Inner House refuses appeals by divorcing couple on financial provision

The defender and reclaimer, MMA, argued that the Lord Ordinary had erred in her assessment of the evidence led in relation to his many business interests. The pursuer, SCA, cross-appealed on the Lord Ordinary’s decision to allow payment in instalments.

The appeal was heard by Lord Malcolm, Lord Woolman, and Lord Pentland.

Assumed a payout

During the proof, the Lord Ordinary rejected the commercial surveyor and forensic accountancy evidence led by the defender. She instead adopted an illustrative valuation of the defender’s various business interests (appendix 15) that valued them at just under £10 million.

The valuation proceeded on the basis that the defender’s various business assets and trading entities would be consolidated in one company and then sold to a willing purchaser as a whole. This would maximise the value, in contrast to the defender’s approach of addressing each part of the business separately, and increase the value of the matrimonial property.

The defender appealed on two grounds, the first of which was withdrawn. The second ground of appeal related to the valuation of a restaurant business owned by a partnership consisting of the defender and his father. The valuation of this business was based on the assumption that the father would be paid out of the partnership at the relevant date.

The father gave evidence that he would object to the sale, but this was rejected by the Lord Ordinary on the view that he would not stand in the way of a realisation of the partnership interests if there was a reasonable financial incentive.

On appeal, it was submitted for the defender that the father’s evidence should have caused the Lord Ordinary to reject the partnership valuation relied on, and this on the view that he would have held out for more than his capital account at the relevant date. This, it was argued, was an error of calculation on the Lord Ordinary’s part that overstated the value of the matrimonial property.

Relatively insignificant

The opinion of the court was delivered by Lord Malcolm. He acknowledged that the submission regarding the calculation error was being made for the first time before the Inner House, saying: “The Lord Ordinary was not invited to recalculate the relevant part of appendix 15 on the basis of inferences to be drawn from the father’s evidence. We do not know what her view would have been.”

He continued: “The point raised now, while perhaps not de minimis, is relatively insignificant in the overall context of the case and the sums involved. It is not open to the defender to characterise it as an error on the part of the Lord Ordinary, and certainly not something which would warrant this court in upsetting her detailed and careful assessment of the value of the matrimonial property.”

Addressing another problem in the defender’s submissions, he said: “If [the defender’s] approach was accepted in principle, this court would have to assess whether a capital gains tax liability would have arisen, if so at what amount, and its impact on the figures. Counsel for the pursuer observed that there was no evidence to allow this to be done, none of the witnesses having mentioned such a liability. This is illustrative of a more general problem in that, even if the court did see merit in this ground of appeal, it is not in a position to unscramble the Lord Ordinary’s figures and identify appropriate alternatives.”

Interest on instalments not unreasonable 

After issuing her opinion, the Lord Ordinary determined that the sum should be payable in instalments because of the impact of coronavirus on trading and the size of the capital sum. Interest was to fall due on each instalment from its due date. The pursuer cross-appealed against this outcome and argued that interest should be paid on the whole sum from the date of the interlocutor.

Lord Malcolm said of this argument: “There is no merit in this challenge to a discretionary decision which was clearly open to the Lord Ordinary. She listened to the competing submissions and reached a decision which cannot be described as unreasonable or manifestly wrong.”

For these reasons, both the reclaiming motion and the cross-appeal were both refused. The interlocutor of the Lord Ordinary was upheld subject to the correction of a minor clerical error.