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Cite as: [2004] ScotCS 43
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AM v. JW [2004] ScotCS 43 (24 February 2004)
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OUTER HOUSE, COURT OF SESSION |
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F46/01
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OPINION OF LORD CLARKE in the cause A. M. or W. Pursuer; against J. W. Defender:
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Pursuer: Scott; Balfour & Manson (for Buchanan Burton, Solicitors, East Kilbride)
Defender: Davie; Wilson & Terris & Co., S.S.C.
24 February 2004
[1] In this family action, which commenced its life in the Sheriff Court at Hamilton, and which was subsequently remitted to this court, the pursuer seeks divorce from the defender on the ground that the parties' marriage has broken down irretrievably, as established by the defender's unreasonable behaviour. She also, in terms of the record, seeks a number of other orders regarding financial provision for herself. [2] The matter came before me for proof. In the event, the orders sought, by the pursuer, were those set out in craves 9, 10, 12 and 13. The defender, himself, in terms of the record, seeks certain orders. [3] In the event, the defender did not oppose decree of divorce being granted. The remaining dispute between the parties related to the valuation of the matrimonial property, at the relevant date, for the purposes of section 9 of the Family Law (Scotland) Act 1985 and what, in the circumstances, fell to be awarded to the pursuer in respect of financial provision. Even within that area of dispute matters, ultimately, became largely focused on two questions, namely the proper valuation of a shareholding of the defender in a company, Phoenix Honda Limited, of which the defender is also an employee, and the extent and nature of the defender's available resources for the purpose of satisfying any financial award that might be made against him. [4] I am satisfied that, on the basis of the evidence contained in the affidavits Nos. 22, 23 and 24 of process and the medical reports 5/1/6 and 5/2/1 of process that decree of divorce should be pronounced. [5] The parties were married on 14 March 1981. There are four children of the marriage, C.J.W. born 23 August 1989, P.J.W. and M.I.W, twins, born 8 October 1992 and M.W. born 6 April 1994. The matrimonial home, since 1990, has been in East Kilbride. The pursuer has continued to reside there with the children of the marriage since the parties separated in 1999. The property is owned by the parties jointly. There is no mortgage over the property. The accommodation comprises three public rooms, kitchen, bathroom and five bedrooms. Each child has a bedroom to himself and the pursuer occupies the remaining bedroom. [6] The defender, after the parties separated, purchased a two bedroom flat for £82,500. The flat is in Glasgow. He presently resides there. The defender is the owner of 55,000 shares in the company Phoenix Honda Limited, which is a private company. As I previously noted, he is employed by that company. He purchased the said shares in about 1992 for £55,000. The price was paid from £30,000 which the parties had received from Tay Homes Limited, the builders of the matrimonial home, in respect of a defect in the garage attached to the matrimonial home. The remaining £25,000 of the purchase price for the shares was borrowed by the defender from a relative. [7] Phoenix Honda Limited is a car dealing company. While the parties cohabited the pursuer had the use of a car provided by the company. She was provided with adequate household money by the defender from his income. The defender took the car back from the pursuer in January 2000. The defender has a pension fund with Pearl Assurance. [8] During the marriage a General Accident Investment bond was taken out in the name of the pursuer. After the parties separated, the pursuer withdrew funds from that bond, which exhausted the investment. In evidence, the pursuer said she required to do this to meet payments for replacement of certain items of furniture and decoration of the matrimonial home. The funds were also employed, she said, to buy a car and clothes and gifts for the children. She also paid for a holiday for herself and the children at St Andrews. In evidence, also, the pursuer said that the defender, when he left the matrimonial home, took some of the living room furniture, including, in particular, an antique grandfather clock and a bureau. [9] Prior to the parties' marriage, and at the beginning of the marriage, the pursuer was employed as an office manager and then as a personal assistant. She gave up working when the first child was born, which was more than eight years after the parties married. The pursuer's evidence was that if she had not married, and had children, she would have had a career. She would, she said, have developed her experience in office administration and would have taken a course in business studies. Since the parties separated, the pursuer has, in fact, taken up studies. She obtained, in September 2001, a Higher National Certificate in business administration. She has recently completed a BA Degree course. It is her intention to take up a teacher training course during 2004/2005 and hopes to commence work as a teacher in the course of 2005. The pursuer said that, but for having children, she might have embarked on this career path earlier. Had she not married, she said, she would have followed such a path. During her period of studies she has been in receipt of both a student grant and a student loan. She is currently in receipt of Income Support. Since the parties separated there have been contested proceedings, in the Sheriff Court, in which the pursuer sought, and obtained, awards of aliment against the defender. The present position is that the Child Support Agency has assessed the defender as being liable to pay the pursuer £598.09, every four weeks, for the children. He is also required to pay £80.94 per month in respect of past arrears. The pursuer gave evidence about the considerable difficulties she had experienced in relation to obtaining payment of aliment for the children from the defender. Her evidence was that he had made no payment to her, directly, since June 2001. She maintained that the failure of the defender to support herself and the children adequately led, in part, to her realising the General Accident bond. She was, at the present time, finding herself short of money. No 37/1 of process is a document, purporting to set out the pursuer's current income and expenditure. The pursuer, however, explained, in evidence, that in fact the expenditure referred to is what she considered was required to be spent on the children and on maintaining the household, as opposed to what she is actually in a position to spend. There is a shortfall per month of £1,268, not taking into account the money she receives in Income Support. [10] On 15 March 2000, the Sheriff at Hamilton awarded the pursuer interim aliment at the rate of £700 per month. This was a variation of a previous award of £900 per month. On 23 October 2003, in this court, the Lord Ordinary, Lord McCluskey, varied the award of interim aliment to the pursuer, to £1,268 per month. His Lordship also ordained the defender to lodge in process, before 4pm on 3 November 2003, that is some three weeks before the commencement of the proof,"(1) details of his present and foreseeable resources, including his heritable property, the extent of any secured loan and the period over which it is to be repaid, value of his pension, any investments, cash at the bank, director's loan accounts and income in terms of section 20 of the Family Law (Scotland) Act 1985; and
(2) bank statements showing the balances held in all accounts at the relevant date;"
"Having had regard to all relevant factors it is considered that the open market value of the property at the present time, with vacant possession, and for loan purposes, could reasonably be stated in the sum of ONE HUNDRED AND TWENTY-FIVE THOUSAND pounds, £125,000".
"I have now inspected the above property and can report my findings to you. In my opinion the property is likely to achieve in the region of £85,000 (subject to a satisfactory survey report) in the current market.
I hope this information is helpful."
This report was not spoken to, in evidence, by its author. It was put to Mr Crooks. He said that he knew Mr Murphy and said that he could not believe that Mr Murphy truly believed that his valuation of £85,000 was accurate. Mr Crooks pointed out that he, himself, had looked at a one bedroom flat, in a much less attractive area than the area in which the defender's flat is situated, and which was also in a very poor condition, which Mr Murphy was offering for sale at £85,000. That simply did not square with his valuation of the defender's two bedroom flat, which was in a good condition, situated in Shawlands, which was presently a "property hot spot". On this matter I found Mr Crooks credible and reliable and, accordingly, hold that his valuation of the defender's flat, as at November 2003, of £125,000 can be accepted.
[22] A good deal of the proof was taken up with the valuation to be placed on the defender's shares in Phoenix Honda Limited, as at the relevant date. In relation to this question the pursuer led, as an expert witness, Mr Michael John Gilbert, who is a Chartered Accountant and is presently a director of Business Service Tenon Scotland. He was formerly a partner in the firm of Scott Oswald, C.A. His full curriculum vitae is set out in Appendix 1 of a report he produced, which is 5/4/5 of process. He explained to the Court that he had experience in valuing businesses, particularly in the context of matrimonial disputes. He had been instructed, on behalf of the pursuer in the present case, to value the defender's share holding in Phoenix Honda Limited as at 7 May 1999, which is the agreed relevant date for the purposes of valuing the matrimonial property. He was also asked to consider and report upon the defender's financial resources. His views on these matters are set out in his report. At para 1.4 Mr Gilbert sets out the information he relied upon in reaching his conclusions. Mr Gilbert points out, at para 2.2 of his report, that, as at the relevant date, the authorised allotted, issued and fully paid share capital of the company was 150,000 ordinary shares at £1.00 each. These were held as follows:-Mr J McGuire 65,000 shares (43.33%)
Mr J Devenny 30,000 shares (20%)
The defender 55,000 shares (36.67%)
Mr Gilbert notes, however, that subsequent to the relevant date, on 30 June 2000, the company became a subsidiary of the Phoenix Car Company Limited. He goes on to explain that, as a result, from that date, the shares in the Company were held as follows:-
Phoenix Car Company Limited 80,000 shares (53.33%)
J McGuire 5,000 shares (3.33%)
J Devenny 10,000 shares (6.67%)
The defender 55,000 shares (36.67%)
Mr Gilbert's report continues to state:
"The company became a subsidiary of Phoenix Car Company Limited as part of a reconstruction of the companies with (sic) the group. The Phoenix Car Company Limited formed in 1997 was owned 75% by J McGuire and 27% by J Devenny who exchanged 60,000 and 20,000 shares respectively in Phoenix Honda Limited for an equivalent number in Phoenix Car Company Limited. The reasons behind the reconstruction were commercial relating mainly to banking, accounting and group simplification."
It is then stated that:
"There are six wholly owned subsidiaries of the Phoenix Car Company Limited all of whom trade with Phoenix Honda. The holding company and its subsidiaries were incorporated and started trading during the year ended 31 January 1998 and Phoenix Honda Limited has traded with them in the normal course of business from that time with initially these companies being related companies as opposed to group ones. The nature of the trading is the sale and purchase of used motor vehicles, mechanical and body parts and the sub-contracting of mechanical labour. There are no formally documented trading agreements nor is interest charged on balances."
At paragraph 2.4 of his report Mr Gilbert points out that the articles of association provide that the shares in the company are under the control of the directors and as far as share transfers are concerned the directors may, in their absolute discretion, and without assigning any reason therefor, decline to register any transfer of any share whether or not it is a fully paid share. As far as valuation is concerned, there is nothing in the articles to give guidance.
[23] Mr Gilbert goes on, in his report, to analyse the financial position of the company, having regard to the material made available to him. In the third section of the report Mr Gilbert sets out his views on how the defender's shareholding, at the relevant date, should be valued. He notes at para 3.2 that:"The objective of the valuation of the holding is to seek to determine a fair and reasonable value of the interest in the company based on the available known information on the company on a willing sell-out/willing buyer no restriction basis."
He states that there are normally three bases for valuing shares in a company of this kind, one based on dividends, one based on earnings and one based on assets. Mr Gilbert sets out in his report his reasons, which he supplemented in evidence, for adopting an asset basis of valuation in this case. I do not need to go into these matters in any detail, as it was accepted, on behalf of the defender, that that was the appropriate approach in this case. The witness's asset based valuation is set out as Appendix 4 to his report. Mr Gilbert calculated that the net assets of the company were valued, as at 31 January 1999, as £1,295,397. That figure was arrived at by reference to the company's financial statements. Mr Gilbert added to that a sum in respect of the increase in value of the company's heritable property from the last valuation until the relevant date. The figure thus produced was £283,333 and it was not disputed that such an addition fell to be made to get to the total value of the company's assets as at 6 May 1999. The total figure, therefore, is £1,578,730. The gross value of the defender's interest in the company, taken at 36.67% would, therefore, have amounted to £578,920. Mr Gilbert, however, made a discount from that figure of 40% to recognise that the shareholding is in a private company and that there are restrictions on transfer of the shares. His final figure, therefore, for the value of the defender's shareholding, at the relevant date, was £347,352.
[24] As shall be seen, the dispute between the parties, as to the appropriate value to be placed on the shares, was confined to an argument as to the appropriate discount that should be made, and an argument as to whether a deduction from the value of the assets should be made in respect of tax, which might be payable on the increase of value of the heritable property of the company. With regard to the discount factor, Mr Gilbert explained that the choosing of the appropriate level of discount in carrying out a valuation exercise of a minority shareholding in a private company was very much a subjective matter. He, himself, had arrived at 40%, in the present case as being appropriate because, if either of the other two share-holders had obtained the shares, they would have obtained control of the company. He, therefore, tempered the discount factor, which he considered on any view, in such a case, would have been a maximum of 60%, because, as he put it, the defender held the balance of power in the company. His reason for not making any allowance in the valuation, for tax payable on the increase in the value of the company's heritable property, was that that would only be appropriate if the sale of the heritage was known to be imminent. Any tax chargeable, however, was not going to be charged on an ongoing basis and if the company was, for example, to remove from its existing premises, which were the heritable asset involved, the tax would be rolled over to the new business location and no tax would be payable at that time. Mr Gilbert informed the court that he had, himself, just completed an acquisition of a company for clients where heritable subjects were included in the company's assets, and full value was paid for them, without recognition of any tax that might be payable on their realisation. [25] In cross examination, Mr Gilbert said that he had no concerns about the way in which the company's accounts had been prepared. He maintained that he had taken into account, in his valuation of the defender's shareholding, the fact that the other directors might decline to register any transfer. He thought that in such a case the defender may well have recourse to the courts, having regard to the law in relation to oppression of minority share-holders. He repeated that it was his opinion that it was inappropriate for tax, payable on the increased value of the heritable assets of the company, to be taken into account in the valuation. He did, however, accept that parties may bargain in an actual sale to have the sale price adjusted, to some extent, to recognise tax that might become payable, in the future, on the realisation of assets. This would simply be a part of a particular actual bargaining process. Mr Gilbert accepted that his valuation, and, in particular, his discount of 40%, proceeded on the assumption that the defender's fellow directors would be interested in the purchase of his shares and he said he reached that view because the financial records of the company disclosed that it was a highly profitable company. [26] The witness led on the defender's behalf in relation to these matters was Mr Richard Gilliland, Chartered Accountant of Gilliland and Company. His views are set out in a letter, addressed to the defender's agents, dated 8 October 2003, which is 42/1 of process. On the first page of that report the writer makes it clear that he is not in a position to provide a full valuation report, but is rather giving what is described as "an initial appraisal" of two valuation reports which had been forwarded to him, namely, that of Mr Gilbert, and a report from Messrs M. P. W., Chartered Accountants. Mr Gilliland, in his letter, states as follows:"In respect of Mr Gilbert's report we have reviewed this in detail and we are of the view that it is a very well written and factual report and we agree with the majority of the report with the exception of one or two matters which we refer to below."
The matters about which Mr Gilliland was in disagreement with Mr Gilbert were the appropriate discount factor to be applied to the valuation of the shares, and the question as to whether provision should be made in respect of tax payable on the increased value of the heritable property of the company. In relation to the first of these matters, Mr Gilliland, in his letter, stated: "In our view the level of discount which Mr Gilbert has utilised at 40% is too low". He also went on to state that a discount of 75% used by another firm of chartered accountants, whose valuation he had been provided with, was too high. He then stated:
"Our own opinion in respect of the discount to be utilised in respect of a minority shareholding in respect of this particular company would be a discount of between 50% and 60% and we have utilised 60% for the purposes of our calculations at this stage."
Mr Gilliland's views as to the need to make allowance for tax payable on the increase in value of the company's heritable property are expressed, in his letter, in the following terms:
"In respect of Appendix 4 of Mr Gilbert's report when he calculates the net asset value in respect of this company, he has increased his net asset value by a figure of £283,333 in respect of the increase in the value of the property from January 1995 to May 1999. We have not seen the valuation report but we have assumed that the figures are broadly correct.
Whilst we agree with the concept of increasing the net asset value by this amount we are of the view that some provision in respect of the additional tax which would arise in respect of this should be taken in account.
In view of the level of profitability from 1995 to 1998 we would have thought that a provision of 30% of the increase of the valuation should be set aside for deferred taxation which would amount to £283,333 x 30% equals £85,000."
Adjusting Mr Gilbert's valuation to make provision for tax and by increasing the discount factor from 40% to 60%, Mr Gilliland brought out a valuation of the defender's shareholding, at the relevant date, at £219,100. Mr Gilliland spoke to this valuation in evidence. He explained that his special area of interest was in the valuation of private limited companies and the acquisition and sale of these. He explained that his position, in respect of the discount requiring to be made in respect of tax due on the increase value of heritable property of the company, was on the basis that this would be something which would be taken into account in an actual sale of the shares and that, normally, a buyer would expect that any price to be paid, would reflect some provision for tax. He said that this would be something that parties to the transaction would haggle about. He himself had experience of being involved in such a process, four or five times a year. Ultimately, he accepted that a reduction in the order of 15%, in recognition of this factor, might be more likely than 30%. He considered that Mr Gilbert's refusal to make any allowance for this factor, in his valuation, reflected an accounting practice which was appropriate only in relation to the preparation of the company's account, but was inappropriate in relation to valuation of the shares on an asset basis.
[27] As regards the appropriate discount factor, this witness said that, in his experience, discounts applied in such cases could range from 40% to 80%. Mr Gilliland explained that, because the company was of a reasonable size and was owned by three individuals, rather than by a family, he would not choose a discount figure at the higher end of that spectrum. On the other hand, it was significant, in his opinion, that, at the relevant date, the motor trade was going through a particularly difficult time and the level of profitability in the company itself was downwards as was recognised in Mr Gilbert's report. Taking all these factors together led him to the conclusion that 60% was the appropriate discount in this case. It was put to him that the company itself might be interested in buying the defender's shares. In reply to that Mr Gilliland said that the company had been run on a tight basis and he himself could not see any advantage for the company in buying its shares. All-in-all, the defender had limited bargaining power in respect of any sale of his shares. While he accepted that if, for example, the defender was to die, the other share-holders and directors would wish to buy his shareholding from his estate, he considered that a suitable discount would be sought by them in relation to any such purchase. [28] In cross-examination, the witness accepted that an allowance for deferred taxation on the increased value of the property, would not normally be recognised in the company's accounts, unless there was "a binding intention to sell". He also accepted that negotiation, or haggling, regarding this factor came up, principally, in the context of companies where the business was property owning and property development. Nevertheless, he said that he had some experience of such negotiations taking place in the context of trading companies when their physical assets were substantial and he considered that that was the situation in the present case. Mr Gilliland said that he had fully taken into account that the defender held the balance of power as between the other two share-holders, in reaching his discount factor of 60%. But for that, he said, the discount would have been greater. He accepted that the possibility of future maintainable profits can affect the discount factor and put the seller in a stronger position. That was not something he had specifically addressed in his letter. [29] In the course of the defender's examination, and in cross-examination of this witness, it emerged that the defender's fellow directors and share-holders are cousins. Neither Mr Gilbert nor Mr Gilliland had taken that factor into account in reaching their conclusions regarding valuation. Mr Gilliland was asked if that might alter his position regarding the discount factor, and he said that it might possibly persuade him to increase it to 65%. Counsel for the pursuer sought leave to recall Mr Gilbert on this matter, on the basis that there was no record, in relation to this matter, that there was no production which indicated that this matter was a relevant factor, and that lastly, counsel for the defender had not cross examined Mr Gilbert on that basis. I allowed Mr Gilbert to be recalled. He advised the court that if he had had the information that Mr McGuire and Mr Devenny were cousins, that knowledge would not, at all, have affected his valuation of the shares and, in particular, the appropriate discount factor. The relationship was, he considered, for these purposes, remote. They were, for example, not "connected persons" in a tax accounting sense. He accepted that had Mr Devenny and Mr McGuire been brothers his position might have been different. [30] I heard evidence from Mr John McGuire. He explained that he was the Managing Director of nine different companies in the group of companies of which Phoenix Honda Limited, forms part. The defender has no involvement in any of the other companies. Mr McGuire confirmed that he and Mr Devenny are first cousins and that they have been in business together, in the motor car trade, all of their adult lives. They were boyhood friends with just a year's difference in their age. Mr Devenny was described by Mr McGuire as his "number two". He described the relationship between himself and Mr Devenny as being one of successful partners. His relationship with the defender was quite different. He was simply a trusted employee who had no role in the management of the company. Mr McGuire confirmed that the defender was involved in the disposal of trade vehicles, at auction, because he did not like to work at week-ends, which he wished to devote to spending time with his children. The witness said that he was responsible for fixing levels of remuneration in the company. Under reference to a letter from himself to the defender dated 10 February 2000, which is 6/2/2 of process, Mr McGuire confirmed that, at that time the defender's basic salary was £40,829 per annum, exclusive of any bonus payments. He also informed the court that the defender's basic salary at the present time, was £46,000 per annum, exclusive of bonuses. [31] In examination in chief, Mr McGuire, was asked, by counsel for the defender, about re-organisation of the group which had taken place, apparently in an attempt to suggest that this might have had an impact on the valuation of the defender's shareholding. This line of questioning was objected to by counsel for the pursuer on the basis of lack of notice. I allowed the line of questioning, subject to all questions of competency and relevancy. Re-organisation of the group structure is, in fact, referred to in Mr Gilbert's report. In the event, however, nothing, it seems to me, was made of this factor by the defender's expert in relation to the valuation of the shares and it is not a factor which I have taken into account. Mr McGuire's evidence was that if someone had asked him, in May 1999, if he might be interested in buying the defender's shares, he would have said he would have some interest in buying them. He accepted that, at that time, the shares would have had a value but for him to be interested, the price would have had to have been right. He referred to the fact that he, himself, had had a valuation placed upon the defender's shares in May 1999, which was provided by the firm of accountants, who are the company's accountants, which brought out a valuation of £153,000. This valuation was not lodged as a production. Mr McGuire said that, in fact, in May 1999, he probably would not have been willing to buy the shares at that price, even if they were on offer, because he had better things to do with £153,000, than purchase the shares. He did, however, say that if the defender had been in difficult financial circumstances and needed to sell his shares, he might have considered purchasing them. He said he thought Mr Devenny might not have been in a position to purchase them. He explained that the shares had been allotted to the defender as part of a policy operated in the group to give key workers a stake holding in the company in which they were employed. Mr McGuire said that, having regard to the provision in the articles of association, regarding the director's right to refuse registration of a transfer of shares, he would have consented only to a transfer of shares by the defender to himself. In giving his evidence, Mr McGuire said that he regarded the company as "my company". He said he had no interest in selling it. He loved his work and his companies. He accepted that, at the right price, the company might buy the defender's shares, if the funds were available to do so, but that would not be high on the company's agenda. [32] In cross-examination Mr McGuire said that the defender regularly received bonuses, normally on a quarterly basis. The maximum amount paid to the defender in bonuses, in any one year, would be £10,000. The defender had not obtained bonuses in recent times, but he might well do so again in the future. While dividends had been paid in the past, they had not been paid in recent years, and there was no plan to do so in the foreseeable future. [33] I found Mr McGuire to be a credible and reliable witness. I formed the clear impression that he was a highly energetic businessman, who clearly controlled the business of Phoenix Honda Limited and the other companies in the group. He regarded them as very much his own property and was determined that that should remain the position. I also formed the impression that he valued the defender, as a colleague, and employee, and would not be averse to helping out the defender if the defender found himself to be in difficulties. [34] Part of the evidence, at the proof, was directed at establishing the defender's present resources and his ability to obtain finance to pay the pursuer a capital sum. I should say, at this stage, that counsel for the pursuer made great play of the defender's alleged failures to provide full and accurate information regarding his resources. At various stages of the proof, objection was taken to questions, or lines of questioning, on the basis of the defender's failure to vouch his resources adequately. I allowed the questions or lines of questioning to continue under reservation of all questions of relevancy and competency. I am, ultimately, satisfied that counsel for the pursuer and the Court, had adequate information to enable the defender's present financial position to be ascertained. I am satisfied that, contrary to what counsel for the pursuer seemed to be implying, at least from time to time, the defender was ultimately not seeking to conceal from the Court, his sources of income or his capital assets. It is true to say that over the period he has been, to say the least, slow in providing such information, and, on occasions, has provided it in a less than direct fashion. It is also clear that the pursuer has had very considerable difficulty in obtaining aliment from the defender, since their separation. These factors, no doubt, made it more difficult, for the pursuer's representatives to advise her on what would be an appropriate sum to accept in satisfaction of her rights, but I am satisfied that, at the proof, the defender's financial position was fully disclosed. I, therefore, do not consider that the pursuer suffered, ultimately, any prejudice in this respect and repel all the objections taken during this chapter of the evidence. [35] I deal first of all with the question of the defender's present income. Under reference to the monthly bank statement dated 5 September 2003, which is 43/5 of process, and an entry relating to a payment from Phoenix Honda Limited of £1,388.16, the defender said that that figure represented his net monthly income after deduction of £700 paid directly to the Child Support Agency. As I have noted above, however, Mr McGuire, gave evidence that the defender's current gross income is £46,000 per annum and I accept that evidence. Mr McGuire also spoke to the probability of the defender obtaining bonuses up to the maximum of £10,000 per year. Counsel for the defender, in her closing submissions, accepted that I would be entitled to reach the conclusion that the defender's present annual income amounted to £56,000 gross, £32,500 after tax and other deductions, but before the deduction of £700 per month payable to the Child Support Agency. After deduction of that last mentioned sum the figure for the defender's net monthly income would be £2,025. In a statement of income and expenditure, which was 43/6 of process, spoken to by the defender in his evidence, his monthly expenditure is stated to be £1,440.04. None of the items of expenditure spoken to by the defender, save for money said to be spent by him on the children in respect of holidays, presents, and money spent on them during week-end visits was, ultimately, the subject of any challenge on behalf of the pursuer. The pursuer's counsel, however, suggested that the total figure of £275 per month, said to be spent on the children by the defender, could be reduced without danger to the defender's relationship with his children. I accept that submission and, accordingly, consider that sum could be reduced by £100 per month leaving the defender with £685 per month, after his recurring items of expenditure are taken into account. [36] As far as the defender's capital assets are concerned, I have already accepted Mr Crooks' evidence that the defender's flat is presently valued at approximately £125,000. I also accept the defender's own evidence that the mortgage presently on the flat is presently £72,650. In addition to that asset, the defender, of course, has his shareholding in Phoenix Honda Limited and he has a pension fund, provided by that company, which, at 2002 was valued at £78,000, CETV £71,364. The Court heard evidence relating to an antique clock, which the defender had removed from the matrimonial home, which he continues to possess. I heard evidence, led on behalf of the pursuer, in relation to its value. The value was stated to be £3,000 in May 1999 and, as at the present date, £5,000. [37] In his statement of income and expenditure 43/6 of process the defender sets out as his outstanding debts, fees and expenses incurred in relation to these proceedings amounting £17,490 and a tax debt of £2,963.54. [38] Certain of the witnesses led were asked to consider the defender's ability to raise monies if an award of a capital payment to the pursuer was made. Mr Gilbert pointed to the fact that Phoenix Honda Limited had a strong balance sheet with a net worth of in excess of £2,000,000, as at 31 January 2002 and, at that date it had distributable reserves of just under £1.4 million. He also pointed out that, as at 31 January 2002, the company had significant net current assets of over £1.2 million and had a long history of being profitable. He was, accordingly, of the opinion that, because of the strength of the company, the defender would be in a position to approach a bank, or other lending institution, for an advance based on the security of his shareholding in the company. He was, furthermore, of the view that, because of the company's balance sheet and profitability, there was likely to be a market for the defender's shares in the company, with possible buyers being the company itself, the company's parent company and the other two share-holders. In addition, while he recognised that it would be in contravention of the companies' acts for the company to lend money directly to the defender, he thought it might be possible for the company to arrange increased remuneration for the defender and for it to recommence paying regular dividends or, indeed to pay a special dividend. Mr Gilbert, of course, recognised that all of that would require the approval of the company's parent and the other directors. Having heard the evidence of Mr McGuire, which I accept, I am satisfied that these suggestions of Mr Gilbert are unrealistic. [39] Mr Gilbert told the Court that if the defender came to him with £50,000 free equity available in his home, and his shareholding he, Mr Gilbert, would have no difficulty in obtaining a loan for him of £140,000 at an annual interest rate of just over 5%. [40] In cross-examination, Mr Gilbert maintained that the shareholding could be utilised as a security for a loan, even though there are restrictions on the transfer of the shares. He maintained that a bank, or other lending institution, would be prepared simply to have the share certificates deposited with them as security. [41] The pursuer also led as a witness Mr William Singer, who is an independent financial adviser, and who has been in that business for thirty one years. The witness said that he gave financial advice to both individuals and businesses. In particular he gave advice to individuals and concerns who needed to raise money. Proceeding on the valuation of the defender's present home at £125,000 and an existing mortgage of £75,000 and his shareholding, the witness considered that it would be possible for the defender to obtain a loan of £50,000, secured over his property and £30,000 unsecured. The lender would, probably, look to the shares as "a comfort factor", rather than requiring to take them in security. A loan of £80,000 in total would be obtainable at an interest rate of 6% per annum. Such a loan would involve interest repayments of £4,800 per annum, and this witness made it clear that the lender's primary interest would be to be satisfied that the borrower was in a position to meet these monthly repayments. The witness also said that it may be possible to obtain a personal loan, on the strength of the shareholding at, an interest rate of 71/2% per annum. [42] Mr Gilliland said that he had not gone into the question of the defender's resources or his ability to raise money, in any detail. He did, however, have experience in advising and assisting persons in the obtaining of finance. It was his view that the major banks would not lend significant sums on the security of shares in private companies. He considered that it would be difficult to obtain a loan of £100,000 on the strength, solely of the defender's shares. Any lender would wish to have a personal guarantee and/or a security over the defender's home. It may be possible to obtain a loan of £25,000 for the defender, unsecured. [43] At the conclusion of the proof counsel for the pursuer sought decree of divorce. I have already indicated that I am satisfied that decree of divorce should be pronounced. [44] Counsel for the pursuer then moved the Court to (a) order a transfer of the defender's interest in the matrimonial home to the pursuer, (b) award a capital sum to the pursuer of £130,000 or alternatively £200,000 if no order in respect of the defender's interest in the matrimonial home was made, (c) award a periodical allowance, the amount of which would be dependent on the amount of the capital awarded, and (d) ordain the defender to grant a standard security, and a pledge of his shares, in security of any order which might be pronounced by the court. The last order was sought on the basis of very detailed submissions which counsel for the pursuer made in respect of the defender's credibility, reliability and his past behaviour in respect of alimenting the pursuer and disclosing his financial resources. I have already, to some extent, touched on this subject. I am satisfied that the defender has, in the past, since these proceedings commenced in the Sheriff Court, sought to avoid alimenting the pursuer. I am also satisfied that during the currency of the proceedings, and probably because of the deteriorating relationship between the parties, the defender has not been as forthcoming with information regarding his resources as he should have been. The defender's conduct, in this respect, is unfortunately not at all unusual in disputes of this kind. It is no less excusable for that. When it comes to the issues which I now have to determine I am, however, satisfied that the defender, at proof, has not sought to conceal the true position regarding his assets and financial resources, albeit that the vouching of these matters was not always provided in the most direct way. I am also satisfied that, notwithstanding his past behaviour to which I have referred, having seen and heard the defender give evidence, he is now anxious to have the position, as between himself and the pursuer, finalised and he gave me no real cause to believe that he would take steps to avoid enforcement of any award made by the Court. I am accordingly not persuaded that it is either necessary, or appropriate, for me to make an order ordaining him to grant security for any sums to be awarded to the pursuer. [45] The pursuer's counsel's submission in relation to the disputed matters were as follows. In relation to the valuation of the defender's shareholding, she invited me to accept, in its entirety, the approach of Mr Gilbert. She, in particular, moved the Court to disregard, in relation to the question of the discount factor, the evidence which had emerged regarding the family relationship between Mr McGuire and Mr Devenny and the evidence which Mr McGuire gave, to some extent, regarding the reconstruction of the group of companies, which counsel for the defender had attempted to use to support an even higher discount factor than Mr Gilliland had originally suggested. Counsel for the pursuer invited me to disregard these factors on the basis there was no notice given of them in either pleading or production by the defender. I am satisfied that she was well founded in making that submission and that it would be unfair to take these factors to any extent into account to discount Mr Gilbert's evidence in any respect. In any event, Mr Gilbert had, apparently, notice of the question of the changes in the make-up of the group, in carrying out his valuation and in giving his evidence. On his recall he also made it clear that he would not have altered his valuation, even if he had known that Mr McGuire and Mr Devenny were cousins. Moreover it was clear that Mr Gilliland had never been asked, on behalf of the defender, to take these factors into account in giving his views on Mr Gilbert's valuation. For the foregoing reasons those factors form no part in my assessment of the appropriate discount factor. [46] Counsel for the pursuer invited me to prefer Mr Gilbert's evidence, to that of Mr Gilliland's, on the two key questions of dispute between them regarding the valuation of the defender's shareholding, namely (a) the discount factor and (b) whether or not the valuation should make an allowance for hypothetical tax, payable on the increase in the value of the company's heritable property. On both of these questions, the pursuer's counsel relied firstly on Mr Gilbert's considerable experience and expertise in relation to such matters, and the fact that the defender was in the position of holding the balance of power between the other two directors and shareholders. There had been discussion with the witnesses, Mr Gilbert and Mr Gilliland, as to whether there should be a reduction in the valuation in respect of the hypothetical capital gains tax which would have been due, had the shares been sold on the relevant date, following the approach of the Lord Ordinary in the case of Sweeney v Sweeney 2003 SLT 892. Counsel for the pursuer brought to my attention that that decision had been the subject of a recently heard reclaiming motion before an Extra Division, in October 2003 and that the Extra Division had taken the matter to avizandum. Since the end of the proof in the present case, the Extra Division, in an opinion issued on 9 December 2003, has reversed the approach of the Lord Ordinary and has held that there should not be any deduction in respect of hypothetical capital gains tax in such cases. [47] In closing her submissions, on this chapter of the matter, counsel for the pursuer sought to criticise what she had detected as a misconception in the approach of counsel for the defender's questioning of the witnesses in relation to the topic of the valuation of the shares. She submitted that the nature of the exercise, when assessing the value of shares as part of the matrimonial property was simply a part of assessing a man's actual worth. The defender's counsel appeared to concentrate, in her examination of the topic with the witnesses, largely on the question of whether or not there was, in fact, a willing buyer and a willing seller in existence at the material time. The concept of the hypothetical willing buyer and willing seller was a tool which fell to be used in the exercise, but the existence of an actual willing buyer and willing seller was not determinative of value in the exercise which required to be performed for present purposes. Reference in this connection was made to the decision of the Lord Ordinary in the case of L v L unreported 13 June 2003. [48] There was a dispute between the parties as to whether the value of the General Accident bond, which as a matter of agreement formed part of the matrimonial property, at the relevant date with a value, then, of £20,000, should be shared between them, notwithstanding that it had been realised by the pursuer and its proceeds used by her. Counsel in, this connection, referred me to the provisions of section 10(1) and (6) of the Family Law (Scotland) Act 1985 to support an argument that there were "special circumstances" for taking the value of the bond, in whole, or in part, out of the property to be shared equally by the parties. Reference was also made to the decisions in the case of Jacques v Jacques 1997 SC (HL) 20, and Cunniff v Cunniff 1999 SC 537. The special circumstance, which the pursuer relied upon in the present case, was that, if the value of the bond was included in the distribution of the net value of the matrimonial property, the pursuer would be credited with an item which she had been required, in the circumstances, to spend, and from which she personally had derived little, if any, benefit. Reference was made to the pursuer's evidence that she had spent the proceeds of the bond on holidays for herself and the children, replenishing furniture and providing herself with a car. [49] Counsel for the pursuer then proceeded to make submissions in support of the application to the Court for an order ordaining the defender to transfer his right and title in the matrimonial home to the pursuer. Counsel submitted that this application could be justified in the first place and, once again, by reference to "special circumstances" in terms of section 10(1) and (6) of the 1985 Act and, secondly, on the basis of the approach of the courts in cases, like the present, as demonstrated in existing case law. Reference was made to Peacock v Peacock 1993 SC 88, Cunniff cited above, and Coyle v Coyle, unreported, 25 April 2003. The circumstances which the pursuer relied upon in this respect were as follows. The house is the home of the pursuer and four children, all under sixteen years of age. The undisputed evidence was that the children are settled happily there. It is within easy reach of the schools attended by them and they have a circle of friends in the neighbourhood. Were their home to be sold, the pursuer would require to purchase alternative accommodation at a price probably not dissimilar from the value of the existing matrimonial home. Removal itself would result in expense. The defender had suggested that the pursuer should buy his share of the property. This, counsel for the pursuer recognised, may in part, at least, have resulted from an attempt to avoid the consequences of the House of Lords' decision in the case of Wallis v Wallis 1993 SC (HL) 49 which held that any increase in the value of matrimonial property, from the relevant date, does not fall to be accounted for in valuing the matrimonial property, as at that date, and is not to be regarded as special circumstances justifying a departure from the norm of equal sharing of the matrimonial property. Counsel for the pursuer accepted that, in certain cases, it may be legitimate to try to avoid the potential for perceived unfair consequences arising from the decision in Wallis, particularly where the matrimonial home is the only significant asset and there has been a significant increase in its value. The position, she contended, is, however, different where, as in the present case, there were other assets, also increasing in value. The defender had purchased a new home for himself within a month of the relevant date. The value of that property had increased by at least £42,500. The net asset value of Phoenix Honda Limited had increased from some £1.5 million to £2.2 million. The defender's company pension had increased in value. In any event, the proposal that the pursuer should purchase the defender's share in the matrimonial home had become less attractive because of the significant lapse of time which had occurred since the relevant date. There were doubts to be cast over whether the defender would, in the event, be willing to sell his share to the pursuer. The pursuer had invested time and effort in the house, since the relevant date by decorating it and maintaining it. The pursuer had an economic disadvantage claim under section 9(1)(b) and section 9(2) of the 1985 Act, insofar as her capacity to develop a career was deflected when her children were young. A transfer of the defender's share in the matrimonial home might also be justified having regard to the terms of section 9(1)(c) of the 1985 Act. Counsel for the pursuer stressed that she was not seeking, on behalf of the pursuer, any more than one-half share of the net matrimonial property, but that the transfer could be a means of effecting payment of that half share. [50] Counsel then addressed me on the question as to whether any award that might be made having regard to an equal division of the matrimonial property should be reduced by reference to the defender's available resources. Counsel renewed her submission that the defender's pleadings did not contain fair or adequate notice of the defender's case as to his resources. What was established was that the defender owned a house which was now worth at least £125,000. If it was accepted that the defender had re-mortgaged the property in May 2003 and had raised £72,650 as a result, he would still be able to raise (£125,000 x £95,000 less £72,650) £46,100 plus £30,000 at 6% on the property, which would result in a liability for annual interest of £4,566. Counsel for the pursuer also contended that, having regard to the evidence of Mr Singer, it would be possible for the defender, as owner of his shareholding in Phoenix Honda Limited, to raise £53,900, albeit at an increased interest rate of 7.5% per annum bringing out a liability for annual interest of £4,042. I was asked by counsel for the pursuer not to accept the defender's evidence that his present income is £2,088 per month (inclusive of a payment £700 per month to the Child Support Agency). I have already made my finding-in-fact regarding the defender's present income. The pursuer's counsel, as previous noted, submitted that there was room for the defender to reduce his expenditure, particularly with regard to the amount of his income he spent on entertaining the children during contact weekends. Lastly, counsel submitted, it would be possible for the defender to sell his shares. [51] Counsel for the pursuer then addressed me on the question of an award of periodical allowance, under section 13 of the 1985 Act. She contended that such an award might be justifiable having regard to the factors set out in section 9(1)(c) and (d) and (e) of the Act. The pursuer, it was said, had been kept seriously short of money. It was, however, recognised that if the pursuer's needs were met by the award of a payment of capital, then the requirement for a periodical allowance could be removed, particularly if the defender's resources were resources which were, in part, to be utilised by him towards the repayment of any loan required to meet that payment. In any event, it was recognised that there would be an inverse relationship between the size of the capital sum paid and the requirement for periodical allowance. [52] Lastly, pursuer's counsel sought certification as skilled witnesses, Mr Gilbert, Mr Crooks and Mr Singer. She also sought certification of Mr Gerard O'Neill, who gave evidence as to the value of the antique clock. He is a dealer in such items, but he is also the brother of the pursuer. An invitation to admit the valuation of the clock had been made to, but rejected by the defender. [53] In opening her submissions, counsel for the defender made the observation that the parties are, by current standards, not wealthy and live modest lifestyles. Nevertheless, this has been a long and expensive litigation for them which has actually exacerbated the relationship between them. As far as the dispute between them regarding financial provision was concerned, it was important for the Court to reach a conclusion that was fair and reasonable, as between them. [54] Counsel for the defender said that the approach, adopted on behalf of the pursuer, in support of her application for a transfer of the defender's interest in the matrimonial home, was novel insofar as it appeared to rely, to some extent, in having regard to the increased value of the property which had been held by the defender at the relevant date and which had been subsequently acquired by him. Any order for transfer of the property had to be justified in terms of the 1985 Act. Notwithstanding that the house was the present home for the four children, and that the pursuer wished to remain living there, those factors alone could not justify the making of an order. Counsel for the defender, however, wished to make it clear that the defender's position was that the pursuer and the children could continue to reside at the matrimonial home, provided that the financial arrangements between the parties were settled in a satisfactory and equitable way. Counsel for the defender then turned to address the question of the valuation of the defender's shareholding, where there was a substantial difference in the approach as between the parties. Counsel excepted that Mr Gilbert's report was a thorough and well presented piece of work, but she characterised it as "something of an academic exercise". Mr Gilliland, on the other hand, she submitted, had attempted to introduce an element of reality into the exercise. Mr Gilliland was perfectly happy to accept the figures presented by Mr Gilbert and, over all, he accepted Mr Gilbert's conclusions. The only issues between them, ultimately, related to the question of what allowance should be made for tax on the increased value of the company's heritable property and the extent of the discount factor to be applied. Counsel for the defender said that in relation to the tax element, a deduction of 15% rather than 30% might be more appropriate. As far as the discount factor was concerned, Mr Gilbert had clearly alighted on 40% as being appropriate because of his "balance of power" argument. His discount factor would, it was submitted, have been much higher otherwise. In this respect the actual evidence of Mr McGuire given in Court was crucial. He had made it quite clear that the restriction on transfer of the shares would be enforced by him and that, in effect, he would be the only purchaser for the shares. Mr Gilbert had not taken into account Mr McGuire's actual position, and attitude, towards the possibility of the defender selling his shares or transferring them. Counsel for the defender sought to elaborate on this submission by referring to the evidence of Mr McGuire relating to the restructuring of the group of companies. I have already indicated that I am not prepared to have regard to this particular factor. [55] Counsel for the defender submitted that a discount figure of 70% would be appropriate, even though that was not spoken to by Mr Gilliland either in his letter commenting on Mr Gilbert's valuation or, indeed, at proof. Counsel for the defender then proceeded to make submissions regarding the General Accident bond. The Court, it was submitted, was not entitled to ignore it in reaching its conclusion as to the value of the matrimonial property at the relevant date. The pursuer had said that she had realised it for the purpose of purchasing things she needed. There was, in place, however a Child Support Agency award for the children. If she chose to spend money on the children beyond that, that was a matter for her but it did not justify her in saying that it should no longer be regarded as part of the matrimonial property at the relevant date. It might have been different, it was recognised, if the evidence was that the defender had emptied the matrimonial home of all the furniture and she had to refurnish the house, but that was not the evidence. The pursuer alleged the removal of certain items, for example the antique clock, but there was no suggestion that the home had been stripped of furniture by the defender. The purchase by the pursuer of a car was exactly the kind of thing that the award of a capital sum was designed to cover. The defender, himself, did not seek to have the furniture in the house included in the matrimonial property. [56] Reverting to the question of whether or not there should be an order requiring the defender to transfer his share in the matrimonial home, counsel for the defender contended that all of the authorities relied upon by the pursuer to support her application in this respect, were distinguishable on their facts and circumstances from the present case. In both Peacock and Cunniff there were no realisable assets apart from the house. In Coyle the pursuer was not a young person. There was compelling evidence in that case of the pursuer having suffered substantial economic disadvantage. Reference in that respect was made particularly to what Lady Smith had to say in relation to the facts at page 6, para 40, of her opinion. The pursuer had given up a career as an air hostess and evidence had been led from a colleague, and contemporary, as to precisely how she might have advanced in her career, had she chosen to carry on with it. In the present case no such evidence was led. There was no evidence from any independent sources as to what the pursuer might have achieved in her career and what she might have earned, had she chosen not to give up work to look after the children of the marriage. Lastly, in relation to the defender's resources, counsel for the defender accepted that the evidence led, on the defender's behalf, as to the present value of the defender's flat in Shawlands, was weak. She also accepted that Mr Crooks' evidence as to the present value of the matrimonial home was compelling, compared to what the defender was able to produce. [57] There was no justification, on any view of matters, counsel for the defender submitted, for an award of periodical allowance in this case. The pursuer's financial position should be safeguarded by an appropriate award of capital. She has, in recent times, been in receipt of student grants and loans of approximately £9000 per annum and should be able to obtain employment in the near future as a teacher. She had said that she was looking to obtain temporary employment before that, which had showed proper recognition by her of her need to get a job. In conclusion, counsel for the defender invited the court to reach its conclusions on the proper value of the matrimonial home, at the relevant date, and to make an award based on an equal split of that property. [58] Before giving my conclusions with regard to matters which ultimately were in dispute, I cannot forbear from agreeing with counsel for the defender that it is extremely unfortunate that the dispute between the parties has endured for such a time and has apparently been so acrimonious, given the relatively modest assets involved. It is of particular concern if, as counsel for the defender suggested, the protracted nature of these proceedings has contributed to an exacerbation of the relationship between the parties. I am not in a position to arrive at any fully informed or concluded view as to where responsibility for that state of affairs lies. I would simply wish to stress what seems to me obvious, namely that it is particularly important in disputes of this sort, in this day and age, that those who are professionally instructed in such matters do so in an objective manner, consistent, of course, with their professional obligations to their clients and that they seek to reach agreements and compromises which reduce hostilities between the parties and the expense to them both in emotional and financial terms. A realistic approach to what the parties' entitlements are should also, in my judgement, be applied in assisting them to reach decisions as to how they might best resolve their disputes. I have already indicated in this case, on more than one occasion, that the defender has not been, in the past, as forthcoming about his resources, as he ought to have been, and this has, no doubt, not helped matters but that is a far cry from the position being that he was, in any material respect, seeking to hide away significant assets or seeking dishonestly to undervalue the true value of those assets. Had that distinction been more clearly grasped, there might have been the possibility that the dispute could have been resolved on a less time consuming and less expensive basis. [59] I now turn to deal with the matters which the parties have, in the event, asked the Court to resolve. Both counsel helpfully provided me with written statements of their respective calculations as to how the value of the matrimonial property, at the relevant date, should be arrived at. There is a great deal of agreement as to the items to be included and the values of those items at the relevant date. That agreement is embodied in a Joint Minute of Admissions, No. 49 of process. The two major remaining elements of disagreement concern the valuation of the defender's shareholding and, whether or not, the General Accident bond should be included as part of the matrimonial property. [60] On the first question I have reached the conclusion that the discount factor to be applied, in the circumstances of the present case, is 60% as suggested, at least initially, by Mr Gilliland. I am not prepared to accept Mr Gilbert's evidence on this one matter. He clearly reached the conclusion that 40% was appropriate because of his view that the shareholding of the defender would always be attractive to one or other of the defender's fellow shareholders as it held, as he put it, the balance of power in the company. Having heard, Mr McGuire, in evidence, I am satisfied that Mr Gilbert's emphasis on this fact, which apparently reduced, in his mind, the effect of the significant factor of the shareholding being in a private company with the restrictions on transfer, which appear in the Articles of Association, was not justified. There was no compelling reason, at the relevant date, for either Mr McGuire or the other shareholder, Mr Devenny, to see the purchase of the defender's shareholding as being attractive to them. Both expert witnesses acknowledged that the fixing of a discount factor, in a case like the present, is a highly subjective matter. I am satisfied, for the reasons given by Mr Gilliland in evidence, and in his letter commenting on Mr Gilbert's report, and having regard to the evidence of Mr McGuire, that a discount factor of 60% is more reasonable, in a range which both witnesses accepted could be between 40% to 80%. I should say that Mr Gilbert, when questioned about the significance of the restrictions on transfer of shareholdings in the company, from time to time, made some play of the fact that the defender, as a minority shareholder, might get round any problems in that regard by relying on the companies' legislation in relation to oppression of minority shareholders. I am bound to say, however, that contemplation of resort to proceedings under that legislation only, in my judgment, supports the higher discount of Mr Gilliland, rather than the lower one of Mr Gilbert. [61] I am, however, on the other hand, persuaded by Mr Gilbert, for the reasons given by him that, in the valuation of the shareholding, no deduction should be made for hypothetical tax payable on a disposal of the company's heritable property in relation to the increase in its value since acquisition. In this respect, it seems to me that Mr Gilliland did stray, from time to time, from the true nature of the valuation exercise, in a situation like the present to what might actually happen in the bargaining process in a particular sale. In any event, he did not contend that such a deduction would always be made in any actual sale. It seemed to me also that his attitude to this point was driven, to some extent, by his own experience in negotiating actual sales of companies whose business was property owning and/or development. [62] It is convenient for me to, at this stage, mention, again the fact that before me, there was some discussion as to whether or not, in any event, a further allowance should be made in the valuation of the shareholding to recognise the incidence of capital gains tax on the disposal of the shares themselves, following the approach of the Lord Ordinary in the case of Sweeney v Sweeney 2003 S.L.T. 392. Since making avizandum, in the present case, an Extra Division of the Inner House has reversed the decision of the Lord Ordinary in an Opinion dated 9 December 2003. It appears to me that there are certain dicta, in the Opinion of the Court, delivered by Lord Hamilton, which might be read as being, at least references to the kind of question raised, in relation to the valuation of the heritable property of the company in the present case, but these would not, at least, at first sight, appear to me to contradict the approach that I, for the moment, prefer to adopt in this matter. Since the parties have not had the opportunity to address me on the effect of the Inner House decision in Sweeney on matters raised in the present case, I shall put the case out By Order, before pronouncing any interlocutor and give parties the opportunity to do so at the By Order hearing. [63] As regards the issue of whether or not the General Accident bond should be included in the valuation of the matrimonial property, I am satisfied that the submissions made, on behalf of the defender, on this point are to be preferred. The evidence was that the proceeds of the bond had been used to provide, in large measure, replacement of capital items such as furniture and a new car. The other major item to which the proceeds had been put by the pursuer, was money spent by her on the children. I am satisfied, that if the pursuer decided or, indeed, found herself obliged, to draw down on that capital asset, which was part of the joint matrimonial property, she cannot avoid having its value being taken into account to that extent, in a valuation of the matrimonial assets at the relevant date. Equally, since, it has to be assumed that the Child Support Agency award provides for adequate aliment for the children, then her decision to use some of the proceeds of the bond to spend on "extras" for the children does not justify its exclusion from the valuation of the matrimonial property. [64] For completeness, since it appears to have been a matter of dispute between the parties, and since the pursuer considered it necessary to lead evidence about it, I reached the conclusion that the antique clock should be considered as part of the matrimonial property with a value, at the relevant date, of £3,000. [65] Having regard to the foregoing findings and the agreed items, I, accordingly, reach the conclusion that the value of the matrimonial property, at the relevant date, is as follows:- The matrimonial home - £150,000 (agreed)
- Pearl pension - £ 37,092 (agreed)
- SERPS pension - £ 6,696 (agreed)
- Director's loan account - £ 21,070 (agreed)
- Bank of Scotland account - £ 1,258 (agreed)
- General Accident portfolio - £ 20,000
- Antique clock - £ 3,000
- Defender's shareholding in
Phoenix Honda Ltd - Value of company including
increase in value of heritage - £1,578,730 - Gross value of defender's
interest at 36.67% - £578,920 - Discount to recognise minority
level of holding and restraints
on transfer - 60% - Value of holding - £231, 568
- Total value of matrimonial
property - £470,684 - The parties were agreed that a
tax liability of £10,035 should
be deducted from the value of the
matrimonial property - £ 10,035
Total £460,649
On the basis of the foregoing calculation, one-half share of the matrimonial property amounts to £230,324.50.
[66] I accept the evidence of Mr Crooks regarding the present value of the matrimonial home, as being £225,000. As far as the defender's own flat is concerned again, as I have already indicated, I accept the evidence of Mr Crooks in this respect and find its present value to be £125,000, with an existing mortgage of £72,650. I refer to my previous findings regarding the defender's present income. [67] On the foregoing findings I am now required to apply the provisions of the Family Law (Scotland) Act 1985 and to determine what orders for financial provision should be made. Section 9(1) of that Act provides:"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 party from contributions by the other, and of any economic disadvantage suffered by other party in the interests of the other party or of the family;
(c) any economic burden of caring, after divorce, for a child of the marriage under the age of 16 years which should be shared fairly between the parties;
(d) a party who has been dependent to a substantial degree on the financial support of the other party should be awarded such financial provision as is reasonable to enable him to adjust, over a period of not more than three years from the date of the decree of divorce, to the loss of that support on divorce;
(e) a party who at the time of the divorce seems likely to suffer serious financial hardship as a result of the divorce should be awarded such financial provision as is reasonable to relieve him of hardship over a reasonable period."
It is provided in section 9(2) as follows:
"In sub-section (1)(b) and section 11(2) of this Act -
'economic advantage' means advantage gained whether before or during the marriage and includes gains in capital, income and in earning capacity, and 'economic disadvantage' shall be construed accordingly;
'contributions' means contributions made 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;"
Section 10(1) of the Act:
"In apply the principle as 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 the parties to the marriage when it is shared equally or in such other proportions as are justified by special circumstances."
Section 10(6) of the Act provides:
"In sub-section (1) above "special circumstances", without prejudice to the generality of the words may include -
(a) the terms of any agreement between the parties on the ownership or division of any of the matrimonial property;
(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 parties during the marriage;
(c) any destruction, dissipation or alienation of property by either party;
(d) the nature of the matrimonial property, the use made (including use for business purposes or as a matrimonial 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 divorce."
As has been held, those provisions mean that the Act contemplates an equal division of the matrimonial property as the normal result - See Adams v Adams (No.1) 1997 S.L.T. 144 at 149.
[68] I reach the conclusion that there is prima facie no good reason, in the present case, from departing from what is deemed should be the normal result contemplated in the legislation. I am, in particular, not satisfied that there is sufficient reason to depart from that approach, in the present case, because of any alleged economic disability suffered by the pursuer. This is not a case like that of the pursuer in the case of Coyle where there was provided to the Court compelling and clear evidence as to the actual economic disadvantage that had been suffered by the wife in the interests of the defender and the children. In the present case, in my judgment, the evidence which came from the pursuer as to what she might have done, but for the arrival of the children, was somewhat unspecific and certainly was not supported by the production of any evidence as to the extent of any actual economic disadvantage in money terms. Any economic disadvantage, in this case, in my judgment, can be met by an equal division of the matrimonial property. I, moreover, conclude that, in the circumstances of this case, there is no justification for the award of any periodical allowance having regard to the terms of section 9(1)(c), (d) or (e) and, in any event, I conclude that the provisions of section 8(2) of the Act can be met with an order for payment and capital and/or an order for transfer of property. The pursuer has until recently been in receipt of student loans and grants and accepts that she requires to get a job in the short period between now and the taking up of a teacher training course. [69] An equal division of the matrimonial property would require each party to be put in funds or have assets transferred to them to a total value of £230.324.50p. I have, no doubt, that it would be, in the best interests of the defender's children for them to be allowed to continue to reside with the pursuer in the matrimonial home. An order for transfer of the matrimonial home to the pursuer would result in the transfer of matrimonial property to the value of £187,500, viz:|
Her half share in the property as at the relevant date |
£ 75,000 |
|
The defender's half share in the property as at the relevant date |
£ 75,000 |
|
The defender's half share in the increase in value of the property since that relevant date |
£ 37,500 ________ |
Total £187,500
As already noted the pursuer has encashed the General Accident bond and has had the benefit therefrom of £20,000. Account requires to be taken of this sum, which if added to the value of a transfer of the defender's share in the matrimonial home would bring out a figure of £207,500. Accordingly, an order for the transfer of the defender's share in the matrimonial home to the pursuer and an order for payment by the defender to the pursuer of a capital sum of £22,824.50 would ensure the equal division of the matrimonial property between the parties and would meet what I consider is the pursuer's entitlement in this case. I have reached the conclusion, that having regard to his own resources and the evidence that was led in this case about his ability to obtain finance, he would not suffer any major hardship if he had to obtain a loan for £22,824.50. I am, accordingly minded, to make an order ordaining the defender to transfer his share in the matrimonial home to the pursuer and to pay the pursuer a capital sum of £22,824.50. Since, however, I intend to put the case out By Order to allow the parties' representatives to make representations, if so advised, on the implications of the Extra Division decision in the case of Sweeney, I will not, for the moment, pronounce any interlocutor to that effect and will allow the parties to address me on the mechanics of giving effect to the decision which I have arrived at. Lastly, as I have already indicated, having heard and seen the defender give evidence at the proof, I am not satisfied that there is any need in this case for any order to be made for him to provide security for any sum awarded.
[70] The pursuer's motion for certification of the witnesses I have named above, was not opposed on behalf of the defender and I shall grant certification as sought.