Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2016] CSOH 32

 

F140/14

OPINION OF LADY WOLFFE

In the cause

EP or G

Pursuer;

against

GG

Defender:

Pursuer:  M Stuart;  Turcan Connell

Defender:  Hayhow;  Lindsays

18 February 2016

Introduction
[1]        The parties to this action of divorce were married in Scotland on 1 October 2005.  They lived together until 31 January 2013.  That date is the relevant date (“the relevant date”) for the purposes of section 10(3) of the Family Law (Scotland) Act 1985 (as amended) (“the Act”). 

[2]        The marriage was a second marriage for both parties.  There were no children of the marriage;  both parties had children from their prior marriages. 

[3]        The pursuer (“EG”), who is 54 years old, seeks decree of divorce on the ground that the marriage has broken down irretrievably by reason of unreasonable behaviour on the part of the defender (“GG”).  In any event, the parties have not lived together as man and wife since the relevant date, albeit the pursuer did not move out of the matrimonial home until several months after the relevant date.  In support of the conclusion for divorce, which is not opposed, I was provided with affidavits of the pursuer and her grown up daughter from her first marriage, LW.  Notwithstanding those affidavits, the pursuer’s daughter was called, as well as the pursuer, to speak to the merits of the action for divorce.  The tenor of their evidence, which was not challenged, was that the parties’ marriage had broken down irretrievably.  The pursuer spoke to the parties growing apart and of the defender pursuing his own interests.  The pursuer perceived the defender to be controlling and more devoted to his daughters from his first marriage than to her.  She and the defender had little in common and, latterly, did not spend time together.  During the latter years of the marriage, the pursuer was drinking heavily and socially isolated.  There was some limited evidence suggestive that the defender had created an account with an online dating website, although there was no evidence to suggest that the defender ever activated or accessed this.  In his evidence, the defender flatly denied ever being unfaithful to the pursuer.  I accept his evidence on this point.  In the light of the whole evidence, parole and by way of affidavit, I am satisfied that the parties’ marriage has broken down irretrievably and I shall grant decree of divorce as first concluded for.

 

The parties’ claims for financial provision
The pursuer’s financial claims
[4]        In terms of the pursuer’s pleadings, she seeks financial provision on divorce as follows:

(i)         a capital sum of £800,000 in terms of section 8(1)(a) of the Family Law (Scotland) Act 1985 (“the Act”);

(ii)        periodical allowance of £2,750 per month for an extended period, in terms of section 8(1)(b) of the Act;

(iii)       interim aliment, also in the amount  of £2,750  per month;  and

(iv)      an order under section 14(2)(a) of the Act for sale of the parties’ jointly owned former matrimonial home, being a substantial three-bedroomed dwelling in the Barnton area of Edinburgh (‘the matrimonial home”), together with ancillary orders relative to the conclusion for sale.  There is no outstanding lending or debt secured in respect of the matrimonial home, although there was at the time of its acquisition in 2004.

[5]        At the close of the proof, the pursuer augmented her submissions for periodical allowance, as necessitated either for the purpose of adjustment to loss of support on divorce (under section 9(1)(d) of the Act) and/or to ameliorate severe financial hardship (under section 9(1)(e) of the Act).

 

The defender’s financial claims
[6]        The defender seeks an order for transfer of the pursuer’s one‑half pro indiviso share of the matrimonial home to him, in terms of section 8(1)(aa).  At the close of the proof, the defender’s counsel fairly accepted that a capital sum was due to the pursuer, as well as periodical allowance, as it was accepted that the pursuer will require time to adjust to loss of support.  The parties differed as to the amount of those payments and, in respect of the periodical allowance, for how long a period after the grant of divorce that should be paid.  However, the defender resisted any payment to the pursuer for the purposes of section 9(1)(e).

 

Departure from presumed equal sharing of the matrimonial property
[7]        As will be seen below, there is no dispute as to what items are matrimonial property and what debt is relevant debt for the purposes of the application of the statutory provisions governing financial provision on divorce.  However, each party contends that there are special circumstances such as to justify an unequal division of the net matrimonial property in their favour.  In particular, the pursuer contends that certain payments made by the defender to his two adult daughters constitute dissipation of matrimonial property, justifying an unequal division of the net matrimonial property in her favour.  For his part, the defender points to the great disparity in the wealth the parties brought to the marriage and, notwithstanding that some of this came to be held in joint names of the parties, on the basis of a source of funds argument, that this is a special circumstance justifying an unequal division of the net matrimonial assets in his favour.  While the pursuer also had on record averments anent an economic disadvantage to her in respect of circumstances post‑dating the relevant date (of not being able to use her one‑half share in the value of the matrimonial home), and a commensurate advantage to the defender, there was no evidence led, nor any submission made, in respect of these averments.  I therefore make no further reference to any issue of economic advantage or disadvantage.

 

Dispute about whether obligations in preliminary Minute of Agreement have been discharged
[8]        In the course of the proof some reference was made to a preliminary Minute of Agreement entered into between the parties after the relevant date.  There are no pleadings about this, although the preliminary Minute of Agreement dated 10 and 15 January 2014 was lodged in the course of the proof (“the Minute of Agreement”).  In essence, the Minute of Agreement was entered into to enable the defender to pay the pursuer a substantial sum to enable her to purchase a home for herself outright.  To the extent that parties have agreed in the preliminary Minute of Agreement certain matters that might otherwise have been resolved in these proceedings, the preliminary Minute of Agreement will govern those obligations. It would be, as it were, a partial compromise of certain issues with the practical effect of removing those issues from determination by the court.  (Neither party sought to rely on the preliminary Minute of Agreement to limit the scope of the proof or to exclude any evidence at the proof.)  In these proceedings, however, for reasons which were never entirely clear, an issue was said to arise because of the source of funds said to have been used by the defender to pay the pursuer the sum agreed in the Minute of Agreement (“the preliminary Minute of Agreement issue”).  At the end of the proof, the defender moved me to grant a declarator in respect of the preliminary Minute of Agreement.  While at the close of the proof there were no pleadings at all about the preliminary Minute of Agreement and no conclusion by the defender providing any indication of the terms of any such declarator as is now sought, the defender amended his pleadings at the By Order on 22 January 2016 to include an appropriate conclusion and plea.   

 

Statutory provisions governing financial provision on divorce
[9]        Section 8(2) of the Family Law (Scotland) Act 1985 (“the Act”) directs that where an application for an order for financial provision has been made:

“… 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”. 

 

The interpretation section, section 27, provides that “resources” means present and foreseeable resources.  Section 8(2) is subject to sections 12 to 15 of the Act.  In the main, these sections deal with the mechanics and other ancillary matters in respect of the grant of financial orders.  Accordingly, I will refer to these provisions only to the extent necessary when I consider the orders to be made consequent upon my determination of the principal matters in dispute.

[10]      Section 9 of the Act provides, so far as the principles there set out are relevant to the issues in this case, as follows:

“(a) the net value of the matrimonial property should be shared fairly between the parties to the marriage.” 

 

In respect of the first principle of fair sharing, as provided for in section 9(1)(a), section 10(1) sets out a presumption that the fair sharing is to be taken to be equal sharing, unless such other proportion is “justified by special circumstances”. 

[11]      Both parties contended that there were “special circumstances” such as to justify an order for a greater than equal share of the net matrimonial property in their favour.  The statutory phrase “special circumstances” is defined, non-exhaustively, in section 10(6).  So far as relevant for present purposes, “special circumstances” under section 10(6) may include the following:

“(b) the source of funds or assets used to acquire any of the matrimonial property…;

  (c) any destruction, dissipation or alienation of property by either person”.

 

As noted above, the defender advanced a “source of funds” argument under section 10(6)(b).  The pursuer advanced a dissipation of assets argument under section 10(6)(c).  In this context, reference was also made to section 11(7)(a), providing that a court may have regard to the conduct of a party which adversely affected the resources relevant to the principles in section 9.

[12]      What is to be apportioned between the parties is the “net value of the matrimonial property”:  see sections 9(1)( a) and 10(1).  The Act defines “matrimonial property” in section 10(4) as:

“all of the property belonging to the parties or either of them at the relevant date which was acquired by them or him (otherwise than by way of gift, or succession from a third party) –

(a)        before the marriage for use by them as a family home or as furniture or plenishings for such a home; or

(b)        during the marriage but before the relevant date”

 

[13]      Given that the second principle in section 9, namely the obligation to take “fair account” of any economic advantage or disadvantage,  does not arise as a live issue, I do not set out any other part of section 9 or of the provisions in section 11 ancillary to that issue.

[14]      While subsection 10(4) is subject to subsections (5) and (5A) of section 10, on the facts of this case neither of these subsections is applicable.  Furthermore, it is agreed that the matrimonial home which was acquired before the parties’ marriage is matrimonial property. In this case, therefore, what falls to be determined is the extent of any matrimonial property created or acquired by either or both of them, other than by way of gift or succession from a third party, during the marriage and before the relevant date of 31 January 2013.

[15]      What is to be shared out in accordance with the principles in the Act is the “net value” of the matrimonial property.  The Act provides that this is ascertained, as at the relevant date, by deducting from matrimonial property certain debts, as set out in section 10(2). 

[16]      Section 10(2) provides:

“(2)      Subject to subsections (3A) below [which stipulates a different valuation date for any property transfer order] the net value of the persons property shall be the value of the property at the relevant date after deduction of any debts incurred by one or both of the parties to the marriage….-

(a) before the marriage so far as they relate to matrimonial property….; and

(b) during the marriage….,which are outstanding at that date.”

 

[17]      While the scheme of the Act is to promote a clean break between the parties, there is provision for payment of sums after decree of divorce has been granted by way of periodical allowance.  As noted above, at the close of her proof the pursuer founded on subsections 9(1)(d) and/or 9(1)(e) in respect of any award of financial provision.  Further provision is made, in subsections 11(4) and 11(5) respectively, of the factors to which the court should have regard in making any award under one or other of those provisions. Under section 9(1)(d) of the Act a person who has been dependent to a substantial degree on the financial support of the other person should be awarded such financial provision as is reasonable to enable him to adjust, over a period of not more than three years from the date of the decree of divorce to the loss of that support on divorce.  In respect of any payment under section 9(1)(d), section 11(4) provides for the court to have regard to the following factors:

(a)        the age, health and earning capacity of the person who is claiming the financial provision;

(b)        the duration and extent of the dependence of that person prior to divorce;

(c)        any intention of that person to undertake a course of education or training;

(d)       the needs and resources of the persons;  and

(e)        all the other circumstances of the case.

[18]      Under section 9(1)(e) of the Act a person who at the time of the divorce seems likely to suffer serious financial hardship as a result of the divorce should be awarded such financial provision as is reasonable to relieve him of hardship over a reasonable period.  For the purpose of any award under section 9(1)(e), section 11(5) provides for the court to have regard to the following factors:

(a)        the age, health and earning capacity of the person who is claiming the financial provision;

(b)        the duration of the marriage;

(c)        the standard of living of the persons during the marriage;

(d)       the needs and resources of the persons; and

(e)        all the other circumstances of the case.

[19]      Under section 13(2) of the Act the court:

“shall not make an order for a periodical allowance under section 8(2) of the Act unless (a) the order is justified by a principle set out in paragraph (c), (d) or (e) of section 9(1) of the Act;  and (b) it is satisfied that an order for payment of a capital sum or for transfer of property, or a pension sharing order under that section would be inappropriate or insufficient to satisfy the requirements of the said section 8(2)”. 

 

Under section 13(3) of the Act, an order under section 8(2) of the Act for a periodical allowance may be for a definite or an indefinite period or until the happening of a specified event.

 

Summary  of issues to be determined
[20]      Having regard to the foregoing statutory context, given the matters still at issue between the parties, it is necessary to determine the following issues:

1.         The nature, extent and net value of the matrimonial property.  While the parties are in broad agreement as to what assets are matrimonial property and as to what indebtedness is to be treated as matrimonial debts, they have nonetheless been unable to agree on what is the correct figure for the net matrimonial property or, more precisely, what proportion of it is  now held by the pursuer.  This uncertainty appears to be generated by the preliminary Minute of Agreement issue and the dispute about the amount and the characterisation of the sums paid to the pursuer thereunder.

2.         Departure from the rule of equal sharing: special circumstances.  Having determined the value of the net matrimonial property, it will then be necessary to consider whether either of the parties has established that there are special circumstances within the meaning of section 10(1) such that a departure from the presumption of equal sharing is justified.  Once the parties’ several arguments about special circumstances have been resolved, it will be possible to state a provisional capital sum that might be paid to the pursuer.  

3.         Whether any award is necessary or appropriate under section 9(1)(d) or (e).  The pursuer seeks an award of periodical allowance justified under either or both of subsections 9(1)(d) and (e).  While the defender concedes payment of periodical allowance to enable the pursuer to adjust to loss of support (as provided for under section 9(1)(d)), he resists any payment on the basis of serious financial hardship (as provided for in section 9(1)(e)).

4.         The reasonableness of any order having regard to the parties’ resources.  It also falls to be considered whether, having applied the principles in section 9 (as further elaborated in sections 10 and 11, so far as they apply on the facts of this case), any order for financial provision is reasonable for the purposes of section 8(2), having regard to the parties’ resources.

[21]      It will be noted that the language of the Act requires a number of qualitative assessments to be made:  the net value of the matrimonial property is to be “shared fairly”, meaning equally, unless a non‑equal apportionment is “justified” by special circumstances (under section 10(1)(a));  “fair account” requires to be taken of economic advantage, disadvantage or of contributions (economic and otherwise) (under section 9(1)(b));  whether any “imbalance” is corrected by a sharing of the matrimonial property, whether other orders are “insufficient” or “inappropriate” such that an award of periodical allowance should be made under section 9(1)(d) or (e) and so on.  Counsel for both parties accepted that in terms of the language and the scheme of the Act, the court at first instance is vested with a wide discretion in its application of the section 9 principles (read together, of course, with their further elucidation in the other provisions of the Act) and the assessment under section 8(2).  The width of this discretion is well vouched by the cases.  I need only refer to, without setting out, the observations of Lord President Hope (as he then was) in Little v Little 1990 SLT 785 at 787B‑D, of the First Division in Jacques v Jacques 1995 SC 327 at 330F-G, and the approval by the House of Lords of those passages in Jacques v Jacques 1997 SC 20 at 22, per Lord Jauncey.

 

Joint Minute
[22]      At the commencement of the proof, parties lodged a joint minute (“the joint minute”).  This agreed inter alia the items comprising matrimonial property and their respective valuations;  that the pursuer retired from her employment on 31 May 2009 and receives a pension of £13,923 per annum;  and that the defender retired from his employment on 15 August 2009 and receives a pension of £107,027 per annum.  It was also agreed, as recorded in paragraph 7 of the joint minute, that the medical reports of Dr Rodger (misspelt in the joint minute as “Roger”), consultant psychiatrist, dated 27 February 2009 and 9 October 2015, numbers 6/78 and 6/100 of process (hereinafter “Dr Rodger’s first Report”, “Dr Rodger’s second Report” and, collectively, ”Dr Rodger’s Reports”), should be treated as his “evidence in chief insofar as relating to the matters expressed within said reports”.  In like fashion, in paragraph 8 of the joint minute, it was agreed that the pension valuation reports of Dr John Pollock, dated 12 May 2014 and 23 September 2015, forming numbers 7/18 and 7/56 of process (hereinafter “Dr Pollock’s first Report”, “Dr Pollock’s second Report” and collectively “Dr Pollock’s Reports”), should be “treated as the evidence in chief of Dr Pollock insofar as relating to the opinions expressed therein”.  Dr Pollock’s Reports related to the valuation of the defender’s pension pot and an apportionment of the proportion of that (being 90.6%) that was generated prior to the date of the parties’ marriage and, hence, was not matrimonial property.

 

Précis of the parties’ circumstances at the time of their marriage
[23]      The parties’ arguments about special circumstances relate, in part, to the disparity in assets they brought to the marriage.

[24]      At the time of their marriage the pursuer was 44 years old and the defender was 54 years old.  Both worked at the same financial institution.  Each had their own properties which, as noted more fully below, they sold for the purpose of applying the net free proceeds thereof to the acquisition of the matrimonial home.  Apart from the equity in her house (totalling about £80,000), and her own accrued pension entitlement, the pursuer brought no other significant assets to the marriage.  Until she retired, the pursuer received her monthly salary, which was modest compared to the defender’s, and which the defender augmented by paying about £1,000 per month into her account.  This was for the pursuer to spend as she wished.  On the defender’s evidence, the pursuer did not want for anything and this was not gainsaid by the pursuer.  On the evidence, the defender was generous in his provision for their common life together.  He was in charge of major expenditure.  This included over time substantial capital refurbishment of the matrimonial home by way of a new kitchen, two new bathrooms and a new conservatory.  In her affidavit, the pursuer stated that this was funded from the defender’s income.  In his own evidence, however, the defender accepted that some of this was paid for by the net free proceeds of the pursuer’s property, once that was realised.

[25]      The pursuer retired on ill‑health grounds with effect from 31 May 2009.  She had for many years suffered from certain mental health issues, including stress.

[26]      The defender had been highly successful, and highly remunerated, in the course of his long service at his employers, a large financial institution.  He had worked at the same financial institution since 1968.  At the time of the marriage he had about £130,000 of capital in his then house and about £100,000 in various savings accounts or bonds.  The defender’s claim of special circumstances concerns some of these accounts, and I will consider this further below.  By virtue of his employment with his employers the defender had also acquired shares in, or had options to acquire shares in, his employers.  As will be seen, realisation of these could generate very substantial sums.

[27]      The defender had also accrued a substantial pension. As noted above, reports were obtained from Dr Pollock, who was a Fellow of the Institute and Faculty of Actuaries.  Dr Pollock was not called, but the terms of Dr Pollock’s Reports were a matter of agreement in the joint minute.  The defender’s employers had provided information to the effect that the cash equivalent value (“CEV”) of the defender’s pension entitlement was about £2,255,923.  On Dr Pollock’s calculations, and taking into account only the period of active membership by the defender in the pension scheme, only £213,070 was matrimonial property.  This equated to some 9.44% of the whole CEV of the defender’s pension.  The figure of £213,070 was agreed in the joint minute.

[28]      Dr Pollock’s calculation was no more sophisticated than a straight apportionment of the period beginning with the date of the marriage and up to the date the defender’s active accrual of benefits ceased (i.e. on retirement), as a proportion of the whole period of the defender’s employment with his employer.

[29]      In the final paragraph of his second report Dr Pollock noted that on retirement the defender had commuted part of his pension into a lump sum of about £650,000 (“the lump sum”).  Applying a like proportion (being 90.56%) to the lump sum to that brought out by his calculation of that part of the CEV of the defender’s pension which pre-dated the defender’s marriage to the pursuer, Dr Pollock opined that some £588,640 of the lump sum was not matrimonial property.  He did not expressly state what proportion of the lump sum could be regarded as matrimonial property, but the straightforward mathematical calculation (deducting £588,640 from £650,000) brings out a figure of £61,360. 

[30]      While Dr Pollock’s Reports were agreed, as stated in the joint minute, the pursuer nonetheless resisted that same methodology being applied to determine which part of the commuted sum might be referable to benefits accrued in the period prior to the parties’ marriage.  She did so on the basis that the joint minute extended only to agreement of Dr Pollock’s Reports as his “evidence in chief”.

[31]      The pursuer’s starting point was to note that the whole commuted lump became matrimonial property at the point the voluntary decision was taken to commute part of the pension into cash.  What the parties did with the cash after this was simply to change one form of matrimonial property into another form, or to transfer ownership of it within the marriage.  The pursuer’s position was that there is no authority or statutory provision dealing with the apportionment of a commuted lump sum.  At paragraph 5 of his second report Dr Pollock had simply made a hypothetical apportionment but, so the argument went, no evidence or explanation for this has been led.  On this basis, the pursuer resisted the court taking any cognisance of what might, practically speaking, be the distinction between that proportion of the commuted lump sum that was referable to benefits accrued by the defender in the course of his employment before the parties’ marriage and the proportion referable to benefits accrued during the marriage. 

[32]      Apart from expressing scepticism about the applicability of this methodology of apportionment to the commuted lump sum, the pursuer did not produce any further report to the court.  The author of the pension report, Dr Pollock, was not called in evidence.  Accordingly, the only evidence available, which is agreed and not subject to any cross‑examination, is as I have just set out in the several preceding paragraphs.  On the basis of the available evidence, I have no hesitation in concluding that over 90% of the lump sum, as with the like proportion of the CEV of the defender’s pension, was not attributable to defender’s employment during the period of the parties’ marriage, but accrued in the period pre‑dating it.  The pursuer’s position in relation to this, and in relation to the realisation of certain share options (as noted below), was that the act of conversion of the pre‑matrimonial pension entitlement into cash upon commutation was sufficient to create a new species of matrimonial property.

[33]      While upon commutation the whole sum became matrimonial property, in my view that is not conclusive of any argument about special circumstances. In respect of the application of those sums, by way of repaying the mortgage (as noted above) or the investment into a form of savings bonds, there was a high degree of traceability in respect of the commuted sum. It was not contended otherwise by the pursuer.  In this context, I need simply refer to the analysis of Lord Eassie at paragraphs 7.24 to 7.27 in R v R 2000 Fam LR 43.  While in R v R Lord Eassie was considering a source of funds special circumstances argument asserted in respect of donated or inherited funds, the same analysis may be applied to pre-matrimonial assets such as the substantial portion of the defender’s pension accrued before the parties’ marriage.

 

First provisional ascertainment of net matrimonial property
[34]      In the joint minute lodged at the start of the proof parties agreed items constituting matrimonial property as well as the relatively limited amount of matrimonial debt, and the value of each item.  However, they did not produce an agreed schedule or an agreed net figure, seemingly because of the dispute arising from the preliminary Minute of Agreement issue.  (I shall return to this issue below.)  The schedules produced by each party at the stage of submissions show a high degree of agreement, though not all of the figures are exactly the same.  Given the large measure of agreement, I do not need to set out in detail the individual items of the parties’ matrimonial property.  I shall itemise only those in respect of which there is a live issue (such as special circumstances) or which may be relevant to any other issue the court must determine.

[35]      The agreed matrimonial property, with figures rounded as appropriate, totalled £1,522,357.  (The defender’s figure in his written submission was the marginally lower figure of £1,522,352.)  This included the matrimonial home, whose value at the relevant date was £680,000 and whose present value is agreed to be £717,500.  The pursuer’s horses and trailer in total had an agreed value of £6,000.  Each party had a car and very modest shareholdings in their former employer.  The CEV of the pursuer’s pension comprising matrimonial property was agreed to be £53,672 and that of the defender was agreed at £213,070.  The pursuer had ISA savings of about £65,201.  The several ISAs held by the defender totalled £116,070 (including a cash ISA of £23,685).  In addition, the defender held a total of some £129,758 comprised of a combination of credit balances on bank accounts, NS&I Premium Bonds and a share dealing account.  Accordingly, if one counts the cash ISA, as at the relevant date the defender had immediate liquid assets of about £154,000.  The defender had also advanced as a special circumstance a “source of funds" argument in respect of the Halifax ISAs agreed at paragraph 3(iii) of the joint minute.  (There is no dispute between the parties about the other Halifax ISAs referred to in paragraphs 3(xiv) and 3(xv) of the joint minute, which are agreed to be matrimonial property).  That argument was abandoned in the course of submissions.  Accordingly, I have simply included that figure in those above, and apportioned the credit balance in that Halifax ISA equally between the parties.

[36]      In addition to the foregoing, there were two bonds, in the amount of £77,418 with the Nationwide (“the Nationwide Bond”) and the other in the amount of £103,772 with Santander (“the Santander Bond”).  The defender asserts a special circumstances argument in respect of these two bonds (collectively, “the disputed Bonds”) on the basis of a source of funds argument.  I shall consider that issue further, below.

[37]      The agreed matrimonial liabilities are relatively modest.  They comprise a fixed term loan and a one‑half share of the debit balance on a bank account of, respectively, £19,451 and £1,074, owed by the pursuer.  The defender had the other one-half share of the debit balance (of £1,074) as well as a credit card debt of £1,103.  Taking these liabilities into account, the net matrimonial property amounts to £1,499,655, as shown in table 1, below:

Table 1:  First provisional ascertainment of equal shares of net matrimonial property

Asset	Wife	Husband	Totals
Matrimonial Home	£340,000	£340,000
The parties' cars	£17,000	£29,375
The parties' pensions	£53,672	£213,070
Shares in employers	£80	£67
Horse and trailer	£6,000
Pursuer’s bank a/c	£3,229
Pursuer’s Deposit a/c	£50,332
Pursuer’s ISA or share of ISA	£65,201
Defender’s ISAs or share of ISA		£92,385
The Santander Bond	£51,886	£51,886
The Nationwide Bond		£77,418
Defender ‘s NS&I Premium Bonds; bank a/cs and share dealing a/c		£130,756
Total assets	£587,400	£934,957	£1,522,357
Liabilities
Bank Fixed Term Loan	-£19,451
Bank a/c ending XX21	-£1,074	-£1,074
Bank Credit Card ending XX05		-£1,103
Net Matrimonial Property held by each party:	£566,875	£932,780
Total value of Net Matrimonial Property:			£1,499,655
One half thereof:			£749,827.50

 

[38]      In the absence of any special circumstances, or of the preliminary Minute of Agreement issue, the provisional capital sum due to the pursuer, taking into account the value of the assets in her name or possession (of £566,875), is a balancing capital payment of £182,952.50, in order to bring her share up to the figure of £749,827.50.  I now turn to consider the parties’ several arguments about special circumstances before going on to consider the orders sought.

 

Special circumstances:  dissipation of funds
[39]      In her pleadings the pursuer asserts that:

“[d]uring the course of the parties’ marriage the defender dissipated matrimonial property by way of gifts of cash of around £240,000 to each of his said daughters.  The pursuer has been economically disadvantaged by said gifts”.

 

No further specification is given.  There is an esto case to the effect that if these were loans, the loans were matrimonial property.  The defender responds to this, averring that he gifted £200,000 each to his two daughters in about April 2007.  He funded these gifts from the sale of 40,000 shares in his employer which he had acquired prior to the parties’ marriage.  He went on to aver that he had also gifted sums to the pursuer’s son and daughter.

[40]      In evidence, and under reference to no. 7/40 of process, the defender explained that on about 3 April 2007 he had exercised an option in respect of 40,000 shares.  The options were awarded from time to time as part of the remuneration from his employers and enabled shares to be purchased at a future point in time, for a limited period of time, for a pre‑determined price.  If the price of the option were higher than the market price when the time for its exercise came, then there would be little point in exercising the option.  By contrast, if at the time it could be exercised the option price was lower than the market value, then the options could be profitably exercised and the shares retained or the price differential exploited by selling the shares acquired in exercise of the option for the prevailing higher market price.  This is what the defender did. In terms of the mechanics, he had taken a short‑term loan from his employers, which was provided for this purpose, in order to buy the shares.  They were then sold at the higher market price.  After repaying that loan, he used the £415,000 profit generated to make the cash gifts to his daughters of £200,000 at that time.  He did so to avoid a prospective IHT liability.

[41]      During the course of the marriage he had made smaller gifts to the pursuer for the benefit of her own family. He had, for example, paid about £15,000 to the pursuer.  This was to enable her to purchase a house in her own name but for her sister to reside in.  This was because her sister was at that time precluded from purchasing a property in her own name.  He also gave the pursuer about £3000 to pay off her sister’s indebtedness in that amount.

[42]      The defender was crossed in detail on the variety of types of transfers disclosed in 7/40, recording the share dealings by the defender for a two‑year period beginning in March 2005.  Some of the transactions were described as “sharekickers” and represented a sort of bonus.  The “Share save” entries referred to a scheme, open to all employees, to pay a monthly amount toward the acquisition of shares.  Upon maturity, the sums could be taken out as cash or applied for the purchase of shares in the employer.  The “LTIP” entries were a form of long‑term incentive programme, available to senior employees or executives only, such as the defender.  This was, in effect, an executive share option scheme.  The options themselves could not be sold.  The potential value in an option could only be realised when it was exercised.  The defender’s evidence was not entirely clear as to the precise terms of these various forms of benefits, but the tenor of his evidence about the options was that they had to be held for a minimum period of time, of several years rather than months, before they could be exercised.

[43]      On the whole evidence, it was not possible to state with any certainty which of the shares acquired in exercise of the various forms of options or other employee share schemes were referable to the period before the parties’ marriage or after it.  As at the date of the sale of the 40,000 shares, the parties had been married for about 18 months.  Having regard to such evidence as there was about the minimum period of time such options had to be held before they could be realised (a period of three years had been referred to in evidence), it is more likely than not that a substantial proportion of the options by which these shares were acquired and then sold had been accrued by the defender prior to the parties’ marriage.

[44]      The pursuer did not really challenge this.  Her position was that, regardless of how the entitlement to the options was accrued, upon either (i) the exercising of the options and obtaining the shares, and/or (ii) the selling of the shares and receipt of cash in return, the defender had obtained or created matrimonial property.  While the realisation of a profit of £415,000 generated upon the exercise of the options created matrimonial funds at the material time, that does not determine the issue of whether there has been any “dissipation” of such funds.

[45]      I was not addressed on the meaning of dissipation.  The pursuer simply asserted that the defender had dissipated funds representing matrimonial property.  There is no statutory definition of “dissipation”, which suggests its ordinary meaning “to squander” or “to waste” is to be applied.  The phrase in which that word appears in section 10(6)(c) is “destruction, dissipation or alienation of property”.  Those other words (“destruction” or “alienation”) colour the meaning of “dissipation”.  In my view, section 10(6) is to enable account to be taken of an intentional or dissolute diminution, by one of these means, of the matrimonial commonwealth and constituting such diminution other than by way of ordinary or bona fides dealings.  Applying its ordinary meaning, “dissipation” is suggestive of a waste or loss of matrimonial funds which cannot be traced or which is not represented by a replacement asset.  Excessive spending grossly out of proportion to the resources within the matrimonial commonwealth or monies lost by gambling might be examples of “dissipation”.

[46]      If that understanding is correct, “dissipation” in section 15(6) is unlikely to include inter vivos inter‑generational gifts or those made for the purposes of tax planning.  What the  whole evidence discloses is a person of wealth passing on some of that wealth, in a way intended to be tax efficient, to his children.  Given the familial context, the usual presumption against donation does not apply but rather such a payment is presumptively a gift made ex pietate or out of a sense of natural obligation, such as that owed by a parent to a child: Malcolm v Campbell (1889) 17 R 255. 

[47]      To test this another way, the idea of dissipation carries with it an adverse impact on the resources or living standards of those dependent upon the resources said to have been dissipated.  That is not the case here.  There is no evidence that the generosity exhibited by the defender to his daughters had any adverse impact on the living standard of the parties at the time.  The logic of the pursuer‘s position, at its starkest, is that any such payment by a person of wealth, even if for sound tax planning reasons at the time, may nonetheless be challenged years later in a divorce as a special circumstances argument of dissipation.  If that argument were correct, then any substantial charitable donation to good causes would also be susceptible to such a challenge.  In my view, this argument is misconceived.  Section 10(6)(d) of the Act should not be used as a means to penalise the generous.

[48]      On my consideration of the whole evidence, I reject the argument that the substantial gifts made by the defender to his daughters constituted dissipation or were otherwise of such character as to constitute a special circumstance justifying an unequal division of the net matrimonial property in favour of the pursuer.  The facts do not instruct any case of special circumstances by reason of dissipation.  Accordingly, I decline to make any adjustment on the basis of this argument.

 

Special circumstances:  source of funds
[49]      The defender’s argument based on special circumstances by reason of the source of funds is asserted in relation to the former matrimonial home, and to two of the financial bonds, namely the disputed Bonds (referred to in paragraph  [36], above).  (As noted above, in the course of submissions his counsel abandoned the special circumstances source of funds argument, insofar as directed toward the Halifax ISA that is referred to in paragraph 3(iii) of the joint minute.  I do not consider that holding further.)  I now turn to consider the defender’s special circumstances arguments in respect of those assets.

 

Special circumstances:  the matrimonial home
The evidence
[50]      The matrimonial home was purchased in joint names in 2004, about a year before the parties’ marriage. At that time, each party owned their own property.

[51]      The undisputed evidence was that after the parties became engaged, they discussed purchasing a house together in Edinburgh in joint names.  In particular, they discussed selling their own homes, contributing the net free proceeds thereof toward the purchase of the matrimonial home and taking out a mortgage to cover the shortfall.  On the pursuer’s evidence, which was not challenged in cross, the parties had also discussed what would happen to the matrimonial home in the event of one party pre-deceasing the other:  one‑half would go to the children of the pre‑deceasing party and the other one‑half share would be retained by the surviving party. 

[52]      It was agreed that they would each sell their existing houses, and apply the net free proceeds to the purchase of the matrimonial home.  The purchase price of the matrimonial home was about £560,000.  They took out a joint mortgage of about £450,000.  There was a bridging loan, of about £133,000. In the event, neither of their properties sold in time for the net proceeds to be used for the acquisition of the matrimonial home.

[53]      No documentation was produced in respect of this transaction and, as it took place some 10 or 11 years ago, the parties’ evidence was a little sketchy.  Both parties, however, were generally trying to do their best in their recollection of the evidence relevant to this issue.

[54]      The defender repaid the bridging loan from the net free proceeds of his own property, which amounted to about £129,000. He also made up the shortfall in repaying the bridging loan, then in the amount of about £133,000.  On the pursuer’s evidence, the net free proceeds from the pursuer’s own property in Fife totalled about £80,000.  By the time the net free proceeds of the pursuer’s property became free, the loan was in place and the bridging loan had been repaid.  On her evidence, she simply provided to the defender the £80,000 representing the net free proceeds of her own property.  She was crossed extensively about this and, in particular, on the absence of any vouching.  However, she was never seriously challenged on the basis that the figure of £80,000 was wrong,  Nor was any other figure put to her.

[55]      In his evidence, the defender was reluctant to accept that the net free proceeds of the pursuer’s house had amounted to £80,000. No other figure was suggested by him.  He initially cavilled as to whether the net free proceeds of the pursuer’s house had been paid to him; he was adamant that they had not been used to pay down the mortgage.  Ultimately, however, the defender accepted that a sum in about this amount had been received from the pursuer.  He also accepted that it was spent essentially on capital improvements to the matrimonial home, which had included extensive refurbishment in the form of a new kitchen, two new bathrooms and a new conservatory.  He also accepted that the parties had purchased the matrimonial home with the intention of living there for the rest of their married lives.  It was put to him that he wanted the pursuer to have one‑half of the matrimonial home.  He replied that at the time he didn’t think of it in those terms but he accepted that they had bought the matrimonial home together, to live there together as a married couple.

[56]      Notwithstanding that it was agreed in the joint minute that the matrimonial home was matrimonial property, parties elicited a good deal of evidence about the acquisition of the matrimonial home.  On the whole evidence, I find that the decision was taken to acquire the matrimonial home in joint names; that each was to apply the net free proceeds of their own properties for that purpose and that, in substance, the amount contributed by the pursuer, even though applied to capital improvements after acquisition of the matrimonial home, was in the amount of £80,000. In crude terms, she contributed somewhere between about 1/9^th (or 11% taking £80,000 as a proportion of the agreed present value of the matrimonial home) and 1/7^th (or 14% taking £80,000 as a proportion of the original purchase price of the matrimonial home).

[57]      In respect of the mortgage liability of some £450,000, this was paid off in the course of the marriage, principally from the majority of the lump sum of commuted pension generated by the defender on his retirement in 2009.  It is agreed that the value of the former matrimonial home was £680,000 as at the relevant date and is now worth £717,500.

 

The pursuer’s submissions
[58]      The pursuer cited the following cases in respect of the special circumstances arguments concerning the matrimonial home: Jacques v Jacques 1997 SC (HL) 20;  Jackson v Jackson 1999 Fam LR 108;  W v W 2013 Fam LR 85 (under reference to the treatment of the shares in X Limited);  Cunningham v Cunningham 2001 Fam LR 12;  Harris v Harris 2013 Fam LR 122;  and R v R 2000 Fam LR 43.

[59]      From these cases, she drew the following propositions:

(i)         The presumption is for equal sharing.

(ii)        It is not enough simply to identify a special circumstance in order to depart from equal sharing.  Unequal division must be justified by those circumstances.

(iii)       In terms of special circumstances under section 10(6)(b), she argued that the cases disclose a clear distinction between source of funds used to purchase, create or fund matrimonial property taken in the name of a single party and source of funds used by agreement of the parties to purchase, create or fund matrimonial property in the joint names of the parties;

(iv)      Further, she argued that agreements between the parties to put assets into joint names reinforce the presumption of equal sharing (reference being made to section 10(6)(a) of the Act).

[60]      The pursuer submits that, having regard to the evidence and under reference to the authorities cited, the asserted source of funds argument pled by the defender is insufficient to displace the presumption of equal sharing.  For her part, she did not in terms suggest that she relied on section 10(6)(a) of the Act, although some of the evidence appeared to have been elicited with that in mind.

[61]      It is clear that Lord Macfadyen’s observations in Cunningham represent the high water mark, as it were, of benevolent treatment of a matrimonial home to be shared fully between the parties upon divorce, notwithstanding the great differential that might exist in terms of contribution of resources by which it was acquired or improved. 

 

The defender’s submissions
[62]      The defender recognised this, and his response was to suggest (i) that properly understood, Lord Macfadyen’s decision in Cunningham is simply an illustration of the exercise of the judicial discretion afforded;  (ii) that Lord Macfadyen’s observations do not amount to a general rule, and (iii) if they did represent the articulation of a general rule, he was wrong.

[63]      After noting the factual background in Cunningham (at [23]) and the views of Lord Macfadyen (at [25]), the defender contended that there is a factual parallel between the circumstances in the present case, in which the price paid for the matrimonial home derived almost wholly from the defender’s pre-marriage (i.e non-matrimonial) funds, and those in Cunningham in which the non-matrimonial funds were applied to the acquisition of the matrimonial home.

[64]      He noted, correctly, that Lord Macfadyen’s observations do not bind the court.  In any event, those observations are not authority for the proposition that the source of funds argument never applies to a matrimonial home, but simply that a matrimonial home may, because of its nature, be treated differently - and less rigorously - in the application of a source of funds argument under section 10(6)(b).

[65]      The defender argued that Lord Macfadyen’s approach supports the contention that where non-matrimonial funds are applied to the purchase of a matrimonial home the court is entitled, having regard to the equities, to go so far as to disregard the non‑matrimonial source of funds in the division of net value of matrimonial property.  Properly understood, he argued that the decision in Cunningham was no more and no less than what the House of Lords was saying in Jacques.  Lord Macfadyen’s views do not impose a general rule.  They are simply the application of judicial discretion on the particular facts of the case and having regard to the special circumstances applying there. 

[66]      The defender next referred to three cases concerning a source of funds argument in relation to the matrimonial home, namely the decision of Sheriff KA Ross in Armstrong v Armstrong 2008 Fam LR 12 and two decisions of Sheriff Morrison in Langlands v Barron (an unreported decision from Edinburgh Sheriff Court of 6 September 2006) and Harris v Harris 2013 Fam LR 122.  The latter two cases were both critical of the use of Cunningham as support for some general principle affording special treatment to the matrimonial home.

[67]      In Armstrong, in which the source of funds argument was not applied in relation to inherited property, but to the sale of property to the defender by his father at a discount, Sheriff Ross distinguished Cunningham on its facts and recognised (at paragraph [23]) that Lord Macfadyen’s decision was simply the exercise of the court’s discretion in the whole circumstances with a view to achieving a fair result.  On the facts of Armstrong, the sheriff accepted that the defender’s father had not intended to benefit the pursuer by his actions and excluded the element of benefit which he thought had been intended only for the defender from the value of matrimonial property at the relevant date.  The manner in which the sheriff resolved the “source of funds” issue – essentially by removing the benefit to the defender from the net value of the asset available for division – was urged upon me.  The Armstrong case was an illustration, if one were needed, that a source of funds argument might be applied to the matrimonial home.

[68]      Turning to Langlands and Harris, it was noted that in both of those cases Sheriff Morrison rejected the proposition that Lord Macfadyen’s decision in Cunningham should be taken as authority for any general rule that there should be a restriction of the application of special circumstances such as to ignore the non-matrimonial source of funds applied to  the purchase of a matrimonial home. Such an approach is not warranted by the terms of section 10(6)(b).  In any event, such a rule would be unjustified in principle and may be productive of practical unfairness.  As Sheriff Morrison said in Harris (at paragraph [35]): “Cunningham v Cunningham is not authority for the proposition that the source of funds never applies to the matrimonial home”.  Langlands concerned the contribution by the pursuer of the majority of the funds used to purchase the matrimonial home, while Harris concerned the use of inherited funds to pay down the mortgage over a matrimonial home owned in joint names.  In both cases, the court accepted that special circumstance had been established by reason of the source of funds.

 

Determination of special circumstances argument in respect of matrimonial home
[69]      On the pursuer’s evidence, she and the defender had discussed selling their own properties with a view to applying their net free proceeds to the purchase of the matrimonial home.  In framing questions to the witnesses, the pursuer’s counsel endeavoured to elicit evidence that this was a matter of agreement.  This may have been done with a view to advancing an argument under section 10(6)(a), that that amounted to an “agreement” that a particular asset should be equally shared, although, in the end no such argument was advanced in submissions.  The defender’s answer to this line of questioning, which I have noted above, is significant: he did not consider it in those terms at the time.  The quality of any “agreement”, such as it was, has to be understood against that background.  In any event, any understanding by the parties had the practical consequence that together they devoted a little over £213,000 towards the house, while assuming a joint and several indebtedness at the time of its acquisition of about £450,000.

[70]      It was never suggested that the pursuer made any material financial contribution to servicing or discharging that indebtedness.  Given the parties’ respective resources, it is unlikely that that was so.  It is not disputed that the defender alone discharged this liability, and did so by applying about £450,000 from his commuted lump sum in 2009.  There was very little evidence to suggest that this was discussed or agreed between the parties.  Such evidence as there was suggested that the defender took all of the larger financial decisions.

[71]      The policy of the Act is to achieve a fair, and presumptively equal, sharing of the matrimonial property upon divorce.  One of the notable features of the Act is the recognition of non‑economic contributions made by one or both parties to the marriage, and to recognise and value that form of contribution to the parties’ collective matrimonial commonwealth.  However, balanced against that is the need to recognise that not all of the matrimonial property as at the relevant date is derived from the parties’ collective efforts (in the broader understanding contained in the Act);  and that the contribution by one party of his or her  non-matrimonial resources over time to the acquisition or creation of matrimonial property may be a special circumstance which might justify a departure from the presumptively equal division of what comprises the “matrimonial property” at the relevant date.

[72]      The purpose of enabling a court to consider a “special circumstance” is to enable it to take cognisance of circumstances where, as at the relevant date, the parties’ matrimonial property may have been increased by the introduction of assets or funds from non-matrimonial resources such as inheritance or pre‑matrimonial wealth.  The pursuer did not really challenge the evidence that a significant amount of matrimonial property derived from the defender’s resources.  Rather, the argument was that where parties had “agreed” to put such resources into a legal title in both names, that was, she argued, a highly significant factor.  The cases cited by the pursuer, so the argument went, disclosed that the courts were exceedingly unwilling to disturb legal title when taken in joint names.  The pursuer did not go so far as to argue in terms that legal title was conclusive, but no circumstance was acknowledged that might overcome legal title.  

[73]      What then of the argument about special circumstances in respect of the matrimonial home?

[74]      I do not find that the evidence in this case discloses the kind of agreement relevant to section 10(6)(a).  In any event, no argument to that effect was ultimately advanced.  I agree with the defender’s submission that Lord Macfadyen’s observations in Cunningham are not to be understood as laying down a general rule according a particular status to the matrimonial home or such as to render it less susceptible to a special circumstances argument.  I do not believe that in that case, properly understood, Lord Macfadyen was doing anything more than considering the equities of the facts before him.  Any approach that had the effect of elevating the matrimonial home into a sort of protected or special category of matrimonial property would not be consistent with the scheme of the Act.  Nor, in my view, would such an approach be warranted in terms of section 10(6)(b).  It would be unjustified in principle. In respect of the argument based on legal title, I do not accept the third proposition that the pursuer sought to extract from the cases she cited.  In my view legal title is simply one factor among many and the weight to be accorded to that factor will necessarily vary from case to case.  The question of legal title is not determinative.  No firmer or more general rule can be extrapolated from the cases.  

[75]      One of the defining features of the Act is the reach of what falls within “matrimonial property” regardless of legal title.  Were it otherwise, and legal title as significant as the pursuer contended, the wealth‑generating spouse could retain all property in his or her own name so as to defeat the claims of the other spouse.  The scheme of the Act addresses such a potential abuse.  But the converse is also true:  legal title cannot be preclusive ab ante of a “source of funds” special circumstances argument.  Upon a consideration of all of the cases cited to me by the parties, I do not find support for any general proposition of law that legal title is either conclusive or a circumstance rarely revisited by the court in its consideration of financial provision on divorce. 

[76]      I have already noted above at paragraphs [54] to [57], the parties’ respective financial contributions to the acquisition of the matrimonial home and to the subsequent discharge of the mortgage.   Like the court in Davidson v Davidson 1994 SLT 506, in making a division of the matrimonial property that was fair and reasonable, it is impossible not to give due weight to the fact that a substantial proportion of the parties’ wealth derived from the defender’s pre-matrimonial resources.  The material improvements by way of new kitchen, bathrooms and conservatory were not quantified in the evidence led at the proof.  Regard should also be had to the non‑financial contribution made by the pursuer in helping to create an upgraded and congenial home.  The defender is highly desirous of remaining in the matrimonial home.  On the whole evidence, I find that an unequal sharing of the matrimonial property represented by the matrimonial home is justified, and that this is fairly achieved by apportioning £205,000 of the agreed present value to the pursuer.  This represents, at the very least, a doubling of the financial contribution she made at the outset.  Another way to achieve this is to remove £307,500 from the agreed present value of the matrimonial home (ie recognising the defender’s special circumstances argument in respect of a little over 40% of its current value), and dividing the remaining £410,000 equally between the parties.  I shall reflect this in the recalculation of the provisional sum in table 2, once I have taken into account my determination of all the arguments on special circumstances.

[77]      It is here convenient to deal with the pursuer’s motion for sale of the matrimonial home.  No compelling reason was advanced for this.  Her evidence was to the effect that the house was larger than the defender needed.  That is as it may be, but if the defender has sufficient liquid assets to meet his obligations for financial provision, there is no basis for ordering a sale against the defender’s wishes to retain the house.  Its value has been agreed in the joint minute.  As I propose to make an order transferring the pursuer’s one‑half share to the defender, I shall reflect that in the provisional calculation below, and shall apply the current value as required by section 10(3A) of the Act.

 

Special circumstances:  the two disputed Bonds
The Santander Bond
[78]      The defender explained that upon retiring in 2009 he commuted part of his pension, generating a lump sum of about £650,000.  After repaying the outstanding mortgage on the matrimonial home (of £450,000), he had about £200,000 of the commuted funds remaining.  Funds that he held in accounts with his former employers exceeded the amount of protection or limit of the guarantee against bank failure.  (This was a live concern in the immediate aftermath of the banking crisis.) If funds were placed in joint names, this would double the level of protection because each individual was entitled to the full level of protection.  The sums put into the Santander Bond represented the proceeds of the lump sum after repayment of the mortgage.  Initially the defender had placed about £100,000 into the Santander Bond.  The pursuer did not make any contribution to the sums held on this bond.  None of this evidence was challenged.  While the relevant date value was as agreed at £103,777.37, it is also agreed that it was encashed for £106,097.72.

 

Nationwide bond
[79]      In respect of the Nationwide bond, the defender’s evidence was that he had always had a Nationwide account.  With a view to maximising the protection afforded to deposits in financial institutions, it seemed simpler to transfer funds into a Nationwide bond and to place this in joint names.  While the evidence was not entirely clear, the defender’s final position was that the monies represented in this bond were derived from the commuted pension lump sum.  The pursuer made no contribution to the sums now held in the Nationwide bond.  The evidence was also a little confused as to the precise title in which this had been held from time to time.  The tenor of the evidence was to the effect that this had been placed in a joint account, for the reasons stated, and thereafter the funds reverted to being in an account in the sole name of the defender at some point before the relevant date.  While the defender was crossed on the basis that the agreed value, of £77,000, was below the threshold (of £85,000) for the protection afforded to an individual (and by implication it had not been placed into joint account for the reasons given by the defender), his evidence was that the sum originally placed in the bond was higher and of the order of £100,000. 

 

Defender’s submissions on special circumstances in respect of the disputed Bonds
[80]      In beginning his reply on this chapter of the arguments, the defender began by reviewing the general approach of the Courts to “source of funds” arguments, which, it was said, has varied according to the circumstances of the case.  In Sweeney v Sweeney 2002 Fam LR 126 Lord Kingarth accepted (at [17]) that the whole value of an item might be excluded from consideration of sharing on divorce on the basis that the funds used to acquire it were not derived from the income or efforts of the parties during the marriage.  While Lord Kingarth’s decision was successfully reclaimed on another matter, this aspect of his decision had not been overturned.

[81]      However, it was accepted that in the majority of cases where a source of funds argument has been considered, the non-matrimonial source of funds has been identified by the court as a reason to depart substantially from the equal division of the value of the property concerned when reaching a conclusion as to what would constitute “fair sharing” on divorce.  The first case the defender cited was Davidson v Davidson 1994 SLT 506.  In that case, which was said to be broadly analogous with the instant one, there was a very short marriage (three years), one of the parties had psychological difficulties which might prevent him from work, and a large part of the matrimonial property derived directly from inherited (and hence non‑matrimonial) sources of the pursuer. 

[82]      In the context of the application of the principles in section 9(1)(e) to a short marriage, it was said in that case (at page 508J-K) that

“…it is impossible not to give due weight to the fact that [the matrimonial property] was acquired entirely by the use of the inherited funds of the pursuer…”

 

Having regard to that factor the court made an order for unequal division of the net value of matrimonial property by an award of one‑third of the whole value of matrimonial property.  It was noted that that order included an element for post‑decree support under section 9(1)(e), and which was said to provide an illustration of the point that periodical allowance need not be granted where section 9(1)(e) applies.

[83]      The defender next referred to the case of R v R 2000 Fam LR 43, a case of Lord Eassie.  This was said to provide another example of a substantial departure from equal sharing in relation to the value of an asset subject to a section 10(6)(b) claim.  On the facts, after a 10 year marriage, virtually the whole matrimonial property derived from assets inherited by or gifted to the defender.  The court gave effect to the special circumstances it found by departing from equal sharing by an award of 31.5% of the net value of the whole matrimonial property to the other spouse.

[84]      I was also referred to a decision of Lord Carloway, as he then was, in Campbell v Campbell 2008 Fam LR 115.  It was suggested that this case was analogous to the present, in its application of section 10(6)(b), and where the majority of the matrimonial property  derived from non-matrimonial sources.  The marriage in Campbell had been for 16 years.  At the beginning of the marriage in Campbell the defender had about £1.435m of assets of which one (a pharmacy business) grew during the marriage and was sold for about £3m.  Those proceeds were then reinvested in matrimonial property to the extent of about £2.45m.  Lord Carloway considered that, having regard to the non-matrimonial source of the matrimonial property, it would be appropriate to divide the net value in the proportions of 75% to 25% in favour of the defender.

 

Pursuer’s reply on special circumstances argument in respect of the disputed Bonds
[85]      Under reference to the cases of Jacques v Jacques 1997 SC (HL) 20, Jackson v Jackson 1999 Fam LR 108 and W v W [2013] Fam LR 55, it was argued that matrimonial assets in joint names that were derived from one party’s non-matrimonial resources did not constitute special circumstances such as to displace the presumption of equal sharing.  It was also argued that, as with Jackson, if one can point to an agreement to put such funds into a form of shared ownership that reinforces the presumption of equal sharing.  I was also referred to the Editor’s Note to the case of R v R 2000 Fam LR 43 regarding the position of matrimonial property taken in joint names.

[86]      In respect of the Santander Bond, it was argued that it was clear from the evidence of both the pursuer and the defender that the Santander Bond had been taken in joint names for the same reason as the Halifax joint investment and the Nationwide joint account;  namely, to pay for items for both parties, for example holidays and cars.  It was said that the defender’s evidence was to the effect that the parties made a choice together to put the Santander Bond into joint names; that his view was as man and wife, the defender wanted the pursuer to share in the matrimonial property. I was referred to the same three cases in support of the pursuer’s position.

 

Determination of special circumstances in relation to disputed Bonds
[87]      In my view, the pursuer’s contention that there was an agreement was not supported by the evidence taken as a whole.  The explanation given, and which I accept, was that in the then immediate aftermath of the banking crisis the defender was looking to secure as much protection as possible for the substantial funds he held by reason of the commutation of the lump sum from his pension.  That explanation appeared to me to be the overriding purpose in having funds placed in joint names.  So far as the evidence disclosed, the pursuer did not actively agree to any particular course so much as simply acquiesce in whatever arrangements the defender chose to make from time to time in relation to larger financial decisions.  I conclude, therefore, that an unequal sharing of the matrimonial property represented by the funds in the two disputed Bonds is justified.  I propose to do so by excluding the value of the disputed Bonds from the matrimonial property to be divided between the parties. 

[88]      In the table below, I recalculate the provisional ascertainment of fair sharing, applying my determination of the parties’ several arguments of special circumstances.

Table 2:  Further provisional ascertainment of the fair sharing of the net matrimonial property

Asset	Wife	Husband	Totals
Matrimonial Home	£205,000	£205,000
The parties' cars	£17,000	£29,375
The parties' pensions	£53,672	£213,070
Shares in employers	£80	£67
Horse and trailer	£6,000
Pursuer’s bank a/c	£3,229
Pursuer’s Deposit a/c	£50,332
Pursuer’s ISA or share of ISA	£65,201
Defender’s ISAs or share of ISA		£92,385
Defender ‘s NS&I Premium Bonds; bank a/cs and share dealing a/c		£130,756
Value of assets held	£400,514	£670,653
Total of assets		£1,071,167
Liabilities
Bank Fixed Term Loan	-£19,451
Bank a/c ending XX21	-£1,074	-£1,074
Bank Credit Card ending XX05		-£1,103
Net Matrimonial Property	£379,989	£668,476
Total value of Net Matrimonial Property			£1,048,465
One half thereof			£524,232.50

 

[89]      As shown at the foot of table 2 above, after determination of the parties’ arguments about special circumstances, the pursuer’s share of the matrimonial property is £524,232.50.  This equates to about 30% of the figure of net matrimonial property brought out in table 1.  Taking into account the net matrimonial property in her name (of £379,989), and deducting this from the figure of £524,232.50, this brings out a provisional balancing payment to be paid to the pursuer of £144,243.50.  However, credit must be given for the transfer by her of her share in the matrimonial home.  In the above‑calculation, the pursuer’s share of the matrimonial home is £205,000.  Taking that into account, on the assumption that there is a transfer, then the provisional balancing payment to be paid to the pursuer is £349,243.50 (being £144,243.50 plus £205,000).  Given that I have excluded the Santander Bond from parties’ matrimonial property, I do not need to take cognisance of the slight increase in the value realised in relation to the value agreed in the joint minute as at the relevant date. 

 

The preliminary Minute of Agreement issue
The payment to account:  the Minute of Agreement
[90]      In the course of the proof a further issue emerged as to the sum or sums paid by the defender to the pursuer in terms of the preliminary Minute of Agreement and how any sums paid were to be characterised.  In terms of the preliminary Minute of Agreement lodged in the course of the proof (as no 7/54 of process), the defender was due to pay the pursuer £200,000.  This was without prejudice to the parties’ claims for financial provision.  The purpose of the preliminary Minute of Agreement was to enable the pursuer to purchase alternative accommodation for herself.  The sum paid was, in effect, a payment to account by the defender although it was not expressly characterised in this way in the preliminary Minute of Agreement.

 

The payment to account:  the amount paid
[91]      On the evidence it is accepted that the defender did pay the pursuer this amount.  However, certain schedules at 7/6(a) and (b) prepared by the defender’s agents were referred to in evidence, to show that the actual sum the defender paid was £213,300 in about January 2014.  The last entry on that schedule records a further £1,000 “transferred” by the defender to the pursuer in June 2014.  (A separate argument arises in relation to this sum, and which I shall turn to shortly).  The schedule at 7/6(a) purports to show the source of the funds from which payments totalling £213,300 were made.  In particular, the schedule at no 7/6(a) discloses three payments totalling £213,300 to the pursuer.  This is said to have included the sum of £210,960.48 realised from the following:

(a)        The Santander Bond (in the amount of £106,170.98);

(b)        The Halifax ISA (in the amount of £58,980.17), and

(c)        Six Halifax “Investor” ISAs (generating a total of £45,809.33).

[92]      Items (a) and (b) above, appear to correspond to the items referred to in paragraphs 3(iv) and 3(iii), respectively, of the joint minute.  The stated value in the joint minute of item (b) above was the lesser figure of £55,999.81.  The six items comprising (c), above, correspond to the assets agreed in paragraph 3(xiv) and (xv) of the joint minute.  Leaving aside the source of funds argument about the Santander Bond (the proceeds of which are reflected in (a) above), the sums reflected in paragraphs (b) and (c) represent the proceeds from matrimonial property totalling £104,789.50.   

[93]      In respect of the additional £1,000 said to have been a capital payment, the evidence was that the defender gave the pursuer this sum in June 2014 as she had a larger than expected vet bill and was unable to pay this from her current resources.  The defender does not contradict this account but now wishes to contend, retrospectively, that this was a further capital payment.  By way of background, it is relevant to note that between June 2013 and April 2014 the defender paid the pursuer interim aliment at the rate of £1,700 per month. However, this sum was reduced from April 2014 to £700 per month.  From August 2014, the defender increased the amount of monthly aliment, initially to the sum of £1,500 and then to £2,000 per month from February 2015.  Having regard to the circumstances and purpose for which this sum was provided to the pursuer, I have no hesitation in finding that this was an alimentary payment.  Accordingly, I do not include it as part of any capital payment to account made by the defender to the pursuer.  The relevant amount of any capital payment to account for the purpose of the preliminary Minute of Agreement issue is £212,300.

 

The payment to account:  from what sources was this paid?
[94]      The evidence and submissions about this issue were confused.  Objections to evidence on this matter were taken at times, and then not insisted upon, depending on the shifting nature of parties’ understandings of theirs and each other’s positions.  Insofar as I could follow parties’ arguments, to the extent that the sum of £212,300 was paid from matrimonial property in joint names, the pursuer wants this taken into account to reflect the fact that she has been paid, as it were, in part from her own funds.  The defender seeks declarator that he has discharged the obligations in the preliminary Minute of Agreement.

[95]      Given that in my resolution of the special circumstances argument I have determined to exclude the Santander Bond (being item (a) of the defender’s schedule, I have referred to four paragraphs above) from the parties’ matrimonial commonwealth, the issue is how to give credit, if appropriate, to the use of the proceeds of the several Halifax ISAs (totalling £104,789.50) to pay the pursuer the payment to account.  Tables 1 and 2, above, have been prepared on the assumption that the pursuer has, or will receive in full, her share of the assets agreed to be in joint names.  In respect of the several Halifax ISAs, it would appear from the schedule at no 7/6(a) of process that the defender controlled the encashment of these assets.  If that is correct, then one‑half of this would have to be deducted from any payment to account because, of course, any payment to account must be from the defender’s resources or his share of the matrimonial assets.

[96]      Accordingly, for the purpose of calculating the payment to account to the pursuer, a deduction must be made therefrom of any part of that which is derived from her share of any joint asset.  The relevant “adjustment” to the defender’s payment to account is therefore the figure of £212,300 less one‑half of the proceeds of the several Halifax ISAs (being £52,354.75), or a net figure of £159,945.25.  This figure of £159,945.25 represents that part of the capital payment to account paid from the defender’s resources.  As noted in paragraph [89] above, the provisional balancing payment, after taking into account the determination of the special circumstances arguments, is the figure f £349,243.50.  Taking into account the payment to account of £159,945.25 by the defender to the pursuer from his own funds, (by deducting this from the provisional balancing payment of £349,243.50), a provisional balancing capital payment of £189,298.25 (“the proposed capital sum”) is due to the pursuer.

[97]      In respect of the defender’s declarator, I shall grant that.  Clause 1 of the preliminary Minute of Agreement stipulated payment of £200,000 by the defender to the pursuer by the end of January 2014.  It is clear that the defender met that obligation at the time.  There was no stipulation in the preliminary Minute of Agreement of the source from which the agreed sum was to be paid.  I have given due credit for that part of the sum paid to the pursuer under the preliminary Minute of Agreement and which was derived from her share of matrimonial property.

 

The pursuer’s needs and resources
[98]      It is here convenient to consider the pursuer’s needs and resources.  The pursuer produced a schedule of her income and expenditure, at number 6/76 of process.  On the figures there provided, her pension income was stated to be £1,115 per month.  She now is in receipt of a pension of £13,923 per annum or about £1,132.72 per month.  Her expenditure, excluding that in relation to the horses, totalled about £2,395.  The expenditure on the horses, including the vet costs, amounted to a further £1,400.  If the monthly expenditure on the horses is included, then even with the interim aliment (of £2,000), the pursuer had a monthly shortfall of between about £600 and £700.  On these figures, if the pursuer did not have the horses, she would have a monthly surplus of about £700.  The pursuer has non‑matrimonial debt which is relevant to the consideration of the needs and resources of the parties.  In particular, she has a secured loan in the amount of £70,600, a credit card debt of £4,200 and a bank overdraft of about £9,857.  She had borrowed some lesser amounts from her sister and daughter’s ex‑partner, totalling about £11,000: see paragraph 4 of her affidavit.  She was crossed extensively on the basis that she was a “woman of debt”.  Her reply was that she had no more debt than many.  In any event, she had made payments of her legal fees up to January 2015.  She estimated her legal fees to be in the region of £70,000 to £80,000 a figure that was not challenged.  Her monthly income post‑separation is comprised of her pension of about £1,132 and the payment of interim aliment of £2,000.  The pursuer’s non‑cash assets comprise her car (£17,000), horses and trailer (£6,000) and her pension (£53,672), which together total £76,672.  There was no direct evidence of the value of the house the pursuer now has, but she was paid £200,000 in January 2014 to assist in its purchase.  At that time, it is understood that the property was mortgage‑free, although she now has secured borrowings of about £70,644 and total indebtedness of about £140,000.  The proposed capital sum is, as noted above, £189,298.25.  If she uses this to clear all of her indebtedness (including the £11,000 owed to family members), she will have a balance of about £38,298.25 remaining from this capital payment.  Her illiquid assets include a house in Edinburgh bought in 2013 for £250,000 (there is no current valuation), a pension pot of some £53,000 and her car.  These assets total some £320,000.  While at the relevant date the pursuer had certain balances in bank accounts, the evidence of the borrowings she has incurred after the relevant date, and of her legal and other expenses, would suggest that little of this remains.  

 

Claim for periodical allowance
[99]      As noted above, the pursuer makes a claim for periodical allowance for an extended period of time.  In terms of the fourth conclusion of the summons, she seeks payment of periodical allowance in the sum of £2,750 per month until her death or remarriage.  In submissions this was modified.  As will be seen, there are a number of factors relied upon in support of her claim for periodical allowance and which are, it is said, unique and, in combination, such as to justify a substantial award of periodical allowance  for a prolonged period.  In the course of the marriage the pursuer acquired or was gifted – parties dispute the precise circumstances - three horses.  Two of these are now lame and cannot be sold (other than for destruction).  The ongoing costs of the stabling and upkeep of the three horses constitute a substantial part of the pursuer’s outgoings.  By reason of the pursuer’s fragile mental health, she is emotionally very dependent upon these horses, as is noted in the Dr Rodger’s second Report.  Those circumstances were relied on in submissions on behalf of the pursuer, to seek periodical allowance in the amount of £2,750 until the death of the first horse;  at which point periodical allowance would be stepped down to £2,283 per month;  on the death of the second and third horses, it would be commensurately reduced to £1,816 and then £1,349, but all subject to the death or remarriage of the pursuer.  Given that the age of the youngest horse is 5 and that the normal life-span of a horse is 25 years, the pursuer’s claim for periodical allowance amounts, in effect, to a claim for a further 20 years. 

[100]    By the time of submissions, the defender accepted that the pursuer will require time to adjust to loss of support and that payment of periodical allowance for a period would be appropriate.  In particular, the defender submitted that after divorce, the pursuer should receive periodical allowance for three months at the current rate of interim aliment (being £2,000 per month);  at the rate of £1,750 for the following three months;  and thereafter at the rate of £1500 per month for a further 12 months.  Periodical allowance would then cease, 18 months after the date of the divorce.

 

Issues arising from the evidence
[101]    As matters evolved in the course of the proof, the dispute in respect of this issue turned on matters of fact as to:  (i) whether or not the pursuer would ever be fit for any form of employment in future;  (ii) to what extent she was dependent on the horses for her mental or emotional well being, with parties pursuing as an ancillary issue the degree to which the defender encouraged or was responsible for this;  and (iii) whether it was reasonable, in effect, for the upkeep of the horses to be included in her outgoings for the purposes inter alia of an award of periodical allowance .

 

(i) Whether the pursuer might be fit for some form of work
[102]    The pursuer retired from her employment on 31 May 2009 on ill health grounds.  This is supported Dr Rodger’s first Report.  She had been under his care from about March 2008 until January 2009.  Dr Rodger produced his first report in March 2009.  In that report, he noted that there had been no improvement in her mental health.  He diagnosed her at that time as suffering from chronic depressive disorder.  In respect of prognosis, he anticipated that there “would be some improvement” but considered that it was unlikely that the pursuer would return to her previous employment.  In general, he precluded “a return to the finance industry or any other form of employment associated with any significant levels of responsibility or stress”.  It was largely on the basis of Dr Rodger’s first Report that the pursuer was retired, with reluctance on her part, on grounds of ill health.  All of this was known to the defender at the time.

[103]    Dr Rodger’s second Report was instructed for the purpose of these proceedings.  In the light of his recent examination of the pursuer, he confirmed that she continued to suffer from chronic depressive disorder, which rendered her highly susceptible to stress.  This also led her to pursue avoidance strategies with consequent social isolation.  It was in this context that he noted she gained “some benefit to her mental wellbeing from her contact with animals, particularly her horses.”  After noting that the pursuer left school with some O level qualifications but without any experience of further or higher education, he concluded (at paragraph 8.04) as follows:

“I do not consider it likely that [the pursuer’s] mental condition would be sufficiently robust for her to contend with a return to any form of formal employment, even on a part-time basis. I do not consider it likely that this situation would change in response to any additional treatment or with future passage of time, and I consider this position to be permanent.”

 

[104]    Earlier in his second report, Dr Rodger had noted (at paragraph 1.03) that the pursuer mentioned concerns about being obliged to give away or destroy her horses.  He returned to this at the very end of his report, stating that if the pursuer were obliged to give away, sell or destroy her horses, in his opinion “then it would be likely that her mental condition and overall levels of functioning would deteriorate”:  paragraph 8.05.

[105]    Dr Rodger was neither called to give evidence nor, as a consequence, was he cross examined.  The defender did not lead any expert of his own in relation to the pursuer’s mental fitness, or otherwise, for any form of formal employment.  In cross examination, the defender accepted, as indeed he had to, Dr Rodger’s conclusions as set out above.  That makes all the more surprising the earlier cross examination of the pursuer on this point.  In particular, under reference to an observation in other medical records that she might benefit from a talking therapy, she was subject to cross examination on the basis that, given Dr Rodger’s conclusions, this form of therapy would be pointless.  Leaving aside the callous character of that line of cross, the line fails to recognise the difference between improvements in her mental health that she might achieve from such therapies and being fit for employment.  Indeed, the defender’s counsel endeavoured to elicit the pursuer’s own subjective view of her fitness, as a means to diminish the weight of Dr Rodger’s conclusions.  Against this, of course, is the agreement of the terms of Dr Rodger’s Reports recorded in the joint minute.  While during the proof the defender’s counsel tried to suggest that this was of limited utility, the agreement being only as to these reports constituting Dr Rodger’s “evidence in chief”, in the absence of any cross or any other relevant evidence, this is the totality of the expert evidence on this point.

[106]    On the whole evidence, I have no hesitation in accepting Dr Rodger’s professional opinion as regards the pursuer’s inability for any form of formal employment in future, whether full or part‑time and I shall take this into account when determining financial provision.  It is accordingly not necessary to consider the ancillary matters pursued in evidence:  namely, whether there was a failure on the part of the pursuer in exploring other possible avenues for work (on which she was challenged in cross), and whether or not the pension trustees retained a discretionary power to revisit (and presumably reduce) her ill‑health pension if she were to resume some remunerative work (being the pursuer’s evidence of the substance of a call made by her to her employer’s pension provider’s helpline in the months before the proof).

 

(ii) The pursuer’s emotional dependence on the horses
[107]    In relation to the circumstances surrounding the acquisition of the horses, the pursuer emphasised that she did not ask for these and was conscious of the cost of stabling and maintaining the horses.  The defender’s evidence was that the pursuer had always made clear her love of horses, ever since girlhood and, if the pursuer was not the instigator of their acquisition (as she maintained), she fairly readily accepted his gift of the first horse.  Unfortunately, the first horse became lame.  The defender purchased a second horse for her.  When this horse, too became lame, he purchased a third horse for her.  They were now aged 5, 14 and 16, respectively.  As a matter of generality, a horse has a life expectancy of up to 25 years.

[108]    The monthly cost of stabling and maintaining the horses was considerable, particularly in relation to the rest of the pursuer’s outgoings.  The costs incurred in stabling and maintaining the horses were estimated to be about £1,400 per month, taking the unchallenged figures set out in the pursuer’s schedule of income and outgoings (no. 6/7 of Process) and the additional vet bills estimated to be about £1,400 a month.  (It was not clear from the evidence whether the “Miscellaneous Expenses” attributed to “Vet fees and kennels etc.” included any double-counting.  See page 49.)   The two horses that were lame could not be ridden.  They could not be sold.  The pursuer had not specifically researched the prospect of a horse sanctuary or other equivalent charity taking the two lame horses.  She could not contemplate disposing of the horses, much less doing so for the purposes of their destruction.  She was visibly upset at that prospect.  She described attending several times daily to care for the horses, and she arranged for help for the times when she was unable to do so because she assisted with, or was on call in respect of, her granddaughter.  She derived great comfort and emotional solace from her care of her horses.

[109]    There was some uncertainty in the evidence as to whether the last horse had been acquired before or after the relevant date.  To the extent that there was a conflict in the evidence, I accept that the pursuer’s concern about assuming debt in relation to them to be genuine and such an economic burden was unlikely to have been assumed by her after it was clear that the marriage did not have a future.

[110]    The defender’s response was to criticise the pursuer for failing to research sanctuaries or other options.  His line was that, whatever had been the parties’ understanding during the marriage, keeping the horses was well beyond her financial needs.  It was not reasonable for the defender to be saddled with these expenses.

[111]    I accept the pursuer’s evidence that she derives great solace from her horses.  I have also recorded the opinion of Dr Rodger that the loss of her horses would be likely adversely to affect her mental condition.  In the light of that evidence, it is in my view largely irrelevant whether the acquisition of the horses was actively encouraged by the defender or acquiesced in by her.  In the present context, however, the question is whether this evidence justifies the claim for periodical allowance made – the amount and extended duration of which is essentially predicated upon the premise that the pursuer retains all three horses for the duration of their natural lives.  Parties made extensive submissions on this issue. I must turn now to consider those submissions.

 

Factors relevant to any award of periodical allowance
[112]    While the scheme of the Act is to promote a clean break between the parties, there is provision for payment of sums by way of periodical allowance after decree of divorce has been granted.  In particular, under section 9(1)(d) of the Act a person who has been dependent to a substantial degree on the financial support of the other person should be awarded such financial provision as is reasonable “to enable him to adjust, over a period of not more than three years from (i) date of the decree of divorce, to the loss of that support on divorce”.

[113]    Turning to the statutory factors that the court shall have regard to, and which I have set out above at paragraph [17], the pursuer founded on the following factors: 

(i)         She is 54 years old.

(ii)        She retired from her previous employment on 31 May 2009 on ill health grounds. 

(iii)       The parties married on 1 October 2005 and have accordingly been married for about seven and one‑half years.  The parties separated on 31 January 2013.  On 28 May 2013 the pursuer moved out of the matrimonial home.  The pursuer now resides in her own home.

(iv)      The pursuer is unlikely to return to any form of employment, whether full time or part time.  This position will not change with treatment, and is permanent.  The defender accepted Dr Rodger’s opinion on this point in cross examination.

(v)       Following her retirement the pursuer has received an ill‑health pension in the sum of £1,133 net per month (see 6/85).  It is her only source of income.  The defender has a pension income of around £72,362 net per annum or £6,030 net per month (see 6/75).  Accordingly the parties have or had a combined income of around £7,163 net per month.  Since her retirement the pursuer has been substantially dependent on the defender.  The defender’s pension at the relevant date had a cash equivalent value (or CEV) of around £2,255,923 (see 7/18). 

(vi)      The pursuer’s schedule of monthly income and expenditure is set out at 6/76.  Her monthly expenditure, including on the horses, totalled about £3,795. Her monthly income, including aliment of £2,000 per month, amounted to about £3,132.  This resulted in a current monthly shortfall of income to expenditure of around £662 per month.

(vii)     The pursuer estimates she has debts totalling around £140,000 (see paragraph 4.01 of Dr Roger’s report), including secured borrowings of around £70,644 (see 6/90) and the debts totalling £11,000 owed to family members. 

(viii)    The purser owns three horses (see paragraphs 32 and 33 of the pursuer’s affidavit).  The defender gifted these to her in 2009, 2010 and 2012 after the pursuer’s ill‑health retirement.  The second horse was purchased after the first became lame; the third being purchased after the second became lame.  The first and second horses cannot be ridden.  At the time of the purchases both parties were aware of the substantial financial commitment in owning horses.  On average horses can be expected to live to around 25 years of age.  The cost of keeping the three horses is around £1,400 per month.

(ix)       It was evident from the way the pursuer gave her evidence that her horses play a significant role in the pursuer’s life.  The defender readily acknowledged that in his evidence.  Dr Rodger expressed the opinion in his report (6/100) that if the pursuer was obliged to sell, give away or destroy her horses it would be likely that her overall levels of functioning would deteriorate.

The pursuer relied on essentially the same factors for her claim under section 9(1)(e).

 

Cases relied on by pursuer for periodical allowance
[114]    The pursuer’s counsel referred to the following authorities in support of the pursuer’s claim for periodical allowance:  Haugan v Haugan 2002 SC 631, Smith v Smith 2010 SLT 372;  and Johnstone v Johnstone SLT (Sh Ct) 79.  Under reference to these cases, he derived the following propositions:

(i)         The court looks from the date of the divorce to the future.

(ii)        Viewing matters prospectively at the time of the grant of divorce, one asks whether the change of status of the relevant party from that of a person married to the other party (with the right in relevant circumstances to enforce the latter’s obligation to aliment the former) to a person not so married (and without the benefit of that right) is likely to:

(1)  require financial provision to enable them to adjust to the loss of support, and/or

(2)  suffer serious financial hardship.

(iii)       Serious financial hardship should be assessed by reference to the parties themselves, particularly those of the claimant, and not according to some undefined objective minimum assistance provision.

(iv)      Reference to the applicant’s position during marriage is relevant in fixing an amount payable under both sections 9(1)(d) and 9(1)(e).

 

Pursuer’s submissions for an order for periodical allowance
[115]    The pursuer contended that the circumstances of this case are very unusual.  The pursuer’s ill health and prognosis in terms of not returning to employment, the three horses and the circumstances in which the pursuer finds herself responsible for them, and the interplay between the pursuer’s ill health and her dependence on her horses were suggested to be almost unique.

[116]    It was submitted that it was clear, standing the disparity of the parties’ respective incomes that the pursuer will suffer a very significant loss of support on divorce.  The pursuer has substantial monthly outgoings, particularly in respect of the costs associated with her horses and very limited income, which she will not be able to supplement through work.  In such circumstances it is likely that payment of a capital sum or a pension sharing order alone would be insufficient to meet the pursuer’s loss of support.  Conversely, it was argued, the defender has a substantial income and would no longer have any financial responsibility for the horses he gifted to the pursuer and previously supported financially.  Given the pursuer’s chronic depressive disorder and her relationship with her horses as referred to by Dr Rodger, it would be appropriate, it was argued, in this very unusual case to grant a periodical allowance under section 9(1)(d) for the full three years at a level sufficient to cover all of the pursuer’s expenditure as detailed in her schedule of income and expenditure (6/76), namely of £2,750 per month.

[117]    Thereafter, and again under reference to the matters referred to above, not least the standard of the living enjoyed by the pursuer during the marriage, it was argued that it would be appropriate to grant a periodical allowance under section 9(1)(e) at a level sufficient to cover all of the pursuer’s expenditure as detailed in her schedule of income and expenditure (6/76), namely £2,750 per month, until the first death of one of the horses and on that event thereafter at the rate of £2,283 per month until the second death of one of the horses; thereafter at the rate of £1,816 per month until the death of the third horse; and finally at the rate of £1,349, all subject to, and only until, the death or remarriage of the pursuer.

[118]    Finally, the pursuer argued that the defender remains entitled under section 13(4) of the 1985 Act to apply to the court for a variation of periodical allowance on a material change in circumstances.

 

Defender’s submissions resisting an order for periodical allowance under section 9(1)(d) of the Act
[119]    Under reference to section 9(1)(d), the defender argued that this provision is to allow a party time to adjust to loss of support on divorce.  The cases cited by the pursuer all turn on their own facts and circumstances.  The making of awards in those cases simply reflects the discretion of the court as to the amount and duration of financial support required for the adjustment in the particular case.

[120]    The defender accepted that the pursuer has been substantially dependent on the financial support of the pursuer both during the marriage and after it.  He accepted that she will require time to adjust to the loss of that support after divorce.  However, the issue was at what level and for what period of time periodical allowance should be paid.

[121]    The defender turned to challenge features of the pursuer’s outgoings, particularly the very substantial sums incurred in respect of the three horses.  He emphasised that having regard to the criteria in section 11(4) – which were relevant to any award for the purpose of section 9(1)(d) - the court is required to consider inter alia the needs and resources “of the persons”(emphasis added), and the whole circumstances.  The terms of the pursuer’s schedule of income and expenditure (6/76) disclose a deficit of income over expenditure of £576 per month.  On the basis of the evidence, that figure is understated by about £100 per month in respect of vet’s bills.  The cost of keeping her horses (including vets bills) is about £1400 per month.  The defender pointed out that the pursuer would have a surplus of income over expenditure of £824 per month if she did not have the horses.  If she retained the horses, she would need £2291 per month to meet her needs.

[122]    Turning to consider the statutory provisions, as applied to the foregoing, the defender argued that periodical allowance under section 9(1)(d) is intended to allow “adjustment” to loss of support on divorce.  It is not, he said, intended as a means of preserving the claimant’s pre‑marriage lifestyle or of supporting obligations which, after divorce, cannot be afforded.  Significantly, he said, it is directed to the needs of the person involved.  The notion that section 9(1)(d) should be applied effectively for the maintenance of three horses goes well beyond the scope of the pursuer’s needs, as properly analysed.

[123]    In the circumstances, he argued, it is both reasonable and necessary for the pursuer to consider the rehoming of her horses, which failing to consider their destruction.  Her refusal to consider those options has led her into debt.  This is irrational.  It is no doubt something which causes her upset to contemplate, but the realities of the situation had to be faced.  Her evidence disclosed an intransigence and unwillingness to contemplate other options and which, he said, bordered on the wilful.  Her view that she may never get over the loss of her pets may be genuine but, objectively analysed, it is not a reasonable view.

[124]    In this connection and again, having regard to the terms of section 11(4), it was argued that the pursuer has been very well provided for in the two years and nine months since the separation.  In that time she has already had more than ample opportunity to adjust to loss of support on divorce.  On the face of it she has made no real attempt to readjust to her altered circumstances.

[125]    In the light of the foregoing, the defender proposed that for the purpose of final adjustment, the pursuer should be given a further three months periodical allowance at the current rate of aliment (£2000 per month);  three months thereafter at £1750 per month;  and 12 months thereafter at £1500 per month.  The staged nature of the payments would allow her time to rehome the horses one by one (if necessary).  That would give the opportunity for psychological as well as financial readjustment.  It would allow her the opportunity to plan her budget for her changed circumstances over 18 months.  Taken with the capital sum which it is proposed she be paid, the defender argued that such provision reasonably meets the pursuer’s needs for adjustment in both amount and timescale.

 

Defender’s reply to pursuer’s submission of financial hardship under section 9(1)(e) of the Act
[126]    Turning to the pursuer’s claim for provision on the basis of financial hardship, the defender again submitted that the cases in this connection also turn on their own facts and circumstances.  He submitted that, notwithstanding the factors to which the Court has to have regard, as directed by section 11(5), the paradigm case in which an award under section 9(1)(e) is made had the following characteristics:

(i)         the existence of a long marriage,

(ii)        the existence of an injury or illness which is likely to cause a lack of earning capacity, and in which

(ii)        the loss of a right to aliment on divorce was likely to cause serious financial hardship.  

In the latter context he argued that it should be remembered that the terms of the Act require the serious financial hardship in question to arise as the result of the divorce.

[127]    The defender cited a number of cases in support of his submissions.  These included the case of Haugan v Haugan 2002 SC 631 , a case of Lord Marnoch’s.  That case concerned parties who had been married for 27 years.  The wife’s health was poor;  she suffered from poor hearing, high blood pressure, fibrositis and depression.  The court in that case expressly declared (at page 324L) that the loss of alimentary support on divorce was the direct cause of the serious financial hardship faced by the wife.  A similar situation was said to have arisen in Smith v Smith 2010 SLT 372.  In that case, there was a marriage of 24 years.  The wife, who was 58, suffered very serious rheumatoid arthritis which caused her to be unable to work.  The court held (at page 376C) that it was the divorce which would be likely to cause her serious financial hardship in the absence of an award under section 9(1)(e).

[128]    By contrast, in this case, the defender emphasised the following factors:  this was a very short marriage (seven years);  the difficulties caused by the defender’s depressive condition had long pre‑dated the marriage;  and a situation in which any financial hardship which might be suffered did not arise from the loss of alimentary support (or indeed from the divorce in any way) but instead from what, looked at objectively, is both an unreasonable unwillingness to face economic reality in relation to keeping her three horses, and an apparently chronic inability to manage on a reasonable budget.

[129]    So far as the unreasonableness of the wish to keep the horses is concerned, the defender referred to the submissions he made in respect of section 9(1)(d) and which were said to apply with equal force here.  The unwillingness to face reality in relation to the horses seemed to be a function of the pursuer’s personality.  Accordingly he argued that any financial hardship caused by that does not arise “as a result of” the divorce.

[130]    So far as the pursuer’s inability to budget is concerned, it is significant that when the parties separated the defender was in possession of net assets of £148,000.  She has been given £213 300, yet she has still accumulated debt.  She was, it was argued, wholly unable to explain how she has accumulated those debts.  She had produced no vouching at all as to the way the sums borrowed had been spent.  Further, as a result of her own fault, she was paying interest on the unsecured borrowing at a higher rate than is advisable.  The acquisition of post-separation debt by a party in such circumstances, it was argued, cannot constitute serious financial hardship as a result of divorce.  In those circumstances, it cannot be said that whatever financial hardship she is suffering arises as the result of the divorce at all.  The defender’s submission is accordingly that the basis for an order under section 9(1)(e) is not made out, and no periodical allowance which is referable to section 9(1)(e) should be granted.

[131]    Separately, it should be noted that in the event that the pursuer is paid a capital sum sufficient to clear her debt, and that she is made an award of periodical allowance under section 9(1)(d) for the purposes of adjustment such as is proposed, then both of the issues giving rise to possible financial hardship for the pursuer will be removed.  Again, the criteria for an award under section 9(1)(e) would not be made out, and no periodical allowance under this provision should be made.

[132]    Finally, it was argued that this was a short marriage, of just over seven years.  The shorter the marriage, it was argued, the more significant the deviation from equal sharing is likely to be, since the period in which the property is “assimilated” into matrimonial property by everyday usage and parties’ shared assumptions as to its matrimonial character are likely to be less significant than in longer marriages.  Having regard to the foregoing, and to the approach adopted in Davidson v Davidson 1994 SLT 506 (being a 33/66 split), R v R 2000 Fam LR 43 (31/69 split), and Campbell v Campbell 2008 Fam LR 125 (being a 25/75 split), the defender’s proposed division of the contentious property is justified.

 

Discussion of pursuer’s claim for periodical allowance
[133]    As noted above, at paragraph [96] the proposed capital sum payable by the defender to the pursuer is about £189,298.25.  This figure was arrived at after:

(i)         applying my determination of the parties’ respective special circumstances claims to the agreed matrimonial assets,

(ii)        taking into account the amounts paid to the pursuer under the preliminary Minute of Agreement (and excluding therefrom any amount paid from her own share of the matrimonial assets), and

(iii)       making further allowance for the value of the matrimonial assets already in the hands of the pursuer.

If she pays off all of her indebtedness (being the £140,000 owed to secured and unsecured third party lenders and the £11,000 borrowed from relatives), on those figures she will still have a balance in her hands of about £38,298.00. She will have a mortgage‑free house purchased in 2013 for £250,000 (and, presumably, worth at least that much) and her pension and her car.  It is having regard to this assessment of the pursuer’s resources that I propose to turn to the parties’ arguments about payment of a periodical allowance to the pursuer. 

[134]    Having regard to the factors relevant to consideration of any payment under section 9(1)(d), as provided for in section 11(4), and which I have set out above at paragraph [17], the pursuer’s ill health is likely to preclude any form of remunerative employment in the future.  Even in the absence of ill-health, the pursuer’s age and relative lack of qualifications would militate against her gaining employment (the factors in section 11(4)(a)).  No training or educational course (the section 11(4)(c) factors) is likely to make any material difference to these features of the pursuer’s situation. It will be recalled, however, that the pursuer had a concern that she might put the present level of her pension at risk, if she took any form of employment.  Furthermore, and in contrast to the position of the wife in Smith v Smith cit supra, the pursuer does have a guaranteed income in the form of her pension.  In respect of the factors set out in section 11(4)(b), this was not a long marriage and the pursuer’s ill-health problems long pre-dated her marriage to the defender. There has undoubtedly been a degree of dependence by the pursuer on the defender, which the defender acknowledged.  I reject the defender’s submission that, since the parties’ separation, the pursuer has already had more than two years to accommodate herself to the new financial realities she is facing, and on that basis any award of periodical allowance under section 9(1)(d) should be restricted.  That submission does not accord with statutory provisions, which is to enable the pursuer to adjust to loss of support on divorce.

[135]    In respect of the pursuer’s needs (one of the other factors in section 11(4)(d)), it is in this context that parties join issue, and do so in respect of the reasonableness or otherwise of the pursuer seeking to maintain her three horses.  It is this aspect of the pursuer’s outgoings that underpins her claim for periodical allowance, and to seek to have it paid for the very extended period she seeks.  This essentially turns on the question of whether it is reasonable or appropriate for her to maintain the three horses at the expense of the defender, or to do so for the whole natural lives of the horses.

[136]    It is important to bear in mind that the policy of the Act is generally for there to be a clean break financially on divorce.  Any award for periodical allowance must be justified as a departure from that principle.  In particular, section 13(2) of the Act provides that the court shall not make an order for periodical allowance under section 8(2) of the Act, unless it is satisfied that an order is justified by the principles set out in any of subsections 9(1)(c), (d) or (e); and that other specified orders would be inappropriate or insufficient to satisfy the requirements of section 8(2).  I am satisfied that the order for capital payment in the amount I have identified will be insufficient to satisfy the requirements of section 8(2).  I am also satisfied that a pension sharing order or an order for transfer of property would be inappropriate.  In any event, there were no pleadings or evidence to support any pension sharing order.  The pursuer seeks periodical allowance for a prolonged period to reflect the potential life-span of her youngest horse and which, on the evidence available, could be a period of twenty years.  The pursuer relies on section 9(1)(d) and, given the three-year maximum duration of an order under that provision, she also relies on section 9(1)(e).  The impetus for this is her strong desire to maintain her horses.  Is periodical allowance on these bases reasonable or justified by the circumstances in this case?

[137]    An inevitable consequence of divorce is that the parties’ matrimonial property is divided between them.  The same resources are now required to fund two separate households.  In most circumstances, this will mean a reduction in the standard of living from that enjoyed during the marriage.  While that is an obvious consequence to state, parties may find it difficult to accommodate themselves to this in practice. The purpose of an award of periodical allowance under section 9(1)(d) is to enable the claimant to “adjust” to the loss of support on divorce, that is, to accommodate oneself to an altered standard of living, and where the other orders that are, or might be made, will be insufficient.  The purpose of an award of periodical allowance under section 9(1)(d) is not, in my view, to enable the standard of living enjoyed during the marriage to be maintained for an indefinite and extended period.  To the extent that the pursuer seeks to do that, in particular in respect of the very extended period for which periodical allowance is sought, this is misconceived.  I accept her evidence that she has found her horses to be a great solace to her and beneficial to her emotional and mental health.  I have taken into account the view expressed by Dr Rodger in respect of the effect on the pursuer of the loss of her horses.  In the light of this evidence, I find that in all the circumstances it is reasonable to award the pursuer a periodical allowance in order to adjust to the loss of support she will suffer on divorce and which will enable her, for a time, to maintain the horses.  I will grant it in reducing stages as suggested by the defender, for a period of 2 years, so that she has time mentally and financially to adjust to her post‑divorce financial circumstances.  For the duration that the periodical allowance is paid, she can, if she chooses, reduce her outgoings commensurately, by reducing the number of horses she stables.  The award of periodical allowance is to enable her to make this adjustment over a reasonable period of time.  On the other hand, she could choose to maintain all three horses for a longer period and to use the surplus capital available to her (even after repayment all of her indebtedness) for that purpose.  That would be a matter for her, in the use of her own resources.

[138]    On the whole circumstances of this case, I am satisfied that the proposed capital sum of £189,298.25 would not satisfy the criteria in section 8(2) of the Act, and that payment of periodical allowance is justified for the purpose of enabling the pursuer to adjust to the loss of support on divorce.  The periodical allowance I shall order will be as follows:  periodical allowance for one year in the sum of £2,000 per month;  and thereafter for a further period  of one year in the sum of £1,500 per month.  On the whole evidence, there is no issue about the defender not being able to fund this.  This accords with the level of aliment he had been paying latterly and is within the resources of his own generous pension.  I am satisfied that the foregoing financial orders, including this award of periodical allowance, constitute fair and reasonable financial provision for the pursuer, and is fair and reasonable having regard to the needs and resources of the parties.

[139]    What then of the pursuer’s claim for periodical allowance, insofar as predicated upon section 9(1)(e)?  

[140]    In the light of the decision I have made, the issue of financial hardship does not arise.  Nonetheless, out of deference to the arguments presented to me, I shall deal briefly with this aspect of the pursuer’s claim.  There is a considerable overlap in the evidence relevant to the factors under section 11(4) - for the purpose of section 9(1)(d) - and that is relevant to the factors in section 11(5).  There was very little evidence to make any meaningful finding as to the comparative living standards of the pursuer during the marriage and now.  In any event, even accepting that the pursuer is unlikely to work again, the whole evidence in this case does not, in my view, instruct a case of financial hardship under section 9(1)(e).  As noted at the end of paragraph [133], the pursuer will have illiquid assets of £320,000 (including a mortgage‑free house), and a capital cushion of about £38,298 (assuming she repays the post-separation debt she has accrued.)  Notwithstanding that I have accepted that the pursuer is unlikely to work again, in my view, the pursuer’s circumstances after divorce (including her own pension and the financial provisional I propose to order) cannot be described as constituting “financial hardship”.  In any event, even if the circumstances instructed financial hardship, I accept the defender’s submission that there must be a causal connection between the hardship and the divorce, and that any hardship that might arise here was caused principally by the pursuer’s maintenance of the horses and not, “as a result” of the divorce.

 

Orders
[141]    As indicated above, I shall grant decree of divorce and the orders for financial provision by way of a capital sum and periodical allowance in the amounts I have determined.

[142]    I have already considered and rejected the pursuer’s order for sale of the matrimonial home:  see paragraph [77] above.  I shall instead pronounce an order requiring the pursuer to transfer her one‑half share in the matrimonial home to the defender.  I shall grant the declarator sought by the defender.  At the By Order on 22 January 2016, the defender indicated that he might require to pay any capital sum in instalments, if it exceeded £160,000.  I shall therefore put the matter out By Order, to be addressed on (i) whether the capital sum should be payable in instalments and what those instalments should be; (ii) whether interest should run on the amount of capital sum that is not paid within two months of the interlocutor granting the same, and (iii) whether any incidental order might be required.  I shall not pronounce any interlocutor meantime.