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OUTER HOUSE, COURT OF SESSION [2008] CSOH 161 |
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OPINION OF LORD DRUMMOND YOUNG in the cause MRS MAXINE ANNE DAY or WILLSON Pursuer; against ANDREW WILLSON Defender: ________________ |
Pursuer: Speir; Pagan Osborne
Defender: Loudon; A & WM Urquhart
[1] The
parties were married on
[2] The
parties lived together until
[3] The
main dispute between the parties relates to their property. Following the marriage the pursuer
transferred a one half pro indiviso share in Bonjedward House to the
defender. The pursuer now seeks an order
that the defender reconvey that share to her.
In addition, she seeks payment from the defender of a capital sum; in
the conclusions of the summons a sum of £600,000 is sought, but in his
submissions counsel for the pursuer suggested that a sum of either £202,387 or
£164,637 would be appropriate; the choice between these figures depended upon
whether the defender's half share of Bonjedward was valued at the date of the
separation or the date of the proof. The
defender has also made financial claims against the pursuer. He seeks payment of a capital sum of £2
million, and an order for the sale of Bonjedward House and the division of the
proceeds. Following the marriage the
parties acquired a further house at 40 Warrenne Keep,
The applicable legislation
[4] The
statutory provisions that govern the parties' property dispute a found in
sections 8, 9, 10, 11, 14 and 27 of the Family Law (
"8. -- (1) In an action for divorce, either party
to the marriage... may apply to the court for one or more of the following
orders --
(a) an order for the payment of a capital
sum to him by the other party to the action;
(aa) an order for the transfer of property
to him by the other party to the action;
...
(c) an incidental order within the meaning
of section 14(2) of this Act".
(2) Subject to sections 12
to 15 of this Act, where an application has been made under subsection (1)
above, the court shall make such order, if any, as is --
(a) justified by the principles set out in
section 9 of this Act; and
(b) reasonable having regard to the
resources of the parties.
(3) An order under
subsection (2) above is in this Act referred to as an 'order for financial
provision'.
9. -- (1) The principles which the court shall
apply in deciding what order for financial provision, if any, to make are that
--
(a) the value of the matrimonial property
should be shared fairly between the parties to the marriage...;
(b) fair account should be taken of any
economic advantage derived by either person from contributions by the other,
and of any economic disadvantage suffered by either person in the interests of
the other person or of the family;
....
10. -- (1) In applying the principles set out in
section 9(1)(a) of this Act, the net value of the matrimonial property shall be
taken to be shared fairly between the persons when it in shared equally or in
such other proportions as unjustified by special circumstances.
(2) Subject to subsection
(3A) below the net value of the property shall be the value of the property at
the relevant date after deduction of any debts incurred by one or both of the
parties to the marriage... --
(a) before the marriage..., and
(b) during the marriage..., which are
outstanding at that date.
(3) In this section 'the
relevant date' means whichever is the earlier of --
(a) subject to subsection (7) below, the
date on which the persons ceased to cohabit;
(b) the date of service of the summons in
the action for divorce....
(3A) In its application to
property transferred by virtue of an order under section 8(1)(aa) of this Act
this section shall have effect as if --
(a) in subsection (2) above, for 'relevant
date' there were substituted 'appropriate valuation date;
(b) after that subsection there were
inserted --
'(2A) Subject to subsection (2B), in
this section the "appropriate valuation date" means --
(a) where the parties to the
marriage... agree on a date, that date;
(b) where there is no such
agreement, the date of the making of the order under section 8(1)(aa).
(2B) If the court considers that,
because of the exceptional circumstances of the case, subsection (2A)(b) should
not apply, the appropriate valuation date shall be such other date (being a
date as near as may be to the date referred to in subsection (2A)(b) as the
court may determine); and
(c) subsection (3) did not apply.
(4)... '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 furnishings for such home; or
(b) during the marriage the before the
relevant date.
...
(6) In subsection (1) above 'special
circumstances', without prejudice to the generality of the words, may include
--
...
(b) the source of the funds are assets is
to acquire any of the matrimonial property... where those funds are assets were
not derived from the income or reference of the persons during the marriage;
(c) any destruction, dissipation or
alienation of property by either person;
(d) the nature of the matrimonial property,
the use made of it (including use for business purposes are as a family home)
and the extent to which it is reasonable to expect it to be realized or divided
or used as security;
...
11. -- (1) In applying the principles set out in
section 9 of this Act, the following provisions of this section shall have
effect.
(2) For the purposes of
section 9(1)(b) of this Act, the court shall have regard to the extent to which
--
(a) the economic advantages or
disadvantages sustained by either person have been balanced by the economic
advantage is orders advantages sustained by the other person, and
(b) any resulting in balance has been or
will be corrected by a sharing of the value of the matrimonial property... or
otherwise.
...
(7) In applying the principles
set out in section 9 of this Act, the court shall not take account of the
conduct of either party to the marriage... unless --
(a) the conduct has adversely affected the
financial resources which are relevant to the decision of the court on a claim
for financial provision.
14. --...
(2) In this Act, 'an
incidental order' means one or more of the following orders --
(a) an order for the sale of property...
27. -- (1)...
'resources' means present
and foreseeable resources".
[5] The
central principles that underlie the following provisions are two in
number. First, the net value of the
matrimonial property should be shared fairly between the parties to the
marriage (section 9(1)(a)); this requires that it should be shared either
equally or in such other proportions as are justified by special circumstances
(section 10(1)). Secondly, fair account
should be taken of any economic advantage derived by either party from
contributions by the other and of any economic disadvantage suffered by either
party in the interests of the other (section 9(1)(b)). The valuation of property is normally carried
out as at the date of the parties' separation (section 10(3)), that being
referred to as the "relevant date" in the legislation.
[6] Matrimonial
property (section 10(4)) comprises all the property belonging to the parties at
the relevant date provided that it has been obtained either during the marriage
or before the marriage for use as a family home or furniture and plenishings
for such home; this is, however, subject to an exception for property obtained
by way of gift or succession from a third party. Consequently property obtained by either
party prior to the marriage is excluded, with the exception of any house
obtained as a family home or any property obtained as the contents of such
home. In sharing the value of
matrimonial property, however, the existence of special circumstances must be
taken into account. In terms of section
10(6)(b), special circumstances may include the source of the funds used to
acquire matrimonial property, in cases where those funds were not derived from
the income or efforts of the persons during the marriage. This is important in cases where one of the
parties had significant property prior to the marriage; if that property, or
its proceeds of sale, is used to acquire another asset during the marriage, the
source of the funds used to acquire that asset constitutes a special
circumstances that may be taken into account in dividing the matrimonial
property. I was referred to a number of
cases where the principles contained in sections 9 and 10 of the 1985 Act were
applied. In Jesner v Jesner, 1992 SLT
999, account was taken of the fact that the principal assets of the parties
comprised property in joint names that had been acquired using the husband's
assets or money held on trust for him.
In these circumstances unequal sharing of the matrimonial property was
held to be justified, with the wife taking slightly under 30% of the
total. In Davidson v Davidson,
1994 SLT 506, unequal sharing was again permitted where all of the matrimonial
property had been derived from funds inherited by the wife. Similarly, in R v R, 2000 Fam LR 43, the
fact that to a large extent the net value of matrimonial property derived from
assets donated to or inherited by the defender amounted to a special
circumstance that justified departing from the presumption in favour of equal
division. Lord Eassie stated (at 47):
"In my opinion the fact that
to a large extent the net value of the matrimonial property in this case
derives from assets donated to or inherited by the defender does constitute a
special circumstance which justifies departing from the presumption of an equal
division of those assets. I consider
that counsel for the defender is correct in saying that the broad policy
underlying s 9(1)(a) and s 10 of the Act was that in principle an equal
division should apply to the fruits of the economic efforts of the parties
during the marriage".
I respectfully agree that that is the fundamental policy
underlying sections 9 and 10. This is a
factor of great importance in the present case.
[7] In MacLean v MacLean, 2001 Fam LR 118, the matrimonial property, most of which
had come from the wife's family, was shared on an unequal basis. Lord Rodger considered that it was
appropriate not to look at individual assets in isolation but to consider the
matrimonial property as a whole.
Reference was also made to
Cunningham v Cunningham, 2001 Fam
LR 12, another case where the court had regard to the extent to which
matrimonial property was derived from the parties' pre-matrimonial assets. The parties were given full credit for their
respective contributions from pre-matrimonial property except for the sums
invested in the matrimonial home. A
similar approach was followed in
The evidence
in general
[8] On a
number of issues the evidence given by the parties conflicted. In such cases I prefer the evidence of the
pursuer to that of the defender, for three reasons. In the first place, I formed a favourable
impression of the pursuer as a witness; she appeared to me to the attempting to
tell the truth and in general to be a fairly careful and reliable witness. In the second place, the pursuer's evidence
was supported by a number of other witnesses.
These included witnesses who were largely independent of the parties,
notably Mora Hoeder, who had worked in the business carried on by the parties
at the Border Hotel, Kirk Yetholm, and Alastair Cockburn, a painter and
decorator who had carried out a considerable amount of work at Bonjedward for
the pursuer. I found that both of these
witnesses were conspicuously fair and honest in their evidence, and they
clearly supported the pursuer's position.
In addition her evidence was supported by her son, Cameron
Donnelly. While he was clearly not an
independent witness I formed the impression that he was in general both
credible and reliable.
[9] In the
third place, I formed a very unfavourable impression of the defender as a
witness. I found him to be evasive in
manner, failing to give straightforward answers. Even when his evidence was clearly shown to
be wrong he refused to accept that possibility.
His answers were frequently self-serving. On a significant number of occasions he gave
answers that were quite frankly incredible.
Three examples may serve to illustrate this. First, in chief (day 6, 11.28) he gave
evidence that under his direction Cameron Donnelly and a handyman had carried
out redecoration work at Bonjedward.
This had involved redecorating the attic floor and the bottom floor,
which consisted largely of cellars. The
defender stated that the work of redecoration had continued from November 2000
to November 2005; the labour cost had been £300 per week from November 2000 to
May 2004 and £450 per week from June 2004 to November 2005. While Bonjedward was quite a substantial
house, I found it utterly incredible that the work of redecoration could take
so long. Secondly, also in chief (day 6,
12.02) the defender was asked about the transfer of Bonjedward by the pursuer
into the joint names of the parties. He
gave evidence that this was the best way to aid the parties' finances, to reduce
the burden of the pursuer's borrowing.
It was not obvious to me why transferring the property into joint names
would help to reduce borrowing, and I asked the defender why he thought that it
would. His initial answers were evasive,
and did not properly answer my question.
He went on, however, to state that the plan was to obtain a further loan
(of £450,000) on the security of Bonjedward.
When, following the transfer into joint names, an application was made
for a loan (no 6/150 of process), the defender had filled in the form, and had
stated that the parties each had income of £70,000 per annum. He explained that this was based on an
assumption that the value of their assets would increase annually by that
amount in future years. I found it quite
extraordinary that he would make such an assumption in filling in the form; it
is obvious that anticipated capital gains are not income, and in any event the
assumption about future increases in value appeared to have little or no factual
basis and clearly could not be sustained indefinitely. The defender maintained the same position in
cross-examination (day 6, 3.36 onwards).
Thirdly, in cross (day 6, 3.09) the defender was asked about a summary
of cheques drawn on certain accounts in the names of the parties (no 6/77 of
process). This disclosed that cheques in
favour of a business owned solely by the defender, Willsons Fireplaces, had
been drawn on a bank account in the parties' joint names; these totalled
£17,744.22, and extended over a period from September 2001 to June 2002. The defender stated that those cheques
represented payment for materials that were required for renovation work at
Bonjedward; the materials were obtained from builders merchants. Counsel for the pursuer suggested that it
would have been simpler to send cheques drawn on the joint account directly to
the builders merchants who supplied such materials; the defender replied that
at the time he had been considering whether Willsons Fireplaces should trade in
[10] My
general impression of the evidence was as follows. Following the death of her husband the pursuer
had inherited substantial property. This
included a house in Kelso, which she sold when she acquired Bonjedward, and
shares in a company known as Peter Day (Finedon) Ltd., which owned land in
England. During the period of the
parties' marriage the defender took control of the pursuer's assets, and
directed transactions relating to her property.
A significant amount of property was realized during the marriage, and
most of that appears to have been spent on living expenses. The defender indulged in a fairly extravagant
lifestyle. He acquired expensive cars,
including a Bentley, a Range Rover and a Mercedes. He took part in country sports, notably
shooting. He also spent a substantial
sum on the installation at Bonjedward of a facility known as a hot tub and
gazebo. I am satisfied that the
defender's lifestyle was in large measure paid for out of the pursuer's
resources, in particular by obtaining loans on the security of Bonjedward. I am further satisfied that the lifestyle
enjoyed by the defender during the marriage was considerably more costly than
anything that he had been able to afford previously.
Accounting evidence
[11] Both
parties led evidence from accountants; Fiona Martin, of Tenon Ltd., gave
evidence for the pursuer, and Judith Scott, of BDO Stoy Hayward, gave evidence
for the defender. Both attempted to
demonstrate the nature of the parties' property, including the matrimonial
property, and to provide an approximate value for such property. The approach followed by each witness was
similar, and on valuation issues each agreed with the other's figures subject
only to minor adjustments. The main
difference was that Miss Scott had been provided with certain additional
information by the defender. As a result
she identified a larger number of specific items of expenditure incurred during
the parties' marriage. These are found
in Appendix 5 to her report, which contains an analysis of cheques in excess of
£1000 drawn on the various bank accounts operated by the parties during the
marriage. By way of example, the first
page refers to a cheque drawn in favour of Cameron Donnelly, the pursuer's
son, on
[12] Nevertheless,
I do not think that the availability or otherwise of the information provided
by the defender to Miss Scott makes any significant difference to my ultimate
decision on the allocation of matrimonial property. For the reasons stated above I have formed an
unfavourable view of the defender's credibility and reliability as a witness,
and consequently I would treat any information that he provided with great
circumspection. Moreover, it seems to me
that both parties enjoyed a relatively high standard of living during the
marriage, and I do not think that any useful purpose is served by a minute
examination of the expenditure that can properly be attributed to one or the
other. Consequently, although I sustain
the objection, I do not regard it as in any way critical to my decision on the
merits of the action.
[13] As I
have indicated, apart from the additional information provided by the defender,
Miss Martin and Miss Scott were in substantial agreement as to the
identification of the parties' property.
They discussed their reports, and arrived at a list of assets that was
largely similar. I have taken account of
the evidence of the two witnesses in the discussion of the matrimonial property
that follows.
[14] Against
the foregoing background, I will now deal with the specific issues that arose
in the present case.
The relevant
date
[15] The
expression "the relevant date" is defined by section 10(3) as the date on which
the persons ceased to cohabit. In the
present case I hold that that date was
Matrimonial property: Bonjedward House
Identification of matrimonial property
[16] Bonjedward
House had been solely owned by the pursuer prior to the marriage. On 13 August 2001 she disponed a one half pro
indiviso share in favour of the defender; the disposition is no 7/121 of
process, and is in the standard form of such a deed, being expressed for love,
favour and affection. There is a
destination in favour of the survivor and the executors of the survivor. The critical question is whether as a result
of that disposition the whole of Bonjedward House became matrimonial property
or whether merely the one half share conveyed to the defender became such
property. In my opinion only the defender's
half share became matrimonial property.
The practical effect of the disposition was to transfer a half share;
the pursuer retained the other half share, which was hers already. For the defender it was submitted that the
whole of Bonjedward House became matrimonial property; the disposition conveyed
the whole subjects to the parties, and it created a survivorship destination
that was not present in the original title.
Counsel referred to
Orders in respect of Bonjedward
[17] The
pursuer acquired Bonjedward in December 1999 at a price of £465,000; it had
been valued by her surveyor at £430,000.
The property comprised Bonjedward House itself, which the pursuer made
her home, and certain cottages and outbuildings. The purchase price was funded from two
sources: £225,000 came from the sale of the pursuer's former home in Kelso and
the balance was borrowed from the Royal Bank of
[18] Bonjedward
increased in value. By the time of the
parties' marriage, in April 2001, it was valued at £490,000. By the time of the parties' separation, in
October 2005, its value had increased to £920,000. By September 2007 the value had increased to
approximately £1,149,000, and by the time of the proof in May 2008 the value
was approximately £1,300,000. The other
buildings were not in good condition when the pursuer acquired the property,
but they were capable of renovation and could yield a rental income. In addition, one of the cottages, Colt
Cottage, could not be sold without serious damage to the amenity of Bonjedward
House itself owing to its location immediately adjacent to the house.
[19] As
mentioned above, on
[20] Against
the foregoing background I am of opinion that I should make an order under
section 8(1)(aa) of the 1985 Act for the transfer of the defender's half share
in Bonjedward to the pursuer. Bonjedward
is the pursuer's home, and indeed it was her home prior to the parties'
marriage. It was clear that she was very
attached to the property. Her other
resources have largely been depleted in the course of the marriage, as
explained below. Consequently the
cottages at Bonjedward are an important potential source of income for her if
they are renovated and let. In these
circumstances I consider that the transfer of the defender's interest in the
house to the pursuer is justified by the principles set out in section 9 and
reasonable having regard to the resources of the parties; it follows that the
requirements of section 8(2) are satisfied.
I should add that, in relation to any claim for economic advantage under
section 9(1)(b), the payments that the pursuer has made in respect of the loan
and insurance on the property would fall to be taken into account. The same is true of the payments that she has
made in respect of maintenance of the house.
Valuation of Bonjedward
[21] It
is accordingly necessary to determine the value of the defender's interest in
Bonjedward, as that is matrimonial property. This matter is governed by section
10(3A) of the 1985 Act, which deals with the application of the Act to property
transferred by virtue of an order under section 8(1)(aa). Under that provision, the concept of the relevant
date is replaced by the "appropriate valuation date". This is defined by subsections (2A) and (2B),
as inserted by section 10(3A)(b). Under
those provisions, the appropriate valuation date will normally be the date of
making of the order (if parties do not agree otherwise); nevertheless, under
subsection (2B) the court may substitute another date because of the
exceptional circumstances of the case, such date being a date as near as may be
to the date of the making of the order.
In my opinion exceptional circumstances sufficient to justify another
date exist in the present case. The
first proof in the present action was fixed for June 2007, but it was
discharged because the defender had made extensive amendments to his
pleadings. That is a matter for which
the defender is clearly responsible. A
further proof was fixed for October 2007, but that diet was discharged because
of insufficient court time. During all
this time the pursuer bore the burden of the loan and other expenses on the
house. During the period between June
2007, when the first diet of proof was discharged, and the proof it is clear
that the value of the house increased significantly. I would not consider it appropriate to allow
the defender to obtain the benefit of the whole of that increase in value. Counsel for the pursuer submitted that I should
value the house as at September 2007, a date when a valuation of £1,149,000 was
available. In principle I would be
willing to take that course, on the basis that September 2007 is reasonably
close to the date of the original proof diet.
It is clear, however, that since the proof property values have started
to fall, perhaps to quite a significant degree.
If that happens I think that it might be appropriate to apply the normal
rule in subsection (2A) and to value the house as at the date of the order for
transfer. Before I follow such a course,
however, I would like to hear submissions from counsel, and possibly to obtain
evidence as to the then current valuation of the house. Nevertheless, in the calculations carried out
later in this opinion, I have assumed that a valuation date of September 2007
would be appropriate. In those
calculations I therefore use the value of £1,149,000 that was spoken to by
Roger Dodd, the surveyor who gave evidence on behalf of the pursuer. I accept that value as accurate at its
date. That figure is provisional,
however, and is open to revision in the manner that I have described.
[22] In
relation to the valuation exercise itself, evidence was led from two surveyors,
Roger Dodd on behalf of the pursuer and Robert Fairnie on behalf of the
defender. As might be expected, Mr.
Fairnie's valuations were consistently higher than Mr. Dodd's. In general I prefer the evidence of Mr.
Dodd. I found him to be a fair and
convincing witness. He had extensive
experience as a valuer of residential property in the Borders. Moreover, he had valued the property at the
time when it was purchased by the pursuer in 1999. That was an advantage that Mr. Fairnie did
not possess. In general, it was clear
from the evidence that Mr. Fairnie was less familiar with the property than Mr.
Dodd; thus, for example, his knowledge of the drainage system was significantly
less than Mr. Dodd's. In addition in his
valuation (no 7/100 of process) Mr. Fairnie placed a value of £200,000 on the
[23] When
Mr. Dodd examined the property in 1999 prior to the pursuer's purchase of it,
he valued it at £430,000. The purchase
price was £465,000, which is not very far from the price that was paid. He produced a valuation report dated
Works carried out at Bonjedward
[24] The
defender gave evidence that he had carried out very substantial work on
renovating Bonjedward House and the cottages in its grounds. He stated that he worked continuously on
renovations for five years. He had
supervised the decoration of much of the house, in particular the attic and
basement floors, and had been responsible for plumbing and rewiring work. Further major works, he said, had taken place
on the exterior of the house, including repointing, the installation of new
windows and the improvement of the basement level. He had obtained planning permission for
substantial works on two of the cottages, and investigated possible planning
permission for an area known as the
[25] Evidence
as to what the defender achieved was given by a number of other witnesses,
notably Cameron Donnelly, Alastair Cockburn, the painter and decorator who was
responsible for the redecoration work instructed by the pursuer, and Roger
Dodd, the surveyor who gave evidence on behalf of the pursuer. In addition, Guy Campbell, who carried on
practice as a building designer, gave evidence as to work that he had carried
out in relation to planning permission for the cottages. Photographs of the buildings were available,
and were referred to in the course of the evidence of Mr. Donnelly and Mr.
Dodd. Those photographs fully supported
the evidence of the pursuers' witnesses.
On the basis of the evidence of these witnesses I am satisfied that the
defender greatly exaggerated the work that he carried out, both in relation to
the amount of such work and, in particular, to what was actually achieved by
such work. I am satisfied that most of
the work involved in obtaining planning permission was carried out by Mr.
Campbell; the relevant drawings, in particular, were his responsibility. I am further satisfied that the work carried
out by the defender on the cottages reduced rather than enhanced their value. Mr. Dodd described them as habitable but
requiring some improvement at the time when the pursuer acquired
Bonjedward. The defender carried out
extensive stripping out and demolition works on the buildings; the result was
that they were no longer habitable and required extensive works to put them
into a habitable condition. Once the
demolition and stripping out works had been carried out on the cottages the
defender left them in that condition, and made no effort to begin, or even to
instruct, the necessary works of reconstruction. Mr. Dodd stated that the defender's work on
the cottages had had the effect of diminishing their value; in his
supplementary report (no 6/91 of process) he stated that the dismantling works
to the Gardener's Cottage and Stable Cottage had effectively rendered them
uninhabitable and had diminished the market value of the whole property by a
sum in the order of £100,000. Mr. Dodd
had had the advantage of examining the cottages both before and after those
works, and I have no hesitation in accepting his evidence on this matter. Moreover, the photographs were particularly
eloquent; they revealed that the defender had turned habitable houses into mere
shells.
[26] In
relation to Bonjedward House itself, I am satisfied that the defender grossly
exaggerated the amount of work that he did.
In this connection I referred to my assessment of his evidence at paragraph
[9] above; his suggestion that redecoration works occupied several years was
manifestly incredible. While the
defender carried out certain works on the property, I was satisfied in the
evidence that they were performed to an incompetent standard. That relates in particular to the plumbing
works, which gave rise to a number of significant problems, and the electrical
works; further rewiring was necessary.
Overall, I am satisfied that the pursuer obtained no economic advantage
from such works as were carried out by the defender. Renovation works were carried out on
Bonjedward House by tradesmen such as Mr. Cockburn, but those tradesmen
were paid from the pursuer's resources, derived from her pre-matrimonial
property.
Matrimonial property: bank accounts
[27] When
the parties separated considerable sums were held in bank accounts in joint
names with the Royal Bank of
[28] In
my opinion the major part of the funds in the joint accounts as of the date of
separation can be traced back to the pursuer's pre-matrimonial property. When funds that represent one party's
pre-matrimonial property, or a gift or succession from a third party, are paid
into a joint bank account, that does not mean that the funds are "acquired" by
the parties during the marriage; the funds remain pre-matrimonial property or
property acquired by gift or succession from a third party. Authority for such an approach is found in Davidson v Davidson, 1994 SLT 506, and in my opinion it accords with ordinary
principles of tracing, which are of general application. I accordingly hold that the bulk of the funds
held in the joint accounts with the Royal Bank of
Matrimonial property: 40 Warrenne Keep,
[29] During
the course of the marriage the parties acquired a property at 40 Warrenne
Keep,
Other matrimonial property
[30] Certain
other items of property became matrimonial property. These comprised the following:
(i) A Bentley car retained by the
defender; the agreed valuation is £10,000.
(ii) A Range Rover car, also retained
by the defender; the agreed valuation is £38,750.
(iii) A Mercedes car which is wanted
by neither party; the parties have agreed that the car should be sold and the
proceeds divided equally, and that an incidental order to that effect should be
pronounced.
(iv) A Rolex watch retained by the
defender; the agreed value is £6,000.
(v) Other household goods. Parties have agreed that these should be sold
and the proceeds divided. No order is
required.
In addition, a loan was due by a
business called Working 4U, which was run by one of the pursuer's
stepsons. The loan was for £50,000. It was repaid to the pursuer after the date
of separation (joint minute, paragraph 192).
The source of the loan was the pursuer's pre-matrimonial property and
other income derived from Peter Day's estate.
In my opinion the source of those funds amounts to a special
circumstances which justifies the loan being left out of account in determining
the matrimonial property that is to be divided between the parties. As with the joint bank accounts, ordinary
principles of tracing operate.
Property of pursuer: 1
[31] The
late Peter Day had owned a one half share of a property at 1
Property of pursuer: Peter Day (Finedon) Limited and land at The Wold
[32] The
late Peter Day also owned a company known as Peter Day (Finedon) Limited. The main asset of the company was land
situated in Northamptonshire. The
pursuer was due to inherit those shares from Mr. Day's estate, but she transferred
20% of her holding to the defender. The
pursuer owned adjacent land known as The Wold.
The two properties were sold in January 2003. The defender was involved to some extent in
events preceding the sale. He sought to
suggest that he played a major part in increasing the price that was obtained
for the land. In particular, he gave
evidence that he had applied for planning permission to convert part of the
land into a garden centre. That was done
along with Cameron Donnelly. I am bound
to say that I did not form the impression that there was any genuine intention
to develop a garden centre on the land.
In any event, the land was sold to a neighbouring proprietor as amenity
ground, and it is clear that the price that he paid was not related to any
proposal to permit a garden centre. On
this aspect of the case, I am satisfied on the basis of the evidence of Cameron
Donnelly, in particular, and the documentary evidence that the defender's
actings did not result in a significantly higher price than was ultimately
obtained.
[33] The
pursuer made a gift of 20% of her shareholding in Peter Day (Finedon) Limited
to the defender. Despite that, when the
funds in the company were ultimately distributed to shareholders, the defender
directed that the whole of the sums due to shareholders should be paid into a
joint bank account in the names of both parties. The sum so paid was £673,873. No accounting took place to reflect the parties'
differential shareholdings in the company.
Furthermore, the sale proceeds from the land owned by the pursuer in her
own name amounted to £34,866. Once again
these were paid into the parties' joint account on the defender's instructions
(no 6/67 of process).
Property of pursuer: Border Hotel
[34] Prior
to the marriage the pursuer had acquired the Border Hotel in Kirk Yetholm, and
she carried on the business there in her own name. It is clear that this business ran at a
considerable loss. The defender
suggested that the pursuer dismiss the manager, and he became involved in the
business to some extent; nevertheless I thought it clear that he exaggerated
his contribution. In reaching this
conclusion I rely in particular on the evidence of Mona Hoeder, who was
employed at the hotel. She stated that
the defender when he visited the hotel did little and was frequently very rude
to customers. He undertook to deal with
the financial affairs of the business, but he failed to ensure that bills were
paid promptly. The result was that
suppliers refused credit, which caused serious problems for the business. There was evidence, however, that labour
costs decreased by £10,000 in the year 2001/02, following the defender's
involvement in the business. In the
circumstances I do not think that I can hold that the defender made no contribution
to the business, but I consider that such a contribution was substantially
outweighed by the standard of living that the defender enjoyed during the
marriage. The Border Hotel was sold in
April 2004 for £420,000. In the course
of the marriage the parties bought another nearby hotel, the Plough Hotel, and
carried on business there for a relatively short time. The Plough Hotel was owned by the parties
jointly. It did not make profits, and
was ultimately sold at a loss. The
losses sustained in the two businesses were absorbed into the proceeds of sale
when the two hotels were sold. The
result was to make those losses part of the parties' general expenses during
the marriage. I think that this is fair,
and indeed it is the only practicable way of treating those payments. No contrary submission was made.
Other property of pursuer
[35] Prior
to the parties' marriage the pursuer held an endowment policy with HSBC. During the marriage she realized £152,677
from this policy. She had also, prior to
the marriage, made a loan to a company, GRP Recruitment Limited, and during the
marriage she received £37,437 from repayment of the loan. The sums were paid into the parties joint
accounts with the Royal Bank of
Property of defender
[36] Prior
to the parties' marriage the defender owned a house in Bourne, Lincolnshire,
and a further property known as the Fox Inn in Barnack, near Stamford. These properties were realized during the
marriage for a total sum of £193,180.
Application of section 9(1)(b): economic advantages and disadvantages
[37] Section
9(1)(b) of the 95 Act provides that, in deciding what order for financial
provision to make, the court should take their account of any economic
advantage derived by either party to the marriage from contributions by the
other and of any economic disadvantages suffered by either person in the
interests of the other person or of the family.
Professor Thomson states (at paragraph 7.17) that claims under this
principle are particularly difficult to quantify. In terms of section 11(2), the court must
balance the parties' economic advantages and disadvantages, and it is only when
there is an economic imbalance that an award can be made. The court is also obliged to consider whether
any resulting imbalance will be corrected by sharing of the value of the
matrimonial property under the principle in section 9(1)(a). For that reason, in practice, the principles
in paragraphs (a) and (b) of section 9(1) are usually considered together; Coyle v Coyle, 2004 Fam LR 2, provides an example of this.
[38] For
the defender it was contended that the value of various properties owned by the
pursuer or by the late Mr. Day's estate was enhanced by the defenders'
activity. In that way, it was said, the
pursuer had received an economic advantage, and that should be taken into
account in any division of the matrimonial property. This argument was developed at some length in
relation to Bonjedward. In this case,
there was evidence that the defender had supervised the decoration and
renovation of Bonjedward House, that he had applied for planning permission to
develop cottages and the area known as the Walled Garden, and that he was
responsible for considerable stripping out and demolition work in the cottages;
I have discussed this evidence at paragraphs [24]-[26] above. I am satisfied that he seriously exaggerated
the amount of work that he did. In
addition, I am of opinion that the work that he carried out did not lead to any
material increase in the value of Bonjedward taken as a whole. Indeed, much of the work carried out on the
cottages had an adverse effect on the value.
In this respect I accept the evidence of Mr. Dodd summarized at paragraph
[25] above.
[39] A
similar claim was made in relation to the property at 1
[40] Yet
a further claim that the defender increased the value of the pursuer's assets
related to the land owned by Peter Day (Finedon) Ltd. and the adjacent property
known as The Wold owned by the pursuer.
In this case the had been some activity by the defender; in particular
he was responsible for making an application for planning permission for use of
part of the land as a garden centre; the object of the exercise was an attempt,
of dubious legality, to contrive a means of ejecting tenants from the
land. In fact planning permission was
not obtained, and the tenants (sons of the late Mr. Day) left
voluntarily. Ultimately the land was
bought by a near neighbour, who wanted it as amenity land for his own
property. In these circumstances it is
quite clear that the defender's activities had no bearing on the price
ultimately obtained.
[41] Finally,
the defender claimed that the pursuer had been benefited from his involvement
with the Border Hotel. For the reasons
stated above at paragraph [34] I am satisfied that the benefit to the pursuer
was not great, and I am of opinion that it was substantially outweighed by the
high, and indeed extravagant, standard of living that the defender enjoyed
during the parties' marriage. That
standard of living was financed by the pursuer's property.
Use of proceeds of realized assets
[42] In
total, £1,128,429 was realized from the pursuer's assets during the marriage
and £193,180 was realized from the defender's assets. In addition, a further £422,000 was realized
from the Border Hotel. It is possible to
identify how part of these sums was spent.
The purchase of the house at 40 Warrenne Keep cost £100,267. The vehicles referred to in paragraph [30]
above cost £135,010 in total. The
purchase of jewellery and a Rolex watch accounted for £14,820. The net cost of operating the Border Hotel
during the marriage was £43,192, and the net cost of operating the Plough Hotel
was £36,718; in each case the costs of realizing the property are included. Payments on account of the loan secured over
Bonjedward amounted to £85,810. A loan
of £50,000 was made to Cameron Donnelly's business, Working 4U. Income tax amounted to £14,733. Finally, £40,969 represented the amount of the
pursuer's bank overdraft at the time of the marriage, and £231,930 was at credit
of the accounts with the Royal Bank of
[43] The
foregoing items amount in total to £727,440.
That leaves a further sum of £594,171 which is not specifically
accounted for. That sum seems to have
been used towards living expenses and general expenditure and works at
Bonjedward. It is clear that the parties
enjoyed a relatively high standard of living, with substantial holidays and
involvement in racing by the pursuer and field sports and flying lessons by the
defender. In addition, in excess of
£17,000 was transferred by the defender to his own business, Willsons
Fireplaces: see paragraph [9] above.
Order under section 8(1)(a)
[44] In
deciding on appropriate order under section 8(1)(a), the first task is to
identify the matrimonial property at the date of the parties' separation. In my opinion this was as follows:
(i)
A
one half share of Bonjedward. I have
accepted Mr. Dodd's valuation figures (paragraph [21]-[23] above), and I have
also decided to use the valuation of the property as at September 2007 for the
purposes of this opinion; nevertheless, that decision is open to revisal if
parties wish to make further submissions on the matter, for the reasons stated
at paragraph [21]. Mr. Dodd expressed
the view that the value of Bonjedward in September 2007 was £1,149,000. I accordingly value the half share that was
matrimonial property at £574,500. The
defender is entitled to half of that sum in exchange for a transfer of his one
half share of the property. The result
is that the defender is entitled to £297,250.
In addition, Bonjedward was subject to a secured loan in favour of
Alliance & Leicester PLC. I discuss
the loan in the following paragraph.
(ii)
40
Warrenne Keep,
(iii)
A
Bentley car retained by the defender.
The valuation is agreed at £10,000.
(iv)
A
Range Rover car retained by the defender.
The valuation is agreed at £38,750.
(v)
A
Mercedes car which neither party wants.
It is the agreed that the car will be sold and the proceeds divided
equally. I accordingly leave this item
of property out of account in the following calculation.
(vi)
The
defender's Rolex watch. The valuation is
agreed at £6,000.
(vii)
The
loan of £50,000 made to Working 4U. This
has been repaid following the parties' separation. The loan was made from funds that the pursuer
had prior to the marriage. In my opinion
that is a special circumstances that justifies leaving the property out of
account in determining financial provision on divorce.
(viii)
Other
personal possessions. The parties have
agreed that these are to be sold and the proceeds divided. I accordingly do not take them into account.
[45] The
loan secured over Bonjedward was the result of a series of transactions during
the course of the marriage. For present
purposes it is sufficient to note that the purchase of Bonjedward had been funded
by an unsecured bridging loan from the Royal Bank of
[46] The
amount of the debt that should be treated as matrimonial can be calculated in
the following manner. First, in relation
to the
[47] In
addition, following the parties' separation in October 2005 the pursuer has
paid the whole of the interest on the outstanding loan. In the period between October 2005 and
October 2007 that interest amounted to £56,432.22. In my opinion that interest should be treated
in the same way as the amount of the loan itself. 75.75 % should be treated as
"matrimonial" payments, and should be deductible in determining the benefit
taken by the pursuer. The remaining
24.25 % should be treated as payments made for the pursuer's own purposes. Those amounts are respectively £42,747 and
£13,684. These relate to the period down to October 2007, the time when the
original proof was due to take place; similarly, the values of Bonjedward and
40 Warrenne Keep that I have used relate to a similar date. The whole of those figures may require
revisal, but I will use them to illustrate the method of calculation that I
have adopted.
[48] At
the time when the parties separated funds amounting to £231,930 stood at credit
of their accounts with the Royal Bank.
Immediately following the parties' separation these were treated as
matrimonial property and divided equally.
The predominant source of the funds in the accounts was the pursuer's
pre-matrimonial property, notably the amount paid to her in respect of her 80%
shareholding in Peter Day (Finedon) Limited, the proceeds of sale of the Border
Hotel and payments totalling £152,677 from HSBC Life in respect of policies
that had been taken out prior to the marriage.
In addition, a substantial part of the funds came from the use of
Bonjedward as security for borrowing.
Nevertheless, part of the money paid into those accounts had been
provided by the defender. Prior to the marriage
the defender owned a house at Bourne, in Lincolnshire, and also a development
property, a public house known as the Fox Inn, in Barnack, Lincolnshire. The house was sold in about September 2001,
and sale proceeds of £60,332 paid into the account. The Fox Inn was sold in about January 2002,
and sale proceeds amounting to £132,848 were paid into the account. Thus a total of £193,180 was paid into the
joint accounts by the defender. The
total sums paid into the accounts in the course of the marriage amounted to
£1,201,961; I take that figure from Miss Martin's summary of income and
expenditure during the marriage as revised following discussions with Miss
Scott (no 6/215 of process; Miss Martin did not produce exactly comparable
figures, but to the extent that it is possible to make comparisons I do not
think there is any difference between the two experts on this matter). On that basis, 16% of the funds paid into the
account came from the defender's pre-matrimonial property, with the remainder
of the funds coming from the pursuer's pre-matrimonial property. That represents a striking predominance of
the pursuer's funds; indeed, it can be said that the parties' lifestyle during
the marriage was funded essentially from the pursuer's pre-matrimonial
property. In those circumstances I am of
opinion that it is appropriate to trace the parties' respective contributions
into the joint accounts; anything else would fail to reflect the clear
predominance of funds coming from the pursuer's pre-matrimonial property. Very substantial sums were paid out of the
joint accounts. Some of the expenditure
is reflected in the present matrimonial property, including the motor vehicles
and the house at 40 Warrenne Keep; other expenditure related to works at
Bonjedward and the businesses at the Border and Plough Hotels; yet other
expenditure (a substantial part) related to the parties' general expenditure,
which was on a fairly lavish scale.
Taking a broad view of that expenditure, I think that it can be said
that it benefited the parties on an approximately equal basis; while the works
at Bonjedward benefited the pursuer in the long run, the defender lived there
during the marriage, and in addition he removed funds from the accounts for his
own personal use (see paragraph [9] above).
In tracing funds into the account, therefore, I consider it appropriate
to divide the account in the same proportions as the parties' respective
contributions from their pre-matrimonial property. On that basis I am of opinion that the
pursuer should take funds amounting to £194,821 and that the defender should
take funds amounting to £37,109.
[49] It
follows that the total value of the matrimonial property, excluding the bank
accounts, is £821,750 (£574,500 for Bonjedward, £192,500 for Warrenne Keep,
£30,750 for the Range Rover, £10,000 for the Bentley and £6,000 for the Rolex
watch). From that amount matrimonial
debt of £420,984 (£378,237 in respect of the capital of the loan and £42,747 in
respect of interest payments) should be deducted, leaving £400,766. That amount should be divided between the
parties, giving them £200,383 each. The
pursuer will take the half share of Bonjedward that is matrimonial property;
the value of that share, net of the "matrimonial" part of the loan and a
corresponding amount of interest paid since separation, is £153,516 (£574,500
less £378,237 capital and £42,747 by way of interest). The defender will take the property at 40
Warrenne Keep, the Range Rover, the Bentley and the Rolex watch; those had a
total value of £247,250. On that basis
an equalization payment of £46,867 is due by the defender to the pursuer; that
represents the excess of the property taken by him over a one half share of the
matrimonial property. In addition, in
respect of the sums that stood at credit of the bank accounts with the Royal
Bank at the date of separation, I have held that the pursuer was entitled to
£194,821 and the defender to £37,109. In
fact each took £115,965. Consequently a
further equalization payment of £78,857 is due by the defender to the pursuer;
that represents the excess of funds taken by the defender. I accordingly calculate that the defender is
due to pay the pursuer a capital sum of £125,724. As indicated above, that figure is
provisional, as it is based on valuations as at September 2007.
[50] Counsel
for the defender submitted that Bonjedward was entirely matrimonial property,
and that it should be sold and the proceeds divided between the parties. For the reasons stated above I reject both of
those contentions. Counsel further
submitted that Bonjedward should be valued at £2 million, on the basis of Mr.
Fairnie's valuation and that if, contrary to her primary submission, the house
were to be transferred to the pursuer, the pursuer should pay the defender a
capital sum of £677,875; that is based on the assumption that the house was
matrimonial property and that Mr. Fairnie's valuation was accurate. I have rejected both of those assumptions,
and consequently I reject this submission.
It was also submitted for the defender that there were no special
circumstances such as to justify an unequal division of the matrimonial
property. In my opinion an unequal
division is justified in respect of the property in the bank accounts, for the
reasons discussed above at paragraph [48].
I should also add that, if I had concluded that Bonjedward was entirely
matrimonial property, I would have divided the matrimonial property unequally,
with a substantial surplus in the pursuer's favour; that reflects the fact that
Bonjedward was her home before the marriage and that the transfer of a half
share to the defender was clearly made at his suggestion and indeed under some
pressure from him. Regardless of the
status of Bonjedward as matrimonial property, I do not think that a payment by
the pursuer to the defender could possibly be justified. During the marriage the parties enjoyed a
lavish, indeed extravagant, lifestyle; Miss Martin calculated that their annual
expenditure amounted to £178,134. That
expenditure was funded essentially from the capital that the pursuer inherited
from her husband. In my opinion it would
be grossly inequitable if the defender were to claim further sums at this
stage.
[51] For
the foregoing reasons I will pronounce decree of divorce; and will order the
transfer of the defender's interest in Bonjedward to the pursuer; the transfer
of the pursuer's interest in 40 Warrenne Keep to the defender; sale of the
Mercedes car and division of the proceeds; and payment by the defender to the
pursuer of a capital sum which I provisionally estimate at £125,724. The case will be put out by order so that
counsel can make further representations on the exact size of the capital sum.