (Scotland) Act 1985 required the court to firstly
establish the total net value of matrimonial property available for division; secondly to
determine whether any section 9 principles apply to justify departure from the presumption
of equal division and to justify the making of any other orders for financial provision; and
thirdly to determine what orders are necessary standing the terms of section 8 to implement
a fair division within the framework of the Act.
[92]
In terms of the identification of matrimonial assets, I was invited to have regard to a
provisional schedule of matrimonial property and liabilities as at the relevant date. Some of
the valuations were arrived at on a `broad brush' approach. In terms of the defender's Legal
& General or ReAssure pension, it was submitted that this pension arose solely from work
carried out by the defender prior to the marriage. A valuation was available from
September 2020 which was "of around £4,800" which could be used as a relevant date
valuation. Although no documentation was available to show precise dates, if the defender
was nominally taken to have started that pension on 1
January 1990 then a matrimonial asset
apportioned valuation in terms of the Divorce etc (Pensions) (Scotland) Regulations 2000
would produce an apportioned matrimonial asset valuation of approximately £3,500.
[93]
I was invited to find that the sum of money, £97,559.61, found in the Virgin Money
bank account was an inheritance from the estate of the defender's late father paid in shortly
before the relevant date and, as such, clearly did not qualify as matrimonial property. It was
noted that the inheritance simply sat in an account prior to the relevant date and "did not
33
intermingle with other assets of the marriage or was not otherwise converted into
matrimonial property."
[94]
In terms of matrimonial liabilities, the only debts spoken to were two mortgages over
the matrimonial home. The relevant date outstanding value of one mortgage
was £36,842.81, while with the other mortgage no relevant date valuation was provided. I
was invited to find that it would have been around £14,000 as at the relevant date, by
reference to the valuation of approximately £9,000 in 2024.
[95]
Using these valuations, I was invited to find that the matrimonial assets were as
follows:
·
St James's Place pension with a valuation of £258,210.00 in the defender's name
·
Baker Hughes pension with a valuation of £176.291.00 in the defender's name
·
Nest pension with a valuation of £3,320.63 in the pursuer's name
·
SPPA pension with a valuation of £59,216.02 in the pursuer's name
·
L&G or ReAssure pension with a valuation of £24,408.62 in the pursuer's name
·
The matrimonial home with a valuation of £330,000.00 in joint names
·
L&G or ReAssure pension with an apportioned valuation of £3,500.00 in the
defender's name
·
A TSB bank account with a balance of £13,145.97 in the pursuer's name
·
A joint bank account with a balance of £8,741.56 in joint names
[96]
The liabilities were the two mortgages, and using the two values one actual, one
estimated, the combined matrimonial liabilities were £50,842.00.
[97]
The net matrimonial property, therefore, had a valuation of £825,991.80, of
which £287,899.56 was joint; the defender had £438,001.00, and the pursuer had £100,091.24.
34
[98]
I was then addressed on special circumstances applying to the St James's Place
pension policy. The defender worked at the Cleveland factory in Peterhead from
August 1977 when he left school as a 17 year old. He left that employment in 1981. He had
forgotten about any pension from that employment, but the pension was found by
Mr McAulay as part of financial planning instructed by the defender. The defender had
been surprised at the value of the pension.
[99]
The policy was instructed to be transferred in 2018, but the policy was not
transferred until 2019. He was able to date the transfer by reference to a major operation he
undertook later that week. The value of the policy with St James's Place was wholly derived
from the transferred value of the Combustion Engineering policy. The defender confirmed
that he had not contributed to the value of the Combustion Engineering policy since he left
that employment in 1981. Neither he nor the pursuer had paid anything into the St James's
Place policy following the transfer.
[100]
It was submitted that Mr McAulay corroborated the defender's evidence. He
confirmed that he was instructed for financial planning and consolidation of pensions, that
he had found the Combustion Engineering pension and that the defender instructed the
transfer of the pension. The transfer was delayed and did not take place until 2019. He
confirmed that he was not aware of any payments into the St James's Place policy by the
parties and that the sole reasons for increases in its valuation would be increases in the value
of the underlying investments.
[101]
Ultimately, I was invited to find both the defender and Mr McAulay credible and
reliable on the value, history, and source of funds of the St James's Place policy. It was
noted that the pursuer accepted the source of the St James's Place pension was from a
pension that the defender had accrued from employment prior to their marriage and that
35
any increase in its value, and then after its transfer to St James's Place, was due to increases
in the value of the underlying investments with no contributions made by the parties to that
pension during the marriage.
[102]
It was submitted that there were special circumstances which applied in this case
such that the St James's Place policy should not be divided equally between the parties. In
particular, reference was made to section 10(6)(b) of the 1985 Act, with the source of funds of
the policy not being "derived from income or efforts of the parties during the marriage". In
this regard I was also referred to the opinion of Lord Clyde in the case of Jacques v Jacques
1997 SC(HL) 20 where a three stage test was laid out, it was submitted, in the following
terms:
(i)
Do the averred facts and evidence support the existence of special
circumstances?
(ii)
Are the special circumstances sufficiently special to justify an uneven division?
(iii)
If there is to be a departure from even division then what is the scale of that
departure to be? How is the asset in question or the overall matrimonial
property to be divided?
It was submitted that the history of the policy was a special circumstance and those origins
were sufficiently special to justify a departure from the presumption of equality.
[103]
was noted that special circumstances was not a feature directly addressed by the court
which was principally concerned with the definition of membership of a pension policy.
The Supreme Court held that membership included periods of time where no contributions
were made to the policy. The court's judgment did, however, make it clear that special
36
circumstances could thereafter be relied upon by parties as a basis for an unequal division,
which was a matter for the court of first instance to determine.
[104]
It was accepted that had the Combustion Engineering pension not been transferred
then there would have been apportionment and some amount of the pension policy would
have qualified as matrimonial property even with no contributions to the policy through the
marriage. However, even with that being so, it would have been possible, and correct, to
argue that special circumstances existed justifying the exclusion of the matrimonial portion
from matrimonial property.
[105]
It was noted that in the McDonald case, by way of contrast to the instant case, the
husband had worked for a time during the marriage with the company which gave rise to
the pension policy.
[106]
I was then directed to the McDonald v McDonald Inner House decision (2016 SC 118),
where Lady Smith gave a dissenting opinion which, ultimately, was in accordance with the
Supreme Court. She emphasised the importance of fairness in the division of matrimonial
assets, particularly so in the context of assets which have nothing to do with the
contributions of either party during the currency of the marriage.
[107]
As a hypothetical, I was invited to consider that, had the Combustion Engineering
policy not been transferred but had the same value as the St James's Place policy at the
relevant date, then approximately £133,813.24 would have been the apportioned
matrimonial value of that asset, with a start date of employment of August 1977, marriage in
June 1998, and then the December 2020 relevant date. It was submitted that this, subject to
considerations of special circumstances, would have resulted, with an equal division of the
matrimonial portion, with the defender retaining approximately 74% of the value, and the
pursuer receiving 26%.
37
[108]
It was submitted that the asset "plainly" had nothing to do with the economic efforts
of either party during the marriage and the wealth created by those efforts during the
marriage. I was referred to a suite of authorities, discussed below: Sweeney v Sweeney 2002
FA LR 126; F v R 2018 FAM 146; EP or G v GG 2016 Fam LR 30; and Douglas v Douglas 2019
Fam LR 12. These authorities were all relied upon as cases in which the courts had found
that there were special circumstances justifying removing a particular asset or assets entirely
out of consideration when calculating the matrimonial `pot'.
[109]
It was acknowledged that there was a transfer of the asset, the pension, in the instant
case. It was acknowledged that the Combustion Engineering policy, in part, would have
qualified as a matrimonial asset in any event. It was submitted, however, that the key issue
is that the asset was attributable to a sole pre-matrimonial source the source of the funds in
the St James's Place policy was "as clear as day". The increase in value over the years since
the employment had ended was not to do with the efforts or income of either party during
the marriage. The fact that there was a transfer produced "no real change in the asset"
which was not intermingled nor mixed up with other assets or property. The funds are
derived solely from the defender's efforts solely during his employment long before the
marriage and not the joint efforts of the parties.
[110]
An esto position was also advanced that, should the court not totally exclude the
asset from consideration then a 95/5 division would be equitable on a "broad brush"
analysis. Again, a suite of authorities were discussed in this regard, including JA v WA 2017
2017 Fam LT 84; Campbell v Campbell (2008) CSOH 101; R v R 2000 Fam LR 43; Davidson v
Davidson 1994 SLT 506; Latter v Latter 1990 SLT 805; and the terms of the Scottish Law
Commission Report on Aliment and Financial Provision from 1981 wherein it was reported
that the source of funds should justify a departure from equal sharing.
38
[111]
I was then addressed on the issue of economic advantages and disadvantages
sustained by the parties during the marriage. Firstly, I was invited to accept the defender's
evidence relating to the £14,000 net free proceeds from the sale of his Aberdeen property
from which he spent £7,000 on paying down the pursuer's mortgage on Serald Street and
spent further money on helping renovate and develop Serald Street. The defender, to his
credit, accepted that the net free proceeds from Serald Street went towards matrimonial
purposes, principally the renovations carried out on the matrimonial home.
[112]
By way of contrast, the pursuer was characterised as inconsistent and evasive, at
times accepting that the defender had made some contributions but then seeming to depart
from that position at other times. It was submitted that she was attempting to minimise the
financial contributions made by the defender to the marriage and maximise her own.
[113]
In any event, it was noted that there were no pleadings on record for any economic
disadvantage for the pursuer nor economic advantage for the defender.
[114]
Mr Walsh, the brother of the pursuer, was referred to for his evidence that it was
possible that the defender had invested money into Serald Street and that the defender had
contributed to works done at that property.
[115]
It was submitted, going beyond the lack of case on record, that any consideration of
any alleged economic disadvantage sustained by the pursuer had to be considered in light of
the defender's own contributions from his sale of his Aberdeen property and the lack of any
specific evidence as to what happened to the net free proceeds from Serald Street's sale. It
was further noted that the defender had, in any event, offset any advantage he had received
by his own contributions to the marriage, being a higher earner during the marriage. The
pursuer had been "enriched not impoverished" by the marriage.
39
[116]
Turning to consider the various gifts and inheritances received by the pursuer, it was
submitted that while they were accepted by the defender, he was unclear what they were
spent on and how he had been advantaged. The pursuer was criticised for not leading
evidence to demonstrate how the defender had been advantaged and she disadvantaged by
the manner in which she dealt with her inheritances and gifts. Again it was noted that there
were no relevant averments surrounding this issue. It was noted that both parties, it
appeared, pooled their resources in the joint account which paid their joint liabilities
through the marriage. It was impossible to attribute any of the balance remaining in the
bank account as at the relevant date to any gifts or inheritances received by the pursuer. The
cases of Kennedy v Kennedy 204 SLT (Sh Ct) 102 and De Winton v De Winton 1998 Fam LR 110
were referred to.
[117]
In terms of the extra payments towards the mortgage, it was submitted that the
defender's evidence was clear in this regard and that the extra payments were evidenced
and quantifiable. The payment of £20,000 made in October 2020, prior to the relevant date,
had come from the defender's father and the encashed cheque, which encashing had been
delayed by the passing of the defender's father and COVID. There were then further
payments made in December 2022 and January 2023 which totalled £21,043. It was
submitted that the pursuer did not seriously challenge this chapter of evidence and the court
was invited to accept it and find that the pursuer benefited by both the reduction in her
mortgage payments and the increase in her equity in the matrimonial home.
[118]
The court was invited to give credit to the defender for the extra payments under
either section 9(1)(a) or (b) or, alternatively, as special circumstances. MacDonald v
MacDonald 2023 Fam LR 2, Douglas v Douglas 2019 Fam LR 12, Farrell v Farrell 1990
SCLR 717, and Kerrigan v Kerrigan 1988 SCLR 603 were all referenced in this regard.
40
[119]
I was then addressed on the question of resources. No order can be made unless the
court is satisfied that any order made would be reasonable having regard to the resources of
the parties. It was submitted that no order can be made that a party cannot meet. It was
noted that the defender has depleted his resources in the years since the relevant date. He
has stopped working, other than irregular and low level income as a caddy. No pensions
are yet being paid to him, and he is living on the inheritance from his father's estate. He has
purchased his own property but it is in a poor condition and will requirement payments to
be made towards it to bring it up to a habitable standard. His future resources and assets
are contingent on the outcome of these proceedings.
[120]
It was submitted that the pursuer retaining her own property, inclusive of her half
share of the matrimonial property, plus a £200,000 payment from the defender was "not... a
remotely fair division by any metric under the Act." It was submitted that the pursuer was
craving, by her £200,000 in addition to her own half share of the assets, approximately 56%
of the matrimonial assets, or approximately 82% if the St James's Place pension policy was
excluded from consideration. Had the pursuer maintained her crave for the transfer of half
of the matrimonial property into her name, together with the £200,000 capital transfer, that
would have been over 100% of the matrimonial property if the St James's Place policy were
excluded from consideration, or approximately 76% if that policy were included.
[121]
It was submitted, ultimately, that the court has "immense discretion" on the division
of matrimonial property in order to achieve a fair division.
[122]
I was invited to leave the joint Virgin Money account out of account because,
although it had a value as at the relevant date, it had been depleted by the time of the proof,
with both parties making withdrawals from it and by continued servicing of joint liabilities.
I was invited to exclude the St James's Place pension policy from consideration, together
41
with the much smaller Legal & General or ReAssure policy, in light of the submissions
summarised above. The matrimonial property should be divided equally except by
reference to the defender's additional payments towards the mortgage. With both parties
having contributed to the growth in equity during the marriage, which came about through
a joint effort with the pooling of resources and income, an equal division was appropriate. I
was invited to consider a pension sharing order for any balance found due to the pursuer. It
was submitted that it would be unfair for any balancing payment to the pursuer to be met
out of non-matrimonial property when there were matrimonial assets, including the not
insignificant Baker Hughes pension scheme, available.
[123]
In the hearing on submissions, parties were agreed that the question of expenses
should be reserved until such time as parties have had the opportunity to see and consider
the terms of the court's judgment. Similarly, ultimately, parties were in agreement that,
while the matrimonial home was to be sold and divided, there was no agreement in place as
yet on how to divide the net free proceeds. That resulted in the net free proceeds being
available to the court in terms of taking account of how to transfer any assets between the
parties, should such be appropriate to achieve a fair division of the matrimonial property.
Applicable Law
[124]
Reading the Divorce (Scotland) Act 1976 as amended shortly and so far as relevant:
"(1)
In an action for divorce the court may grant decree of divorce if, but
only if, it is established in accordance with the following provisions of this Act
that-
(a)
the marriage has broken down irretrievably,
...
(2)
The irretrievable breakdown of a marriage shall, subject to the following
provisions of this Act, be taken to be established in an action for divorce if...
42
(e)
there has been no cohabitation between the parties at any time
during a continuous period of two years after the date of the marriage
and immediately preceding the bringing of the action."
[125]
Section 13, the interpretation section, defines "cohabitation":
"(2)
For the purposes of this Act, the parties to a marriage shall be held to
cohabit with one another only when they are in fact living together as man and
wife; and "cohabitation" shall be construed accordingly."
[126]
The central legislation to the instant action is the Family Law (Scotland) Act 1985 as
amended which, inter alia, governs financial provision in divorce actions. So far as relevant:
"8(1) In an action for divorce, either party to the marriage... may apply to the
court for one or more of the following orders-
(a)
an order for payment of a capital sum to him by the other party
to the action;
(aa)
an order for the transfer of property to him by the other party to
the action;
...
(baa) a pension sharing order;
...
(c)
an incidental order within the meaning of section 14(2) of this
Act.
(2)
Subject to sections 12 to 15 of this Act, where an application has been
made under subsection (1) above, the court shall make such order, if any, as is-
(a)
justified by the principles set out in section 9 of this Act; and
(b)
reasonable having regard to the resources of the parties."
[127]
Section 9, as amended and so far as relevant, reads:
"(1)
The principles which the court shall apply in deciding what order for
financial provision, if any, to make are that-
(a)
the net value of the matrimonial property should be shared fairly
between the parties to the marriage...
(b)
fair account should be taken of any economic advantage derived
by either person from contributions by the other, and of any economic
disadvantage suffered by either person in the interests of the other
person or of the family;
...
(2)
In subsection (1)(b) above and section 11(2) of this Act-
`economic advantage' means advantage gained whether before or during the
marriage... and includes gains in capital, in income and in earning capacity,
and `economic disadvantage' shall be construed accordingly;
43
`contributions' means contributions whether before or during the marriage...
and includes indirect and non-financial contributions and, in particular, any
such contribution made by looking after the family home or caring for the
family."
[128]
I have omitted references above to the principles referring to the economic burden of
caring for children under the age of 16 years; financial dependence; and serious financial
hardship as none of those principles are pled by the parties in this case.
[129]
Section 10, as amended and relevant, reads as follows:
"(1)
In applying the principle set out in section 9(1)(a) of this Act, the net
value of the matrimonial property... shall be taken to be shared fairly between
persons when it is shared equally or in such other proportions as are justified
by special circumstances.
(2)
Subject to subsection (3A) below, the net value of the property shall be
the value of the property at the relevant date after deduction of any debts
incurred by one or both of the parties to the marriage...
(a)
before the marriage so far as they relate to the matrimonial
property... and
(b)
during the marriage...
which are outstanding at that date.
(3)
In this section "the relevant date" means whichever is the earlier of-
(a)
subject to subsection (7) below, the date on which the persons
ceased to cohabit...
(3A)
In its application to property transferred by virtue of an order under
section 8(1)(aa) of this Act this section shall have effect as if-
(a)
in subsection (2) above, for `relevant date' there were substituted
`appropriate valuation date';
(b)
after that subsection there were inserted-
(2A)
Subject to subsection (2B), in this section the "appropriate
valuation date" means-
(a)
where the parties to the marriage... agree on a
date, that date;
(b)
where there is no such agreement, the date of the
making of the order under section 8(1)(aa).
(2B)
If the court considers that, because of the exceptional
circumstances of the case, subsection (2A)(b) should not apply,
the appropriate valuation date shall be such other date (being a
44
date as near as may be to the date referred to in subsection
(2A)(b)) as the court may determine."; and
(c)
subsection (3) did not apply.
(4)
Subject to subsections (5)... below, in this section and in section 11 of
this Act "the matrimonial property" means all the property belonging to the
parties or either of them at the relevant date which was acquired by them or
him (otherwise than by way of gift or succession from a third party)-
(a)
before the marriage for use by them as a family home or as
furniture or plenishings for such home; or
(b)
during the marriage but before the relevant date.
...
(5)
The proportion of any rights or interests of either person-
...
(b)
in any benefits under a pension arrangement which either
person has or may have (including such benefits payable in respect of
the death of either person,
which is referable to the period to which subsection (4)(b)... above refers shall
be taken to form part of the matrimonial property...
...
(6)
In subsection (1) above `special circumstances', without prejudice to the
generality of the words, may include-
...
(b)
the source of the funds or assets used to acquire any of the
matrimonial property... where those funds or assets were not derived
from the income or efforts of the persons during the marriage;
(c)
any destruction, dissipation or alienation of property by either
person;
(d)
the nature of the matrimonial property... the use made of it
(including use for business purposes or as a family home) and the extent
to which it is reasonable to expect it to be realised or divided or used as
security;
(e)
the actual or prospective liability for any expenses of valuation
or transfer of property in connection with the divorce..."
[130]
Section 11, as amended and so far as relevant, reads:
"(1)
In applying the principles set out in section 9 of this Act, the court shall
have regard to the extent to which-
(a)
the economic advantages or disadvantages sustained by either
person have been balanced by the economic advantages or
disadvantages sustained by the other person, and
(b)
any resulting imbalance has been or will be corrected by a
sharing of the value of the matrimonial property... or otherwise."
[131]
So far as potentially relevant, and as amended, section 12 states:
45
"(1)
An order under section 8(2) of this Act for payment of a capital sum or
transfer of property may be made-
(a)
on granting decree of divorce... or
(b)
within such period as the court on granting the decree may
specify.
(2)
The court, on making an order referred to in subsection (1) above, may
stipulate that it shall come into effect at a specified future date.
(3)
The court, on making an order under section 8(2) of this Act for
payment of a capital sum, may order that the capital sum shall be payable by
instalments."
[132]
Section 14, which deals with incidental orders, so far as potentially relevant and as
amended, reads as follows:
"(1)
Subject to subsection (3) below, an incidental order may be made under
section 8(2) of this Act before, on or after the granting or refusal of decree for
divorce...
(2)
In this Act, `an incidental order' means one or more of the following
orders-
(a)
an order for the sale of property;
...
(j)
an order as to the date from which any interest on any amount
awarded shall run;
...
(k)
any ancillary order which is expedient to give effect to the
principles set out in section 9 of this Act or to any order made under
section 8(2) of this Act."
[133]
Section 27 is the interpretation section for the 1985 Act. As well as defining pension
arrangements and pension sharing orders, subsection (2) adopts similar language to the
Divorce (Scotland) Act 1976 in stating that cohabitation refers to "in fact living together as
man and wife."
[134]
The Divorce etc (Pensions) (Scotland) Regulations 2000 provides the apportionment
equation for pensions. Taken short, the matrimonial value of a pension is calculated by
simply taking the value as at the relevant date and then multiplying that by the ratio of the
years of membership during the marriage and the years of membership overall.
46
[135]
The defender referred me to the Scottish Law Commission report on Aliment and
Financial Provision from 1981 which was behind the 1985 Act. At paragraph 3.79 of the
report, under a topic of source of funds or assets:
"Property bought after the marriage may have been paid out of funds owned
by one party at the time of the marriage. It may represent merely a switching of
investments. We think that this should justify a departure from equal sharing.
Similarly, we think that a departure from equal sharing could be justified if the
source of funds assets used by a spouse to acquire property during the
marriage was a gift from a third party (such as a spouse's parent). The
underlying principle is the sharing of property acquired by the spouses' efforts
or income during the marriage. Property acquired wholly or partially with
funds or assets derived from other sources need not be shared equally. The
possible combinations of circumstances which might arise are such that, as
noted above, we prefer to deal with this question by giving the court a
discretion rather than by laying down any rule."
[136]
Latter v Latter 1990 SLT 805 was advanced as an authority dealing with unequal
division of matrimonial property in reflection of special circumstances. I found the case,
however, to be one very much centred on its own facts and circumstances, beyond a single
passage where Lord Marnoch opined:
"...it seems to me that the principal objective of the legislation is to secure an
equitable division of the wealth accruing to the parties through their own
industry, effort and savings during the period of communion and I am in no
doubt that to a very material extent the value of the shareholding at the relevant
date reflected wealth of that description."
[137]
The case of Farrell v Farrell 1990 SCLR 717 was referred to for the manner in which
the court dealt with post-separation mortgage payments. In that case the court considered
that the pursuer having assumed all of the joint mortgage responsibilities and maintained
the payments on her own post-separation represented an economic disadvantage for the
pursuer and an economic advantage for the defender. Special circumstances were,
therefore, made out for an unequal division of matrimonial assets.
47
[138]
In terms of financial provision in divorce cases generally, I was referred to the case of
Little v Little 1990 SLT 785 and the lead opinion of the then Lord President Hope which
contains the following after a discussion of the history of divorce legislation and a
consideration of the 1985 Act:
"... despite all the detail much is still left to the discretion of the court. This is
clear from an examination of section 8(2), which provides that the court shall
make such order, if any, as is justified by the principles set out in section 9 and
reasonable having regard to the resources of the parties. The concept of sharing
the net value of the matrimonial property fairly, the flexibility which is given by
the expression "special circumstances" in section 10(6) and the repeated
references in section 11 to all the other circumstances of the case serve to
emphasise that, despite the detail, the matter is essentially one of discretion,
aimed at achieving a fair and practicable result in accordance with common
sense. It remains as important as it always has been that the details should be
left in the hands of the court of first instance and not opened up for
reconsideration on appeal."
[139]
I also had my attention drawn to a later passage in Lord Hope's dicta which may
have relevance to the instant case:
"The significance of section 10(6)(d) is that the court can in its discretion take
account of the nature or use of individual items of matrimonial property in
whatever way it thinks fit, so it can if it thinks appropriate refrain from valuing
a property if to do so will have no practical result. Moreover, since section 10(1)
permits the net value of the matrimonial property to be shared, if not equally,
in such other proportions as are justified by special circumstances, the
discretion extends to treating some items of matrimonial property differently
from others according to their nature or the use to which they are put."
In the Little v Little case, the Lord Ordinary at first instance deliberately left some property
out of consideration, such as personal effects and cars which were retained and used
separately by the divorcing spouses.
[140]
The case of Reynolds v Reynolds 1991 SCLR 175 was referred to for the simple
proposition that it would be open to the court to make financial provision through
incidental orders even to the extent, potentially, of interfering with the net free proceeds of
the sale of the, as yet unsold, matrimonial home.
48
[141]
In Davidson v Davidson 1994 SLT 506 the sole matrimonial property was a farm worth
approximately £177,000. It had been purchased by the pursuer who had liquidated
inherited assets to do so. The defender had made no contribution to the purchase.
Lord Maclean made clear that where property was acquired by a party to a marriage during
the marriage but prior to separation, then it is matrimonial property, even if it is purchased
with funds which have been inherited or gifted to them. The funds themselves would not
be matrimonial property, but once converted, the new property would be. In the case the
defender was awarded a capital sum of £60,000, being just over one third of the value of the
farm.
[142]
Parties were agreed before me on the importance of Jacques v Jacques 1997 SC (HL) 20
to financial provision divorce cases. Lord Clyde, in the leading opinion, stated:
"Section 10(1) of the Act gives direction on the meaning of fairness for the
application of the principle set out in section 9(1)(a). It is not disputed that
where there are no special circumstances an equal sharing of the net value will
secure compliance with the principle of fairness. The words `special
circumstances' do not have any technical meaning but refer to any
circumstances which are special to the case. Section 10(6) gives illustrations of
what may be included. But that subsection states expressly that the illustrations
are given without prejudice to the generality of the words. Moreover in stating
that the words `may' include the stated illustrations it is indicating that there is
no necessary conclusion that any of the illustrations must require some unequal
sharing. The final part of section 10(1) requires the court to consider if there are
any circumstances special to the case which justify a departure from the general
course of an equal division. If the matter is approached by a consideration of
evidence it could be analysed in terms of a presumption for equality in the
absence of any special circumstances justifying otherwise. As a matter of
construction it is sufficient to understand that in the ordinary course an equal
division will be fair but that where there are special circumstances some
unequal division may be justified. I find nothing in section 10 which requires an
unequal division whenever special circumstances are found to exist. ... it is not
enough simply to identify some special circumstance in order to depart from an
equal division. An unequal division must be justified by those circumstances.
The court has the task of determining the proper apportionment where an
unequal division is justified and that apportionment will be determined by
what is justified by the special circumstances. But the earlier step of deciding
whether any departure from equality should be made also involves the test of
49
justification by the special circumstances. ... The statement of principles in
section 9 by which under section 8(2)(a) any order must be justified together
with the sections which follow upon those sections certainly impose some
constraints on the court's discretion but some areas remain in the application of
the principles for the court to exercise its own judgment on the facts of the
particular case so as to achieve a fair result. But in the task of applying the Act
and in the working out of the detail the matter must essentially be one for the
judge who first hears the case."
[143]
The opinion of Lord Jauncey of Tullichettle includes the following, having discussed
the terms of the Family Law (Scotland) Act 1985 and, in particular, the term "special
circumstances" found within section 10(1):
"Section (1) presupposes that only in the event of there being special
circumstances justifying an unequal division should the matrimonial property
be divided other than equally. The presumption is thus for equality. Subsection
(6) by its use of the words `may include' rather than some such words as `must'
or `shall include' recognises that the existence of one or more of the events
specified in para (a)-(e) does not automatically constitute special circumstances.
It must be for the court of first instance in each case to determine whether an
event specified in subsection (6) amounts to special circumstances in the case in
question and if so whether it justifies a division in proportions other than equal.
The provisions of subsection (6) give guidance to the court of first instance but
they do not fetter its discretion in applying the principle set out in section
9(1)(a)."
[144]
The case of Adams v Adams (No 1) 1997 SLT 144 was drawn to my attention on behalf
of the pursuer. I did not find that this case particularly expanded upon Little v Little and
Jacques v Jacques but rather, again, emphasised that in the ordinary course a fair division of
matrimonial property will be an equal division.
[145]
I was referred to the case of De Winton v De Winton 1998 Fam LR 110 as a leading
authority on how to deal with arguments of economic advantage and disadvantage. At
paragraph 110-12 Lord Cameron of Lochbroom opined:
"...where a balancing exercise requires to be carried out such as section 11(2)(a)
provides for, the court must identify all the economic advantages derived by
each party from the contributions of the other and all economic disadvantages
suffered by either party in the interests of the other or of the family. Thereafter,
upon a consideration of that balancing exercise the court can determine
50
whether an order should be made. I agree that it is plain from the interaction
between section 9(1)(b) and section 11(2) that it is only where there is an
imbalance that the court can then go on further to consider what order is called
for."
[146]
The case of R v R or Robertson v Robertson (No 1) 2000 Fam LR 43 was referred to by
the defender. The court was presented with a special circumstances argument based on the
source of funds. The argument presented on behalf of the defender in that case was that a
large amount of the matrimonial assets had been inherited by him or gifted to him and, as
such, did not represent the wealth acquired during the marriage as a result of the efforts of
the parties during its currency. Lord Eassie opined:
"...the fact that to a large extent the net value of the matrimonial property in
this case derives from assets donated to or inherited by the defender does
constitute a special circumstance which justifies departing from the
presumption of an equal division of the assets. I consider that counsel for the
defender is correct in saying that the broad policy underlying section 9(1)(a)
and section 10 of the Act was that in principle an equal division should apply to
the fruits of the economic efforts of the parties during the marriage."
Lord Eassie held that an unequal division was appropriate in that case because of the
sources of the income, but he also paid regard to other factors including the financial
advantages and disadvantages sustained by each through the marriage.
[147]
The case of Sweeney v Sweeney 2002 Fam LR 126 was referenced on behalf of the
defender on the issue of an asset being entirely left out of account because of the source of
funds used to purchase that asset. Lord Kingarth, on the issue of an asset with disputed
ownership, opined that he was not satisfied that the property in question should be included
in matrimonial property as he was not satisfied that it belonged to the defender as at the
relevant date. His Lordship then went further:
"I would, in any event, have been inclined to disregard it for the purposes of
any sharing on the basis that the funds used to acquire it, were not, it seems,
derived from the income or efforts of the parties during the marriage."
51
Although this case was successfully reclaimed, that reclaiming was in relation to another
matter the above reproduced aspect of Lord Kingarth's opinion was left undisturbed.
[148]
Kennedy v Kennedy 204 SLT (Sh Ct) 102 was an appeal where, among many other
issues, the court was concerned with the issue of the quantification of economic advantages
and disadvantages. The sheriff principal referred to marriage, generally, as "a common
enterprise involving the pooling of resources". Part of the appeal concerned a consideration
of the pursuer having lived, rent-free, in the matrimonial home after the date of separation.
The sheriff principal was of the view that there had been no attempt at quantification of the
extent of economic advantages and disadvantages by the pursuer. The sheriff principal
considered that, in the absence of quantification of economic advantages and disadvantages,
the "balancing exercise" which section 11(2) requires cannot be "embarked on or even
contemplated". Section 11(2) "requires some degree in my opinion of quantification,
however broad that may be, of the advantages and disadvantages to be balanced."
[149]
I was referred to the case of Campbell v Campbell 2008 Fam LR L115 by the defender, a
case decided at first instance by the then Lord Carloway. It is further authority for an
unequal division of matrimonial assets. In that case the defender husband had owned
significant assets prior to the marriage including his successful pharmacy business.
Ultimately, in light of the significant pre-marriage capital owned by the defender and the
underlying impact that capital had on the value of matrimonial property, the court took the
view that it was appropriate to divide the matrimonial property one quarter to the pursuer
and three quarters to the defender.
[150]
Another case concerning special circumstances and departing from an equal sharing
of matrimonial property in order to achieve fairness is EP or G v GG 2016 Fam LR 30, a
52
decision from the Outer House by Lady Wolffe. At paragraph 71 Lady Wolffe provides a
helpful summary of the Act and its intent:
"The policy of the Act is to achieve a fair, and presumptively equal, sharing of
the matrimonial property upon divorce. One of the notable features of the Act
is the recognition of non-economic contributions made by one or both parties to
the marriage, and to recognise and value that form of contribution to the
parties' collective matrimonial commonwealth. However, balanced against that
is the need to recognise that not all of the matrimonial property as at the
relevant date is derived from the parties' collective efforts (in the broader
understanding contained in the Act); and that the contribution by one party of
his or her non-matrimonial resources over time to the acquisition or creation of
matrimonial property may be a special circumstance which might justify a
departure from the presumptively equal division of what comprises the
`matrimonial property' at the relevant date.
The purpose of enabling a court to consider a `special circumstance' is to enable
it to take cognisance of circumstances where, as at the relevant date, the parties'
matrimonial property may have been increased by the introduction of assets or
funds from non-matrimonial resources such as inheritance or pre-matrimonial
wealth."
[151]
Lady Wolffe, in that case, was presented with two bonds. The defender in the case
explained that he had commuted part of his pension on retirement. He paid off the
outstanding mortgage on the matrimonial home and then paid the remaining balance into
two bonds held, at least for a time, in joint names. The reason for paying into two bonds,
and in joint names, was to secure the most protection available should the banks fail (this
having been done in the immediate aftermath of the `Credit Crunch'). Lady Wolffe was
primarily concerned with an argument, not before me, that placing bonds into joint names
was part of an `agreement' for the purposes of section 10(6)(a). She rejected this argument.
In the circumstances Lady Wolffe considered that excluding the full value of the disputed
bonds was justified in the circumstances the source of the funds coming from the sole
efforts of the defender pre-marriage and the pursuer having simply gone along with the
defender's financial plans and arrangements.
53
[152]
referred to by both parties. In that case it was held that the Divorce etc (Pensions) (Scotland)
Regulations 2000 necessitated that apportioned pension schemes were considered
matrimonial assets even if no contributions were made to them during the currency of the
marriage. As Lord Hodge, giving the opinion of the court, noted the "flexibility" which was
built into the 1985 Act beyond the presumption contained in section 9(1)(a) that fair sharing
is equal sharing in the absence of special circumstances. These further provisions he
described as "safeguards" which "temper [the] prescriptiveness" of the 1985 Act.
[153]
I was also referred to the Inner House decision in McDonald v McDonald, reported at
2016 SC 118, by the defender solely for Lady Smith's dissenting opinion which, of course, in
due course was in agreement with the opinion of the Supreme Court. Lady Smith, on
discussing the statutory regime, confirmed that as well as income or efforts of the spouses
being the source of matrimonial property, it can also be windfalls such as a lottery win, or
bonus shares or paid damages or the like. Lady Smith noted that the courts have powers to
share assets unequally between the spouses on divorce. She gave the worked example of
one spouse's pre-marital asset being sold to purchase matrimonial property, it "might
otherwise seem a harsh outcome" for an equal division to take place thereafter. Lady Smith
then, in a later passage, places the pension provisions in the 2000 Regulations within their
wider context, essentially a longer treatise than that provided by Lord Hodge in the
subsequent Supreme Court decision:
"[The 2000 Regulations] do not trespass on the court's discretion when it comes
to deciding what, in a particular case, amounts to fair sharing of that property,
what is justified by application of all the relevant section 9 principles and what
is a reasonable award once regard is had to the resources of both parties at the
time the award is made. This is not a matter of providing a safety net. It is an
intrinsic aspect of the 1985 Act scheme."
54
[154]
Turning to consider the consequence of including a pension in matrimonial assets:
"The inclusion of an asset in the pool of matrimonial property does not make it
inevitable that it will be split equally between the parties or, in this case, that a
pension sharing order will result whether reflecting one half of the value of the
pursuer's interests in it or otherwise. The court will have to identify what, in all
the circumstances including any special circumstances (see 1985 Act section
10(6)), amounts to fair sharing and then decide what, overall, amounts to a
reasonable award of financial provision taking account of the resources of both
parties."
[155]
The case of JA v WA 2018 SCLR 157 is a decision of Lady Carmichael. I was referred
to this case on behalf of the defender. In the case the pursuer contended that the
matrimonial property derived substantially from that which was gifted or inherited by him,
or his pre-marriage property. Although there was evidence which was led in the case of
various competing contributions that each had made to the family and to each other, the
ultimate view reached by parties in terms of section 9(1)(b) was that economic advantages
and disadvantages were evenly balanced, a view which Lady Carmichael agreed with
Lady Carmichael noted the terms of Sweeney v Sweeney, confirming that an asset may, on the
basis of the source of the funds used to acquire it, be left entirely out of account. She noted
the difficulties that can arise in economic advantage and disadvantage cases, certainly when
compared to source of funds arguments which, on the whole, are more "clear cut".
Although a number of cases had resulted in proportions broadly in the region of 66%
to 33%, she was clear that there is no arithmetical or principled basis for this as a generality,
and that the exercise is, in any given case, one of discretion for the court taking account of
the facts and circumstances of the individual case.
[156]
The case of F v R 2018 Fam LR 146, a case decided by Sheriff Sheehan was referred to
by the defender. It dealt with a couple of issues surrounding pre-matrimonial property.
One was an investment portfolio. It had been owned by the defender pre-marriage but it
55
was argued on behalf of the pursuer that, with trading which had taken place during the
currency of the marriage, the investment portfolio was converted into a matrimonial asset.
The sheriff rejected the factual basis for that argument, but also the legal basis:
"Even if it were possible to make accurate findings in fact as to the extent of
trading which had been undertaken by the defender's IFA and even if I were to
have been persuaded that this trading amounted to the acquisition of a new
element of matrimonial property, I am of the view that the defender's portfolio
should be left out of account regardless. The portfolio derived from funds held
by the defender prior to the marriage, those funds having been inherited from
his parents. Trading decisions were made by the defender's IFA. In no sense
did any element of this investment derive from the income or efforts of the
parties to the marriage. In this context I refer to section 10(6)(d) of the 1985 Act
and to the case of EP or G v GG. Accordingly, esto an element of the portfolio
should properly fall to be regarded as matrimonial property there are very
compelling circumstances to depart from an equal sharing of this asset and I
would have exercised my discretion to leave it out of account entirely when
calculating a fair sharing of the matrimonial property."
[157]
Sheriff Sheehan then considered pensions which had been contributed to solely pre-
marriage by both parties. She referred to the "ethos" of the 1985 Act as follows:
"The ethos of the 1985 Act is to fairly share property acquired during the
marriage and to take account of property which does not derive from the
income or efforts or the parties during the marriage when calculating a fair
sharing of the matrimonial property."
In the context of a "short marriage" of approximately four years, the sheriff considered that
there were special circumstances such that the full matrimonial values of the pensions
should be left out of account.
[158]
In the case of Douglas v Douglas 2019 Fam LR 12 Sheriff Collins KC was presented,
not unlike the instant case, with a dispute over pensions. In a concise summation of the
financial provision provisions, Sheriff Collins KC stated:
"The policy aim underlying these provisions has been said to be to achieve a
fair, and presumptively equal, sharing of the matrimonial property on divorce,
being the property held by the parties to the marriage at the relevant date (in
this case the date of separation). The legislation recognises and values non-
economic contributions made by one or both of the parties. And it recognises
56
that not all property held at the relevant date will have been derived from the
parties' collective efforts during the marriage, and therefore that the
contribution by one party of non-matrimonial resources over time to the
creation of matrimonial property may be a special circumstance justifying
departure from the presumptions of equal sharing. But the mere fact that
special circumstances are found to exist does not mean that an unequal division
must necessarily follow. If such circumstances exist, the question remains as to
whether they are such as to justify an unequal division in all the circumstances
of the case. These various considerations fall to be applied in the present case.
Detailed though the legislation is, the question for the court remains essentially
one of discretion, aimed at achieving a fair and practicable result in accordance
with common sense."
[159]
The argument presented was that a pension policy was not, or was not wholly,
matrimonial property. Although the particular policy before the court had been taken out
during the currency of the marriage, it was a consolidation of multiple pensions some of
which pre-dated the marriage. Sheriff Collins KC considered that making reference to the
formula in the 2000 Pensions Regulations was "mandatory". In that case, because the policy
was taken out during the marriage, the entire value was matrimonial property. That,
however, did not preclude the argument that there were special circumstances such that an
unequal division was justified, which was a "further and distinct question". That question
was returned to at paragraph 96 of the sheriff's judgment:
"That the SIPP had been created from consolidation of other pension funds also
created during the marriage does not in itself preclude consideration of the
source of those funds in turn, to see whether ultimately they derive from pre-
marriage funds which were solely the property of the pursuer. ... I am satisfied
that part of the CETV of the SIPP can properly be traced to the pursuer's pre-
marriage contributions, accepting that this will be a matter of fact and evidence
in any given case."
[160]
In relation to pensions held by the defender, Sheriff Collins KC stated:
"The position in relation to the defender's occupational pensions is reasonably
straightforward. It is clear that she was employed and made pension
contributions up until BD was born in 1997. She then ceased to be in
employment and made no further pension contributions prior to the relevant
date. The increase in the value of her two pension funds during the period of
the marriage after 2003 therefore derived entirely from investment income. The
57
funds were never changed nor converted, and no complex tracing of the
pension funds was necessary. In these circumstances I would accept that the
whole value of the matrimonial property elements of the defender's two
pensions were derived solely from her own income and efforts prior to the
marriage and were not derived from the parties' efforts during the course of the
marriage. I am therefore satisfied that special circumstances exist in terms of
section 10(6)(b) of the 1985 Act in relation to the whole of the matrimonial
property element of the CETV of the defender's two occupational pensions."
[161]
The Douglas v Douglas case is also notable for the manner in which continuing
mortgage payments were dealt with by the court. It was agreed in that case that joint
liabilities in the form of mortgage payments and certain other, more modest, payments had
been serviced solely by the pursuer post separation. The sheriff formed the view that it was
appropriate to take account of these payments by the pursuer for these payments. It is
awkward to do so for the reasons set out briefly by the sheriff:
"They are not matrimonial debts existing at the date of separation and therefore
no account has been taken of them in the schedules."
The sheriff took account of the payments by adjusting the division in the pursuer's favour
by half of the value of the payments, reflecting that they were joint liabilities.
[162]
In the relatively recent case of MacDonald v MacDonald 2023 Fam LR 2
Lady Carmichael opined on a divorce where, among many other issues, one issue was
payments made towards a mortgage post-date of separation by one of the parties. In the
case the defender, the party who made the extra mortgage payments, lived in the property
while the pursuer had left the property. The defender also used the property for business
purposes and allowed others to do so rent free half of which rent would have been due to
the pursuer for the use of the joint, matrimonial, property. In short, the defender gained
from the continued use of the property and the pursuer did not. Due to those features,
Lady Carmichael departed from what would otherwise have been a finding that half of that
sum should be "credited" to the defender.
58
[163]
The defender referred me to the case of Kerrigan v Kerrigan 1988 SCLR 603 as an older
authority dealing with payments made towards a mortgage post separation. I found this to
be a case where the court was presented with a very unusual set of facts and circumstances
involving a disputed gift or loan from a family member as deposit for the marital home and
a marriage described as a "sham" with a date of separation two months on from marriage. I
find this case very much confined to its own facts and circumstances. It may be referred for
authority that continued mortgage payments post separation, maintained by one party, may
form a special circumstance, but that was already plainly so from other authorities.
[164]
The case of Galloway v Galloway 2003 Fam LR 10 was referred on behalf of the
pursuer. I found that case to be one very much concerned with and confined to its own facts
and circumstances. I understand it was referred to for the fact that dividends paid to the
pursuer in that case from shares in her sole name were paid into a joint account such that
she suffered financial disadvantage, and the defender in that case a corresponding financial
advantage, as the joint account was used to service marital liabilities. The presiding judge,
in due course, took account of these (dis)advantages in the financial orders pronounced. I
took little of general application from this authority.
[165]
The case of M v M 2014 Fam LR 116 was also referred to for the pursuer on the issue
of financial advance and disadvantage. The pursuer in that case had left her family in
Australia to live her married life in the United Kingdom. She had left behind her career in
Australia to do so. She had depleted her personal savings through the course of the
marriage. She had increased the value of some of the matrimonial property by her
maintenance and running of it. She had further increased some non-matrimonial property
belonging solely to the defender. Lord Armstrong identified all of these as relevant factors.
The case was a highly unusual one, though, where the pursuer held approximately 90% of
59
the value of the matrimonial property but still sought, and was awarded, a capital sum
payment in addition because of the work she had done improving the defender's non-
matrimonial property and for her to provide a home for the children of the marriage. The
facts are far removed from the situation before this court.
Analysis
[166]
Broadly speaking, as will perhaps be apparent from the findings I have made as set
out above, I found the witnesses that were presented before me mostly credible and reliable.
There were slight criticisms to be made of most of the witnesses on reliability particularly
when they were being invited to cast their minds back 20 or more years to remember who
paid for what or who contributed to what. There were also issues of credibility where it
seemed to me in particular that the pursuer was keen to slightly enhance her own position
and slightly diminish the defender's position.
[167]
I found the defender to be the more credible and reliable between the two parties. I
found that he gave his evidence in a straightforward manner. He was prepared to make
concessions when appropriate. He presented his position, I felt, in a balanced fashion. He
did not, to my mind, seek to unfairly put the pursuer down. He credited her with certain
qualities, particularly in finances, which he sees lacking in himself. Where his evidence
differed from the pursuer's, which it did on occasion, I preferred his evidence to hers. The
evidence was, in any event, broadly characterised by agreement between the parties.
[168]
One area of contention was what was done with the proceeds of the sale of the
defender's Aberdeen property. I accepted the defender's evidence that money was paid
towards the pursuer's Serald Street mortgage and also towards improving that property.
The pursuer only accepted that there was a contribution to the improvements. I preferred
60
the defender's evidence on this for a number of reasons. I accepted his evidence that the
parties never had great savings through the marriage which would be consistent with the
Aberdeen proceeds being spent on something at an early stage. This lack of savings seemed
generally consistent with the financial information provided to the court. I also accepted
that putting some of the proceeds from Aberdeen towards the Serald Street property was
consistent with the defender's evidence, which I accepted, that the pursuer was the one who,
even pre-marriage, was financially managing things. I found the defender credible and
reliable when he gave evidence that he left financial matters to the pursuer.
[169]
The pursuer made reference to the scale of the inheritances and gifts that she had
received from family over the years but then accepted that the documentary vouching
available to the court did not confirm the extent of inheritances and gifts that she spoke of. I
note that it was her case to make out on that front. I also found that, at times, she was quick
to criticise the defender, where the defender did not seem as quick to criticise her despite the
clear antipathy between the parties now. This, too, counted against her credibility. All of
this to say, however, that the parties were broadly agreed on the vast majority of the factual
circumstances. The real question is more so the application of the law to those facts.
[170]
I did not find that the pursuer's other witnesses, nor Mr McAulay the financial
advisor, added a huge amount to proceedings. The pursuer's witnesses were able to
confirm that the marriage was at an end and give some evidence as to the financial
arrangements between the parties, but it seemed to me that both derived their knowledge
from the pursuer and what she told them. So, the pursuer's sister not knowing about, and
the implication that she did not accept, that there were overpayments made by the defender
towards one of the matrimonial home mortgages in late 2022 and early 2023 had a small
impact on her reliability because of the clear vouching of such overpayments. Similarly,
61
Mr McAulay was able to confirm the broad details of the transfer of the Combustion
Engineering pension into St James's Place, but little beyond that, in part because of the
passage of time and also because he had retired since and so no longer had access to his own
paperwork on the matter. These witnesses supported the pursuer and defender's evidence
appropriately, but only to a limited extent.
[171]
The main area of dispute between the parties in this case was legal in nature
namely the proper way for me to calculate and then divide the matrimonial assets and the
ordering of a capital sum payment to either of the parties, or indeed an incidental order as
may be appropriate under section 14 of the 1985 Act.
[172]
It was agreed between the parties that divorce was appropriate. Both parties gave
evidence to that effect and there was no challenge to the pursuer's averments anent divorce
in the record. It was plain to the pursuer's witnesses as well that the relationship was at an
end and has been for some time. I am satisfied that the marriage has broken down and
irretrievably so. I am satisfied that they have not, in fact, lived together as man and wife for
many years now. The relevant date, the date on which they ceased living together as man
and wife, is 3 December 2020. That is the date, as the pursuer put it, that a number of issues
came to a head. Decree for divorce is appropriate in this case.
[173]
It will have been apparent from the summary of evidence touched upon above that it
has not proven possible for the court to be provided with valuations for all of the various
assets held by the parties as at the relevant date. However, from the submissions that I have
heard, I understand that it is accepted by all parties that I should simply take what
valuations are available as being the appropriate valuations for the relevant date purposes of
the 1985 Act. This is consistent with taking a broad brush approach to the financial
questions, which seems to me to be appropriate. This has been a lengthy marriage of many
62
decades. I accept the evidence that the parties have, throughout that marriage, financially
supported one another and also that there are no great savings what was brought into the
marriage by both of them, whether in the form of originally matrimonial property such as
wages or in the form of non-matrimonial property such as property, inheritances, and gifts,
have all been put into the matrimonial `pot' and spent over the decades. The clear view I
have of this relationship is that the parties have, throughout the marriage, been engaged in a
common enterprise with the appropriate pooling of resources.
[174]
At this stage I will identify the matrimonial assets and consider any special
circumstances on an asset by asset basis.
[175]
The matrimonial home at Cruden Bay is, obviously, a matrimonial asset. It is held in
joint names. Parties are already agreed that the property should be sold (contrary to the
pursuer's case on record) and the proceeds split equally between them. The defender,
however, invites me to make such an order for the sale and equal division of the proceeds,
even with the broad agreement in principle that exists between the parties. There is no
formal or detailed agreement in place for the sale of the home. Parties were also agreed
before me, in submissions, that the net free proceeds of the sale of the matrimonial home
would be available to me, if I considered it appropriate, to divide in some other fashion than
equally should that be required in terms of any capital sum due from one party to the other,
and taking account of the available resources of the parties. With the agreement in place
between parties, however, for the sale and equal division of the net free proceeds the house
may be left out of account. Doing so has the very real advantages of avoiding any issues
arising of a greater or lesser sale price being achieved, or any need to account for
conveyancing fees and the like issues which simply cannot be accurately accounted for at
this time.
63
[176]
Discussion of the matrimonial home, however, leads on to discussion of the
mortgages over the property. As at the relevant date there were two mortgages. Just over a
month before the relevant date the defender cashed the £25,000 cheque which his father had
gifted to him shortly before he passed away many months earlier. The defender gifted
£5,000 of that cheque to family and paid the remaining £20,000 into one of the mortgages. In
his hands, the cheque was a gift and, therefore, not matrimonial property. Paying the
money into the mortgage, a joint matrimonial debt, functionally converted it into
matrimonial property. Both the defender and the pursuer benefited from this payment into
the mortgage as they jointly serviced the matrimonial debts. This payment in was consistent
with the approach taken by the pursuer with the various gifts and inheritances which were
vouched before the court, all of which simply went into the joint account and then appear to
have been spent on matrimonial expenses over the years. Although the defender's payment
was a not inconsiderable sum, and was close to the end of the marriage, I do not see special
circumstances nor an economic (dis)advantage that I require to take account of arising from
that, for reasons I have touched upon above and will discuss further below.
[177]
It is different, however, when one considers the extra payments which were made by
the defender in December 2022 and January 2023 which settled the larger of the two
outstanding mortgages. These payments were made post the relevant date. The marriage
was plainly over, in the minds of both parties, by the time these payments were made.
Indeed, these payments all took place over two years since the parties had ceased living
together as man and wife and so they would have been entitled to decree of divorce. These
payments, totalling £21,043.60, represented an economic advantage for the pursuer in that
she no longer had to service her share of that mortgage. That advantage, however, is
balanced out by the defender also no longer having to service his share of that mortgage.
64
Both parties benefit. However, the defender has solely met the capital payment, so he has
been economically disadvantaged by half of the value of his overpayments and the pursuer
economically advantaged by the same figure, such that section 9(1)(b) of the 1985 Act
applies. On balance, given his resources, the balancing payments came from non-
matrimonial property namely the inheritances from his father. It is my view, and
consistent in particular with Douglas v Douglas, that allowance should be made for these
payments. In fairness it was not argued otherwise on behalf of the pursuer. In due course,
£10,521.50 should either be transferred to the defender by the pursuer or deducted from any
payment due to the pursuer to make allowance for the pursuer's economic advantage and
the defender's economic disadvantage from the defender's overpayment of the mortgage.
[178]
The next asset identified is the St James's Place pension. This asset had a value
of £258,210 as at the relevant date. It is held in the defender's name. The pension was
created in May 2019. There is, therefore, no question of apportionment as per the
2000 Regulations, or rather the apportionment is 100%, because the pension had been in
existence for one year as at the relevant date and the defender was married to the pursuer all
of that time. It is accepted before me that the St James's Place pension is a matrimonial asset
the argument between parties is the existence or otherwise of special circumstances, and
the effect those special circumstances should have, in line with the approach explained in
Jacques v Jacques.
[179]
In my view there is a very strong special circumstances argument in relation to this
particular matrimonial asset militating against an equal share being a fair share. That
argument has, as its foundation, the source of funds used in terms of section 10(6)(b) of the
1985 Act.
65
[180]
There is no challenge in this case that the source of funds used to purchase the St
James's Place pension was the Combustion Engineering pension. It was also accepted for
the pursuer that the defender had worked for Combustion Engineering prior to the
marriage. Further, there was no challenge to the defender's position, which I accepted, that
he made no contributions to the Combustion Engineering pension after he left that
employment, and certainly no contributions were made during the marriage. What
increases there were in the value of the pension post his Combustion Engineering
employment were explicable solely by reference to the decisions taken by those managing
the pension and the increases in the underlying investments chosen by them. The value of
the asset had nothing to do, therefore, with the income or efforts of the parties during the
marriage. Although a purely hypothetical exercise standing the transfer that had taken
place, had the pension in existence at the relevant date been the Combustion Engineering
pension rather than the St James's Place pension then the apportionment ratio would have
been approximately 50% given a start date for the pension of 1977, a marriage in 1998, and a
relevant date in 2020 (22 over 43, or 51%). So, just over half of the pension would have
qualified as matrimonial property, while just under half would not have qualified as
matrimonial property, in line with the 2000 Regulations and the Supreme Court decision in
McDonald v McDonald. Absent any questions of unequal division or special circumstances, it
would have been approximately 25% of the Combustion Engineering pension to which the
pursuer would have been entitled, in that hypothetical scenario.
[181]
The source of funds argument in this case is a powerful one. It is, to quote the
defender's agent, "clear as day" that the source of funds in the St James's Place pension
came from the Combustion Engineering pension, and that pension alone. No other
contributions have, before or since, been made to the St James's Place pension. The
66
authorities of EP or G v GG, F v R, and Douglas v Douglas all dealt similarly with pre-marital
assets and their absolute exclusion as matrimonial assets even, in the case of EP or G v GG
where the assets were now held in joint names after a transfer during the marriage.
[182]
In the instant case, of course, there was a transfer. The defender gave instructions for
the transfer of the Combustion Engineering pension into the St James's Place pension. That
was so because of the concerns that he had to provide for his family in the event that he
should not survive the major heart surgery that was going to be carried out upon him. The
Combustion Engineering pension had very poor death benefits. The St James's Place policy
was more favourable in that regard. The intention that the defender had was to create a
matrimonial asset, a family asset. This was the subject of discussions which took place
between the parties at the time, among other possible uses for the newly discovered
Combustion Engineering pension.
[183]
The transfer in this case was not a transfer which took place for other reasons, purely
administrative or the like. So, for example, when comparing the circumstances in this case
to those in EP or G v GG, I note that in that case Lady Wolffe held that the defender had
simply chosen to arrange his pre-marital finances in such a way that included the pursuer
but with her acquiescence rather than with any input therein, and that the transfer took
place in such a way as to best protect his invested, inherited, money, rather than for any
other reason. That stands in contrast to the instant case. In the instant case there were
discussions taken between the parties. The pursuer was, on the defender's own account, the
party who mainly dealt with the family finances, and the intention behind the transfer was
to cater for the family, the matrimonial unit to provide a more valuable family asset in the
event that the risks associated with the major heart surgery should be realised.
67
[184]
Similarly, the case of F v R where the asset, a share portfolio, if it had changed such
that it could be considered a matrimonial asset, had not involved the will of the defender in
doing so but was a decision or series of decisions by those managing the portfolio. Again,
that is clearly, to my mind, distinguishable from the instant case where the defender
ultimately gave the instructions that he did deliberately, after consultation with the pursuer,
in order to create a more favourable family asset than the asset which had been discovered
by the financial advisor.
[185]
The source of funds of this pension was the Combustion Engineering pension. The
only contributions made by the defender to that pension was pre-marital. That is a
significant factor to be considered in this case and goes a substantial way towards
demonstrating that this matrimonial asset should not be equally divided between the
parties. The source of funds had nothing to do with the work or efforts of the parties during
the marriage.
[186]
However, in my view in looking for a fair division of this asset, there are some
factors which indicate that it would be unfair to leave it entirely out of account. The asset,
first of all, has functionally been a windfall to both parties the pursuer had never known
about it, and the defender had forgotten about it by the time it was drawn to their attention
by Mr McAulay. The parties, together, discussed what should be done with the asset. The
transfer was ultimately instructed, not on a purely administrative level, but in order to
create a matrimonial asset something that would better provide for the family should
anything tragic happen to the defender. I do not see this transfer as being a mere switch of
investments or some transfer carried out for purely administrative or non-matrimonial
reasons as seen in some of the authorities referred to. All of this, as well, occurring at a time
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when the parties had been married for 20 years. This is by no measure a short marriage and
was not a short marriage at the time that the pension was brought to the parties' attention.
[187]
When balancing the competing arguments, both in terms of the source of funds and
the nature of the asset, I consider that it would be fair to divide this asset on a 90/10 basis in
favour of the defender, the defender retaining 90% of the value and the pursuer being
due 10% of the value of the asset. This takes fair account, in my opinion, of both the source
of funds of the policy and also the intention that there had been by the defender to take the
pension and make it into some form of matrimonial asset, a decision which was discussed
with the pursuer and at some decades into their marriage.
[188]
The next asset identified is the defender's Baker Hughes pension. There was no
argument advanced before me other than that this pension should fall to be considered, in
whole, as a matrimonial asset. That being so, no doubt, because of the fact that the vast
majority of the contributions to the pension came during the marriage. I will therefore hold
that this is, in whole, a matrimonial asset. The value provided is £176,291.37 as at the
relevant date. This asset is retained by the defender in his sole name.
[189]
The next three assets can all be dealt with together and quickly. They are the
pursuer's three pensions Nest, SPPA, and Legal & General or ReAssure. The valuations
which are given for each are, respectively, £2,619.98, £59,216.02, and £24,408.62. These are
all held to be matrimonial assets and, there being no argument otherwise, fall to be divided
equally. They are all in the pursuer's sole name and retained by her.
[190]
The next asset is the defender's Legal & General or ReAssure pension, valued
at £4,705.53. This was a pension which was fully attributable to pre-marital work done by
the defender. No contributions were made to it during the marriage. It has never been
transferred nor touched in anyway during the marriage. If parties will permit me to elide
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questions of apportionment and such, there is to my mind an irresistible argument that the
full value of this asset should be left out of consideration in light of the special circumstance
of the source of funds of this pension. Indeed, such was broadly acknowledged on behalf of
the pursuer. This asset, therefore, falls to be disregarded when totalling the available
matrimonial assets.
[191]
The next identified matrimonial asset is the joint Virgin Money bank account. This
had a value of £8,741.56 as at the relevant date. This asset would, ordinarily, fall to be
divided equally between the parties. It is plainly, on the face of it, a matrimonial asset this
is where payments in of wages and such took place during the currency of the marriage and
from which joint liabilities and other matrimonial expenses were met. The issue is, however,
as was acknowledged on behalf of the defender, that the asset has, since the relevant date,
been dissipated by both parties. After the defender used the account to pay for golf lessons
the pursuer withdrew what she saw as her share of the funds and, in due course, the
defender did likewise, leaving a functional nil balance in the account. It has also continued
to be used to service joint liabilities of the parties since the relevant date. The parties have,
effectively, already divided this asset between them. Rather, then, than potentially giving
rise to any issues of double counting or the like by awarding one party or the other the same
asset or asset value twice, the best course is to simply leave this asset out of account as I was
invited to do on behalf of the defender.
[192]
The next asset was the pursuer's TSB account which at the relevant date had a value
of £13,154.97. This was explicable, on her evidence, as a result of the payment of a lump
sum from a pension. There being no arguments otherwise, this is an asset which falls to be
considered matrimonial.
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[193]
The final asset to which I have had attention drawn is the defender's Virgin Money
account which had a value of £97,654.71 as at the relevant date. As explained above, this
asset is explicable almost exclusively by reference to the payment, shortly before the relevant
date, of the defender's share in his father's moveable estate. This has been fully vouched
before this court and is accepted on behalf of the pursuer. In the circumstances, this account
does not fall within the meaning of matrimonial property as defined in section 10(4) of the
1985 Act. This account falls, therefore, to be discounted from consideration in full.
[194]
Having identified the matrimonial assets it then falls to consider the division which
is appropriate. I have, in this regard, already discussed specific assets above and the reasons
why some are excluded in whole or divided unequally. The question I am now concerned
with is whether some division other than an equal division is appropriate in this case
overall, for the remaining assets that require to be divided between the parties. I am invited
on behalf of the pursuer to find that there is an economic disadvantage argument in her
favour, essentially arising from a combination of her contributions from the value of the
Serald Street address and the inheritances and gifts through the marriage into the
matrimonial `pot'. It is argued for the defender that the pursuer has been "enriched not
impoverished" by the marriage overall, particularly by reference to the economic
contributions of the defender through the marriage including his income from work and the
early contribution from the net free proceeds from his Aberdeen property.
[195]
I accept that the defender has earned more money than the pursuer through the
currency of the marriage from his employment. No doubt, in part at least, family
commitments have fallen to the pursuer although no argument is expressly advanced for the
impact of any family commitments on the pursuer and her income.
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[196]
The pursuer introduced to the matrimonial assets the proceeds from the sale of her
previous property at Serald Street. At this time removed, however, it is impossible to track
those funds in any meaningful way into and through the matrimonial assets, and no real
attempt was made at doing so. I accepted in any event, however, the defender's evidence
that some of the sale of his property in Aberdeen went towards Serald Street, both in paying
the mortgage to the tune of around £7,000 (which was disputed by the pursuer) and also in
paying for some improvements made to Serald Street (which was accepted by the pursuer).
In any event, what I do accept is that both parties sold the properties they had prior to
moving to the matrimonial home and that both contributed the proceeds from their pre-
matrimonial properties into the matrimonial assets. It is impossible at this time removed to
say exactly where funds went. Although the net profit from Serald Street was larger than
the net profit from the defender's Aberdeen property, both net profits were used
matrimonially. Both parties introduced significant value to the matrimonial assets through
the relationship and, it seems to me, acted as a team through the marriage. Gifts and
inheritances of tens of thousands of pounds were introduced, by both parties, to the
matrimonial `pot'. In the background to all of this, the defender was a higher earner than
the pursuer, but both their wages went into the joint account and were spent on matrimonial
expenses. There is no real question, to my mind, of anything other than an equal share
being a fair share in this case. I do not see that there is any real question of an economic
advantage or disadvantage having been derived or suffered by either party such that some
share other than an equal share is, in broad terms, the fair share in this case.
[197]
It is apparent that the pursuer has introduced, over the years, non-matrimonial assets
into the matrimonial `pot'. There has been evidence led of many thousands of pounds
which have been gifted to her or inherited by her throughout the marriage. There is also
72
evidence that these inheritances and gifts have simply been used matrimonially. On one
view these could be seen as evidence of economic disadvantages suffered by her (losing half
of their value into the matrimonial `pot') while a corresponding economic advantage
sustained by the defender (gaining half of their value). There are three factors, in my
judgment, which go against such a view being appropriate in this case.
[198]
Firstly, there is the disparity in income through the relationship the principal
breadwinner in the relationship was the defender.
[199]
Secondly, there is the £20,000 payment into the matrimonial assets by the defender in
the October of 2020 not long before the relevant date. That was clearly evidenced as coming
from the cheque which had been gifted to him by his father not long before his father's
passing, but the encashing of which was delayed by both COVID and his father's passing.
That asset, not matrimonial in the defender's hands, was then paid into the matrimonial
property and thus converted into matrimonial property. That is, in my judgment, an
important factor in considering that this payment of £20,000 has been converted into
matrimonial property. Again, when taken with the disparity in income between the parties,
this goes a long way towards balancing any economic disadvantage argument advanced on
behalf of the pursuer.
[200]
Thirdly, as stated above, marriage is, or should be, that common enterprise with the
pooling of resources. For their marriage, it was thus for the parties. I do not see that there is
any argument which can successfully be advanced on either side, in broad terms, that there
has been such an economic advantage or disadvantage that a share other than an equal
share is a fair share in this case. The defender's evidence that, for example, he left the
pursuer to deal with the conveyance of his Aberdeen property because he would be "pretty
useless" at organising a conveyance spoke volumes to me. It had the ring of truth and
73
highlighted and emphasised to me that, even at that stage the pursuer and defender were
acting as a team, helping one another.
[201]
All in all, on a broad approach and by reference to the section 9 principles, it is my
view that there is no real argument to be advanced successfully for either party under
section 9(1)(b) on economic advantage or disadvantage. Other than as discussed above on
an asset by asset basis, the fair sharing of the matrimonial property in this case is achieved
by an equal share.
[202]
The property and the relevant values in this case are as follows:
Asset
Pursuer
Defender
St James's Place Pension
£258,210.00
Baker Hughes Pension
£176,291.37
Nest Pension
£2,619.98
SPPA Pension
£59,216.02
L&G (ReAssure) Pension
£24,408.62
Pursuer's TSB Bank
Account
£13,154.97
Running Totals
£99,399.59
£434,501.37
[203]
The above does not include the matrimonial home, of course, which is an asset to be
sold and divided equally between the parties, subject to an incidental order which I will
discuss further below.
[204]
On a 90/10 division of the St James's Place pension, the pursuer is entitled
to £25,821.00 of the value of that asset, with the defender retaining £232,389.00 of the
relevant date value of that pension.
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[205]
The rest of the remaining matrimonial assets require to be totalled and divided
equally, to achieve a fair division. The total of the remaining assets, less the St James's Place
pension from the above, is £275,690.96, half of which is £137,845.48. With the addition of
the £25,821.00 from the pursuer's fair share of the St James's Place pension, but less the
£10,521.50 from the defender's additional mortgage payments in 2022 and 2023, gives a total
of £153,144.98. Again, I emphasise, this does not include a half share of the matrimonial
home which would be anticipated to approximately double this figure. When the pursuer's
retained assets are set off against that value, the balance is £53,745.39.
[206]
The pursuer is, therefore, entitled to a capital sum from the defender of £53,745.39.
This will be in addition, of course, to her half share of the net free proceeds from the sale of
the matrimonial home as the parties have agreed themselves.
[207]
Such a payment is beyond the defender's means and resources at this time in terms
of liquid assets. He has an asset in the property that he has bought but he cannot borrow
against it standing his age and unemployed status. The funds that he has at this time are
used to live on and are diminishing with the expenses of running both properties. He will
also require to spend on his new property to make it habitable. He is due, however, to get
half of the value of the matrimonial property once it is sold. With the equity held in that
property, he will be due a six figure sum.
Decision
[208]
I will grant decree of divorce. What I will order thereafter is the sale of the
matrimonial home with half of the net free proceeds and an additional £53,745.39 to be paid
to the pursuer, with the remaining balance of the net free proceeds to be paid to the
defender.
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Expenses
[209]
As indicated above, parties invited me to reserve the question of expenses at this
time. I will direct my clerk to fix a hearing on expenses for a date at least 4 weeks after the
date of issue of this judgment to allow parties the opportunity to adequately consider their
positions on expenses in the meantime. In the event that parties ultimately consider that a
hearing on expenses is not necessary, for whatever reason, then of course they are free to
communicate that to my clerk and the court may discharge that hearing and make any
order, or no order, as parties agree in due course.