SHERIFFDOM OF GLASGOW AND STRATHKELVIN AT GLASGOW

F1404/12

JUDGMENT

of

SHERIFF PRINCIPAL C A L SCOTT, QC

in the cause

Kelly Rodger or Findlay

Pursuer

against

Alasdair Russell Findlay

Defender

Glasgow, 14 March 2014.

The sheriff principal, having resumed consideration of the appeal, Allows same and that to the extent of recalling the sheriff's interlocutor dated 12 July 2013 insofar as it granted an order for a capital payment of £8,177.24; Substitutes therefor an order for a capital payment of £50,000 with interest thereon at 8 per centum per annum from the date of citation until payment; quoad ultra Adheres to the sheriff's interlocutor; Finds the defender liable to the pursuer in the expenses of the appeal; Allows an account thereof to be given in and remits same, when lodged, to the auditor of court to tax and and to report thereon; and Certifies the hearing on 9 January 2014 as being suitable for the employment of senior counsel.

NOTE:-

Background

[1] The sheriff heard evidence at a diet of proof on 17 June 2013. In her note she records that the evidence was in short compass. The extent and value of the matrimonial property was apparently agreed and a joint minute had been lodged in process. The issue in dispute was whether special circumstances existed such as to justify a departure from equal sharing of the matrimonial property between the parties. The sheriff recorded at the outset of her note that an equal share would have entitled the pursuer to a sum of £95,000 which was the order sought by way of a capital sum in terms of the second crave in the writ.

[2] It is worth noting the respective pleas in law. The pursuer pleaded that the order for a capital sum sought was justified in terms of section 9(1)(a) of the Family Law (Scotland) Act 1985 and that it was reasonable having regard to the resources of the parties. (See section 8(2)(a) and (b) of the 1985 Act). For his part, the defender, in terms of his first plea in law, pleaded that the property transfer order which he craved was justified in terms of section 9(1)(a) and 9(1)(c) of the 1985 Act and that it was reasonable having regard to the resources of the parties. In relation to the order for a capital sum sought by the pursuer, in terms of his second plea in law, the defender contended that that order was unjustified in terms of section 9(1)(a) of the 1985 Act and that it was unreasonable having regard to parties' resources.

[3] The pursuer's first plea in law seeking divorce was not a matter of controversy.

[4] There was, of course, no dispute as between the parties regarding the application of the 1985 Act provisions. However, as senior counsel's submission (for the pursuer) developed, it became apparent that the sheriff's purported application of those provisions to the particular case in hand was to be the subject of significant challenge.

Pursuer's submissions

[5] At the outset of the appeal, senior counsel for the pursuer tendered an extremely helpful note of argument but supplemented that written note by oral submissions. It was argued on behalf of the pursuer that the sheriff, in reaching her decision regarding the capital sum awarded to the pursuer, had erred in three ways. Firstly, she had failed to take into account all of the specific circumstances which applied and, accordingly, there had been error by omission on her part. Secondly, the sheriff had become confused regarding the criteria which she ought to have adopted in determining the pursuer's claim for a capital sum. Thirdly, the sheriff had erred in relation to the issue of resources.

[6] Senior counsel contended that the sheriff required to exercise judicial discretion within the law and in relation to the parties' pleadings as framed. Reference was made to various provisions within the 1985 Act. At the heart of the matter lay section 8(2) which is in the following terms:

"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."

(Section 8(1) relates to certain orders for financial provision including an order for the payment of a capital sum.)

[7] It was stressed on behalf of the pursuer that the only principle invoked by her for the purposes of the litigation was that embraced by section 9(1)(a) to the effect that "the net value of the matrimonial property should be shared fairly between the parties to the marriage..." Moreover, that was the only principle which the defender sought to invoke in contending that the capital sum sought was unjustified.

[8] Reference was also made to section 10(1) which states that:

"In applying the principle 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 is shared equally or in such other proportions as are justified by special circumstances."

Senior counsel submitted that, essentially, the statutory provisions were underpinned by a presumption in favour of equality.

[9] For completeness, it was submitted that "relevant date" for the purposes of section 10(2) equated to the cessation of cohabitation; that in terms of section 10(3A)(b) the "appropriate valuation date" meant the date of the order in question; and that the provisions of section 10(4) involved, as senior counsel put it, "putting in the pot" for consideration under section 9(1)(a) everything acquired during the marriage together with any property acquired before the marriage where such property, for instance, had been purchased as a family home.

[10] Senior counsel submitted that section 10(6) put flesh on the bones when it came to special circumstances under section 10(1). For the purposes of the present case, she highlighted the inclusion of section 10(6)(a), (b) and (d). Reference was made to the case of Jacques v Jacques 1997 SC (HL) 20. The leading speech was given by Lord Clyde who appeared to be satisfied that section 10(6)(a) would comfortably cover the situation in which, by agreement, the title to heritable property had been taken in joint names. Moreover, senior counsel pointed to the observations of Lord Jauncey at page 22. He referred to the presumption for equality following from the presupposition under section 10(1) of the 1985 Act that only in the event of there being special circumstances justifying an unequal division should the matrimonial property be divided other than equally.

[11] Lord Jauncey went on to say that:

"Subsection (6) by its use of the words 'may include' rather than some such words as 'must or shall include' recognises that the existence of one or more of the events specified in para (a) - (e) does not automatically constitute special circumstances. It must be for the court of first instance in each case to determine whether an event specified in sub sec (6) amounts to special circumstances in the case in question and if so whether it justifies a division in proportions other than equal. The provisions of sub sec (6) give guidance to the court of first instance but they do not fetter its discretion in applying the principle set out in sec (9)(1)(a)."

[12] A further passage within Lord Jauncey's speech, at page 22, was highlighted as follows:

"...the matter is essentially one of discretion, aimed at achieving a fair and practicable result in accordance with common sense. It remains as important as it always has been that the details should be left in the hands of the court of first instance and not opened up for reconsideration on appeal."

[13] Accordingly, for the avoidance of any doubt in the matter, senior counsel for the pursuer declared her submission to be that the placing of the title to property in joint names was eminently capable of falling within the provisions of section 10(6)(a). It was, she submitted, necessary to have regard to all the circumstances in deciding whether they justified an unequal division of property.

[14] Reference was also made to the case of Jackson v Jackson 1999 FamLR 108 being a decision of Lord MacFadyen sitting in the Outer House. Lord MacFadyen had been of the view that the evidence in Jackson did not disclose special circumstances which displaced the presumption that equal sharing of the value of matrimonial property was fair. In particular, at paragraph 95-37 he commented that:

"Section 10(6)(a) makes any agreement as to the division of matrimonial property a potential "special circumstance". Here I rely on the agreement (and, perhaps more importantly, on the underlying intention on the defender's part which it reflects) not in support of unequal division, but as countering the potential effect of other circumstances and reinforcing the presumption in favour of equality. I regard the passage in Lord Clyde's speech in Jacques at page 25 as supporting the legitimacy of that approach. For those reasons I conclude that the presumption in favour of the fairness of equal sharing of the net value of the matrimonial property has not been displaced."

[15] Senior counsel drew the court's attention to the provisions of section 11(2) of the 1985 Act. That subsection, in turn, referred to section 9(1)(b) of the Act. However, senior counsel stressed that section 9(1)(b) was not in issue as far as the parties to the litigation were concerned. There were no averments concerning that provision nor were there any references to it within the respective pleas in law. Senior counsel argued that no relevant evidence had been led about economic advantages or disadvantages nor did such features find their way into the sheriff's findings in fact and findings in fact and law.

[16] Under reference to the record, senior counsel pointed out that whilst the pursuer did not oppose the property transfer order sought by the defender, the defender's first plea in law thereanent confined itself to establishing justification in terms of section 9(1)(a) and (c) of the 1985 Act. However, the parties were unquestionably at odds when it came to the capital sum payable to the pursuer. The acute issue was how much the pursuer should be awarded.

[17] Finding in fact 6 set out the sheriff's assessment of the matrimonial property at the relevant date. The matrimonial property included the matrimonial home at [address]. At the relevant date, the pursuer held a one‑half pro indiviso share in those subjects. Senior counsel pointed out that the net value of the home at the appropriate valuation date was about £194,000 and yet the sheriff had singularly failed to incorporate into her order for payment of a capital sum any amount attributable to the pursuer's joint interest in the heritable subjects. Accordingly, as senior counsel for the pursuer put it, the pursuer arrived at the proof with entitlement to a share in heritable property to the extent of £97,000 or thereby. In contrast, after proof, she emerged with none of it.

[18] Senior counsel referred specifically to her written note of argument at paragraph [3.8] onwards, inter alia, in contending that there was a presumption that the net value of the house would go "into the pot" when it came to consideration of matters. Reference was made to Cunningham v Cunningham 2001 FamLR 12. It was submitted that the sheriff did not appear to have appreciated that section 10(6)(a) was capable of being a special circumstance when it came to consideration of equal sharing or otherwise.

[19] The sheriff had made reference to Lord Clyde's speech in the case of Jacques at paragraph [23] in her note. She quoted extensively from that speech. However, at the outset of paragraph [24] in the note, the sheriff had referred to "one of the factors to be taken into account in that exercise" as being "an assessment of the balance between parties' economic advantages and disadvantages." Senior counsel maintained that, in the particular circumstances of the present case and, having regard to the constraints of parties' pleadings, the sheriff's reference in the first sentence of said paragraph [24] must be regarded as wrong. On any view of matters, section 9(1)(b) was not in issue as between these parties. The case of Jacques was solely concerned with section 9(1)(a). Accordingly, at this point in her note, the sheriff's reasoning had broken down.

[20] As senior counsel for the pursuer highlighted at paragraph [3.10] in her note of argument, the sheriff was charged with making a decision about division of the net value of the matrimonial property, not compensation for gain or loss in capital, income or earning capacity. Moreover, there were no findings in fact such as would permit any exercise in terms of section 9(1)(b), even if it were legitimate to go beyond the pleadings in this connection.

[21] It was argued that an analysis of paragraph [25] within the sheriff's note disclosed continuing errors. For instance, whilst she continued to proceed as if section 9(1)(b) and section 11(2) of the Act were relevant for the purposes of the case, she further strayed into consideration of the relative financial burden on the parties in relation to the child's upkeep and the issue of fair sharing in that regard. All that would only be pertinent as far as section 9(1)(c) is concerned and, as previously discussed, that statutory provision had not formed part of the basis upon which parties had joined issue in the litigation.

[22] Senior counsel for the pursuer submitted that what was, in fact, required was a consideration of both parties' resources, including an assessment of how much the defender could pay the pursuer by way of a capital sum (ie applying section 8(2)(b)). The defender had savings (finding in fact 6) and the potential to borrow more than the existing mortgage (paragraph [16] in the sheriff's note). Senior counsel criticised the sheriff for failing to deal with that critical issue.

[23] The sheriff's reference in paragraph [25] to the balancing act required by section 9(1)(b) and section 11(2) appeared to be rooted in the sheriff's reliance upon the observations of Sheriff Principal Nicholson in the case of McVinnie v McVinnie (No 2) 1997 SLT (Sh Ct) 12. However, senior counsel pointed out that the "balancing exercise" discussed by Sheriff Principal Nicholson clearly related to contributions for the purposes of section 9(1)(b). Accordingly, senior counsel professed difficulty in understanding any proper basis upon which the decision in McVinnie had relevantly informed the sheriff's own decision.

[24] At paragraphs [3.13] and [3.14] in her written note of argument, senior counsel detailed further criticism of the sheriff's approach. In conclusion, at [3.15], it was submitted that the court was being called upon to deal with a reasonably straightforward case of omission and confusion on the part of the sheriff. A number of errors had been identified any one of which vitiated her decision. All that being so, senior counsel invited the court to consider the issue of a capital sum payment de novo and five potential options were set out within the note of argument for the pursuer.

Defender's submissions

[25] The solicitor for the defender, at least at the outset, sought to justify the sheriff's approach and invited the court to adhere to her interlocutor. However, it was, quite properly, accepted that section 9(1)(b) of the 1985 Act was not relevant to the case. That concession in itself created a difficulty for the defender having due regard to the sheriff's treatment of the issues.

[26] As the submission for the defender's solicitor developed, it became readily apparent that she was experiencing considerable difficulty in resisting the force of the arguments presented by senior counsel for the pursuer. In the event, I allowed the defender's solicitor to bring her submission to a conclusion and that without any material discussion of what the court should do if seized of the matter de novo. I then reflected upon the various submissions which I had heard.

Decision on the merits of the appeal

[27] Standing the cogency of the submissions advanced by senior counsel for the pursuer, I found myself able to pronounce a decision on the merits there and then. I indicated that, for the reasons identified by senior counsel, I was constrained to take the view that the sheriff had, indeed, erred when it came to the order for a capital sum sought by the pursuer. Whilst I suspect that the sheriff, at first instance, did not have the benefit of submissions akin to those presented by senior counsel before me, nevertheless, I concluded that the sheriff's application of the statutory provisions to the case in hand was, in places, plainly incorrect. That conclusion having been reached, it was then open to the court to consider the order for a capital sum payment de novo.

Further procedure

[28] After an adjournment for lunch, senior counsel addressed the court in respect of the five options set out within her note of argument. The solicitor for the defender was afforded a right of reply, naturally. However, it appeared that, for whatever reason, she was not properly equipped to address the court in a detailed manner. In fairness to the defender's solicitor, it may be that the appearance of senior counsel at the appeal had taken her somewhat by surprise and that she was somewhat overwhelmed as a consequence. At all odds, the matter now being essentially a discretionary decision for the court of new, I resolved simply to make avizandum.

[29] Without going into the precise chronology of events, the defender's solicitor thereafter submitted written submissions in response to the options already put forward by senior counsel on behalf of the pursuer. The court was requested to take these submissions into account when considering the matter de novo.

[30] The case having been taken to avizandum, the court's consideration of these additional submissions would, in the normal course of events, be regarded as unacceptable and, indeed, illegitimate. However, standing the absence of a response from the defender's solicitor on the occasion of the appeal hearing, I resolved to put the case out for a further hearing to establish whether, in the circumstances, there would be any objection from the pursuer's legal advisers to the additional written submissions for the defender being taken into consideration. At the further hearing, once again, senior counsel appeared for the pursuer and, once again, a very helpful supplementary note of argument was tendered to the court. Paragraph 1 of that note indicates that the content of the defender's written submissions as framed post-avizandum caused no difficulty in general terms. Accordingly, both sides were, in the interests of expediency, afforded a further opportunity to address the court but only as regards the nature and extent of any capital sum to be arrived at de novo. In addition to the written submissions for the defender, I noted his solicitor's position to be that ability to pay any capital sum was not necessarily in dispute. However, in terms of resources, she submitted that it was pertinent that, depending upon the award made by the court, the house may require to be sold in order to meet such an award.

[31] Senior counsel for the pursuer reiterated an earlier submission to the effect that resources were not in issue and that by way of concession having regard to the court's interlocutor of 14 June 2013. Accordingly, she submitted that there could be no argument as to how the defender might fulfil the terms of an order for capital payment to be made by the court.

[32] For completeness, both the pursuer's supplementary note for the purposes of the hearing on 9 January 2014 and the defender's "Analysis and Response to the Appellant's Suggested Options" submitted to the court by letter dated 16 December 2013 are appended hereto as is a copy of the pursuer's note of argument for the original appeal hearing on 3 December 2013.

Decision re order for payment of a capital sum

[33] I have, of course, given due consideration to each party's detailed, written submissions. In my view, whilst the court's approach can never be characterised as an exact science, I am satisfied that to adhere to equal sharing of the equity in the subjects at [address] would not produce a just outcome in all the circumstances. On the other hand, the sheriff's failure to recognise the significance of the pursuer's one-half pro indiviso share in the subjects, to my mind, also produced a demonstrably unjust result.

[34] In my opinion, a proper balance requires to be achieved in the present circumstances by following the approach suggested under option 2. In other words, taking a broad approach, fairness as between the parties can be achieved by halving the sum to which the pursuer would otherwise be entitled were equal sharing to have prevailed. From the figures produced I conclude that such an approach would result in the sum of £48,500 being allocated to the pursuer's share. The sheriff has already made an order for a capital payment in the sum of £8,177.24.

[35] Whilst I accept the force of senior counsel's submission regarding the non‑availability of a "resources" argument, it seems to me that, in the exercise of its discretion, the court requires to exercise a moderate degree of caution when it comes to the practical realities of the situation. All that being so, I have rounded down the pursuer's total entitlement in terms of the court's interlocutor to the sum of £50,000. That, in my view, ought to temper the consequences of the order at least to some degree.

Expenses

[36] At the hearing on 9 January 2014, the solicitor for the defender resisted the pursuer's motion for the expenses of the hearing to be awarded against the defender and for the employment of senior counsel to be sanctioned for the purposes of the hearing. In contrast, senior counsel for the pursuer argued that previously, on 28 November 2013, the defender had expressly maintained that he was ready, willing and able to argue the appeal and, thus, the diet proceeded on 3 December 2013. The additional and, strictly speaking, unnecessary hearing on 9 January 2014 was the direct result of the failure of the defender's representatives to respond to arguments about the nature and extent of any capital sum payment on the hypothesis that the sheriff's interlocutor were to be recalled. Senior counsel submitted that the additional procedure involved came with a penalty, viz. expenses. Whilst her services had been provided on a pro bono basis in respect of the diet on 3 December 2013 that, she advised the court, was not so as far as 9 January 2014 was concerned. In the particular circumstances the instructions to appear could not be passed to any other counsel. Therefore, her appearance at the hearing effectively generated by the conduct of the defender's advisers was necessary and justified.

[37] The pursuer in this appeal has achieved success and is, accordingly, entitled to the expenses of the appeal to include the hearing on 3 December 2013 and the subsequent hearing, by order, on 9 January 2014. Moreover, I consider that senior counsel's argument regarding the need for her attendance on 9 January 2014 to be sound. It is, in my view, entirely appropriate that her appearance on that date ought to be sanctioned by the court.