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Cite as: [2004] ScotSC 63

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SHERIFFDOM OF LOTHIAN AND BORDERS

F444/01

JUDGMENT OF

SHERIFF PRINCIPAL IAIN MACPHAIL QC

in the appeal

in the cause

SHONA SCOTT BARNS or McCASKILL

Pursuer and Respondent

against

DOUGLAS GLEN McCASKILL

Defender and Appellant

_________________________

Act: Scott; Campbell Smith WS

Alt:Doyle; Doyle & Co

EDINBURGH, 22 September 2004.

The Sheriff Principal, having resumed consideration of the cause, refuses the appeal; adheres to the interlocutor of 12 February 2004 complained of; reserves all questions of expenses and appoints parties to be heard thereon on 12 October 2004 at 10.30 a.m. within the Appeal Court, Court No 9, Sheriff Court House, 27 Chambers Street, Edinburgh.

NOTE/

NOTE

Introduction

[1] This is a husband's appeal against the orders for financial provision made in the interlocutor granting decree in a wife's action of divorce. The wife craved, in addition to decree of divorce, a capital sum of £80,000 and an order for the sale of the former matrimonial home ('the flat') the title to which is in the parties' joint names. The husband did not contest the divorce on the merits but craved an order in terms of section 8(1)(aa) of the Family Law (Scotland) Act 1985 ('the Act') transferring the title to the flat to him in exchange for the payment by him to the wife of the sum of £20,000. Each party also stated other craves which are no longer material. The Sheriff granted decree of divorce; ordered the husband to pay to the wife a capital sum of £14,570; and also ordered that the flat should be sold, certain deductions made from the proceeds of sale, and the net proceeds divided equally between the parties. The husband has appealed.

[2] The parties agreed by joint minute that the relevant date (section 10(3) of the Act) was 11 August 1998, the date when the wife left the flat. They also agreed the following values of the only significant items of matrimonial property. The capital value of the husband's pension at the relevant date was £21,640. The value of the flat was £45,000 at the relevant date and £100,000 at the date of the proof (8 January 2004), an increase of 122 per cent. After hearing the evidence and considering all the facts admitted or proved, the Sheriff decided that the net value of the matrimonial property should be shared equally between the parties, subject to two modifications. The first took account of the fair sharing of the economic burden of caring for a child of the marriage. For this purpose the Sheriff when calculating the capital sum to be paid to the wife added to the figure representing one half of the value of the husband's pension (£10,820) a figure of £3,750, giving a total award of £14,570. The second modification took account of certain payments, amounting to £4,070.60, made or to be made by the husband in relation to the flat. Here the Sheriff ordered the deduction of certain figures from the proceeds of sale of the flat prior to the equal division of the net proceeds between the parties.

Submissions

[3] The husband's solicitor began by making what he described as 'arithmetical points' about the figures in the Sheriff's interlocutor. It will be convenient to dispose of these points at once. They fall into two groups. First, criticism was made of the deductions, apart from the legal and other expenses associated with the sale, which the Sheriff had ordered to be made from the proceeds of sale of the flat prior to the equal division of the net proceeds between the parties. It was submitted that the Sheriff should have taken account of a sum of £3,237 which the husband had paid to clear the mortgage which had been outstanding at the relevant date. This matter is referred to in the note of appeal. When considering a ground of appeal on an issue such as this it is necessary to keep in view that the matter complained of is essentially one of discretion. '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.' (Little v Little 1990 SLT 785 per Lord President Hope at 787D; approved, Jacques v Jacques 1997 SC (HL) 20 per Lord Jauncey of Tullichettle at 22, Lord Clyde at 25.) The Sheriff carefully considers this matter in paragraph 34 of his note at pages 22-23, where he approves of the detailed submissions for the wife which he narrates at paragraphs 11.2 and 11.3 on pages 13-14. In my opinion the Sheriff's decision was properly made in the exercise of the discretion confided to him.

[4] The husband's solicitor concluded this first group of arithmetical points by criticising the deductions from the proceeds of sale which are considered by the Sheriff in paragraphs 36, 37 and 39 of his note on pages 23-24. Secondly, he took exception to the Sheriff's inclusion in the capital sum of £14,570 of the figure of £3,750 to take account of the fair sharing of the economic burden of caring for a child of the marriage. The wife's solicitor pointed out that these further submissions had not been foreshadowed in the note of appeal. He submitted that in any event they were unsound. I do not propose to entertain these submissions. In my view they should have been stated in the note of appeal. The purpose of a note of appeal is to identify for the respondent and the Sheriff Principal (and for the Sheriff, if he or she is asked to write a note) the points which will be in issue at the hearing of the appeal and the nature of the argument in relation to these points (Ordinary Cause Rules 1993, rule 31.4(3); Smyth v Pearce, Edinburgh Sheriff Court, 13 July 2004 at [14]). It is unjust to the respondent if the appellant raises at the hearing points of which the respondent has had no fair notice. I consider that argument on such points should be permitted only of consent or on cause shown, and on such conditions as to adjournment or otherwise as the Sheriff Principal sees fit in order to elide any prejudice to the respondent. In any event I would not have sustained these submissions. The assessment of these various figures was a matter for the Sheriff, and in my opinion it has not been demonstrated that his exercise of his discretion is open to challenge.

[5] The principal submission for the husband was that the Sheriff had erred in law by making the order for the sale of the flat craved by the wife instead of making the order for the transfer of property craved by the husband. The Sheriff had followed views expressed by Sheriff Bell in Quinn v Quinn 2003 SLT (Sh Ct) 5 and had declined to make the latter order on the ground that there were no special circumstances warranting the transfer of the title to the property. He should have followed Wallis v Wallis 1993 SC (HL) 49 and made such an order, achieving an equal sharing of the net value of the flat at the relevant date and disregarding the increase in its value since the relevant date. By taking the course recommended in Jacques v Jacques 1995 SC 327 at 331G-332C he had exercised his discretion wrongly. Reference was made to Christie v Christie 2004 SLT (Sh Ct) 95, Kennedy v Kennedy 2004 SLT (Sh Ct) 102 and Livie v Livie 1999 GWD 34-1639.

[6] While these submissions are not as clearly adumbrated in the note of appeal as they should have been, the wife's solicitor was able to respond to them. He submitted that the selection of the order for financial provision had been a matter for the discretion of the Sheriff (Jacques) and his decision could be set aside only on the grounds stated in Britton v Central Regional Council 1986 SLT 207. The question was whether the circumstances of the case made it appropriate for the Sheriff to order the transfer of property (Wallis, Lord Keith of Kinkel at 55F-G). It was unnecessary to search for 'special' circumstances (Jacques). The Sheriff had considered and discounted, with appropriate reasons, the circumstances relied on by the husband. This was a very plain case in which it had been patently appropriate to make orders such as those indicated in Jacques.

Discussion

[7] In my opinion the Sheriff arrived at the correct conclusion in relation to the flat, although not by the correct route. I consider that the appropriate way to approach the making of financial orders is as follows.

[8] The first task for the court is to value the matrimonial property (section 10(4)) at the relevant date (section 10(3)). As noted above, it is agreed by joint minute that the relevant date is 11 August 1998 and that at that date the material items of matrimonial property were the flat, then worth £45,000, and the defender's pension, the capital value of which at that date was £21,640.

[9] The next step is to decide upon the appropriate order or orders for financial provision to be made under section 8. Any such order must be justified by the principles set out in section 9 and must be reasonable having regard to the resources (as defined in section 27(1)) of the parties (section 8(2)). The court's approach to its decision is 'essentially one of discretion, aimed at achieving a fair and practicable result in accordance with common sense' (Little 1990 SLT 785 per Lord President Hope at 787C-D; approved, Jacques 1997 SC (HL) 20 per Lord Jauncey of Tullichettle at 22).

[10] The principle set out in section 9(1)(a) is that the net value of the matrimonial property should be shared 'fairly' between the parties. For this purpose 'fairly' means 'equally' unless some other division is justified by special circumstances (section 10(1)). While a number of special circumstances are specified in section 10(6), the words 'special circumstances' do not have any technical meaning but refer to any circumstances which are special to the case (Jacques 1997 SC (HL) 20 per Lord Clyde at 24).

[11] In the foregoing paragraphs I have adopted the approach of Lord Gill in Adams v Adams (No 1) 1997 SLT 144 at 147K-L. In the present case the Sheriff had to consider how the net value of the pension and the matrimonial home should be shared between the parties. As to the pension, he included in the capital sum of £14,570 which he awarded to the wife the sum of £10,820 representing one half of the value of the pension at the relevant date. It has not been suggested that he was wrong do to so, and indeed he was plainly right. The only other element he included in the capital sum was the figure of £3,750 reflecting the economic burden of caring for the child. His decision in this respect has not been successfully challenged, as I have noted at [4] above.

[12] In relation to the flat, however, I consider that all the Sheriff had to do was to examine the two options offered by the parties in their pleadings and decide, in the exercise of a proper judicial discretion, which of them would achieve a fair and practicable result in accordance with common sense (Little). The parties' craves set out two alternative courses for the Sheriff to follow. He could have made either an order for the sale of the flat, as craved by the wife, or an order transferring the title to the flat to the husband, as craved by him. I now examine each course.

[13] It is important to notice at the outset that the parties are the pro indiviso proprietors of the flat. On the ordinary principles of the common law of property, any increase in the value of jointly owned property enures to the benefit of all the joint owners. Now take the first course: an order for the sale of the flat and the division of the net proceeds equally between the parties. Here, the flat is treated as matrimonial property for the purposes of section 9(1)(a). The order is an incidental order in terms of section 14(2)(a) and (k). Such an order is made under section 8(2) (section 14(1)). It must therefore be justified by the principles set out in section 9 (section 8(2)(a)) and be reasonable having regard to the resources of the parties (section 8(2)(b)). The order would secure the following result. First, the free proceeds of the sale would be shared equally between the parties to the extent of the value of the flat at the relevant date. That would satisfy the requirements of sections 8(2)(a), 9(1)(a) and 10(1) to (4) of the Act. Secondly, the surplus over that value, which may be expected in view of the flat's increase in value since the relevant date, would also be shared equally between them. That would be in accordance with the principles of the common law, whereby each is entitled to one half of the increase in value. Such an order would be justified by the principles set out in section 9, and thus satisfy section 8(2)(a); and there has been no suggestion that it would not also satisfy section 8(2)(b) by being reasonable having regard to the resources of the parties. It would also have the merit of being fair, practicable, and in accordance with common sense (Little). This is the course commended by the First Division in Jacques 1995 SC 327 at 331G-332C.

[14] The only available alternative to that course in this case is to make an order in terms of section 8(1)(aa) transferring the title to the flat to the husband in exchange for a payment by him to the wife. In the husband's crave the sum to be paid is stated as £20,000, but in his solicitor's submissions to the Sheriff at the hearing on evidence the sum proposed was £31,701.50. It is clear that such an order should be made only if circumstances make it appropriate (Wallis 1993 SC (HL) 49, Lord Keith of Kinkel at 55F-G). It would scarcely be appropriate here. The value of the flat is now £100,000, an increase of 122 per cent over £45,000, its value at the relevant date. Thus the present value of each party's one-half pro indiviso share is £50,000. If the court were to make the order sought by the husband, its effect would be that for a payment of only £31,701.50 he would acquire, and the wife would relinquish, her interest in the flat for some £18,000 less than its market value of £50,000. He would receive an asset worth £50,000 in return for a payment of £31,701.50: an undeserved windfall of some £18,000, when his proved expenditure on the flat, which he was entitled to ask the court to consider, had been only £4,070.60. That would be the result of the application of Wallis, which no doubt would have to be followed if the path of a section 8(1)(aa) order were to be chosen. But there is nothing in the whole circumstances of this case to indicate that that would be an appropriate result. It could not reasonably be described as fair, practicable, and in accordance with common sense. It would be so inequitable that no reasonable Sheriff, properly exercising his discretion, could conceivably make such an order.

[15] The Sheriff appears to have adopted the approach of beginning by considering whether special circumstances existed to justify the making of a transfer of property order, with the consequent inequality of division, as opposed to ordering a sale of the flat and the equal division of the proceeds. I do not think that was necessary. All that was required was a careful examination of all the relevant circumstances, such as the Sheriff certainly carried out in his judgment, and then no more than a properly considered discretionary decision as to which of the various courses craved by the parties would best achieve 'a fair and practicable result, in accordance with common sense' (Little). He was perfectly entitled to moderate the application of the principle of equal division by taking account of the circumstances special to the case as he did, correcting the few imbalances between the parties through adjusting the amount awarded as a capital sum and directing deductions from the gross proceeds of sale, without first justifying his refusal to make a transfer order by demonstrating the absence of the special circumstances relied on by the husband. The correct reason for not making a transfer order in this case is simply that it would have led to a wholly unjust result.

Decision

[16] I have decided, accordingly, that the Sheriff reached the correct conclusion. Parties asked me to reserve the question of expenses. I have done so and appointed a hearing. After disposing of any issues as to expenses I shall remit the cause to the Sheriff to proceed as accords in relation to the details of the working out of the orders in his interlocutor.