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OUTER HOUSE, COURT OF SESSION
[2025] CSOH 31
F33/21
OPINION OF LADY CARMICHAEL
In the cause
IAN GEORGE JOHNSTONE HODGE
Pursuer
against
RACHEL ANNE HODGE OR CURRIE
Defender
Pursuer: Party
Defender: J Scott KC, Conroy, (sol adv); CSG Legal
27 March 2025
Introduction
[1]
This is an action for divorce. The pursuer seeks an order for transfer to him of the
defender's share in certain heritable property at Hodges Farm, Pencaitland ("the property").
The defender seeks an order for sale of the property, and for the distribution of the free
proceeds of sale.
[2]
The action was raised in 2021. It has an unusually protracted and complicated
procedural history. A number of diets of proof were appointed and discharged between the
commencement of the action and June 2023. Until June 2023 it appears that the principal
focus of the dispute between the parties was in relation to arrangements for their children,
2
who are both still under the age of 16 years. The curator ad litem to the children entered,
and remained in, the process until the parties reached an agreement about arrangements for
the children which resulted in an interlocutor dated 5 June 2023 making orders for residence
and contact. Neither party seeks any further order in relation to the children.
[3]
The only issue remaining between the parties was in relation to financial provision.
A diet of proof in December 2023 was discharged because the pursuer was not in attendance
and had previously provided a soul and conscience letter. A diet set down for 21 May 2024
was discharged on the defender's motion. On 1 July 2024 the defender enrolled a motion for
an incidental order in terms of section 14 of the Family Law (Scotland) Act 1985 ("the
1985 Act") for the sale of the property. On 17 September 2024 the Lord Ordinary refused
that motion, and refused a motion for leave to reclaim (appeal). On 20 November 2024 the
Lord Ordinary made an incidental order for valuation of the property, directing that access
be given to a named surveyor for that purpose. The case called before me for proof on
4 March 2025.
Divorce
[4]
The parties were married on 22 November 2014. They separated on 28 February
2021, which is the relevant date for the purposes of the 1985 Act. I am satisfied on the
evidence of the pursuer and of Janet Currie (the defender's mother) that the marriage has
broken down irretrievably and that there is no prospect of reconciliation.
Background
[5]
The following matters are either the subject of agreement or of unchallenged
evidence which I have accepted.
3
[6]
The matrimonial property included the parties' interests as partners in the firm of
Hodges Farm Partnership ("the partnership"). There was no written agreement in respect of
the partnership, and the parties' respective rights as partners were governed by the
Partnership Act 1890.
[7]
The parties purchased land at Hodges Farm Pencaitland on 30 January 2018 as
partners of and trustees for the partnership. The purchase price was £500,000. The title is
registered under title number ELN 22709. In 2019 the partnership sold two portions of land
to the Woodland Trust. The partnership has not paid capital gains tax in respect of that
transaction, and has not made any return to HMRC in that connection. The heritable
property held by the parties as trustees for the partnership after the disposition to the
Woodland Trust is the heritable property referred to as "the property" in this opinion.
[8]
The partnership borrowed a total sum of £590,750 from the Agricultural Mortgage
Corporation plc (AMC). It borrowed £540,000 at the time of the purchase in 2018, and a
further £50,750 on 20 September 2019. It is a term of the standard security in favour of AMC
that the parties cannot transfer the land at Hodges Farm under burden of the standard
security without the prior consent in writing of AMC. AMC does not consent to the transfer
of the land under burden of the standard security.
[9]
Other than payments in March 2022, April 2022 and May 2022, the partnership has
not made loan repayments to AMC since March 2021. The last payment was on 5 February
2021. Before then monthly payments, subject to an exception during the period January to
June 2020, following the cancellation of a direct debit, were made regularly and on time.
The position regarding January to June 2020 was regularised in June 2020. The total sum
due at the date of proof, including arrears, was £540,289.69. AMC have issued a formal
demand for payment.
4
[10]
Since the defender left the family home on 21 June 2021 the defender has received no
sums from the partnership.
[11]
The pursuer was sequestrated at Edinburgh Sheriff Court on 14 March 2023 with
effect from 20 December 2022. The Accountant in Bankruptcy is his trustee ("the pursuer's
trustee"), and the administration of his bankruptcy has been entrusted to Wbg Services LLP
(formerly Wylie & Bisset). The pursuer has not co-operated with his trustee. He has not
returned the statutory documents that he requires to provide. He remains undischarged.
[12]
The pursuer's trustee accepts that the property is property held in trust for the
partnership, and the trustee has no interest in the property itself. The property did not vest
in the pursuer's trustee. The interest of the pursuer's trustee is in any sums that would fall
to be paid to the pursuer on winding up of the partnership. If the property were to be sold,
the pursuer's trustee would issue a letter of comfort to the purchaser.
[13]
The partnership was dissolved when the pursuer was sequestrated, by virtue of
section 33 of the Partnership Act 1890. The pursuer has continued to trade using the assets
of the former partnership, including the property.
[14]
If the property is sold, that is likely to result in a liability to pay capital gains tax.
The evidence
[15]
The pursuer gave evidence. He did not lead evidence from any witness. The
defender gave evidence. She led evidence from her mother, Janet Currie; Hugo Struthers,
chartered surveyor; David Bell, chartered accountant; Marlon Cumberbatch, of the AMC;
and Cameron Andrew of Wbg Services LLP.
5
The pursuer
[16]
The pursuer gave oral evidence. He spoke to the grounds for divorce. His evidence
was directed principally to his contentions that the court should not order the sale of the
property, and that there were special circumstances militating against equal sharing of the
matrimonial property.
[17]
He said that his great grandfather became the tenant at Hodges Farm in 1936. His
grandfather and father had also been tenants. He referred to the tenancy latterly held by his
father as a "1991 Act" tenancy. I take that to be a reference to the Agricultural Holdings
(Scotland) Act 1991. The pursuer was an only child, and so the farm "came to" him.
Sir Francis Ogilvy, of the Winton Trust, which was the landlord, thought he had found a
"loophole" in the lease and in the leases of other farms. The pursuer's family and another
family had contested the matter. The dispute would have had to be determined by the
Scottish Land Court. Matters ended up so that the pursuer's family had the opportunity to
purchase the farm at a discounted price. The price had been 48 per cent of the market value.
Sir Francis Ogilvy would not have sold it for that price if he had not been obliged to do so
because of the value of the tenancy.
[18]
The pursuer's father had relinquished his secure tenancy and the pursuer and
defender were allowed to purchase the land. They did not need to contribute any capital,
because the borrowing was so modest. The pursuer said that that was: "... off the back of
the value [his] family had put in off the back of the lease." That was why he believed that it
should not be split equally between him and the defender. He and the defender would not
have had the land at all had it not been for the discount.
[19]
Since the relevant date the pursuer had been making a "small amount of money"
with the partnership assets. He had been working predominantly for other people. The
6
business was the same as it had been before he and the defender had taken it over from his
parent: shed rentals, a livery yard, and caravan storage. The business had continued in the
same way after the parties separated. The partnership income went into his account. He
was still trading at the time of the proof. He had paid no tax on the income.
[20]
In cross-examination, the pursuer said he did not know whether his father had been
sequestrated. He thought that he had needed financial help.
[21]
Senior counsel asked the pursuer about 7/116 of process. That is a letter dated
5 April 2005 from Chalmers & Co, Chartered Surveyors and Property Consultants, as agents
for the Winton Trust, that contains an offer to let to the pursuer's father and mother, as
trustees of the firm of Hodges Farm Diversification, land comprising Butterdean Cottage and
the buildings and yard area at Hodges Farm. The duration of the lease was to be from
28 November 2003 to 28 November 2018, and thereafter continuing on a 3-yearly basis.
[22]
The pursuer accepted that the reason why the lease had been offered was that there
had been a problem in the relationship between his parents and the Winton Trust because
they had started using the land for storage and caravan storage, rather than agricultural
purposes. Part of the land had been extracted from the agricultural tenancy and then leased
on a commercial basis. The "diversification" firm had been formed for the purpose of letting
storage and caravan storage.
[23]
The pursuer disputed that his parents had not operated a livery yard. He said that
there had been a difficulty regarding access to the subjects let on the commercial lease
because the access road was part of the subjects of the "original" lease. He did not accept
that the landlord had been going to repossess the subjects because the diversification
enterprise had expanded in to areas of land not the subjects of the commercial lease.
7
[24]
Asked whether there had been difficulties because his mother had not prepared any
accounts for his parents' business, he said, "You would need to ask her". He did not
respond directly to the question when asked whether the defender had required to help his
mother. He said he was not aware that his parents had had any difficulties in relation to
value added tax.
[25]
Senior counsel asked the pursuer whether it was the case that he and the defender
could not afford to purchase most of the agricultural land, and that his uncle had taken over
most of the agricultural land. He responded that the Winton Trust had resumed most of the
agricultural land.
[26]
The pursuer went on to explain that there had been 202 acres in total. The Winton
Trust had resumed 88 acres on the south side of a road. All the land on the north side of the
road was available for purchase. He and the defender had not been able to afford all of it,
and his uncle had purchased the remainder. The pursuer and the defender had purchased
60 acres of land, and the pursuer's uncle 55 acres.
[27]
Asked why, if he wished to keep the farm, he had not paid the mortgage, he asked,
rhetorically, "So the court can decide that half of it belongs to Rachel, and then we lose it?"
He went on to say that friends or relatives could discharge the liability to AMC. Senior
counsel asked the pursuer about representations he had made to the Lord Ordinary, in the
context of the motion for an order for sale, to the effect that his uncle would help by
purchasing the land. He said that his uncle had said, "Why sort it out to lose it?"
I understood the pursuer to be saying that he and his relatives were unwilling to pay off the
secured loan because they perceived that that might be to the financial advantage of the
defender in these proceedings. Later in his evidence he suggested that a forced sale on
repossession might not necessarily be disadvantageous. Whether it would be
8
disadvantageous would depend on who purchased it. He appeared to think that a relative
might be able to purchase it at a lower price were there to be a forced sale.
[28]
The pursuer accepted that the defender worked as a bank manager when they met.
He did not answer directly when asked whether she had paid off debts that he had by way
of council tax and rent, but said, that had she paid them, she would have proof of having
done so. The defender had helped the pursuer's mother with bookkeeping and
administration. Asked whether an accountant had advised that the parents' business could
go on, he queried why he and the defender would have taken the business on had that been
the case. He accepted that the accounts for the partnership dated 31 January 2018 had been
prepared by James Anderson, accountants, on the basis of figures collated by the defender,
and that those had been submitted to AMC to support the application to borrow. The work
that the defender had done in that regard had been critical to obtaining the secured
borrowing. She had helped to negotiate obtaining the mortgage.
[29]
The pursuer said that the defender had given up being a bank manager when the
parties opened up a small garage business before taking over the farm business. The
defender had opened a sole trader bank account in her own name for the business of
Hodge's Autocentre. The pursuer was a mechanic and had worked for the business. The
business had the use of a shed on the farm free of rent, and used a portacabin as an office.
His parents had taken over making payments for the portacabin, as the garage business
could not afford them. The pursuer had started working for his parents for a wage, and he
and the defender had then taken over their business some months or a year later. The
pursuer was unaware of any problems that the defender had experienced with her credit
rating as a result of the unpaid arrears due to AMC. He denied retaining the defender's
9
wedding ring, engagement ring and eternity ring. He accepted keeping his own wedding
ring, a Tag watch, and a Rolex, but said that he had the Rolex before he met the defender.
[30]
Asked about a horse, a pony, a carriage and some tack, he disputed the values
proposed in the defender's affidavit, number 92 of process, and was unsure whether they
were business assets or held by him personally. He denied that a horse named Bella was
worth £10,000, and said that she was worth £3,000. A Shetland pony owned at the relevant
date was worth £500. He said that Bella was away, being broken in for driving. He had
another horse, acquired in summer 2022. He had not paid for that horse, but had won it
from a "gypsy" at St Boswell's Fair.
[31]
The pursuer had not permitted Mr Struthers to enter some of the residential premises
when he inspected the property, notwithstanding the terms of the incidental order made by
the Lord Ordinary. He had not told Mr Struthers that there was an "injunction" preventing
access. The defender had pleaded guilty to stalking and harassing the residents, and they
were concerned that photographs of their home would be made available to her.
[32]
Senior counsel asked the pursuer about information he had provided to Mr Struthers
regarding the business at the property. One of the fields was a hay field. The stables were
let to individual owners of horses for £229 per month, with bedding and hay provided. The
pursuer occupied six stalls, three of which were occupied by a horse or pony. There were no
written agreements with the owners of the horses. That was the responsibility of the
defender, who had done the "bookwork and admin". There were no records of payments
coming in, other than in bank statements. At one point 31 horses had been accommodated.
The pursuer was evasive when asked whether he could count on accommodating at least 15,
and said that he did not know what the "average was in the area". Senior counsel suggested
10
that the pursuer could expect to make at £36,000 or more in profit each year from stabling
horses, and he responded that it might be less.
[33]
The pursuer accepted that if he were renting out 72 caravan and container storage
spaces at £300 per year, he would receive £21,600. He said that he had had to reduce the
number of caravans stored from 105 to 72 because of a requirement to space the units so as
to create fire breaks. He let out farm buildings for £9,600 per year. He did not dispute the
rental values proposed by Mr Struthers for the farmhouse in which he lived, a cottage in
which his parents lived and a "chalet" or moveable log cabin in which he allowed a friend to
live. Those, were, respectively, £1,800-£2,000, £1,000-£1,300 and £950.
[34]
The chalet was, according to the pursuer, partnership property. The local authority
had refused planning permission for it. In an appeal to the Scottish Ministers the pursuer
had represented that his parents in law lived in it and provided childcare. His parents in
law moved out before the defender moved out in June 2021. His appeal was the subject of a
story in the press in 2022. He had said what he "had to say to try to get planning
permission".
[35]
For a period a third party had run a dog daycare business on the premises, and had
paid £500 per month for about 18 months. The pursuer did not dispute the projections and
calculations produced by Mr Bell, but observed that they would have been more reliable had
the defender produced accounts for the years between January 2018 and the relevant date.
[36]
The pursuer did not accept that the defender's parents had loaned him £9,000 in cash
to purchase a horse, carriage and tack. He did accept purchasing a carriage, and said it had
been purchased from Cumbria Carriages in Durham. He accepted that a schedule prepared
by the defender (7/144) showed business receipts paid into a joint account with Santander
between 29 November 2020 and 10 February 2021. It showed business receipts between
11
29 December 2021 and 1 May 2024, totalling about £96,000 being paid into a Bank of
Scotland account held by Emma Black. It showed also business receipts totalling
about £72,000 between 25 May 2021 and 8 March 2023 being paid into a Bank of Scotland
account held by the pursuer. Emma Black was the pursuer's girlfriend. The pursuer said
that payments had been received in that way because he was "blocked" from his account,
and in particular from a business account. He had not had access to online banking, and
was not particularly computer literate. He did not dispute the content of the defender's
supplementary affidavit, number 95 of process.
The defender
[37]
The summary below follows the order in which the defender's witnesses gave
evidence.
Mr Hugo Struthers
[38]
Hugo Struthers is a director of Savills estate agents, and is a chartered surveyor. He
leads the rural division of Savills. His qualifications and experience are such as to permit
him to give the opinion evidence that he did in this case. He adopted his report,
number 7/150 of process, which was dated 20 December 2024. His evidence was largely
unchallenged.
[39]
Mr Struthers inspected the property following the order made by the Lord Ordinary,
and carried out a "red book" valuation; that is a valuation that complies with standards
issued by the Royal Institute of Chartered Surveyors. He had assessed the market value of
the property on the basis of an arms length transaction between a willing buyer and a
willing seller. The pursuer showed him around. He did not allow him to go inside some of
12
the residential properties. Mr Struthers understood that there was an "injunction"
preventing the defender from accessing those properties. He accepted the restriction
because he did not wish there to be a confrontation, but clarified, during cross-examination,
that the pursuer had not presented as being confrontational or challenging.
[40]
The valuation related to the area shaded red in a plan at paragraph 13.4 of
Mr Struthers' report. After the parties sold land to the Woodland Trust, the property
occupied 53.4 acres, of which 38.05 acres were agricultural land, 8.57 acres were woodland,
and the remainder yards and woodland. He had not valued the chalet, as it was a moveable
asset, and there was a planning enforcement notice relating to it. The valuation included
Hodges Farmhouse, Butterdean Cottage and various farm buildings.
[41]
The majority of the farmland was used for horse livery grazing or sown down to
temporary grassland. His understanding was that the land was not claimed for Basic
Payment Scheme. Areas of the land mown or cut for silage or hay could have been eligible,
but no claim had been made. An area at one time used for dog daycare was fenced off with
a temporary structure. The residential dwellings appeared externally to be in good
condition. The more modern farm buildings were in fair to good repair.
[42]
Mr Struthers gave evidence as to the figures the pursuer had provided him with
regarding the rental for livery, dog daycare, and caravan and container storage, and which
are narrated in the summary of the pursuer's evidence. He had learned from the pursuer
that there were no written agreements regarding horse livery. Similarly, the caravan and
container customers occupied by virtue of licences not recorded in writing. A section of the
property was occupied by the pursuer's uncle, and the pursuer occupied a portion of his
uncle's land. Two of the farm buildings were let to third parties for £400 per month
13
respectively. None of that was regulated by any formal agreement. That suggested that it
would be straightforward to provide vacant possession.
[43]
The pursuer told Mr Struthers that it was typical to have 72 caravans and containers
on site. The number was restricted to a total of 100 to 105 units because of firebreak
requirements in the policy of insurance. The defender had provided information to the
effect that there was capacity for 300 units, but Mr Struthers did not regard that as realistic;
105-100 units "felt" realistic.
[44]
A number of planning issues were associated with the property. There was an
enforcement notice in respect of unauthorised development in relation to the erection and
residential use of the chalet, and the unauthorised erection of a garden shed, garden
decking, steps, hardstanding and the use of the curtilage of a mobile home as domestic
garden ground. An extension to the farmhouse was erected without planning permission or
building warrants. Mr Struthers learned that the pursuer was required to reinstate
woodland adjacent to the caravan storage area. The caravan storage area had been extended
in a manner that did not comply with planning permission.
[45]
The market for residential property in East Lothian was buoyant, and the area highly
sought after. Demand for prime agricultural land was high. East Lothian was a prime
location in the equestrian market because of its geographical situation, constrained supply
and general wealth in the area. The property would support only a relatively small venture,
and was more likely to appeal to a purchaser from the point of view of amenity, rather than
as a purely commercial enterprise. The property as a whole would primarily appeal to a
residential lifestyle buyer because the acreage of the property would not be viable as a
standalone agricultural enterprise. The diversification that had been pursued on the site
would provide a source of income for a purchaser of the property, but an amenity/lifestyle
14
buyer might prefer not to pursue any commercial activity. Mr Struthers took into account
the various planning and enforcement issues associated with the property. He considered a
number of comparator properties, detailed in his report. In his opinion the current market
value of the property was £1,400,000.
[46]
That valuation assumed that there would be a reasonable period of marketing, which
would be 6 to 12 months for a property of this nature. If the heritable creditor were to
repossess and force a sale, there would be likely to be a restricted period of marketing when
not all the information relevant to a purchaser might be available. It might be put to auction.
He estimated that the value achievable on a forced sale would be diminished by 20 per cent
or more. Even on a forced sale, given the desirability of the location, a cash buyer might still
acquire the property for full market value, but a price of around £1,100,000 would be a
typical outcome.
[47]
Mr Struthers' opinion was that the rental values of the farmhouse, Butterdean
Cottage and the chalet were those already referred to in the summary of the pursuer's
evidence.
[48]
In cross-examination, Mr Struthers agreed that the area of land owned by the
pursuer's uncle and occupied by the pursuer was greater than the area of land owned by the
parties' former partnership and occupied by the pursuer's uncle. He had been given access
to the property other than the interior of the residential units. None of the buildings had
appeared to post-date 2018.
Mr David Bell
[49]
David Bell is a chartered accountant, and a managing director of Quantuma
Advisory Limited. He was instructed to value the partnership. There was no dispute as to
15
his qualification to provide expert evidence in the field of accountancy. He adopted his
report, number 7/151 of process.
[50]
Mr Bell said the information available to him was very limited. The only accounts for
the partnership were those for year ending 31 January 2018. Those accounts disclosed a
profit margin of 58 per cent. He also had available to him Mr Struthers' valuation of the
heritable property as at December 2024 and a property valuation by Edwin Thompson
Chartered Surveyors dated August 2019. The partnership acquired the land just after the
year covered by the accounts.
[51]
The partnership had acquired various items detailed at paragraph 4.9 of Mr Bell's
report. That suggested that the partnership had continued to trade between 31 January 2018
and the relevant date. The fact that until the relevant date the partnership had met its
obligations to repay money to AMC indicated that it was not in financial difficulties.
[52]
The market value of the heritable property held by the partnership was a necessary
component in calculating the value of the partnership. In 2019 the land, including the areas
disponed to the Woodland Trust, was valued at £1,100,000. In the absence of other
information, Mr Bell proceeded on the basis that the land had a similar value at the time
when the partnership acquired it in 2018. He produced a relevant date value on a pro-rata
basis, assuming a straight line increase in value between 2019 and 2024. The figure at which
he arrived was £1,184,375. On the basis that the cost of acquisition had been the £540,000
borrowed from AMC, he calculated an uplift of £644,375 in the carrying value of the
property.
[53]
The defender had provided Mr Bell with some information as to the rental income
and associated costs regarding the business of the partnership. He had not tried to estimate
profit on the basis of the information she provided, as there were too many gaps in the
16
information. On a very broad basis he had formed the view that the business of the
partnership had expanded as there were additional income streams since 2018. He
produced two scenarios. In scenario A, the partnership's profit and drawings remained as
they had been in year ending 31 January 2018. In scenario B, the profit and drawings had
grown by 10 per cent each year. Under scenario A he valued the partnership at £747,861 at
the relevant date, on a net asset basis. Under scenario B, the value was £761,591. He
proposed current valuations for "the partnership" of £1,047,377 and £1,119,277 on the same
scenarios. I note that the partnership was dissolved by operation of law with effect from
December 2022, and so there is no partnership currently in existence.
[54]
Mr Bell considered also the share of profit on the defender's capital that had
remained in the business since the relevant date. In the first instance, he applied an interest
rate of 5 per cent per year to the capital value retained in the partnership, in accordance with
section 42 of the Partnership Act 1890. On scenario A, that produced £73,230, and on
scenario B £74,573. Mr Bell also calculated what the defender's half share of the profits of
the business would have been since the relevant date on scenario A and scenario B. The
figures he produced relative to those scenarios were, respectively, £106,571 and £180,467.
[55]
The figure of 10 per cent per year in scenario B had been selected because it was not
"too aggressive". Mr Bell had noted expansion of the business so far as rental of dog
daycare premises was concerned. Information from the defender suggested that additional
containers had been rented out, although that would also have given rise to additional
expenditure. There was no science involved in selecting the figure. It represented a prudent
estimate of profit growth. He had applied the same increase to the level of drawings in his
scenario B. It was hard to find directly comparable business models.
17
[56]
In cross-examination Mr Bell said that the extent of the uplift he had identified in the
carrying value of the land resulted from a combination of a keen purchase price, and
increasing land values over time. He agreed that the value of the partnership derived
principally from the value of the land, and that the profits derived from the use of the land.
The defender
[57]
The defender adopted her affidavits numbers 12, 54, 77, 92 and 95 of process. Insofar
as earlier affidavits conflicted with anything she said in number 95 of process, she confirmed
that the content of number 95 of process was correct. I do not summarise all of her evidence
here. Some of the evidence in the earlier affidavits was more obviously directed towards the
dispute regarding arrangements for the children.
[58]
The defender is 37 years of age. She met the pursuer in February 2014 and moved in
with him shortly afterwards. She and he made plans to purchase the farm in 2016.
[59]
The defender qualified as a hairdresser after leaving school. When she was 22 years
old, she changed career, and started work with Lloyds TSB as a cashier. She enjoyed it, and
her career progressed. She became a personal banker. She was working in Evesham in 2012,
and wanted to return to Scotland. She applied successfully for the role of bank manager,
and underwent training. She took over the management of a branch in Fountainbridge,
Edinburgh. The performance of that branch improved under her management. At the start
of 2013 she joined a progression programme for women employees aiming for higher
graded roles. She moved in February 2013 to a role managing a large branch in Haddington
and two sub-branches in North Berwick and Dunbar. Her gross salary increased from
about £26,000 to something in the region of £32,000 to £33,000 gross. She enjoyed the benefit
of private health cover and a pension.
18
[60]
In early March 2014 she was approached and asked to take on the management of a
branch in Dalkeith, with sub-branches in Peebles and Penicuik. Her salary increased to just
over £40,000 gross, and she was provided with a car allowance.
[61]
She left her position with the bank because the pursuer become controlling. When
she spent long periods of time at work in meetings and unable to answer her phone, he
accused her of having sexual relations with her colleagues. He would become distraught.
He promised her that life would be better if she did not work at the bank, and if the two of
them worked together. Initially she did not know that his parents leased, and did not own,
the farm. The pursuer convinced her that they could work in a partnership and take over
his parents' business. She handed in her notice in October 2014. That was after a period of
sick leave. She had not in fact been sick, but had pretended to be in order to be absent from
work while receiving pay for a period. She now felt ashamed of having done that.
[62]
Before she left the bank, the defender helped the pursuer's mother with
administration of the farm. She prepared and posted out invoices for caravan storage. By
the time she took sick leave, she was helping with other matters, including invoices for
livery. When she first met the pursuer, he had been sacked from a garage in Peebles, and
was asking his parents if he could work for them. He then put it to his parents that he could
use a shed on the farm to fix cars, and use a portacabin as an office for the garage and for the
farm more generally. The pursuer had problems with his credit rating, so the defender
opened a business sole trader account. She printed out invoices for the business. That
business lasted for about 6 months.
[63]
At that point conversations started about the pursuer's parents' business and their
inability to continue trading, and about the pursuer and the defender starting their own
business to continue the activities that were going on at the farm. The pursuer started
19
working manually on the livery side of the business, and the defender undertook more
administrative tasks.
[64]
The defender first became aware of the lease to the firm of Hodges Farm
Diversification when she learned of a dispute between the landlord and the pursuer's
parents. She thought that his parents had been receiving correspondence about the matter
for about a year before she and the pursuer learned about it in late 2016. She understood
that there had been a diversification into business activities that were not allowed under the
1991 Act tenancy. She had not known the pursuer's parents were in partnership. His
mother had an account in her sole name, and his father had been sequestrated. He could not
open a business account and did not have a personal account. The pursuer and his parents
told her that his father had been sequestrated. From what the pursuer's mother said, it
appeared that she had not been aware of the lease to the firm of Hodges Farm
Diversification. It had been signed only by the pursuer's father for the firm.
[65]
The defender understood that the diversification activities had extended onto land
not included in the lease to Hodges Farm Diversification. That was not brought to her
attention until the landlord was trying to "reclaim at the end of the tenancy".
[66]
There had been no accounts completed for 7 years. The pursuers' parents used an
accountant, James Anderson, who was a family friend. He had prepared estimates for the
purposes of paying income tax, but at a certain point said he was not willing to prepare any
further estimates, and that accounts would be required. The pursuer and the defender
attended a meeting with him, the pursuer's parents and another accountant. The pursuer's
parents explained that in their livery business they had been providing services, in that they
were mucking out the horses, and offering to take them out and bring them in. It transpired
that they should have been registered and accounting for value added tax. The accountant
20
said that the best thing they could do was retire and wind up the business. He advised that
the livery business should be run on a DIY basis, so that no services were provided to the
owners of the horses.
[67]
The defender had not sorted out those issues; the accountant had done that. She had
helped with paperwork, and with issuing and paying invoices. It had been too much for the
pursuer's mother, who had a heart condition. Both she and the pursuer had helped.
[68]
Tenancies under the 1991 Act were in place for a number of farms in the area. The
landlord believed he had found a "loophole" in all of them and served a notice on the
tenants. It was notice that he could "get the land back if he wanted to". In her oral evidence
the defender said that she was not sure that it was a notice to quit, although her affidavit
number 77 of process suggests that it was. She understood that it was an invitation "to have
conversations". It then emerged that a portion of the land was held on a commercial lease.
The pursuer's father had tried to "brush that under the carpet" for about a year. At the first
meeting the defender attended about the matter, Sir Francis Ogilvy, of the landlord, outlined
that even if the pursuer's family went to court to argue about the "issues with the 1991 Act
tenancy" there was a portion of the land - that held on the commercial lease - which could be
lost, leaving the parties or the pursuer's parents homeless. It included Butterdean Cottage.
The circumstance that some of the commercial activities had extended onto land held under
the 1991 Act tenancy was also raised. The defender attended ten or twelve meetings about
this. She went to every meeting.
[69]
The pursuer and the defender bought what they could afford to buy. The pursuer's
uncle negotiated separately to buy other fields. There were numerous negotiations. The
starting position so far as the price was concerned was full market value. An important
factor in the negotiations was the cost of litigation in the Land Court. There was advantage
21
to both sides in reaching a price that suited all the parties. Nigel Parmenter of Edwin
Thomson put the mortgage application together as a professional. She and the pursuer only
had one year of accounts and a business plan. She had been responsible for the information
in those documents. The business plan was based on increasing the livery business. They
built two extra stables, and put a field not previously used to grass for livery. They had a
shed for indoor riding, but cleared it out and rented it to a joinery business. Those initiatives
formed part of the business plan.
[70]
After the partnership bought the heritable property, the defender kept preparing
accounts manually in preparation for the year end in January 2019. Some items were
missing, and the accountant agreed to provide an estimate to avoid fees for submitting
self-assessment late. At that point the relationship between the pursuer and the defender
became volatile, and things fell by the wayside.
[71]
The defender produced an estimated tax computation for the pursuer for the year to
5 April 2017, and a similar computation for herself, both estimated at nil (numbers 7/131 and
7/132 of process). A partnership tax return for the tax year to 5 April 2017 was 7/133 of
process, disclosing a net profit of £7,697. Mr Anderson had submitted it. Tax returns for the
following year were lodged as 6/136. They disclosed tax liabilities for each of the pursuer
and the defender of £3,284.76. The defender confirmed that the tax had been paid from
drawings. The personal tax computation for the tax year to 2019 was an estimate:
number 7/142. No further tax had been paid on the profits of the partnership.
[72]
Customers of the partnership told the defender that after the relevant date the
pursuer had asked them to make payments into his personal account. Both the pursuer and
the defender had access to the partnership's Santander account by way of an app on their
telephones. During the early days of the parties' separation, money moved back and forth.
22
The pursuer removed cash from the former matrimonial home. He threatened to leave the
defender with nothing. The pursuer did not have online access to the defender's TSB
account, but did have a card for that account.
[73]
The defender had also learned of payments being made to Emma Black.
A specification of documents had produced bank statements that disclosed payments of
partnership receipts to her and to the pursuer's personal account. The defender had
produced the schedule at 7/144 of process, referred to in the summary of the pursuer's
evidence. The payments to Ms Black were primarily in relation to the livery business.
[74]
Since the relevant date, the defender had not had access to any business information
relating to the partnership. The pursuer removed all paperwork with client details from the
farmhouse in February 2021, although the defender continued to have access to the
partnership bank account with Santander.
[75]
Following the parties' separation, the defender did not wear her engagement,
wedding or eternity rings. She stored them in a box in the bedroom. The pursuer had keys
for the house, and one day she found that the rings, and other items, including the pursuer's
clothes, were gone. She inferred that the pursuer had taken the rings. In her affidavit
number 92 of process she provided purchase prices totalling £13,200 for these rings.
[76]
At the time of the proof the defender was receiving Universal Credit, and trying to
earn money as a hairdresser. She said that applicants for a job in banking required to
provide information about their credit history. With a "damaged file" like her own, an
applicant would be seen as high risk and would not gain employment. Her credit rating
had been damaged by the missed payments to AMC. She had been unable to keep paying
for phones, iPads and Apple watches for the parties on a contract taken out in her sole name.
23
The defender had subsequently relied on a friend and her partner to take out contracts for
mobiles phones for her use.
[77]
The defender's evidence (affidavit number 77 of process) was that after paying for
solicitors, and making payments to AMC, £114,000 was left of the £175,000 from the
transaction with the Woodland Trust. She said that it was used to tar the whole of the farm
road, to build an extension to the farmhouse, and to renovate the farmhouse by installing a
new kitchen and new bathrooms and re-plastering and redecorating throughout. The cost of
renovating the road was £15,000. Renovations to the farmhouse cost £50,000. In her
affidavit number 95 of process she explained that the sum of £114,120.37 was paid into her
personal TSB Classic Plus account xxxx1268 on 29 June 2020. Number 6/42 was a collection
of statements for that account extending to 51 pages and covering a period from June 2020 to
April 2021. Both the TSB personal account and the Santander business account were used
for partnership income.
[78]
The opening balance on the TSB account on 20 September was £71,058.66, and the
balance on the relevant date was £14,243.34. In affidavit number 95 of process, the defender
identified a number of items of expenditure from the account relating to work on the farm
house or the purchase of items for the farm. She said that the account was also used for
family expenditure. The parties used the funds instead of taking drawings from the
partnership profits.
[79]
At the relevant date, the Santander Account (for which some statements were
produced at 6/39 of process) had a balance of £13,967.88. On 1 March 2021, £13,000 was
transferred from it to the TSB account. On the same day £5,000 was transferred from the
TSB account to the Santander account, and £4,500 transferred the Santander account to the
TSB account and then back to the Santander account.
24
[80]
On 8 March 2021 a payment of £4,500 was made from the Santander account to the
TSB account, and on 9 March 2021 £3,000 was transferred from the TSB account to the
Santander account. On 10 March 2021 £3,000 was transferred from the Santander account to
the TSB account. The overall result of these transactions was that the TSB account balance
increased by £12,500. The defender says she does not recall why the series of transactions
took place, but that there was a period when both she and the pursuer were moving money
around "in conflict". The defender says that £9,000 was used to pay a matrimonial debt to
her mother, and that she retained £3,500 for herself and the children. She says that she did
so because the pursuer threatened to leave her with nothing.
[81]
On 8 April the pursuer moved £16,000 from the TSB account to a different (TSB)
account ending xxxx9560, and the following day moved £19,000 back from that account to
the TSB account, which suggests that the account ending xxxx9560 had a balance of at
least £3,000 before the transfer. No records have been produced for account ending
xxxx9560 and the pursuer says that she no longer has records for that account. The defender
then transferred the £19,000 to a new account with Monzo. A statement for that account, in
number 6/41 of process, discloses a payment of £9,000 to Janet Currie on 20 April 2021.
[82]
A TSB account xxxx0460 had an overdraft balance of £537.37 at the relevant date
(6/40 of process). The partnership had had a business savings account xxxx7689 with
Santander. Some transactions on that account after the relevant date are disclosed in a mini
statement in 7/156. Shortly after the relevant date it has a credit balance of £3,000.
[83]
The defender's evidence was that at the relevant date the pursuer owned the
following items of matrimonial property: a Shetland pony worth £1,000; a horse (Bella)
worth £10,000; a carriage worth £3,500; two horse carts worth £1,500; and horse equipment
worth £3,000. She believed that Bella had been sold after the relevant date.
25
[84]
In cross-examination the pursuer asked the defender to confirm who had been
present at the final two meetings to conclude the bargain for the sale of the heritable
property to the partnership. She responded that Sir Francis Ogilvy, the pursuer's uncle
(Alexander Hodge), the pursuer, herself, and Richard Leslie of Shepherd and Wedderburn
had been present. She could not say whether there had been any meetings that took place
that she had not attended. Her recollection was that it was at the last couple of meetings, at
which a solicitor was present, that the price was finally agreed. A price of £700,000 had been
proposed, but the partnership could not get a mortgage for that amount. The final price had
been arrived at because Alexander Hodge had decided to purchase part of the land.
[85]
If Alexander Hodge had not taken that approach, negotiations would have
continued, and it was impossible to say how they would have concluded. The discounted
purchase price had been important, as AMC only loaned up to 60 per cent of value.
[86]
The pursuer queried why the defender had left the farm. She replied that he had
disconnected the WiFi and told the provider not to reinstate it. There had been no phone
signal. The pursuer had "capped the water" and drained the oil tank so that there was no
heating oil available. Associates of the pursuer had threatened her and her parents.
[87]
The pursuer put to the defender that Alexander Hodge had said that he would
challenge "the lease" at the Land Court, and that Sir Francis Ogilvy had said that he did not
have funds for the litigation. That was why the bargain to purchase the land had been
concluded. The defender responded that her understanding was that the tenancy was in the
name of the pursuer's father, and that the pursuer's father did not have funds for the
contemplated litigation.
[88]
In re-examination the defender explained that the subject of the proceedings in the
Land Court would have been the 1991 Act tenancy.
26
Mrs Janet Currie
[89]
Mrs Currie is the mother of the defender. She adopted her affidavits numbers 76
and 91 of process. As I have already noted, her affidavits, particularly the more recent one,
contain evidence confirming that the marriage has broken down irretrievably.
[90]
Mrs Currie's evidence was that she and her husband had been concerned when the
defender gave up her career as a bank manager. The pursuer had not been working at the
time and the defender had had to spend money on Butterdean Cottage, which was where
they first lived together.
[91]
The defender had told her that she was needed in the family business because of the
ill-health of the pursuer's mother. The defender had seemed happy to be joining the family
business, although Mrs Currie worried that the pursuer was manipulating the defender.
The pursuer told Mrs Currie that he would look after the defender financially. Mrs Currie
babysat her young grandson to allow the parties to attend meetings regarding the purchase
of the farm. The parties told Mr and Mrs Currie that they were buying the farm because the
pursuer's father had breached the terms of his tenancy, and had not prepared accounts for a
number of years. Mr and Mrs Currie moved their log cabin - the chalet already referred to,
which is a type of mobile home - to the property. They later regretted having done so. The
pursuer would not let them remove it and they had "lost everything".
[92]
The money that the defender paid to Mrs Currie on 21 April 2021 was the repayment
of a loan made to the pursuer and the defender. It had been loaned for the acquisition of a
horse. Mr and Mrs Currie were in the habit of transacting using cash. The pursuer often
came to them if he needed cash, and sometimes repaid loans through the bank, and
27
sometimes using cash. The £9,000 borrowed to purchase a horse was the largest sum he had
borrowed.
[93]
In cross-examination, Mrs Currie reiterated that the log cabin was purchased by her
and her husband. The deal had been that they would live in it on the farm, provide help to
the parties, and that their grandchildren would benefit after their deaths from its presence
on the property.
[94]
The pursuer noted that Mrs Currie had said he had borrowed money on occasions
other than that relating to the horse, and asked her whether he had repaid loans on those
other occasions. She said that he had always done so. He suggested to her that £9,000 was a
lot of money for a horse, and asked her whether she had questioned him about that. She
responded that she had never questioned him, and trusted him. She did not know which
horse he had bought with the money. He suggested to her that she had not loaned him the
money in question. She responded that she had loaned the money to him. He had always
said that he liked to deal in cash, and she had not questioned him about what he was
borrowing money for. Her understanding was that the deal for the horse was a cash deal.
The pursuer questioned why Mrs Currie would accept £9,000 from her daughter shortly
after the parties separated, in a situation where the defender was in some financial difficulty.
Mrs Currie responded that she had accepted the money "on the basis it was given". She had
helped the defender out financially when required, and would never have left her
grandchildren "destitute".
Mr Marlon Cumberbatch
[95]
Marlon Cumberbatch is a recoveries analyst employed by AMC. He adopted his
affidavits numbers 53 and 93 of process. His evidence was uncontroversial. He spoke to the
28
mortgage balance, the extent of the arrears and the making of payments before and since the
relevant date. He and his colleagues had contacted the pursuer on many occasions since
March 2021 regarding the outstanding arrears. The AMC had been monitoring matters
pending the outcome of these proceedings.
[96]
In his oral evidence, Mr Cumberbatch said that before AMC would lend money in a
secured loan, they would wish to see 3 years of accounts, possibly bank statements,
depending on the nature of the business, cash flow projections and a business plan. He
confirmed that AMC did not consent to transfer of the property, and that no consent to
transfer would be forthcoming. That was because the account was in arrears. AMC had
issued a demand for payment on 26 February 2025. If payment was not received by
12 March 2025, AMC staff would have a meeting with a view to moving to repossessing and
selling the property. AMC remained open to proposals. If the parties said they were going
to sell the property and repay the debt, then repossession would be put on hold. AMC
would not wish to duplicate costs associated with selling the property.
[97]
In cross-examination Mr Cumberbatch confirmed that AMC would lend only up to
60 per cent of market value. If a third party provided funds, that would in principle be
acceptable to settle the debt, providing that AMC were able to carry out checks such as to
comply with regulations aimed at preventing money laundering.
[98]
In re-examination Mr Cumberbatch explained that on 12 July 2023 the pursuer had
made an approach to AMC requesting information as to the amount that would be needed
to pay off the whole of the loan by close of business on 14 July 2023. Mr Cumberbatch had
provided him with the relevant figure, but no repayment had been made.
29
Mr Cameron Andrew
[99]
Cameron Andrew is a chartered accountant. In his oral evidence he required to
correct some erroneous references to documents in his affidavit number 90 of process. He
also departed from the final two sentences of his affidavit, in which he had indicated that
any claim by the defender in the sequestration would be late having regard to section 122(4)
of the Bankruptcy (Scotland) Act 2016.
[100]
His evidence was not controversial. He spoke to correspondence issued by Wbg on
behalf of the pursuer's trustee (7/118,119) and confirmed that the attitude of the trustee
regarding the property was that summarised earlier in this Opinion. He confirmed also that
the pursuer had not cooperated. He had not returned the "Form 10" Statement of Assets
and Liabilities. He had done nothing to cooperate with the trustee, and as a result remained
undischarged.
[101]
The pursuer's trustee would admit a claim by the defender for a capital sum if the
court were to order payment of a capital sum. Although there were time limits for the
submission of such claims by virtue of section 122 of the Bankruptcy (Scotland) Act 2016, it
was Mr Andrew's position that time had not yet begun to run against the defender, because
she had not received any relevant notice such as to start time running so far as she was
concerned.
[102]
In cross-examination Mr Andrew explained that the pursuer had been sequestrated
because he had not paid the fees of his former solicitor. To recall the sequestration it would
be necessary for the pursuer to settle all debts, and the fees and outlays of his trustee.
30
John Currie
[103]
Senior counsel tendered the affidavit of this witness (78 of process), who is the
brother of the defender, for what it was worth. She did not produce him as a witness for
cross-examination. I have placed no reliance on the content of this affidavit.
Decision
Credibility and reliability of witnesses
[104]
There are reasons to be cautious about the credibility and reliability of the evidence
of both the pursuer and the defender. The pursuer has made representations, and on at least
one occasion an undertaking, to the court during these proceedings. He has not followed up
those representations and that undertaking with the actions that he said he would take.
In May 2023 the defender enrolled a motion for an order under section 2(4)(b) of the
Matrimonial Homes (Family Protection) Act 1981 for payment by the pursuer of mortgage
arrears and future mortgage payments. On 14 June 2023 the Lord Ordinary continued the
motion until 14 July 2023, and noted in the Minute of Proceedings that the pursuer had
undertaken to clear the mortgage arrears by 14 July 2023. In the Minute of Proceedings for
14 July 2023 the Lord Ordinary noted that by the next hearing (on 21 July 2023) a number of
things should have been done. Those included payment of the mortgage arrears. The
undertaking was given and the representation made in the context of opposition to the
defender's motion. It is clear from Mr Cumberbatch's evidence that the pursuer made an
inquiry of AMC regarding repayment of the loan on 12 July 2023, 2 days before the case was
due to call in court following the undertaking he had given on 14 June 2023.
[105]
The pursuer at some points did not answer senior counsel's questions directly. At
times he answered her questions in an ironical tone, and instead of engaging with the
31
questions cast back at her aspects of the positive case she sought to make on the defender's
behalf. For example, when she asked him about bank accounts, and the use of personal and
business accounts, he responded, "It wasn't really my department, as you have said", "You
have said Rachel dealt with the finances" and "She was in charge, like you said".
[106]
On her own admission the defender falsely represented to her former employer that
she was sick when she was not, and was paid by her employer for a period when she was
neither at work nor unwell. Her evidence about the movements of money between accounts
in the period after the relevant date did not provide a complete explanation as to why those
transactions were taking place. I consider that evidence in more detail below. As I have
already noted, there was at least one personal account belonging to the pursuer at the
relevant date which is likely to have had a positive balance at the relevant date and in
relation to which there has been no evidence.
[107]
The reliability of both parties in relation to matters relating to business and finances,
and to some extent their credibility also, must be viewed in the context of the very informal
manner in which they operated the partnership. There were no written agreements between
the partnership and the customers of the partnership. The partnership produced no
accounts after 31 January 2018. No income tax has been paid for many years. Capital gains
tax arising from the sale to the Woodland Trust has not been paid. Partnership funds were
in some instances paid into a personal account rather than a business account. While I
accept the defender's evidence that she has had no access to the records of the
business - other than through bank accounts to which she has had access - since
February 2021, and it is matter of agreement that she has not received any money from the
partnership since 21 June 2021, she shares responsibility with the pursuer for the way in
which the business was conducted until February 2021.
32
[108]
The breakdown of the parties' marriage has involved a great deal of acrimony.
Relatives of the pursuer have formed a very negative view of the defender, and the parents
of the defender have formed a very negative view of the pursuer, his family, and some of his
associates. I have borne that in mind in assessing the evidence of Mrs Currie.
[109]
I have no concerns about the credibility or reliability of the evidence of any of the
other witnesses, subject to the observation I make below regarding Mr Bell's qualification to
estimate a figure for the value of the heritable property at the relevant date.
Financial provision
The matrimonial property
[110]
There is very little evidence about the extent of the matrimonial property at the
relevant date, its value at the relevant date, or what matrimonial property each party
retained. What is not in dispute is that the only asset of any real value at the relevant date
was the interest of the parties in the partnership. On the basis of Mr Bell's opinion the value
of that at the relevant date lay in the range £747,861 to £761,591. The value of the property,
taking into account the debt secured over it, was a significant part of that value. The
property is the only asset of any significant value currently in existence.
[111]
No objection was taken to Mr Bell's estimate of the value of the heritable property at
the relevant date, and the pursuer did not challenge the approach that Mr Bell took. It is not
obvious why a surveyor had not been asked to provide a relevant date value for the purpose
of Mr Bell's calculations, or that Mr Bell has any relevant expertise in the valuation of
property. The value of the property held by the partnership at the relevant date probably
had a value lower than £1.1m when it was acquired, when one takes into account that two
portions of land were disponed in 2019 for a price of £175,000. That would suggest a greater
33
monthly increase in value than that proposed in Mr Bell's "straight line" calculation, but
might also result in a slightly lower estimate of the relevant date value. All of the figures at
which Mr Bell arrived are necessarily inexact and produced on a broad basis in the absence
of detailed information about the affairs of the partnership, and in the particular
circumstances of this case, nothing turns on the precise value of the partnership at the
relevant date.
[112]
I find that the pursuer retained rings belonging to the defender, and that he also
retained his own wedding ring and a Tag watch that was matrimonial property. I do not
know the market value of those items, although I have no reason to doubt the evidence
provided by the defender as to the prices for which some of them were acquired. Their
second-hand market value is likely to be considerably lower than their price on acquisition.
The pursuer retained various items of equipment on the farm, but it is not at all clear
whether they were partnership property or personal property.
[113]
The defender acknowledges that she retained a total of £17,743 from money in
various bank accounts. I have concluded for the following reasons that it is more likely than
not that she retained a total of at least £26,743. I do not accept the evidence that the £9,000
she paid to her mother was the repayment of a matrimonial debt.
[114]
The movements of money shortly after the relevant date described in the defender's
evidence involved transfers between accounts. In that context her evidence that she and the
pursuer were moving sums of money "in conflict" is unlikely to be correct. On her own
evidence, the pursuer did not have online access to her personal TSB account, and while the
pursuer could have made withdrawals from it, or used it to buy items online, using his card
on that account, it is not obvious how he could have effected transfers from it to the
34
Santander account. It is not obvious why, if he had, he would have left money there in the
knowledge that the defender was making transfers from it to her personal account.
[115]
In relation to the evidence of both the defender and Mrs Currie, I note that there was
no detail offered by either as to the date on which the pursuer is said to have borrowed the
sum of £9,000. The explanation for the payment by the defender of £9,000 to Mrs Currie is
one that was offered only in a supplementary affidavit tendered for the defender after the
proof had started. It did not feature in either of the affidavits that Mrs Currie provided. I
have not accepted the evidence of either that the £9,000 paid to Mrs Currie was a
matrimonial debt.
[116]
There was no evidence about the value of the defender's pension from her
employment as a bank manager. There is no suggestion that she concealed its existence;
indeed, she mentioned it in an affidavit produced some months before the proof (16 May
2024). No CETV figure was provided. Senior counsel acknowledged that had a CETV been
secured, part would have fallen within the formula for calculation of property referable to
contributions were made before marriage, and that there would have been a compelling
argument to exclude the pension when coming to make orders to divide the matrimonial
property, and I accept that that analysis is correct.
Factors relevant to orders for financial provision
[117]
The pursuer's position was that the matrimonial property should not be shared
equally. Special circumstances existed that justified departure from equal sharing:
section 10(1) of the 1985 Act. The property was part of land that had been farmed by his
family since his great-grandfather became a tenant in 1936. The parties had been able to buy
35
the property at considerably less than market value in 2018 because of his family's
involvement with the land. Those were factors broadly analogous to those identified in
section 10(6)(b) and (d). The list of factors in section 10(6) was non-exhaustive. I accept that
the circumstances in which the land came to be acquired by the parties as trustees for the
partnership are potentially relevant to whether the matrimonial property should be shared
equally.
[118]
The circumstances in which the purchase came to be made for less than full market
value have not been fully elucidated in the evidence. Both parties gave evidence that the
agricultural landlord, Sir Francis Ogilvy, believed that he had found a "loophole" of some
sort so far as the tenancy was concerned. Neither party was able to provide any further
detail as to what that was. Both gave evidence that there was a prospect of expensive
proceedings in the Scottish Land Court, but neither explained at whose instance the
contemplated proceedings would have been. They agreed that it was against the
background of a legal dispute that the bargain came to be concluded. Another matter that is
unclear on the evidence is whether the pursuers' parents conducted some or all of their
business activities as sole traders or in partnership.
[119]
Despite the lack of clarity as to exactly what factors may have been important in the
negotiations to purchase the property, I am satisfied that the parties were presented with the
opportunity to purchase the property because of the existing legal relationships between one
or more of the pursuer's parents and the landlord. I am satisfied also that the parties as
trustees for the partnership purchased the land at a substantial discount. Exactly what led to
the price being agreed as it was is, again, unclear on the evidence. I am satisfied that the
price was agreed in the context of a legal dispute of some nature between the landlord and
one or more of the pursuer's parents. I accept also the defender's evidence that one or more
36
of the pursuer's parents received advice from an accountant to the effect that they had not
been accounting for VAT when they should have been, and that in the context of that advice
they were keen to wind up their business. The parties did not purchase significant parts of
the agricultural land previously the subject of a tenancy under the 1991 Act.
[120]
The parties agreed that the property should be held by them as trustees for their
partnership on a 50/50 basis. Although that is not determinative of how the property should
be shared, it may be a relevant factor: Jacques v Jacques 1997 SC (HL) 20, at 25. The property
includes, but is not limited to, the land that was the subject of the separate commercial lease
relating to the diversification of activities from those that were agricultural in nature. The
pursuer would not have inherited that lease; it was not an agricultural holding. The lease
would have terminated, unless extended, in 2018. The parties purchased the land having
taken on jointly, as trustees for the partnership, a debt of £540,000 to AMC. Until
February 2021 they serviced that debt on the basis of their joint endeavours in the
partnership. The defender played an active role in the business, and in achieving the
purchase. I did not consider that she overstated her role when giving evidence. She said
that that Mr Parmenter of Edwin Thomson had put the mortgage application together.
I accepted her evidence that she was responsible for the material used to prepare the
accounts for the year ending January 2018, and for the business plan presented to AMC that
helped persuade it to provide the borrowing. I accept also her evidence that she was
actively involved in the negotiations to purchase the land and that she attended all, or the
vast majority, of the meetings that took place in that connection.
[121]
The defender has sustained economic disadvantage in giving up her career as a bank
manager, in which she was doing well and had achieved a number of promotions. Between
doing so in 2014 and the relevant date she engaged in activities supporting the enterprises of
37
the pursuer (in his garage business), his parents (in relation to the farm), and then in
participating in the operation of the partnership between the parties. Her activities
conferred some economic advantage on the pursuer, although her activities in the
partnership are also likely to have increased the value of her own interest in the partnership.
[122]
The pursuer has had sole use of the main partnership asset, namely the property. He
has lived on the premises, although it is relevant to note that the parties' children have also
lived there. His parents and a friend have lived rent free on the property. I accept the rental
values to which Mr Struthers spoke in evidence. I leave out of account the log cabin, which
appears not to have planning permission for residential use. The rental value of the
farmhouse alone is £1,800 to £2,000 per month. Taking the lower of those figures, the
pursuer has had sole use of the farmhouse since June 2021, a period of some 45 months.
That alone represents a benefit at the expense of the defender in excess of £40,000. The
rental value for Butterdean Cottage is in the range £1,000, to £1,300 per month.
[123]
The pursuer has also used the property to generate income. The defender has been
excluded from the business of the partnership since February 2021. I accept her evidence
that she has had no access to business papers or records since then. She has received no
partnership income since June 2021. The pursuer has retained all the partnership income
since then. Since the partnership was dissolved he has used the property to generate income
which he has retained. On Mr Bell's figures, the profit generated by the defender's capital in
the business since the relevant date falls in the range £73,230 to £180,467. Given the limited
information available to him, Mr Bell required to take a very broad approach. It is, however,
sufficient for present purposes to note that the benefit that the pursuer has had, and which
has been withheld from the defender, dwarfs the funds retained by the defender.
38
[124]
The partnership has as a matter of law been dissolved: section 33 of the 1890 Act.
It has not been wound up. A partner has the authority to bind the firm, and continues to
have certain rights and obligations notwithstanding the dissolution, but that is only so far as
may be necessary to wind up the affairs of the partnership: section 38. The pursuer's
ongoing use of the partnership assets to produce income, which he has retained since
June 2021, goes far beyond what that provision permits.
[125]
Not only has the pursuer retained the income generated by the property, but he has
not paid any of the instalments due to AMC since the relevant date. That has resulted in
additional interest and fees, reducing the net proceeds. An additional result of his failure to
pay the instalments is an impairment in the defender's ability to obtain credit.
Orders for financial provision
[126]
So far as the sharing of the net value of matrimonial property is concerned, I am
satisfied in this case that fair sharing will be achieved by equal sharing. The circumstances
in which the parties acquired, for their partnership, the property, taken alone, might have
militated against equal sharing, and in the pursuer's favour. There are, however in this case
a multitude of countervailing factors which merit at least the same weight as that to be
accorded to the special circumstance on which the pursuer founded. I have set them out in
paragraphs 120 to 125 of this Opinion. I regard them, and in particular those arising from
the pursuer's use of the partnership assets since the relevant date, as having conferred
economic advantage - as defined in section 9(2) of the 1985 Act - on the pursuer at the
expense of the defender. That said, there is considerable force in the submission made by
senior counsel to the effect that those factors are capable of being viewed either as part of the
overall assessment of fair division in terms of section 9(1)(a) or as expressions of economic
39
disadvantage under section 9(1)(b); and that it is not necessary to allocate factors to a
particular principle, as any award of financial provision must be justified by the principles in
section 9 read as a whole.
[127]
Were it possible for the defender to transfer to the pursuer her interest in the
partnership, including the property, which is on the evidence the only significant asset of the
partnership, in exchange for a capital sum paid to her by the pursuer, that would have been
a desirable outcome. Such a transfer would not have given rise to an immediate charge to
capital gains tax, given the relatively recent changes to the Taxation of Chargeable Gains
Act 1992: see in Foster v Foster 2024 SC 99, paragraph 42.
[128]
That is not possible, as a result of the terms of the standard security, and the
circumstance that the pursuer remains sequestrated. It is a term of the standard security
signed by the parties as trustees for the partnership that the parties cannot transfer the land
at Hodges Farm under burden of the standard security without the prior consent in writing
of AMC. AMC, reasonably, do not consent to the transfer of the land to the pursuer under
burden of the standard security, because of the extensive arrears. Section 15(1) of the
1985 Act provides that the court shall not make an order for financial provision for the
transfer of property if the consent of a third party which is necessary under any obligation
has not been obtained.
[129]
The defender moved me to make an order for sale of the property with division of
the net proceeds between the pursuer's trustee and the defender. To do so would resolve all
issues between the parties. It would be undesirable, cumbersome and disproportionately
expensive to require the defender to commence some other form of proceedings - such as
count, reckoning and payment - in relation to the pursuer's use of partnership assets. In the
meantime, without an order for sale, the property would be repossessed by AMC. The
40
Lord Ordinary had proposed the appointment of a judicial factor to the partnership. The
matter had been investigated, and legal aid to pursue such an appointment had been
refused.
[130]
Senior counsel acknowledged that both parties would require to account to HMRC in
respect of liabilities arising from their respective interests in the partnership, and that that
would require to be resolved by the defender and by the pursuer's trustee.
[131]
The pursuer resisted the defender's motion that I should order the sale of the
property. I should determine what was due to the defender by way of a capital sum. If
there were to be a forced sale, then a relative, possibly his uncle, might purchase the
property. A third party, again possibly a relative, would pay off the mortgage once the
extent of the liability to the defender by way of capital sum was ascertained. Similarly, a
third party would pay his debts so that his sequestration might be recalled. The
matrimonial property should be divided unequally in his favour. The main partnership
asset, namely the property, had been acquired at less than market value because of his
father's tenancy of the farm.
[132]
The pursuer asked for the opportunity for his family to resolve the sequestration by
paying his debts and for his family to repay the loan to AMC. He acknowledged that neither
his uncle nor any other family member had given evidence of being willing or able to assist
him in that way. He said that they had been unwilling to give evidence because of the
conduct of the defender towards them. I noted that there had been no application to have
any witness treated as a vulnerable witness.
[133]
I have no confidence that the pursuer's financial difficulties will be resolved in the
way that he has indicated. I have already narrated some of the procedural history of this
case, and the pursuer's earlier representations and undertaking to the court that the
41
mortgage arrears would be repaid. Those date from summer 2023. The pursuer had a
further opportunity when the defender applied in the summer of 2024 for an order for sale
of the property to make arrangements for a family member to purchase it. He did not take
that opportunity.
[134]
If nothing is done, then AMC will take steps to repossess the property and sell it.
The pursuer does not regard that as entirely undesirable, because of his perception that a
family member may be able to purchase it at an advantageous price, and keep the asset
within the family. Although it is possible that a forced sale by the heritable creditor will not
result in depression of the price, I have concluded, on the basis of Mr Struthers' evidence,
that it is more likely than not that a forced sale by the heritable creditor will result in
depression of the price achieved by about 20 per cent.
[135]
It would be possible to make an order for payment of a capital sum to the defender.
It appears that it would still be open to her to make a claim in the sequestration. That would
leave unresolved the financial issues arising out of the pursuer's use of the partnership
assets. It would leave the parties holding, as trustees, the property for the former
partnership, and the defender's share of that unrealised. The parties were the only partners
in the business.
[136]
The purpose of the 1985 Act was to give to courts the widest possible powers to
enable them to effect a fair division of the matrimonial property on divorce. It must be
construed in a way that does not place artificial barriers in the way of that objective:
Murdoch v Murdoch 2012 SC 271. The "barrier" considered in that case was the absence of a
crave for a particular order. More recently, in Foster, at paragraph 30, referring to Murdoch,
Lady Wise, delivering the opinion of the court, said:
42
"On the basis that the statutory scheme gives considerable flexibility in relation to the
orders that can be sought, especially where an order may be regarded as ancillary to
the court's primary decision, the Extra Division allowed an amendment to achieve
the result supported by the sheriff's findings. It can thus be seen that the court was
willing to take a pragmatic and flexible approach."
[137]
Senior counsel referred to Scottish Law Commission ("SLC") Report number 67 on
Aliment and Financial Provision. The 1985 Act gave effect to many of its recommendations.
Senior counsel drew my attention to paragraphs 3.128, 129, 131, and 141. The SLC
recommended that the power to order sale should be expressed in wide and unqualified
terms, and should be available whenever necessary to give effect to the principles governing
financial provision on divorce. The court should have power to resolve property disputes
between parties, which might be needed where, for example, the parties had been partners
in a small family business. The recommendation to that effect had resulted in the enactment
of section 14(2)(c), which allows the court to make an order determining any dispute
between the parties to the marriage as to their respective property rights by means of a
declarator or otherwise. The court's powers to make incidental orders should be open-
ended, so that the court could give effect to an agreement between the parties, even if the
agreement contained incidental provisions beyond the scope of the court's main powers.
The underlying policy was to provide for flexibility of technique in applying the relevant
principles.
[138]
I am making an order for sale of the property, and for payment of the net proceeds
equally to the defender and the pursuer's trustee. To do so will bring an end to the situation
in which they hold together the principal asset of the former partnership. There is no
sensible alternative to doing so in the circumstances of this case. Although the pursuer was
opposed in principle to that course, he confirmed that he had no objection to the
appointment of Messrs Strutt & Parker to sell the property, or of Messrs Lindsays to carry
43
out the conveyancing. Those matters had been the subject of discussion between him and
senior counsel. I was told that both firms had expressed willingness to act.
[139]
Senior counsel for the defender proposed that that the proceeds of sale should be
distributed with, first, a sum equal to the lesser of the whole proceeds and £400,000 to be
paid to the defender; second, the remaining proceeds up to a total of £400,000 to be paid to
the pursuer's trustee, and thereafter the remaining proceeds to be divided equally between
the defender and the pursuer's trustee. The property was valued at £1,400,000 with secured
debt of £540,290. The proceeds of sale should be in excess of £850,000. The scheme was
intended to deter the pursuer from engineering a forced sale by failing to cooperate with the
marketing and sale of the property. In the event of a forced sale that was not "of [the
pursuer's] making", the order could be varied under section 14(4) of the 1985 Act.
[140]
I accept that it should be in the pursuer's interest that the property be sold for the
best price achievable on the open market. That should increase the chance that the proceeds
will be such as to facilitate his release from sequestration. On any logical approach, the
pursuer should have taken that view before now, and that causes me to have some
reservations about whether any particular scheme for distribution will have the result of
incentivising him to co-operate. If he does not, further orders may be required. In the event
that the property sells for less than Mr Struthers predicts it should, the principal interest in
seeking variation of the order may be that of the pursuer's trustee, rather than the pursuer
personally. The scheme proposed by senior counsel depends on the property achieving the
price predicted by Mr Struthers, or something very close to it, and leaves no explicit
allowance for the costs of marketing and sale.
[141]
With all that in mind, I considered whether I should order sale of the property and
defer making an order regarding the distribution of the proceeds until the outcome of the
44
sale is known. As I understand it, a desire to proceed in that way underlay the application
made to the Lord Ordinary in 2024; the proposal had been that there be an order for sale
and a proof set to take place some months later. Deferring making an order for division of
the funds would, however, inevitably involve further procedure, when there has already
been a proof.
[142]
It is desirable, so far as possible, to make an order that disposes finally of these
proceedings, and that has been my principal concern when deciding what order to make.
There is not a perfect solution; senior counsel acknowledged that the order that she sought
on behalf of the defender brought with it the possibility of an application for variation. An
order structured along the lines of that proposed for the defender should give the pursuer
an incentive to co-operate. The figure mentioned in the proposed scheme is to some extent
arbitrary. The sum of £400,000 for the first distribution to the defender is in my view too
high, having regard to allowance for cost of sale and some variation downwards from the
sale price predicted by Mr Struthers. A slightly lower figure may mitigate the risk of further
procedure in the case. I have therefore decided to adopt the structure proposed by the
defender, but to select the figure of £374,000 rather than £400,000 as the figure for the first
instalment. The figure takes account of the factors I have already identified as relevant,
namely cost of sale and some possible variation downwards in the price. It is also
approximately half of the value of the parties' interest in the partnership at the relevant date
on the lower of the values identified by Mr Bell.
[143]
I shall therefore issue an interlocutor divorcing the defender from the pursuer. The
interlocutor will include an order for sale of the property, with associated orders for the
marketing and conveyancing of it. The net proceeds will be paid so that the first payment is
to the defender of the lesser of £374,000 and the whole net proceeds; the second of the
45
remaining proceeds up to £374,000 to the pursuer's trustee, and thereafter equal division of
any remaining proceeds equally between the defender and the pursuer's trustee. I reserve
all questions of expenses.
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