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Scottish Sheriff Court Decisions
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Cite as: [2006] ScotSC 46
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(F706/03)
JUDGMENT OF
SHERIFF
PRINCIPAL EDWARD F BOWEN QC
in the appeal
in the cause
JAMES SWAN McKENZIE
Pursuer and
Appellant
against
MARY McCANN or McKENZIE
Defender
and Respondent
Act: Blane, A & W M Urquhart,
Solicitors
Alt: Doyle, Doyle & Co, Solicitors
The Sheriff
Principal, having resumed consideration of the cause, refuses the appeal and
adheres to the sheriff's interlocutor complained of dated 2 September
2004; substitutes the date
1 September 2006 as the before which no sale of the matrimonial home shall
be completed; reserves all question of
expenses.
NOTE:
1. Parties
to this action were married on 26 January 1962.
They separated on 31 May 2001 at which date the pursuer left the
matrimonial home at 4A Fettes Row Edinburgh.
At that date, being the "relevant date" for the purposes of
section 10(3) of the Family Law (
2. The
parties only other assets comprise two pensions in name of the pursuer and £900
held by him in a building society account.
The total net value of the parties' matrimonial property at the relevant
date is agreed to have been £256,347.42.
3. An
action of divorce was raised by the pursuer on the ground that the marriage had
broken down irretrievably by reason of the defender's behaviour. In it he sought an order for sale of the
former matrimonial home and the declarator that the purchase price should be
divided equally between the parties.
Failing such order he sought decree against the defender for payment of
a capital sum of £150,000. In her
defences the defender accepted that the marriage had broken down irretrievably
and although she did not seek to defend the action on the merits contended that
she had been assaulted by the pursuer at the time of the separation and that an
interdict against further molestation had been obtained against him. She sought decree ordaining the pursuer to
transfer his interest in the former matrimonial home to her, and a capital
payment of £20,000.
4. Immediately
prior to the proof the pursuer's ground of action was amended to that of two
years separation with consent, and the proof was in consequence confined to
financial matters. There being full
agreement between the parties as to the extent of their property there was in
effect only one issue to be resolved.
That related to the former matrimonial home which continued to be
occupied by the defender and, by the date of the proof, was worth
£340,000. The pursuer maintained his
position that it should be sold, the proceeds divided, and a balancing payment
by way of capital sum of £13,552 made to the defender to compensate for the
assets retained by him. In turn the
defender contended that a transfer order should be made in her favour of the
pursuer's half share of the former matrimonial home. In that event she accepted that it would be
appropriate for her to pay him the sum of £103,947 representing one half of the
value of the net matrimonial property at the relevant date less the value of
the pensions and savings retained by the pursuer.
5. It is
readily apparent that the defender's proposal would have produced a result
heavily weighted in her favour, simply because of the appreciation in value of
the former matrimonial home. She would -
on September 2004 figures - come into ownership of a house worth £340,000,
having made a payment which represented a one half share of a property valued
at £235,000. Accepting her solicitor's
argument, this is simply the consequence of a strict application of the terms
of sections 9 and 10 of the 1985 Act which call, in the absence of special
circumstances, for equal sharing of matrimonial property based on its value at
the relevant date. It is a difficulty
which is familiar in this area of the law, having been the subject of comment
in the House of Lords in the case of Wallis
(1993 SC(HL) 49) and numerous cases subsequent to it. Whilst the provisions of section 16 of the
Family Law (
6. The
proof before the Sheriff was in short compass.
Having reviewed the evidence and narrated the competing submissions she
decided in favour of the pursuer. She
said this in the concluding paragraph of her Note: "In the absence of there being special
circumstances justifying unequal division, and there are none here, the presumption
is thus for equality. The house is owned
in joint names. It is currently valued
at £275,000 (this was subsequently
corrected to £340.000). Since the date of separation the defender has
continued to enjoy not only her half share in the house, but also the pursuer's
half share in this house. She made no
payment to him in consideration of her enjoyment of his half share between the
relevant date and the date of divorce.
The pursuer's current resources are such that he is unable to purchase
alternative accommodation for himself.
He initially occupied a room in his mother's house and since her death
has required to pay rent for alternative accommodation. That accommodation is inferior to the
accommodation provided by the matrimonial home.
He is dependent upon the two pension entitlements referred to. He wishes his equity in his half share of the
matrimonial house released in order that he can purchase alternative
accommodation. In the event that a
transfer order is made the maximum capital available to this 65 year old man to
purchase alternative accommodation is some £103,947.69. For that to be achieved the defender will
require to borrow at least that amount against the equity in the house. She will then require to service a loan in
approximately that amount. I was given
no information as to the manner or funds which she could service such a loan at
this stage in her life. There was no
evidence that she had resources from any other source. Alternatively in the event that an order for
sale of the house is made each party would realise the cash equivalent
representing their respective half shares in the house. On the basis of the agreed current valuation
then each could look forward to receiving £137,500 (again that this would be subject to correction). The defender would additionally receive an
agreed capital sum of £13,552.31 from the pursuer. Having regard (a) to what is justified by the
principles set out in section 9 of the 1985 Act; and (b) to what is reasonable
having regard to the resources of the parties, I have decided that the house
which is in common ownership should be sold subject to the provisio that the
granting for the order for sale will not take effect until 30 October 2004
in order to allow the defender time to make any arrangements necessary to
obtaining alternative accommodation. In
addition to the order for the sale of the house I shall grant decree against
the pursuer for payment by him to the defender of a capital sum of £13,552.31
from the net free proceeds of sale in satisfaction of the defender's second
crave".
7. It is
to be noted that the Sheriff's interlocutor granting this order was dated
2 September 2004. That was some 28
days before, and in consequence without the benefit of the knowledge of, the
issue of the decision of Sheriff Principal Macphail in this Sheriffdom in the
case of Macaskill v Macaskill
(2004 FamLR 123) to which I shall refer later.
The general approach of the Sheriff in the instant case might be said nevertheless
to be consistent with the Sheriff Principal's approach in Macaskill.
8. The
defender lodged a note of appeal which included extensive criticism of the
Sheriff's decision and the adequacy of the findings leading to it. A hearing took place before Acting Sheriff
Principal Stewart who remitted the case to the Sheriff to make certain
corrections and additional findings in fact on five specific matters. This was duly done. When the matter came back before me the
defender's agent advanced as his principal submission the contention that the
Sheriff's judgment was still so essentially unsatisfactory that it could not be
allowed to stand. He argued alternatively
that the Sheriff had erred in the exercise of her discretion. Either way he contended that the Court should
look of new at division of the matrimonial property and on so doing should
grant an order for transfer of title to the matrimonial home into the
defender's name.
9. In
amplification of these submissions it was contended that the Sheriff had made
inadequate findings as to the parties' resources. To some extent that had been rectified
following the interlocutor of the acting Sheriff Principal. The Sheriff had heard that the pursuer was
reliant on £111 per week old age pension and £43 from his two private
pensions. She held that he received
unspecified sums in housing benefit and council tax concessions. She also held that he paid £450 monthly
rent; in fact the position was that his
lease, which was produced and agreed, stated that rent of £450 per month was
payable. But the landlord was his
daughter, and neither she nor the pursuer actually said that he paid £450 a
month to her. The finding that he paid
rent of £450 was accordingly not justified.
Further the Sheriff had not dealt fairly with the defender's evidence
about her ability to pay a capital sum.
The defender stated in evidence that she could raise £100,000 and was
not cross-examined on that. Despite
that, the Sheriff had made no finding as to the defender's ability to pay. She had held that she could raise a figure in
excess of £100,000 but had expressed doubts as to how the loan could be
serviced without any evidential justification for such concern.
10. It was
further argued that the Sheriff's judgment was deficient in respect that she
had failed to make sufficient findings regarding the parties' separation. The defender had averments in her pleadings
about the circumstances of the separation.
One of the productions was an affidavit sworn by the defender in an
action for interdict. The defender, in
the context of the present proceedings, had been shown the affidavit and asked
to verify the accuracy of the contents.
No objection had been taken.
Despite that the Sheriff had made no findings as to the circumstances of
the pursuer leaving the matrimonial home.
She had found that the defender wished to remain there because she had
lived in the same house for 40 years.
She had failed to comment, however, on the fact that for the defender
this was a "traumatic" separation or to make any comment on whether it was
reasonable for the defender to wish to remain in the house.
11. The
defender's solicitor then drew attention to the final part of the interlocutor
pronounced by the acting Sheriff Principal.
This requested the Sheriff "to make a finding in fact of law as to the
reason why the sale of the matrimonial home is preferable to a transfer of the
pursuer's share therein to the defender".
All that the Sheriff had said was:
"Having exercised my discretion and weighed and balanced all the
relevant factors and considerations, finds in fact in law, that the sale of the
matrimonial home is preferable to a transfer of the pursuer's share therein
having regard to the principles set out in section 9 of the 1985 Act and having
regard to what is reasonable and equitable having regard to the resources of
the parties". This was inadequate. In particular it gave no indication as to
whether the Sheriff had applied the correct legal test in determining the issue
in favour of the pursuer. The fact that
the defender had conceded that there were no special circumstances within the
meaning of section 10(6) of the 1985 Act did not necessarily lead to the
conclusion that a division of the matrimonial property involved selling the
house. The form of division contended
for by the defender would have resulted in equal division of the matrimonial
property at the relevant date. In short
the Sheriff had not indicated why she had exercised her discretion in favour of
the pursuer, and the Court should accordingly look at the matter afresh.
12. Before
turning to the law the defender's solicitor submitted that the Court should
make two additional findings in fact.
These were: "(1) At the time of
the separation the defender called the police to attend the matrimonial home. The pursuer was removed from the house by the
police. He has not returned since
then. The defender thereafter required
help and support from her general practitioner.
(2) The defender can pay a capital sum in return for transfer of the
pursuer's interest in the property. This
would be funded by equity release".
13. The
defender's solicitor then turned to consider certain authorities and decisions
on the approach to be taken by the Courts in questions of the divisions
matrimonial property. He cited the
observations of the Lord President (Hope) in Little v Little 1990 SLT 785, where his Lordship dealt with
the task of a court of first instance in applying the provisions of sections 8
to 11 of the Family Law (Scotland) Act 1985 but went on to say that the matter
remained "essentially one of discretion, aimed at achieving a fair and
practicable result in accordance with common sense". Citing Wallis
both in the Inner House (1992 SC 455) and in the House of Lords he founded in
particular on a passage in the opinion of the Lord President at page 460 in the
Inner House Report where his Lordship said "...what required to be shared equally
between the parties was the net value of the matrimonial property at the
relevant date. Various kinds of
financial provision may be made to achieve that object whether by means of an
order for payment of a capital sum or an order for a transfer of property or a
combination of the two. There is a
choice of method by which the financial provision may be made, but whichever
method is chosen the only legitimate object is to achieve a fair division of
the net value of the matrimonial property at the relevant date. It is irrelevant to this exercise that the
value of the matrimonial property, or of any items comprised within it, may
have altered between the relevant date and the date of division". The upholding of the decision in Wallis by the House of Lords
presented clear authority for the view that matrimonial property was to be
valued at the relevant date, divided in accordance with that value and it was
irrelevant that there had been any increase in value in any part of the
property since that date. The defender
had presented to the Court a form of division which was fair and practicable
and in accordance with common sense and in the absence of any proper indication
for rejecting it the Sheriff should have given effect to it.
14. The
case of Wallis had been
applied and considered by Sheriff Principal Kerr, QC in the cases of Christie v Christie (2004 SLT
(ShCt) 95) and Kennedy v Kennedy
(2004 SLT (ShCt) 102). In Kennedy Sheriff Principal Kerr
said (at page 106: "If the financial
provision ordered by the Court includes a property transfer order based on
property values taken at the relevant date then the result, assuming all other
matters to be correctly attended to, is deemed by the act to be a fair sharing. There is no room as the law currently stands
for any idea that a change in property value since the relevant date can result
in an unfair sharing unless specifically rectified by the Court".
15. A
different approach had however, been taken by Sheriff Principal Macphail in Macaskill (supra). That was an appeal by a husband who had
sought an order transferring title of the matrimonial home to him in exchange
for a payment based on the value of the property at the relevant date. It was agreed that that value was £45,000 but
the flat had increased in value to £100,000 by the date of the proof. The Sheriff had ordered that the flat
should be sold and the net proceeds
divided equally between the parties. The
Sheriff Principal upheld this decision.
He said in paragraph 12 of his note that "In relation to the flat 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 of the flat to the husband as craved
by him. I now examine each course". The Sheriff Principal dealt with the proposal
that the flat should be sold and went on to say in paragraph 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 of the flat to the husband in exchange for a payment by
him to the wife". He proceeded "It is
clear that such an order should be made only if circumstances make it
appropriate...It would scarcely be appropriate here. The value of the flat is now £100,000 an
increase of 122% 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".
16. The
defender's solicitor submitted that this approach was not supported by what was
said in Wallis and "was not
necessarily good law". He submitted that
in the instant case fairness could be achieved by either option. The starting point was "common sense" and on
that approach, having regard to the fact that the defender had occupied the
matrimonial home for 40 years, common sense favoured her remaining there.
17. In
reply to these submissions the solicitor for the pursuer maintained that the
Sheriff's judgment was not deficient; that it contained no material error in
law; and if there were any failings in it these did not go to the core of the
matter to the extent that warranted any interference. Turning to particular matters the Sheriff had
made no error in respect of the finding relating to the defender's ability to
raise a capital sum. Her finding was
simply that "the defender could initially raise a figure slightly in excess of
£100,000 through equity release in the former matrimonial home. There was no evidence as to how she would
service the loan". That finding
reflected the evidence. There was no
other evidence given as to how the loan would be raised or financed and the
Sheriff could not be criticised for failing to take into account evidence which
did not exist. So far as the separation
of the parties was concerned again there was no deficiency in that
respect. The defender in evidence had
referred to affidavits which had been lodged in connection with an interdict
action. No leave to refer to these had
been sought and technically they were not before the court.
18. Turning
to the fundamental basis of the Sheriff's decision she had in terms of her note
(at page 10 thereof) set out and considered the relevant statutory
framework. The Sheriff had stated that
"in the absence of there being special circumstances justifying unequal
division, and there are none here, the presumption is thus for equality". She had proceeded to reach a decision which
divided the property equally. That
decision was consistent with Macaskill
and provided the only equitable manner of dividing the parties' assets. The defender had been given a substantial
period to adjust to the change in her circumstances. The fact that she had lived in the house for
40 years and would no doubt be distressed at having to leave was not a factor
such as to bring about the approach sought on her behalf. The pursuer had also lived in the house for
40 many years and had no doubt been distressed by the circumstances of the
separation. The situation was in fact
very similar to that in Macaskill
and in consequence the Sheriff's decision, being in accordance with it, should
be allowed to stand.
DECISION
19. I
consider that the first point for determination is whether there is any
substance in the argument that the Sheriff's decision is inadequate in respect
of the two particular issues founded upon by the defender. In relation to the question of the defender's
ability to raise a capital sum it appears to me that, as submitted on behalf of
the pursuer, the Sheriff's finding simply reflects the evidence. If one reads the sentence: "There was no evidence as to how she would
service said loan" as constituting a doubt raised by the Sheriff as to
defender's ability to raise any such loan, it might be said that the Sheriff
went too far. It may be the case that
equity release can be achieved on a basis which involves no servicing of the
loan, but there was no evidence about that and I am not satisfied that it could
be said to be a matter on which one could make any assumption based on judicial
knowledge. So far as the separation of
the parties is concerned again I am not convinced that the Sheriff made any error
in that respect, not for any reason relating to the technical admissibility of
the evidence, but for the reason that I am doubtful that such evidence was
relevant. Having made the concession
that this is a case in which there are no "special circumstances" upon which he
could found, the defender's solicitor sought to argue that the circumstances of
the parties' separation simply formed part of the background on which to
approach the division of their assets from a common sense point of view. It seems to me however, that if one is using
the circumstances of the separation as a basis for preferring one course or
another in the context of the division of matrimonial property it is difficult
as a matter of law to do so other than on the basis of that it constitutes a
"special circumstance". The law has
moved on from a situation where fault in the breakdown of a marriage had a
bearing on the financial implications of divorce and although the defender's
agent was at pains to avoid any suggestion, or any finding, that the pursuer
had been violent towards the defender it is difficult to avoid the conclusion
that the purpose of his argument was to create an impression that the defender
had in some way been "wronged". In my
view in proceeding to consider the division of the matrimonial property in the
absence of special circumstances the Sheriff was right in omitting this
evidence from her consideration.
20. Of more
fundamental consideration is whether the Sheriff has given no adequate reason
for preferring the pursuer's approach to the division of property than that of
the defender. It is certainly correct
that no reason is to be found in the concluding paragraph of the Sheriff's
supplementary note as quoted in paragraph 11 above. But if one looks at the concluding paragraph
of the Sheriff's original note, as quoted in paragraph 6 above, it is not
difficult to see why she reached the decision which she did. The decision is based on the relevant
circumstances of the parties. The
Sheriff notes that the pursuer's accommodation "is inferior to the
accommodation provided by the matrimonial home". She had previously recorded that the former matrimonial
home had three bedrooms and a garden and that the defender's rented property
was "inferior". There cannot be much
doubt that the Sheriff took the view that a sale of the former matrimonial
home, and division of the free proceeds of sale provided a more equitable
solution to the division of their assets than the defender's proposal.
21. That
brings into sharp focus the question of whether the decision in Macaskill should be
followed. In giving that decision
Sheriff Principal Macphail said, in relation to the outcome of the proposal by
the husband that the matrimonial home be transferred to him, that "There is
nothing in the whole circumstances of the case to indicate that that would be
an appropriate result. It could not
reasonably de 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". On the basis of
that expression of opinion it is difficult to see how the Sheriff could have
favoured the approach advocated by the defender in this case. Her approach is entirely consistent with the
Sheriff Principal's view, albeit she has not set it out in such trenchant
terms.
22. I am
not bound by the decision in Macaskill,
although I would not lightly disagree with the observations of my distinguished
predecessor. I am not disposed to take a
different view. Wallis, it seems to me, is no more than authority for the
view that when an interest in the matrimonial home is transferred the amount of
capital payment to be paid by the transferee is fixed according to the value of
the home at the "relevant date" and not in the light of any subsequent
variation in its value. It is only when
a transfer order is made that any question of unfairness arises. In Macaskill
Sheriff Principal Macphail said in relation to the proposal to sell the
matrimonial home and divide the property that it would secure the following
result: "First the free proceeds of the
sale would be shared equally between the parties to the extent 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 satisfy section 8(2)(b) by being reasonable having
regard to the resources of the parties.
This would also have the merit of being fair, practicable, and in
accordance with common sense". In my
judgment exactly the same considerations apply in this case and in consequence
there is no reason for interfering with the decision of the Sheriff.
23. In her
interlocutor the Sheriff gave the defender a period of two months in which to
make arrangements to obtain alternative accommodation. In my view a somewhat longer period ought to
be available and a period closer to four months would be more appropriate. I shall appoint 1 September 2006 as the
date before which no sale of the matrimonial home shall be completed.
(signed) EFB