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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Dow v. Sweeney [2005] ScotCS CSIH_65 (24 August 2005) URL: http://www.bailii.org/scot/cases/ScotCS/2005/CSIH_65.html Cite as: [2005] ScotCS CSIH_65, [2005] CSIH 65, 2005 SCLR 1073 |
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JISCBAILII_CASE_FAMILY SCOTLAND
Dow v. Sweeney [2005] ScotCS CSIH_65 (24 August 2005)
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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION |
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Lord Hamilton Lord Cameron of Lochbroom Lord Marnoch
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[2005CSIH65] A1642/01 OPINION OF THE COURT (NO. 2) delivered by LORD HAMILTON in RECLAIMING MOTION in the cause SUSAN DOW or SWEENEY Pursuer and Reclaimer; against PATRICK CORNELIUS SWEENEY Defender and Respondent: _______ |
Act: Wise, Q.C., Cheyne; Digby Brown (for HBM Sayers, Glasgow) (Pursuer & Reclaimer)
Alt: Macnair, Q.C., Louden; Brodies (Defender & Respondent)
24 August 2005
The background
[1] On 15 October 2002 the Lord Ordinary pronounced decree in the following terms:" ... Divorces the Defender from the Pursuer, and Decerns; Decerns against the Defender for payment to the Pursuer of a capital sum of Seven Hundred and Forty Four Thousand, Seven Hundred and Eighty Four Pounds (£744,784.00) Sterling, the sum of Three Hundred and Fifty Thousand Pounds (£350,000.00) Sterling thereof to be paid immediately with interest thereon at the rate of eight per cent per annum from this date until payment, the balance to be paid by a date or dates to be afterwards fixed; Appoints parties to be heard thereon, and on any further question of interest, By Order on Tuesday 5 November 2002 at 10 a.m.; Decerns against the Defender for payment to the Pursuer of a periodical allowance in the sum of Four Thousand Pounds (£4,000.00) Sterling per month, payable monthly and in advance, for the period of one year from this date; finds the Defender entitled to Contact with Stuart Kyle Sweeney, child of the parties, every second Sunday between the hours of 2 p.m. and 6 p.m. commencing as of this date; Reserves meantime the question of expenses".
Submissions for the parties
[7] In advance of the continued diet Mr. McNair for the husband helpfully prepared a schedule setting forth in tabulated form the values of the various assets, assessed as at the relevant date, held by each of the parties. That schedule (under deletion of certain notes, to the content of which we shall separately return) is in the following terms:|
DEFENDER |
reasonable to realise |
unreasonable to realise |
PURSUER |
reasonable to realise |
unreasonable to realise |
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17 Sunningdale Wynd |
£ |
305,000.00 |
£ |
305,000.00 |
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92 Springcroft Crescent |
£ |
64,065.00 |
£ |
64,065.00 |
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Contents |
£ |
5,100.00 |
£ |
5,100.00 |
£ |
2,237.00 |
£ |
2,237.00 |
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Co Pensions |
£ |
363,280.00 |
£ |
363,280.00 |
£ |
383,688.00 |
£ |
383,688.00 |
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Personal pension |
£ |
137,661.00 |
£ |
137,661.00 |
£ |
78,689.00 |
£ |
78,689.00 |
||||
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peps |
£ |
130,501.00 |
£ |
130,501.00 |
£ |
102,206.00 |
£ |
102,206.00 |
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Shares |
£ |
324,144.00 |
£ |
324,144.00 |
£ |
85,347.00 |
£ |
85,347.00 |
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Cars |
£ |
109,600.00 |
£ |
109,600.00 |
£ |
60,000.00 |
£ |
60,000.00 |
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Premium bonds |
£ |
1,500.00 |
£ |
1,500.00 |
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Bank Accounts |
£ |
48,849.00 |
£ |
48,849.00 |
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Building Soc |
£ |
382,307.00 |
£ |
382,307.00 |
£ |
50,732.00 |
£ |
50,732.00 |
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Fishing Rights |
£ |
32,300.00 |
£ |
32,300.00 |
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AXA policy |
£ |
105,718.00 |
£ |
105,718.00 |
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Sweeney Plant |
£ |
1,709,000.00 |
£ |
1,709,000.00 |
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Total |
£ |
3,363,676.00 |
£ |
1,084,570.00 |
£ |
2,279,106.00 |
£ |
1,118,106.00 |
£ |
348,634.00 |
£ |
769,614.00 |
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Less Tax |
£ |
46,947.84 |
£ |
46,947.84 |
£ |
2,556.73 |
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Total |
£ |
3,316.728.16 |
£ |
1,037,622.16 |
£ |
2,279,106.00 |
£ |
1,115,691.27 |
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Grand total |
£ |
4,432,419.43 |
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Discussion
[14] An order made on an application for financial provision on divorce must, subject to sections 12 to 15 of the Act, satisfy the dual criteria of being (a) justified by the principles set out in section 9 and (b) reasonable, having regard to the resources of the parties (section 8(2)). The only principle specified in section 9 which is applicable for present purposes is that in section 9(1)(a), namely, that the net value of the matrimonial property should be shared fairly between the parties to the marriage, that principle itself being regulated by the provisions of section 10. "Resources" means present and foreseeable resources (section 27(1)). Sections 12 to 15 include provisions whereby an order for payment of a capital sum may be stipulated to come into effect at a specified future date (section 12(2)) and that a capital sum may be ordered to be payable by instalments (section 12(3)); the court is also empowered to make an order as to the date from which any interest on any amount shall run (section 14(2)(j)). All of these provisions must be borne in mind by the court when determining what, if any, financial provision should be made. While there may be a logical order in which the application of these provisions should be addressed, it is important to bear in mind that it is the end result, in the terms of the order made, which, regarded as a whole, must satisfy the statutory requirements. [15] Before addressing the application of these provisions to this case it is appropriate for this court to make certain findings additional to those made by the Lord Ordinary. Evidence was led from the husband as to the various transactions affecting the matrimonial property which had occurred between the relevant date and the date of the proof. No other evidence in relation to these transactions was adduced by either party. While there are some internal inconsistencies in the husband's testimony, it was not maintained that his evidence, taken generally, was on these matters either incredible or unreliable. In the circumstances of this case no material issue arises in relation to the burden of proof. Evidence was, without objection, adduced by both parties from the husband on the relevant matters. That evidence was, in relation to primary matters of fact, neither seriously challenged nor contradicted, except on one aspect. We accordingly accept that unchallenged evidence, referred to in the narrative of counsels' submissions in paragraphs [10] and [13] above and which need not be repeated, and hold the matters of fact to which it relates as established. There was an issue between counsel as to the level of profit to be anticipated from the husband's business. We find it unnecessary to reach any more definite view on that issue than that the indications for the future appear to be markedly favourable. It remains for this court to evaluate the effect of those facts and of the other material facts established at the proof. [16] The effect of the husband's evidence was that during the period in question he had redeployed many of his reasonably realisable assets. Some of that redeployment had produced profits (as in his house transactions and in the sale of part of his share portfolio, the incidence, albeit unquantified, of capital gains tax being indicative of capital gains having been made); others had, as a matter of immediate effect, resulted in modest losses (as in the realisation of his PEPS and of the AXA insurance policy). A major feature of the redeployment was further investment of sums in the husband's business interest. There is no suggestion that such redeployment was carried out otherwise than voluntarily and with a view to securing the success, or further success, of that enterprise. The husband's own evidence indicates that, although the business had earlier had some difficulties (primarily related to the husband's own health and his ability to devote himself to it), by the date of the proof it was expanding significantly, with at least the potential for the creation of even greater wealth in terms of capital and income resources. On the other hand, the business, being one dependent for its success on the health and energy of the husband personally, was and is exposed, perhaps more than many other commercial enterprises, to risks and uncertainties. [17] Mr. McNair's primary submission on "special circumstances" was founded on the preponderance of "not reasonably realisable" assets in the share of the net value of the matrimonial property to be retained by the husband. This argument proceeded on the basis that it would not be reasonable to expect that the business (or the husband's pensions or his house or its contents) would be realised in order to satisfy an award of financial provision to the wife; and that accordingly, if provision were made to the extent demanded by the wife, the husband would be left with little, if any, assets in readily realisable form. By contrast the assets available and prospectively available to the wife included substantial items readily realisable as cash. [18] In Jacques v. Jacques Lord Clyde, with whose reasons the majority of their Lordships agreed, held at pages 24-5 that, as a matter of construction of the 1985 Act, the existence of "special circumstances" did not lead to the necessary conclusion that there must be an unequal division of matrimonial property. "Special circumstances", he observed, referred to any circumstances which were special to the case; and the decision as to whether there should be any departure from equality " ... involves the test of justification by the special circumstances" (page 25). Thus, the critical issue in a case such as the present is not simply whether any circumstances of it can be described as "special" (an expression without technical meaning and not closely defined by section 10(6)) but whether they are such as to justify departure from the presumption that sharing equally is sharing fairly. In McConnell v. McConnell (No. 2) Lord Morison, while opining that it was relevant to consider whether an order for equal sharing in value would lead to a marked disparity in the nature of the property allocated, also recognised that it was relevant to consider whether that disparity was such as to justify departure from the principle of equal division (para. 20-51). [19] On the assumption (which was not challenged by Mr. Cheyne and which we are prepared for present purposes to accept) that a marked disparity in the nature of the property allocated could constitute special circumstances, we are not persuaded that in this case they in fact justify a departure from equal sharing. As Mr. Cheyne pointed out under reference to Little v. Little per Lord President Hope at page788D-E, there are various ways, including an order for payment by instalments, by which the non-realisable nature of an asset can be reflected in the provision made. It is accepted by parties that the capital sum to be awarded in this case should be made by instalments, albeit parties disagree as to the amount of these instalments and as to the intervals at which they should be payable. We intend to make an order for payment by instalments. The value of the husband's business interest at the relevant date was determined by the Lord Ordinary on the basis of expert evidence; that determination is not challenged. That interest was then and remains in the husband's sole proprietorship. It is clear from the evidence that in the period between the relevant date and the date of the proof the husband was able to make investments in his business at will. The indications are that the business remains a source of substantial capital wealth and generates for him a substantial income. Subject to due consideration of what is reasonable, having regard to the resources of the parties, we see no justification in this case for departing, on the basis of Mr. McNair's primary argument, from the principle of equal sharing of the matrimonial property.
[20] In our earlier Opinion in this reclaiming motion we rejected the contention that, in assessing the value of the matrimonial property at the relevant date, such capital gains tax as would have been exigible, if particular assets were at that date realised, should be brought into account by way of deduction. We noted (para. [15] of that Opinion) that there were other stages at which the actual or foreseeable incidence of tax and other liabilities or costs upon any realisation or other disposal could be brought into account. The stages we there had in mind were the determination of proportions in which the matrimonial property would be shared fairly and the determination of what was reasonable having regard to the resources of the parties. The assets on which capital gains tax was contingently exigible on realisation were the husband's share portfolio and his business interest. Between the relevant date and the date of the proof the share portfolio was partially realised; some liability to capital gains tax, it appears, was incurred, though the amount was not quantified. No evidence vouching any sum paid or exigible in respect of such tax is before this court. So far as concerns the business, it was not disposed of, either in whole or in part, between the relevant date and the date of the proof. All the indications at the date of the proof was that it prospering. At that date the husband was 45 years of age; he is still under 50. There is no basis in the evidence to anticipate that in the immediate or even the foreseeable future he will dispose of the business or any part of it. It is impossible to tell whether he will ever incur a liability to capital gains tax in respect of any disposal of it and, if so, when and in what amount. [21] We do not exclude the possibility that a contingent liability to capital gains tax might in some cases constitute special circumstances such as to justify a departure from the principle of equal sharing. But, having regard to the situation as described, we are not persuaded by the husband, upon whom the burden on this matter rests, that special circumstances justifying such departure are, by reason of any tax liability, made out either in respect of the shares (disposed of or retained) or in respect of the business. We shall, when considering the issue of what is reasonable having regard to the resources of the parties, return to the matter of capital gains tax. [22] As to the resources (both present and foreseeable) of the parties these will, at least ordinarily, fall to be assessed by the Lord Ordinary at the date of the proof on the basis of the evidence led at it. In this case that proof took place in June and July 2002, some three years ago. The Lord Ordinary did not, in the circumstances, find it necessary to make such an assessment. This court must now do so. It is not suggested that in the interval there has occurred any material change in the circumstances of either party. So far as is known to this court, all that has occurred in that interval is that throughout almost all of it the wife continued to receive from the husband £4,000 per month in name of interim aliment and that recently he has paid to her, against certain other stipulations, £350,000 towards a capital sum. The manner in which the latter sum had been raised was not disclosed. This court was invited to make its assessment of resources and to reach a determination of the appropriate capital sum on the basis of the evidence led at the proof, due regard being had to the known events since then referred to above. This is not an ideal situation for any court; but we must make such assessment and determination as best we can. It will inevitably involve the application to the canvas of a somewhat broad brush. [23] As at the relevant date, the husband had readily realisable assets which, if realised, would have allowed him to satisfy, or almost to satisfy, the full claim made by the wife for a capital sum. A substantial number of these assets were subsequently realised by him and the proceeds advanced to his business by way of director's loan. If one proceeds, as seems reasonable in the circumstances, upon the basis that these advances could, with appropriate planning, be redeemed without serious prejudice to the viability of the business, the husband's resources are such that he could over a reasonable tract of time meet, or almost meet, the wife's claim in full, without requiring to dispose of his home, its contents, his pension provisions or his business (or any interest in it). There is, it is true, some uncertainty as to the extent to which the advances could readily be replaced by bank borrowing, as an alternative to their orderly withdrawal over time. On the other hand, the business appears to have been expanding, with future maintainable profits of a high order. If, nonetheless, the husband were, by substitution or withdrawal or a combination of these methods, to realise the advances mentioned and were further to realise his existing readily realisable assets and required to use the whole proceeds to satisfy the wife's claim, he would, on such satisfaction, be left only with assets which it was not reasonable to expect him to realise. He would, in particular, have no ready funds with which he could, if required or if appropriate, make fresh investment in his business. [24] We acknowledge that the absence of readily available "private" funds to invest in the business interest as need or opportunity arose could be an inhibiting factor in maintaining the business or in developing it to its full commercial potential. Between the relevant date and the date of the proof the husband had, on three occasions, disposed of readily realisable assets (his PEPS, the AXA policy and part of his share portfolio) and invested the proceeds (about £100,000, £97,000 and £150,000) by way of director's loan into the business. The reasons why he took these steps on these occasions are not disclosed in the evidence. But the need or commercial advantage of being able to do so in the interests of preserving or developing the enterprise can readily be understood. Even on the basis that the advances mentioned could be redeemed without serious prejudice to the viability of the business, an order having the result that these and the husband's resources currently available in readily realisable form be made over wholly to the wife would not, in our view, be reasonable having regard to her, as well as to his, resources. [25] Such a result can be averted by two mechanisms, first, by modifying to some extent the amount of the capital sum to be awarded and, second, by making it payable in instalments over an appropriate tract of time. That course we shall adopt. The amount of the modification must necessarily proceed upon a broad discretionary approach, having regard to the resources and to the form of the resources of both parties. In the particular circumstances of this case, we consider it reasonable that the husband should retain assets in readily realisable form to the value of about £100,000 - to deal with business contingencies or other contingencies of life requiring ready funds. We also recognise that, to satisfy the order we intend to make, some liability to capital gains tax (although not quantified before us) may arise on the disposal of certain assets. We make a small allowance for that. On the other hand, given the nature of the husband's business and the uncertainty as to whether and, if so, when and in what amount he might incur capital gains tax in respect of any disposal of it, we are not persuaded that his resources are for the purposes of the Act diminished by that possibility.Disposal
[26] In the foregoing circumstances we assess the capital sum appropriate for payment to the wife (leaving out of account for that purpose the £350,000 paid to account) in the sum of £950,000 - that is, a modification of a little more than £100,000 of the amount claimed by her. Accordingly, the balance now remaining to be paid by him as a capital sum we determine in the amount of £600,000. That sum will be payable in five instalments as follows:- (1) £100,000 within three months of the date of our interlocutor, (2) £100,000 by 31 March 2006, (3) £100,000 by 31 March 2007, (4) £150,000 by 31 March 2008 and (5) £150,000 by 31 March 2009. Interest at the judicial rate will be payable on these sums from the respective dates when they become payable until payment. We do not consider that, in the circumstances of this case, interest on these sums should run from any earlier date or dates. We are also satisfied that, having regard, among other factors, to the circumstance that the wife has been receiving substantial sums as interim aliment, the ordering of payment of interest on the sum of £350,000 between the date of the Lord Ordinary's interlocutor and the date of payment would not be warranted.
