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Cordiner v. McConnachie [2003] ScotSC 30 (27 January 2003) SHERIFFDOM OF GRAMPIAN HIGHLAND AND ISLANDS AT INVERNESS

A217/98

		JUDGEMENT of SHERIFF PRINCIPAL SIR STEPHEN S T YOUNG Bt QC
		in the cause
		ERIC WILLIAM HAWTHORN CORDINER
		Pursuer and Respondent
		against
		SANDRA MARGARET McCONNACHIE or CORDINER
		Defender and Appellant

Act: Mr Mundy, advocate, instructed by Macleod & MacCallum, Inverness

Alt: Miss Clarke,advocate, instructed by Simpson MacDonald, Inverness

Inverness: 27^th January 2003

The Sheriff Principal, having resumed consideration of the cause, sustains the appeal in part and adheres to the interlocutor of the sheriff dated 6^th June 2001 subject to the following adjustments:-

In finding in fact 58 substitute £81,000 for £83,000.

In finding in fact 64 delete the words "is of no value" and substitute therefor "was worth £15,000 at the relevant date".

In finding in fact 65 against the entry for "Pinnacle loan" delete NIL and substitute therefor £15,000, and against "TOTAL" delete £209,312 and substitute therefor £224,312.

In Note 2 appended to finding in fact 65 delete £209,312 and substitute therefor £224,312.

In the paragraph immediately after finding in law 8 which begins "THEREFORE Sustains the first and second ......" delete the words (a) "SUSTAINS the sixth plea-in-law for the pursuer consistent with the capital payment awarded to the defender", (b) "SUSTAINS the ninth plea-in-law for the defender so far as consistent with the capital payment ordered", (c) "Grants decree against the pursuer for payment to the defender of a capital sum of FORTY NINE THOUSAND POUNDS (£49,000) STERLING with interest thereon at the rate of eight per centum per annum from the date or dates of payment, said date or dates of payment to be afterwards determined", and (d) "(2) the date or dates of payment of said capital sum";

repels the ninth plea-in-law for the defender, sustains the fourteenth plea-in-law for the pursuer and sustains also in part his thirteenth plea-in-law; grants an order for the sale of the parties' heritable property collectively known as "Monkland" and being all and whole the house Monkland, Monkland Cottage and the land pertaining thereto at Thurlow Road, Nairn and ordains the pursuer and the defender to execute and deliver to the purchaser or purchasers of the said subjects such disposition and other deeds as shall be necessary for constituting full right thereto, failing which dispenses with such execution and delivery and authorises the sheriff clerk at Inverness to execute such disposition and other deeds, all as adjusted at her sight, as shall be necessary aforesaid, and orders division of the net free proceeds of sale into one hundred and twenty six (126) parts whereof sixty nine and one half (691/2) parts shall be paid to the pursuer and fifty six and one half (561/2) parts shall be paid to the defender, and grants warrant to sell accordingly; makes an order for the transfer by the defender to the pursuer of her whole right, title and interest in the joint endowment policies with Standard Life, policy nos. X41103659 and W46176795A-C; adheres also to the interlocutor of the sheriff dated 26^th June 2001 subject to the following adjustments:-

Delete the words "Decerns for payment by the pursuer to the defender of the capital sum already awarded of £49,000, on or before 6 calendar months from this date with interest thereon from that date at 8 per centum per annum until payment thereof",

For the sum of £3,000 wherever it appears substitute the sum of £2,750; and

Delete the words "Remits an account thereof, when lodged, to the auditor of court to tax and to report; suspends extract of any decerniture in respect of said taxation until payment of the capital sum aforesaid has been made to the defender; and stipulates that that decerniture may not be made until written confirmation, acceptable to the court, has been received from the defender or her solicitor that payment of the said capital sum has been received".

reserves meantime the question of the expenses of the appeal and appoints parties to be heard thereon at Inverness Sheriff Court on Wednesday 12^th February 2003 at 9.30 am

Note

In this case the pursuer and respondent and the defender and appellant were married on
27^th December 1985. In June 2001 when the sheriff issued his judgement the pursuer was aged 48 and the defender 46. The pursuer had previously been married in 1977, but that marriage had ended in divorce in 1984. There were no children of that marriage. There is one child of the parties' marriage, namely a daughter Amber Elizabeth Cordiner who was born on
5^th November 1992. The sheriff made orders to the effect that she should reside with the pursuer and that the defender should have contact with her at specified times. In her note of appeal the defender challenged these orders, but in the event her counsel stated that she did not insist upon these challenges. But she did insist upon her appeal against the sheriff's decision to award her a capital sum of £49,000. She also disputed the sheriff's decision in relation to the expenses of the action.

In 1982 both the parties were employed by a company named McDermotts. In that year the pursuer was transferred by the company to work in Singapore. In December of the same year the defender gave up her employment with the company and went to Singapore to join the pursuer. She has not been in employment since then. For the next three years she had to leave Singapore initially every four weeks, and latterly even more frequently, since she was not permitted to reside there permanently.

After their marriage at the end of 1985 the parties remained in Singapore until 1988. Early in 1989 they returned to the United Kingdom. They lived briefly in rented accommodation in London and then in Aberdeen. In the summer of 1990 the pursuer sold a house at Balloch, near Inverness, which he had owned at the date of the marriage. The net free proceeds amounted to £48,377.50. At the same time the parties bought a house in Stonehaven for £183,000. An initial deposit of £81,000 was paid towards the purchase price with the balance of £102,000 being borrowed from the Halifax Building Society. £40,000 of this was repaid shortly afterwards, on 13^th November 1990. About eighteen months later this house was sold and the proceeds applied towards the purchase of a property in Nairn known as Monkland which was bought by the parties early in 1992, the title being taken in their joint names. Again money was borrowed from the Halifax Building Society to assist with the purchase.

On 1^st September 1996 the pursuer commenced employment with a company named Pinnacle Business Solutions Limited ("Pinnacle"). He became a director of the company and acquired forty shares, being 20% of the company's issued share capital. He also lent certain sums of money to the company in the ensuing years.

The sheriff found in fact that the pursuer moved into a separate bedroom at Monkland on or about 1^st September 1997 and that the parties have not lived together nor had marital relations since that month. It appears that the exact date of separation, and hence the relevant date within the meaning of section 10(3) of the Family Law (Scotland) Act 1985 ("the Act"), was disputed as between September and December 1997, but the sheriff found that, whatever the precise date, the net value of the matrimonial property was the same, namely £209,312.

This sum was made up of various elements. For present purposes it is necessary to notice only certain details. Monkland had a net value of £126,000 after deduction of the outstanding mortgage of £79,000. The sheriff found that the appropriate basis for the valuation of the pursuer's shares in Pinnacle was the assets basis, and that this gave a value for these shares of £3,200. But he found that the loan made by the pursuer to the company was of no value at the relevant date. He found too that the estimated value of the pursuer's capital as at the date of the parties' marriage was £75,000 in respect of various investments together with £32,000 (namely £40,000 less the mortgage of £8,000) in respect of the house at Balloch, giving a total value for his assets at the date of the marriage of £107,000. The defender had no capital assets at that stage. In reliance upon sections 10(1) and 10(6)(b) of the Act the sheriff deducted this sum of £107,000 from the net value of the matrimonial property which he rounded up to £210,000. This left the sum of £103,000 from which the sheriff deducted the defender's only capital asset at the relevant date, namely the sum of £5,127 at credit of an account with the Halifax Building Society, to leave a net rounded up sum of £98,000. This he divided into two equal halves to give the sum of £49,000 which, as indicated, he ordered the pursuer to pay as a capital sum to the defender.

The pursuer had sought an order for the transfer to him of the defender's whole right, title and interest in Monkland upon payment of such sum as might be considered appropriate and reasonable by the court. But the sheriff refused to grant this order. The result therefore of his judgement was to leave the parties as joint proprietors of Monkland while at the same time the pursuer was ordered to pay the defender the sum of £49,000. The sheriff was evidently aware of the injustice inherent in this disposal, but took the view that he had no power in light of the parties' craves to cure it. For her part, it might have been thought that the defender would have been wiser in the circumstances to have acquiesced gratefully in this part of the sheriff's judgement rather than to have appealed against it. But appeal she did.

In her note of appeal the defender challenged the sheriff's decision to award her a capital sum of £49,000 on six separate grounds. But in the event only the first four of these were argued by her counsel.

The first of these grounds was to the effect that the sheriff had erred in law by giving undue consideration to the evidence of the pursuer as to the extent of his pre-marriage assets which, it will be recalled, the sheriff had found to have had an aggregate value of £107,000. In short, counsel for the defender submitted that there was insufficient credible and reliable evidence to support the sheriff's finding that the pursuer's total assets as at the date of the marriage amounted to £107,000. At best it was said that the pursuer had established that the total value of these assets was £37,494, being £32,000 for the net value of the house at Balloch and £5,494 in respect of the sum at credit of the pursuer's account with the Halifax Building Society. In response, counsel for the pursuer submitted that it had been open to the sheriff to make the findings which he had in relation to the value of the pursuer's assets at the date of the marriage, and that I ought not to interfere with these findings on appeal. Counsel drew attention here to the sheriff's observation at page 58 of his judgement to the effect that his conclusions on credibility and reliability affected the issue of the residence of Amber "but not the other issues mainly financial and patrimonial".

In my opinion the submissions for the pursuer on this branch of the case are to be preferred. There is no doubt that the net free proceeds of sale of the house at Balloch amounted to £48,377.50. This is vouched by the letter dated 17^th July 1990 from the parties' then solicitors - see no. 5/9/13 of process. As the fee note attached to the letter demonstrates, the work involved in the sale included the redemption of the mortgage secured over the property. All this is consistent with the evidence of the pursuer (which the sheriff was of course entitled to accept) on page 1.86D/E to the effect that the house was sold for £52,000, that at the date of the parties' marriage its value was about £40,000 and that the amount of the mortgage at that time was about £8,000. It also fits in with the pursuer's evidence at page 1.96E/97D to the effect that the initial deposit of £81,000 (not £83,000 - see the statement attached to no. 5/9/25 of process) came, not from the proceeds of sale of the house at Balloch, but from the sum totalling £114,000 which had been lodged in the pursuer's account with the Halifax Building Society. Counsel for the defender suggested rather faintly that the net value of the house at Balloch should be taken to have been £25,000 at the date of the parties' marriage. But she did not advance any cogent reason to support this suggestion, and I am quite satisfied that the sheriff was well entitled to find that the value at that date of the house was £40,000 less the mortgage of £8,000.

As indicated, counsel for the defender accepted that the pursuer had the sum of £5,494 more or less in his account with the Halifax Building Society at the date of the marriage. This is vouched by the entry in the pursuer's pass book, a copy of which forms no. 5/9/14 of process. The same pass book shows the sum of £20,000 having been credited to the account on
7^th October 1998, which was almost three years after the parties' marriage. In his
evidence-in-chief (page 1.90A) the pursuer's position was that this sum was derived from investments which pre-dated the marriage. But in cross-examination (page 2.124E) he accepted that this particular sum could have been accumulated from savings made after the date of the marriage.

The next item to which the pursuer spoke (page 1.91C/D) was the sum of £8,565.77 which is the subject of the letter which is no. 5/9/15 of process and which the pursuer said he would have had at the date of the marriage. That this is likely to have been so is I think confirmed by the heading to the letter which referred to the account in question as having been a twelve months fixed account with a maturity date of 27^th February 1987. On this basis the initial deposit, which with interest, added up to the sum of £8,565.77 must have been made not later than
27^th February 1986 which was only two months after the date of the marriage. It is not apparent what rate of interest was paid on this deposit, but it seems to me to be reasonable to assume that initially it would have been of the order of £7,500 to £8,000.

Next there are nos. 5/9/17 to 19 of process which vouch the transfer of the sums of £20,353.18 and £5,787.75 from the pursuer's Halifax Building Society account already referred to and a further sum of £10,479.30 from an account with the Abbey National Building Society to an account with Robert Fleming (Isle of Man) Limited. These three sums totalled £36,620.23, of which only some £5,500 can clearly be demonstrated to have been in the Halifax Building Society when the parties were married. On the other hand it may be said that the balance of some £31,000 (derived as it was from the deposit of £20,000 in the Halifax Building Society and the withdrawal of £10,479.30 from the Abbey National Building Society) was a large amount for the pursuer to have saved from his income in the three years or so following the marriage, especially if during that time he also saved the sum of US$31,899.62 which was transferred from his Singapore Citibank account on 27^th October 1989 - see his evidence at page 1.93C and the later statement of account in no. 5/9/19 of process.

The pursuer next referred (page 1.93D) to the statement of account prepared by
N M Financial Management Limited (no. 5/9/20 of process) and he confirmed that the sum of £12,121 had been invested when the account had been opened on 12^th July 1985, which of course was four months or so before the parties' marriage. Likewise he confirmed (page 1.94B) that the sum of £10,000 shown as having been invested in the Sterling Growth Portfolio administered by Finesco Financial Services Limited ("Finesco") was derived from funds saved by him before the marriage. The copy letter which forms no. 5/9/21 of process refers to this investment and its date, namely 15^th May 1986, seems to me to support the pursuer's evidence as to the source of this sum of £10,000.

The pursuer also referred (pages 1.87D and 1.88E) to a life insurance policy issued by Norwich Union which had been effected when the house at Balloch was purchased in 1978. This policy had a surrender value of £14,940 on 1^st December 1997 and £16,044 as at September 1997 - see nos. 5/3/4 and 5/9/5 of process respectively. By pro-rating the latter sum back the pursuer calculated that the policy had had a surrender value of £6,000 at the date of the parties' marriage. Given that surrender values of life insurance policies are notoriously low in the early years, I am inclined to think that this estimate of £6,000 was on the high side. But, so far as I can see, it was not challenged in cross-examination and accordingly the sheriff was in my view quite entitled to accept the pursuer's evidence in this respect.

The pursuer also spoke (page 1.94C) to four life assurance policies issued by NEL Britannia International Limited ("NEL"). These were evidently surrendered in about July 1990 for a total sum of approximately £22,500 - see nos. 5/9/22 and 23 of process. But it is clear that these policies were only taken out in April or May of 1984 (page 2.133B/C) and that they were funded by savings from the pursuer's salary at the rate of £300 per month. Thus they had been in force for about eighteen months when the parties were married in December 1985. By that time some £5,400 would have been invested, and by the time the policies were surrendered six years worth of premiums would have been paid, namely £21,600 or so. The value of these policies as at the date of the marriage must be considered to be somewhat speculative, but it seems to me to be reasonable to assume that it would have been of the order of £5,000.

At page 1.95D the pursuer spoke to the contents of the letter from Finesco dated
31^st July 1990 which, with its enclosed statement, forms no. 5/9/24 of process. He agreed that the payments totalling £18,730 shown in the statement related to the four NEL policies. In that I think it is plain that he was mistaken. As the heading of the letter indicates, the sum of £18,730 was derived from the encashment of the parties' Portfolio Management Service account and had nothing to do with the four NEL policies. It seems to me to be more likely that this sum derived from the £10,000 which the pursuer had originally placed with Finesco in May 1986 (and, albeit that it was not put to him in evidence, the schedule which forms his own production
no. 5/3/2 of process appears to bear this out).

In summary so far it seems to me that there was evidence before the sheriff which entitled him to find it proved that at the date of the parties' marriage the pursuer's assets, exclusive of the house at Balloch, amounted to not less than £46,115 made up as follows:-

Halifax Building Society

£5,494

National Westminster Bank

£7,500

NM Financial Management

£12,121

Finesco

£10,000

NEL Policies

£5,000

Norwich Union Policy

£6,000

£46,115

As already indicated, the sheriff found that the pursuer's assets, exclusive of the house at Balloch, amounted in fact to £75,000 at the date of the marriage - see finding in fact 59. He explained this figure at page 65 of his judgement where he wrote: "The figure for the pre-marriage assets of the pursuer is clearly stated from his own evidence at £75,000, necessarily an estimate. To that has to be added a specific asset of the value of the house in Balloch net at £32,000 bringing out a total deduction of £107,000". It is certainly true that the evidence of the pursuer as to his financial position at the date of the marriage was not as clear as might have been hoped. On the other hand, allowance has to be made for the fact that he was giving evidence in December 1999 about a state of affairs that existed almost exactly fourteen years before, and it is hardly surprising that he should have had some difficulty in this respect. Counsel for the defender pointed out that he had been divorced from his first wife in 1984, and she submitted that he ought to have been able to identify clearly what assets he had then by reference to the terms of the divorce settlement at that time. I do not agree. This particular settlement was evidently a straightforward affair in which the pursuer retained the house at Balloch and his former wife the furniture, and each retained their own cash - see page 1.97A. So it is not surprising that no detailed record of the settlement should have survived. The pursuer spoke (at page 1.88F) to the terms of the schedule which forms no. 5/9/26 of process and which included the assertion that he had savings and investments at the time of his marriage to the defender of at least £75,000. He confirmed this figure at page 1.99B/C, and this of course was evidence that the sheriff was entitled to accept, albeit that he was bound to look at it critically in light of the remainder of the pursuer's evidence and in light also of the evidence of the defender.

It appears that the pursuer arrived at the figure of £75,000 by working back to the date of the marriage from the summer of 1990 when he had deposited the sum of £114,502 in his account with the Halifax Building Society. It was out of this sum that the deposit of £81,000 for the house at Stonehaven was paid. It is perhaps instructive in this context to deduct from this sum of £114,502 those sums which can be shown to have been attributable either to an increase in the value of the pursuer's investments since the date of the parties' marriage or to sums of money which, according to him, he had saved out of his salary after that date. £18,694 (£16,000 plus £2,694) represented the proceeds of the original investment of £10,000 which had been made through Finesco, so that there had been a gain here since the date of the marriage of £8,694. Of the £22,686 derived from the four NEL life policies, a sum of the order of £16,200 must have been accounted for by the pursuer's savings out of his salary at the rate of £300 per month for the four and a half years or so between the date of the marriage and the date on which the policies were surrendered. A further £7,237 would have been accounted for by the increase from £12,121 to £19,358 in the value of the investment with N M Financial Management. And by the pursuer's own account, as demonstrated in no. 5/9/26 of process, he saved a total of £22,657 from his salary in the three years 1986, 1987 and 1988. Over these three years £10,800 out of these savings would have been accounted for in the payments towards the four NEL policies, leaving a balance of £11,857. In summary therefore, between the date of the marriage and the summer of 1990 the pursuer's savings appear to have grown by at least the sum of £43,988 made up as follows:

Finesco

£8,694

NEL Premiums

£16,200

N M Financial Management

£7,237

Balance of savings from income

£11,857

£43, 988

Deducting £43,988 from £114,502 leaves £70,514 which of course is rather less than the £75,000 of savings and investments which the pursuer said that he had had at the date of the parties' marriage. But it is clear that this sum of £114,502 did not represent the full extent of the parties' assets (none of which was said to have been contributed by the defender) in the summer of 1990. Thus the pursuer was at pains to point out (at page 2.127E) that there were then other accounts apart from the account with the Halifax Building Society. In particular there was a sum of £20,000 which he had transferred into an account in the defender's name (pages 1.99D and 2.127C).

The defender in her evidence (at page 4.82F/83A) said that she had seen no evidence that the pursuer had had the amount of money that he claimed to have had at the date of their marriage. But that is not perhaps very surprising given that, as she also acknowledged (page 4.83B), he was evidently in control of their financial affairs and kept matters close to his chest. The point was also made that the pursuer would not have been able to save as much before the marriage as he did after it since the defender had to leave Singapore initially every four weeks, and latterly every two weeks (pages 2.50C and 4.83E). But the difficulty here is that, apart from the occasions (the number of which was not specified) when the defender would return to the United Kingdom (page 2.50D), it is not clear where she went, or at what cost - and here it will be recalled that the state of Singapore is not a large one, so that the defender had not far to travel in order to leave it. It was also said (page 4.83E) that the pursuer's allowances were increased after the marriage, but the extent of this increase was not vouchsafed so I do not think that any inference can safely be drawn from this particular observation.

It seems to me to be quite likely that the sum of US$31,899.62 transferred from the pursuer's Singapore Citibank account to his account with Robert Fleming (Isle of Man) Limited (see no. 5/9/19 of process) represented, at least in part if not altogether, savings made by him during his employment in Singapore following the date of the marriage. The rate of exchange of US dollars to £ pounds sterling appears to have fluctuated between 1.5 and 1.8 at that time - see page 2.97C and no. 5/9/26 of process - so that the sterling equivalent of the sum so transferred would have been of the order of £18,000 to £21,000. Clearly it is possible that the source of the sum of £20,000 deposited in the pursuer's account with the Halifax Building Society on
7^th October 1988 (see no. 5/9/14 of process) and the sum of £10,479.30 withdrawn from the Abbey National Building Society on 25^th January 1989 (see no. 5/9/18 of process) could also have been savings made by him following the parties' marriage but, as I have already suggested, it may be asked whether it is likely that he would have saved as much as £30,000 or so in this way over and above the sum transferred from his Singapore Citibank account and the regular payments of £300 per month towards the NEL policies. On balance therefore I am satisfied that, while the evidence on these matters was certainly not as clear as it might have been, there was enough overall to justify the sheriff's finding that, when the parties were married, the pursuer had assets to the extent of £75,000 in value in addition to the house in Balloch, the net value of which was £32,000. As the sheriff put it in his finding in fact 59:- "The total assets of the pursuer at the date of the marriage were therefore £107,000. The defender had no capital assets at the date of the marriage".

The defender's second ground of appeal was to the effect that the sheriff had erred in law "by incorrectly using his discretion under section 10(6)(b) of (the Act) by deducting the whole of the alleged pre-marriage assets from the total of the matrimonial property". In the course of his judgement the sheriff summarised the submissions for the pursuer on this branch of the case at pages 44/5 as follows:-

(The pursuer's solicitor) then referred more specifically to section 10(6)(b) of (the Act). She quoted the essential provisions. The paragraph dealt as did the other paragraphs of section 10(6) with special circumstances applicable to an equal sharing. The paragraph in question provided that one of those circumstances was the source of the funds or assets used to acquire any of the matrimonial property where those funds or assets were not derived from the income or efforts of the parties during the marriage. This provision dealt with assets before marriage. The pursuer had such assets, ultimately used to facilitate the purchase of Monkland. These assets were derived partly from his own investments and savings, and partly from the selling and buying of the houses at Balloch and Stonehaven. From the evidence of the pursuer the pre-marriage assets which he brought were £140,000, but the evidence as a whole showed that the correct basic figure was £110,000. £190,000 was paid for Monkland with a mortgage, when bought, of £79,000. If traced back to the pre-marriage assets, the figure of £205,000 should come down by £110,000, to a sum of £95,000. These were of evidential value, but did not in themselves constitute special circumstances. The special circumstances were the large sums involved, their existence providing a high standard of living, and there being no contribution, pre-marriage, at all from the defender".

The sheriff then summarised the submissions for the defender at page 50 as follows:-

In respect of section 10(6)(b) ...... she referred to the evidence in that respect in the shorthand notes (at page 1.85-93 and no. 5/9/26 of process). It had to be borne in mind that consideration had to be given to the defender having not been employed and spending the years looking after Amber. There was no evidence of special circumstances in that respect and even if there was a deduction of the level sought by the pursuer was unjustified.

Finally the sheriff explained his own reasoning at page 64. After dealing with certain other arguments under reference to section 10(6) of the Act (which are not the subject of this appeal), the sheriff stated:-

My view of the point on section 10(6)(b) ....... is different. I agree with the pursuer, though not quite with the figures. There is no doubt that the source of the assets pre-marriage is that of the pursuer. Account has to be taken not necessarily complete deduction. Again, however, I refer to the argument of (the pursuer's solicitor) which was well founded and I cannot put it better. A deduction is appropriate. It is therefore my view that the capital payment to the defender should be one half of the matrimonial property with the appropriate deduction in terms of section 10(6)(b) of the 1985 Act.

He then described how, as already indicated, he had deducted the sum of £107,000 from the aggregate value of the matrimonial property, namely £210,000, to give the sum of £103,000 upon the basis of which the capital sum to be paid to the defender fell to be assessed.

Counsel for the defender submitted under reference to Jacques v Jacques 1997 SC (HL) 20 that the sheriff had erred in the exercise of his discretion in deducting the whole value of the pursuer's pre-marriage assets, namely £107,000, in this way. She suggested that it was irrelevant that these assets had provided a high standard of living for the parties, and further that the sheriff had failed in particular to take into account that the defender had given up her employment in 1982 and had gone to live with the pursuer in Singapore where she had at first been unable to marry him, where she had cooked and cleaned for him and had looked after Amber following her birth. In addition she had been unable to obtain work and the sheriff had failed to take into account the economic loss which she had sustained as a result. The matter was therefore at large on appeal, and I should hold that there were no special circumstances which would justify a departure from the principle of equal sharing of the matrimonial property.

Counsel for the pursuer drew attention to the observations of the Lord President (Hope) in Little v Little 1990 SLT 785 which were approved in Jacques v Jacques. These observations are to be found at page 787B of the report where his Lordship, after referring to the detail in the Act, stated:

But despite all the detail much is still left to the discretion of the court. This is clear from an examination of section 8(2) which provides that the court shall make such order, if any, as is justified by the principles set out in section 9 and reasonable having regard to the resources of the parties. The concept of sharing the net value of the matrimonial property fairly, the flexibility which is given by the expression "special circumstances" in section 10(6) and the repeated references in section 11 to all the other circumstances of the case serve to emphasise that, despite the detail, the matter is essentially one of discretion, aimed at achieving a fair and practicable result in accordance with common sense. It remains as important as it always has been that the details should be left in the hands of the court of first instance and not opened up for reconsideration on appeal.

Counsel submitted that the sheriff had recognised the existence of special circumstances in the present case and had held that they justified a departure from the principle of equal sharing. These were issues for his discretion, and it could not be said that he had erred in law in his approach to the matter.

In my opinion the submissions here for the pursuer are to be preferred. As was emphasised by the Lord President (Hope) in the passage just quoted, the issue was essentially one for the discretion of the sheriff, and I am quite unable to hold that he erred in this respect. It seems to me that, in a situation where the pursuer brought to the marriage assets worth £107,000 and the defender brought none, it was perfectly reasonable to take the view that on the breakdown of the marriage twelve years later the pursuer should in effect be given credit for the value of those assets (but not of course the gains accruing from them during the marriage itself) in working out how the net value of the matrimonial property at the relevant date should be shared between the parties.

The defender's third ground of appeal was to the effect that the sheriff had erred in law by failing to take into account the value of the director's loan due to the pursuer by Pinnacle as a matrimonial asset. Counsel for the defender drew attention here to the evidence of the pursuer in relation to the accounts of Pinnacle (nos. 5/9/10, 11 and 12), and in particular the fact that the accounts for the year ended 31^st May 1997 showed that he had lent the company £15,000 while the draft accounts for the year ended 31^st May 1999 showed that this had increased to £26,270. Counsel pointed out too that at page 2.110E the pursuer had stated that he had invested £23,000 or £24,000 in the company. Counsel suggested that the value of the pursuer's loan as at the relevant date should be taken to have been £20,000, or at least £15,000.

In reply, counsel for the pursuer acknowledged that the evidence of the company's accountant Mr Shepherd to the effect that the loan should be valued at nil had been based on a state of affairs (namely the company's bank having lent money to the company and taken a guarantee from the pursuer) which had existed only after the relevant date. Counsel accepted that there was prima facie evidence, which had not been challenged, to the effect that as at the relevant date the loan had had a value of £15,000, and he acknowledged therefore that the value of the loan should have been stated at £15,000. But he did not accept that any higher amount than this should be attributed to it.

In light of this concession I am satisfied that the sheriff ought to have valued the pursuer's loan to Pinnacle at the relevant date in the sum of £15,000. It is true that it appears both from the pursuer's own evidence and the draft accounts to 31^st May 1999 that he lent further sums to the company after 31^st May 1997. But it is impossible to say whether any of these additional sums were lent between the latter date and the relevant date, whether this was in September or in December 1997.

The defender's fourth ground of appeal was to the effect that the sheriff had erred in law by incorrectly valuing the pursuer's interest in the business of Pinnacle. It became clear that what was meant here was the value of the pursuer's shares in the company. Mr Shepherd, who was called as an expert witness for the pursuer, was of the opinion that these shares should be valued on an assets basis. On the other hand the defender's expert witness, Miss Hardiment, was of the opinion that they should be valued on an earnings basis. Mr Shepherd's approach gave a value for the pursuer's shares of £800, or £3,200 if no deduction was made from the company's net assets in respect of certain grants which had been made to the company. Miss Hardiment's approach gave a value of £10,000. The sheriff preferred Mr Shepherd's method of valuation, but rejected his view that the deduction should be made (and this part of the sheriff's decision has not been challenged on appeal), and in the result he found that the value of the pursuer's shares at the relevant date was £3,200.

The sheriff dealt with this aspect of the case at pages 65/6 of his judgement as follows:-

There is competing expert professional evidence on the value of the shareholding of the pursuer in Pinnacle. For the pursuer Mr Shepherd, the company accountant, gave evidence based on his report, 5/8/1 of process. His evidence is at volume 3 of the notes at 100-129. For the defender Miss Hardiment gave evidence based on her report, 6/2/1 of process. Her evidence is at volume 5 of the notes at 97-121. Both are suitably qualified and experienced chartered accountants. Both are agreed that there are three possible methods of valuing shares of a private company such as Pinnacle. Both reject the dividend basis. There they part company. Mr Shepherd values on an assets basis, Miss Hardiment on an earnings basis. The shares have to be valued at the relevant date of September or December 1997, it does not matter which. Miss Hardiment considers that a buyer, objectively looking at Pinnacle would not look at the assets of the company, consisting mainly of computer hardware and software. As I understand his approach Mr Shepherd does not, in principle, disagree with this. What he says is that there is no evidence on which earnings can be worked out with the necessary projection for the future, and there must be such a projection, in the view of both professional experts. Miss Hardiment advances the proposition of projected earnings on three foundations. First is the turnover of the company which is going up. Second is the confidence of the bank in lending at a sum of £80,000. Third there is the nature of the company in a hi-technology area being a business of the type which is likely to be sustained and grow in the future. Mr Shepherd points out that the first year's trading was almost entirely based on a contract for McDermott's, which was not going to be sustained and was never going to be sustained. Therefore the whole foundation of the argument is based on one year's trading. He agreed that turnover was up but pointed out that profitability was down. In my view Mr Shepherd is to be preferred for those reasons, and also because the existence of lending and the type of company are too speculative to sustain an earnings basis valuation. He concludes that assets basis is the only practical and possible one, and I accept that conclusion.

Counsel for the defender submitted in short, and under reference to McConnell v McConnell 1997 Fam LR 97 and Fulton v Fulton 2000 Fam LR 8, that the sheriff had erred in preferring the evidence of Mr Shepherd on this branch of the case to that of Miss Hardiment. Counsel for the pursuer on the other hand submitted that it had been for the sheriff to decide whose approach to the valuation of the pursuer's shares he should adopt. He had been entitled on the evidence to prefer Mr Shepherd's approach and had given satisfactory reasons for doing so - see Macphail's Sheriff Court Practice (2^nd Edn) at paragraph 18.107 where it is said: "But where the finding does not bear to have turned upon the judge's observation or impression of the witness, the appellate court is free to examine for itself his stated reasons for accepting or rejecting the witness's evidence and, if they are unsound or unsatisfactory, to form its own conclusion".

Albeit that he dealt with the matter somewhat briefly, I am persuaded that the sheriff has given satisfactory reasons for preferring the evidence of Mr Shepherd to that of
Miss Hardiment. In any event, had I been in the sheriff's position, I am confident that I too should have accepted that the pursuer's shares should be valued on an assets rather than an earnings basis. Plainly the issue has to be judged in light of the information that would have been available as at the relevant date to a willing purchaser of the pursuer's shares. At that time such a purchaser would have seen the company's accounts for the years ended 31^st May 1996 and 1997, and presumably also some sort of management accounts which would have shown how the company's financial position had developed between 31^st May 1997 and the relevant date and was projected to develop thereafter. In the absence of such management accounts, the best guide to what they might have disclosed is to be found in the figures for the year ended
31^st May 1998 which are shown in the draft accounts for the year ended 31^st May 1999. Over the three years ended 31^st May 1998 the company's turnover was £484,527, £356,444 and £733,642 respectively while the profit before tax in each of these years was £13,394, £3,925 and £1,972 respectively. In short, the picture at that stage was one of increasing turnover and decreasing profitability - hardly an encouraging one to a prospective purchaser of shares in the company. It is true that such a purchaser would have expected to have become a director of the company and hence would have been interested, not merely in the overall profitability, but also in the level of directors' remuneration which in the year ended 31^st May 1997 was £65,150 and in the following year £82,500. Such a purchaser might also have been impressed by the fact that the bank had been prepared at some time after 31^st May 1997 to grant the company overdraft facilities on a secured basis to the extent of some £84,000. But this was no doubt upon the basis that the pursuer and his two fellow directors (each of whom had given a guarantee to the bank) would continue to be actively involved in the management of the business. In reality, if the pursuer were to have sold his shares in the company at the relevant date, it is scarcely likely that he would have continued to be employed by the company. In paragraph 4.3 of her report Miss Hardiment opined that a sustainable profit figure was considered to be £10,000 with an appropriate multiple of 5 to be applied, and that this gave a value for the company of £50,000. No further specification was given of the basis upon which she felt able to say either that £10,000 might be considered to be a sustainable profit figure or that 5 might be an appropriate multiple to be applied. In light of the available information these two figures must I think be regarded as highly speculative, and it does not seem to me that
Miss Hardiment was able in her evidence to offer coherent grounds for supporting them. In short, Mr Shepherd was right in my opinion to say that, in the particular circumstances of this company as at the relevant date, it would not have been appropriate to value its shares on an earnings basis. I am myself inclined to think that even a valuation on an assets basis produced rather an optimistic picture. But it was not argued that any lesser figure than the resulting sum of £3,200 for the value of the pursuer's shares should be adopted.

In summary therefore the only adjustment that falls to be made to the sheriff's findings in relation to the matrimonial property is that required to reflect the value of the pursuer's loan to Pinnacle at the relevant date, namely £15,000. The result of this is to increase the aggregate value of the matrimonial property to £224,312. When this is rounded up to £225,000 and £107,000 deducted therefrom in respect of the pursuer's assets at the date of the marriage, the resulting figure for the value of the matrimonial property to be divided equally between the parties is £118,000. Counsel for the pursuer accepted that from this sum fell to be deducted the only asset owned outright by the defender at that date, namely the sum at credit of her account with the Halifax Building Society. This amounted to £5,127, and for present purposes may be rounded down to £5,000. £113,000 is thus the sum to be divided, and this gives £56,500 as the value of the defender's share of the matrimonial property as at the relevant date.

There remains the question what orders should be made to give effect to this conclusion. Counsel for the defender advanced various solutions in the course of her submissions, but at the end of the day I understood her position to be that I should (1) ex proprio motu order the sale of Monkland in terms of section 14 of the Act and the division of the free proceeds of sale equally between the parties, and then (2) order payment by the pursuer to the defender of a balancing capital sum of £57,000. This was all on the basis that no deduction was made in respect of the assets owned by the pursuer at the date of the marriage, that the value of his loan to Pinnacle was taken to be £20,000 and the value of his shares in the company £10,000. In round terms this meant that the net value of the matrimonial property at the relevant date was £240,000 and an equal division of this would result in each party being entitled to £120,000. The net value of Monkland at the relevant date was £126,000 and, on the basis of this figure, each party would therefore receive £63,000 on the sale of the property. Payment of a further £57,000 by the pursuer to the defender would result in her receiving the sum of £120,000 to which, so it was argued, she should be found entitled.

In response, counsel for the pursuer moved a minute of amendment (no. 42 of process), the chief feature of which was to add two new craves for the pursuer. The first of these craves in short sought an order for the sale of Monkland and payment of £56,500 out of the free proceeds to the defender and the balance to the pursuer. The second new crave sought an order for the transfer by the defender to the pursuer of her interest in two endowment policies which are currently in the joint names of the parties. Having heard counsel for the defender I allowed this amendment and counsel for the pursuer proceeded to invite me to grant decree in terms of these two new caves, the purpose of which, so he said, was to give effect to what the sheriff had evidently intended should happen (subject to the adjustment of the net value of the matrimonial property to reflect the value of the pursuer's loan to Pinnacle).

Section 8(2) of the Act provides that any order for financial provision must not only be justified by the principles set out in section 9 but also must be reasonable having regard to the resources of the parties. It is plain that the only resource out of which a capital payment might realistically be made to the defender is Monkland, and at the end of the day there was no dispute that the property should be sold. The real question in my view is how the proceeds of sale should be divided between the parties. On the assumption that the net value of the property is £126,000 I have found that the defender would be entitled to payment of the sum of £56,500 as her share of the value at the relevant date of the matrimonial property. Accordingly, if the property is sold now for a net sum of £126,000, I could indeed order £56,500 out of this sum to be paid to the defender and the balance to the pursuer. The same effect would of course be achieved by an order that £69,500 should be paid out of the free proceeds to the pursuer and the balance to the defender. The difficulty here is that it cannot be assumed now that the free proceeds of sale of the property will indeed amount to £126,000. For obvious reasons therefore I do not suppose that the pursuer would be any more enthusiastic about an order that he should be paid £69,500 out of the proceeds with the balance to the defender than would she be happy with an order that she be paid £56,500 with the balance to the pursuer. In the circumstances it seems to me that the fairest course would be to order the sale of the property and the division of the free proceeds into one hundred and twenty six (126) parts whereof sixty nine and one half (691/2 ) should be paid to the pursuer and fifty six and one half (561/2 ) to the defender. In this way each party will receive his or her appropriate share as at the relevant date of the only item of matrimonial property that is readily and sensibly realisable. This is essentially what happened in Jacques v Jacques, only in that case each party was entitled to a straightforward one half share of the proceeds of sale of the property. And as in that case, so too in the present case I think that the order which I have made will get round the problem that arose in Wallis v Wallis 1993 SC (HL) 49.

Since I have proceeded upon the hypothesis that only Monkland should be realised in order to fund the payment to the defender of her share of the matrimonial property, it follows that her interest in the two endowment policies should be transferred to the pursuer for no consideration, and I have accordingly pronounced an order to this effect.

In his interlocutor dated 6^th June 2001 the sheriff reserved the question of expenses. He dealt with these in his interlocutor dated 26^th June 2001 in terms of which he found the defender liable, as an assisted person, for payment to the pursuer of the expenses of the cause, to the extent of 75% of the taxed amount thereof and assessed the liability of the defender in that respect at £3,000, that is £3,000, not 75% of £3,000. To this interlocutor he appended a very brief note in which he dealt with other matters that had evidently been raised at the hearing on 26^th June 2001. But he did not explain (and here I intend no criticism of him) why he had decided to dispose of the expenses in the manner just indicated.

In her final ground of appeal the defender challenged this last part of the sheriff's decision. It was said that the sheriff had erred in law by making an award of expenses against the defender and by failing to assess her liability as an assisted person for expenses at nil given that she was legally aided and in receipt of Income Support. But no note was requested from the sheriff, despite the terms of rule 31.4(2)(d) which provides that, where a note has not been provided by the sheriff, a note of appeal shall request that the sheriff write a note setting out the reasons for his decision.

At the hearing of the appeal counsel for the defender proceeded to attack the sheriff's decision on the matter of expenses as unreasonable, and she criticised him for not having given reasons for his decision. In response, counsel for the pursuer relied upon the fact that the defender should have sought a note from the sheriff to explain why he had dealt with the expenses as he had, and, this not having been done, he submitted that it was not now open to an appeal court to review the sheriff's decision.

Strictly speaking, I dare say that I could have adjourned the hearing of the appeal until a later date to allow time for the preparation by the sheriff of a note to explain his decision on the matter of expenses - see Macphail at paragraph 18.59. But I was not asked to do this by counsel for the defender, and besides the sheriff himself has now retired. In these circumstances and given (a) the amount of time that has already been taken up in the hearing of this appeal, and (b) that the sheriff's decision on the matter of expenses was very much one for his discretion in any event in light of the history of the action as a whole, I do not think that it would be appropriate now to entertain this ground of appeal or to interfere with the sheriff's decision subject to one qualification. The sheriff has at least been shown in the course of this appeal to have erred in his valuation of the pursuer's loan to Pinnacle, and some adjustment of his decision on expenses should be made to reflect this. Looking at the notes of evidence as a whole and the submissions thereon as recorded by the sheriff, I think that it is plain that the question of the value of this loan only took up a small amount of time at the proof. In the circumstances it would I think be reasonable to reflect this be restricting the defender's liability as an assisted person to the pursuer to the sum of £2,750 rather than £3,000 as ordered by the sheriff.

It will be seen that, in addition to the decree for payment of a capital sum of £49,000, I have deleted the whole of the latter part of the sheriff's interlocutor dated 26^th June 2001 beginning with the words "Remits an account thereof ......". Looking to the interlocutors in the cause, the length of the record and the notes of evidence, I find it very hard to believe that 75% of the taxed amount of the pursuer's expenses would come to less than £2,750. If I am right in this, and if the defender is prepared to concede the point, then I should have thought that nothing would be gained on either side by a remit of the pursuer's account of expenses to the auditor of court to tax and to report. It seems to me that it would be more sensible simply to grant decree now for payment by the defender to the pursuer of the sum of £2,750 in full of her liability for expenses and to suspend extract of this until written confirmation has been exhibited to the sheriff clerk to vouch the payment to the defender of her share of the proceeds of sale of Monkland. In practice of course I dare say that the better way would be to adjust the division of these proceeds to reflect the defender's liability in this respect.

These outstanding matters may be dealt with at the hearing which will in any event be necessary to consider the question of the expenses of the appeal which, it was agreed, should be reserved.