SHERIFFDOM OF GRAMPIAN HIGHLAND AND ISLANDS
AT ABERDEEN
F83/05
JUDGEMENT
of
SHERIFF
PRINCIPAL SIR STEPHEN S T YOUNG Bt QC
in the cause
MRS JULIE DEPTFORD or SIMPSON
Pursuer and Respondent
against
GEORGE ALEXANDER HENDRY SIMPSON
Defender and Appellant
|
Act:
Mr C G H Wilson, solicitor, Stuart, Wilson, Dickson & Co, Alford
Alt:
Mr Allan Duffill, solicitor, Stewart & Watson, Banff
Aberdeen: 2nd July 2007
The
sheriff principal, having resumed consideration of the cause, allows the
appeal, recalls that part of the interlocutor of the sheriff dated 11 April
2007 which begins "THEREFORE SUSTAINS the
3rd plea-in-law for the pursuer ......" and ends "...... to the auditor of court to tax
and to report" and adheres otherwise
to this interlocutor subject to the following qualifications:
1.
In finding in fact 23 delete the last sentence and
substitute: "The pursuer's dogs were worth £4,250 and those of the defender
£1,500".
2.
In finding in fact and law 2 delete the words: "and the
value of the Single Farm Payment, viz:
£29,670".
3.
In finding in fact and law 3 delete the figure
"£182,195.76" and substitute "£148,275.76".
Finds
the pursuer and respondent liable to the defender and appellant in the expenses
of the appeal and allows an account thereof to be given in and remits the same,
when lodged, to the auditor of court to tax and to report; quoad ultra remits the cause
to the sheriff to proceed as accords under reference to the ensuing note.
Note
[1] This is an action of divorce. After proof the sheriff by interlocutor dated
11 April 2007 found the
pursuer and respondent entitled to a capital sum of £65,882.89 and ordained the
defender and appellant to pay her the sum of £50,882.89 being the capital sum
to which she was entitled under deduction of the sum of £15,000 paid to account
on 19 June 2006 . It is this interlocutor which is the subject
of the present appeal, and in short it is said that in calculating the total
value of the matrimonial property at the relevant date (which was 9 January
2004) the sheriff made two errors, the effect of which was to overstate this
value.
[2] At page 15 of his judgement the sheriff
listed the various assets, and their respective values, which went to make up
this total value. Item 3 is said to be
the pursuer's business valued at £21,906 and item 7 is said to be her dogs
valued at £4,250. It is not in dispute
that the value of these dogs was included in the value of the pursuer's
business (see no. 5/2/5 of process) so that on any view the total value of the
matrimonial property was overstated by the sheriff to the extent of
£4,250.
[3] Item 9 in the list of assets is said to be
a Single Farm Payment of £29,670 to which, in the opinion of the sheriff, the
defender was entitled at the relevant date.
At the hearing of the appeal the defender's solicitor maintained in
short that the sheriff had been in error in including this among the items of
matrimonial property whereas the pursuer's solicitor submitted that it had
rightly been included. Here it will be recalled that section 10(4) of the
Family Law (Scotland) Act 1985 provides inter
alia that "the matrimonial property" means all the property belonging to
the parties or either of them at the relevant date which was acquired by them
or him (otherwise than by way of gift or succession from a third party) - (a)
before the marriage for use by them as a family home or as furniture or
plenishings for such home; or (b) during the marriage but before the relevant
date.
[4] The parties were married on 15 July 1995. At that time the defender was the tenant of a
farm named Yonder Bognie. In 1999 he
took the tenancy of a second farm called Kirkland
adjacent to Yonder Bognie and since then the two farms have been known, and
traded, as Kirkland. The sheriff made a variety of findings in
fact about the farming business but for present purposes it is necessary to
notice only the following:
24. From the date of the
marriage onwards, the farm business attracted a government subsidy known as
sheep quota. The sheep quota was based on
the number of sheep owned by a farmer.
25. The sheep quota appears in
the balance sheet for the Yonder Bognie farm as at 30th
November 1994 at £1578, but in the balance sheet for 30th November 2003, it appears at £5,963.
26. In the business account
for the period from 1st December
2003
to 9th January 2004, the value of the sheep
quota was only £783.
27. By 2004, farmers knew that
the sheep quota would be replaced by a Single Farm Payment which is based on
the number of hectares held by a farmer.
28. The Single Farm Payment was
created by a European Community Directive of 2003, but it did not come into
force in the United Kingdom until 1st January 2005, with an entitlement to the
first payment arising on 16th May 2005.
29. The entitlement to Single
Farm Payment was based on the average number of hectares held by a farmer for
the years 2000, 2001 and 2002.
30. The introduction of Single
Farm Payment had an adverse effect on the value of sheep quota. Sheep quota did not continue in existence
after Single Farm Payment came into effect.
31.
The Single Farm Payment was not tradable at the date of
separation but since January 2005 it has been tradable at between 2.2 and 2.5
times its annual value. The current
annual value of the Single Farm Payment for Kirkland is £12,625.55. The average (2.35) would produce a figure of
£29,670.
[5] Among the sheriff's findings in fact and law there is a
finding that at the relevant date the value of the Single Farm Payment, viz:
£29,670, formed part of the matrimonial property.
[6] The sheriff explained why he had made this finding at pages
13/14 of his judgement. At page 13 he
wrote:
The only other
issue which was contested was whether the value of the Single Farm Payment
should be considered as matrimonial property.
It was not disputed by the defender that the sheep quota valued at the
relevant date at £783 was matrimonial property.
The Single Farm Payment was due to be paid to the defender in terms of
the 2003 legislation, but was not payable until 2005.
The sheriff then proceeded
to consider three cases to which he had been referred, namely Tyrrell v Tyrrell 1990 SLT 406, Skarpaas v Skarpaas 1991 SLT (Sh.Ct.) 15
and MacRitchie v MacRitchie 1994 SLT
(Sh.Ct.) 72.
[7] Tyrrell was an
action of divorce. The parties separated
in October 1982 and the defender was made redundant in June 1986 and received a
severance payment in respect of this. It
was argued that this payment should be taken into account in the valuation of
the matrimonial property. The argument
was rejected by the Lord Ordinary (Sutherland) who said at page 408:
This argument, in my opinion, misunderstands the position of a
redundancy or severance payment. The payment is made not as compensation for
loss of earnings, but as a payment for loss of employment. No contribution
towards such a payment is made by the employee during his employment, nor has
it ever been suggested that the possibility of a future redundancy payment
having to be made has any bearing on the earnings of an employee during his
employment. There can be no question of any part of the potential redundancy
payment being vested in an employee during his employment as, of course, it
only comes into effect on his dismissal.
[8] In Skarpaas
the question was whether an award of damages made to the defender in
respect of an accident which occurred during the course of the marriage fell to
be treated as matrimonial property. At
first instance Sheriff A L Stewart held that it did. At page 18 he stated:
Although the defender has no specific plea directed at the issue,
I consider that the first question to be answered is whether the defender's
award of damages, or any part thereof, is "matrimonial property" at
all. In my opinion a substantial proportion of the award is indeed matrimonial property.
The accident occurred during the course of the marriage and it gave rise to a
claim for damages. A claim for damages is itself an asset which may be assigned
(Traill & Sons v. Aktieselskabat
Dalbeattie Ltd (1904) 6 F 798). Although the claim was not quantified until
after the relevant date and payment was not made until later still, I am
satisfied that the claim itself is matrimonial property and that its value
should be assessed in conformity with the sums awarded by Sheriff Risk. The solicitor
for the defender submitted that that part of the damages consisting of solatium
and compensation for loss of future earning capacity should be excluded from
the matrimonial property. In my opinion that submission should be rejected
although the same result may ultimately be achieved by other means as I shall
deal with below. Although, as the defender's solicitor submitted, solatium is
essentially personal to the defender, the definition of matrimonial property
includes the property of both parties. Although the part of the damages
for future wage loss is undoubtedly attributable to a period after the relevant
date, it is a sum to which the defender had a valid claim at the
relevant date.
[9] On appeal, Sheriff Principal R A Bennett
QC adhered to the sheriff's conclusion on this point, stating at page 20:
The solicitor for the defender argued that from the date of the
accident the defender had an assignable claim to damages but that that claim
had no value until it was either settled or decree was granted. There was a
potential asset only, which might even turn out to be a liability in the event
of the defender losing his action and becoming liable in expenses. At the
relevant date there was only a possibility of damages which was not then
capable of valuation. On this point I agree with the sheriff's reasoning when
he holds that the claim itself was matrimonial property although not quantified
until after the relevant date. It cannot be said that prior to the relevant
date the claim necessarily had no value at all, and no doubt a potential
assignee after considering the available evidence would have been prepared to
make him an offer for it. I therefore reject this first argument.
[10] This case was subsequently appealed to the
Court of Session (1993 SLT 343) but there it was accepted by the defender that
the sheriff principal had been well founded in holding that the defender's
claim of damages was an asset which had a value at the relevant date and hence
was matrimonial property.
[11] In MacRitchie
the question was whether a refund of income tax overpaid by the defender
and attributable to a period before the relevant date but received after it
constituted matrimonial property. The
sheriff held that it did not, but on appeal Sheriff Principal Risk QC took a
different view. At page 73 he stated:
Reverting to the present case I consider that the sheriff erred in
holding that the fact that the money paid by the Inland Revenue was the
defender's income prevented it from being matrimonial property and that in
looking to the date upon which it was actually paid he applied the wrong test.
The proper question is whether at the relevant date the defender had a right to
the money which he ultimately received. In my opinion he had. It was money
which he had earned. He was liable to pay income tax but, because he had failed
to make tax returns, the Inland Revenue deducted tax at an excessive rate. In
effect the defender was making a compulsory, interest free investment in the
Inland Revenue. All that he had to do in order to realise his
"investment" was to submit the relevant returns. Once he had done
that the application of the relevant tax statutes to the figures produced the
sum due by way of repayment. Just as the defender would have been entitled to
deduct from the matrimonial property an outstanding claim by the Inland Revenue, so it seems to
me he must add in to the matrimonial property a valid outstanding claim by him
against the Inland Revenue.
At page 74
the sheriff principal drew attention to the similarity between a claim for
damages and a claim for repayment of tax.
He stated:
The point of similarity is that both the claim for damages and the
claim for refund of overpaid tax were
valuable rights which came into existence before the relevant date but which
were not converted into money until after that date. In each case, in my view,
the claim is matrimonial property.
[12] Having considered these cases the sheriff continued at page 14
of his judgement:
The Single Farm
Payment is something to which the defender was entitled at the relevant
date. Not only had the relevant UK legislation been passed,
but the basis for payment, namely the farm's hectarage, was known--it was based
on the hectarage for 2000, 2001 and 2002.
It was admittedly not payable by the relevant date, but, following the
reasoning in MacRitchie and Skarpass, that is not a precondition of
its being matrimonial property. The
amount due to the defender was ascertainable and he was entitled to it, and
accordingly, it was more precise than a claim for damages and as precise as the
calculation of overpaid tax. I am
therefore of the opinion that Single Farm Payment is matrimonial property. It is helpfully agreed that it has an annual
value of £12,625.35 and is tradable at between 2.2 and 2.5 times its annual
value. Mr Wilson's submission was that
it would be fair to take the average of these, namely 2.35. While it might be argued that there ought to
be some discounting to reflect the fact that the money was not payable at the
relevant date, any such discounting as counterbalanced by the fact that the
defender has received the payments and has enjoyed their fruits since their
receipt. In all the circumstances, I
consider the figure of 2.35 to be reasonable and using that multiplier, would
give a total figure of £29,670.00.
[13] It is perhaps unfortunate that the sheriff was apparently not
referred to the relevant regulations in Scotland which govern the
administration of the Single Farm Payment scheme (and to which I drew the
attention of the parties' solicitors).
The principal regulations are the Common Agricultural Policy Single Farm
Payment and Support Schemes (Scotland) Regulations 2005 (SSI
2005/143). These were made on 9 March 2005 and came into force on 18
April 2005. They were subsequently amended
by the Common Agricultural Policy Single Farm Payment and Support Schemes (Scotland) Amendment Regulations 2005
(SSI 2005/257). These regulations were
made on 12 May 2005 and came into force on 16
May 2005. The Explanatory Note to the
principal regulations indicate that they make provision in Scotland for the administration of
Council Regulation (EC) No. 1782/2003, Commission Regulation (EC) No. 795/2004
and Commission Regulation (EC) No. 796/2004 in relation to establishing a new
system of direct support schemes (including the Single Farm Payment scheme)
which came into force on 1 January 2005 under the Common Agricultural
Policy. It is evidently these
regulations to which the pursuer's witness Mr John Reid referred at page 5 of
the notes of his evidence.
[14] For the defender it was submitted that what he had at the
relevant date, and what could then have been traded by him, was the sheep
quota. It was only later that this was
replaced by the Single Farm Payment, and at no stage had it been possible to
receive both. At best the Single Farm
Payment had been in contemplation at the relevant date but there was no
evidence that it had had a value or had been capable of being traded at that
date. It was true that it was calculated
by reference to the area of land held in the years 2000 to 2002 but this did
not alter the fact that at the relevant date the entitlement to the Single Farm
Payment was merely contingent upon a variety of matters including the continued
management by the defender of his farm.
[15] In response, the pursuer's solicitor emphasised that the Single
Farm Payment was based upon the area of land held between 2000 and 2002 which
was well before the relevant date.
Although it was not in payment at that time its value was determinable
by reference to farming operations which had been completed by the end of
2002. By the relevant date everyone in
the world of farming knew that it would be paid and the basis of its
calculation was known. It was known too
that the sheep quota was going to end and, as indicated in the sheriff's
finding in fact 30, the anticipated introduction of the Single Farm Payment had
had an adverse effect on the value of sheep quota. Although it was not yet in payment, the
Single Farm Payment was matrimonial property since it was derived from the
joint efforts of the parties in the years 2000 to 2002. Unless he disposed of the farm, there was no
doubt that the defender would in due course receive the Single Farm Payment and
the sheriff was therefore correct to have found that it formed part of the
matrimonial property.
[16] In my opinion the submissions for the defender are to be
preferred. As the sheriff found in his
finding in fact 28, the Single Farm Payment scheme did not come into force in
the United Kingdom until 1 January 2005 and in Scotland the principal
regulations were only made on 9 March 2005 and came into force on 18 April
2005. So there can have been no question
of the defender having been entitled to the Single Farm Payment at the relevant
date. It is true that the amount of the
Single Farm Payment to which he would in due course become entitled was capable
of being ascertained at some point during 2004, and indeed was calculated by
reference to the area of land which had been farmed by the defender in the
years 2000 to 2002. But neither of these
considerations serve to undermine the basic point that until the Single Farm
Payment scheme came into force his entitlement was at best provisional. One can envisage circumstances in which even
such a provisional entitlement might have had a value as at the relevant
date. But it was accepted by the
pursuer's solicitor that there was no evidence of this value in this case and
indeed in his finding in fact 31 (which was evidently based on paragraph 6 of
the parties' joint minute, no.18 of process) the sheriff found that the Single
Farm Payment was not tradeable at the date of separation. The fact that it can now be traded is beside
the point.
[17] In each of Skarpaas
and MacRitchie the crucial point was
that the defender had at the relevant date a present right to claim which was
capable of being valued, whereas in Tyrrell the defender's right to a redundancy payment
had not vested in him at the relevant date. In my opinion the sheriff's error
in this case is to be seen in the assertion that he makes more than once that
the defender was entitled to the Single Farm Payment at the relevant date. The plain fact is that he was not so entitled
and could not have been since the scheme had not yet come into force. It follows that the Single Farm Payment which
the defender subsequently received did not form part of the parties'
matrimonial property.
[18] It was accepted that, if the values of both the pursuer's dogs
and the Single Farm Payment were excluded from the total value of the
matrimonial property, then the amount of the capital sum to which the pursuer
should be found entitled should be reduced from £65,882.89 to £48,932.89 and
the amount of the capital sum for which decree should be granted should be
reduced from £50,882.89 to £33,932.89.
[19] It was agreed that the expenses of the appeal should follow
success and I have found the pursuer liable to the defender accordingly.
[20] When I began to prepare this judgement I noticed that the
sheriff appeared to have gone too far in ordaining payment of a capital sum by
the defender to the pursuer given that decree of divorce has not yet been
granted. It will be recalled here that
an order for payment of a capital sum may be made on granting decree of divorce
or within such period as the court on granting decree may specify - see section
12(1) of the Family Law (Scotland) Act 1985.
In these circumstances I have decided, with the agreement of the parties'
solicitors, that the proper course would be to recall that part of the
sheriff's interlocutor of 11 April 2007 in which he ordained the
defender to pay the capital sum to the pursuer.
If and when he comes to grant decree of divorce (but not before) the
sheriff should at the same time find the pursuer entitled to a capital sum of
£48,932.89 and he should grant decree for payment by the defender to the
pursuer of £33,932.89. He should find
the pursuer entitled to interest on the larger of these two sums at the rate of
8% per annum from 11 February 2005 until 19 June 2006 and on the lesser of these sums at the rate of 8% per
annum from 20 June 2006 until payment. Finally he should find the defender liable to
the pursuer in the expenses of the action down to the date of his interlocutor,
namely 11 April 2007. Thereafter he should proceed as accords.
