Financial Provision on Divorce or Dissolution (Scotland)

Brief Comparison
1. ONE state TWO very different systems
2. Scotland - strict legislative framework, high degree of certainty and predictability in determining financial outcomes, clean breaks prioritised
3. England - wide discretion, on-going maintenance awards far more common than clean break
Financial Provision in Scotland under the Family Law (Scotland) Act 1985
1. Per Lord Hope in Little v Little 1990 SLT 785 - "The Act sets out in considerable and almost clinical detail the nature of the property with respect to which orders may be made, the principles which are to be applied and the factors which are to be taken into accoun. No stone seems to have been left unturned by this analysis"
  1. "The Court is taken through a step-by-step check list of provisions to which it must have regard, so that no point which might conceivably be relevant is at risk of being forgotten as it proceeds through the exercise to the result...:
    1. "...despite the detail, the matter is essentially one of discretion, aimed at achieving a fair and practicable result in accordance with common sense"
2. e.g. CB v MB [2012[ CSOH 21, 2012 Fam LR 65 - Lord Tyre goes through the criteria in a clear step-by-step manner
3. The 1985 Act Checklist
  1. There has to be a divorce action - if it is a marriage that is to be ended, or an action for dissolution if it is a civil partnership which is to be ended
  2. Who can apply? Either party to the marriage or either partner in civil partnership
4. When will the Court make an Order?
  1. Subject to ss.12-15 of the Act, orders will be made by a court where to do so is
    1. Justified by the five principles set out in s.9
    2. Is reasonable having regard to the resources of the parties
    3. This is the rule set out in s.8(2)
    4. s.9 - the Principles
      1. (a) the net value of the matrimonial property should be shared fairly between the parties to the marriage or as the case may be the net value of the partnership property should be so shared between the partners in the civil partnership
      2. (b) fair account should be taken of any economic advantage derived by either person from contributions by the other, and of any economic disadvantages suffered by either person in the interests of the other person or of the family
      3. (c) any economic burden of caring, should be shared fairly between the persons
        (i) after divorce, for a child of the marriage under the age of 16 years
        (ii) after dissolution of the civil partnership, for a child under that age who has been accepted by both partners as a child of the family
      4. (e) a person who at the time of the divorce or of the dissolution of the civil partnership seems likely to suffer serious financial hardship as a result of the divorce or dissolution should be awarded such financial provision as is reasonable to relieve him of hardship over a reasonable period
    5. (d) a person who has been dependent to a substantial degree on the financial support of the other person should be awarded such financial provision as is reasonable to enable him to adjust over a period of not more than three years from
      1. (i) the date of the decree of divorce, to the loss of that support on divorce
      2. (ii) the date of the decree of dissolution of the civil partnership, to the loss of that support on dissolution
Principle 1 - There should be a fair sharing of matrimonial or partnership property
1. What is matrimonial/partnership property?
  1. all 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)
    1. (a) before the marriage for use by them as a family home or as furniture or plenishings for such home
    2. (b) during the marriage but before the relevant date (relevant date being the cut off time for ascertaining what is or is not matrimonial property at the end of a marriage or partnership)
      1. relevant date means whichever is earlier of
        (a) the date on which the persons ceased to cohabit
        (b) the date of service of the summons in the action for divorce or for dissolution
        Banks v Banks 2005 LR 116
        Buczynska v Bucynski 1989 SLT 558
        Exceptions
        Skarpass v Skarpass 1993 SLT 343
  2. Excluded Property
    1. property acquired before the marriage/CP
    2. Mitchell v Mitchell 1995 SLT 426
      1. s.10(4) does not require that the property has to be acquired for use as a family home in relation to a particular marriage or that the property has to have been used continuously by the parties as a family home
  3. Property acquired by gift or succession from a third party
    1. What happens if the form of such property is changed by one or both of the spouses?
      1. Does change in form transfer excluded property to included property?
        Latter v Latter 1990 SLT 805
        Whittome v Whittome (No.1) 1994 SLT 115
2. Valuation
  1. Expert Valuations?
    1. Parker v Parker [2014] CSOH 159
  2. s.9(1)(a) the value we are concerned with is the net value - meaning all debts must be included
  3. Timing of Valuation?
    1. Subject to ss.(3A), net value shall be the value of the property at the relevant date after deduction of debts incurred by one or both of the parties to marriage/parternship
      1. (a) before the marriage so far as they relate to the matrimonial property or before the registration of the partnership so far as they relate to the partnership and property
      2. (b) during the marriage or partnership, which are outstanding on that date
3. Change in value between relevant date and divorce?
  1. Wallis v Wallis 1992 SLT 672 (IH) Affirmed by HL 1993 SLT 1348
  2. Reform: s.16 Family Law (Scotland) Act 2006
    1. s.10(3A) 1985 Act provides that where an order for transfer of property is sought the property shall be valued at the 'appropriate valuation date'
      1. Meaning the date agreed by the parties, or, in absence of agreement the date the order is made (in exceptional circumstances the court can fix another date close to the order date)
        This deals with the issues which arose in Wallis
4. Valuation during economic downturn
  1. the difficulties in the housing market may mean that a house cannot be sold quickly after a hearing, during this lapse in time the money received from the sale may be less than the valuation
    1. Smith v Smith [2009] CSOH 2, 2010, SLT 372
5. Valuation of Pensions
  1. Pension Formula
    1. AxB/C
      1. A = cash equivalent transfer value
      2. B = years in scheme whilst married
      3. C = total years in scheme
    2. N.B. active membership is what counts
      1. TCM v AFMM 2014 Fam LR 11
  2. Dealing with Pensions
    1. Where one party has a pension and the other does not
      1. If assets are available spouse with pension to pay money in lieu of share in pension
        Where there are no available assets
        through lump sum order possible where the pension contains a lump sum payable on death or retirement
        Pension sharing (s.8(1)(baa) - the pension will be shared when it matures. This requires many formalities, in particular qualifying agreement between the parties
  3. s.10(5) makes clear that pensions are to be included as MP
  4. The proportion of any rights or interests of either person
    1. (a) under a life policy or similar agreement
    2. (b) in any benefits under a pension agreement which either person has or may have (including such benefits payable in respect to the death of either person), which is referable to the period to which ss.(4)(b) or (4A)(b) above refers shall be taken to form part of the MP or PP
6. What is a Fair Share?
  1. s.10(1) a fair share is an equal share
  2. s.10(1) in applying the principles set out in s.9(1)(a) the net value of property shall be taken to be shared fairly between persons when it is shared equally or in such other proportions as are justified by special circumstances
7. Special Circumstances?
  1. Jacques v Jacques 1997 SC 20 (HL)
  2. Special circumstances may include
    1. (a) the terms of any agreement between the persons on the ownership or division of any of the matrimonial property or partnership property
    2. (b) the source of funds or assets used to acquire any of the MP or PP where those funds or assets were not derived from the income or efforts of the persons during the marriage or partnership
      1. (c) any destruction, dissipation or alienation of property by either person
        Short v Short 1994 GWD 21-1300
        Park v Park 1988 SCLR 584
        L v L 2013 GWD 26-530
  3. The underlying principle is the sharing of property acquired by the spouses' efforts or income during the marriage. Property acquired wholly or partially with funds or assets derived from other sources need not be shared equally
    1. Robertson v Robertson 2000 Fam LR 43
    2. Kerrigan v Kerrigan 1988 SCLR 603
    3. CB v MB [2012] CSOH 21
    4. M v M [2014] Fam LR 1136
  4. s.18 of the Family Law (Scotland) Act 1985
    1. SECURITY MECHANISM - if in the year after the disposal of the financial claim a spouse discovers that in the previous 5 years the other spouse or partner has disposed of assets he may apply to the court for an order to set aside or vary that transfer
      1. (d) the nature of the family property or PP, the use made of it (including use for business purpose or family home) and the extent to which it is reasonable to expect it to be realised or divided or used as a security
        nature of property
        Skarpass v Skarpass 1993 SLT 343
        use of property
        Peacock v Peacock 1994 SLT 343
        M v M [2014] CSOH 136
        Geddes v Geddes 1993 SLT 494
        Mayor v Mayor 1995 SLT 1097
      2. (e) the actual or prospective liability for any expenses of valuation or transfer of property in connection with the divorce or dissolution of the civil partnership e.g. tax expenses
        W v W [2013] CSOH 136
  5. Can conduct be considered a special circumstance?
    1. s.11(7) - in principle NO the court shall not take account of the conduct of either party UNLESS
      1. the conduct has adversely affected the financial resources which are relevant to the decision of the court on a claim for FP
      2. in relation to s.9(1)(d)/(e) principles it would be manifestly inequitable to leave the conduct out of account
Principle 2: Economic Advantage and Disadvantage Contributions
1. s.9(1)(b) 1985 Act - forms of compensation where either
  1. one spouse has derived economic advantage from the contributions of the other
    1. economic advantage means advantage gained whether before or during the marriage or CP and includes gains in capital, in income and in earning capacity
    2. "contributions" means contributions made whether before or during the marriage or CP and includes indirect and non-financial contributions and, in particular, any such contribution made by looking after the family home or caring for the family
  2. one spouse has suffered economic disadvantage in the interests of the other/family
    1. Economic disadvantage shall be construed accordingly
2. s.11(2) for the purposes of s.9(1)(b) of this Act, the court shall have regard to the extent to which
  1. (a) the economic advantages or disadvantages sustained by either person have been balanced by the economic advantages or disadvantages sustained by the other person
  2. (b) any resulting imbalance has been or will be corrected by a sharing of the value of the matrimonial property or the partnership property or otherwise
3. s.9(1)(b) case law
  1. Robertson v Robertson 2000 Fam LR 43
  2. De Winton v De Winton 1996 GWD 29-1752
    1. Welsh v Welsh 1994 SLT 828
  3. Coyle v Coyle 2004 Fam LR 2
Principle 3 - Fair Sharing of the Economic Burden of Childcare
1. This recognises that the party with care may have additional costs from having the children e.g. from only being able to work part time, or having to pay for childcare. It is fair to share the burden of these costs
2. s.11(3) 1985 Act for the purposes of s.9(1)(c) the court shall have regard to
  1. (a) any decree or arrangement of aliment for the child
    1. (b) any expenditure or loss of earning capacity caused by the need to care for the child
      1. (c) the need to provide suitable accomodation for the child
        (d) the age and health of the child
        (e) the educational, financial and other circumstances of the child
        (f) the availability and cost of suitable childcare facilities or services
        (g) the needs and resources of the persons
        (h) all other circumstances of the case
3. Morrison v Morrison 1989 SCLR 574
4. MB v CB [2012] CSOH 21
Principle 4 - Adjustment from Financial Dependence
1. Interim financial support where one spouse was financially dependent on the other to a substantial degree
  1. Award may be through a periodical allowance if TPO or CSO not appropriate
    1. 3 year maximum duration
    2. Sweeney v Sweeney 1993 SLT (Sh Ct) 892
    3. Smith v Smith [2009] CSOH 2, 2010 SLT 372
2. s.11(4) 1985 Act - Factors to Consider
  1. (a) the age, health and earning capacity of the person who is claiming the financial provision
    1. (b) the duration and extent of the dependence of that person prior to divorce or to the dissolution of the civil partnership
      1. (c) any intention of that person to undertake a course of education or training
        (d) the needs and resources of the persons
        (e) all the other circumstances of the case
  2. Miller v Miller, McFarlane v McFarlane [2006] UKHL 24, [2006] AC 618
Principle 5 - Serious Financial Hardship
1. 1985 Act s.9(1)(e)
  1. intended as a protection of last resort, however, used more frequently than may have been intended. Thomson's critique is used when really the principle in s.9(1)(b) (that is, economic advantages and disadvantages) should be relied upon
    1. Barclay v Barclay 1991 SCLR 205
    2. Smith v Smith [2009] CSOH 2, 2010 SLT 372
    3. s.11(5) for the purposes of s.9(1)(e) the court shall have regard to
      1. (a) the age, health and earning capacity of the person who is claiming the financial provision
      2. (b) the duration of the marriage or of thecivil partnership
      3. (c) the standard of living of the persons during the marriage or CP
      4. (d) the needs and resources of the persons
      5. (e) all other circumstances of the case
  2. Residual Discretion - s.8(2)
    1. what is reasonable having regard to the resources of the parties
      1. resources go beyond matrimonial property and also include foreseeable resources
        i.e. affording the court additional discretion
  3. Orders for Financial Provision
    1. s.8 1985 Act
      1. (1) in an action for divorce, either party to the marriage and in an action for dissolution of a CP either partner may apply to the court for one or more of the following orders
        (a) an order for the payment of a capital sum to him by the other party to the action
        (aa) an order for the transfer of property to him by the other party to the action
        (b) an order for the making of a periodical allowance to him by theother party to the action
        (baa) a pension sharing order
        (c) an incidental order within the meaning of s.14(2)
    2. Financial Provision by Agreement
      1. Kibble v Kibble 2010 SLT (Sh Ct) 5
      2. Radmacher v Granatino [2010] UKSC 42; [2010] 3 WLR 1367

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Financial Provision on Divorce or Dissolution (Scotland)

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	Created by Ruaraidh Simpson about 7 years ago