[2] As
the financial arrangements feature prominently, the background to these is
usefully set out in limine. The pursuer, who had been struggling with her
finances at the time of the marriage, moved, with at least two of her three
sons, to live in the defender's house in Aberdeen.
The defender gave the pursuer £5,000 to
deal with her then current financial problems. She also, at the defender's request, kept the
proceeds of sale (£23,000) from her house in Newport.
Each party kept his and her own income
and accounts. The defender paid for a
housekeeper and a gardener. He paid all
of the household expenses, apart from food. The pursuer usually paid for the food
shopping, unless the defender happened to be with her. The defender, having consulted a friend on
the appropriate amount, gave the pursuer £200 per week to pay for the food and
related household items. This sum
remained static for sixteen years of the marriage until it was increased to
£300, when the pursuer stopped working altogether. She worked throughout most of the marriage and
contributed her earnings from that and her capital to the general support of
the family, including her three boys. At
one point the pursuer had paid for a cleaner, but the defender took that
expense on when she began to find that difficult. The pursuer had done some gardening but admitted
to having become "scunnered" with it and stopped. She did do the cooking and was otherwise generally
in supervisory charge of household matters.
[3] The
defender took on the burden of paying the school fees for two of the children,
although this did not last for very long given their ages. He assisted the older son to buy a flat at King
Street, Aberdeen, by giving
him £5,000 and paying the conveyancing fees. He helped with the children's finances, paying
the accumulated debts of one son, and assisting to some extent when they became
students (although the bulk of the support was through student loans). He contributed to the costs of two weddings. He stood in as guarantor to enable the younger
son to buy a flat in Dundee. He bought another flat at 16
Panmure Place, Edinburgh, for
the same son. This was shared by the son
and the pursuer's nephew, who paid the defender rent.
(b) THE PURSUER'S ACCOUNT
[4] According
to the pursuer, the marriage was initially a happy one. But the defender was not open with her about
his finances. She described the move to Aberdeen
as an uprooting, although it did not last long. Her youngest son experienced problems at the
two schools to which he had been transferred (Robert Gordon's College and Cults
Academy). The pursuer was acutely sensitive to this and decided
that his request to return to the school where he had been prior to the
marriage (Madras College,
St Andrews) should be granted. The parties began to look for a home from
which the son could travel to school and the defender could continue to operate
his business in Aberdeen. This exercise culminated in the defender
buying the house of friends of the parties (the Duffins) in Coupar Angus. The story behind that was that the parties
were buying a lawnmower from the Duffins and had gone to collect it. When they did so, the defender and Mr Duffin
reached an agreement for the purchase of the house whilst loading the lawnmower
into the parties' car. The defender had
not previously discussed the purchase with the pursuer. This house was Abbotsville, which remained the
family home thereafter. The parties had
lived in Aberdeen for only about a
year and a half.
[5] The
defender declined to operate a joint bank account with the pursuer, which
caused her hurt because she felt that he did not trust her. He did not respect her opinions, except in
relation to the refurbishment of properties, which the parties bought from time
to time. All of these properties were
put into the defender's sole name. Again,
the pursuer took this as meaning that the defender did not trust her. The pursuer now, but not at the time,
understood that the defender wanted his estate to go to his niece and nephew
and not to her children. She knew that
he had made two wills. The first had
left her his estate in liferent with the fee to his heirs. The second (7/31), at her prompting, left her
Abbotsville and its contents as well. Eventually,
in August 2006, she asked the defender to put Abbotsville into joint
names. He rebuffed this suggestion by
swearing at the pursuer. The pursuer went for a drive to cool her temper. When she returned, she asked the defender to
put at least one property into joint names. She suggested that the flat at Panmure
Place might be a candidate for this. That property was put in joint names.
[6] In
2003, the defender announced that he was going to India
with a friend, Hamish Shepherd. He told
the pursuer that she was not going with him as the trip was not going to be a
comfortable one. He told her that they
were going to "rough it". The pursuer
was upset at this, because she felt devalued. She explained that she could have roughed it
too, having been a hippy in her youth. The
defender left her with three cheques to deal with any problems which might have
arisen during his absence. The defender and his friend had not roughed it in
any event. The pursuer did not go on a
second India
trip, as she had not felt well enough to do so. She did go on a third trip.
[7] The
pursuer attempted to resolve what she perceived to be the parties' difficulties
by going to marriage counselling, but the defender would not go with her. She
began to have panic attacks when driving, which she attributed to the
defender's conduct. Her blood pressure
increased. By the time of the
separation, the parties had not been sleeping together for several months, yet
the defender, according to the pursuer, appeared to think he was in a happy
marriage, oblivious to its problems. In
November 2006, the pursuer went away to Edinburgh
for a long weekend. She decided to seek a divorce and instructed a summons,
which was served on the defender on 13
November 2006.
[8] The
pursuer said that she has struggled financially since the separation, having to
sell assets to support herself. But she
does have pensions from her former employment and interim aliment from the
defender. She is presently renting
accommodation in Perthshire but wishes to buy a house in central Edinburgh,
where she has close relatives. She has
been paid £100,000 as an interim capital payment, which is intact apart from
legal fees.
(c) THE SUPPORTING EVIDENCE
[9] Margaret
Gee, aged 55, a university lecturer and friend of the pursuer for thirty five
years, gave evidence. Most of it seemed
to be hearsay. She spoke of the pursuer
as a strong and clever woman. Mrs Gee
was in touch with the pursuer every fortnight or so during the marriage. She detected a change in the marriage
coincident with a shift in the defender's attitude to the pursuer's sons
(something not mentioned by the pursuer). She was able to speak to the pursuer's
surprise at the way in which the family finances were regulated. The pursuer thought that the defender did not
trust her because of the lack of sharing of a bank account and financial
information. Mrs Gee regarded the
pursuer as the person who organised the household and other aspects of making
married life comfortable. The pursuer
had been distressed over the defender deciding to go to India
without her and over the decision to buy Abbotsville without consultation. She became stressed, depressed and her blood
pressure increased. She had not been in
that kind of state after her previous divorce.
[10] There was an Affidavit from Dorothy Duffin, who had known the
pursuer for thirty five years. Most of
this appears also to be hearsay, but it does reflect the pursuer's
disillusionment with the marriage from an early stage. It states that the pursuer was finding it
difficult to make ends meet during the marriage and that she was having to use
some of her own money to support her children. She felt insecure in the absence of property
being in her own name. Mrs Duffin
confirmed the sale of her house to the defender without the pursuer being
consulted. She supported the pursuer's
evidence of the India
trip being a blow to her self esteem and of the defender's conduct affecting her
health, in the form of panic attacks. Mrs
Duffin also confirmed that the defender had declined to attend marriage
counselling.
(d) THE DEFENDER'S ACCOUNT
[11] The breakdown of the marriage came as a "total shock" to the
defender, and had "astonished" his best man, David Dalgarno, a fellow
pharmacist, who gave evidence. The defender
had been awaiting the return of his wife from her weekend away in Edinburgh,
when messengers-at-arms arrived to serve the divorce summons upon him. He described how he had supported the family over
the years. He had paid the household
expenses and paid the pursuer an allowance, which was increased when she had asked
for that. He paid for a housekeeper and
a gardener. He had moved to Coupar Angus
to "save" the pursuer's son's education. He described family life at Abbotsville as
"luxurious". He had even installed a
swimming pool at the house, which is set in over an acre of garden. The pursuer had no household tasks to perform
other than cooking.
[12] The defender said that he had trusted the pursuer. He had assisted her and her sons during the
marriage, as outlined above, including the purchase of Panmure
Place. This was put into the joint names of the
parties when the pursuer agreed not to go on at the defender about putting
other property into joint names. He had
not put Abbotsville into joint names because, he thought, if anything happened
to his wife, she would have left her share to her sons. He was a "name" at Lloyds until 1997 and any
transfer of title might have been viewed suspiciously by Lloyds, were they to
go against him for insured losses. The
defender maintained that he had told the pursuer this. Furthermore, he wanted
the bulk of his estate to go to his nephew and niece, although he had made
provision for his wife in his will. He
did not tell the pursuer that he did not plan to leave her children anything in
his will, for fear of upsetting her.
[13] The defender had planned to go to India
and "rough it" with Mr Shepherd, who had friends in Naipur. The pursuer had been upset when he had told
her that she would not be accompanying him. The defender accepted that he had
phrased matters badly. The defender said
that the pursuer had never recovered her nervous health, which had been adversely
affected by her previous divorce.
(e) CONCLUSIONS ON THE MERITS
[14] This was the pursuer's second marriage. She had a family moving rapidly towards
adulthood. She expected the defender to
take on the role of the major provider for herself and, at least to a
significant extent, for her three sons. This
was so even although she too would, and did, contribute to the family finances
from her own earnings. Her former
husband's role in the upbringing of the children was not explored at the proof.
The pursuer no doubt also expected a
degree of mutual co-operation and warmth in the relationship. Ultimately the pursuer's expectations were not
achieved.
[15] The pursuer's attitude to money was perhaps more cavalier than
the defender's more conservative and canny approach. The pursuer was in error in considering that
there was anything insecure in the financial aspects of her relationship. Her desire to have the defender place funds
into a joint account or put the title to property into joint names may have
stemmed from a sense of insecurity, but the defender always had funds to
provide for her and such evidence as there was to the effect that he was
unwilling to do so was not convincing. He
undoubtedly did provide for the defender. He gave her capital to meet her
indebtedness at the time of the marriage and took her and her sons, or at least
two of them, into his household. He
spent considerable sums assisting at least two of the boys to set themselves up
in flats. He provided them with some
additional support. In purely financial
terms, with one exception, the defender was not ungenerous. He paid all the
household bills and employed a housekeeper and gardener.
[16] The problem does not seem to have stemmed from the net
contribution made by the defender to the support of the pursuer and her sons in
his household. Rather it was the way in
which he provided that support. The
defender had been a bachelor for many years and was, no doubt, used to spending
his own money on his own expenses in his own way, without the need to consult
with anyone else, especially a wife. Although there is no reason to question
his motives, he appears to have proceeded along the same track after the
marriage. He did not consult the pursuer
on financial matters and approached the housekeeping allowance in a rather cold
accounting or businesslike manner, rather than adopting a more flexible
approach which the parties' finances were more than capable of supporting and
which happy married relations may sometimes demand. His failure to increase the housekeeping
allowance for sixteen years or so is the one area where his generosity did let
him down, given the increase in the cost of living, which he had presumably
noticed, over that period and the commensurate increase in the family wealth.
[17] Similar considerations apply to the issue of joint accounts and
joint titles. There was no need for the
parties to operate a joint account. The
lack of a joint account in a marriage is hardly an unusual feature and cannot of
itself be taken as an indicator of mistrust or lack of confidence. Parties to a marriage may arrange their
finances in many satisfactory different ways without a joint account. The same applies to joint title. The reality in this marriage was that the
pursuer's financial position was always going to be secure, without the pursuer
having a joint title to any property. The
defender is hardly the type of person who might have been expected to desert
his wife and flee with his assets converted into untraceable cash. He was a respectable pharmacist of many years
standing with a portfolio of heritable and moveable assets not immediately
convertible into liquid funds. It is
slightly surprising, with the pursuer's obvious intelligence, that she appears
not to have had a reasonable grasp of this.
[18] Once again, the problem between the parties stemmed from the
defender's somewhat hard headed or isolationist approach to his finances. He undoubtedly saw no need to consult the
pursuer on such issues. The sudden
purchase of Abbotsville was an extreme example of this. It must be unusual, although no doubt not
unique, for one party to a marriage to buy a matrimonial home without prior
consultation. The decision to go on
holiday to India
without the pursuer was another aspect of the defender's insensitivity. He might have justified his actions to the
pursuer, but the sudden announcement of his solo departure on a foreign holiday
was bound to cause the pursuer to feel devalued and unwanted.
[19] The defender's approach, although not intended to cause the
pursuer distress, was one which, looked at objectively, was calculated to do
so. It did so and the pursuer's health
did deteriorate accordingly. Relations
reached the stage when she could not reasonably have been expected to continue
married life with the defender. The pursuer's position in this regard is
supported by Mrs Gee and the affidavit from Mrs Duffin, both of whom appeared
to have painted an accurate picture of the pursuer's married life and its
effect upon her. Decree of divorce will
accordingly be granted.
2. Financial Provision
(a) LEGISLATIVE FRAMEWORK
[20] Section 9 of the Family Law (Scotland)
Act 1985 (c 37) sets out the principles to be applied when the Court is asked
to make an order for financial provision on divorce. These include that:
"(a) the net value of the
matrimonial property should be shared fairly...
(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".
"Economic advantage" is defined as
including "gains in capital, in income and in earning capacity", and
disadvantage is to be "construed accordingly". "Contributions" includes indirect and
non-financial contributions and, in particular, any such contribution made by
looking after the family home or caring for the family" (s 9(2)).
[21] Section 10 provides that sharing fairly means "equally or in
such other proportions as are justified by special circumstances". The "matrimonial property" means all the
property belonging to the parties at the relevant date which was acquired by
them "(otherwise than by way of gift or succession from a third party)...during
the marriage" (s 10(4)). "Special
circumstances" may include:
"(6)(b) the source of the funds
or assets used to acquire any of the matrimonial property...where those funds or
assets were not derived from the income or efforts of the persons during the
marriage".
There is then a presumption in
favour of equal sharing unless special circumstances are found to exist. But even if they do, that does not mean that
an unequal sharing ought to follow. As
the pursuer submitted, the court has a discretion in that regard (Jacques v Jacques 1997 SC (HL) 20, Lord
Clyde at 24; see eg Sweeney v Sweeney
2003 SLT 892 (successfully reclaimed on another matter), Lord Kingarth at paras
31-33). In applying 10(6)(b), there is a
limit to how far it is appropriate to trace the sources of the matrimonial
property (McCormick v McCormick 1994
SCLR 958, unreported on this point, Lord Marnoch at p 12).
[22] Section 11 provides that, in applying the principles in section
9, the court must have regard to the extent to which:
"(a) the economic advantages or
disadvantages sustained by either person have been balanced by the economic
advantages or disadvantages sustained by the other person, and
(b) any resulting imbalance has
been or will be corrected by a sharing of the value of the matrimonial
property".
(b) MATRIMONIAL PROPERTY
[23] It was agreed that the "relevant date" for the purposes of
section 10(3) was 13 November
2006. It was also agreed
that, at that date, the matrimonial property included the following:
|
|
Defender
|
Pursuer
|
Joint
|
|
Heritage
|
|
|
|
|
(3F2) 16
Panmure Place, Edinburgh
|
|
|
170,000
|
|
Abbotsville, Coupar Angus
|
450,000
|
|
|
|
Ellenslea, Balbeggie
|
250,000
|
|
|
|
4 Grampian Road,
Rosyth
|
80,000
|
|
|
|
2 Grampian Road,
Rosyth (garage)
|
5,000
|
|
|
|
Red Cross Hall, Coupar Angus
|
33,000
|
|
|
|
Westwood, Lamlash
|
300,000
|
|
|
|
Crawford Back Cottage, Lamlash
|
90,000
|
|
|
|
St Anne's, Blairgowrie
|
350,000
|
|
|
|
Barochan Resevoir, Houston
|
5,000
|
|
|
|
1 Blairgowrie Road, Coupar Angus (half share)
|
50,000
|
|
|
|
|
|
|
|
|
Furnishings
|
|
|
|
|
Panmure Place
|
|
|
1,000
|
|
Abbotsville
|
47,250
|
2580
|
|
|
Westwood
|
2,000
|
|
|
|
St Annes
|
2,000
|
|
|
|
|
|
|
|
|
Pensions
|
|
|
|
|
Standard Life Policy 8087661
|
14,235
|
|
|
|
Standard Life Policy 8087662
|
14,235
|
|
|
|
Standard Life Policy 8087663
|
14,235
|
|
|
|
Standard Life Policy 8087664A-V
|
201,380
|
|
|
|
Abbey Life Policy 002038974
|
20,372
|
|
|
|
SPPA Pension
|
|
21,492
|
|
|
Standard Life Policy X23684278
|
|
20,733
|
|
|
Additional State Pension
|
|
15,250
|
|
|
|
|
|
|
|
Bank Accounts
|
|
|
|
|
Royal Bank of Scotland Account 00730565
|
28,678
|
|
|
|
Royal Bank of Scotland Account 00125696
|
5,085
|
|
|
|
Royal Bank of Scotland Treasury Reserve Account 50020080/30
|
952,983
|
|
|
|
Bradford & Bingley Account 044XA600007B
|
|
1,145
|
|
|
Halifax
Instant Saver Account 01909102
|
|
2,361
|
|
|
Bank of Scotland Account 00305473
|
|
4,209
|
|
|
|
|
|
|
|
Shareholdings
|
|
|
|
|
Royal Dutch Shell plc @ £19.14
|
57
|
|
|
|
Marks & Spencer plc @ £7.015
|
70
|
|
|
|
Shell T & T plc 1713 shares @ £19.14
|
32,787
|
|
|
|
Axis-Shield plc -
|
20,800
|
|
|
|
MacFarlane Group plc - @ £0.31
|
69,750
|
|
|
|
Standard Life plc - 29,670 shares @ £2.575
|
85,301
|
|
|
|
RBS plc - 6,077 shares @ £18.74
|
113,883
|
|
|
|
Standard Life plc - 3832 shares @ £2.575
|
|
11,017
|
|
|
Axis-Shield - 3,500 shares @ £2.60
|
|
9,100
|
|
|
|
|
|
|
|
Rensburg Sheppards General PEP
|
|
15,110
|
|
|
BA 1250 ordinary 25p shares @ £4.6275
|
5,784
|
|
|
|
M & S - 1245 ordinary 25p shares @ £7.015
|
8,734
|
|
|
|
Cash
|
3,099
|
|
|
|
Further Sums
|
|
6980
|
|
|
Rensburg Sheppards ISA
|
|
16,208
|
|
|
Axis-Shield - 1950 shares @ £2.60
|
5,070
|
|
|
|
Cable & Wireless - 1500 shares @ £1.5875
|
2,381
|
|
|
|
Cash
|
225
|
|
|
|
Further cash
|
33
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
Mercedes 230
|
20,000
|
|
|
|
Personalised number plate DC55
|
5,000
|
|
|
|
Range Rover - SP04VOD
|
25,000
|
|
|
|
Wine cellar
|
1,500
|
|
|
|
Jewellery
|
|
9315
|
|
|
|
|
|
|
|
Totals
|
3,314,927
|
135,500
|
171,000
|
The parties have a jointly owned
timeshare at Cancun, Mexico,
but it was agreed that this was to be sold and the proceeds divided without it
being included as matrimonial property. There
was a £106,500 loan to North Latch Developments Ltd by the defender, but the
parties were agreed that this should be left out of account on the basis that
any dividend payable from the liquidation of that company would be divided
equally between the parties. The
defender's business partner in this venture was one Kenny Hampton who, the
pursuer thought, had ended up disappearing and being "bumped off" in London
or Dublin! The defender ended up as a creditor to the
company to the extent of about £106,000 with little prospect of recovery
(6/126).
[24] There were a number of, relatively minor, areas of dispute to
be resolved in relation to the valuation of matrimonial property as follows:
(i) Barochan Reservoir
[25] This is an interesting property at Houston, Renfrewshire,
consisting primarily of a plot of ground on which there is a disused concrete
water tank (6/51). The defender bought it
at a contested auction in about July 2006 for £74,000. He said that he had discussed its development
potential with an architect, although not with local planning officials. The defender applied for planning permission
to build holiday chalets on it in October 2006. That was the status of the property at the
"relevant date". The plot is in the
green belt. Permission was refused by
the local planning authority in March 2007 and again on appeal in August 2007
(6/118; 7/10). It is agreed, somewhat
pessimistically, that the property is now worth only £5,000 because of the
planning decisions. Alexander
Carmichael, a surveyor with Allied Surveyors, Paisley, who
had been instructed for the pursuer, nevertheless valued it at £74,000 (6/117)
at the relevant date, having regard to the "hope value" of the plot at that
time. He had regard to the fact that
this is the price which the defender had paid for it a few months before. Mr Carmichael had valued a number of
properties in the vicinity. Donald Yellowley, a surveyor with DM Hall, Bridge
of Allan, instructed by the
pursuer, considered the value to be £5,000 then, as well as now (6/52). Knowing the limited potential for development
in the green belt, he did not consider that in November 2006 the plot had any
"hope value". In reaching his view he
accepted that he had ignored the price paid by the defender.
[26] The Barochan plot is reasonably valued at the relevant date at
the price paid at auction by the defender only a few months before. He had been pushed to offer the £74,000 by
other bidders and that sum represents the true open market value, being the
price paid in just such a market. In
this respect the approach of Mr Carmichael is to be preferred over that of Mr
Yellowley, who ignored the actual price paid.
(ii) 1 Blairgowrie
Road
[27] This house was worth £150,000 (6/54), but the defender only
owned a one half share. He had paid for
that share in order to assist Mr and Mrs Cameron, his housekeeper and gardener,
to buy a house. There is a somewhat
intricate Minute of Agreement regulating ownership (7/16). This stipulates that the defender can realise
his interest only: (i) when the survivor of Mr and Mrs Cameron dies (they are
in their fifties); (ii) if the Camerons cease to occupy it; or (iii) in ten
years time (from 2006). Because of these
restrictions, Richard Lennon, a surveyor with DM Hall, Perth,
instructed by the pursuer, valued the defender's share at £50,000. This seems to be a reasonable estimate of the
value given that the defender has tied up his half share (£75,000) for a period
of ten years without the benefit of any rent or interest. There must be some discount applied, unless it
were demonstrated (which it was not) that the capital value of the share would
appreciate beyond the rate of inflation. There was no competing level of discount and,
even if Mr Lennon was, as he said he was, taking a stab in the dark, his aim
was an experienced and qualified one.
(iii) Shares
[28] The pursuer valued these at £325,322 in total. Ultimately the dispute centred upon the number
of Macfarlane Group shares. These had
been partly bought by the defender and partly inherited from his mother. The correct figure for the shares bought by
the defender is the defender's one of 225,000 shares; the total holding being
297,375 of which 72,375 were inherited (6/76). The correct value is then £69,750, bringing the total of the defender's shares to £322,648.
(iv) East Redstone Antiques
[29] After the sale of the pharmacy, the parties became involved in an
antiques business along with Mr Shepherd, whom the defender had met by chance
in the context of furniture renovation. Mr
Shepherd purported to have a degree of expertise in the antiques trade. The operation involved the conversion of an
old farm steading or barn, belonging to the local farmer (Mr Morrison), into a
shop from which the antiques could be sold. The defender's interest in the business was
valued for the pursuer by Greig Rowand CA of Messrs Henderson Loggie (report
6/130). The steading had been renovated over
a period of about a year from September 2005 at considerable expense, with the
defender introducing £178,000 into the business to allow this to take place. Trading commenced in about August 2006. Thereafter the business made a small loss over
the next eighteen months (accounts 6/124) before Mr Shepherd resigned from
the firm in March 2007. He had a
disagreement with the defender and appears effectively to have walked out of
the business to travel in Spain
and France. There does not seem to be any prospect of
recovering any money from him. Mr
Shepherd left several bills unpaid and the defender thought that he was now
sequestrated. The antiques business generally is not at all buoyant.
[30] Mr Rowand considered, no doubt correctly, that only an assets
valuation was appropriate, given the absence of profit. There were essentially two potentially significant
assets to be valued. The first was the
stock and the second was the firm's interest in the steading. The accounts, which were signed by the defender
in January 2008, show the stock in March 2006 as worth £68,000 and at March
2007 as £85,000. The defender contended that these had been overestimates and
that the figures must have been created by the accountants from receipts. He would have discussed the figures with the
accountants but would not himself have estimated the value of stock. The defender
produced a valuation by Lindsay Burns & Co., auctioneers, as at January
2008 of only about £43,000. It was agreed that, as at 8 January 2008, the stock in the business of
East Redstone Antiques was worth £42,808. The relevant date is, of course, in November
2006.
[31] As at the date of the proof, there was no executed written lease
in existence in respect of the shop. Were
no lease to exist at all, the firm's interest in the heritable property would
be valued at very little, if anything. However,
as Mr Rowand commented in his report (para 3.5):
"It seems odd...that an experienced
businessman such as [the defender] who has operated a pharmacy business from
leased premises for a number of years would commit expenditure of £178,000
which appears to be irrecoverable from the point of expenditure. This does not seem to make commercial
sense. I also note that both [the
defender] and the accountants to the Business appear to have considered that
there was no need to write off the costs of this expenditure (as irrecoverable)
in the 2007 accounts".
The defender said that he had an
oral arrangement with the farmer whereby he was to receive the first two years
of occupation rent free, being from either the date of entry to renovate or
that of the commencement of trading.
Thereafter the firm was to occupy the premises at a "peppercorn" rent
for a number of years. The peppercorn
turned out to be about £1,500 per annum and the period to be at least five
years. There was now a draft lease in
existence but a dispute remained over the defender obtaining a right of
pre-emption over the shop in the event of the farmer wishing to sell his farm.
[32] Mr Rowand valued the defender's interest in the business on two
bases; one with a lease being in place and one without. Although the terms of the hypothetical lease
were not explored, he proceeded on the basis that the whole cost of the
renovations could be regarded as an asset or as representing the value of the
leasehold interest. The second scenario
was on the assumption that the renovation costs would have to be written off,
but Mr Rowand took into account that Mr Shepherd would have to bear his share
of the write-off in capital terms. That
will not happen. In each scenario, Mr
Rowand took as his starting point the capital value of the defender's interest
as expressed in the capital accounts as at April 2006. This was largely stock (£68,000 out of
£73,172). To this he added the
renovation costs, although accepting that the cost did not necessarily
translate into value. The range of the
two bases was £187,940 to £277,142.
[33] John Gellatly CA of Miller, McIntyre & Gellatly was
instructed on behalf of the defender to comment on the entry of the renovation
figure in the accounts. He stressed the
absence of a written lease in valuing the renovation as "fairly close to zero"
(7/4). Even if there were a lease, the
cost did not equate to value. He had not
been asked to value the business or its stock, nor was he an expert in property
valuation.
[34] When valuing the defender's interest in the business, it is
reasonable to proceed on the basis that the only potentially significant assets
were its stock and its interest in the heritage. The defender was content to sign the stock
figures as accurate and, in these circumstances, they ought to be accepted as
such rather than a figure calculated over a year after the relevant date. The
approach of Mr Rowand, in taking the March 2006 stock figure, is therefore
adopted as a starting point. The
defender appears to have an agreement with the farmer to lease the steading for
a period of at least five years beyond an initial two year period. The rent is far less than might be expected
for such a renovated property. This is
no doubt why the defender elected to invest such a large sum in the
renovations. The lease must be worth a
substantial amount, but there is a great deal of force in the submission that
it is unlikely to equate to the full cost of the renovations. There was no evidence of just what the value
of the lease might be. Taking a broad
axe, a value of £100,000 will be taken as a reasonable estimate. This, plus the stock and the other bits and pieces
in the accounts, would add up to an asset value of perhaps £175,000 or
thereby. Since the whole of the capital
appears to have been introduced by the defender, as distinct from Mr Shepherd,
it seems reasonable to take the whole of this figure as representing the
defender's interest in the firm at the relevant date. Mr Shepherd does not appear to have
thought that he was entitled to a share of the capital, when he deserted the
firm a few months after the relevant date.
(v) Debts
[35] There were three debts which the defender said existed at the
relevant date. The first is in the form
of a credit card indebtedness of about £500 (6/103). The second is the alleged negative value of a
yacht "Snoopy" which sits in the defender's garden. The defender paid over £6,000 for the boat but,
he claimed, it was worthless and would require expenditure of £3,000 to dispose
of it (7/38). The pursuer objected to
the evidence on these matters in the absence of either being put to the pursuer
in cross-examination. However, there was
no need to do so in the absence of any indication that the pursuer would have had
any input into their existence. There
were averments on record about them and, if the pursuer had wished to
contradict these averments, she could have done so in her evidence-in-chief. The objection is accordingly repelled. The
credit card amount has been vouched. However,
given the price paid by the defender for the yacht, I do not accept that it has
a negative value. It could be disposed
of for at least a "nil" value.
[36] The third debt is a loss said to have been made on the construction
of four houses at the Beehive, Wormit.
The defender said that he had made a loss on this project, in which each
house has been sold for about £175,000. The
defender said that the arrangement had been to share the profits with the
architect, although he seemed unclear on what the shares were to be. The architect had not done a competent job and
had walked away from the project leaving the defender to pay the builders, who
had proceeded to two successful adjudications.
He had been required to pay out over £100,000 to make good defects in the
houses, of which about £25,000 was outstanding as at the relevant date (see
7/25 and 42). He was pressed on whether
he could sue the architect and/or builder in respect of the defects, but said
that he had been advised that success would be hard to achieve. He did not want to lose again and be liable
for further legal fees.
[37] Thomas Taylor, a quantity surveyor trading as Burns &
Taylor, construction consultants, Dunfermline, had been
engaged by the defender after the unsuccessful adjudications to extract him
from the project's problems. He
confirmed the exposure figures noted above.
The defender's liability existed in terms of an agreement with the Zurich
insurance group, which is in similar terms to new build guarantees from the
National House Builders Council. Mr
Taylor considered that, having regard to the nature of the defects, any
litigation with the architect or the builders would be "very long" and the
prospect of recovery "very limited".
[38] The defender has vouched liabilities of about £25,000 existing
at the relevant date and these ought to be taken into account in assessing the
matrimonial property. The view taken by the defender, that it would be too
risky from a financial point of view to attempt to recover these by court
action, seems entirely reasonable, given the amount involved, his past
adjudication experience and the vagaries of litigation.
[39] The matrimonial property agreed by the parties should
accordingly be: (i) increased by £69,000 in respect of the Barochan reservoir;
and (ii) £175,000 for Redstone Antiques.
It should be decreased by (i) the £500 credit card indebtedness and (ii)
the £25,000 Beehive liability. The
agreed minimum total of £3,621,427 is increased to, in broad terms, £3,840,000.
I determine that to be the matrimonial
property at the relevant date.
(c) SOURCES OF FUNDS
[40] The defender produced a schedule of his assets at the time of
the marriage (7/39). This was broadly as follows:
|
1. Pharmacy Business
Goodwill
- per valuation
|
650,000
|
|
Net
assets - per accounts
|
256,596
|
|
7 Lintmill Terrace - per accounts
|
17,000
|
|
Fixtures and fittings at 7 Lintmill
Terrace- per accounts
|
1,900
|
|
Motor
vehicles - per accounts
|
5,250
|
|
2. Standard Life Endowment Policies
|
26,700
|
|
3. Properties
(a) 11 Queens
Gardens, Aberdeen
- purchased 1972
£5,600 -
sold 1998
|
100,000
|
|
(b) 689
George Street, Aberdeen -
purchased 1980
£15,750
- sold 1991
|
55,000
|
|
(c) 5A Rubislaw Den North, Aberdeen
- purchased 1978
£33,005
- sold 1992
|
225,000
|
|
(d) 5B Rubislaw Den North, Aberdeen
- gift by mother
1972 -
sold 1992
|
140,000
|
|
4. Shares in FHHCP (Forrester Hill Health Centre Pharmacy)
Limited
|
33,000
|
|
5. Range Rover Vogue - purchased 1985
|
5,000
|
|
6. Maserati Biturbo Coupe - purchased 1989
|
23,500
|
|
7. Lloyds Interest
|
250,197
|
|
|
|
|
TOTAL
|
1,789,143
|
[41] The valuation of the goodwill of the pharmacy at £650,000 in
1990 came from Duncan Heap, a specialist in that field (7/5). His method was to assess the "super net
profit" of the business by looking at the relevant accounts and building in an
additional cost for the employment of a manager or locum, if that were
necessary. In the defender's case, there
was already a sufficiently high wage bill to take care of such a cost. He then took the net profit of the business
(£46,411, per accounts to 31 March
1990, 7/7) and added back the bank interest charges (£34,524), the
depreciation figure (£7,498) and the sum of the FHHCP dividends (£2,568). Mr Heap also erroneously added in the "Lloyd's
Syndicate" income mentioned in the accounts (£17,279), having misunderstood its
nature. He arrived at a super net profit
figure of £108,280. This he multiplied
by six to find the correct estimated valuation of the goodwill in 1990. The correct figure ought to have been £91,001,
which can be multiplied by six to produce £546,000. "Six" was appropriate at the time, although in
2004 the pursuer's business would have justified a higher multiplier because of
the increase in the number of outlets sold.
The shares in FHHCP Ltd were sold in February 2002 for cash and loan
notes totalling about £41,000 (7/46). The
valuation in the schedule seems not unreasonable. On the other hand, the Lloyd's figure is
double counting as it includes the defender's other property.
[42] Adjusting the schedule, which was not disputed to any other
material degree by the pursuer, to take into account the errors in the
valuation of the goodwill and the inclusion of the Lloyd's figure, a sum of about
£1,435,000 is brought out as the defender's capital at the time of the
marriage. In order to determine how that compares with the matrimonial
property, this sum ought to be adjusted for inflation (using, for example, the
Retail Price Index over time as a measure). If that exercise were carried out, to produce
its relative value at the relevant date, a figure of at least £2,325,000 is
reached. In short, at the time of the parties'
marriage, the defender already had very substantial funds constituting well
over one half of what ultimately became matrimonial property. Notably, there were the properties in Aberdeen
which, in due course, would, in part, be converted into the matrimonial home in
Coupar Angus, and, of greatest significance, the pharmacy business.
[43] One point of debate was whether the business sold in 2004 could
be regarded as the same as the business which the defender had at the start of
the marriage. The business was sold in
2004 for £3,209,770 (although £250,000 was paid thereafter in capital transfer
tax) (7/40). The sale price of the
pharmacy business was made up almost entirely of goodwill (over £3M of the
total). There is no doubt that the
business had grown significantly over the years of the marriage, as it had
prior thereto. The defender had started
from modest beginnings at 7 Lintmill Terrace in 1972. Three years later, he doubled the size of the
premises by acquiring 3 Lintmill Terrace. He enjoyed his work. He was a hard worker, being in the shop seven
days a week. He later acquired 689
George Street, upgrading it in 1986 to the larger 695
George Street, which he operated under management.
The businesses were particularly
successful because the defender secured the Domiciliary Oxygen Service contract
and looked after the pharmacy requirements of several Old Folks and Nursing
Homes. At the time of the marriage, the
defender was trading from George Street
and Lintmill Terrace, turning over almost £716,000 per annum to produce a net
profit of over £46,000. The pursuer
reduced his working hours after the marriage; ceasing to work on Sundays. After the move to Coupar Angus, he reduced his
hours to four days per week; hiring a locum for the other two. But the driving, coupled with the hours,
became too much for him. He twice fell
asleep on his way home and eventually decided to put all the pharmacies under
management. By then, he had acquired a
third pharmacy. He had bought a small
shop in King Street but its
ultimate value was in the transfer of its licence in 1999 to premises at the City
Hospital. By the time of the sale, the defender was
trading from all three pharmacies: George Street;
Byron Square (a direct substitute
for Lintmill); and the City Hospital.
He was turning over £4.2M producing a
net profit of over £333,000. The City
Hospital pharmacy accounted for
£1.3M of the sales. Its value must have
accounted for slightly less than one third of the final sale price.
[44] The pharmacy business sold in 2004 was the same business which
the defender had at the time of the marriage.
He had added a further shop, which he had spotted as a sound business
opportunity, but he would have done this whether or not he had been married. After the sale of the pharmacy, the defender
re-invested the proceeds in much of what became matrimonial property, including
as follows (7/40):
|
Investment in RBS Treasury Reserve a/c
|
952,993.00
|
|
Price and costs of 16 Panmure Place
|
157,537.25
|
|
Price and costs of Ellenslea, Balbeggie
|
143,500.38
|
|
Price and costs of Red Cross Hall
|
31,219.59
|
|
Price and costs of Westwood
|
296,883.35
|
|
Price and costs of Crawford Back Cottage
|
80,734.12
|
|
Price and costs of Barochan Reservoir
|
67,622.58
|
|
Price and costs of 1 Blairgowrie
Road
|
76,453.31
|
|
Price and costs of St Anne's
|
336,122.50
|
|
Share Purchases 6000 RBS Ord Shares
|
100,883.34
|
|
East Redstone Antiques
|
213,095.00
|
|
|
2,457,044.42
|
Having regard to the source of the
matrimonial property having been, in very large measure, assets which the
defender had at the date of the marriage, there are "special circumstances"
which justify a departure from the principle of sharing fairly being an equal
division of the matrimonial property.
(d) CONTRIBUTIONS AND ADVANTAGES
[45] It is perhaps stating the obvious that this was not a marriage
where one of the parties was able to develop a lucrative career at the expense
of the other, who either looked after the home or the children or both. Both parties entered upon the marriage when they
both had well developed careers. They
both continued with these careers. The pursuer was not disadvantaged in any way
in that regard. As has already been
noted, she was considerably advantaged by the marriage in financial terms, as
were her sons (although I do not regard the latter as relevant or material) in
relation to her increased standard of living and extraction from her
pre-marriage financial difficulties.
[46] The defender's friend, Mr Dalgarno, described the defender as
having been a highly motivated businessman who would have spent more time
developing the pharmacies had he not married. This is undoubtedly correct. The defender was a very hard working
pharmacist. However, having married the
pursuer, he did make substantial sacrifices in relation to the development of
his business, principally because of the move to Coupar Angus for the sake of
the pursuer's youngest child's education. The defender had planned to continue work
until aged 70 and he would have done so. Not surprisingly, he found the effort of
operating from Coupar Angus too strenuous and tiring and eventually retired
prematurely at the age of 60. If there were
a financial disadvantage arising from the marriage it was to the defender, who
ultimately sold his business (possibly at undervalue, according to Mr Heap) and
retired early. However, this
disadvantage has not been deemed sufficiently material as to require an
adjustment in the eventual division of the matrimonial property, although it
certainly more than balances any contribution (infra) by the pursuer to the business or the family finances.
[47] The pursuer did assist in hosting three parties for the
pharmacy staff. Otherwise, she had no direct involvement in the running of the
defender's pharmacy business. However,
she did have some input into the defender's attempts to obtain a consent on
appeal for a transfer of the pharmacy at King Street.
This had not succeeded. She also prepared the brochure for the
transfer of the pharmacy to the City Hospital.
The defender described this as producing
half a dozen brochures in a situation where the transfer was a "certainty". The pursuer's contribution to the success of
the defender's business was minimal. He
would have obtained the transfer to the City
Hospital without the pursuer's
input.
[48] The pursuer maintained that she had assisted in the design of
the converted steading for East Redstone Antiques and on antiques to buy at
auction (which the defender denied). She
was offered a partnership in this business, the defender leaving a partnership
agreement on the kitchen table for her consideration. She declined as she "could not be bothered" as
she had formed the view (probably correctly) that her husband did not want her
to be a partner. The pursuer was retired
by the time of this whole venture. She
did make some contribution to it but, of course, whether any profit will ever
derive from her efforts is unknown. It
seems unlikely.
[49] The parties acquired properties for development. One was Beechhill House. The pursuer said that she had been involved in
the decision to buy it and organised and assisted in it being cleared. Another was the Rectory, bought in 1992. The pursuer said that she had been involved
in its refurbishment and in the preparation of the sale brochure. The defender accepted that the pursuer did
have some involvement with these properties. He said he paid her £2,000 for her work on the
Rectory, although she disputed this. There
was also the Beehive. The pursuer again had
an input into the house designs and the sale brochures. Mrs Gee was able to confirm the latter. The defender did not dispute that she had some
involvement but, as already noted, the Beehive has been a problematic
development.
[50] It is accepted that the pursuer had some involvement in
assisting with the property development. Again, in relative terms, her contributions in
this regard were minimal in so far as adding to the parties' finances. Any contributions which the pursuer made
either in her efforts to assist the defender or financially through her
earnings were more than set off by the defender's contributions to her support
during the marriage.
(e) RESOURCES
[51] The defender produced a schedule of his current resources
(7/51) showing: heritable property at £1,770,500; contents at £50,000; pensions
worth £264,907; cash in the bank at £185,087; miscellaneous items including
Redstone stock and motor vehicles at £100,308; and shares valued at £860,000. The total was £3,230,802, much of which
constitutes the current state of the re-investment of the pharmacy sale
proceeds.
(f) GENERAL SUBMISSIONS
[52] The pursuer sought a capital sum of amounting to one half of
the matrimonial property, including a transfer of the defender's one half share
in the flat at Panmure Place,
but under deduction of the interim payment of £100,000 and the property she
already had. This was notwithstanding
the capital which the defender had at the commencement of the marriage. It was maintained that the pursuer had made a
significant contribution to the pharmacy and the development of the
properties. It was also maintained that
the defender had not suffered any economic disadvantage in moving to Coupar
Angus and had made no significant contribution to the pursuer's sons. Taking all matters into account, equal sharing
was the appropriate result.
[53] The defender maintained that, having regard to the source of
the funds or assets, special circumstances existed to justify an unequal
sharing of the matrimonial property. He
submitted that any contributions made by the pursuer were heavily outweighed by
those of the defender, especially in terms of the pharmacy business existing at
the time of the marriage and built up by the defender since then. The pursuer had gained substantially in
economic terms through the efforts of the defender in paying for the household
expenses and contributing towards her sons' finances. The pursuer had not
contributed to the wealth of the matrimonial property nor had she been the
homemaker, permitting the defender to go out and earn money from a sound home
base. In relation to apportionment, he
suggested that at least two thirds of the value of the business ought to be
deducted prior to calculating the matrimonial property for division. Alternatively, the value of the business at
the commencement of the marriage ought to be deducted. He accepted that apportionment was not a
strict accounting exercise. Ultimately
by a series of permutations, he submitted that somewhere between £800,000 and
£1,000,000 might be appropriate, assuming that no transfer of Panmure
Place took place.
(g) CAPITAL SUM
[54] The special circumstances set out above lead to the conclusion
that equal sharing of the matrimonial property would not be fair. Having regard to the value of the defender's
pre-marriage assets, which provided a significant source of the funds for what became
matrimonial property, the defender appears to be being excessively generous in
his assessment of fairness. In all the circumstances,
but notably having regard the defender's pre-marriage capital, a fair apportionment
of the matrimonial property is: one quarter to the pursuer and three quarters
to the defender. The effect of this is that
the pursuer should obtain £960,000 of the total property. She already has £135,500 of this in her own
name. She has the interim payment of
£100,000. She has one half of the flat
and the contents at Panmure Place
at a value (at the relevant date) of £85,500. She is to have transferred to her (this not
being opposed) the value of the other half of the flat and contents, being
worth £93,000 at the date of transfer (see s 10(3A) of the 1985 Act). These
sums will be deducted from the total to produce a balance for capital payment
of £546,000.
[55] I will accordingly sustain the pursuer's first plea-in-law,
repel the defender's first plea-in-law and grant decree of divorce. I will sustain the pursuer's second
plea-in-law to the extent of granting decree for the transfer of Panmure
Place to the pursuer in terms of the fifth
conclusion and for payment of a capital sum of £546,000. I will refuse the third conclusion, which was not
insisted upon. There will also be
certification of the persons in the appendix as skilled persons reasonably
instructed in the cause.
SKILLED WITNESS :
Pursuer : Richard
Lennon
Greig
Rowand
Alexander
Carmichael
Neil
Bennie
Ruby
Ashworth
Iain
Swayne
Mr
McHugh
Lindsay
Burns
Timothy
Hardie
Defender:
John Gellatly
Duncan Heap
Donald
Yellowley
Tom
Taylor
Kevin
Williams
