BAILII [Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]

Scottish Court of Session Decisions


You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Dow v. Sweeney [2005] ScotCS CSIH_65 (24 August 2005)
URL: http://www.bailii.org/scot/cases/ScotCS/2005/CSIH_65.html
Cite as: [2005] ScotCS CSIH_65, [2005] CSIH 65, 2005 SCLR 1073

[New search] [Printable version] [Help]


JISCBAILII_CASE_FAMILY SCOTLAND

Dow v. Sweeney [2005] ScotCS CSIH_65 (24 August 2005)

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Hamilton

Lord Cameron of Lochbroom

Lord Marnoch

 

 

 

[2005CSIH65]

A1642/01

OPINION OF THE COURT (NO. 2)

delivered by LORD HAMILTON

in

RECLAIMING MOTION

in the cause

SUSAN DOW or SWEENEY

Pursuer and Reclaimer;

against

PATRICK CORNELIUS SWEENEY

Defender and Respondent:

_______

 

Act: Wise, Q.C., Cheyne; Digby Brown (for HBM Sayers, Glasgow) (Pursuer & Reclaimer)

Alt: Macnair, Q.C., Louden; Brodies (Defender & Respondent)

24 August 2005

The background

[1]      On 15 October 2002 the Lord Ordinary pronounced decree in the following terms:

" ... Divorces the Defender from the Pursuer, and Decerns; Decerns against the Defender for payment to the Pursuer of a capital sum of Seven Hundred and Forty Four Thousand, Seven Hundred and Eighty Four Pounds (£744,784.00) Sterling, the sum of Three Hundred and Fifty Thousand Pounds (£350,000.00) Sterling thereof to be paid immediately with interest thereon at the rate of eight per cent per annum from this date until payment, the balance to be paid by a date or dates to be afterwards fixed; Appoints parties to be heard thereon, and on any further question of interest, By Order on Tuesday 5 November 2002 at 10 a.m.; Decerns against the Defender for payment to the Pursuer of a periodical allowance in the sum of Four Thousand Pounds (£4,000.00) Sterling per month, payable monthly and in advance, for the period of one year from this date; finds the Defender entitled to Contact with Stuart Kyle Sweeney, child of the parties, every second Sunday between the hours of 2 p.m. and 6 p.m. commencing as of this date; Reserves meantime the question of expenses".

[2]     
The pursuer and reclaimer ("the wife") reclaimed against that interlocutor in so far as it fixed the capital sum payable in the sum therein specified. She maintained that, in determining the net value of the matrimonial property, the Lord Ordinary had erred in law in deducting amounts which would have been payable as capital gains tax if the whole matrimonial property had been realised for cash as at the relevant date. The defender and respondent ("the husband") lodged cross grounds of appeal by which he contended that the Lord Ordinary had erred (1) in ordering that the first instalment of the capital sum to be paid should be £350,000, (2) in making an award of periodical allowance (at all or in any event for as long as a year) and (3) in any event, in fixing that award in the sum of £4,000 per month.

[3]     
Following the hearing of the reclaiming motion in part, this court held that the wife's ground of appeal was well-founded (Sweeney v. Sweeney 2004 S.C. 372). Thereafter the husband lodged supplementary grounds of appeal in which he contended (1) that special circumstances existed which justified the value of the net matrimonial property being shared in proportions other than equally and (2) that the making of an order for payment of a capital sum of an amount equivalent to half the value of the matrimonial property at the relevant date would, due regard being had to the resources of the parties, be unreasonable.

[4]     
The result of the wife's marking of the reclaiming motion was to suspend the effect of the Lord Ordinary's interlocutor, except in so far as it dealt with contact to the child of the marriage. An award, made on 12 December 2001, of interim aliment payable to the wife by the husband at the rate of £4,000 per month continued to have effect. Shortly before the continued diet of the reclaiming motion (in June 2005) parties reached an agreement in terms of which the husband paid to the wife £350,000 as a first instalment of a capital sum. In terms of that agreement the wife waived her claim for payment of a periodical allowance. In these circumstances the issues raised by the husband's original cross grounds of appeal became, except in so far as they touched incidentally on other issues, no longer live.

[5]     
The Lord Ordinary having formed the opinion which he did in relation to capital gains tax did not, except on one aspect, find it necessary to reach a concluded view on whether special circumstances existed to justify an unequal sharing of the matrimonial property. Also, counsel for the husband did not before the Lord Ordinary dispute that an award of a capital sum of the order of £750,000 could be said to be reasonable, having regard to the resources of the husband. In these circumstances the Lord Ordinary found it unnecessary to make a detailed assessment in relation to the application of section 8(2) of the Family Law (Scotland) Act 1985.

[6]     
The Lord Ordinary did, however, reach a definite view on one aspect of fair sharing of the matrimonial property. He held that, having regard to the history, including the history prior to the marriage, of the businesses operated by the defender, an unequal division of the net value of the matrimonial property, in so far as comprising the value of the husband's interest in those businesses at the relevant date, was justified. He found, under reference in particular to section 10(6)(b) of the Act, that a sharing of the value of that interest in the proportions of 48% to the wife and 52% to the husband was justified. That apportionment was, in the event, not challenged in the reclaiming motion.

Submissions for the parties

[7]     
In advance of the continued diet Mr. McNair for the husband helpfully prepared a schedule setting forth in tabulated form the values of the various assets, assessed as at the relevant date, held by each of the parties. That schedule (under deletion of certain notes, to the content of which we shall separately return) is in the following terms:

 

DEFENDER

reasonable

to realise

unreasonable

to realise

PURSUER

reasonable

to realise

unreasonable

to realise

17 Sunningdale Wynd

           

£

305,000.00

   

£

305,000.00

92 Springcroft Crescent

£

64,065.00

   

£

64,065.00

           

Contents

£

5,100.00

   

£

5,100.00

£

2,237.00

   

£

2,237.00

Co Pensions

£

363,280.00

   

£

363,280.00

£

383,688.00

   

£

383,688.00

Personal pension

£

137,661.00

   

£

137,661.00

£

78,689.00

   

£

78,689.00

peps

£

130,501.00

£

130,501.00

   

£

102,206.00

£

102,206.00

   

Shares

£

324,144.00

£

324,144.00

   

£

85,347.00

£

85,347.00

   

Cars

£

109,600.00

£

109,600.00

   

£

60,000.00

£

60,000.00

   

Premium bonds

           

£

1,500.00

£

1,500.00

   

Bank Accounts

           

£

48,849.00

£

48,849.00

   

Building Soc

£

382,307.00

£

382,307.00

   

£

50,732.00

£

50,732.00

   

Fishing Rights

£

32,300.00

£

32,300.00

               

AXA policy

£

105,718.00

£

105,718.00

               

Sweeney Plant

£

1,709,000.00

   

£

1,709,000.00

           

Total

£

3,363,676.00

£

1,084,570.00

£

2,279,106.00

£

1,118,106.00

£

348,634.00

£

769,614.00

Less Tax

£

46,947.84

£

46,947.84

   

£

2,556.73

       

Total

£

3,316.728.16

£

1,037,622.16

£

2,279,106.00

£

1,115,691.27

       

Grand total

£

4,432,419.43

                   
[8]     
The figures in that schedule are not in dispute; nor is the classification of the various items into "reasonable to realise" and "unreasonable to realise". The "net value of the matrimonial property" for the purposes of section 10 of the Act is the figure (£4,432,419.43) described as "Grand total" in the schedule. As, however, the wife now accepts that the value of the business interest (described in the schedule as "Sweeney Plant") should be apportioned otherwise than equally, her claim is to that extent restricted. Taking into account the assets which, as at the relevant date, were in her hands, but leaving out of account the £350,000 recently received by her, her claim for a capital sum amounts (ignoring pence) to £1,066,338. If the sum of £350,000 is deducted, her outstanding claim is in the amount of £716,338. The husband resists that claim.

[9]     
As regards special circumstances justifying an unequal sharing of the value of the matrimonial property, Mr. McNair relied primarily on the extent to which the assets held by the husband were, in contrast with those held by the wife, in the category of those "unreasonable to realise". Among other assets these included the business interest, valued at the relevant date at £1.7m - a substantial proportion of the total value of the matrimonial property. It had never been suggested that that interest should be realised for the purpose of meeting a capital sum award. The husband's wealth, in particular that in his business, was "theoretical" rather than "practical". His financial position would also be precarious if he could not call upon personal resources of wealth to keep his business afloat. The assets available and prospectively available to the wife included, by contrast, substantial sums readily realisable as cash. Although the husband had at the relevant date assets within the "reasonable to realise" category which, if then realised, might have satisfied an equal sharing (subject to the 48/52 sharing of the value of the business interest), that did not prevent the marked disparity in the nature of the property allocated from being special circumstances within the meaning of section 10(6)(d) of the Act. Reference was made to McConnell v. McConnell (No. 2) 1997 Fam.L.R. 108, especially per Lord Morison at para. 20-51. Had the business interest been realised at the relevant date, a very substantial charge to capital gains tax (about £593,000) would have arisen; expenses would also have been incurred. A charge of £73,860 would also, hypothetically, have arisen on the disposal of the whole of the husband's share portfolio at the relevant date. If the capital sum to be awarded were confined to the £750,000 awarded by the Lord Ordinary (now subject to deduction of the £350,000 recently paid), the sharing of the value of the matrimonial property would be in the proportions of about 42% to the wife and about 58% to the husband. That sharing would in all the circumstances be fair. It was also relevant to bear in mind the risks attendant on the holding of certain types of property, particularly business enterprises, and the need to spread risk.

[10]     
As to the resources of the parties, although it might be necessary for this court to fix of new the amount of the capital sum to be awarded, it was appropriate for it to do so on the basis of the evidence led before the Lord Ordinary. It was for the wife, as applicant for financial provision, to satisfy the court that the amount claimed by her was not only justified but also reasonable (Ali v. Ali 2001 S.C. 618, at page 627). The only evidence before the Lord Ordinary about the husband's resources was that given by him. That had disclosed that between the relevant date and the date of the proof certain of his assets had been realised and the proceeds, as noted in the schedule, dealt with as follows. His home (which had been of a modest character) had been sold and another house at Bishopbriggs purchased for £190,000; that house had in turn been sold for £215,000 and his present house acquired for £165,000. His PEPS had been disposed of for £100,000 and the proceeds lent, by way of director's loan, to his business. So also had the AXA policy, the amount realised, and then lent to the business, being about £97,000. His share portfolio had been partially realised (with some unquantified liability to capital gains tax) and the proceeds (about £150,000) again lent to the business. The monies held in the building society (£382,307) had been used partly to meet tax liabilities (being the outstanding debt of about £50,000 due at the relevant date and about the same amount in tax subsequently levied), partly to purchase the house at Bishopbriggs and to furnish it, partly to acquire shares (for £20,000 - £30,000) and partly in living and holiday expenses. There had been some changes in the private cars owned by him, though their total value remained at about £100,000. The defender had given evidence of difficulty experienced by him in obtaining bank borrowing. The effect of the above transactions was that, as at the date of the proof, the husband had available in reasonably realisable assets (1) fishing rights (worth £32,300), (2) cars (worth about £100,000) and (3) shares (worth £224,000 gross, but only £175,000 if capital gains tax on realisation was brought into account) - an effective total of about £307,300. He also was the lender in respect of loans made to his business but the extent to which these could be realised, or replaced by bank borrowing, was uncertain. An award of a capital sum in excess of more than £1m would in these circumstances be grossly excessive. While the husband did not depart from his concession made before the Lord Ordinary that a capital sum of £750,000 (if payable in appropriate instalments) was reasonable, that was, Mr. McNair contended, a generous figure. An appropriate capital sum now to be awarded would be £400,000 (£750,000 less the £350,000 recently paid), payable in instalments of £50,000 per annum over the next eight years. There was no justification for allowing interest on the sum of £350,000 from the date of the Lord Ordinary's interlocutor, not least because in the period since then the wife had continued to receive aliment at the rate of £4,000 per month. Nor was there justification for ordering interest in the future except from the dates when the instalments of the outstanding capital sum respectively fell due.

[11]     
In the course of his submissions Mr. McNair made reference also to Geddes v. Geddes 1993 S.L.T. 494, especially per Lord President Hope at pages 500C-501B, Jacques v. Jacques 1997 S.C. (H.L.) 20, Little v. Little 1990 S.L.T. 785 and Haugan v. Haugan 2002 SLT 1349.

[12]      Mr. Cheyne for the wife submitted that the determination of what capital sum in the circumstances of this case satisfied the statutory requirements was at large for this court, the Lord Ordinary not having reached a definite view either on special circumstances (except in so far as related to the value of the business interest) or on what was reasonable in circumstances where hypothetical capital gains tax did not fall to be deducted in computing the net value of the matrimonial property. "Special circumstances" were circumstances which were special to the particular case; and the identification of such circumstances did not of itself justify a sharing which was unequal (Jacques v. Jacques, per Lord Clyde at page 24). Even if an uneven distribution between the parties of reasonably realisable and not reasonably realisable assets could amount to special circumstances, that did not justify an uneven sharing. There were other mechanisms (such as the deferment of payment or payment by instalments) by which the not reasonably realisable nature of assets could be reflected (Little v. Little, per Lord President Hope at page 789D-F). The wife had always been prepared to accept that payment by instalments should be part of the order made. The instalments could be funded out of the husband's business (which produced a substantial income for him) without his being required to realise assets which were not reasonably realisable. Such shortfall (some £38,000) as existed between the husband's reasonably realisable assets (as per the schedule) and the wife's claim could be met by him out of income. Under reference to McConnell v. McConnell (No. 2), it was accepted that a marked disparity in the nature of the property allocated could amount to special circumstances but, except in so far as related to the 48/52 split in respect of the business interest, none were made out here such as to justify displacing the presumption of equal sharing. The possible incidences of capital gains tax (whether on the business or on the share portfolio) did not, in the circumstances of this case, constitute special circumstances. There was no justification for departing from equal sharing to the extent urged by Mr. McNair.

[13]     
As to resources, neither party had suggested that circumstances had so changed since the proof that, on the basis of res noviter veniens ad notitiam, material beyond that led in evidence at the proof should be considered by this court. The husband had not only given evidence in chief as to what had become of the scheduled assets but had been cross-examined as to his means. It was plain from his answers in cross-examination that he was a man of ample means and resources. He was alive to the advantages of moving funds so as best to secure advantage. He had made a substantial profit on re-sale of a house and had made, since the relevant date, further investment to the extent of several hundred thousand pounds in his business. The arrangements under which he had advanced monies to his business as director's loan were very informal; in effect he used his business as his personal banker. Although the business had at one stage had its difficulties, it was plain that by the date of the proof it was expanding substantially and likely to continue to do so. The husband had accepted that the director's loan made was gradually being repaid and that at least some support from his regular banker could be expected. The evidence suggested that, as at the relevant date, future maintainable profits of the business were of the order of £252,000 per annum. In the absence of proof to the contrary, it was reasonable to assume that the husband's assets remained in value substantially the same as at the relevant date (Fulton v. Fulton 1998 S.L.T. 1262, per Lord Nimmo Smith at pages 1263L-1264A). As to interest in respect of the past, it was appropriate that the husband pay interest on the £350,000 from the date of the Lord Ordinary's interlocutor until the date of payment of that sum; while there was force in Mr. McNair's submission that the continued receipt by the wife of interim aliment during that period was relevant, it was important to recognise the different principles which applied to interim aliment (the claimant's needs) and those which applied to interest (representing the fruits of a capital sum withheld). As to the balance, this court should fix the capital sum yet to be paid at £716,338 payable by instalments as follows - £300,000 immediately, further instalments of £100,000 by the end of each of December 2005, December 2006 and December 2007 and the remainder (£116,338) by the end of December 2008. Interest at the judicial rate should be ordered on the whole balance outstanding from time to time. Reference was made to McCue v. McCue 2001 Fam.L.R. 30, as an illustration of interest being ordered to be paid on the whole outstanding balance.

Discussion

[14]     
An order made on an application for financial provision on divorce must, subject to sections 12 to 15 of the Act, satisfy the dual criteria of being (a) justified by the principles set out in section 9 and (b) reasonable, having regard to the resources of the parties (section 8(2)). The only principle specified in section 9 which is applicable for present purposes is that in section 9(1)(a), namely, that the net value of the matrimonial property should be shared fairly between the parties to the marriage, that principle itself being regulated by the provisions of section 10. "Resources" means present and foreseeable resources (section 27(1)). Sections 12 to 15 include provisions whereby an order for payment of a capital sum may be stipulated to come into effect at a specified future date (section 12(2)) and that a capital sum may be ordered to be payable by instalments (section 12(3)); the court is also empowered to make an order as to the date from which any interest on any amount shall run (section 14(2)(j)). All of these provisions must be borne in mind by the court when determining what, if any, financial provision should be made. While there may be a logical order in which the application of these provisions should be addressed, it is important to bear in mind that it is the end result, in the terms of the order made, which, regarded as a whole, must satisfy the statutory requirements.

[15]     
Before addressing the application of these provisions to this case it is appropriate for this court to make certain findings additional to those made by the Lord Ordinary. Evidence was led from the husband as to the various transactions affecting the matrimonial property which had occurred between the relevant date and the date of the proof. No other evidence in relation to these transactions was adduced by either party. While there are some internal inconsistencies in the husband's testimony, it was not maintained that his evidence, taken generally, was on these matters either incredible or unreliable. In the circumstances of this case no material issue arises in relation to the burden of proof. Evidence was, without objection, adduced by both parties from the husband on the relevant matters. That evidence was, in relation to primary matters of fact, neither seriously challenged nor contradicted, except on one aspect. We accordingly accept that unchallenged evidence, referred to in the narrative of counsels' submissions in paragraphs [10] and [13] above and which need not be repeated, and hold the matters of fact to which it relates as established. There was an issue between counsel as to the level of profit to be anticipated from the husband's business. We find it unnecessary to reach any more definite view on that issue than that the indications for the future appear to be markedly favourable. It remains for this court to evaluate the effect of those facts and of the other material facts established at the proof.

[16]     
The effect of the husband's evidence was that during the period in question he had redeployed many of his reasonably realisable assets. Some of that redeployment had produced profits (as in his house transactions and in the sale of part of his share portfolio, the incidence, albeit unquantified, of capital gains tax being indicative of capital gains having been made); others had, as a matter of immediate effect, resulted in modest losses (as in the realisation of his PEPS and of the AXA insurance policy). A major feature of the redeployment was further investment of sums in the husband's business interest. There is no suggestion that such redeployment was carried out otherwise than voluntarily and with a view to securing the success, or further success, of that enterprise. The husband's own evidence indicates that, although the business had earlier had some difficulties (primarily related to the husband's own health and his ability to devote himself to it), by the date of the proof it was expanding significantly, with at least the potential for the creation of even greater wealth in terms of capital and income resources. On the other hand, the business, being one dependent for its success on the health and energy of the husband personally, was and is exposed, perhaps more than many other commercial enterprises, to risks and uncertainties.

[17]     
Mr. McNair's primary submission on "special circumstances" was founded on the preponderance of "not reasonably realisable" assets in the share of the net value of the matrimonial property to be retained by the husband. This argument proceeded on the basis that it would not be reasonable to expect that the business (or the husband's pensions or his house or its contents) would be realised in order to satisfy an award of financial provision to the wife; and that accordingly, if provision were made to the extent demanded by the wife, the husband would be left with little, if any, assets in readily realisable form. By contrast the assets available and prospectively available to the wife included substantial items readily realisable as cash.

[18]     
In Jacques v. Jacques Lord Clyde, with whose reasons the majority of their Lordships agreed, held at pages 24-5 that, as a matter of construction of the 1985 Act, the existence of "special circumstances" did not lead to the necessary conclusion that there must be an unequal division of matrimonial property. "Special circumstances", he observed, referred to any circumstances which were special to the case; and the decision as to whether there should be any departure from equality " ... involves the test of justification by the special circumstances" (page 25). Thus, the critical issue in a case such as the present is not simply whether any circumstances of it can be described as "special" (an expression without technical meaning and not closely defined by section 10(6)) but whether they are such as to justify departure from the presumption that sharing equally is sharing fairly. In McConnell v. McConnell (No. 2) Lord Morison, while opining that it was relevant to consider whether an order for equal sharing in value would lead to a marked disparity in the nature of the property allocated, also recognised that it was relevant to consider whether that disparity was such as to justify departure from the principle of equal division (para. 20-51).

[19]     
On the assumption (which was not challenged by Mr. Cheyne and which we are prepared for present purposes to accept) that a marked disparity in the nature of the property allocated could constitute special circumstances, we are not persuaded that in this case they in fact justify a departure from equal sharing. As Mr. Cheyne pointed out under reference to Little v. Little per Lord President Hope at page

788D-E, there are various ways, including an order for payment by instalments, by which the non-realisable nature of an asset can be reflected in the provision made. It is accepted by parties that the capital sum to be awarded in this case should be made by instalments, albeit parties disagree as to the amount of these instalments and as to the intervals at which they should be payable. We intend to make an order for payment by instalments. The value of the husband's business interest at the relevant date was determined by the Lord Ordinary on the basis of expert evidence; that determination is not challenged. That interest was then and remains in the husband's sole proprietorship. It is clear from the evidence that in the period between the relevant date and the date of the proof the husband was able to make investments in his business at will. The indications are that the business remains a source of substantial capital wealth and generates for him a substantial income. Subject to due consideration of what is reasonable, having regard to the resources of the parties, we see no justification in this case for departing, on the basis of Mr. McNair's primary argument, from the principle of equal sharing of the matrimonial property.

[20]     
In our earlier Opinion in this reclaiming motion we rejected the contention that, in assessing the value of the matrimonial property at the relevant date, such capital gains tax as would have been exigible, if particular assets were at that date realised, should be brought into account by way of deduction. We noted (para. [15] of that Opinion) that there were other stages at which the actual or foreseeable incidence of tax and other liabilities or costs upon any realisation or other disposal could be brought into account. The stages we there had in mind were the determination of proportions in which the matrimonial property would be shared fairly and the determination of what was reasonable having regard to the resources of the parties. The assets on which capital gains tax was contingently exigible on realisation were the husband's share portfolio and his business interest. Between the relevant date and the date of the proof the share portfolio was partially realised; some liability to capital gains tax, it appears, was incurred, though the amount was not quantified. No evidence vouching any sum paid or exigible in respect of such tax is before this court. So far as concerns the business, it was not disposed of, either in whole or in part, between the relevant date and the date of the proof. All the indications at the date of the proof was that it prospering. At that date the husband was 45 years of age; he is still under 50. There is no basis in the evidence to anticipate that in the immediate or even the foreseeable future he will dispose of the business or any part of it. It is impossible to tell whether he will ever incur a liability to capital gains tax in respect of any disposal of it and, if so, when and in what amount.

[21]     
We do not exclude the possibility that a contingent liability to capital gains tax might in some cases constitute special circumstances such as to justify a departure from the principle of equal sharing. But, having regard to the situation as described, we are not persuaded by the husband, upon whom the burden on this matter rests, that special circumstances justifying such departure are, by reason of any tax liability, made out either in respect of the shares (disposed of or retained) or in respect of the business. We shall, when considering the issue of what is reasonable having regard to the resources of the parties, return to the matter of capital gains tax.

[22]     
As to the resources (both present and foreseeable) of the parties these will, at least ordinarily, fall to be assessed by the Lord Ordinary at the date of the proof on the basis of the evidence led at it. In this case that proof took place in June and July 2002, some three years ago. The Lord Ordinary did not, in the circumstances, find it necessary to make such an assessment. This court must now do so. It is not suggested that in the interval there has occurred any material change in the circumstances of either party. So far as is known to this court, all that has occurred in that interval is that throughout almost all of it the wife continued to receive from the husband £4,000 per month in name of interim aliment and that recently he has paid to her, against certain other stipulations, £350,000 towards a capital sum. The manner in which the latter sum had been raised was not disclosed. This court was invited to make its assessment of resources and to reach a determination of the appropriate capital sum on the basis of the evidence led at the proof, due regard being had to the known events since then referred to above. This is not an ideal situation for any court; but we must make such assessment and determination as best we can. It will inevitably involve the application to the canvas of a somewhat broad brush.

[23]     
As at the relevant date, the husband had readily realisable assets which, if realised, would have allowed him to satisfy, or almost to satisfy, the full claim made by the wife for a capital sum. A substantial number of these assets were subsequently realised by him and the proceeds advanced to his business by way of director's loan. If one proceeds, as seems reasonable in the circumstances, upon the basis that these advances could, with appropriate planning, be redeemed without serious prejudice to the viability of the business, the husband's resources are such that he could over a reasonable tract of time meet, or almost meet, the wife's claim in full, without requiring to dispose of his home, its contents, his pension provisions or his business (or any interest in it). There is, it is true, some uncertainty as to the extent to which the advances could readily be replaced by bank borrowing, as an alternative to their orderly withdrawal over time. On the other hand, the business appears to have been expanding, with future maintainable profits of a high order. If, nonetheless, the husband were, by substitution or withdrawal or a combination of these methods, to realise the advances mentioned and were further to realise his existing readily realisable assets and required to use the whole proceeds to satisfy the wife's claim, he would, on such satisfaction, be left only with assets which it was not reasonable to expect him to realise. He would, in particular, have no ready funds with which he could, if required or if appropriate, make fresh investment in his business.

[24]     
We acknowledge that the absence of readily available "private" funds to invest in the business interest as need or opportunity arose could be an inhibiting factor in maintaining the business or in developing it to its full commercial potential. Between the relevant date and the date of the proof the husband had, on three occasions, disposed of readily realisable assets (his PEPS, the AXA policy and part of his share portfolio) and invested the proceeds (about £100,000, £97,000 and £150,000) by way of director's loan into the business. The reasons why he took these steps on these occasions are not disclosed in the evidence. But the need or commercial advantage of being able to do so in the interests of preserving or developing the enterprise can readily be understood. Even on the basis that the advances mentioned could be redeemed without serious prejudice to the viability of the business, an order having the result that these and the husband's resources currently available in readily realisable form be made over wholly to the wife would not, in our view, be reasonable having regard to her, as well as to his, resources.

[25]     
Such a result can be averted by two mechanisms, first, by modifying to some extent the amount of the capital sum to be awarded and, second, by making it payable in instalments over an appropriate tract of time. That course we shall adopt. The amount of the modification must necessarily proceed upon a broad discretionary approach, having regard to the resources and to the form of the resources of both parties. In the particular circumstances of this case, we consider it reasonable that the husband should retain assets in readily realisable form to the value of about £100,000 - to deal with business contingencies or other contingencies of life requiring ready funds. We also recognise that, to satisfy the order we intend to make, some liability to capital gains tax (although not quantified before us) may arise on the disposal of certain assets. We make a small allowance for that. On the other hand, given the nature of the husband's business and the uncertainty as to whether and, if so, when and in what amount he might incur capital gains tax in respect of any disposal of it, we are not persuaded that his resources are for the purposes of the Act diminished by that possibility.

Disposal

[26]     
In the foregoing circumstances we assess the capital sum appropriate for payment to the wife (leaving out of account for that purpose the £350,000 paid to account) in the sum of £950,000 - that is, a modification of a little more than £100,000 of the amount claimed by her. Accordingly, the balance now remaining to be paid by him as a capital sum we determine in the amount of £600,000. That sum will be payable in five instalments as follows:- (1) £100,000 within three months of the date of our interlocutor, (2) £100,000 by 31 March 2006, (3) £100,000 by 31 March 2007, (4) £150,000 by 31 March 2008 and (5) £150,000 by 31 March 2009. Interest at the judicial rate will be payable on these sums from the respective dates when they become payable until payment. We do not consider that, in the circumstances of this case, interest on these sums should run from any earlier date or dates. We are also satisfied that, having regard, among other factors, to the circumstance that the wife has been receiving substantial sums as interim aliment, the ordering of payment of interest on the sum of £350,000 between the date of the Lord Ordinary's interlocutor and the date of payment would not be warranted.


BAILII:
Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII
URL: http://www.bailii.org/scot/cases/ScotCS/2005/CSIH_65.html