MICHELLE MACDONALD AGAINST GARY MACDONALD [2022] ScotCS CSOH

OUTER HOUSE, COURT OF SESSION

[2022] CSOH 84

F55/20

OPINION OF LADY CARMICHAEL

In the cause

MICHELLE MACDONALD

Pursuer

against

GARY MACDONALD

Defender

Pursuer: J Scott KC; SKO Family Law Specialists

Defender: Hayhow KC; Levy & McRae

25 November 2022

Introduction

[1]

The parties were married on 9 August 2002. They separated on 27 May 2019 and

have not lived together since. They agree that 27 May 2019 is the relevant date. I am

satisfied that their marriage has broken down irretrievably. There is no dispute that I

should in due course grant a decree divorcing them. The dispute between them relates to

financial provision.

[2]

Parties were agreed as to the values to be placed on a number of items of

matrimonial property. A number of items remained the subject of dispute. Parties also led

evidence about factors which they contended should have a bearing on how the matrimonial

property should be divided.

[3]

The defender wished to retain his share of certain items of joint property, to have the

pursuer's share transferred to him, and to assume responsibility for her share of the secured

lending. At the time of the proof it was unclear whether or how he would be able to finance

the capital payment necessary to achieve that. That depended in part on how much he

required to pay. If he could not finance the capital payment, some or all of the items of joint

property would have to be sold. Senior counsel were in agreement that I should reach

conclusions about the disputed valuations and the division of matrimonial property, and

then put the case out by order for submissions as to the orders that I ought to make. I did so

in this case. It is in some cases convenient to hear submissions about the form of the orders

that ought to be made at a by order hearing. I emphasise, however, that parties should be in

a position at proof to provide the court with the information about resources that it requires

in order to dispose of the case. A by order hearing is not an opportunity to address

deficiencies in the evidence presented at proof.

[4]

This opinion is structured principally by reference to the areas of dispute between

the parties. The evidence of relevance to the areas of dispute is, subject to some limited

exceptions, summarised under the headings which relate to those areas, rather than in a

narrative of the evidence of each witness.

[5]

The pursuer gave evidence in person. She led oral evidence from Mr Atholl

Newlands and Dr Ben Lennon in relation to the valuation of land; from Mr Greig Rowand

in relation to the value of the defender's interests in certain businesses; from Paul Campbell

in relation to the value of some items of jewellery and her transactions with him; and from

Ms Laura Brown in relation to capital gains tax liability. She provided affidavit evidence

from Chloe Macdonald in relation only to the grounds for divorce.

[6]

The defender also gave evidence in person. He led oral evidence from Ms Philippa

Cliff regarding the valuation of land; Mr Graham Cunning in relation to the valuation of his

business interests; from Mr Lee Thomson, the director of Macdonald Groundworks

Limited; and from Mr Paul Capewell, of A9 Accountancy Limited. He relied on affidavit

evidence from Cole Macdonald and Gavin Sweeney.

Agreed matters

[7]

The values of the following items of matrimonial property were agreed.

Matrimonial property

Relevant date

Proof date

Joint property

"No Bother" (former matrimonial home)

(INV22824)

£775,000

£812,500

Birchview Cottage and Lairgandour

Farmhouse (INV23791)

£365,000

£382,500

Industrial units at Lairgandour (INV23791)

£605,000

£722,500

Joint bank account

£22,554

Pursuer sole property

Pension

£4,280

Pension

£3,237

Defender sole property

Property at Ladystone

£152,500

£156,250

Birchwood House

£91,627/£102,592

Sum due from MGL

£16,214

Shares in GDM Properties

£481,000

Pension

£4,280

Pension

£15,727

Sole trader business Daviot Farms

£353,000

[8]

It was also agreed that at the relevant date there were standard securities over "No

Bother" in respect of debt totalling £521,249, and over land and buildings at Lairgandour

and Scatraig totalling £1,258,671. It was agreed that there was a further matrimonial debt at

the relevant date of £60,000 in respect of the defender's debt to GDM Properties.

[9]

At the time of the proof the secured loans over "No Bother" amounted to £380,024,

and the secured loan over the land and buildings at Lairgandour and Scatraig to £676,137.

Disputed matters

[10]

Although the parties agreed that the following items were matrimonial property, the

valuations of them were disputed.

(a)

Jointly owned farms at Lairgandour and Scatraig (INV23791, INV23802

and INV23803), other than the valuations of the residential properties and

industrial units there already mentioned.

(b)

The pursuer's jewellery.

(c)

The defender's:

(i)

shareholding in Macdonald Groundworks Limited ("MGL");

(ii)

shareholding in HRL Scrap and Waste Solutions Limited ("HRL")

(iii)

interest in Café V8.

(d)

The money in a black box or safe that the pursuer took from the former

matrimonial home in September 2019.

(e)

The contents of "No Bother".

[11]

The defender contended that a Range Rover used by the pursuer should be treated as

matrimonial property.

[12]

The defender contended that there were two additional items of matrimonial debt to

be taken into account, namely his debt to HMRC at the relevant date, and a standard

security which he had granted in favour of Aqua Leisure.

[13]

The defender contended that there should be an unequal sharing of the matrimonial

property in his favour. The pursuer submitted that there were balancing advantages and

disadvantages between the parties, and that on a "broad brush" basis there should be no

adjustment. The parties agreed that the pursuer should receive a periodical allowance, at

least until such time as she receives a capital payment, but disagree as to how much she

requires.

Credibility and reliability

[14]

There were some features of the evidence of both the pursuer and the defender that

caused me to be cautious about relying on their evidence in the absence of some

independent source of evidence. The pursuer had not troubled to produce a comprehensive

list of the jewellery held by her. Her explanation for failing to return to her son his Rolex

watch, despite requests over a period of two years, was unimpressive. She said, "He is my

son. I thought he would ask himself, not through solicitors." The impression was of

someone who did not take much care to provide accurate and complete information about

her property, and who had not taken care to return an item that did not belong to her to its

owner. She gave conflicting accounts as to why she had taken her son's watch in the first

place.

[15]

The defender was disqualified from being a company director for eight years.

Following a warning that he did not require to answer any question that might implicate

him in criminal activity, he declined to answer questions about his role as the executor

nominate on the estate of his late father, who died in February 2014. The context was his

evidence that he had received a gift of £300,000 from his parents in order to buy a farm

in 2008, and questions suggesting that he had not made HMRC aware of that in the context

of liability for inheritance tax.

[16]

The defender was evasive when asked about the circumstances which led to his

being disqualified from acting as a company director in 2014. I discuss this more fully

below. On a number of occasions he appeared to be confused as to what property or

obligations were his, and what were the property and obligations of MGL.

[17]

My overall impression of the pursuer and the defender is that they shared a tendency

towards carelessness so far as the provision of accurate information relevant to fin ancial

provision is concerned.

Relevant background

[18]

The pursuer and the defender formed a relationship in 1996. The pursuer was

working part-time as a cleaner. She had a daughter, Chloe, who was then aged 2. The

pursuer gave up her cleaning job in 1997. In 1998 she became pregnant with the parties' first

child, Cole. Their daughter, Dana, was born in 1999. The defender already had a son,

Stephen, from an earlier marriage.

[19]

The defender trades in surfacing and construction. He has traded in those fields

through a number of different companies during the course of the marriage. These included

Highland Quality Construction (HQC). The pursuer started working in the accounts office

of HCQ in 2008. Her work included invoicing, payroll and administration.

[20]

HCQ went into receivership in 2010. As a result of matters connected with the

failure of HCQ, the defender was disqualified from acting as a director for a period of eight

years from 20 May 2014. He defended the proceedings and his evidence was that he

spent £450,000 doing so. He said that he felt unable to bear the additional expense that

would have been associated with a proof, and conceded the matter. A summary of the

history of that matter contained in a decision of the Upper Tribunal (Administrative Appeals

Chamber, Traffic Commissioner Appeals) dated 18 February 2019, was put to the defender

in the course of his evidence. It narrates that the defender signed a form of company

director disqualification admitting his unfit conduct. It narrates that he admitted

misapplying company funds by arranging payments to connected parties and unlawfully

disposing of assets subject to hire purchase. In his oral evidence the defender said that he

had admitted these matters simply to put an end to the proceedings in 2014. He gave the

impression of distancing himself from the admissions he had made in 2014.

[21]

The defender acquired MGL. He owns all the shares in it. The pursuer was a

director of MGL until 2016. Lee Thomson is currently the director of MGL. He is not an

employee, but is paid on a consultancy basis.

[22]

The pursuer worked part-time for MGL in an administrative role. In 2016 her dog

became ill, and she required to spend time at home to administer medication to the dog. She

remained on the payroll of MGL, and was paid £441.64 per week. Latterly that sum was

increased to £776.68. She is still employed by MGL, but she does not do any work there.

The defender's bail conditions and latterly the terms of a non-harassment order make that

impossible. She drives a car that is the property of MGL. It is a Land Rover. After the

relevant date the pursuer initially moved in with her daughter, Chloe. She has been living

in rented accommodation since March 2020.

[23]

There was initially a suggestion that Birchwood, an earlier matrimonial home,

contained furniture which was matrimonial property, and which the pursuer had removed.

She denied having done so. In the course of the proof it became clear that any furniture in

Birchwood was the property of MGL.

[24]

During the marriage the parties enjoyed a high standard of living. Both Birchwood

House and "No Bother" were substantial detached properties. The latter has a swimming

pool. The parties took expensive holidays abroad.

Disputed valuations of matrimonial property

Lairgandour and Scatraig

[25]

Lairgandour and Scatraig are two farms at Daviot, south of Inverness. The parties

bought them together and farmed them together. Lairgandour and Scatraig were farmed

together by the previous proprietors. Lairgandour comprises 382.68 hectares (945.60 acres).

The lower lying ground is classified as predominantly grade 4.1 agricultural land, with some

areas of grade 5.2 to 5. The higher ground is of lower quality. It includes two residential

properties and industrial buildings (which are the subject of separate, agreed, valuations),

and part of the land on the higher ground is subject to a forestry grant scheme contract.

Scatraig comprises 65.7 hectares (162.3 acres). The land is of similar quality to the lower

lying land at Lairgandour. It includes farm buildings and steadings and salmon fishing

rights on the River Nairn.

[26]

After the relevant date planning applications were made and approved in relation to

the use of the steading at Scatraig as a farm shop and café, and for the construction of a

fishing or tourist lodge at Scatraig.

[27]

The pursuer had the property valued by Bowlts. Mr Atholl Newlands and Dr Ben

Lennon gave evidence in relation to the valuation. Dr Lennon is a specialist in woodland

and forestry matters. The defender instructed a valuation by Highland Rural, and

Ms Philippa Cliff gave evidence about that. There is no dispute that all three witnesses are

properly qualified to give the opinions that they did.

[28]

Mr Newlands and Dr Lennon valued the property as at the relevant date, and as at

30 August 2021, and as at 28 March 2022. The proportion of value allocated to woodland is

relevant in relation to current values, and the availability of resources, as disposal of

woodland is subject to a lower rate of taxation for CGT purposes. In the course of evidence

it became clear that there was a difference between the skilled witnesses in relation to the

value of woodland at particular times, and the extent to which it had increased over time,

and I therefore have detailed the valuations at all three points in time that Bowlts

considered.

Relevant date

30 August 2021

28 March 2022

Land and

woodland,

including sporting

interest

Woodland element

£1,480,000

£690,000

£1,665,000

£795,000

£1,810,000

£825,000

Agricultural

buildings

£130,000

£158,000

£160,000

Telecoms masts

£57,500

£56,500

Subtotal

£1,666,500

£1,880,500

£2,026,500

Marriage value 5% £83,325

£94,025

£101,325

Total

£1,749,825

£1,974,525

£2,127,825

[29]

At proof Mr Newlands indicated that he had been prepared to modify his relevant

date valuation, exclusive of marriage value, to £1,601,000. The marriage value at that level

would be £80,050.

[30]

Ms Cliff valued the property as at the relevant date, and also as at the date of an

inspection in late October 2021. In her opinion the value of the property, and the woodland

element of it, had not increased between her inspection in 2021 and the date of the proof.

Relevant date

October 2021

Land

Woodland element

£1,291,000

£592,000

£1,470,000

£790,000

Steading

£75,000

£100,000

Telecoms masts

£34,000

£30,000

Total

£1,400,000

£1,600,000

[31]

I leave aside for the moment the valuation of the woodland. The principal

differences between Mr Newlands and Ms Cliff in relation to the non-woodland parts of the

farms were in relation to the following.

(a)

Mr Newlands had attributed some value to sporting interests, and Ms Cliff

had attributed none.

(b)

Mr Newlands had been more generous in his approach to a "hope" element

prior to the grants of planning permission, and in relation to the value of the

grants of planning permission at the current date than had Ms Cliff.

(c)

Mr Newlands had attributed some value to farm buildings which in

Ms Cliff's view had no value other than that already reflected in the per acre

price of the land.

(d)

The value to be attributed to leases in respect of telephone masts.

(e)

Mr Newlands was willing to attribute a marriage value to L and S to the

extent that a purchaser would pay 5% over and above his valuation in order

to secure the purchase of L and S together.

[32]

There was no material difference otherwise in their approaches to valuation. Both

Mr Newlands and Ms Cliff had examined comparator transactions, and considered matters

on the basis that there would never be a precisely similar comparator in relation to a

property of the type in question. A number of the comparators were comparators that both

of them considered. Both considered that the market for agricultural land was buoyant.

[33]

In respect of each of the five points of difference identified above, I have preferred

Ms Cliff's approach. There are no sporting interests of any value in relation to the land in

question. The woodland area of Lairgandour is fenced off. There is presently no potential

for deer stalking. Mr Newlands' own evidence was that in twenty years' time the woodland

area would provide shelter for deer. There was no evidence that there was any shooting

other than rough shooting for rabbits. Shooting on the lower ground would in any event be

unsafe and too close to residential properties. It would not have any commercial potential.

[34]

Although Scatraig has salmon fishing rights, the river in question does not provide

prime salmon fishing. There is no recent track record of anyone successfully fishing for

salmon on the area of river concerned. The river bank at the property is difficult to access,

and considerable work would be required to make it accessible for fishing.

[35]

The use of the steading as a farm shop and café has relatively little appeal to a

purchaser. Mr Newlands and Ms Cliff essentially agreed about that. If development were

to take place on Scatraig it would be more likely to take the form of residential development.

A significant disincentive to the developments for which planning permission had been

granted was the need to improve the access to th e site, and to build a suitable junction with

the A9. That would be an expensive exercise. The defender, who has relevant construction

experience, estimated the cost at £300,000. Neither Mr Newlands nor Ms Cliff was in a

position to comment in detail on that estimate, but both appeared to accept that there would

be a substantial cost. Even if the defender's estimate is an over estimate by 100%, it is still

probable that a six figure investment in infrastructure would be required for these

developments.

[36]

The fishing lodge is a project with limited capacity to generate funds such as to pay

for its development, or render it a profitable development. It is subject to planning

restrictions which prevent occupants from residing there for more than three consecutive

months, and from residing there for more than six months in a calendar year. The

development for which permission had been granted was a six bedroom house.

Construction costs would be substantial, perhaps, on Ms Cliff's admittedly very rough

estimate, £750,000, and weekly rental in the summer, again on her estimate, in the region

of £2,000.

[37]

None of the agricultural buildings was modern or of particularly good quality. It

was common ground that they fell within the range of ageing buildings that wou ld normally

occur on farms such as Lairgandour and Scatraig. On that basis, I accept that Ms Cliff's

approach of looking at the per acre price of similar farms, which would have included

broadly comparable, but never precisely identical, buildings. There was no evidence to

suggest that any of the agricultural buildings were of a nature or quality as positively to

enhance the value of the land. Ms Cliff had checked transactions that had taken place since

her report, and had learned nothing that caused her to alter her view of the land as at

November 2021, or to think that the value had increased between then and the date of the

proof.

[38]

There is a telecommunications mast site at Lairgandour, and another at Scatraig.

Each is currently leased out at a rental of £3,200 per year. The lease on the former is

until 2036, and on the latter until 2026. Mr Newlands took into account offers to purchase in

relation to comparator masts. He had no information about concluded sales. Ms Cliff

assessed the value of the masts by reference to their income stream. There were two fewer

years of income stream in 2021 than there were at the relevant date. The terms of the lease

were relevant, as they gave the tenant a unilateral right to terminate on notice.

Mr Newlands attributed a residual value at the end of the lease. He had applied a lower

discount rate than had Ms Cliff. Ms Cliff considered that there would be no residual value.

The Telecommunications Code had come into force since the leases were entered into.

Telecommunications providers could occupy land on the basis of powers akin to

compulsory purchase in order to enable the rollout of 4G. There was now no incentive for a

telecommunications provider to pay thousands of pounds to rent a mast. The reasons that

Ms Cliff gave for taking a conservative approach to valuation were cogent and I accept her

evidence on this point. Evidence about offers which did not lead to concluded transactions

is of relatively little value in this context.

[39]

I do not accept that there is a sound evidential basis for attributing a marriage value

to the two sites. Mr Newlands' own evidence was that it was very difficult indeed to

identify market evidence for a marriage value, or to assess it by reference to comparable

transactions. It appears to me a matter of little more than speculation as to whether a

purchaser might pay more to buy the two farms together, if they were marketed as separate

lots. The farms have been owned and worked together by the parties, and also by the

previous proprietors. It seems more likely than not that a purchaser would similarly see

them effectively as a single unit, even if marketed in separate lots.

[40]

So far as the evidence about the woodland is concerned, I prefer the evidence of

Dr Lennon to that of Ms Cliff. Dr Lennon was an impressive witness. He is a chartered

forester. He had expertise in forestry and the valuation of woodlands beyond that of

Ms Cliff, who is not a specialist in that field. A difficulty in providing a relevant date value

for the woodland that both he and Ms Cliff faced was that neither had seen it at the relevant

date. Unlike the rest of the land, its condition at the relevant date would have been rather

different from the time when each of them viewed it in, respectively, late summer and

Autumn 2021. It was planted in 2018 and 2019. At the relevant date the trees were younger,

and more vulnerable. They were at a stage when they required more management,

including "beating up" (removing trees which have perished and replacing them).

[41]

The woodland at Lairgandour was not registered against the UK Woodland Carbon

Code, although it would have been eligible to be registered until July 2021. The scheme is

no longer open to new registrations of woodland which has already been planted. Since

July 2021 woodlands can only be registered before they are planted. The result is that the

woodland cannot provide its proprietor with future income from carbon sales. Had it been

registered, the woodland would have been more valuable. The woodland has benefited

from grants.

[42]

It was common ground that woodland had increased in popularity as an investment

in recent years, and that the value of woodland had increased. Timber is a sustainable

product. Imports of timber have become more expensive. Woodland is attractive to "green"

investors. There are tax advantages when the land comes to be sold.

[43]

All the comparators identified related to larger woodlands than that at Lairgandour .

Dr Lennon's evidence was, however, that the price difference between small and large

woodlands had become less marked in the last two years. Established woodland had the

highest value. Young woodland held the promise of growth.

[44]

Dr Lennon's evidence was that between 2019 and 2021 the average value of younger

woodlands had increased at a higher rate than the overall average. The overall average

increase was 10% year on year. He had allowed a 4% increase from his valuation in

August 2021 to the value current at the date of the proof. He accepted that there had been a

degree of "hype" created by transactions regarding very large areas of woodland purchased

by institutional investors, and accepted that he had no recent comparator sale of woodland

of a similar size to that at Lairgandour. He said 4% was reasonable in a context where the

year on year average increase over 20 years had been 10%, and the increase in the market

over the short period in question had been significantly more than 10%.

[45]

I have therefore accepted Ms Cliff's valuations, save in relation to the woodland. The

consequence of that is that I have increased each of her figures to account for the difference

between her valuation of woodland and that of Dr Lennon.

[46]

On that basis I find that the relevant date and current values of Lairgandour and

Scatraig are as follows:

Relevant date

Current

Land

Woodland element

£1,389,000

£690,000

£1,505,000

£825,000

Steading

£75,000

£100,000

Telecoms masts

£34,000

£30,000

Total

£1,498,000

£1,635,000

The pursuer's jewellery

[47]

The pursuer produced a valuation for five pieces of jewellery as at the relevant date.

The author is Paul Campbell, of Colin Campbell and Co Ltd ("Colin Campbell"), a jeweller

trading in Inverness. The total value of those five pieces is £5,580. The valuation is not

challenged. The pursuer's affidavit includes a list of 21 further items, at paragraph 5.2. She

says she sold those to Colin Campbell to obtain money for legal fees. She produced a receipt

showing Colin Campbell paid her £700 for a cocktail ring in December 2020, £8,885 for

16 listed items in November 2020, and £3,700 for a watch, also in November 2020. Her bank

statement dated 4 December 2020 shows payments in of £8,885 and £3,700 from

Colin Campbell with the reference "scrap buy in", and a payment of £1,500 with the

reference "pendant". The pursuer's evidence was that the payment of £1,500 related to a

green beryl pendant and chain, and that the £700 related to a green beryl ring. These are the

first two items listed at paragraph 5.2 of her affidavit. The £3,700 related to the ladies' Rolex

watch in the list.

[48]

With the assistance of Paul Campbell's oral evidence, it was possible to reconcile

some of the other 18 items listed by the pursuer with the list he had prepared of the items he

purchased from her in November 2020. He confirmed that he had purchased items listed in

the affidavit which did not feature in his list from November 2020. He thought there were

four or five of those, purchased for about £1,700.

[49]

Mr Campbell had paid the pursuer only the scrap value of the jewellery she sold

him, with the exception of the ladies' Rolex watch . The second hand retail for a similar

watch at the time was £5,000, fully serviced and guaranteed. He had serviced the watch he

purchased at a cost of £600, and considered £3,700 a reasonable price for the watch in the

condition he received it.

[50]

He did not trade in second hand jewellery himself, and was interested only in the

value of the metal. He paid the pursuer for both the stones and the metal, but on the basis

that he would have to "burst" the pieces in order to sell the metal, and would then be left

with the stones. He had offered her the alternative that he return the stones to her and pay

her only for the metal. Breaking up the jewellery depressed the price of the item. He would

not be able to sell the stones unless a customer came in needing a replacement for a missing

stone matching the cut and colour of one of those he had purchased. He had afforded the

pursuer special treatment as a long-standing customer. He would normally have told a

customer simply that he did not purchase stones.

[51]

The parties had been customers of Colin Campbell for more than 20 years.

Mr Campbell estimated that the defender had spent more than £40,000 buying jewellery for

the pursuer from his company over the years.

[52]

The pursuer lists at paragraph 5.4 of her affidavit items she has retained, including

the five items which have been valued, and a number which have not. In her oral evidence

she said that she had items in storage which she h ad not recovered from storage when asked

to list the jewellery she held. She was unable to say precisely what items were still in

storage. The list includes a watch belonging to her son, Cole. In oral evidence she

acknowledged that the defender had bought her jewellery often during the marriage. The

defender's position was that he had bought jewellery during the marriage at a cost of more

than £250,000. The pursuer did not know whether this was an accurate estimate.

[53]

The pursuer submitted that the relevant date value of the jewellery was £22,065. The

defender submitted that it was £50,000 (about a fifth of what he said he had spent

purchasing it).

[54]

It is necessary to take a very broad approach to the value of the jewellery the pursuer

retained at separation. Five pieces she retained had a relevant date value of £5,580. She

realised a combined scrap value of £12,785 for 19 items that she sold to Colin Campbell.

Most, if not all, of these were sold in late 2020. I accept that £3,700 represents the value of

the Rolex watch at the time she sold it. There is no evidence to suggest that any of the

pursuer's jewellery would have depreciated significantly in value between the relevant date

and late 2020. The pursuer sold 19 items for less than their second hand market value.

Comparing the five valued items with the 19 sold items is necessarily a crude exercise. The

average value of the former is £1,116, and the average value of the latter is £672. The former

is 66% more than the latter. On a conservative basis, applying instead an increase of 50% to

the scrap value achieved produces a figure of £19,177 for the 19 sold items. On that

approach, the overall relevant date value for all the items of jewellery just mentioned would

be £28,457.

[55]

Paragraph 5.4 of the pursuer's affidavit discloses more retained items that have not

been valued or sold (four watches and 15 other items). In her oral evidence she indicated

that she has retained more jewellery which has not been identified or valued for these

proceedings in a storage facility. On the basis of the available evidence about those items

which have been identified, and taking a conservative approach, I assess the relevant date

value of all the jewellery that the pursuer retained to be £38,000.

The defender's interests in MGL, HRL and Café V8

[56]

The values of the defender's interests in MGL, HRL and Café V8 were disputed. In

relation to all of these matters the pursuer led evidence from Greig Rowand, who is a

chartered accountant, and a director of GR Forensic Accounting Ltd. The defender led

evidence from Graham Cunning, a chartered account and a partner in Azets Holdings Ltd.

MGL

[57]

The difference between Mr Rowand and Mr Cunning had narrowed substantially by

the time of the proof. The principal reason was that Mr Rowand had initially thought that

MGL should be valued on an EBITDA basis (earnings before interest, taxes, depreciation

and amortisation). He became persuaded, like Mr Cunning, that valuation should be

approached on an EBIT basis (earnings before interest and taxes). It was common ground

that an EBIT basis was appropriate because MGL regularly purchased and sold plant and

equipment. The defender confirmed in his evidence that it did so because it was important

to MGL's clients that MGL have new and reliable equipment of good quality.

[58]

Counsel for the defender submitted that this change of approach, which made a

significant difference to the pursuer's valuation, had been a significant error on the part of

Mr Rowand. It should cause me to attach little weight to his evidence. I do not regard the

matter in that light. Mr Rowand became aware of more information than he had had

initially about the way in which MGL operated. This occurred at a relatively late stage, after

he had met and had discussions with Mr Cunning. He amended his approach accordingly.

I take nothing adverse from his having done so. The dispute became more focused as a

result of their having met. That is the point of experts meeting.

[59]

Mr Rowand valued the pursuer's shareholding in MGL at £2,550,000. Mr Cunning

valued it at £1,106,070.

[60]

The witnesses agreed that the FME (future maintainable earnings) were £1,341,000.

Their differences were in relation to the following:

(a)

Mr Rowand applied a multiplier of 4, and Mr Cunning applied a multiplier

of 3.25. Each accepted that the selection of a multiplier was not an exact

science, and involved questions of professional judgment.

(b)

Their approach to net debt differed in two respects.

(i)

Mr Cunning took into account liability for corporation tax, and

Mr Rowand did not.

(ii)

Mr Cunning took into account the cost of equipment the purchase of

which had not been completed at the relevant date.

(c)

Mr Rowand considered it appropriate to take the value of the net tangible

assets as a "backstop": the shares could not be worth less than the company's

assets. Mr Cunning proceeded on the basis that the value of the shares might

be less than the value of the assets.

[61]

Both witnesses referred to comparable transactions involving companies (subject to

one exception) with very much higher revenues than MGL. Apart from one company which

had a revenue of £1.07m, the revenues were in the range £10.14m to £99.18m.

[62]

In Mr Rowand's opinion, the defender's 100% shareholding in MGL was

worth £2,550,000 at the relevant date. He arrived at his chosen multiplier in the following

way. He considered eleven transactions and ten listed companies mentioned as comparable

in Mr Cunning's report. He did not discover independently of Mr Cunning any comparable

transactions or companies. The publicly available information about the transactions did

not show the relationship between the enterprise value and the EBIT of the company in

question.

[63]

Mr Rowand attempted to check the revenue and EBITDA figures by examining the

financial statements of the acquired companies as they were lodged with Companies House.

He also identified the EBIT figures for the acquired companies. He worked out the EV/EBIT

and EV/EBITDA multipliers for each transaction. The average EBITDA multiplier was 8.3

and the average EBIT multiplier was 11.1. He saw that the average multiplier for companies

with smaller enterprise values (less than £20m) and smaller EBITDA (less than £3m) was

lower than the overall average, but not by much. He selected an EV/EBIT multiplier of 4,

which represented a discount of 64% from the average EBIT multiplier of 11.1.

[64]

As I have already indicated, it was Mr Cunning who identified the transactions that

were said to be comparable. He considered that those with an enterprise value of less

than £20m and an implied EBITDA of less than £5m were more suitable comparators for the

purpose of valuing MGL. He discounted the range of multipliers by 50%, as the sums

involved in the transactions were higher than MGL would achieve if sold. That then

produced a range from 1.5 to 5.7 (EV/EBITDA). He regarded the lower end of that range as

appropriate for the purpose of valuing MGL, settling on a range of 2 to 2.5.

[65]

In order to identify an EV/EBIT multiplier, Mr Cunning first looked at the EBIT and

EBITDA figures for MGL in the financial years from 2017 to 2020, and concluded that EBIT

was about 66% of EBITDA. Applying that information to an EV/EBIDTA range of 2 to 2.5

produced an EV/EBIT range of 3 to 3.5. He selected a multiplier of 3.25. In doing so he took

into account that while MGL had a high level of repeat business and relationships with blue

chip customers, a very significant proportion of its business was with its top three

customers. It did not have long term contracts with its principal customers. It also relied

strongly on the defender himself to secure customers and drive growth. A buyer would

regard the customer concentration and central role of the defender as risks militating

towards a low multiplier. The multiplier reflected the view a purchaser would take about

the ongoing profitability of the company.

[66]

Mr Rowand's view was that liability for corporation tax (£38,301) should not be

taken into account in calculating net debt. If it were, then monies due from HMRC under

the construction industry scheme would also have to be brought into account . He relied on

earlier experience in practice, and accepted that his work for the last two years had been

exclusively in litigation support. He maintained that he had seen corporation tax excluded

from consideration in transactions within the last ten years. He also excluded from net debt

about £500,000 which related to hire purchase liability for plant and machinery purchased

on 20 June 2022, after the relevant date. Mr Cunning took a different view. In relation to

corporation tax he said that ten or fifteen years ago there would have been an argument as

to whether corporation tax should be treated as working capital or debt. Generally accepted

modern practice was to treat it as a debt-like item. The seller had enjoyed the profit, and

should bear the tax. He drew a distinction between corporation tax and monies retained by

HMRC under the construction industry scheme. The latter should be treated as working

capital.

[67]

The hire purchase was capital expenditure to which MGL had been committed at the

relevant date. A purchaser would have discovered that in the course of due diligence. He

did not accept that the purchaser would simply regard it as part of the usual trading of the

organisation. He said a purchaser might use it as a bargaining chip. Two of the three items

of plant had been delivered before the relevant date, and used before th e hire purchase

agreement was executed.

[68]

Mr Rowand used the net asset value of MGL as a cross check. The plant and

machinery was the principal asset of the business, and the market value of it might be higher

than the value in the balance sheet. The value on the balance sheet was £2.186m on

31 March 2019 and £2.785m on 31 March 2020. Mr Cunning put the relevant date balance

sheet value at £2.228m.

[69]

Mr Cunning's evidence was that it was not uncommon for businesses to be worth

less than their net assets. In "old economy" businesses, which he said included construction

and printing, there was heavy capital expenditure. The fixed assets might produce a large

balance sheet, but the real worth of the company was a multiple of its earnings. One could

liquidate the company and get less than the value of the shares calculated on an earnings

basis. If the company were to stop trading, even with an orderly winding down, there

would be a risk of realising less than the net asset value. One risk was that when a company

was about to cease trading, plant would be treated with less care than usual. The risks

associated with a "fire sale" were of a greater magnitude. Mr Cunning prepared a net asset

value on a break up basis. That did not involve valuing the assets on a commercial basis.

The sale would be forced, resulting in price reductions because of the time-sensitive nature

of the exercise, and the costs involved in closing down the business. He arrived at a figure

of £317,000.

[70]

Both accountants recognised that the purchase and sale of plant and machinery was

part of MGL's business. It was for that reason that they came to agree that an EBIT, rather

than an EBITDA, basis of valuation was appropriate.

[71]

There was evidence from Lee Thomson and Paul Capewell, given after the evidence

of Mr Rowand and Mr Cumming, to which I attach some weight in relation to the value of

the plant and machinery. Mr Thomson said that MGL's transport manager, Mr Leslie, and

the defender constantly assessed the needs of the business so far as plant and equipment

were concerned. They considered what they needed to serve their market, the age of the

existing equipment, and the specific requirements of the business at the time. His evidence

was that in the five to ten years preceding th e proof the lead in period from the point at

which one might require plant until the hire purchase agreement was signed had increased.

The equipment was not readily available. MGL identified with its key suppliers what they

would need. Acquisitions were planned six months in advance. Discussions with key

suppliers started six months in advance.

[72]

Paul Capewell is a chartered accountant, and has been the auditor of MGL

since 2019. He had considered how money might be raised to meet the defender's liabilities

in this action. During the course of the proof AMC had confirmed in principle that it would

advance £640,000 over the farm. It was possible that a different lender might advance more.

Trading conditions were currently difficult. MGL might downsize, dispose of assets, in

particular plant, and pay a dividend to the defender. That would be subject to tax. The

market for plant and equipment was very strong. Vehicle axles and new plant and

equipment were very hard to get hold of. Lead times were six months to a year for new

items, and that gave rise to a strong second hand market.

[73]

I accept that, as Mr Cunning said, a purchaser at the relevant date would have

become aware during due diligence before the relevant date that there was a commitment to

capital expenditure regarding the plant in respect of which MGL signed agreements in

June 2019.

[74]

I also accept that there will be situations in which a business will be worth less than

the value of its assets, if those assets actually required to be sold and realised when the

business ceased trading. The evidence of Mr Thomson and Mr Capewell, however, runs

counter to the proposition that the value of the business will be so markedly below the value

of its assets as Mr Cunning's valuation suggests. I recognise that Mr Capewell when

speaking about the strong second hand market for plant and equipment was speaking about

conditions at the time of proof, and not at the relevant date. His evidence about lead times

for new equipment was, however, broadly in line with that of Mr Thomson. Mr Thomson

said that lead times for new equipment had been increasing over a five to ten year period,

and I accept his evidence about that. Mr Cunning himself noted that the sector in which

MGL operates has high barriers to entry with large capital costs for necessary equipment for

new entrants in the market. I am satisfied that MGL's assets are of a type for which there is

currently a strong demand in the second hand market, and that that was probably the case

at the relevant date as well. MGL is a business that turns over its plant and equipment

frequently. It is likely that its equipment at any given time will be of a type and quality for

which there is a demand, and that its value or a substantial proportion of it would be

achieved on sale.

[75]

I generally considered that Mr Cunning took a cogent and reasoned approach to

valuation. He identified the comparators from which both witnesses derived their

valuations. His approach to deriving an EV/EBIT multiplier tailored to MGL seemed, on

balance, preferable to that of Mr Rowand. I took that view because of his examination of

MGL's own EBIT/EBIDA ratio, and application of it to the multipliers he had derived from

the information about comparator companies. Having regard in particular to the very

substantial difference between the value of MGL's assets and the valuation of the shares at

which Mr Cunning arrived, I take the view that the multiplier he selected was too low.

Taking all of that into account I have use the multiplier at the upper end of his selected

range, namely one of 3.5. That produces an enterprise value of £4,693,000.

[76]

The pursuer suggested that I should take the same approach to corporation tax as

had Lord Tyre in W v W 2013 Fam LR 85, at paragraphs 24-25. In W the experts agreed

about the methodology, but one suggested that an imminent liability for corporation tax

would be a "haggle point" which would in a real transaction drive down the purchase price.

Lord Tyre declined to take the liability into account in assessing the value of the company's

shares. That is not the position here. There is a dispute as to whether, as a matter of normal

methodology or practice in valuations of this sort, liability for corporation tax should form

part of the net debt. Mr Cunning has considerably more recent experience in transactions

than does Mr Rowand, and for that reason I prefer his evidence on this point.

[77]

The suggestion of a "haggle point" has more force so far as the commitment to

purchase the plant and equipment is concerned. There is no reason in principle to leave out

of account a factor which would, on the evidence, be relevant to the price that would be

achieved between a willing buyer and willing seller at the relevant date. It can, however, be

difficult to assess what the effect of the "haggling" would be. Lord Tyre described the effect

of a "haggle point" as introducing a subjective and unverifiable element. It was common

ground that the buying and selling of plant and equipment was part of the normal business

of MGL. Although the sums concerned are substantial, they are part of the normal trading

of the business. Against that background I am not satisfied that the result of any negotiation

between buyer and seller would be, as Mr Cunning asserted, the deduction from the price of

the items for which hire purchase agreements were executed on 20 June 2019. With both

that background and Lord Tyre's approach in W in mind I have left this commitment out of

account.

[78]

Taking an enterprise value of £4,693,000, deducting £38,000 for corporation tax

liability, and a further £2,814,000 which is the net debt figure identified by Mr Rowand,

produces a figure of £1,841,500.

HRL

[79]

HRL is a scrap metal merchant operating in Inverness. The defender has a

60% shareholding, with the remainder of the shares held by Ronald Dyce, the sole director

of the company. Mr Rowand and Mr Cunning agreed that the appropriate basis for

valuation was an EBITDA earnings basis. Mr Rowand valued the defender's shareholding

at £366,000. Mr Cunning valued it at £135,000.

[80]

The business was incorporated in 2010. The defender initially owned the whole

share capital (100 shares). In 2014 he transferred 60 shares to the pursuer, and 40 to

Mr Dyce. In September 2016 the pursuer transferred her 60 shares to the defender.

[81]

The defender's evidence, which I accepted, was that he did not take any part in the

day to day running of the business. That was done by Mr Dyce. Mr Dyce did not have a

service contract with HRL. I accepted the defender's evidence that Mr Dyce's personal

contacts, character and reputation were of significance in the continuing profitability of the

company, although I also accepted, on the basis of Mr Rowand's evidence, that the business

would derive some trade simply from being an available facility in the Inverness area.

[82]

Mr Rowand and Mr Cunning arrived at broadly similar figures for future

maintainable earnings (£248,000 and £256,000 respectively). The differences of substance

between them were in relation to the multipliers that they selected (2.75 and 1.5

respectively), and whether to apply a discount for the level of shareholding. Both

recognised that there was a dearth of directly comparable transactions. There was a

difference between them so far as net debt was concerned. That was accounted for by their

differing approaches to corporation tax, already discussed in relation to MGL.

[83]

Mr Rowand used the BDO Private Company Price Index, which is not sector specific;

the Damodaran database, which relates to metal and mining and precious metals sectors,

but which does not include sector information for the scrap metal industry; and

MarktoMarket, a report on UK transaction indices, focusing on the small and middle

market. Those resources provided a range of multipliers for 4.72 to 10.4. Based on those

and his experience in the market he derived a range of 2.5 to 3, and selected the midpoint in

it. He did not think that the business was particularly dependent on the person conducting

it. Its presence in the market in a particular location would attract custom. Mr Rowand

explained that the market experience he relied on was six or seven years in the past, and in

relation to a transaction or transactions the details of which he did not have a precise

memory.

[84]

Mr Cunning used a single transaction involving the acquisition of a scrap metal

processing company in Yorkshire, which operated from ten facilities. The EV/EBIDTA

multiplier was 4.9 in that transaction. Mr Cunning regarded a multiplier of between 1.25

and 1.75 as appropriate and selected the midpoint in that range, 1.5. He took into account

that the market in scrap metal was a volatile and fluctuating market, the reliance of the

business on Mr Dyce, and the location of the business.

[85]

Mr Rowand's approach was influenced by a document entitled Put and Call Option

Agreement. It bore to be between the defender and Mr Dyce. The document lodged in

process was unexecuted and undated. The agreement provides Mr Dyce with an option to

acquire the defender's shares for £350,000 in exchange for 70 monthly payments of £5,000.

Some monthly payments appear to have been made from HRL's bank account to the

defender's account and to an account in the name of Daviot Farms. The defender's evidence

was that there was a misunderstanding on Mr Dyce's part that he would be able to pay the

defender out using HRL's money. The defender and Mr Dyce then agreed that the

agreement was not viable and that they would treat it as void. The payments were then

accounted for as a debt owed by the defender to HRL. The price in the agreement was

broadly in line with the valuation that Mr Rowand came to.

[86]

So far as the approach to the multiplier is concerned, I prefer the evidence of

Mr Cunning. The comparator transaction he identified was sector specific, whereas

Mr Rowand relied on resources which were not sector specific. The put and call agreement

does not provide reliable support for the multiplier that Mr Rowand selected. I do not know

the context in which the agreement came to be drafted, or the basis on which the sum

of £350,000 was calculated. The defender's evidence cast little light on those matters.

Mr Rowand's evidence about market experience in the relevant sector was vague, and

related to a time before the relevant date.

[87]

A 75% shareholding was required in order to pass a special resolution. Mr Cunning

discounted the value of the defender's shareholding by 20% to take account of that factor.

Mr Rowand declined to do so because the most likely buyers were the company itself and

the other shareholder. He thought that the defender would be unlikely to accept a discount

as he had not taken any financial return from the business, and he had seen no evidence of a

discount being applied in relation to the put and call agreement. In similar vein, senior

counsel for the pursuer suggested in submissions that a discount was inappropriate because

HRL was a quasi-partnership. There was an understanding that the defender had rights

beyond those in the articles, and that he could withdraw his capital. She referred to

O'Neill v Phillips [1999] 1 WLR 1092, Lord Hoffman, page 1101F-G.

[88]

Lord Hoffman was discussing the possible significance of promises or undertakings

between individuals to the assessment of whether a private company's affairs had been

conducted in an unfairly prejudicial manner, in the context of section 459 of the Companies

Act 1989. His remarks are not of assistance in determining whether a discount is

appropriate in a valuation of a shareholding. Mr Rowand's approach to discount takes into

account factors that relate to buyers with particular characteristics, who would gain a

particular benefit from purchasing the defender's shares. That is not consistent with an

arms-length transaction between a notional willing buyer and willing seller. It also

expressly takes into account the put and call agreement, to which I afford little weight for

the reasons already mentioned.

[89]

I accept Mr Cunning's valuation and find that the defender's shareholding in HRL

was worth £135,000 at the relevant date.

Café V8

[90]

The defender and Mr Dyce formerly ran Café V8 in partnership. It was common

ground that the defender sold his interest in the business to Mr Dyce, and that Mr Dyce

made payments to the defender in respect of the purchase. The pursuer's evidence was that

those payments were of £5,000 per month. The vouching provided by the defender discloses

that the first 12 payments were of £2,000, with all the payments thereafter being £5,000.

[91]

The defender's evidence was that it was agreed that Mr Dyce would pay £134,000 in

instalments; that Mr Dyce's payments in respect of the defender's interest started in

April 2017; and that by the relevant date £94,000 had been paid, leaving him with an

interest worth £40,000. Further payments were made after the relevant date. The last

payment was made in March 2020. I accept that evidence. There is vouching of the

payments. On the defender's bank statements they bear to come from Café V8, rather than

Mr Dyce. The dates and amounts of the payments are consistent with the defender's

position about the agreement between him and Mr Dyce.

[92]

The dispute about this interest arose because the accounts of the partnership at the

relevant date showed that the defender had a capital account which stood at £77,930 as at

31 March 2019. The pursuer submitted that the value of the defenders interest was that sum,

less two payments totalling £10,000 made between 31 March 2019 and the relevant date.

Senior counsel also submitted that it was possible both that the defender's capital account

stood at £77,930 and that Mr Dyce owed him £40,000.

[93]

On the face of the accounts, the partnership owed the defender more than £40,000 at

the relevant date. In reality, the value of the defender's capital account was part of the

interest that he had agreed to transfer to Mr Dyce. Had the defender demanded payment

of £77,930 (or £67,930) on the relevant date, I consider that his entitlement to that would

have been disputed in the light of the agreement that he had entered into, and the payments

he had already accepted. I heard no evidence about how the arrangement between the

defender and Mr Dyce ought to have been reflected in the partnership accounts. I am

satisfied that the defender's only remaining interest in the partnership was properly valued

at £40,000 at the relevant date.

The black box

[94]

The pursuer said that in September or October 2019 she took a safe containing a

black box from the house. The box contained £65,000 or £66,000. According to the pursuer,

the defender told her that the money in the box was his inheritance from his father . On her

account, however, the defender's father gave him £60,000. The defender spent the money at

the time, and a note in the black box, which she photographed, showed what he had done

with it. The money that was in the box when she took it was cash that the defender derived

from cash-in-hand jobs, likely laying driveways. The pursuer is unable to account for how

she has disposed of all of the cash in the box. Very little is vouched. Her TSB account

statements disclose cash payments into the account totalling about £29,500, which she says

she used to pay legal fees. She says she used £750 to pay off a credit card, and estimates that

she gave about £14,000 to her daughter, Chloe, with whom she was living for about seven

months. She says that she paid for some furniture in cash. There is vouching for a cash

payment of £3,913 to Blackridge Furnishings in February 2020. There is an invoice from DFS

for £3019. A 10% deposit was paid by card, and there is no indication whether the balance

was paid by cash or by card. The pursuer says that she spent £8,000 on weekends away.

[95]

Photographs that the pursuer took of the contents of the box show an envelope

marked "40K", and bundles of notes, including a bundle of one hundred pound notes and

one of fifty pound notes, along with some handwritten notes on the blank side of postcards

from Monaco. The handwritten notes list sums of money alongside what appear to be the

names of payees.

[96]

The defender's position is that the pursuer stole £90,000 in cash. In his affidavit he

says he had been "left" approximately £130,000 in cash by his late father. The defender's

father died in February 2014. The defender says that he did take cash out from time to time

and sometimes put money in it. He had a "rough running total in [his] head", so he knew

how much money was in the box. He knew that almost all of the money still in the box

came from his parents.

[97]

There is in process a handwritten letter from the defender's mother, to which the

defender referred in his evidence. It reads:

"My husband and I owned a family safe. When my husband passed away I gave the

safe to [the defender] with the money therein amounting to one hundred and forty

five thousand pounds (£145,000) as his inheritance".

[98]

The defender said that the figure mentioned by his mother was incorrect. He

accepted that the notes photographed by the pursuer were in the box when she took it . He

said there would have been more notes, and that the pursuer had been selective. He would

probably have put a note in the box if he put money in or took it out. The defender was his

late father's executor nominate. The inventory provided for confirmation does not list any

cash. The moveable estate was said to consist only of household contents and effects and the

contents of two bank accounts. It totalled £53,002.24. The will attached to the confirmation

disposed only of a single item of heritable estate, so any moveable estate will have fallen into

intestacy.

[99]

One of the two handwritten cards from the box includes a passage reading, "In total

Grandas money was 2000 to GDM out of box £47000 left £19000 Total was 66000". On the

same card are entries:

"10K for discovery jeep

10 to Allison for GDM

15K to MM for farm + sisters

10K out today 28/4/14"

Those sums, added together, total £45,000, which when added to £2000, amount to £47,000,

one of the sums mentioned elsewhere in the note. The defender's position was that there

had been more than £66,000 to start with, and that he had already spent some of the money

by the time he made this note.

[100]

The other postcard is headed "Grandas Cash 27th April 2014". It reads:

"29K in box

2000 to GM

10000 to GDM properties

15000 to MM for sisters"

The entries may be duplicates of some of those on the other card. In a separate, delineated,

section of the card is an entry A/C into farm 19K". The sums listed on the card total £75,000.

[101]

The postcards are the only written record that has been produced relating to the

contents of the box. It is not entirely easy to make sense of these entries. It is, however,

reasonable to infer from them that at a point rather less than three months after the

defender's father died, the sum in the box was not more than £75,000, and may have

been £66,000. Either of those figures is much closer to the sum of £60,000 that the pursuer

thought had been in the box when the defender received it, than to the sum he mentioned,

namely £130,000. The notes indicate that substantial sums were distributed from the cash

fairly shortly after the defender received it. At least £47,000 was distributed. It appears that

a further sum of £19,000 may have been paid out in relation to the farm. Both the pursuer

and the defender spoke to the defender's putting money into the box and taking it out . It is

common ground that the pursuer took the box in September 2019.

[102]

The defender conceded in submissions that the sum in the box should be accounted

for as matrimonial property in the light of the evidence of both parties that monies were

removed from the box and replaced from time to time.

[103]

On the balance of probabilities I find that the pursuer's evidence that she took

about £66,000 is broadly correct. That would be consistent with the defender's having tried

to keep the sum in the box at about the level it was when he received it.

[104]

The defender submitted that I should draw an inference adverse to the pursuer fr om

the circumstances that Chloe Macdonald's affidavit did not touch on the contents of the safe,

some of which were allegedly distributed to her by the pursuer, and that she was not

available for cross-examination about the contents of the safe. He submitted that she had

produced a soul and conscience certificate "to avoid having to answer her citation". He did

not suggest any basis on which I ought to look behind the certificate, apparently produced

by a medical professional. He did not challenge the authenticity of the certificate or its

content during the proof. I draw no inference from the production of the certificate.

[105]

Cole Macdonald's affidavit, which was unchallenged, relates that Dana Macdonald

told him, shortly after the pursuer took the box, that there was £90,000 inside it.

Dana Macdonald did not give oral evidence. The defender had cited her. I was told that the

defender could not send her a link to allow her to give evidence by Webex. The defender's

agent had expected that the pursuer's agent would cooperate by providing contact details

for her so that she could be sent a link, but that had not happened. When I became aware of

this, I indicated that if it were impossible to secure that a cited witness appear via Webex, I

would entertain a motion that she should give evidence in person (contrary to what was at

the time the default position). The defender did not make any such motion. There is

probably some force in the defender's submission that Dana Macdonald was not keen to

give evidence. Cole Macdonald's account is, however, hearsay evidence of a statement by

Dana Macdonald. Relations between him and Dana Macdonald and between him and the

pursuer have broken down. I attach little weight to this part of his affidavit evidence.

The contents of "No Bother"

[106]

It is common ground that the pursuer visited the matrimonial property on two

occasions in Autumn 2019 with a van and removed certain items. Chloe Macdonald and her

boyfriend attended with the pursuer. The visits were associated with conflict, which came

to involve some of the adult children and stepchildren of the marriage. The police were

called. According to Cole Macdonald, whose affidavit was produced by the defender, the

pursuer took smaller items of furniture and crockery and cutlery. She left bulkier items and

televisions attached to the wall.

[107]

The defender contended that the pursuer removed about 80% of the value of the

contents of the property. He estimated the cost of the furniture at £219,000, of art and

antiques at £25,000 and of garage contents at £35,000. He accepted that these values would

have been accepted by depreciation. He submitted that he was unable to provide vouching

because the pursuer had taken the items, and that she had failed to provide valuations of

what she had taken. He asked me to find that the relevant date value of the items

was £56,000, of which the pursuer had retained £44,800.

[108]

The pursuer's account is that she took only her and Dana Macdonald's personal

possessions. She denies taking any furniture. She produced vouching in relation to

furniture she had bought for her own use after the relevant date. The vouching relates to

large items of furniture. The pursuer also produced screenshots dated 31 March 2021 which

she said derived from a social media account of the defender's girlfriend bearing the

message "Out with the old in with the new". The pursuer said they showed items of

furniture which were matrimonial property in the former matrimonial home, and their

replacements. I accept that the pursuer did not take large items of furniture from the

property. The pursuer claims that the defender telephoned her and said he had burned

certain items she would have liked, but had been unable, to take. According to the pursuer

much of the furniture had been purchased in 2011 or earlier.

[109]

There is no credible and reliable evidence that enables me make a finding as to the

relevant date value of the contents of "No Bother", or as to the proportions in which it has

already been divided between the parties. In particular I am not prepared to accept the

defender's estimates, given the views I have already expressed about his credibility and

reliability in relation to financial matters affecting his own interest. I have therefore left the

value of the contents of "No Bother" out of account for the purposes of making a decision

about financial provision.

Range Rover

[110]

The pursuer was driving a Range Rover car at the relevant date. It was a vehicle

registered to MGL, and subject to finance for which the company was liable. The pursuer

was asked to return the car, but refused to do so. The company met the finance payments,

and those were then debited from the defender's shareholder's loan account. The defender

said that it was a vehicle provided by him for the use of the pursuer. He proposed that he

should continue to fund the monthly payments and to have MGL transfer the vehicle to the

pursuer when that was done. He submitted that the value of the car at the relevant date

was £48,000 and that the pursuer should be credited with that value as a matrimonial asset

held by her at the relevant date.

[111]

The car was not a matrimonial asset held by the pursuer at the relevant date. There

is no dispute that it was, and remains, the property of MGL. I regard the defender's funding

of the pursuer's possession and use of the car as alimentary in character.

Non-agreed matrimonial debts

[112]

Aqua Leisure Ltd was a business belonging to a Brian Hepburn, who had on various

occasions funded the defender and the defender's businesses. The pursuer submitted that it

was difficult to work out whether loans were made to the businesses or to the defender . The

defender's position was that he, personally, took out loans secured over a smallholding at

Inshes (which is not matrimonial property) in order to inject funds into MGL.

[113]

In his affidavit he referred to a standard security for all sums due and to become du e

to Aqua Leisure Ltd, dated 26 March 2015, and to a loan agreement (7/57) signed by the

defender on 24 August 2018. Both are in his name personally. The loan agreement refers to

the standard security. The potential source of confusion is a loan repayment schedule

headed "GDM Properties Loan". The sum shown on that schedule as initially advanced,

and the term at which it shows the loan was repaid, but for a balance of £16, are both

consistent with the terms of the loan agreement to which the defender as an individual was

party. I am satisfied that the debt of £72,928 at the relevant date was one incurred by him

personally.

[114]

The defender's liabilities to HMRC at the relevant date are vouched by

production 7/56 in the sum of £5,326.25.

[115]

I am satisfied that both these sums were matrimonial debts at the relevant date.

Contentions regarding unequal sharing

[116]

The defender argued that there should be unequal division of the net value of

matrimonial property. He submitted that there were a number of respects in which the

pursuer had benefited from an economic advantage, with corresponding disadvantage to

him: section 9(1)(b). He also submitted that there were special circumstances which

justified unequal division: section 10(1) and (6). The pursuer submitted that there were

advantages and disadvantages to each party which could not be quantified mathematically,

and which should be treated as balancing out, with no resulting adjustment to the division

of net matrimonial property.

The defender's submissions

[117]

The defender accepted that the pursuer would require to be credited with the

increase that had occurred in the value of "No Bother": section 10(3) of the 1985 Act. The

pursuer did not dispute that this was the correct approach. The defender submitted

however that he should be given credit for the extent to which he had paid down the

secured loan over "No Bother" since the relevant date. He had discharged a joint and

several obligation without any intention to donate. The pursuer had made no contribution.

One half of his payments, around £100,000, should be treated as having conferred an

economic advantage on the pursuer. He had paid for maintenance and repairs. While he

accepted that not all of the vouching that he had produced related to work on the house

after the relevant date, on a conservative approach he had spent £75,000, of which half had

conferred an economic advantage on the pursuer.

[118]

Lairgandour and Scatraig had also increased in value since the relevant date, and,

again, the defender had paid down the mortgage. Part of the increase in the value of the

property arose because of work done by MGL. Two new industrial buildings had been

constructed, and others maintained. The total cost was £354,000, not all of which was after

separation, and not all of which related to the sheds. On a conservative approach the

amount expended was £320,000. Half of that was expended by the defender, through his

wholly owned company, for the benefit of the pursuer.

[119]

The source of funds for Lairgandour and Scatraig included a gift of £300,000 from his

parents. He should be credited with a proportion of the non-matrimonial fund contributed

by his parents. The property had been purchased in 2008 in the parties' joint names. He

submitted that he should be given credit for one third of the gift made to him,

namely £100,000. That would give appropriate weight to the non-matrimonial source of the

original purchase, which could not have been made without it.

[120]

The pursuer had appropriated the funds in the parties' joint Santander account.

Apart from her wages, which were paid into it, the funds in it came from the defender. The

defender submitted that the pursuer had given Chloe funds from the account in order to

conceal her appropriation of the jointly held capital in it. The defender was entitled to be

credited with half the sum paid to Chloe, about £17,000. The pursuer had had the benefit of

sharing £20,000 in the joint account which was payment from Mr Dyce in respect of the

defender's interest in Café V8. They were monies to which the defender was contractually

entitled, and he should be credited with one half. The pursuer should also be treated as

having retained the whole agreed relevant date balance on the account.

[121]

The pursuer had received the whole net proceeds of the sale of Birchwood House,

and was credited with that in the division of matrimonial property. The defender had

however met the costs of that sale. He alone had made mortgage payments and met the

costs of utilities, insurance and repairs. He had sustained an economic disadvantage in the

sum of £103,593.

[122]

The defender asked me to infer that the pursuer had removed the entire contents of

Birchwood with her boyfriend, Colin Thomson, in about May 2019. Mr Thomson had been

residing at the property before May 2019. Both he and the pursuer had keys. She had

concealed her relationship with Mr Thomson from the defender for a period, and she had

been motivated to ingather as much matrimonial property as possible. There was no

evidence from Mr Thomson. A reasonable estimate of the second hand value of the

property was £4,000.

[123]

In total the defender sought adjustments amounting to £723,501 to the sum that

would otherwise be due to the pursuer in respect of departures from equal sharing.

The pursuer's submissions

[124]

The defender had had the use of "No Bother" throughout, while the pursuer had not.

He had maintained it for his own use and occupation. He had used rent from the jointly

owned telephone masts to do so. There had been no accounting for that rent, although the

pursuer had been credited with it for tax purposes. MGL had not been charged a market

rent (which was agreed to be £70,000) for its occupation of land at Lairgandour and Scatraig.

Had MGL been charged rent and the pursuer received her share of it, she would have been

in a position to contribute to the mortgage. There had been no accounting to her for the

grant received in respect of the woodland at Lairgandour. The defender had failed to

maximise the value of the woodland because he had failed to register it at the appropriate

time.

[125]

The building work at Lairgandour was done by MGL, not the defender. According

to the defender's own evidence, some of it was funded by a bounce back loan to a company,

Highland Machinery Dealers, which had not traded. The defender had accommodated

friends and relatives rent free in buildings on land which was jointly owned by the pursuer .

[126]

The defender did not support the pursuer from income until he started to pay

aliment of £2,300 per month in December 2020. The pursuer used the Santander account for

alimentary support until it was closed in September 2019.

[127]

The property in Birchwood House was, on the defender's own account, the property

of MGL.

[128]

The defender had dissipated assets. By reason of his own unlawful conduct as a

director he had faced disqualification proceedings. His evidence was that he had

spent £450,000 on defending them. He had then admitted the conduct and accepted

disqualification. In those circumstances his expenditure had dissipated matrimonial assets;

it was conduct that had adversely affected the financial resources relevant to the decision of

the court on the claim for financial provision: sections 10(6)(c), 11(7)(a); McCallion v

McCallion 2021 Fam LR 30.

[129]

The pursuer accepted that the defender's parents had provided funds toward the

purchase of Lairgandour and Scatraig, but maintained that the sum was £150,000.

Conclusions unequal sharing

"No Bother", Lairgandour and Scatraig

[130]

Between the relevant date and the date of the proof the debt secured over "No

Bother" reduced by £141,225 by reason of payments made by the defender alone. During

the same period the debt secured over Lairgandour and Scatraig reduced by £582,534. On

the face of matters, the pursuer has benefited to the extent of £361,879.

[131]

I do not consider that the defender should simply be "credited" with the whole sum

of £361,879. He has occupied "No Bother", which is on the evidence a well-appointed

property, and has benefited from doing so. The pursuer has not. The defender has allowed

other persons to live rent free on the jointly owned land at Lairgandour and Scatraig. MGL

occupied the land and buildings at Lairgandour and Scatraig free of rent. As the defender

had conceded in relation to the valuation of MGL, the market rent for MGL's occupation of

jointly owned land there was £70,000 per year. Had that rent been paid, the pursuer would

have been entitled to half of it.

[132]

The defender produced vouching for repairs and maintenance to "No Bother". They

relate generally to repairs and maintenance of a swimming pool, hot tub and steam

room (£30,693) and pest control, electrical and joinery work connected to a rodent

infestation (£51,681). One of these, rendered by ANM Electrical works, for £27,120, was

addressed to MGL rather than the defender. There is a further invoice to the defender for

plumbing work in the sum of £2,020. While it is correct that the defender should have

accounted to the pursuer for the rental from the phone masts, rent was received for only one

of them during the period after the relevant date, and was only £2,300 per year. The rental

for the other was paid in advance in 2016, with no further payment due until 2026.

[133]

Two industrial buildings constructed at Lairgandour and Scatraig after the relevant

date have contributed to the value of the matrimonial property. They were, however

constructed at the expense of MGL, not the defender personally. I do not accept that

because the defender is the only shareholder in MGL, the expenses incurred by MGL in

connection with the industrial buildings should be treated as expenditure incurred by him

personally. There is no lease between the parties and MGL. MGL paid no rent. There is no

evidence about any contract requiring the parties to account to MGL for the extent to which

the parties' heritable property has been enhanced by the money spent by MGL. I note also

that there is no evidence before me that the value of the parties' heritable property increased

to the extent of the costs incurred by MGL. I leave the expenditure by MGL out of account.

[134]

I leave out of account the grant for woodland at Lairgandour. The planting and

maintenance of the woodland has enhanced the value of the land both as at the date of

separation, and quite markedly, after separation. There is no evidence to suggest that the

grant has been employed other than in relation to the woodland. Its existence does not

justify a departure from equal sharing. Any disadvantage caused to the pursuer by the

failure to register the woodland is a disadvantage which applies equally to the defender, so

far as the value of the woodland is concerned.

[135]

The pursuer has benefited from the payments that the defender has made in respect

of secured debt regarding both "No Bother" and Lairgandour and Scatraig. He has also

paid for maintenance of "No Bother" which I accept falls to be taken into account. For the

reasons given above, I do not consider that the question of economic advantage or

disadvantage is a matter of straightforward calculation. The defender has had the use of the

properties. The pursuer has not had any use of them, and she has derived no rental income

from them. On a very broad basis I have taken account of the economic advantage to the

pursuer, and the corresponding disadvantage to the defender by deducting £200,000 from

what would otherwise be due to the pursuer.

Source of funds, Lairgandour and Scatraig

[136]

I do not accept the defender's evidence that he received £300,000 from his parents as

a gift towards the purchase of Lairgandour and Scatraig. It is unvouched. For the reasons I

have already explained I am cautious about accepting evidence from either party about

contentious matters where there is no vouching, or that evidence is unsupported by the

testimony of another witness or witnesses. The defender suggested that his evidence was

supported by a letter from his mother, lodged in process. The letter in fact reads:

"When Gary bought Lairgandour Farm my husband and I gave him three hundred

thousand pounds (£300,000) which was our inheritance money (from my and my

husband's family). Gary made a promise to repay it, as and when he could".

[137]

The defender did not accept that he had promised to repay the money, or that it was

a loan. The letter from his mother does not support the proposition that the money was an

outright gift. Having been warned that he need not incriminate himself, the defender

declined to answer questions directed at the absence of disclosure of the "gift" from the

declaration that he made as his late father's executor. I give limited weight to the content of

the letter, as its author did not give evidence. I accept that there was a gift to the defender

from his parents, as both the defender and the pursuer gave evidence to that effect. I am not

satisfied that it was any greater than the sum of £150,000, which was the evidence of the

pursuer. That is a sum that was acquired by way of gift from a third party. The defender

did not suggest that the gift should simply be subtracted from the value of the matrimonial

property. It is a matter, however that is relevant to the source of funds used to acquire

Lairgandour and Scatraig. I have taken account of this by deducting £50,000 from what

would otherwise be due to the pursuer.

Birchwood House and contents

[138]

Whether the pursuer took the contents of Birchwood House is irrelevant. The

defender's oral evidence was that those contents belonged to MGL. They were not

matrimonial property. I am not in any event satisfied that she did take them. There was no

direct evidence that she did, and I do not draw that inference from the matters on which the

defender relied.

[139]

So far as the costs of sale, repairs and mortgage payments for Birchwood House are

concerned, I accept that the defender has borne those. The sale generated a charge to capital

gains tax, which he bore. The figure used for the value of Birchwood in the calculations in

this opinion (and by both parties in submissions) is the net free proceeds, rather than the

relevant date value of the property less relevant date secured debt. The costs of

sale (£39,057.98) and capital gains tax charge (£11,194.44) have to some extent therefore

already been taken into account. Both parties have benefited from those. The defender has

benefited to the extent that he has by reason of the sale already been able to discharge in part

his obligations to the pursuer in respect of the division of matrimonial property. The use of

the net proceeds of sale figure in calculations means that the "value" net of debt will have

been inflated at least to some extent because the defender had paid down the mortgage

by £64,355, and will make an adjustment in that sum.

Defender's legal fees

[140]

The pursuer did not give any notice in the pleadings that she intended to characterise

the defender's spending on legal fees as a special circumstance of the sort referred to in

section 10(6)(c) (destruction, dissipation or alienation of property by either person). The

defender's evidence about this was disclosed in his affidavit. If this line was to be pursued,

the pleadings should have been amended, and proper vouching obtained of the sum said to

be involved. I am in any event reluctant to take at face value the defender's assertion about

the extent of the legal fees that he paid. I have already explained why I approach

unvouched assertions by him about financial matters with some caution. In this context, as

senior counsel for the pursuer pointed out, the defender was at pains to distance himself

from the admissions that he made about his misconduct as a director. He was seeking to

explain them by reference to financial pressure which prevented him from defending the

proceedings as far as he might have wished to. Against that background I suspect that he

may have overstated the extent of the legal fees that he incurred, perhaps significantly.

Santander joint account

[141]

There is no dispute as to the credit balance in the parties' joint Santander bank

account at the relevant date. What is in dispute is the nature and extent of the pursuer's

intromissions with it after the relevant date. The pursuer's salary was paid into the account,

and she is plainly entitled to that. Her evidence was that she received over £15,000 by way

of salary into the account between the relevant date and 30 September, when the account

was closed. That does not reconcile with her evidence that at separation her salary

was £441.63, and that it increased to £498 in July 2019. There are payments in for those

amounts (with a figure of around £498 appearing from 25 July 2019), although the

descriptions of them in the statements vary, and not all are expressly recorded as wages.

Payments for other amounts are expressly recorded as wages.

[142]

On the basis of the pursuer's evidence about the amounts of her weekly wages she

would have received £8,508 between the relevant date and 30 September 2019 (8 x £441

plus 10 x £498). Her affidavit evidence, however, incorporates a spreadsheet which includes

a payment, said to be of wages, of £5,781.52 in a single week, on 19 July 2019 (paragraph 10.4

of her affidavit, and 6/39).

[143]

According to my own calculations, payments totalling £76,108 were made into the

account between the relevant date and 30 September 2019, when the account was closed.

Even on the basis that the pursuer's wages during that period were in the region of £15,000,

that leaves payments in of more than £60,000 that were not her wages.

[144]

Among the payments made into the account were four payments of £5,000 in respect

of the purchase of the defender's share in Café V8. Payments from Daviot Farms bearing to

be rent for Birchwood also appear in the statements.

[145]

According to the defender, the pursuer transferred a total of £34,280 to

Chloe Macdonald. On the pursuer's account she transferred approximately that sum to

Chloe Macdonald because, although she, the pursuer, had a dormant bank TSB account of

her own at the time, she was not using it. In October and November 2020 Chloe Macdonald

transferred £18,270 to the pursuer's TSB account. The pursuer claims that Chloe Macdonald

paid for items for the pursuer and herself from the funds she retained, and that the funds

were also used to support Chloe Macdonald, who was not working.

[146]

The defender retained the closing balance of £994.33. Some of the sums drawn from

the account are direct debits and transfers which do not relate to expenditure by the

pursuer. These amount to £23,174 and include substantial payments to Shawbrook, one of

the secured creditors in respect of "No Bother". I understand it to be common ground that it

was the pursuer who was responsible for the remainder of the spending on the account from

the relevant date until the account closed.

[147]

It is not possible to make a very precise mathematical calculation in relation to the

way in which the funds in the account at the relevant date and paid in thereafter were

applied. Very broadly, the total of the balance at the relevant date plus the funds paid in

thereafter is around £98,662. Accepting for present purposes as correct the pursuer's

representation that £15,000 or thereby of that was her wages, and working on the basis that

she was prima facie entitled to half of the balance at the relevant date, and taking into

account the sums withdrawn other than by the pursuer leaves a figure of £49,211. I have

treated £10,000 of that, on a broad basis, as alimentary spending during a period of just over

four months.

[148]

The defender's contention is that the pursuer should be regarded as having retained

the whole of the relevant date balance, and that he has suffered economic disadvantage to

the extent of £27,000 by reason of the payments to Chloe Macdonald and the pursuer's

retention of monies contractually due to him. Essentially that would result in an overall

adjustment in his favour of just over £38,000. That appears to be reasonable, cross checked

against the non-alimentary withdrawals by the pursuer as I have calculated them.

Resources

[149]

Attached to the defender's affidavit were tables setting out a scheme for payment to

the pursuer projected over a number of years. In his oral evidence, however, Mr Capewell

suggested that the defender might obtain resources more swiftly than had been thought

possible when he swore the affidavit. In particular, he had approval for £640,000 of further

borrowing secured over the farm. In addition, it might be desirable, in response to the

current trading environment, for MGL to downsize and to sell plant and machinery. That

would provide cash for distribution to the defender as a dividend. After income tax and

corporation tax, that would be between £260,000 and £270,000. The defender submitted that

he would retain the ability to sell heritage if necessary in order to generate funds. He

submitted (in the context of a submission by his counsel that he would be liable to pay a

capital sum of £1,350,000) that he would have resources to fund the capital sum within a

time period of about two years and four months, which was reasonable. He would be able

to organise sales at times such as to maximise value, rather than on the basis of a timetable

imposed by the court.

[150]

I accept that Mr Capewell's evidence was given honestly and in good faith. I have no

reason to doubt what he said about the approval for further borrowing, and accept it . I

accept in general terms that there is a real potential to generate funds from the sale of plant

and equipment. I regard the evidence about the extent of a potential dividend as to some

extent speculative. I was not provided with any detailed figures as to the basis for the

dividend that he said might be generated.

[151]

Mr Capewell's evidence about MGL's potential downsizing was in the context of oral

evidence from Mr Thomson about adverse trading conditions. Senior counsel for the

pursuer objected to the oral evidence of both these witnesses, on the basis of lack of fair

notice in the pleadings. She withdrew her objection to the evidence of Mr Capewell, but not

to the evidence of Mr Thomson.

[152]

Mr Thomson gave evidence in fairly general terms about the difficulties in trading in

a market where it was difficult to obtain certain essential supplies, including red diesel,

because of the war in Ukraine. It did not consider that what he said about difficult trading

conditions did not go beyond what is common knowledge and the subject of discussion in

the media. He also gave evidence about the lead in times for the purchase of equipment,

with a view, as I understand it, to supporting the proposition that a purchaser of MGL

would have known about a forthcoming purchase of plant and insisted on a reduction in the

purchase price. The significance of planned purchases of plant was in my view plainly in

issue given the respective approaches of the forensic accountants. In any event, as will be

apparent from earlier passages in this opinion, I accepted that there were significant lead in

times, and that new plant was not readily available. Given the approach that I have taken to

this information in the context of the valuation of MGL, I do not consider that there has been

any prejudice to the pursuer by reason of the admission of Mr Thomson's evidence about

this matter.

Capital gains tax

[153]

The pursuer led evidence from Ms Laura Brown, director of tax at Murray Beith

Murray. The defender objected on the basis that Ms Brown was speaking to matters of law.

I heard her evidence subject to competency and relevancy. The rates of and circumstances

in which liabilities arise for capital gains tax are matters of domestic law. Ms Brown's

evidence was in part evidence setting out what the rates of capital gains tax were, and the

calculation of liabilities on certain hypothetical valuations. That evidence is inadmissible.

Matters of domestic law are for the court, as is the application of that law to the facts of the

case. Part of her evidence was, however, in relation to HMRC practice, and that part of her

evidence was admissible. In particular she gave evidence that HMRC would generally

accept valuations which were the subject of findings by the court.

[154]

Ms Brown's evidence was challenged on the basis that she had selected valuation

figures which were unduly generous to the pursuer. I did not understand the defender to

suggest that the calculations she carried out were inaccurate on the basis of the valuations

she used, or that she had erred in any way as to the rates applicable to the transactions she

was considering.

Periodical allowance

[155]

The pursuer produced a schedule of estimated income and expenditure. She was

receiving salary from MGL of £3,304.34, aliment of £2,300 and payments of £60 by way of a

contribution from her daughter. She maintained that she could not live on an income at that

level. She calculated her monthly outgoings at £9,441.70. Of that £1,920.23 went to repay

loans incurred to cover legal fees. The costs listed for accommodation and associated

utilities and other expenses is £1,641.40, which appears reasonable. Her monthly household

spending is £1,729.75, of which £1,475.06 is food, groceries and household purchases. The

figure is relatively high for a single person. The pursuer's transport costs of £1,948.97

include a monthly rental cost of £1,276 for a BMW X5 series car. She is not in fact incurring

that cost, and continues to drive the Range Rover already referred to, although it has at

times been unavailable because it needed repairs. If the pursuer were to buy a car of her

own, there is no obvious reason why she would require to incur a monthly finance or

leasing cost as high as £1,276 per month. Her personal expenditure, including clothing,

is £817.47. She estimates her leisure activities cost £383.88, and claims that she has been

spending on average £400 a month on the birthdays of family members. She claims

£1000 per month in respect of holidays and mini breaks, which is very generous for a single

person.

[156]

The pursuer aspires to work in retail. She has no formal qualifications. She is

unlikely to earn as much working in retail as she is currently paid by MGL. Until such time

as the pursuer receives a capital payment I consider that she should receive a periodical

payment of £2,700 per month. That is on the basis that I am assuming that she continues to

be employed by MGL and that she will continue to receive net pay at the level that she

currently does. That will result in net income of around £6,000 per month. I consider that

that sum will be sufficient to meet her reasonable needs until such time as she receives a

capital payment.

Conclusions

[157]

The values of all the items of matrimonial property at the relevant date are as

follows:

"No Bother" (former matrimonial home)

£775,000

Birchview Cottage and Lairgandour Farmhouse

£365,000

Industrial units at Lairgandour

£605,000

Joint bank account

£22,554

Lairgandour and Scatraig

£1,498,000

Jewellery

£38,000

Pension (pursuer)

£4,280

Pension (pursuer)

£3,237

Property at Ladystone

£152,500

Birchwood House

£91,627

Sum due from MGL

£16,214

Shares in GDM Properties

£481,000

Pension (defender)

£4,280

Pension (defender)

£15,727

Sole trader business Daviot Farms

£353,500

100% interest in Macdonald Groundworks Limited

£1,841,500

Interest in V8 Café

£40,000

60% interest in HRL Scrap and Waste

£135,000

Contents of safe

£66,000

Total

£6,508,419

[158]

The matrimonial debts at the relevant date were £1,918,174. The net value of the

matrimonial property at the relevant date was, therefore, £4,590,245. An equal sharing of

that would involve an allocation of £2,295,122 to each party. In respect of financial

disadvantage to the defender, and corresponding financial advantage to the pursuer, I

adjust that sum downwards by £302,355 so far as the pursuer is concerned. I adjust it

downwards by a further £50,000 in respect of the source of funds for the purchase of

Lairgandour and Scatraig. That produces a figure of £1,942,767.

[159]

The pursuer has retained jewellery and pensions, and has received the net proceeds

of the sale of Birchwood House. These have a total value of £137,144. In addition, she

retained the money in the parties' joint account at the relevant date, a sum of £22,554 and

the £66,000 contained in the safe. These sums in total amount to £225,698.

[160]

That means that the on the face of matters, the pursuer requires £1,717,069 in order to

achieve fair sharing of the matrimonial property. She currently retains a half share in a

number of jointly owned items of heritable property. I put the matter out by order so that

parties might address me as to what orders ought to be made, and, in particular, whether

the distribution of assets could be achieved in part in the context of transfers of the pursuer's

shares of heritable property to the defender at current values, or whether at least some of the

heritable property would have to be sold on the open market.

By order hearing

[161]

At the by order hearing, the defender intimated that he had secured lending in

principle with a view to having the pursuer's shares in the jointly owned properties

transferred to him. As a result of a miscommunication for which he bore no responsibility,

he had at that stage sought only to secure borrowing to the extent of £1.717m. Against that

background I continued the by order for four weeks on the defender's opposed motion so

that he could seek to secure lending to the full extent that would be required in order to

enable the transfers to take place in the way he envisaged. The pursuer was in principle

content that transfers should take place in the way proposed, if funding were available to

permit that to happen, although her motion at the by order had been for decree of divorce

and for the court to make the orders for financial provision at the hearing.

[162]

On the footing that matters were to be resolved by the court's making orders for

transfer, the following are the relevant calculations. Both parties approached these

calculations in the same way. The pursuer's interest in the joint property was

worth £731,540 at the relevant date, and is worth £1,248,170 currently. Deducting the

relevant date net value of the pursuer's interest in the heritable properties, and adding back

in the current value produced a figure of £2,233,699. That is the sum that the defender will

require to pay the pursuer on the basis that she transfers her shares in the heritable

properties to him.

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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> MICHELLE MACDONALD AGAINST GARY MACDONALD [2022] ScotCS CSOH_84 (25 November 2022) URL: http://www.bailii.org/scot/cases/ScotCS/2022/2022_CSOH_84.html Cite as: [2022] ScotCS CSOH_84, [2022] CSOH 84

Scottish Court of Session Decisions