Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2009] CSOH 58
F175/07	OPINION OF LADY SMITH in the cause JAMES WATT Pursuer; against ANN BRUCE or WATT Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: Scott, Q.C., Komorowski; Balfour + Manson LLP

Defenders: Wise, Q.C., Innes; HBJ Gateley Wareing

29 April 2009

INTRODUCTION

[1] This is an action of divorce. The parties were married on 22 July 1977. They separated on 20 August 2002. They have one child who is over the age of 16 years. They have not lived together since the date of separation and it was plain from the evidence that their marriage has broken down irretrievably. I will pronounce decree of divorce.

[2] The defender has a substantial claim for financial provision. In terms of her conclusions, she seeks payment of a capital sum of £4.25m and property transfer orders in respect of the pursuer's interests in two heritable properties at (a) Eschol, McKenzie Crescent, Peterhead and (b) 20/2 Duff Street, Edinburgh. The defender also seeks transfer by the pursuer of his whole right, title and interest in and to a Scottish Widows bond: 8453950/1-20.

[3] As regards the extent of the defender's claim for a capital payment, the sum ultimately sought on her behalf in submissions was £3,988,515.00, together with interest from 30 August 2002 until payment.

[4] The pursuer was a fisherman at the time the parties married and has remained in the fishing business ever since. He works in the pelagic sector, fishing principally for mackerel but also for herring. The value of the parties' matrimonial property at the date of separation arose largely from his fishing interests.

[5] To a large extent, the facts were not in dispute. The principal issue between the parties was that of valuation of the pursuer's business interests.

WITNESSES
The following were led in evidence on behalf of the pursuer:

i. Billy Smith, a Certified Accountant with Johnston Carmichael, Chartered Accountants, who is based in their Fraserburgh office and has known and acted for the pursuer for over thirty years.

ii. Iain Webster, Chartered Accountant, who is a partner of Johnston Carmichael and is based in their Edinburgh office.

iii. Charles Scott, solicitor, who is a partner in Mackinnons, solicitors, Aberdeen.

iv. The pursuer.

v. George Tait, fisherman.

vi. Graham Taylor, manager of the Westward Fishing Company.

vii. Alexander West, fisherman.

The following were led in evidence on behalf of the defender:

i. Mr John Hermse, who was presented as an expert in the valuation of fishing quota and fishing licences.

ii. Mr Frank McMorrow, chartered accountant, of Henderson Logie, chartered accountants.

The defender gave evidence by way of affidavit.

BACKGROUND
[6] The relevant background facts, as agreed, or which I was satisfied were established in evidence were as follows.

[7] Prior to his marriage, the pursuer had interests in two fishing vessels, the "Julieanne" and the "Heritage". He held two out of the sixteen shares in the Julieanne and two out of the sixteen shares in the Heritage. Two other families, namely, the West family and the Alexander family held the other shares in these two vessels. Alexander West, of the West family, has been a close friend of the pursuer's for many years.

[8] Following his marriage, the pursuer transferred one of his shares in the Heritage to the defender. That was because it was advantageous, from a tax point of view, to show the profit share as split between him and his wife.

[9] In 1978, a company called Melantic Limited ('Melantic') was formed. The date of its incorporation was 28 December 1978. Shares in Melantic were issued to the pursuer (120 shares), the defender, (80 shares), Mr Alexander, (700 shares) and Mr West, (700 shares). Melantic was to be a fish selling company and it was also planned that it would invest in white fish and prawn vessels.

[10] Subsequently, the Julieanne and the Heritage were transferred into Melantic.

[11] In 1986, the company Westward BF350 Limited ('Westward') was incorporated. The pursuer got 382 shares in that company. Melantic was also a shareholder in Westward.

[12] In 1995, the pursuer bought a further 200 shares in Westward from Melantic.

[13] In 1998, it was decided that the Heritage and Julieanne vessels would be transferred out of Melantic. One vessel went to the West family and the other vessel went to the Alexander family. To compensate the pursuer in respect of the consequent reduction in Melantic's assets, he received further shares in Westward. Accordingly, 1602 shares in Westward were issued to the pursuer (as bonus shares) bringing his total holding in Westward up to 2202 shares. That meant that his direct interest in Westward was increased to a 68.39% holding. Melantic owned the other 31.61% of the shares in Westward. The pursuer continued up to and after the date of separation, to hold 120 shares in Melantic (and the defender continued to hold 80 shares in Melantic). The pursuer, accordingly, also had an indirect interest in Westward via his Melantic shareholding.

[14] In the accounts of Westward for the year ending 31 December 2002, it is stated that:

"The company is controlled by James Watt who owns 72% of the issued share capital."

[15] Westward owned the vessel "The Westward" and as at 2000/2001, the pursuer "pair trawled" for mackerel along with another fisherman called George Tait. Mr Tait was the controlling shareholder of the Challenge Fishing Company Limited and that company's vessel was called "The Challenge".

[16] At about that time, Alexander West became aware of the possibility of obtaining assignations of shipbuilding contracts to enable two new "super trawlers" to be built. Mr West was very keen to acquire bigger vessels for mackerel fishing. Mr West had a major interest in a company named M B Daystar BF250 Limited. The pursuer was not so keen to get involved at first. Another mackerel fisherman, Jan Colm, who is based on the south coast of England and fishes through his company, called 'Interfish', was interested in the venture that Mr West was proposing. Mr West was not as keen to go into business for this venture with Mr Colm as he was to go into business with the pursuer and Mr Tait. The upshot was that Mr West, Mr Tait and the pursuer agreed that the three companies would form a limited liability partnership, take assignations of the shipbuilding contracts and, thereafter, the three of them would fish for mackerel using the two new vessels.

[17] The limited liability partnership, which was named "Mewstead (Fraserburgh) LLP" ('Mewstead'), was formed on or about 15 May 2001.

[18] The pursuer, Mr West and Mr Tait each intended to allow the mackerel quota held by each partner in Mewstead to be used by and for the benefit of Mewstead. Mr Tait's partner company held the most mackerel quota, Mr West's company held a little less than his and Westward held less than both of them.

[19] The three men trusted each other to allow their quotas to be used in this way. They did not, however, enter into any written agreement between them regarding the use by Mewstead of their quota. They did not want to put their quota into Mewstead.

[20] Mewstead took assignations of the shipbuilding contracts and two new vessels, "The Ocean Quest" and "The Ocean Venture", were built, in Spain. The Ocean Quest was delivered in December 2002. The Ocean Venture was delivered in March 2003. Prior to 2002, Mewstead fished using another vessel it had acquired, "The Diligent".

[21] The funding of the construction of the Ocean Quest and the Ocean Venture was achieved through bank borrowings of approximately £15,000,000.00. Mewstead has proved to be a very successful business. Profits in each of the years 2003, 2004, 2005, 2006, and 2007 have been £916,899.00, £2,931,833.00, £4,014,329.00, £2,161,125.00, and £2,913,993.00 respectively. Its net assets as per its balance sheets have risen throughout the period 2001 to 2007 from £1,712,401.00 to £14,358,868.00. Its bank borrowings have reduced to a figure of around £5-6,000,000.00.

[22] Whilst its accounts for the year 2008 were not available at the time of proof, the pursuer said in evidence that he was expecting the profit for 2008 to be of the order of £1,500,000.00 to £2,000,000.00.

[23] The main mackerel fishing season is during the first part of the year. In 2008, Mewstead completed its main fishing for the year in the first six to six and a half weeks. In December each year, the pursuer, Mr West and Mr Tait meet to discuss Mewstead's financial position. Amongst other things, profits are reviewed and decisions about drawings are made. Profits are generally taken out in full, as members' remuneration.

[24] The business interests that formed part of the matrimonial property at the date of separation were, accordingly:

a. The pursuer's 7.5% share in Melantic;

b. The defender's 5% share in Melantic; and

c. The pursuer's 68.39% share in Westward.

[25] One of the component parts of the valuation of the interests in Melantic Limited is that company's shareholding in Westward. A component and important part of the value of Westward is the value of the fishing quota held by that company, to which I shall return. There is no doubt that it runs to millions of pounds; the question is how many millions?

[26] Since its inception, Mewstead has purchased mackerel quota, in 2003 and in 2006. It paid £7,000 per tonne in 2006. It also took a lease of mackerel quota from Jan Colm at one point. Also, Mr Tait's company acquired further mackerel quota in 2003 for which it paid £4,000 per tonne.

[27] In or about January 2008, by deed between Westward and Tenon ( Isle of Man) Corporate Services Ltd, an offshore investment known as "The Westward BF350 Ltd employee Trust 2008" was set up (see 6/82 of process). According to note 1.6 to the Westward accounts for the year to 31 December 2007, Westward had, by that date already established an employee benefit trust, raising the question of whether the 2008 trust was the only one. However, parties were agreed that there was only one relevant employee benefit trust, namely the one referred to in the 2008 deed ('EBT'). The extent of the investment in it available to the pursuer was, at the time of proof, as set out in 6/81 of process (£881,056). The pursuer's case was that that sum represented not only sums available to the pursuer as a result of profits earned by Mewstead in 2007 but those derived from 2008 as well. He was not himself at all clear about the matter. Further, Mr Alexander West gave evidence that I accepted to the effect that he did not think that the money earned in 2008 had been distributed by the time he gave evidence. It seems only logical that, despite the fact that most of the mackerel fishing is done in the first part of the year, the partners of Mewstead would not be in a position to know the business' trading results until its year end. Hence Mr Tait's evidence, that I also accepted, that in December each year they sit down and make decisions about drawings. I conclude, accordingly, that the EBT investment did not include monies available to the pursuer as a result of Mewstead's profits for 2008.

[28] Turning to background matters other than those relating to the pursuer's fishing activities, in 2005, Mr West bought the Alexander family's shares in Melantic. He and Mr Alexander negotiated the sale between them. Before their discussions took place, Mr West asked his accountants to give him what he referred to as 'a letter' regarding the valuation of the shares to assist him in discussing the purchase. His discussion with Mr Alexander centred around that valuation from the accountants and around the borrowings of the company. The price arrived at was based on a percentage of the accountant's valuation, the percentage in question being the percentage of the Alexander family's shareholding in the company. They had 43.75% of the shares in the company and Mr West paid him 43.75% of the value of the company. He did not try to give him any less than 43.75%. The price he paid was £1,200,000.

[29] Then, in the tax year 2006-2007, the pursuer transferred 660 of his shares in Westward to his son. The schedule to the capital tax gains pages of his tax return for that tax year was prepared by a member of Johnston Carmichael's tax department. It shows the shares as having been acquired in 1998 at a total value of £114,728. Accordingly, they were shown as having been acquired at a value of £3,138 per share. No minority discount had been applied to arrive at the share value figure. On that basis, the pursuer's entire shareholding of 2002 Westward shares in 1998 would have had a value of just under £7m.

[30] Moving then to the parties' heritable property, the parties jointly owned the former matrimonial home known as Eschol. They also jointly owned a flat in Edinburgh at 20/2 Duff Street, which was purchased for the use of their son whilst he was at University. The flat has been let out and the defender has retained the rental of £600.00 per month. She has also paid out expenses for repairs, maintenance and factoring charges.

[31] Regarding the house, Eschol, there is a history of some difficulty between the parties regarding it. After their separation the pursuer lived in it initially. He then moved out and the defender moved back in. Thereafter, without reference to the defender, the pursuer removed some items. It was accepted between parties that those included fitted furniture from the parties son's bedroom, as a result of which there was some damage. Ultimately, no claim was made in respect of it.

[32] I turn then to one or two matters in the background to the parties' relationship and, in particular, matters that occurred at or about the time of their separation.

[33] The pursuer had started working as a fisherman prior to the parties' marriage. He had gained his skippers' ticket and mates' ticket at Fraserburgh College. The defender qualified as a teacher at or about the time of their marriage. During the ten years following the birth of their son in 1982, the defender was keen to return to teaching but the pursuer actively discouraged her from doing so. He told her he was earning plenty of money for both of them. In 1992, the defender began working as a supply teacher occasionally. She carried on supply teaching until 1996. In 1998 she obtained a part-time permanent contract for three days a week at the Anna Ritchie Special Needs School in Peterhead and remains in their employment.

[34] When the defender took up employment with the Anna Ritchie Special Needs School she was asked if she wanted to join the pension scheme. The pursuer told her that there was no need for her to do so because he would look after her.

[35] The defender gave evidence by way of affidavit. Whilst she was present in court throughout the proof, she was suffering from long standing vocal dysphonia (as certified by her general practitioner). Her general practitioner was of the view that she was not fit to give evidence in court due to severe hoarseness and poor voice volume.

[36] In her affidavit, the pursuer states that around the date of separation, her husband told her that he was worth between £10 and £12 million pounds. She states that shortly after the separation, she went to Eschol to return ironing that she had been doing for him. She states that he told her that he had been to Fraserburgh and he had signed a document, the result of which was that she would not get anything in terms of a settlement. She also states that she went to Eschol between Christmas and New Year in 2002 to see her son and both her son and the pursuer tried to force her to accept £1.5 million as a settlement. These assertions were put to the pursuer in cross-examination, and he accepted that he could have said to his wife that he had been to Fraserburgh and signed a document and she would not be getting anything. In these circumstances, I accepted the defender's evidence regarding the statements made to her by the pursuer. The fact that the pursuer was prepared to say these things to her at that time also lends support to her evidence that he and the parties' son sought to put her under pressure to accept the settlement referred to at or about Christmas 2002.

[37] The parties' son did not give evidence. Some reference was, however, made to him. The pursuer suggested that he was likely to pursue, in the long term, a career as a fisherman. Whilst the parties' son does join the pursuer on fishing trips, he did not go to sea at all during the period 2000 to 2004 and since graduating from university, he and a friend have set up a successful brewery business ("Brewdog") based in Fraserburgh. I conclude that there is at least some doubt as to whether he will continue to work as a fisherman in the long term.

THE MEWSTEAD AGREEMENT
[38] 6/49 (Appendix 6) of the pursuer's productions is a document headed "Limited Liability Partnership Agreement" between the three partners of Mewstead. It bears to have been signed on 12 September 2002 by the pursuer, George Tait, and Alexander West. Each of the three signatures has been witnessed by Graham Taylor, who is the manager employed by Melantic and was described by Mr West as being a man who does mostly what he's told to do and does not make decisions for his employers. The provisions of the Mewstead Agreement include:

"2. DURATION
2.1 Not withstanding the date or dates hereof, the LLP shall be deemed to have commenced on 15 May 2001 and the terms hereof shall apply from that date. The LLP shall continue until terminated in accordance with clause 12".

So far as termination is concerned, the agreement provides for termination where any party gives notice:

"11. TERMINATION
11.1 In the event of any of the following events occurring, namely:

a. Any party giving not less than six months' written notice of its intention to withdraw from the LLP, declaring that no party may give written notice of the aforesaid until the expiry of the period of four years after the delivery of the second of the Vessels by Zamacona".

The clause then deals with what happens if one of the parties becomes insolvent and continues:

"The following options shall successively arise:

(1) The remaining members shall have the option to purchase and acquire the whole share and interest in the LLP of the outgoing member at the date on which his ceasing to be a member is to be effective, in proportion to their shareholdings in the LLP, which failing

(2) Any one remaining member may purchase and acquire the said whole share and interest of the outgoing members.

11.2 The said options shall be exercisable only within three months of the event which gives rise to the said option occurring..."

The agreement then provides for what is to happen if any of the remaining members do not wish to exercise their option and provision is made for winding up. Clause 12 refers to valuation and provides:

"12.1 For the purpose of determining the value of the share and interest to be purchased and acquired by all or any of the parties in terms of clause 11, the price of the said share and interest to be paid by the party or parties purchasing the same shall be based on the market value of the vessels, the fishing licences pertaining to the vessels ("the fishing licences"), quota units, quota allocations and track records (together "Quota Rights") and the other assets of the LLP, declaring that no value shall be placed on goodwill".

[39] Clause 14 of the agreement is headed:

"FISHING LICENCE AND QUOTA RIGHTS" and provides:

14.1 Except insofar as the parties may otherwise agree in writing, any Fishing Licences or Quota Rights issued or allocated by any relevant authority or other body in respect of the Vessels in the name of any of the parties shall be held in trust for the LLP. The person in whose name the Fishing Licences or Quota Rights are issued or allocated shall not dispose of or otherwise deal with Fishing Licences or Quota Rights without the prior written consent of all parties".

The term "the vessels" is defined in the agreement as being the two vessels being built in Spain. As at 12 September 2002, the construction of neither vessel had been completed.

[40] The pursuer, Mr West, Mr Tait, Graham Taylor and Charles Scott all gave evidence about the Mewstead agreement. Mr Scott, whose evidence I accepted, also gave evidence regarding the background to the three men going into business together in the Mewstead venture. His first task had been to attend to the assignation of the shipbuilding contracts, which he did. Thereafter, the limited liability partnership agreement was drafted but it was evident that finalising it and getting it signed was not treated as a priority. There was discussion regarding the fishing quota held by each of the partners to Mewstead. Mr Scott and, indeed all three men, were quite clear that they wished to, as they put it, keep the quota out of the partnership. Mr Scott described fishermen's attitude to fishing quota as being a form of "birthright" which they are loathe to give up. None of the three men demurred from this proposition. There was, however, some discussion about the possibility of some quota being "put into" Mewstead so as to keep the banks happy. In particular, there was discussion of the possibility of 1,000 tonnes' worth of quota being put in. However, it became apparent that there could be adverse tax consequences if quota was transferred into Mewstead, so the preference was not to effect such transfers. Mr Scott explained that the first draft of the Mewstead agreement was prepared in summer 2001 but at that point some key points still required to be finalised, including the quota question. It was difficult to get the three men together. He obtained final input from the men's accountants, Johnston Carmichael, in April 2002. Clean drafts were issued in May 2002. Clause 14 was drafted so as, as he put it, to provide some flexibility regarding quota rights. Mr Scott also said, in cross-examination, that he could have deleted paragraph 14 and left quota to be dealt with in a separate agreement. That was the intention.

[41] As regards the signing of the Mewstead agreement, Mr Scott explained that on 11 September 2002, he received an e-mail from Graham Taylor asking for an electronic copy of the agreement. He did not know it was for signing purposes. He sent a copy of the agreement to Mr Taylor electronically. He did not know why, as he put it, the agreement was signed in such a hurry. He said that if he had known that the men were planning to sign the agreement, he would have advised them to get the quota agreement in place as well.

[42] Subsequently, on 28 February 2003, Mr Scott sent draft agreements to the three men which were never signed but had they been, would have had the effect of transferring some mackerel quota from each of Mewstead's partners, into Mewstead.

[43] Mr Taylor was a very nervous, anxious witness, who was sweating at times and not always as forthcoming as could reasonably have been expected. For instance, he sought to suggest, unconvincingly, that he did not know that the matter of the signing of the Mewstead agreement was a contentious matter in the case but then changed his evidence to indicate that he did know that it was. He said he had no recollection of the agreement being signed. He could not remember asking Charles Scott to e-mail him a copy of it although he accepted that the pursuer could have asked him to get a copy of it.

[44] Mr West, a robust witness who did not always keep to the point, appeared to recall that the agreement was signed just after the pursuer had separated from the defender. The pursuer's personal life was in chaos at that time and Mr West was not sure how the agreement would affect how things would work out. He did not know how the law stood. He wasn't sure whether the agreement was important or not. He could not remember who instigated the signing of the agreement but he was sure it was not the pursuer. He sought to suggest that it was Mr Taylor who instigated the signing of it, to clear his desk. He did so notwithstanding having given the impression that Mr Taylor, as manager, did what he was told rather than took the initiative in making decisions for the men. His evidence regarding the signing of the agreement was not satisfactory and I was left with the impression that he was not telling the whole story.

[45] Mr Tait, a man who impressed as being rather quieter and more reserved than the pursuer and Mr West gave evidence in chief that he did not remember signing the agreement. However, he eventually conceded in cross examination, in an honest manner, that he had signed it to keep the quota available for the partnership. That was important for the pursuer and it might help him if he did not get back together with his wife.

[46] As far as the pursuer was concerned, he said he did not know what prompted the signing of the agreement. All he could say was that it was a bit of paper waiting to be signed. He specifically refuted any suggestion that it was anything to do with his separation from his wife that the agreement was signed.

[47] In all these circumstances, particularly in the light of Mr Tait's evidence, I infer that the pursuer instigated the signing of the Mewstead agreement and did so in the belief that it would put him in a stronger position to resist any financial claim that his wife might have following their separation.

[48] Turning to the effect of the Mewstead agreement on quota rights, whatever the pursuer may have thought, it is plain from the terms of clause 14.1, that the partners' pre-existing quota rights are unaffected by the agreement. The clause only affects licenses and quota rights issued in respect of the Ocean Quest and Ocean Venture and is in terms which look to the future, not to the past. Thus, the parties agreed, in terms of clause 14.1, that any quota rights issued or allocated in respect of the Ocean Quest or Ocean Venture at any point after the date of signing the agreement would be held in trust for Mewstead. They did not, however, thereby enter into any agreement about the quota already held by each partner company for those vessels owned by those companies.

MATRIMONIAL PROPERTY: AGREED VALUES
[49] Parties were in agreement regarding the values of a number of items of matrimonial property as confirmed by the terms of the joint minute no. 18 of process. In particular, parties were agreed about the following values:

(a) The former matrimonial home, Eschol, in the joint names of the parties.	£155,000.00
(b) Flat at 20/2 Duff Street, Edinburgh, in the joint names of the parties.	£110,000.00
(c) The pursuer's life insurance policy with the Prudential	£25,750.00
(d) The pursuer's Halifax TESSA	£9,549.00
(e) The pursuer's fidelity ISA	£8,498.00
(f) The pursuer's Aberdeen Unit Trusts	£6,406.00 £7,488.00
(g) The pursuer's Allied Dunbar Bond	£57,796.00
(h) The pursuer's 1092 HBOS shares	£7,906.00
(i) The pursuer's 760 Scottish Hydro PLC shares	£5092.00
(j) A Scottish Widows "with profits" bond on the parties joint lives	£32,784.00
(k) The pursuer's interest in the Westward Retirement Benefits Scheme	£189,433.00
(l) The defender's interest in the Westward Retirement Benefits Scheme	£25,231.00
(m) The pursuer's personal pension plan with Standard Life	£40,165.00
(n) The pursuer's personal pension plan with Zurich Assurance Company Limited	£33,833.00
(o) The defender's M&G Life PEP	£10,325.00
(p) The defender's Skandia Life PEP	£4,987.00
(q) The defender's SG Asset Management ISA	£4,839.00
(r) The defender's Jupiter ISA	£4,628.00
(s) The defender's Threadneedle Maxi ISA	£5,251.00
(t) The defender's Premium Bonds	£50.00
(u) The defender's 542 Railtrack Shares	£1,345.00
(v) The defender's 250 Bradford & Bingley Shares	£763.00
(w) The defender's 228 HBOS Shares	£1,651.00
(x) The defender's 256 International Power Plc shares	£335.00
(y) The defender's 1200 Scottish Hydro Plc shares	£8,040.00
(z) The defender's Abbey National TESSA	£9,000.00
(aa) The defender's Standard Life pension	£26,536.00
(bb) The balance at credit of the parties joint account with Halifax Building Society, retained by the defender	£25,357.00
(cc) The balance in the parties' joint Bradford & Bingley's Society account, retained by the defender	£5,919.00
(dd) The defender's Mercedes motor car	£30,000.00
(ee) The defender's jewellery	£26,100.00

[50] By the close of proof, parties had also agreed the values to be attributed to certain other items of matrimonial property namely:

(ff) The pursuer's 3,000 Granite City Ice Limited shares	£2,400.00
(gg) The pursuer's 2,00 Faithlie Ice Company Limited shares	£2,000.00
(hh) The pursuer's 9,500 Fraserburgh Ice (1988) Limited shares	£8,550.00
(ii) The defender's 3,000 Fraserburgh Ice (1988) Limited shares	£2,700.00
(jj) The sum at credit of the defender's Nationwide Building Society account	£21,793.21

DISPUTED MATRIMONIAL PROPERTY VALUES
[51] Parties were at odds as to the values to be attributed to the shareholdings in Melantic and Westward. Evidence regarding those valuations came from, on the one hand, Mr Iain Webster and, on the other hand, Mr Frank McMorrow. Since questions were raised as to whether or not Mr Webster could properly be regarded as an expert witness, I propose to look firstly at the background to his involvement in the case and the circumstances of his instructions.

THE PURSUER'S EXPERT WITNESS: MR IAIN WEBSTER
[52] Iain Webster is a partner in the firm of Johnston Carmichael, Chartered Accountants. Johnston Carmichael have been the pursuer's accountants since he started fishing, about 30 years ago. The pursuer's main contact at Johnston Carmichael is Billy Smith.

[53] In November 2003, the pursuer sought advice from Johnston Carmichael regarding the value of his shares. That was prior to the raising of the present action. Johnston Carmichael prepared a document referred to in the course of the proof as "a share valuation memorandum". It was not a production. It was not disputed that it was based, amongst other things, on a valuation of the mackerel quota owned by Westward as at the date of separation of £370 per Fixed Quota Allocation Unit.

[54] Mr Webster was involved in the preparation of the share valuation memorandum in 2003. His involvement was as what he referred to as the "consultation partner". The lead partner in the preparation of the memorandum was a man called Roderick Mathers who has since left Johnston Carmichael.

[55] In 2008, Mr Webster was instructed to prepare a report for the purposes of this litigation. His report is dated 29 August 2008 and forms 6/48 of process. In the course of preparation of that report, he relied heavily on information provided to him by Mr Smith. In particular, he relied on information provided to him regarding the valuation of quota on the basis that he regarded Mr Smith as an expert in that regard. He explained that when the instruction commenced it came from the pursuer's solicitors on a conference call. The participants in that call were the solicitors, counsel, Mr Smith, the pursuer and Mr Webster. He subsequently had phone calls with Mr Smith to gather information for his report.

[56] So far as Mr Webster's valuation experience is concerned, he explained that he heads up Johnston Carmichael's corporate finance department and that he probably spends 20% to 25% of his time on valuations and expert reports. He was curiously uncomfortable about responding to questions in cross-examination as to what proportion of his expert reports were for clients and what proportion were for non-clients. He appeared to be very uncomfortable about answering the question, flicked through 6/48 as though it would give him the answer (which plainly it could not) and although initially he said he had no idea as to the proportions, he ultimately stated that he had prepared only one expert report in 2008 for a client of the firm namely that which he had prepared for the pursuer.

[57] Mr Webster was cross-examined regarding his reliance on Mr Smith's figures for quota valuation. Mr Smith whilst giving evidence regarding what he had been told about the sale price of mackerel quota in a transaction which occurred in 2002, had accepted that he was not an expert in quota valuation. The document relied on by Mr Webster, 6/50 (Appx 31) is not a contract nor is it signed. It appears to be a note (authorship not apparent) described by Mr Smith as being a "summary we drew up" after a transaction in summer 2002 involving a different vessel. It relates to the vessel "the Convalaria" and stated that its owners owned roughly the same quota allocation as Westward and the price received for the sale of their quota was £3,500 per tonne for mackerel and £1,000 per tonne for herring. When it was put to Mr Webster in cross-examination that he did not know about quota valuation from his own knowledge, his response was that he had a view about value from an expert in the fishing industry namely Mr Smith. He became very defensive when it was pointed out to him that Mr Smith had specifically demurred from any suggestion that he was an expert in valuation. I had the clear impression that, at the time of preparing his report, Mr Webster had simply not addressed the issue of whether, in relying on Mr Smith's figures, he was relying on an expert valuation of quota. Further, the note at appendix 31 indicates that the sale took place "in the summer of 2002" without further specification. Mr Webster does not appear to have even reverted to Mr Smith to ask for a precise date for the sale, a matter which must have been known to Johnston Carmichael since the owners of the Convalaria were clients of theirs.

[58] One of Westward's assets at the relevant time was the vessel, the "Westward". It was sold some months after the parties' separation. In the accounts of Westward to 31 December 2001, the vessel is shown as having a value of over £1.8 million. The accounts for the year to 31 December 2002 show a loss on sale of tangible assets of £1,624,279.00. The loss is not specifically explained in the notes to the accounts. The Westward had been sold on 18 December 2002. Mr Webster was provided with a document headed "Protocol of Delivery and Acceptance" in respect of the Westward. It states that Westward are sellers and the buyers are a company named "Mackinco (Twenty Six) Limited" (an "off the shelf" company made available by the pursuer's solicitors) and the first paragraph states:

"With reference to memorandum of agreement dated 18/12/2002, the sellers and the buyers hereby confirm that the above vessel is delivered by the sellers to the buyers in accordance with the memorandum of agreement".

Later in the document, the total price payable by the buyers is stated to be £256,532.50. That document forms no. 6/50 Appx 32 of process. Mr Webster did not ask to see the memorandum of agreement referred to. He did not question the apparent substantial discrepancy between the book value of the vessel and its sale price, which was in a sale to an off the shelf company. I should, at this point, add that the defender's advisers raised questions regarding this matter. It is entirely understandable why they did so in the circumstances. Ultimately, the memorandum of agreement was produced and it was accepted that the price stated in the protocol was the price for which the vessel sold in an arm's length transaction and properly reflected its deteriorated condition. However, Mr Webster did not know that but accepted, without question, the price stated in the protocol document.

[59] S & S Co-operative Limited is a fish selling agent. Its accounts for the year ending 31 March 2002 show that the pursuer held 1,000 shares in the company. Mr Smith told Mr Webster that the pursuer held those shares in trust for Westward. Mr Webster accepted, without further question, that that was the case.

[60] In the 2003 share valuation memorandum, a discount was applied to the value of the pursuer's holding in Westward to allow for his lack of control with the company, of 10%. In his report 6/48 of process, Mr Webster has applied a 20% discount. He was cross-examined about that doubling of the discount. He accepted that there was an inconsistency and explained it as being his having updated his personal opinion and it was because he was the author of the report at 6/48 of process. He accepted that he did not, however, challenge Mr Mathers' view on that matter in 2003. He was challenging it now. He gave no further explanation.

[61] It also emerged that Mr Smith was involved in the preparation of the extensive appendices that were lodged along with Mr Webster's report.

[62] In these circumstances, it was submitted by senior counsel for the defender, Ms Wise Q.C., that Mr Webster's evidence was not reliable. He lacked the requisite independence. He had failed to do as an expert witness should do and assist the court with objective unbiased opinion in relation to matters within his expertise (Expert Evidence Law and Practice, Hodgkinson & James (Sweet & Maxwell 2007) chapter 10, para 10-013-10-020). His lack of independence affected the weight that could be given, properly, to his evidence (Hodgkinson & James at para 10-014, R (Factortame Ltd v Transport Secretary) no. 8) [2003] QB 381 at paragraph 6370, and McTear v Imperial Tobacco [2005] 2 SC1).

[63] In particular, Ms Wise relied on paragraph 5.18 in McTear, where Lord Nimmo Smith noted that he had to consider whether and if so, to what extent, each of the expert witnesses may have been acting as an advocate rather than providing independent assistance to the court.

[64] Ms Wise also submitted that authorities about apparent and actual bias of decision makers provided a useful analogy. She referred to the well known passage in the speech of Lord Hope of Craighead in Porter v McGill [2002] 2 AC 357 and also to the comments in Helow v Secretary of State for the Home Department 2008 SLT 967 regarding the importance of the public being able to have confidence that a judge or tribunal chair is neither seen to be biased or actually biased. She submitted that where an expert witness is involved, the question is whether the court can have confidence in the expert and in his having discharged his primary duty to the court. The problem here was that Mr Webster had not managed to put his duty to the court above his professional duty to a client of his firm to act in their best interests. He was not truly independent. He had been anxious to do what he could to support his valuable client. It was not his skill as an accountant that was in question, it was his partiality.

[65] Senior counsel for the pursuer, Mrs Scott QC, stated that Mr Webster was employed to prepare a report in this case because he regularly gives evidence in relation to business valuations, his firm have a significant number of clients in the fishing industry and are therefore familiar with the operation of fishing businesses, he had had some previous involvement as a consultation partner in the 2003 share valuation memorandum and so would not need to start from scratch and so far as reliance on Mr Smith was concerned, Mr Smith had spoken to fact within his experience and as such was able to present evidence that bore on matters of value.

[66] So far as the challenge to Mr Webster's independence was concerned, Mrs Scott submitted that it was the function of the expert to furnish a judge with the criteria to assist the court in forming a judgement. It was the function of the court to form a judgement on the basis of the evidence. She relied in support of that submission on the well known passage in Davie v Magistrates of Edinburgh 1953 SC 34. The task was to consider whether or not the evidence was soundly based. She accepted that it was not for an expert to assume the role of advocate but whether or not they had done so required to be considered by a scrutiny of their evidence, as discussed by Lord Nimmo Smith in the case of McTear at paragraph 5.18.

[67] Mrs Scott submitted that in considering the reliability of Mr Webster's evidence it was appropriate to bear in mind that the extent of opinion evidence on which he relied was limited; Mr Smith's evidence, for instance, was evidence of fact. She stated that Mr Webster was a professional accountant and an experienced expert who was aware of his duty of independence as declared on page 2 of his report. She stated that he had no direct professional involvement with the pursuer, being based in Edinburgh whereas the purser's business affairs were dealt with by the Fraserburgh office. She stated that the structure of Mr Webster's analysis was accepted and used as a basis by the defender's expert Mr McMorrow. He had no criticism of the general approach and many of the figures were accepted. The material disputes amounted to a criticism of the methodology used by Mr Webster in valuing Westward's quota and on his use of a minority discount. Further, it was for the court to assess on the basis of the evidence, whether or to what extent Mr Webster was influenced in relation to these two issues by the fact that the Fraserburgh branch of the firm were accountants for the pursuer.

[68] Paragraph 10-013 in the Hodgkinson & James text, referred to by Ms Wise, provides a useful summary of the essential principles to which regard must be had when considering whether a witness who has given "expert evidence" was truly independent:

"It is clear law that, in both civil and criminal cases:

(1) Expert evidence presented to the court should be and be seen to be the independent product of the expert uninfluenced as to form or content by the exigencies of litigation.

(2) An expert witness should provide independent assistance to the court by way of objective unbiased opinion in relation to matters within his expertise. An expert witness should never assume the role of advocate. It has long been recognised by the courts that bias is not the preserve of lay witnesses, and that experts may display it in their evidence. Indeed in many respects the incentives for experts to favour one party contrary to their actual belief are substantial. First, expert witnesses are paid for their evidence. Secondly, they may be retained on a regular basis by a particular client or group of clients in different cases. Thirdly, the expert may hope to gain favour with a client generally, perhaps because he hopes that non-legal professional engagements maybe forthcoming or continue. Lord Campbell noted that the temptation to bias was strong even for "respectable witnesses,"..."

In the case of McTear at paragraph 5.18, Lord Nimmo Smith said:

"Another matter which I propose to mention at this stage, and to which I shall also return, is the need for expert witnesses to be independent. I must decide in relation to each of the expert witnesses whether, and if so to what extent he may have been acting as an advocate rather than providing independent assistance to the court. ... .... .... .....

Senior counsel for the pursuer put it to three of these witnesses that they were being "handsomely" paid for giving evidence. I have no basis for saying that any of their fees were not properly charged. In discussion at the hearing on evidence, counsel maintained that I had to be very careful with witnesses whose research was funded by the tobacco industry and who were paid handsome fees. There was the danger that this might induce bias, and I should look critically at such evidence. I do not accept as an a priori assumption that funding from the tobacco industry is tainted. Everything depends on the independence of the researcher and the quality of the research; and it may well be that ample funding leads to sound research. The question, however, remains for consideration whether the expert witnesses for ITL complied with their obligations as independent expert witnesses and how soundly based their views were".

[69] At paragraph 5.2.20 of his report Mr Webster sets out a list of factors which he took into account when arriving at his valuation of Westward's quota interests. He stated:

"I summarise my rationale as follows:

·       There was only an ability to sell the quota, either by breaching the LLP agreement or selling it with the very restricted rights whereby the quota was committed to Mewstead.

·       The quota would only have a value to a purchaser if the purchaser has appropriate vessels and licences.

·       The sale at the end of the restricted period could only be done with the written consent of the other members of Mewstead who may have been the only buyers.

·       Whilst significant premiums were being paid for pelagic quota around the relevant date, there was also much uncertainty over the market conditions that might exist in mid 2007. The United Kingdom fishing sector is very heavily regulated by the European Commission and the decisions made by the commission have had the effect of creating uncertainty in the sector. Significant risks would be attached to acquiring quota at the relevant date on which there was firstly a restriction in use until mid 2007 and secondly an uncertainty over whether it might be arbitrarily reduced further.

·       The pelagic fishing boat market was becoming stabilised. The fishing fleet had reduced from 45 vessels in operation to a small fleet of 18 highly efficient boats. The boats held their optimum level of quota and therefore there would be very little supply in demand in the future to acquire quota.

·       Westward will have to pay capital gains tax on the disposal proceeds".

These factors all served to diminish the value of the quota, in Mr Webster's opinion. However a number of the assertions were, simply, wrong. As I have already indicated, Westward did not put its quota into Mewstead. Further, neither at the relevant date nor since has there been any transfer of Westward's quota interests to Mewstead nor any burdening of those interests with any legal right in favour of another party. This is a matter to which I will return. Then, since Westward's quota was not put into Mewstead, there was no question of sale of that quota requiring written consent to the other members of the partnership. So far as the bullet point regarding the market conditions affecting the pelagic fishing sector is concerned, that is not a matter within Mr Webster's own knowledge and he had no expert advice given to him regarding it.

[70] One might ask how, in any event, Mr Webster could have thought it appropriate to take account of an interpretation (albeit a misinterpretation) of an agreement that had not been signed as at the valuation date. The answer to that is provided by his paragraph 2.1.15 where he records that the agreement was signed after the relevant date and then stated:

"Notwithstanding the date of signing, clause 2.1 of the LLP agreement makes it clear that the LLP was deemed to have commenced trading on 15 May 2001 and the terms containing in the LLP agreement of 12 September 2002 were deemed by the members to have applied from 15 May 2001".

Whilst that clause achieves retrospectivity, it had no effect at the relevant date. The agreement had not been signed then and was not in force in any respect .

There was no evidence of Mr Webster having taken any legal advice as to whether, for relevant date valuation purposes, he should or should not take into account the provisions of the Mewstead agreement.

[71] I have given careful consideration as to whether or not Mr Webster's evidence can be accepted as being reliable. There was no question of it being suggested that he set out to deceive the court and I had no reason to believe that that was his intent. There are, however, real difficulties here. Mr Webster was and is a partner in a firm of accountants which has acted for the pursuer for many years. The pursuer is a very successful business man. It can readily be inferred that he is a valuable client to Johnston Carmichael. It can, equally, be inferred that they would hope that the result of the present litigation is favourable to the pursuer in so far as possible. It is in the pursuer's interests that the valuation of his assets as at the relevant date be minimised as far as possible.

[72] I do not see how I can conclude that Mr Webster's evidence can be accepted as reliable. The fact that the pursuer was and remains a client of the firm of which he is a partner means that a question is immediately raised as to whether he was truly independent. Whilst I do not suggest that in such circumstances, a partner in a separate office may not be able to provide expert evidence, the facts and circumstances surrounding the giving of the instruction and the carrying out of the instruction require, in such circumstances, to be very carefully scrutinised to see whether independence has been demonstrated. The flaws in his approach to which I have referred to above are all relevant to these considerations and when looked at as a whole, they point strongly against my being able to conclude that Mr Webster was truly independent. I had, rather, the impression that he sought to act as advocate for the pursuer. When I add to that my observations regarding the discomfort he displayed when cross examined as discussed above, I am reinforced in my conclusion that I cannot rely on his valuation evidence. Separately, there are problems with his methodology to which I shall return later.

QUOTA
[73] One of the means by which sea fish stocks are conserved is by imposing a restriction on the amount of fish that can be taken out of the sea by fishing. Specific restrictions are imposed on fishermen in the United Kingdom in respect of mackerel fishing. To be able to fish lawfully for mackerel, a fisherman requires to have a fixed quota allocation. Fixed quota allocations are issued in units. As at 1 May 2002, Westward was the holder of a number of FQA units as set out in the document no. 6/50 Appx 30 of process, as follows:

Quota Stock	FQA Units
Mackerel flex box	3,247
NS herring	9,428
NS horse mackerel	1,901
WS herring	6,926
WS horse mackerel	249
WS mackerel	30,202

[74] Each year, the European Commission determine the total catch which can be taken from the sea in respect of each type of fish subject to these controls. The amount of catch allocated to each fisherman is calculated by reference to the number of FQA units held.

[75] By letter dated 20 September 2002, the Scottish Fishermen's Organisation Limited provided the following information to the pursuer in respect of the Westward quota:

"In the case of your vessel, the final allocation after all necessary adjustments have been made amount to 2,975 tonnes of which 922 tones can be taken in the so called Mackerel Box".

The letter also advised:

"Your catch in the current year according to our records amounts to 2284 tonnes.

This means that the balance you have left to catch is 690 tonnes of which 690 tonnes can be taken in the Mackerel Box...".

Appended to the letter was a formal direction from the SFO, the terms of which included:

"The above named vessel when fishing in ices statistical areas II (International Waters), II (North of 62 degrees M), IIa (EEC Zone) (Norwegian Sea), IV (North Sea), Vb (EEC Zone), (Faros Grounds), VI (West of Scotland Rockall) and VII (English Channel and West Waters) shall not in the period commencing 1 January 2002 and ending 31 December 2002, catch, land, trans-ship, transfer, offer for sale, barter, deal in or retain on board, more than the amount shown below;

Western Mackerel	2975 tonnes*
*of which the following amount may be fished in the period 1 October 2002 to 31 December 2002 in ices Division IVa (EC Zone)	922 tonnes
Western Horse Mackerel	0 tonnes"

Thus, in respect of 30,203 FQA units of Western Mackerel, the Westward was, for the year 2002 entitled to fish 2975 tonnes of mackerel, 922 tonnes of which could be fished in the period 1 October 2002 to 31 December 2002 and 690 tonnes of which could be taken in the area referred to as "Mackerel Box".

[76] Quota is traded between fishermen. In particular, mackerel quota is traded. The pursuer, Billy Smith, Mr Tait and Mr West spoke of quota price as being an amount per tonne. Mr Hermse also spoke of quota price in terms of amounts per tonne. He, however, indicated that when valuing quota, it is appropriate to use FQA's because it is an exact figure whereas the tonnage that the quota holder is allowed to catch can vary from year to year. For instance, in the course of the proof, the news broke that the mackerel tonnage which fishermen in the European Union were to be allowed to catch in 2009 had been increased by the European Commission by a third as compared to the catch allowed in 2008.

[77] So far as the relationship between FQA units and the tonnage that fishermen are allowed to catch is concerned, Mr Smith and Mr Hermse both gave evidence of there being a 1:10 relationship. That relationship seemed to date back to the beginning of the issuing of FQA units and intimation of allowable catches. I would also observe that in 2002, the relationship between the Westward's mackerel FQA Western Mackerel Units and its total allowable catch is close to being a 1:10 relationship.

[78] Parties were at odds, however, as to the basis upon which price is fixed when quota is traded. Whilst there was no doubt that prices are paid according to tonnage, what was at issue between the parties was whether the tonnage in question was the tonnage which, in terms of the fishermen's allowable catch intimation could be caught in the year of sale or a tonnage which was 1/10^th of the relevant number of FQA units.

[79] The pursuer was adamant that quota traded in tonnes and by reference to the allowable catch for the current year. He did not accept that the FQA units were of any relevance when it came to arriving at the price. Mr Smith gave evidence that the price is fixed by reference to tonnes, not by reference to FQA units but he did not explain whether the tonnes to which he was referring were the tonnes allowed to be caught in the year of sale or tonnes derived from dividing the number of FQA units by ten and in cross examination he agreed that, for example, 33,000 FQA units was the equivalent of 3,300 tonnes. Mr Tait spoke of quota being traded in tonnes but he was unaware of the relationship between tonnes and FQA units. Whilst Mr Webster sought to defend the pursuer's approach, he eventually, in cross examination, accepted that the starting point for valuation of quota must be the FQA units held because they are the relevant assets.

[80] No documents were produced by the pursuer to show how quota prices are arrived at when it is traded notwithstanding the fact that the pursuer has himself been involved in a number of quota acquisitions. I have already referred to the fact that in February 2003 Mr Scott prepared a draft agreement whereby the partners of Mewstead would put some of their quota into the partnership. That draft agreement was the only document that was put before me which related to the transfer of quota. In terms of clause 1 of the draft agreement between Mr Tait's company and the partnership, Mr Scott provided:

"Beneficial ownership of the Challenge FQA units and the Challenge track record is and shall be allocated between Mewstead and Challenge as follows:

Mewstead - 11367 FQA units, WS Mackerel

Challenge - the remainder of the Challenge FQA units and the Challenge track record".

In his covering letter dated 28 February 2003, Mr Scott stated:

"As far as the FQA units mentioned in the agreement are concerned, this number to be 'owned' by the LLP would produce approximately 1,000 tonnes of WS mackerel this year although in future years the exact amount generated would vary depending on the TAC".

The draft agreement and letter are at 7/54(17) of process. The relevance of 1,000 tonnes is that it was, for sometime, thought that the Bank would insist on each of the three partners putting, as it was repeatedly stated in the evidence, 1,000 tonnes of mackerel quota into the partnership. It is, however, of significance, that when it came to seeking to document the matter, what was shown was not a transfer of tonnage, but a transfer of FQA units.

[81] For the pursuer, Mrs Scott submitted that quota prices were not fixed in relation to FQA units. It was natural to fishermen to think in concrete terms of tonnes of catch as opposed to what was, she submitted, the more artificial coefficient of total allowable catch inherent in a FQA unit. It was not a matter of trading simply on the basis of current year figures since projections were considered as a relevant factor in relation to price. It was not, however, correct to say that price related to FQA units.

[82] Ms Wise on the other hand, submitted that although confusion arose because the fishermen themselves speak in tonnes, it was important to recognise that a tonne of the year's total allowable catch is quite separate from the measurement of a tonne as a fraction of an FQA unit. It could not be the case that what the Westward had available for a hypothetical sale as at the date of separation, August 2002, was the total allowable catch for 2002 because that catch had, for the most part, already been used up by then. The matter could be tested by considering what would occur if only part of the quota was sold. The question then was: what did the business have left? The price per tonnes or per FQA would naturally take into account the movements in total allowable catch year on year.

[83] I cannot accept the pursuer's assertion that mackerel quota is traded according to the tonnage in the total allowable catch for the year in which the quota is sold. As Ms Wise pointed out, by the time the quota is sold in any one year, the total allowable catch for that year may have been wholly or partly caught. Yet it seemed equally plain, that the selling fishermen would still regard himself as having an intact asset, not diminished to any extent by the fact that fish had been caught in that year. Mr Hermse' evidence on this matter makes sense namely that the correct starting point is the FQA units held. Further, Mr Hermse gave a reason for, in the case of pelagic fish, talking in tonnes rather than FQA's. It was because the quantities of FQA's generally allocated in the case of the pelagic sector were so vast.

[84] There was an issue between parties regarding the market value of the quota. I have already referred to Mr Smith's evidence regarding the sale of the Convalaria. The note at 6/50 appx 31 shows a price for mackerel quota of £3,500 per tonne and for herring quota of £1,000 per tonne. The front sheet to the note states: "Quota prices around mid 2002". The note itself states the quota referred to "Was sold in the summer of 2002". Nobody directly involved in the transaction gave evidence. The pursuer was aware of the sale of the Convalaria and he gave evidence that it took place in the spring of 2002. The defender was aware of the transaction and in her evidence, states that it occurred in "early 2002". As I have already observed, Mr Smith expressly accepted that he was not a valuer. He did not give expert evidence. No other evidence was led on behalf of the pursuer of quota value at the relevant date.

[85] I turn to the evidence of quota value led on behalf of the defender. It came from Mr John David Hermse. Mr Hermse, who is now aged 51 years, has worked in the fishing industry all his life apart from a few years when he trained as an engineer. In particular he has worked in fisheries management and enforcement. In 1993 he set up his own business to deal with the provision of licence and quota valuations. He provides valuations for the purpose of sale and purchase transactions and also to banks for lending purposes. He gathers information regarding prices and valuations through contacts which include fishing vessel agents, fishermen's associations, producer organisations, brokers, banks and business managers. So far as banks are concerned, he explained that the banks approach him so as to obtain an independent valuation to support loans that they advance against the value of quota.

[86] Mr Hermse impressed me as being a straightforward and honest witness who was entirely independent of the parties.

[87] Mr Hermse explained that he used his sources extensively and has kept a database to assist him in his work since he started business. As a generality he said that he had a good working knowledge of pelagic quota and, although the mackerel quota valuation advanced by him was questioned, he was not challenged in that respect.

[88] Mr Hermse provided an opinion as to the value of the Westward quota. He began by noting the number of FQA units held by Westward. He then proceeded on the basis to which I have already referred, namely that there was a 1:10 relationship between FQA units and tonnes. He was aware that the 2003 share valuation memorandum proceeded on the basis that the mackerel quota had a value of £370 per FQA unit. He also had access to Mr Webster's report 6/48 of process and noted that it proceeded on the basis of a value of £3,500 per tonne, a decrease in value from that used in the 2003 share valuation memorandum. Mr Hermse considered both those figures to be too low. He valued the Westward mackerel quota at £3,800 per tonne. That was a conservative valuation. Information he had suggested that it could have been £4,000 per tonne. He considered, however, that £3,800 was fair and just. He knew some quota had been sold for £3,800 and he knew of there having been some valuations at £4,000. The sale at £3,800 per tonne was the sale of quota from a boat on the west coast known as the "Silvery Sea". It was sold round about 2000/2001. He also knew of quota from a boat called the "Alert" on the east coast having been sold for £4,000 per tonne. That sale was sometime in the period 2001/2003.

[89] Mr Hermse was pressed in cross examination regarding the "Silvery Sea" quota. The vessel was lost at sea in June 1998 and it was suggested that the quota was sold for a much lower price at that time. Mr Hermse' understanding was that the quota was leased out until the executry was sorted out. He was actually party to one of the transactions in the executry and it was not finalised until 2004. His position remained that he was under the impression that the "Silvery Sea" quota had been sold to Mr Colm of Interfish in 2001. In re-examination he explained that his information about the "Silvery Sea" quota sale had come from a person who was involved in the sale. He was also cross examined regarding the "Alert" quota. It was suggested to him he was wrong in his evidence. His position remained that it was sold at the figure he had given in chief. He said in re-examination that the source of his information was a fish salesman. Mr Hermse also referred again to information that comes his way about valuations, in cross examination. It was not just a matter of his relying on the information he had about the "Silvery Sea" and "Alert" quota transactions. He had other information from other sources as well. These were values based on information from contacts and colleagues including producer organisations, fishing vessel agents and other quota traders and pelagic fishing companies. These included valuations for banks and also for accountants.

[90] Although, in this part of the opinion, the focus is on the issue of quota valuation, I should say something regarding Mr Hermse' evidence about licences. In short, a vessel cannot fish unless it has the appropriate licence. A pelagic vessel could have a licence authorising it to use a purse net, which would also cover it for trawling. Alternatively it could have a licence for trawling only. The former is, and was, at the relevant date, more valuable than the latter. During 2002, Mewstead set about buying up licences which could be attached to the two new vessels contracted for, once they had been built. At that time it was possible to buy white fish licences which would, once attached to a pelagic vessel, entitle the vessel to fish in the pelagic sector. Mr Hermse, in his report (7/121 of process) valued the licences that had been acquired by Mewstead by the relevant date, on the basis they were all purse licences. The licences aggregated and attached to the "Ocean Venture" were certainly such as to authorise that vessel only to fish by trawling (7/54(1)) and the same may have been the case in respect of the licences aggregated and attached to the "Ocean Quest", (7/54(1)). However, there is a note on the licence document (no. 41022) for the latter which appears to indicate authorisation for purse netting. The question as to whether or not it did remained unresolved at the end of the proof. Mr Hermse did not have the licence documents for the "Ocean Quest" and "Ocean Venture" at the time of his valuation. His having approached his licence valuation on the basis that the Mewstead licences were purse licences appeared to be on the basis of a misunderstanding for which he apologised.

[91] There was a separate chapter of Mr Hermse evidence opened up in cross examination regarding the extent to which particular white fish licences could or could not be used to increase the horsepower authorisation on a pelagic vessel. Mr Hermse did become somewhat confused by the questioning at one point and commented that he was "a bit woolly" on the matter. The challenge arose from a passage in Mr Hermse' report in which he states that once white fish licences are placed upon a pelagic vessel, they immediately become a pelagic VCU. He then gives the licence value which would have been appropriate to a purse licence. That was fixed upon in cross-examination as being wrong on the basis that as Mr Hermse accepted, the mere fact of putting a white fish licence on to a pelagic vessel does not give that vessel the added benefit of being able to purse trawl. However, as became plain in the course of Mr Hermse' evidence, he had been operating under the misunderstanding that Mewstead had acquired purse licences. He was not in fact seeking to suggest that a white fish licence would produce purse net entitlement for its proprietor simply by being attached to a pelagic vessel.

[92] This part of Mr Hermse' evidence was strongly relied on by the pursuer as indicating that it called into question whether Mr Hermse knew what he was talking about regarding the pelagic sector at all. It should, it was submitted, be viewed as indicating that his evidence about valuations ought to be discarded.

[93] I have given careful consideration to the matters raised by the pursuer. I am not, however, persuaded that the difficulty Mr Hermse had over this matter casts doubt on the credibility and reliability of his valuation evidence. I was impressed by his careful and thoughtful approach when it came to valuation. He was not dogmatic. He did not seek to overvalue. He has been keeping in close touch with quota values for many years. He had exercised independent judgement as to a fair value drawing on that experience and drawing on information not only about sale transactions at about the relevant time but about valuations.

[94] Thus, the evidence regarding the value of the Westward mackerel quota at the relevant date was, on the one hand, expert evidence that it was worth £380 per FQA unit (£3,800 per tonne) and, on the other hand, hearsay evidence that either early in 2002, in Spring 2002 or in Summer 2002, the Convalaria quota was sold at £3,500 per tonne but, at an unknown price per FQA unit. I am persuaded that Mr Hermse' evidence as to the value of the Westward quota is to be preferred and accepted. Parties were agreed as to the value of the herring quota (£1,000 per tonne).

LICENCE VALUATIONS
[95] There were two matters of licence valuations. The first was the question of the value of the licences that had been acquired by Mewstead by the relevant date. The second was the value of the licence attached to the Westward vessel at the relevant date. So far as the first was concerned, at the end of the day, parties were not at issue as to the value of those licences. They fell to be valued at £2,300,800.00 and that valuation was used when valuing Mewstead.

[96] Parties were, however, at issue so far as the valuation of the Westward licence was concerned. The pursuer sought to rely on the price for which the licence was sold in 2003, a price which was arrived at on the basis of allowing £1,000 per vessel capacity unit ("VCU"). The Westward licence was a purse licence. Drawing on his knowledge and his experience, Mr Hermse indicated that the Westward licence would, in August 2002, have been worth £1200 - £1500 per VCU. He was not aware of any transactions at that time but there were bank valuations and valuations for fishing associations for members' boats. He also drew on his knowledge of valuations carried out for transactions prior to August 2002. If the Westward licence was valued at £1,000 per VCU at the relevant date it would have been worth £753,760. If valued at £1,500 per VCU at the relevant date it would have been worth £1,130,640.

[97] I accept Mr Hermse' evidence as to the value of the Westward licence. It was expert evidence and it was an assessment of value as at the relevant date. As compared to that, the pursuer's figure came from the sale of the licence about a year later and the pursuer offered no expert evidence on this matter.

TRADING ADJUSTMENTS
[98] Melantic, Westward and Mewstead all have their year end for accounting purposes at 31 December each year. Parties were agreed that a net asset valuation was the appropriate basis to use when valuing the pursuer's interest in Melantic and Westward and Westward's interest in Mewstead. Thus, since the available accounts showed each company's trading results at the end of December, an adjustment to those figures required to be made to ascertain value at the relevant date, it being a date some months prior to the year end. The necessary adjustment involves taking a view regarding the spread through the year of profits/losses and of the appropriate spread for amortisation and depreciation. The defender's expert accountant, Mr McMorrow, started at the beginning of the year and, as he put it "rolled forward" to take account of the net assets movement. Mr Webster, on the other hand, had begun at the end of the year and "rolled backwards". Mr McMorrow explained that there was a risk of the significant transaction for the sale of the Westward boat which took place after the relevant date at a substantial loss, was as he put it "lost in translation" in Mr Webster's figures. He also wondered if Mr Webster had missed half a month or so in his calculation. When Mr McMorrow's approach was put to Mr Webster, he did not disagree with it although he said he defended his.

[99] A particular point arose regarding Mr Webster's trading adjustment for Mewstead. At paragraph 4.3.3 of his report, he brings out a figure of £57,929, as the appropriate adjustment. That is an adjustment that takes account of Mewstead having, by the end of 2002, sustained a loss of £343,324 and allowing for amortisation and depreciation at £135,837 and £38,699. However, when it comes to his overall valuation of Mewstead, at paragraph 5.3.4 of his report, Mr Webster states that to reflect losses for the period between the relevant date and 31 December 2002, he assumed that the retained losses were spread evenly through the year and therefore, for trading adjustment purposes, he added back a figure of £116,000. He cross references that explanation to paragraph 4.3.3 which does not use £116,000 at all. Mr Webster's answers in cross-examination regarding this matter were less than satisfactory. He said that the patent conflict between these figures in his report was not a slip. It was simply a matter of him having left two figures in that were incorrect and he sought to excuse it under reference to it being a report of some length. I have already commented on my overall concerns regarding the independence of Mr Webster's evidence. His lack of care on this matter served to reinforce the impression of a lack of real independence which I gained as he was giving evidence. I was persuaded that Mr McMorrow's approach to trading adjustments was fair and correct.

DISCOUNTING SHARE VALUES
[100] The questions that arose so far as discounting was concerned were (a) whether the value of the Westward quota should be discounted to allow for its commitment to Mewstead and (b) whether the pursuer's shareholdings in Melantic and Westward should suffer "minority discounts" to allow for lack of control.

[101] I have already referred to Mr Webster having, firstly, thought that the Mewstead agreement was effective as at the relevant date and, secondly, that the effect of the Mewstead agreement was to give Mewstead rights in respect of the Westward quota. Mr Webster approached his valuation on the basis that Westward was severely restricted in its ability to trade or otherwise deal in the quota it held. He proceeded on an assumption that all of Westward's quota was locked into Mewstead for an indefinite period and certainly not less than four years and six months from the date of delivery of the second vessel. On that basis, Mr Webster proceeded to carry out a complicated cashflow projection valuation of Westward's quota. In that calculation, he allowed for a value of £3,500 per tonne for mackerel, (i.e. lower than what I have found was the correct value of £3,700 per tonne) and only for the tonnage that constituted the total allowable catch for 2002 (2,975) rather than the tonnage derived from the FQA units. Another assumption made by Mr Webster was that each of the three partners had committed equal amounts of quota to Mewstead. As I have already indicated, that was not correct; the three partners did not have the same amount of quota. Mr Webster's starting point for the value of the quota (which was, as I have noted, not on the basis of the FQA units but on the basis of the allowable catch for 2002) was £11,466.500. The application of his cashflow projection approach to valuation reduced that figure to £6,188,021.

[102] Mr McMorrow did not agree with Mr Webster's approach. It was not, in principle, the correct approach to adopt and there were difficulties inherent with it such as his failure to allow for indexation so as to avoid double discounting. Further, Mr Webster's approach involved using a figure of 18% as the average return expected of equity investments in 2002 as per the British Venture Capital Association but that rate takes no account of the industry in which the asset is being used.

[103] Mr McMorrow, on the other hand, approached matters by using Mr Hermse' valuation of £370 per FQA unit and allowing for tax. The result was a valuation of £10,045,280. I have already indicated that I accept Mr Hermse' valuation. Separately, I am not persuaded that the value of the quota falls to be discounted as Mr Webster suggested it should. I have already referred to the erroneous assumptions included in his basis for it and I was left with the impression that his discounted cash flow approach was an exercise in producing as low a valuation as possible rather than a real attempt at a fair valuation. I accepted Mr McMorrow's criticisms of it as being soundly based.

[104] I turn now to the question of whether any broad "commitment" discount ought to be made to the value of the Westward quota. As I understand it, the pursuer's position was that there should be such a discount to allow for the fact that the pursuer had committed himself to applying the Westward quota to Mewstead and Mr Tait and Mr Alexander were trusting him to do so. The suggestion appeared to be that even if it were the case that Mewstead had no contractual or other entitlement to the Westward quota or any part of it, the quota was to be viewed as being, in some way, burdened. The argument was one which really seemed to flow from the fact that as at the relevant date the pursuer did not intend to sell the Westward quota and he would have regarded himself as being in breach of the trust that had been placed in him by Mr West and Mr Alexander if he had done so. The fact remains, however, that, as a matter of law, Westward could have sold its quota in August 2002. None of the Westward quota had been transferred to Mewstead. None of it was secured in any way. There was clear evidence from all three men that they were determined to retain their quota in their individual companies. As Mr West graphically put it, if everything went "belly up" that would mean that they at least still each had their quota. There was no evidence that, as at August 2002, the bank was pressuring Westwood to transfer quota into Mewstead. It was not until February 2003 that Mr Scott got round to putting together a draft agreement for some quota to be transferred into Mewstead but it never happened, even then. It is clear to me that the only proper approach to valuation of the Westward quota as at the relevant date is to regard it as being an asset to which Westward was wholly entitled and free to do with as it chose. Further, there was ample evidence that mackerel quota was highly marketable in 2002.

[105] Separately, I observe that when Mr West first became interested in getting involved with the two new large trawlers, he did consider going into business with Mr Colm, a man who he appears to know well. The picture that emerged in evidence was one of Mr Colm being a major player in the mackerel fishing industry and being someone who owns a substantial amount of mackerel quota. It seemed at least possible that, had the pursuer pulled out of the Mewstead venture at the relevant date, Mr Colm is someone to whom Mr West and Mr Tait could have turned.

[106] In all the circumstances, I am not, accordingly, persuaded that it would be appropriate to discount the value of Westward's quota to allow for the pursuer having, in his own mind, committed it to Mewstead.

[107] I turn now to the matter of minority discounting. Mr Webster discounted the pursuer's and defender's shareholdings in Melantic and the pursuer's shareholding in Westward on the basis that they were all minority interests. In Melantic, the pursuer held 7.5% and the defender held 5% of the shares. Neither holding was in any strategic position in control and operation of that company. Neither could insist on the payment of the dividend, appoint directors or exercise any form of control or had blocking rights in the company. A discount of 40% to 60% was appropriate. So far as Westward was concerned, Mr Webster noted that Melantic held 31.6% of the shares in Westward and the pursuer held 68.4%. Whilst the pursuer had majority control, he did not have the ability to carry a special resolution (which requires a 75% vote). Thus he could not change the articles of the company or liquidate the company without the approval of the other shareholder. Whilst he could appoint and remove directors and determine matters such as dividends, he was unable to have outright control therefore a discount of 15% to 25% was appropriate. Mr Webster took no account of the fact that the accounts for Westward for the years ended 31 December 2001 and 31 December 2002 which were prepared and audited by the firm of which he is a partner state:

"Control
Westward BF350 Limited is a subsidiary of Melantic Limited, a company incorporated in Scotland. The company is controlled by James Watt who owns 72% of the issued share capital"

Thus, when fulfilling the important responsibility of acting as auditors, his firm concluded that the pursuer controls Westward yet Mr Webster appeared to disregard that conclusion.

[108] Mr McMorrow was clear in his view that it was not appropriate, in this case, to apply a minority discount. Whilst accepting that, as a generality, minority discounts are applied when valuing shares in private companies to allow for restrictions on transfer and reduced marketability and suchlike, he considered that it was not appropriate to apply a discount in the present case. That was because of the nature of the industry. He considered it striking that where fishing vessel ventures are put into company structures, it is for tax and legal reasons that that happens but, in the eyes of the fisherman, he continues to have whatever his percentage share in the boat was prior to incorporation. Thus, if a fisherman had a 10% share in a boat prior to incorporation, he would expect to have a 10% share of the value of the company.

[109] It is striking that Mr McMorrow's view as to how matters actually operated in the fishing industry was supported by the fact that when Mr West bought the Alexander family's interest in Melantic, since they had a 43.75% interest in the company, he paid them 43.75% of its value. There was no question of any discount for minority interest being applied. Nor had Johnston Carmichael applied any discount for minority interest when attributing a value to the 660 shares in Westward which were transferred by the pursuer to his son in 2006. Further, there was no evidence put before me of any transaction involving the transfer of a shareholding in a fishing company to which a minority discount had been applied.

[110] The pursuer submitted that the constraints on a minority holding that exist as a matter of law required to be recognised by applying a minority discount. She referred to the case of O'Neill v Phillips [1999] 1 WLR 1092. Mrs Scott sought to deal with the point regarding Mr West's purchase of the Alexander family shares by indicating that the price agreed on was based on a lower value of the company than that advanced by Mr McMorrow and Mr West would not have been prepared to pay a higher price. That, however, misses the point. It remains the case that the way in which the price was arrived at was by agreeing a figure for the value of the company and then accepting that the seller was entitled to a proportion of that value that directly reflected the proportion of his shareholding.

[111] I was referred to four cases in which minority discounting has been considered in the context of financial provision on divorce; Jackson v Jackson 1999 Fam LR 108, W v W 2004 Fam LR 54, L v L 2003 Fam LR 101 and Hodge v Hodge 2008 Fam LR 51. None of these are binding on me and the approach in each has varied according to the facts and circumstances of the individual cases. I am satisfied that, on the facts and circumstances of this case, it is not appropriate to apply a minority discount to the relevant Melantic and Westward shareholdings.

SHARE VALUATIONS
[112] As a result of the conclusions which I have drawn, I accept the valuations of the pursuer's and defender's shares brought out by Mr McMorrow as summarised in 7/132 of process subject to one caveat. That is that he has valued the Westward shareholding on the basis of an allowance of £1,500 per VCU for its licence which is at the top end of Mr Hermse' range of £1,200 - £1,500. Since a range of value was given it does not seem appropriate to use the figure at the top end of that range. Had Mr McMorrow used £1,200 per VCU for instance, his valuation would have incorporated the sum of £904,512 in respect of the Westward licence rather than the figure used by him of £1,130,640. His deduction for tax would, however, have been less. The effect on his final valuation of the share holding, which is stated to be £8,196.657 would, it seems, have been to reduce it to just below £8m and I conclude that it would be appropriate to proceed on the basis that it would have reduced it to £7,900,000.

[113] So far as the pursuer's and defender's interest in Melantic are concerned, I accept Mr McMorrow's valuations which were £359,723 and £239,815 respectively.

THE PURSUER'S RESOURCES
[114] The pursuer's available resources was said to be those set out in no. 6/81 of process. It was in the following terms:

JAMES WATT v ANNE WATT

PURSUER'S RESOURCES - SEPTEMBER 2008

"Liquid" assets

Cash in EBT (subject to tax)	7/116		881,056
	and 6/82
Cash in bank accounts	6/83
ISA Saver		11978
Websaver		645
ISA Saver		1219
Instant Access		189218
Current account		4957
Deposit to guarantee Brewdog Limited		60075	268092
Eschol	agreed	162500
20/2 Duff Street	agreed	80000
Scottish Widows Bond	agreed	22300	264800
Total "liquid" assets				1410784
Other assets
Ocean View, Rosehearty	est		250000
Lobster boat - with father	est		50000
Ice company shares
Faithlie Ice Company Limited	6/80	2000
Fraserburgh Ice (1988) Limited	6/80	8550
Granite City Ice Limited (in liquidation)		0	10550
Pensions
Zurich	6/68	52817
Standard Life (1) (ex Westward Retirement Scheme)	7/108	253404
Standard Life (2)	7/108	58835	365056
Investments
760 Scottish & Southern shares (ex Scottish Hydro)
1092 HBOS shares
SL shares - demutualisation issue
Premium bond		50	50
Total other assets (including pensions)				675656
Plus small investments
Assets not easily realisable
Fishing interests
1542 shares in Westward BF350 Ltd
120 shares in Melantic Ltd
Reversionary interest in father's house	6/75

[115] Withdrawal of money from the EBT investment will trigger an annual tax charge of 2.5%.

[116] So far as the purser's father's house was concerned, he was quite understandably anxious to make it clear that although he owned an interest in the house in which his father lives, he has no intention of requiring his father to move. That does not, however, detract from the fact that that interest is an asset of his and is, at the very least, available as security for borrowings. Other than that, the pursuer was clear in his evidence that he was prepared to regard all the assets set out on 6/81 as available to use for paying a capital sum to the defender.

[117] I turn then to a chapter in the pursuer's evidence regarding an approach he had made to the Bank of Scotland to enquire about obtaining a loan facility for the purpose of paying the defender. He had approached the Bank of Scotland the week before he gave evidence. The man who normally dealt with his business told him that there was no money to lend. He was referred to Mr Fraser Bews of the Bank of Scotland's private banking division and had a meeting with him. Graham Taylor was also present at that meeting and the pursuer's son arrived ten minutes after the beginning of it. Mr Bews advised that taking account of his income and expenditure as set out in a statement of means, the maximum he felt that the bank could lend would be £250,000. The picture that emerged in evidence, however, was to the effect that this was no more than a token effort on the pursuer's part. It transpired that the statement of means to which Mr Bews referred was a pro forma document that had been completed at the meeting by Graham Taylor who inserted, in the part of the form for the pursuer's income, his "monthly salary", as Mr Taylor called it, which was one twelfth of £50,000. Whilst that may, strictly, be correct so far as the pursuer's director's salary from Westward is concerned, it by no means reflects the true position regarding his income and resources which is that Mewstead is a highly profitable business from which Westward benefits to the extent of one third. I have already set out the profit figures from the accounts which were available for the period since Mewstead started fishing.

[118] It was clear that Mr Bews, who was new to the pursuer and new to his business, was told nothing of those figures. Even taking account of the change in the state of the economy by the time the pursuer approached the bank and the diminution in the availability of bank loans, I do not see that I can infer that had Mr Bews known the true position regarding the pursuer's circumstances, he would have restricted his offer of loan to the sum of £250,000. It appeared to me that this was another example of the pursuer's conduct being geared to seeking to minimise his liability to the defender. He sought to suggest that he simply relied on Graham Taylor to complete the statement of means, seeming to suggest that if there was a problem with it, that was Graham Taylor's fault and not his. It seemed to me that this was disingenuous. The pursuer had a responsibility to check that accurate details were included in the statement of means form and he was well aware of the true state of affairs as regards his own wealth and the income of Westward from which he had benefited since Mewstead had started trading. A person in his position who genuinely wanted to ensure that he had explored every avenue for obtaining adequate funding to meet his liabilities to his wife would have acted rather differently and seen to it that Mr Bews was put in possession of a full and complete picture.

DIVISION OF MATRIMONIAL PROPERTY
[119] S.8 of the Family Law (Scotland) Act 1985 requires me to determine what capital sum is (a) justified by the principles set out in section 9 of the 1985 Act and (b) reasonable having regard to the resources of the parties. Parties were in agreement that the only s.9 principle of relevance in this case is that the net value of the matrimonial property should be shared fairly between the parties to the marriage. S.10(1) of the 1985 Act provides that the net value of the matrimonial property shall be taken to be shared fairly between the parties when it is shared equally or in such other proportions as are justified by special circumstances. The pursuer's case was that fair sharing in this case was unequal sharing, in his favour, and the defender's case was that fair sharing was equal sharing.

[120] So far as "special circumstances" are concerned, as commented by Lord Clyde in his speech in the case of Jacques v Jacques 1997 SC (HL) 20, at p.24;

"The words "special circumstances" do not have any technical meaning but refer to 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.... 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 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".

[121] Examples of the court having had to give consideration to the question of whether or not special circumstances pointed to fair sharing being unequal sharing can be found in cases such as Little v Little 1990 SLT 785, McLean v McLean 2001 Fam LR 118, RVR 2000 Fam LR 43, Sweeney v Sweeney (No2) 2006 SC 82 and McConnell v McConnell (No2) 1997 Fam LR 108. However, at the end of the day, each case will turn on its own facts and circumstances as Lord Clyde plainly emphasised.

[122] The pursuer's case was that there were a number of specialities of fishing that ought to be taken into account. Significant capital commitment was necessary, large amounts of capital became locked up in vessels, licences and quota, re-investment is required if the fishermen are to stay in business, assets change in the course of the fishermen's business life and therefore there is a likelihood of his fishing interests becoming matrimonial property whereas if, for instance, they were heritable property such as a farm owned before marriage, they would not. Mrs Scott submitted that these factors together with the fact that prior to marriage the pursuer had a 121/2% interest in the Julieanne and the Heritage ought to lead to unequal sharing. S.10(6)(d) of the Act, which indicated that special circumstances could include the use made of an asset for business purposes, showed that it was not the intention of the Act to put a spouse out of business. Further the pursuer continued to fish and intended to remain in business for the foreseeable future. It was also his ambition to pass on his fishing interests to his son James.

[123] For the defender, Ms Wise submitted that the pursuer's case based on the non-matrimonial source of the matrimonial property represented by the pursuer's fishing interests was too remote to justify unequal division. On marriage, the pursuer had a small interest in two vessels, he transferred half of one of those interests to the defender. On re-organisation, when the two vessels were transferred out of Melantic, although the pursuer was "compensated" for his loss of share value, the defender had not received any compensation for the loss of value in her shares. More importantly, the quota which was Westward's major asset had not been acquired until after the marriage. In any event even if allowance was to be made for the non-matrimonial source of the pursuer's shares in Westward, the allowance should be a small one. Ms Wise pointed to the indication given as to the value of the Westward shares in 1998 (a value which did not include the value of the quota) in the capital gains tax schedule setting out the transfer of 660 shares to the pursuer's son in 1998. That showed that 1620 shares at that time were, at that time, regarded as having a value of £281,604. On that basis the source of funds argument being advanced by the pursuer was worth less than £300,000, and in the light of the overall figures involved in the case that was de minimis.

[124] Ms Wise also submitted that the matter was a discretionary one and that S.9(1)(b) was engaged. She referred to evidence of the defender's contributions to the marriage, to her having, at the pursuer's behest, not resumed her teaching career when she would have done and also at his behest, not having taken up the opportunity to invest in her own pension. There was, she said, no justification for any departure from equal sharing. So far as the reference to the pursuer's interest in Westward being a business asset and him hoping to pass it onto his son were concerned, they were not of relevance to this exercise.

[125] There is much to be said for the defender's argument. There is no doubt that the pursuer's fishing interests prior to his marriage were de minimis as compared to those acquired during his marriage and held at the relevant date. It is of some significance that the pursuer received no compensation in respect of her Melantic shares when the two vessels were transferred out of the company. However, it does seem to me to be significant that the business interests which the pursuer had at the date of separation can be tracked back directly to the interests which he owned prior to the marriage. The fact that his substantial wealth has grown from those interests does, I accept, require recognition. I do not accept that the pursuer's hopes regarding his son making a career in the fishing business are such as should have any bearing on this matter particularly since there are significant doubts regarding what his son's future career will actually be. So far as the pursuer's business assets argument is concerned, I consider that it can, in all the circumstances, adequately be accounted for by the unequal sharing which I propose to adopt, namely a 52%/48% sharing in favour of the pursuer.

INTEREST
[126] In terms of her second conclusion, the defender seeks interest on the capital sum awarded:

"at the rate of eight per cent per annum from the date of decree to follow hereon (or from such other date as to the Court seems appropriate) until payment."

[127] There are no averments relating to the issue of what interest should be awarded nor is it referred to in any plea in law.

[128] Section 8(2) of the Family Law (Scotland) Act 1985 provides:

" 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."

[129] Section 14(1) and (2) of the 1985 Act provides:

"(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 of divorce.

(2) In this Act "an incidental order" means one or more of the following orders -

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

(j) an order as to the date from which any interest on any amount awarded shall run;"

[130] As discussed in the case of Geddes v Geddes 1993 SLT 494, it can be assumed that the purpose of the statutory provision was to empower the court to do that which it would not have had the power to do at common law, namely to award interest from a date other than the due date for payment in terms of the decree pronounced by it. That would include a date earlier than the date of decree and, indeed, earlier than the date of citation in the action. There are no limits placed by the statute.

[131] However, the awarding of interest from a date earlier than the date that payment is due must be on the basis that, on a consideration of the whole facts and circumstances of the individual case, it is reasonable to do so. In Geddes, at p.500, the Lord President (Hope) indicated that it would seem to be "not unreasonable" to follow the common law rule that interest is the equivalent of the 'fruits' of an asset which is to be the subject of transfer during a period that it has been retained in the hands of the paying party and continued:

"There may be circumstances where a party who has had the sole use or possession of an asset since the relevant date, the whole or part of the value of which is to be shared with the other party on divorce, should be required to pay interest as consideration for the use or possession which he has had between the relevant date and the date of decree."

[132] Those circumstances were referred to by way of example and, not surprisingly, it is later emphasised that all questions of interest are a matter for the discretion of the court. The circumstances of that particular case were such that the court was satisfied that it was reasonable to award interest from the date of citation, the date chosen by the sheriff; the main asset, a farm, had been enjoyed solely by the husband and had increased in value since separation and it was considered that in those circumstances he should be required to pay something by way of interest.

[133] In the case of Welsh v Welsh 1993 SLT 828, interest was awarded on the wife's share of the former matrimonial home from the date of separation to recognise the economic advantage to the husband of having been able to live there after the separation. That was in circumstances where there had been an increase in the value of the house in the intervening period.

[134] In the present case, Ms Wise referred to the fact that the pursuer had retained the vast majority of the income - producing matrimonial property in his hands throughout the period since the parties' separation and he had not used the assets to support the defender, to any extent, there having been no payment of interim aliment. In these circumstances, she submitted that interest should be awarded from the date of separation. She added that the rate of interest was also a matter for the discretion of the court and it would be possible to award a rate that was less than the judicial rate. She recognised that, at eight per cent per annum, it was high, even in the early post separation years.

[135] For the pursuer, Mrs Scott submitted that there should be no award of interest earlier than the date of decree. The defender had amended her claim during the proof to increase the sum sued for to £4.25m. That was a claim focussed on the date of decree. Awards of interest from a date earlier than the date of decree were rare. There were no averments to support the making of such an award. No notice had been given of the facts on which the defender relied. It was too late to introduce a claim under section 14(2)(j); the claim was only introduced at the point of submissions. The pursuer had interpreted the conclusion as being for interest from the date of decree or such later date as the court considered appropriate.

[136] I am not satisfied that it would be appropriate for me to make an award of interest to run from a date any earlier than the date of decree. It is, I accept, quite competent to do so and I am not persuaded that the relevant conclusion would require to be drafted in any different terms from those in the present case. What I am, however, persuaded of is that where the party seeking an award of financial provision intends to seek interest from a date earlier than decree, principles of fair notice require that the case for it be at least outlined in the averments. The defender has not done so here. Whilst the facts on which she relies are not a matter of dispute, the pursuer was entitled to know that the defender intended to rely on them for the purposes of this claim for interest, in advance. He may have sought to lead evidence regarding them directed to showing that the facts did not point to it being reasonable to award interest from the earlier date, an award which could have had a substantial impact on the value of the defender's claim. I will, in the circumstances, follow the more usual practice of the court and award interest from the date of decree, at the judicial rate.

TAKING ACCOUNT OF RESOURCES
[137] Section 8(2) empowers the court, when awarding financial provision on divorce, to make only such order as is justified by the principles set out in section 9 and:

(b) reasonable having regard to the resources of the parties."

[138] It is thus for the party who seeks to limit what would otherwise be payable as financial provision under the section 9 principles by reference to limitation of his resources, to establish that limitation and persuade that it should have a limiting effect.

[139] It is plain that, in this case, the purser's resources are very much greater than those of the defender. They are, on any view, very substantial. It was, however, submitted by Mrs Scott that they were such as to limit his ability to pay .

[140] She relied on 6/81 of process, the terms of which are set out in the 'Resources' section at paragraph 114 above. She submitted that the pursuer has about £1.4m available in cash. To 'borrow" his entitlement from the Isle of Man Employee Benefit Trust, he will incur an annual tax charge of 2.5%. His case was that the funds in the Trust were paid out of the 2007 profits and out of the profits earned in the first few weeks of 2008. 7/118 showed that the Trust was set up in early 2008 and funds paid into the account on 21 February 2008. The profits for the 2008 season were already accounted for. As I have already indicated, I do not accept that submission.

[141] She submitted, under reference to the evidence about the pursuer's approach to the bank, that he could only borrow £250,000. She also submitted that account should be taken of the fact that there is currently a difficulty in securing bank borrowing, that the pursuer had no interest in minimising his borrowing capacity and that the offer of a loan of £250,000 was over 10 years with £25,000 being repayable each year and interest due. The annual repayment with interest at 6.5% would be about £35,000. She suggested that that showed that the offer of loan would not have been made if all that the bank had taken account of was a disclosed gross income of £50,000.

[142] Immediate payment could be on the basis that the pursuer could find about £1,650,000 but that would be on the basis that he would be left with a residual charge on his income of about £57,000 per annum. Mrs Scott submitted that any payment by instalments would require to be made out of future income and his income over the last three years, as shown by his tax returns at 7/104-106 showed that there would be a major impact on it. It was accepted that on the basis that the Total Allowable Catch for mackerel had been increased for 2009, that might result in profits for Mewstead. The pursuer would regard any such increased profit as available to pay the defender but there was no way of knowing how much he would have available.

[143] For the defender, Ms Wise submitted that, properly understood, the pursuer's resources were not such as to limit his ability to pay. Account required to be taken of the fact that, in reality, his main source of income was Westward's share of the Mewstead profits. Dividends were one way in which that income found its way to the pursuer but there were others. The evidence regarding the source of the funds to set up the Employee Benefit Trust was not satisfactory. The directors' remuneration figure in the Westward accounts did not afford adequate clarification. Even if the pursuer was correct that the Mewstead profit for the year to December 2008 had already been distributed by April 2008, the same would be available again in 2009 but subject, on the face of matters, to a 33% increase, that being the increase in the TAC. The pursuer's resources figures took no account of the profit that would be earned in the first six weeks of 2009.

[144] Ms Wise referred to the fact that the pursuer had said in evidence that he would prefer to raise the money in a single payment rather than pay by instalments. She submitted, under reference to the evidence of the pursuer and Mr Graham Taylor about the meeting with the bank, that there were doubts about the credibility of the pursuer's position; it showed, rather, that there was no real attempt to raise finance. Further, the partners of Mewstead seemed confident about its future. It had been a highly successful venture thus far and had exceeded expectations as could be seen by comparing the 2001 projections (7/54 (2)) with the results shown in the accounts and by looking at the steady increase in its net asset value. The partners could be expected to carry on with this highly successful business. She also relied on the fact that the pursuer was content that the shares he had transferred to his son be treated as his own as he still had control of them.

[145] Overall, the pursuer had, it was submitted, led no satisfactory evidence to justify a conclusion that he could not raise the necessary funds. It was only when the sum sued for was raised from £3.5m to £4.25m that he had raised the issue; the inference was that he had not thought it a problem before then. That undermined the case that all he could find was £1.65m.

[146] I begin my considerations on this matter by looking at the pursuer's own evidence, bearing in mind that by that time, he knew that the defender was seeking payment of a capital sum of £4.25m. He must be taken to be aware that there was a risk of a sum of that magnitude being awarded. He was asked, in examination in chief, whether he would seek to pay his wife by instalments. He said that he would leave it "up to the court". He wanted to get it sorted out. Once the court had reached a figure he would "have to find a solution". He would have to find "the quickest way possible to do it." Having been taken through 6/81 of process shortly before that evidence, it was surprising, to say the least, that that, rather than, a plea for payment by instalments, was his approach. It seems to me that I can only infer that notwithstanding the terms of 6/81, the pursuer considers that he is in a position to raise whatever the court awards in response to the defender's claim. That is not surprising. As regards investments which are immediately realisable, it is probable, as I have indicated, that the EBT figure in 6/81 does not include profits that were available and distributed from the outcome of Mewstead's trading activities in 2008. Even the pursuer estimated that those profits would be of the order of £1.5 - 2m.

[147] Another relevant aspect of the pursuer's evidence is that he accepted in cross examination that he could realise everything specified in 6/81 to put towards paying his liability to the defender, apart from his interest in his parents' house (a half share) which he excluded from his considerations because he did not want to uproot them. He would not consider borrowing against its value because that would mean that they would have to sign papers and they were too old to be asked to do so. If that house is left out of account, available assets of over £2m are brought out on that schedule.

[148] Then, as regards the pursuer's business interests, it is striking that he has, throughout his life as a fisherman, been financially successful. In particular, in the period since 2001, when he agreed to become involved in Mewstead, the picture has been one of year on year of profitable trading and a steady increase in the net value of its asset base. The partnership's results are such as to show that each partner, including Westward, now has a highly valuable asset in the form of a one third interest in it. To have grown from an net asset base of £1,712,401 in 2001, to one of £14,359,000 in 2007 whilst reducing the debt incurred to fund the building of the vessels from a figure of some £15m to, according to the pursuer, about £5-6m, is impressive, as is the level of profit achieved from fishing activities which take place over a matter of weeks each year. The men involved appeared to be intending to continue with the business which is also not surprising. The pursuer, who was aged 53 years at the time he gave evidence, spoke of working on as a fisherman for another few years, maybe 5-6 years. It seems highly likely that over that period he will benefit from further substantial profits whilst also retaining, through his interest in Westward, an asset of considerable value.

[149] Before leaving the matter of the pursuer's business interests, two other features fall to be taken into account. The first is that towards the end of 2008 a substantial increase in the TAC relating to mackerel for 2009 was announced, namely a 33% increase. All the indications in the evidence were that that would be likely to lead to an increase in profits. Mrs Scott's figures did not contain any estimate for those profits yet, on the basis of previous years of trading with lower TAC's, it appears that they are likely to be substantial. The second is that the pursuer indicated in re-examination that he would regard the profits available to him from the first part of the 2009 mackerel fishing season i.e. January and February 2009, as being money he could use to fund his financial obligations to the defender.

[150] I am not persuaded that I can place any weight on the evidence regarding what the bank said they were prepared to lend to the pursuer. As I have indicated, it seemed to me that the meetings with the bank did not represent a real effort on the pursuer's part to secure funding. I do not see that I can infer that the bank must have been allowing for an income of more than £50,000, as Mrs Scott invited me to do, particularly since I heard no evidence from any bank representative. As to the question of whether the pursuer's ability to secure funding would be affected by the current economic downturn, I do not see that I can conclude that it would. The generality of news about such matters, in particular that the United Kingdom has entered a period of recession, does not lead to the conclusion that in the pursuer's particular circumstances, there would be a problem. The pursuer's case that it would be difficult for him to borrow is advanced in the absence of credible and reliable evidence as to what a bank which is fully cognisant of the pursuer's whole circumstances, would lend him and on what terms. I cannot, accordingly, conclude that he has established that there will be a difficulty in this regard.

[151] The essential features of the pursuer's financial position is that he has, on his own admission, immediately available resources of over £2m, he appears to have managed his finances very successfully for many years, he is involved on an ongoing basis in a highly successful business enterprise which is likely, in the current financial year, to produce increased and substantial profits, he intends to carry on with his involvement in that business for the next five or six years, there is no reason to think that the business will not carry on being successful, and he has not sought an order that he be allowed to pay what, on any view, has always been likely to be a substantial sum of money, in instalments. I am not, in all the circumstances, persuaded that his resources are such as to limit what would otherwise be the appropriate sum to award under reference to section 9 principles.

PROPERTY TRANSFERRED
[152] The defender seeks the property transfer orders referred to in paragraph (2) as part of her entitlement to an order for financial provision. Section 8(1)(aa) of the 1985 Act expressly allows a party to the marriage to apply for an order:

"....for the transfer of property to him by the other party to the marriage."

[153] It was not disputed that it was appropriate to order those property transfers.

[154] Property value is referred to in section 10(2):

"The net value of the matrimonial property shall be the value of the property at the relevant date after deduction of any debts incurred by the parties or either of them- ........."

[155] Concerns which have been well publicised arose about the risk of injustice if, in accordance with the decision of the House of Lord in Wallis v Wallis 1993 SC (HL) 49, the subject of a property transfer order was an asset which had increased in value since the relevant date, such as a half share in a house, yet was transferred only at relevant date value. The recipient of the transfer in such a case could be seen as gaining an unintended windfall benefit because of the way in which the statutory provisions were drafted. The problem thus perceived has been addressed in section 10(3A) of the 1985 Act, introduced by section 16 of the Family Law (Scotland) Act 2006. It is in the following terms:

" 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 or, as the case may be, the partners agree on a date, that date;

(b) where there is no such agreement, the date of making of the order under section 8(1)(aa)

......................................"

[156] The section goes on and makes provision for the court's powers if there are exceptional circumstances. Parties did not suggest that there were exceptional circumstances in the present case. Nor was there agreement that a date other than the date of making the order should be the valuation date. That said, parties were agreed that the agreed values which were current at the time of proof should be used.

[157] Parties made submissions as to the effect of section 10(3A). Mrs Scott submitted that "property transferred" could mean either 'an interest in property transferred' or "property in which an interest is transferred". In the case of the former where the pursuer's share in jointly owned property was transferred to the defender then her interest would feature in the appropriate calculations at relevant date value whereas the pursuer's would feature at current value. If that were correct then there would be a disincentive to agree to a property transfer order. The latter interpretation would mean that both parties' interests would bear the same value at the time of transfer. That was appropriate. She referred to the case of Sutherland v Sutherland (Sheriff Kinloch, Linlithgow Sheriff Court, 28 8 08) where the sheriff had been persuaded that the latter interpretation was correct under reference to the undesirability of there having to be two valuations (one at relevant date value and one at current value) and the view that the party retaining a half share in the property would be receiving a windfall benefit. Mrs Scott suggested at one point that if her submission on the interpretation of these provisions was not accepted then the pursuer would wish the property which the defender sought to be transferred to her to be sold. That did not, however, accord with what the pursuer's approach had been in evidence; he said in cross examination that he was willing to transfer the property sought.

[158] I note from the judgment in Sutherland that Sheriff Kinloch also expressed the view that since joint ownership connotes ownership in one estate vested in the joint owners pro indiviso, the property transferred is, therefore, a share in a single estate and it ought accordingly to have a single valuation.

[159] Ms Wise submitted that the interpretation advanced by the pursuer was not correct. The short point was that the provision dealt only with the value of property being transferred. When it came to calculating what the pursuer had to pay to meet his obligations, the defender was entitled to retain her interest in heritable property at its relevant date value just as the pursuer was entitled to retain his business interests at relevant date value. The proper method was to value all the assets at the relevant date and then require the defender to 'pay' one half of current value to the pursuer for a transfer to her of his share. The difficulty perceived by Sheriff Kinloch was more apparent than real. Relevant date and current date valuations were required for a number of matrimonial assets. Only one (relevant date) is inserted into the assessment at valuation stage. Current value is then used to assess the 'price' to be paid for the transfer which was, here for the husband's interests. The defender also relied on the pursuer's prior willingness to effect these transfers.

[160] I am not persuaded by the pursuer's argument. It seems to me to be clear that section 10(3A) is concerned only with valuation of the property that is being transferred. The wording is clear. It has no application to property retained whether or not the transfer is of one half of an asset where the recipient already owns the other half. The plain words of the section do not, either, indicate that where the property transferred is a half share in joint property then, because of the correct legal analysis of the nature of pro indiviso proprietorship, a single valuation must have been intended. Had that been the intention of the legislation, I would have expected there to be express provision to that effect. Accordingly, I hold that the pursuer's one half shares in the property in respect of which transfer orders are sought requires to be included at current value in any calculation of what he is due to pay the defender, whilst the defender's retained shares require to be included at separation date values.

THE ORDER FOR FINANCIAL PROVISION
[161] As I have indicated, I consider that the only relevant section 9 principle is that the net value of the parties' matrimonial property should be shared fairly and that fair sharing in this case will be achieved by making an award that has the result of the defender retaining property and being paid a capital sum that together give her 48% of that amount.

[162] Once the agreed values of matrimonial property and those which I have determined are added together, a total net value of matrimonial property at the relevant date is brought out of £8,829,1709,417,038.21.

[163] 48% of £8,829,1709,417,088 is £4,238,001.60.4,520,178.34.

[164] The defender already has ownership of a number of items of matrimonial property, valued at a total of £587,919 at the relevant date. That means that the pursuer requires to pay money/transfer property to her totalling £3,650,082.60. The current values of the pursuer's interests in the house, flat and Scottish Widows' bond in respect of which property transfer orders are sought are agreed to be £162,500, £80,000 and £22,301. Also, and the defender has retained the pursuer's share of sums at credit of a Halifax account and a Bradford and Bingley account (£12,679 and £2,960). Thus, the defender is to be taken to have retained or to be receiving further property at a total value of £280,440. The sum of £868,359 requires, accordingly, to be deducted from £4,520,178.34 to ascertain the capital sum that the pursuer requires to pay to the defender.

[165] Once £280,440 is deducted from £3,650,082.60, the sum of £3,369,642.60 is brought out. I am, accordingly, satisfied that it is appropriate to award the defender a capital sum of £3,369,0003,651,819.34 and to make the property transfer orders sought by her. I shall pronounce an interlocutor effecting the property transfer orders and ordering that the pursuer pay the sum of £3,369,000 to the defender, £2,000,000 to be payable immediately, with interest thereon from the date of decree. As regards the balance, I consider it reasonable to allow the pursuer some time to put together the necessary funding and I will order that it be paid by a date six months from the date of decree with interest at the judicial rate running thereafter.

EXPENSES
[166] I shall reserve all and any questions of expenses in the meantime.

ADDENDUM : MOTION FOR PROOF IN REPLICATION
[167] On 13 January 2009, when she resumed the submissions that she had begun on 13 and 14 November 2008, Mrs Scott made a motion for proof in replication. I heard argument on the motion and refused it. The following is a transcript of the ex tempore judgment that I gave at that time:

"This is the pursuer's motion to allow the pursuer a proof in replication on the issue of the sales of quota held on the vessels Silvery Sea and Alert, spoken to by the defender's witness John Hermse, by allowing the Affidavits of Andrew Pullar and John Smith to be lodged and received in evidence pursuant to Rule of Court 36.8 and/or to allow said persons to give evidence by a live link pursuant to Rule of Court 93.1. That motion is in the terms that it finally arrived at yesterday. The original motion was amended at the bar to add the final clause seeking to allow the persons named to give evidence by live link. It is important to note the stage at which this motion is made. The pursuer's proof has closed, the defender's proof has closed, Mrs Scott began her submissions on behalf of the pursuer at two o'clock on Thursday 13 November 2008 and continued her submissions during the day of Friday 14 November. She had not finished her submissions when the proof was adjourned. She was due to complete her submissions in the course of the continued diet which began yesterday morning. I was told that she anticipated that she would have completed her submissions yesterday (13 January) had it not been for this motion. It can thus be said that this motion comes at a point when, on behalf of the pursuer, Mrs Scott is about halfway through her submissions. Mrs Scott submitted that the defender was proposing to rely on the opinion of an expert that was based on certain assertions of fact. The assertions of fact in question were, she said, two in number, firstly that a sale of quota attached to the vessel Silvery Sea took place in the period 2000 to 2001 at £4,000 per ton or £3,800 per ton and secondly that there was a sale of the quota attached to another vessel called the Alert. She said that she had no notice of these assertions of fact. The defender's expert report stated that he had indicated the sources of all information that he had used. It now transpired that she said that was inaccurate. When she refers to the defender's expert she was of course referring to the expert witness called by the defender, Mr Hermse. She said that these two assertions of fact could not have been reasonably anticipated unless they were true. The pursuer's position appears to be that he seeks to show in evidence that those two facts are wrong. The assertions that the quotas of those two vessels had been sold at about the material time was not, it was said, put to the pursuer's witness Billy Smith who gave factual evidence about the sale of the Convalaria quota. All that had been put to him was that there was evidence of other sales of mackerel quota at £4,000 per ton. It was accepted by Mrs Scott that that witness had responded by saying that he was not in a position to take issue with any such evidence. She founded, however, on the fact that the particular vessels, the Silvery Sea and the Alert, were not referred to in the defender's cross-examination of them. Mrs Scott submitted that the questioning of Mr Smith in cross had not given her the notice that she needed to lead evidence about the Silvery Sea or the Alert. Principally though, she relied on the lack of notice in Mr Hermse' report that he had relied on transactions involving those two vessels. Mrs Scott submitted that it was competent to allow proof in replication at this late stage. Proof in replication was, she submitted, competent at any stage. She relied on McLaren, Court of Session Practice, at page 562, where under the sub-heading, 'Proof in Replication', the learned author states: 'Where something comes out in the defender's proof which the pursuer could not reasonably anticipate, a proof in replication may, in the discretion of the judge, be granted'. She relied on "The Practice of the Court of Session" by David Maxwell at page 308 where under the sub-heading 'Proof in Replication' the learned author states "that it is never too late to allow such a proof when there is a necessity". The author relies in support of that proposition on the case of Strang v Stewart 1862 24D 955 and also Roy at page 85. I was not referred to Roy. I was however then referred to Strang v Stewart. The Lord Justice Clerk, Lord Kinloch, in a very short opinion in Strand v Stewart comments obiter,

'It is never too late to allow a proof in replication when there is a necessity, and if the Lord Ordinary sees that there is grounds for it in the present case he may still grant it specifying the particular matters of fact to which it has to be directed; but I entirely disapprove of allowing this proof in replication per se and reserving the legal objections to the courses of examination and in particular interrogatories to be determined afterwards;'"

[168] The stage to which his Lordship was referring in that case was a stage before parties had reached a point of making their submissions on the evidence in the case. Mrs Scott then referred to the case of Dick v Stephenson & Mackay 1880 4R 778 at page 791. I note that the circumstances in Dick v Stephenson & Mackay were very similar to those in Strang v Stewart. The passage relied on there was a passage in the opinion of Lord Shand at where he states

"Of course I distinguish between conjunct proof and proof in replication which may always be properly adduced in reply in regard to any incident or matter of which notice has not been given or in which it may fairly be said proof in anticipation could not be expected but, for the avoidance of doubt, again, the stage at which the issue was being considered in that case was in advance, the parties having moved to make the submissions in the case".

[169] Mrs Scott also relied on the case of Bryce v British Railway's Board 1996 Scots Law Times at page 1378 for the proposition that the Court had always, when considering such an application, to look at the interests of justice. Mrs Scott also referred to some authorities regarding the powers relating to additional evidence although, properly, did not suggest they were directly in point when considering a motion for evidence in replication. These were the cases of Miller v Mac Fisheries 1922 SC 157 at pages 160 to 161, Mackie v Pratt 1870 42 Scottish Jurist 273 also reported at 7 Scots Law Reporter 323 the same year, Rainsford Hannie v Smith 1934 Scots Law Times 491 and the case of Coyle v Coyle 2004 Family Law Reports at page 2. In summary, Mrs Scott submitted that before she closed her proof she had no way of knowing the relevance of matters relating to the Silvery Sea and the Alert. Their relevance emerged only in the course of the defender's proof. She sought to, as she put it, set the record straight. Mrs Scott accepted that she could have asked for an adjournment when the matter came out in evidence. It had not at that stage been known how easy it would be to track down the information and the pursuer was concerned to make progress. It was frankly accepted by her that advantage had been taken opportunistically of the fact that the submissions did not finish in November and there was time available before the present continued diet. So far as the procedure was concerned, Mrs Scott referred to the second part of the motion in particular and explained that what was proposed was that there would be a conference call involving the two witnesses named.

[170] On behalf of the defender, Ms Wise opposed the motion. It was, she submitted, of doubtful competency and the pursuer had not discharged the onus of showing that it was competent to allow proof in replication at this stage. In any event the application came too late. The pursuer had not shown that the evidence could not reasonably have been anticipated, it had not been shown that it was necessary to the pursuer's case. The proposal was that evidence be by way of affidavit which failing by conference call. Both would be to the defender's prejudice. Cross examination would be excluded if the evidence were taken purely by affidavit and it would be impossible properly to test credibility and reliability by way of affidavit or by conference call. How could the Court assess credibility and reliability without seeing the two witnesses? How could the demeanour be assessed? It was submitted that none of the authorities relied on by Mrs Scott showed that evidence in replication after submissions had commenced was competent. She had searched the authorities and could not find any that supported that proposition. In addition to those referred to on behalf of the pursuer she referred to the fact that McLaren , in Court of Session Practice distinguished between proof in replication and additional evidence. She referred to the case of Gardner v Youngs at 1874 2R page 173 and also to the case of Martin v Roberts 1873 4R page 225. In both of these cases proof in replication was under consideration and the point in time at which it was being considered was prior to the case having moved to the point of submissions being made. Ms Wise drew an analogy with criminal procedure. She referred in particular to section 269 of the Criminal Procedure (Scotland) Act 1995. Section 269 provides for evidence in replication. It states that the judge may, on a motion of the prosecutor made at the relevant time permit the prosecutor to lead additional evidence. The relevant time is defined in sub section 4 of section 269 as meaning

"(a) in proceedings on indictment after the close of the defence evidence and before the commencement of the speeches to the jury and

(b) in summary proceedings after the close of the defence evidence and before the prosecutor proceeds to address the judge on the evidence."

[171] An analogy could, in particular, she said, be drawn between the procedure for evidence in replication in a summary trial and the appropriate procedure in civil cases. Ms Wise submitted that it would have been open to the pursuer to seek to call evidence in replication up until any point before Mrs Scott began her submissions. It was too late to do so now. Ms Wise also drew a comparison between the present circumstances and those allowed for in the Civil Evidence Scotland Act 1988 where, in section 4, provision is made for the leading of additional evidence. This was not, of course, evidence in replication but additional evidence. At section 4, it was provided that for the purposes of section 2 or 3 any person may, at the proof, with leave of the court at anytime before the commencement of close of submissions be recalled as a witness or be called as an additional witness. There is no provision in the Civil Evidence Scotland Act 1988 for the purposes set out in section 4 whereby evidence by way of recall of a witness or by way of calling an additional witness can be led, once proof is closed and submissions have begun. Ms Wise submitted that the balance should fall in favour of the defender and that the motion should be refused. If it was to be granted, care would need to be taken to specify precisely what issue or issues were to be explored in the further proof.

[172] I turn now to look at some of the evidence that has been led in this case. I consider it is necessary to do so to put the motion into context and to reach my decision in respect of it. I turn firstly to Mr Smith's evidence. Mr Smith (Mr Billy Smith ) gave hearsay evidence as a witness to fact, not as an expert witness. That was evidence about the sale of the Convalaria quota. His reaction was sought in cross-examination to the proposition that independent records for the period 2001 to 2003 showed that there were transactions involving mackerel quota in that period at up to £4,000 per tonne and he said that he would not be in a position to take issue with that. I turn now to Mr Hermse' evidence but before doing so I should indicate that after we adjourned yesterday afternoon I listened again to sections of Mr Hermse' evidence, in particular at those sections that had been referred to in the course of submissions yesterday. I begin though by referring to Mr Hermse' report. At page 2 in sub paragraph 4 he states "I have indicated the sources of all information that I have used". At part 5.26 to 5.28 of his report he states "my own confidential records show transactions of upto £400 per FQA for mackerel in 2001 to 2003". I note in passing that the pursuer appears to accept that mackerel achieved £4,000 per tonne in 2003. It is in respect of 2002, the year that includes the relevant date, that the parties are at odds over the market price. Mr Hermse' report was lodged without objection from the pursuer on the second day of the proof. That was in October 2008. Had the pursuer had concerns that Mr Hermse had confined his specification of the source of his information to his own confidential records, and had not said what precisely was contained in those records, the pursuer could reasonably have been expected to raise the issue at that stage by, for instance, objecting to the lodging of that report. That was not done. Returning to what Mr Hermse said in evidence: in chief he said that he had found out what mackerel quota had sold for at about the relevant date. He found that there were two records that were relevant and he based his estimates on that, and further he noticed that the Johnston Carmichael Share Valuation Memorandum in 2003 had valued the quota at £3,700 per tonne. He said that he thought that it would be quite easy to value the quota higher than he had done. His valuation was of course £3,800 per tonne. He had information that suggested that it could be £4,000 per tonne. He referred to there having been both sales and valuations as high as £4,000 per tonne. He did not, though, see the sense in overvaluing the species. He agonized over the figure, and determined that it should be £3,800. He said that he was valuing the quota at £4,000 originally but thought it best to put in a good average price all round. He considered that £3,800 was fair and just. He was asked for the parameters of his thinking and he said that he knew that some quota had gone at £3,800 and he knew of valuations at £3,800. He knew of valuations at £4,000. Regarding the quota that had gone at £3,800 he said that it was from the sale of quota from a boat called the Silvery Sea. That sale had been around about 2000 to 2001. He also referred to a boat called the Alert which had mackerel quota. He said that he was led to believe that its mackerel quota went for £4,000 per tonne. He did not know exactly when. He thought it was 2001 to 2003. He was asked by Ms Wise whether then he had two comparisons and he said yes, but "there was (sic) also valuations done, for example, so that banks could ascertain the assets of individual companies". That type of information he got from various sources so that he could keep abreast. He said that the valuations that he knew about indicated that £4,000 per tonne was the going rate for mackerel quota. The valuation information was obtained by him from various contacts. In cross-examination he was asked about the quota valuation. He said that one of the ways he got information about prices and valuations was from the grapevine.

Regarding mackerel he said that he knew about the Silvery Sea and the Alert but he had information as well from other sources regarding values and that included from producer organisations, fishing vessel agents, contacts and colleagues, quota traders and other pelagic fishing companies. Regarding the Silvery Sea, he was told that the transaction had gone ahead and what the prices were. The price of the mackerel was £4,000 per tonne. He could not remember the date of the transaction. The information was correct as far as he knew. He was asked whether he was saying it was the date that he had given in chief namely 2000 to 2001 and he said that it was round about that time but it could be later. It was put to Mr Hermse that the Silvery Sea was lost at sea on the 14 June 1998 and he agreed that that was the case. He was not however aware of its quota being sold at that time. It was put to him that the Silvery Sea quota was sold for £2,000 per tonne in 1998 and he said that he only became aware that the quota had been sold in 2001. He said that after everything had been sorted out the quota had been up for sale. He said he was led to believe and understood that the quota was not sold until 2000 to 2001. He said that he was told that the quota was leased until the executry had been sorted out. He was party to one of the transactions arising from the executry and he knew from his involvement in that transaction the executry was not finalised until 2004. Mrs Scott returned to the matter of the Silvery Sea and Alert quotas in the afternoon of that day. She put to Mr Hermse that he was basing his evidence of value on transactions that he said actually took place. His answer was yes plus other materials. She then asked Mr Hermse whether he was aware that Mr Smith had taken his quota from the Alert with him to the Challenge, a boat that he had bought from Mr Tait. I then asked Mrs Scott on what basis it was that she was putting that proposition to the witness and she responded as follows: she was very concerned that the witness had given evidence about transactions he said had taken place. She then said that information in her hand - and she referred to a document that she was holding - indicated .... I stopped her from reading the document because it was not a production in the case and had not been put to the witness. Thus the pursuer was, it seems, at that point, in possession of some detailed information that was considered relevant regarding the Silvery Sea and Alert transactions that had been referred to by Mr Hermse. That was prior to the end of cross examination. Cross-examination continued. Mr Hermse said he was under the impression that the Alert quota had been sold. He was led to believe that by one of his contacts; he couldn't say who. It having been put to him that that quota was not in fact sold, he said that it could have been that there was a valuation on it, a valuation to allow the transaction with the new vessel to take place, so as to allow the Bank to finance the transaction. There was, he said, no doubt that the Alert quota was applied to another vessel and he was aware that there was a transaction involving the quota. In the context of that transaction information had come to him about the value of its quota. It could have been a sale, it could have been a valuation for bank purposes. In re-examination he was asked to clarify his sources of information, namely the sources from which he made up the confidential record referred to in his report . That information was also referred to in his evidence as being from his own database. He said he used fishing vessel agents, fisherman's association, producer organisations and other brokers with an interest. Also he said that he knows what's happening in the market. He said he also speaks to banks and to business managers about quota values. He had had access to all those sources for his valuation in this case. So far as the Silvery Sea was concerned he had information from a person who was involved in the sale and regarding the Alert the source of his information was a fish salesman.

[173] Turning to my own discussion of the decision in this case, I consider that the allowance of proof in replication after submissions have begun is of very doubtful competency, and I cannot be satisfied that the pursuer has established that it is competent. I observed that the high point for the pursuer's submissions under reference to authority on the matter of competency was the reference to the case of Strang v Stewart but that amounts to reliance on an obiter remark in an old authority which does not expressly support the proposition that once all the parties have closed their cases and submissions have begun, proof in replication can competently be allowed. The additional evidence authorities relied on do not assist. Different considerations arise when the Court is considering whether to allow additional evidence. It is important to recognise that the power to allow additional evidence at common law and indeed under the Civil Evidence Scotland Act is different from proof in replication. It would cover those occasions when the information is new for instance. It is not directed towards considering when it is appropriate to allow a party to lead evidence to respond to a point that has come up in the other side's evidence. I observe that if it was competent to lead proof in replication after submissions had begun that that would conflict with the rule under our criminal procedure to which Ms Wise referred. That would be a surprising result. I would add that it would seem odd that it would be too late to lead additional evidence under the Civil Evidence Act but not too late to lead evidence in replication if it were correct that it was now competent to do so. I would further observe that the party who has moved to the stage of submissions could be viewed as having waived their right to apply for a proof in replication. By that stage that party knows everything it needs to know about what evidence the other party has led and has been in a position to consider their position in relation to that evidence. It is in a position to know whether to seek to lead new evidence on a matter and is in a position to assess whether or not it is important to do so. Furthermore, that party, before moving to the important stage of starting submissions has a choice as to whether or not to make a motion to the court to seek evidence in replication. Not having made that choice it does seem to me that it may well be correct to view the party as having waived any right it has to make that application.

[174] I turn now to the question of the exercise of discretion approaching matters on the basis of the hypothesis, for the moment, that it is competent to allow proof in replication at this stage. In this case, I do not consider it would be appropriate to exercise such a discretion in favour of allowing such proof. Consideration has to be given to what Mr Hermse actually said in evidence. It is not at all clear that it was simply a matter of making the firm assertions with which he is charged as having done by Mrs Scott. I note that his opinion on valuation does not proceed purely on the basis of his understanding from what he was told about what had happened to the quotas on the Silvery Sea and Alert. As he explained in his evidence he relied on a number of other factors including the pursuer's own 2003 valuation which was but £100 less per tonne than his. I note further that parties appear to agree that the Silvery Sea quota was sold and the issue between them would seem to be over its value but Mr Hermse has made his position clear that his understanding was on the basis of what he had been told by somebody involved in the transaction. It is not suggested that anything that would be put in proof in replication would be to the effect that Mr Hermse had not been told that by the person who had told him, nor indeed that it had been suggested that proof in replication would, perhaps more significantly, challenge the whole breadth of Mr Hermse' evidence which included not looking just at the Silvery Sea quota sale price but the other matters referred to him in his evidence as influencing his valuation.

[175] Turning to the matter of the Alert, Mr Hermse accepted that the Alert quota may not have been sold. His figure could have come from the valuation for the purposes of the transaction of the previous owner of the Alert putting his quota onto another boat. He was not categorically asserting a definite sale of the Alert quota. The point he made was that his understanding was that the value of the Alert quota at the periods to which he referred was as he said it was. I consider also to be relevant the fact that Mrs Scott did have some details to put to Mr Hermse in cross-examination. She had a document in front of her at the time. I have already referred to what she said about that. No adjournment was asked for either during Mr Hermse' cross-examination, as it could have been, or at the end of his evidence as it could have been, or indeed at the end of the defender's case after Ms Wise had closed her case and before moving to submissions, as it also could have been. I bear in mind that the pursuer accepts that such an adjournment could have been asked for, I bear in mind that I was advised that the pursuer chose not to ask for an adjournment and chose not to seek evidence in replication because the pursuer wanted to make progress in the case. I bear in mind that the pursuer frankly accepts that the motion is now made on what was described as an opportunistic basis arising from the break between the end of the November diet of proof and the current diet of proof. Finally, I bear in mind that both methods proposed for taking the evidence in replication had real difficulties involved in them. It is not proposed that these witnesses actually be brought to court to be available to be cross-examined where they can be seen and heard directly in court and where a check can be made for instance on who else is there and what documents are before them at the time and so on. It is plain to me that there could be prejudice to the defender in proceeding in respect of this matter in the way proposed. So, in summary I refuse this motion firstly because I have grave doubts as to its competency and secondly, even if it is competent I am satisfied that it would not be appropriate to exercise my discretion so as to grant it."

INDEX

Paragraph nos.

1. Introduction 1-5

2. Witnesses 5

3. Background Facts 6 -37

4. The Mewstead Agreement 38 -48

5. Matrimonial Property : Agreed Values 49- 50

6. Matrimonial Property: Disputed Values 51

7. The Pursuer's Expert Witness 52 -72

8. Quota 73 - 94

9. Licence Valuations 95 -97

10. Trading Adjustments 98- 99

11. Discounting Share Values 100 -111

12. Share Valuations 112- 113

13. Pursuer's Resources 114 - 118

14. Division of Matrimonial Property 119 - 125

15. Interest 126 -136

16. Taking Account of Resources 137 -151

17. Property Transferred 152 - 160

18. The Order for Financial Provision 161 -165

19. Expenses 166

20. Addendum : Motion for Proof in Replication 167 - 175