Muriel v. Russell [2005] ScotSC 63 (26 September 2005)

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DUNFERMLINE, 26 September 2005. The Sheriff Principal, having resumed consideration of the cause, varies the sheriff's interlocutor of 18 February 2005 complained of (1) by deleting the date of 1 July 2005 from which interest is payable and substituting therefor 5 December 2005 and (2) by adding after the words "Finds no expenses due to or by either party" the words "Supersedes extract until 5 December 2005"; quoad ultra refuses the appeal and adheres to the said interlocutor; finds the pursuer and appellant liable to the defender and respondent in the expenses of the appeal; allows an account thereof to be given in and remits the same, when lodged, to the auditor of court to tax and report.

[1] This is an appeal at the instance of the wife pursuer in an action of divorce. The defender sought payment of a capital sum and the only live issue at the proof and in the appeal was the amount of that sum.

[2] In terms of section 8(2) of the Family Law (Scotland) Act 1985 (hereinafter referred to as "the 1985 Act") any order for a capital sum must be justified by the principles set out in section 9 and must be reasonable having regard to the resources of the parties. The principle set out in section 9(1)(a) is that the net value of the matrimonial property should be shared "fairly" between the parties. For this purpose "fairly" means "equally" unless some other division is justified by special circumstances (section 10(1)).

[4] For the purposes of the present action "the relevant date" was the date of the parties' separation, namely 10 January 2003.

[5] The financial circumstances of the parties were not in dispute. At the relevant date the only material asset was the matrimonial home, which then had a value of £48,000. This property was and is owned by the pursuer and appellant. There was an outstanding loan of £10,480.32 in respect of that property, which the appellant was liable to repay. The parties had joint debts totalling £746.80 and in addition the defender and respondent was liable to repay a bank loan of £12,500. In broad terms therefore the position was one in which, as the sheriff puts it, "one party holds the sole asset and each party, as an individual, remains personally liable for roughly half of the matrimonial debt."

[6] It was the common position of the parties that all these debts fell to be taken into account in calculating the net value of the matrimonial property and that accordingly that value amounted to £24,272.88. Although the sheriff does not in terms adopt that figure it is clear that he has approached the question of identifying the net value of the matrimonial property in the same way.

[7] On these figures the sheriff fixed the amount of the capital sum payable to the respondent at £24,400. For the purposes of this appeal the precise arithmetical route by which he came to that figure is less important than his general approach, which is reflected in his second finding in fact and law in these terms:-

[8] The sheriff intended therefore that each party should be left with an approximately equivalent amount after each had settled the debts for which, in a question with their creditor, each was personally liable. He plainly took the view that such a result would represent equal sharing of the net value of the matrimonial property but, as a fallback position, he supported the same level of award by finding that the incidence of debt amounted to a special circumstance justifying an unequal division.

[9] The solicitor for the appellant challenged the sheriff's finding of special circumstances. It should be said however that the solicitor for the respondent did not seek to support the sheriff's decision insofar as founded on such a finding and accordingly, in light of my conclusion on the primary ground of that decision, I do not consider it necessary to embark upon an examination of that issue.

[10] In relation to the primary ground of the sheriff's decision the submission advanced on behalf of the pursuer and appellant can be stated fairly shortly. It was emphasised that, in terms of section 9(1)(a) of the 1985 Act, it was the "net value" of the matrimonial property that fell to be shared equally. Given a net value of £24,272.88 and the fact that the matrimonial property was wholly in the ownership of the appellant the amount of the capital sum payable to the respondent ought to have been £12,136.44. It was submitted that there was no longer any general liability of one spouse for the other's debt and that any award greater than that sum would in effect render the appellant liable for the respondent's debt. The 1985 Act made no reference to the term "matrimonial debt" and there was no statutory warrant for adjusting the level of financial provision by reference to how any debt fell to be paid by either party.

[11] In support of these submissions reference was made to Graham v Graham an unreported decision of the Second Division of the Inner House dated 10 July 1997. The only reference to this case produced at the appeal was the brief summary in 1997 GWD 32-1631. So far as that summary is concerned it bears to show that the parties' assets were offset by an equivalent amount of debt so that effectively the net value of the matrimonial property was nil. The only asset was the former matrimonial home, which was partly owned by the defender. The sheriff had ordered the transfer of the defender's interest to the pursuer with the result that the pursuer was left with the property and the defender with the whole of the debts. In an appeal by the defender, the Inner House recalled the sheriff's interlocutor and made no order, apparently on the ground that there was no "net value" to be shared. The conclusion drawn by the solicitor for the appellant from this narrative was that, even though all the debts were left with one party nevertheless no order could be made if there was no net value to be shared.

[12] In replying to these submissions the solicitor for the respondent submitted that fair sharing of the net value of the matrimonial property was achieved if the parties were left in broadly equal positions once one took account of the ownership of the matrimonial assets and the extent to which each was liable for the debts that had been deducted from those assets in arriving at a figure representing the net value of the matrimonial property. The sheriff's approach was unobjectionable and there were no circumstances justifying interference with his decision. Reference in this regard was made to Little v Little 1990 SLT 785.

[13] While it was difficult to discern from such a brief report what had been the reasoning in Graham v Graham it was submitted that the Inner House appeared to have been unwilling to allow a situation in which all the matrimonial assets were left in the hands of one party while all the debts were left in the hands of the other. The case was therefore rather more helpful to the respondent than the appellant. While it was acknowledged that one spouse is no longer liable for the debts of the other, it was submitted that that had no bearing on the appropriate level of financial provision on divorce, which raised an entirely different question. In any event it was submitted that one must assume that all debts that required to be taken into account in the calculation of the net value of the matrimonial property were incurred for the benefit of both parties. In such circumstances fair sharing of the net value of the matrimonial property could not be achieved without taking account of which party had the liability for settling those debts.

[14] In my opinion the submissions on behalf of the respondent are well founded. While it is true that the 1985 Act does not use the expression "matrimonial debt" nevertheless it is a useful shorthand way of describing those debts which fall to be taken into account in calculating the net value of the matrimonial property in accordance with the provisions of section 10(2) of the Act.

[15] In calculating the net value one does not require to be concerned with the question which party owns which items of matrimonial property or which party is liable for which debts. In my view however the position is different when one gets to the stage of deciding what order should be made so as to achieve fair sharing of that net value, since some of that net value may be found in the hands of one party and some in the hands of the other. In such circumstances it seems to me entirely reasonable that the order for financial provision should bear some relationship to the extent to which there is an imbalance between the net value of one party's property when set against that of the other. In the absence of special circumstances in my view it would be consistent with the principle of fair sharing were the court to order the payment of such capital sum as would remove that imbalance, thus leaving each party in an approximately similar position so far as concerned their net assets. Accordingly the incidence of debt is as much a part of the fair sharing of the net value of the matrimonial property as it is in the calculation of that net value.

[16] This is an approach which is commonly adopted and in my view fully justified by the terms of the statutory provisions under discussion. It is not in conflict with the entirely different consideration that one spouse is no longer liable for the debts of the other in a question with the creditor in that debt. To take account of the incidence of debt in the fair sharing of the net value of matrimonial property is not the same thing as making one party liable to the creditor of the other for debts incurred by him or her. In any event, I consider that the assumption underlying the provisions of sections 9(1)(a), 10(1) and (2) is that debts have been incurred for the benefit of both parties to the marriage and as a general rule there is nothing obviously unfair in bringing them into account when selecting the means by which the net value of the matrimonial property is to be fairly shared.

[17] That being the case is there any reason why the approach should differ either because one party owns none of the matrimonial property or because the net value of the matrimonial property is nil? On the face of it the abbreviated report of Graham v Graham bears on this question. It is widely recognised that little, if any, weight can be attached to the report of decisions appearing in Green's Weekly Digest and that, if reliance is to be placed on any case referred to in it, the full judgment should be obtained by the party intending to rely on it. If that does not happen (as was the case in this instance) it leaves the court in a most unsatisfactory position. On this occasion, in view of the importance that was attached to the decision in Graham v Graham and since it appeared to me that it might be directly relevant to the issue in the appeal and binding on me, I procured a copy of the full judgment.

[18] The factual circumstances are not materially different from those which can be discerned from the abbreviated report in Green's Weekly Digest and to which I have already referred. It is the case that the Inner House appears to endorse the proposition that, as there was no net value of matrimonial property to be shared between the parties, the principle set out in section 9(1)(a) was not applicable. It is to be noted however that that conclusion proceeded on a concession by counsel for the respondent to that effect and there does not appear to have been any critical examination of it. Furthermore it respectfully seems to me to sit uneasily with the court's view that the "order made by the sheriff was plainly unfair as it would have left the pursuer with the whole value of the parties' interests in the former matrimonial home while the defender would be responsible for all the parties' debts."

[19] In that case the unfairness was created by the sheriff's order but in my view it would be no less unfair to leave the parties in that position by making no order for financial provision. In that situation I would respectfully question whether the court is powerless to provide a remedy to remove that unfairness because the value of the matrimonial assets happens to match the amount of "matrimonial debt". It seems to me that the words "net value" are as apt to describe a figure of zero as they are to describe a positive figure and in my view it is not straining the language of section 9(1)(a) to speak in terms of fairly sharing a net value of zero, thus avoiding the outcome that was described by the Inner House in Graham v Graham as plainly unfair. So, if the net value of the matrimonial property is zero, then the principle of equal (and hence fair) sharing of that net value would demand that the court should make such orders as are necessary to secure that each party should be left with property which, after deduction of debts for which he or she is liable, has a net value of zero.

[20] I would venture to suggest therefore that there is no reason why the approach that I have outlined in paragraph [15] above should be any different because either all the matrimonial property is in the hands of one party or the net value of that property is nil. Whether or not this analysis is well founded however I consider that, for the purposes of this appeal, Graham v Graham can be distinguished since one is not here concerned with matrimonial property that has a net value of nil.

[21] It follows from what I have said that in my opinion the sheriff's approach was well founded. It is clear from the opinion of the Lord President in Little v Little that the sheriff has a wide discretion "aimed at achieving a fair and practicable result in accordance with common sense" and that "the details should be left in the hands of the court of first instance and not generally to be opened up for reconsideration on appeal." With these observations in mind I find nothing in the sheriff's primary reasons for his decision which would justify me interfering with it. The appeal must therefore be refused.

[22] Parties were agreed that expenses should follow success. The only other matters that require consideration are firstly the date from which interest should run and secondly whether extract of the sheriff's decree should be superseded. It is clear from the sheriff's findings in fact and law that he was prepared to allow the pursuer a period of time to raise the amount of the capital sum before interest became payable and, by implication, before the capital sum itself became payable. In view of the appeal those dates have now passed and the solicitor for the appellant asked me to make similar provision by varying the sheriff's interlocutor so that interest became payable only ten weeks after the date of this judgment with extract being superseded for the same period. I did not understand this motion to be opposed and in my view it is reasonable to do so.

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Scottish Sheriff Court Decisions