Scottish Sheriff Court Decisions

SHERIFFDOM OF GRAMPIAN HIGHLAND AND ISLANDS AT ABERDEEN

 

[2017] SC ABE 35

F327/14

JUDGMENT OF SHERIFF W H SUMMERS

 

In the cause

 

GG

 

Pursuer

 

Against

 

WG

 

Defender

 

Pursuer:   Aitken;  Burnett & Reid, Solicitors

Defender:   Shewan;  Gray & Gray, Solicitors

 

Aberdeen, 31 May 2017

The sheriff, having heard parties in debate and having resumed consideration of the cause, sustains the first plea-in-law for the defender to the extent of excluding from probation, firstly the averments in Article 4 of condescendence at page 3 of the Record in paragraph (a) reading “As at the date of separation the said asset was worth in the region of TWO HUNDRED AND NINETY THOUSAND POUNDS (£290,000) Sterling. A valuation report prepared by D M Hall, Chartered Surveyors is produced herewith.” and secondly the averments in Article 4 of condescendence at page 4 of the Record commencing seven lines from the bottom of that page and reading “Upon the house being built upon land which was not matrimonial property, the land in the form of the garden and other ground and buildings required for the amenity and convenience of the house became matrimonial property”;  Quoad ultra Allows parties a proof of their respective averments before answer; appoints parties to be heard in relation to the expenses occasioned by the diet of debate of 16 May 2017 and in respect of  further procedure on 22nd June 2017 at 10am.

 

NOTE:

Introduction

[1]        This is a divorce action in which the pursuer seeks a capital payment of some £200,000.  That capital payment is calculated in part on the basis that a house and land is matrimonial property and that the value of that property should be included in the division of the total net value of the parties’ assets comprising matrimonial property.

[2]        Unusually for a divorce action the defender insists in a preliminary plea.  That is the defender’s first plea-in-law “The pursuer’s averments being irrelevant et separatim lacking in specification should not admitted to probation”.  More unusually, I heard a debate in relation to that plea on 16 May 2017.

[3]        The defender’s preliminary plea and the submissions made at debate focus an issue that is of more than merely academic interest.  Put simply, prior to the parties becoming involved in a relationship, the defender bought a plot of land. While the parties were in a relationship, but before they married, a house was built on that plot of land.  The pursuer makes extensive averments on Record in relation to the extent to which she was involved in the process of arranging for that house to be built and the extent to which she contributed to the construction of the house.  She argues that the house and the plot on which it is built comprise part of the matrimonial property.  For his part, the defender disputes the extent to which the pursuer was involved in the process of having the house constructed. The defender asserts that neither the house nor the land comprise part of the matrimonial property.

[4]        The debate focused on the application of s10(4)(b) of the Family Law (Scotland) Act 1985 (“the Act”) to a house built for use as a family home before marriage on land that is not matrimonial property.

 

The Pursuer’s Case

[5]        The critical averments for the pursuer are to be found in Article 4 of condescendence.  Reading that article short and, in so far is relevant, those averments are:-

“The relevant date for the purposes of the Family Law (Scotland) Act 1985 is 28 January 2008 being the date on which the parties ceased co-habitation with one another.  As at that date the matrimonial property held by the parties was:  (a) the house, garden and other ground and buildings required for the amenity and convenience of the house at…...  This asset is held in the sole name of the Defender.  As at the date of the separation the said asset was worth in the region of TWO HUNDRED AND NINETY THOUSAND POUNDS (£290,000) Sterling.  A valuation report prepared by D M Hall, Chartered Surveyors is produced herewith.  There is no mortgage over the said asset……..  The house was built in 1997.  It was built prior to the parties’ marriage.  It was built upon a plot of land which was owned by the defender.  The defender acquired that plot of land in 1994.  The defender acquired the plot of land before he and the pursuer were in an established relationship. The parties’ relationship commenced in April 1994.  The parties continued their relationship until March 1995 when the relationship came to a temporary end. The parties’ relationship recommenced in December 1995.  The parties started to live together on 11 February 1996.  The parties initially resided at a flat in Aberdeen.  In July 1996 the parties moved to a mobile home situated on the plot of land.  That mobile home was situated on the plot of land when it was first acquired by the defender ……... The parties together chose the design of the kit home and engaged in the planning of the design of the home ......The house was acquired by the defender at the time it was built in the period between July and October 1997.  At the time that the house was built, the parties were in a stable, long-term relationship.  At the time that the house was built, the parties had been residing together for over a year.  At the time that the house was built, the parties intended to continue to live together as a family…….. The intention was that the parties and any children would reside in the house as a family ….In all of the circumstances the house was acquired by the defender prior to the parties’ marriage for use by the parties as a family home and, as such, it is matrimonial property for the purposes of the 1985 Act.  Upon the house being built upon land which was not matrimonial property, the land in the form of the garden and other ground and buildings required for the amenity and convenience of the house became matrimonial property ….... Esto the house, garden and other ground and buildings required for the amenity and convenience of the house is not matrimonial property, the pursuer has been economically disadvantaged in the interests of the defender and the defender has been economically advantaged by contributions from the pursuer.”

 

 

Submission for the Defender

[6]        The submission for the defender was that I should sustain the defender’s first plea-in-law to the effect of excluding from probation certain averments in Article 4 of condescendence.  Those averments all appear in the passages from Article 4 set out above and they are the averments that I have shown in bold. They are the averments through which the pursuer asserts the house is matrimonial property.

[7]        For the defender I was referred to a number of authorities. I was referred to MacPhail, Sheriff Court Practice, paragraphs 9.13 to 9.39 and 13.15 to 13.24; to Jamieson v Jamieson 1952 SC (HL) 44; the Stair Memorial Encyclopaedia, volume 18, paragraphs 570 to 587; Brand’s Trustees v Brand’s Trustees (1876) 3R (HL) 16; Christie v Smith’s Executrix 1949 SC 572; and Scottish Discount Company Limited v Blin 1985 SC 216. I was also referred by counsel for the defender to the authorities on the pursuer’s list - Mitchell v Mitchell 1994 SC 601; the Matrimonial Homes (Family Protection) (Scotland) Act 1981 (“the 1981 Act”), section 22; the Family Law (Scotland) Act 1985 (“the 1985 Act”), sections 8, 9, 10 and 27; and Clive, The Law of Husband and Wife in Scotland, paragraphs 24.025 to 24.026.

[8]        Much of the submission for the defender was uncontroversial.  It related to matters of pleading practice and to the law of accession.  I do not propose to set out those submissions in detail. There is no controversy in relation to the court’s function and powers at debate. The pursuer does not dispute that the house built on the plot of land acceded to the plot of land.  The issue between the parties is in relation to what is the practical effect of that accession for the purposes of this action. 

[9]        The essential submission for the defender was in relation to the effect of accession. There was no dispute that the parties’ home was a matrimonial home for the purposes of the Matrimonial Homes (Family Protection) (Scotland) Act 1981.  The submission proceeded on the basis that the land on which the home had been built was not matrimonial property.  The home having been built on land that was not matrimonial property, the home acceded to the land and it was submitted the matrimonial home was thus not matrimonial property.

[10]      I was reminded of the provisions of section 8 and 9 of the 1985 Act.  I was reminded that the premise on which the Act proceeded was that the net value of the matrimonial property should be shared fairly between the parties.  In terms of section 10(1) of the Act the starting point for determining what is a fair share is that the net value of the matrimonial property should be shared equally or in such other proportions as is justified by special circumstances.  Most importantly, for the purposes of the debate, it is provided by section 10(4) of the 1985 Act-.

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

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

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

 

[11]      I was reminded that the general rule is that property acquired by either of the parties during the marriage will comprise part of the matrimonial property.  Property acquired before the marriage will not generally comprise matrimonial property unless it was acquired before the marriage “... for use by them as a family home ...” If, for example, the defender had owned a house on the plot of land before the parties met and they had lived in it for ten years as is averred by the pursuer here, that house would not have comprised matrimonial property.

[12]      In this case, the defender bought the land in 1994 when he was not involved in a relationship with the pursuer.  The house was built in 1997 when he was in such a relationship.  The pursuer avers that it was built as a family home although that is disputed.  The parties married in 2003.

[13]      Against the backdrop of the analysis of the law of accession, counsel for the defender submitted that it was accepted that the plot of land is not matrimonial property.  There was no doubt that the house acceded to the land (which in the event is not in dispute).  It became part of the land and is indivisible from it. The house acceded to the land not the other way around.  The title to the plot is in the defender’s sole name.  The house cannot be matrimonial property when the land is not matrimonial property.  It is against that backdrop I was invited to sustain the defender’s first plea and exclude the averments in Article 4 of condescendence that are subject to challenge.

 

Submission for the Pursuer

[14]      For the pursuer, I was invited to repel the defender’s first plea-in-law and to fix a proof.  The argument for the pursuer proceeded on the basis that it was accepted the house had acceded to the land.  There was no dispute about that.  It was accepted that the defender is the owner of the house and the land.  The question is what is the effect of that? 

[15]      The submission for the pursuer rested on four propositions.  Firstly it was important to note that the case was being dealt with at debate and not after proof.  It was submitted that the case pled for the pursuer was relevant and specific.  Secondly, for the purpose of subsection 10(4) of the 1985 Act it was important to identify whether the house was a family home, when it was acquired and what was the intention of the parties.  Those are matters of fact which could only be determined at proof. For the purposes of determining if the house was a family home it was not necessary that marriage was in contemplation.  Thirdly, it was accepted that the plot of land is not a family home.  That is asserted for the defender in the defender’s Rule 22 Note.  At the date of separation there was a home on the plot which had been occupied by the defender, the pursuer and her children for a period in excess of 10 years.  It was acquired at some point between the date of acquisition of the plot and the date of the parties’ separation. Fourthly it was asserted that when the family home was built on the plot of land the effect of that was to convert the plot to matrimonial property.  It was submitted that there were other examples of such “conversion”.

[16]      In support of the first proposition, I was referred to MacPhail, paragraph 9-14, 9-15 and 9-32. I was taken through the detailed averments for the pursuer in Article 4 of condescendence.  It was submitted that the case set out in Article 4 was relevant and specific and gave the defender fair notice.  The averments in support of the second and third propositions are to be found in Article 4 of condescendence. 

[17]      In support of the fourth proposition, I was referred again to section 9(1)(a) and section 10(1) of the 1985 Act.  In support of the proposition that the plot of land had been converted to matrimonial property, I was referred to an example which, it was said, illustrated beyond doubt why that had to be the case.  The example simply was of a husband who bought a plot of land before marriage.  He then marries, buys a family home and takes title to that in his sole name.  There is no doubt but that the family home would comprise matrimonial property.  In this example, counsel hypothesised that the couple stay together for 40 years and then sell the family home.  The sale proceeds comprise the entirety of the matrimonial property.  Parties take the sale proceeds and use them to build a house on the plot owned by the husband before marriage.  For the pursuer it was submitted in that example, if the argument for the defender was correct, in a subsequent divorce the wife would have no claim on the house built on the plot.  The plot was not matrimonial property and if the defender’s argument was correct the house built on the plot would not be matrimonial property either.  There would be no other matrimonial property and thus no special circumstances argument available to the wife.  There might be an economic advantage/disadvantage argument but none was obvious. It was submitted that the argument for the defender if successful would create a loophole and cause potential prejudice. 

[18]      Against that it was submitted that if the argument for the pursuer was correct and if the plot converted to matrimonial property, the defender in the particular circumstances of this case would retain a remedy. That was a special circumstances argument in relation to the value of the plot and in fact such an argument is taken for the defender at the end of Article 4 of condescendence.

[19]      In support of the submission for the pursuer, I was referred again to section 10(4) of the 1985 Act.  It was reminded that for the purposes of that section what was important was that the property was acquired for use as a “family home” not as a matrimonial home.  The parties were not required to have marriage in contemplation when the property was bought.  It was accepted that the land itself was not bought by the defender for use as a family home but it was submitted it converted to matrimonial property when the house was built on it.

[20]      I was referred to section 27 of the 1985 Act.  That is the definition section.  For the purposes of that section “matrimonial home” has the same meaning as is adopted in section 22 of the 1981 Act and includes not only the house but “... any garden or other ground or building usually occupied with, or otherwise required for the amenity or convenience of, the house ...” I was reminded that the purpose of this section was to ensure that a property bought by the parties before marriage could, in certain circumstances, be regarded as matrimonial property.

 

Defender’s Reply

[21]      In a brief reply for the defender, counsel dealt with the example supposedly giving rise to a loophole and potential unfairness.  It was submitted that it would be open to the wife in the example to take an economic advantage/disadvantage argument.  It was submitted that a special circumstances argument might be available to the wife but counsel recognised that would not apply if in the example the entirety of the matrimonial property was invested in the new home.

[22]      It was submitted that a family home was not in any special category of asset.  A family home did not comprise part of the matrimonial property irrespective of when it was bought.  If it was bought during marriage it would comprise matrimonial property.  If it was bought before marriage then it would only be matrimonial property if section 10(4) applied. If the defender had owned a house before the parties’ marriage, and if that house had not been bought for use as a family home then, regardless of how long the pursuer had lived in that home, it would not have become matrimonial property.

[23]      I was referred to no authority for the proposition that land could convert from being non matrimonial property to matrimonial property.  In the cases where “conversion” took place, it only took place when an asset which did not comprise matrimonial property was realised during the marriage and used to buy an asset that thereby became matrimonial property.  The asset did not change its nature in the manner being suggested here. 

 

Decision

[24]      The debate before me focussed a discrete legal issue.  The defender owned a plot of land before the parties were involved in a relationship.  After they had become involved in a relationship, a house was built on that plot of land.  For the purposes of this action the pursuer’s case is that the house was acquired as a family home, that the effect of it being built on the plot of land was to convert the plot of land to matrimonial property. For the pursuer it was submitted both the house and the plot are matrimonial property.  The defender disputes that. The argument for the defender is that the house accedes to the land and neither the plot nor the land are matrimonial property. 

[25]      I do not accept the arguments advanced on behalf of the pursuer.  No authority was advanced for the proposition that non matrimonial property could be converted to matrimonial property in the manner contended for by the pursuer.  I know of no case where such a “conversion” has taken place and I was referred to no such case.  The examples that I am aware of are, for example, in relation to an inheritance.  A party to a marriage might inherit money in the course of a marriage, realise that inheritance and use it to buy something else.  By definition, in terms of section 10(4)(b) of the 1985 Act, that something else would be matrimonial property although, of course, subject to a special circumstances argument.  Another example might be shares or other assets that were owned prior to marriage, the proceeds of realisation being used during the marriage to purchase another asset.  Again, that other asset would become matrimonial property.

[26]      The circumstances of the “conversion” in those examples are significantly different from what is said to have happened in this case.  Here there was no realisation of the plot of land.  A house was built on that plot of land.  The house itself might or might not comprise matrimonial property but the accession of the house to the land does not, in my opinion, have the effect of causing the land to become matrimonial property.

[27]      I also have a difficulty with the argument advanced on behalf of the defender.  I was referred at some length to authorities in relation to the law of accession. There is no dispute but that the house built on the plot acceded to the plot.  I am entirely satisfied that the criteria that require to be satisfied for accession to take place are indeed satisfied.

[28]      The proposition for the defender is that while the house might be matrimonial property at the point in time when it acceded to the land, it undeniably became the property of the defender, it became indivisible from the land and thus ceased to be matrimonial property.  I do not agree. 

[29]      It is important to bear in mind the purpose behind the 1985 Act and in particular the chapter dealing with financial provisions. The intention was that wealth or property built up by the parties to a marriage as a result of the efforts of the parties during the marriage should be divided equally when they divorced unless there was some justification for departing from that equal sharing.  The provision of section 10(4)(a) was an extension of that principle to recognise that parties might acquire a property for use as a family home before they married. There is no reason in principle to distinguish a property that they bought from a property that the parties had built.

[30]      While I recognise that much of what is averred on behalf of the pursuer is disputed by the defender, there are averments through Article 4 of condescendence that set out a clear and specific case for the pursuer.  There are detailed averments in relation to what is said to represent her extensive involvement in the process of building the house, the circumstances in which it was built for use as a family home and her contribution to that process. 

[31]      The example used by counsel for the pursuer illustrates the difficulties that might arise if the position contended for by the defender is correct.  I had in mind a similar but slightly different example.  A husband might have owned a plot of land before marriage.  During marriage he might conclude that his marriage was in difficulty.  In anticipation of an impending separation he might use assets, perhaps substantial assets, comprising matrimonial property to build a home on the plot he owned before marriage which plot does not comprise matrimonial property.  If the argument advanced for the defender is correct then those assets that did comprise matrimonial property would cease to be matrimonial property by virtue of having acceded to the land.  In that example a party to a marriage would be able to acquire non matrimonial property in the course of the marriage. That would be a surprising outcome.

[32]      In my opinion, the position is much more straightforward than that contended for by either counsel for the defender or counsel for the pursuer.  In the examples given, it does not seem to me that the plot of land which was non matrimonial property becomes matrimonial property by virtue of having a house built upon it. Nor do the matrimonial assets used to buy the house become non matrimonial property simply by virtue of acceding to the plot of land.  In my opinion, the underlying nature of the assets is not changed for the purposes of the 1985 Act.

[33]      The 1985 Act set out a new statutory framework for dealing with the division of parties’ assets on divorce.  It defined “matrimonial property” in a particular way but by reference to the acquisition of that property rather than ownership of the property by either party. I accept unreservedly the submission for the defender that when the house was built upon the plot of land, the house acceded to the land.  I accept that it then came to be owned by the defender. What I do not accept is that in consequence of that the house ceased to be matrimonial property.

[34]      In my opinion, in the examples given and in the present case, it is open to the pursuer to argue that the blocks, the timber, the pipework, the cabling and the other building materials that came to represent the physical embodiment of the house or “family home” were matrimonial property. For the purposes of s10(4) those are the “property…which was acquired…(by the parties) ….. before the marriage for use by them as a family home…”. Those remain matrimonial property, notwithstanding the construction of the family home on a plot that does not comprise matrimonial property.  Within the context of this case it is open to the pursuer to prove that those items used to build the house were acquired before the marriage for use as a family home.

[35]      There is nothing unusual in such an approach. An analogous approach is adopted in relation for example to life policies and pensions.  A party to a marriage might be a member of an occupational pension scheme and have contributions made to that scheme both before and after marriage. The contributions made after marriage do not cease to be matrimonial property by being added to an asset that is not matrimonial property.  The value of the pension fund pre marriage does not become matrimonial property by funds comprising matrimonial property being added.  Rather, in terms of s10(5) of the 1985 Act the proportion of the party’s interest in the scheme attributable to the period of the marriage is regarded as matrimonial property.

[36]      This approach is consistent with the general theme of the 1985 Act. Although it raises a practical difficulty it avoids the difficulties that emerge from the approach commended by counsel for the pursuer and the approach commended by counsel for the defender.

[37]      The practical difficulty is how it is possible to value a house separately and distinctly from the land on which it is built.  One way to deal with that would be to have the house and land valued, and at the same time to instruct a separate valuation of the land assuming that it was undeveloped.  That is only one possible way to deal with the issue, but proceeding in that way it might be thought that the difference between the two valuations is a reasonable measure of the value of the house.

[38]      The parties to the debate have met with mixed success.  I do not accept the argument for the defender that when the house was built on the land it ceased to be matrimonial property. I do not accept the argument for the pursuer that when the house was built on the land, the land became matrimonial property.  I have excluded the averments to that effect in Article 4 of condescendence. 

[39]      Following on from that, I questioned whether I should have excluded the other averments in relation to the garden and other ground in paragraph 4(a) and the averments in relation to the valuation of the property in the same paragraph pertaining as those averments do to the valuation of the house and the land.  On balance I have not excluded the averments in relation to the garden ground.  For the purposes of the first part of the exercise I have described above the house should be valued with the garden ground required for its convenience and amenity. I have excluded the averments in relation to the valuation. Those averments plainly relate to the value of the house and the land on the hypothesis that each is matrimonial property.  For the reasons I have given it does not seem to me that is correct.  I have not excluded the other averments which were the subject of challenge because it seems to me on the basis of the decision that I have taken it is open to the pursuer to argue at least that account should be taken of the value of the house.

[40]      I have allowed parties a diet of proof before answer and so far as neither party was entirely successful at debate I have fixed a hearing on expenses.