Lack of legal advice insufficient to render divorce agreement ‘unfair’

The Sheriff Appeal Court ruled that the man’s decision to sign the agreement without seeking the advice of a solicitor did not make the agreement “unfair and unreasonable” when it was signed.

Sheriff Principal Ian Abercrombie QC, Sheriff Principal Craig Scott QC and Appeal Sheriff Nigel Ross heard that the pursuer and respondent James Bradley and the defender and appellant Jacqueline Bradley separated in May 2007 and by agreement dated 2 December 2008, agreed the distribution of assets between them.

Pre-divorce agreement

Mr Bradley, a retired police officer, retained assets including his police pension, a vehicle and shares of two investment policies.

He also received a capital payment of £120,000 from the defender, who obtained a loan in that sum and for that purpose, in return for his agreement that she would retain the matrimonial home.

He undertook to pay the defender a one-half share of his monthly pension payments, without limit of time, until the death of one of the parties.

In order to give the defender a degree of security for this ongoing monthly payment, the pursuer (who used the £120,000 to purchase a house) was to grant a security over that house for all sums due to the defender.

Ms Bradley, a civil servant, retained the matrimonial home, her own modest pension entitlement, a share of the investment policies and one of the couple’s two cars.

She also assumed the burden of paying off the loan of £120,000, but was to receive a monthly income from the pursuer of approximately £1000, being one-half of his monthly pension payment.

Unfair and unreasonable

The parties operated that arrangement, but Mr Bradley raised a divorce action in 2012 and during the proof in 2016 he sought reduction of the 2008 agreement.

Section 16(1)(b) of the Family Law (Scotland) Act 1985 allows a court to set aside, in whole or in part, an agreement as to financial provision to be made on divorce “where the agreement was not fair and reasonable at the time it was entered into”.

Mr Bradley argued that the test has been met because he had received “no legal advice” when he signed the agreement; he was in “poor mental health”; he was “dominated” by the defender and was “in fear” of her; she “withheld vital information” from him; and he did not read it before signing.

After proof the pursuer failed on all of these grounds, but the sheriff observed that the pursuer failed to obtain legal advice on what was an “extremely unusual and open ended agreement” and therefore concluded that the agreement was unfair in its terms as it “flew in the face” of the “ethos” of the 1995 Act.

The sheriff set aside two of the clauses: clause 6, which required Mr Bradley to create a standard security over his new house; and clause 4, which required Mr Bradley to pay half his police pension to his ex-wife until the death of either party.

Sheriff erred in law

The first ground of appeal was that the sole justification relied upon by the sheriff, namely the pursuer’s choice to sign the agreement without legal advice, was not sufficient to show that the agreement was unfair and unreasonable at the time it was entered into, while the second ground was that the variation imposed by the sheriff amounted to a rewriting of the agreement in a way which would not have been agreed to, and which was unworkable on a practical level many years after the agreement was made.

The appeal sheriffs upheld the first ground of appeal after ruling that the sheriff misdirected herself in considering that fairness and reasonableness required a time-limited agreement.

Delivering the opinion of the court, Appeal Sheriff Ross said: “An apparently indefinite payment arrangement may be capable of operating unfairly or unreasonably, but this will turn on the facts of each case, not on any other principle introduced by the 1985 Act. Whatever the legislative intent of the 1985 Act might be, the terms of the 1985 Act do not limit parties’ freedom in reaching their own specific arrangements. Parties are free to regulate their own affairs by agreement, subject to fairness and reasonableness.

“The 1985 Act does not require parties to conform to any particular model of agreement, or time-scale, or content. It does not require parties to obtain the consent of the court. It does not require the court to approve any such arrangement. Any arrangement remains in force until one party assumes and discharges the burden of proving to a court that the agreement is unfair or unreasonable. In that context, section 16(1)(b) directs the court to assess only whether the terms of the agreement are unfair and unreasonable, without reference to any wider test or ethos.

“The sheriff found that the relevant terms were unfair and unreasonable because they flew in the face of the 1985 Act principles. In this, we consider that the sheriff was in error. There are (for the purposes of section 16(1)(b)) no such principles, other than fairness and reasonableness.”

The court also observed that the findings in fact showed that the pursuer had a solicitor at the material time but chose not to take legal advice because he considered that he did not need it as the parties had discussed the terms of settlement frequently and arrived at a position that was of “mutual benefit” to them.

Appeal Sheriff Ross added: “On the basis of these findings, we consider that the sheriff had insufficient factual basis to conclude that the pursuer had suffered unfair or unreasonable disadvantage as a result of lack of legal advice. The pursuer had legal advice if he wanted it. He chose not to take legal advice…

“The mere fact that an agreement becomes inconvenient or a matter of later regret, does not mean that it was unfair or unreasonable at the time it was entered into. Even the fact that it subsequently transpires that the agreement has led to an unequal, and possibly very unequal, division of assets does not by itself necessarily give rise to any inference of unfairness or unreasonableness (Gillon v Gillon (No 3) 1995 SLT 678).

“We have determined that the sheriff was in error in finding that the agreement was unfair and unreasonable at the time it was entered into. It follows that this appeal must be granted. We refrain from commenting on the merits of the agreement as a whole. It is not the function of an appeal court to conduct a further assessment of unfairness or unreasonableness. The burden remains on the party offering to prove the existence of those characteristics and, in that regard, the pursuer has failed.”