Posted: Monday 21 March 2011
When you hear the phrase “Scottish matrimonial law”, what images spring to mind? No maintenance? A weeping ex-wife, bemoaning her fate at the hands of the penny-pinching misogynistic Scots system? Or nothing at all, because as a family practitioner say in the Home Counties you feel it’s just not something you need to know about?
This article will provide a brief summary of Scots matrimonial law, and compare how Scots and English law deal with various financial circumstances arising upon divorce. Increasingly,the Family Law Team at the author’s firm (based in Edinburgh and Glasgow) find that they are dealing with cases which have an English element, and so knowledge of English law is an advantage to a Scottish family practitioner. In England the converse must be true – what do you advise when a client who last lived in Scotland during the marriage, steps through the door, or whose spouse lives there, or who has property in Scotland? The aim of this article is to better equip English practitioners to deal with such a situation.
Divided by a common language
It is not just the substance of the law which is different in Scotland, but the legal language as well. Here is a brief summary:
Term in England & Wales
Equivalent Scottish Term
The Sheriff Court
An Initial Writ if you are divorcing in the Sheriff Court, or a Summons if you are divorcing in the Court of Session. These are legal pleadings not court forms
Does not exist. The Initial Writ or Summons comprises both the Petition and the Form A, as these include formal requests for financial provision.
Decree nisi / decree absolute
Do not exist. There is only one decree of divorce in Scotland, which is only granted after all issues of financial provision have been resolved.
When would Scots law apply?
Let’s assume that you have a case where both the courts in England & Wales and the Scottish courts could, potentially have jurisdiction – most commonly because one party is now resident in Scotland and one is resident in England. Say the husband is living in Scotland and has raised an action there, while the wife is living in England. What happens if the wife objects to the Scottish proceedings, and wishes to commence English proceedings instead? Which court wins the jurisdiction battle?
The view taken by Parliament and currently being applied is that Council Regulation (EC) No 2201/2003 (Brussels II bis) does not apply for intra-UK divorce jurisdiction conflicts. Instead, the relevant statute is the Domicile and Matrimonial Proceedings Act 1973. In terms of the 1973 Act, commencing an action “first” makes no difference.
In our example above, under the 1973 Act, Schedule 3, para 8, a Scottish action must be stayed on the application of the other spouse who has commenced divorce proceedings in England or Wales if:
The Scottish system for financial provision upon divorce is quite distinct from that of ancillary relief in English law. The law relating to finances is set out in the Family Law (Scotland) Act 1985, as amended by the Family Law (Scotland) Act 2006. So, there has been a fairly recent overhaul of Scots matrimonial law.
One very important point to highlight is that in Scotland, one cannot seek financial provision (i.e. ancillary relief) after decree of divorce. Therefore, if your client is served with Scottish divorce proceedings, you must lodge a “Notice of Intention to Defend” if there remain any financial matters to be resolved. If you do not do so within the set timeframe, decree of divorce will probably be pronounced automatically, and your client will have lost any opportunity of making a financial claim, whether in the Scottish or the English courts. You may also be exposed to a claim for professional negligence.
There are various steps to be taken in terms of Scots law with regard to finances, as follows:
1. Identify the date of separation – known as the “relevant date”
2. Identify the “matrimonial property” at the relevant date.
3. Value the matrimonial property at the relevant date.
4. Consider appropriate division in terms of the principles of the 1985 Act
1 “Relevant date”
In terms of the legislation the “relevant date” is the earlier of “(a) the date on which the parties ceased to cohabit; (b) the date of service of the summons in the action for divorce”.
In most cases, the relevant date will be the date the couple actually separate. It is very important to establish this, because this is the point at which a “snapshot” of the parties’ finances is taken. Any assets or debts acquired after that date are not matrimonial property.
2 “Matrimonial property”
Matrimonial property is all the property belonging to the parties (or either of them) at the relevant date, which was acquired by them:
The following property is excluded:
Therefore, pre-marriage, inherited or gifted assets are not matrimonial property, as long as they remain in the same form throughout the marriage. However, if such “non-matrimonial” property is sold during the course of the marriage and the sale proceeds are used to buy something else (e.g. a car, another home) then the “something else” will be matrimonial property. There may be scope for arguing that the value of that converted property should be discounted in some way, but that is a separate issue. An asset either is, or is not, matrimonial property: there is no half-way house.
Once the assets which are matrimonial property have been identified, they must be valued, as at the “relevant date”.
One exception to this general rule is in the case of property which is to be transferred between the spouses. Where property is to be transferred from one spouse to the other, the 2006 Act changed the law so that it will be valued at the “appropriate valuation date” which is usually either a date agreed by the parties, or current date.[i] For example, if the jointly owned family home is to be transferred to one spouse, then the valuation used will be as at the date of agreement or court order, rather than the value at the date of separation.
4 Division of matrimonial property
In an action for divorce, either party may apply to the court for payment of a capital sum; an order for the transfer of property; payment of “periodical allowance” (i.e. maintenance post-divorce); payment of “spousal aliment” (i.e. maintenance pre-divorce); a pension lump sum order; and/or pension sharing, all in terms of s.8(1) of the 1985 Act.
When such an application is made, the Court is directed to make such order as is:
“(a) justified by the principles set out in section 9 of the Act; and
(b) reasonable having regard to the resources of the parties.” [ii]
There are 5 principles in relation to financial provision, set out in the 1985 Act, s.9(1):
(a) the net value of the matrimonial property should be shared fairly between the parties to the marriage;
(b) fair account should be taken of any economic advantage derived by either party from contributions by the other, and of any economic disadvantage suffered by either party in the interests of the other party or of the family;
(c) any economic burden of caring, after divorce, for a child of the marriage under the age of 16 years should be shared fairly between the parties;
(d) a party who has been dependant to a substantial degree on the financial support of the other party should be awarded such financial provision as is reasonable to enable him to adjust, over a period of not more than three years from the date of decree of divorce, to the loss of that support on divorce;
(e) a party who at the time of the divorce seems likely to suffer serious financial hardship as a result of the divorce should be awarded such financial provision as is reasonable to relieve him of hardship over a reasonable period.
The general rule in terms of the principle contained in s. 9(1)(a) (the main principle in the vast majority of cases) is that the net value of the matrimonial property identified and valued at the relevant date will be divided fairly. “Fair” means “equal” unless there is a compelling argument to justify a fair but unequal split.
Section 10 provides that the court can depart from “equal sharing” if this departure is justified by “special circumstances”. The law does not provide an exhaustive definition of “special circumstances”, and the facts and circumstances of each case need to be considered individually.[iii] One situation which does crop up quite often is where the source of funds used to acquire an item of matrimonial property came from outwith the marriage – for example, where equity from a pre-marriage property is used towards the purchase of a matrimonial home. It is often argued (with varying degrees of success) that the pre-marriage element should be excluded. This is not a straightforward area of law and ultimately it is a matter of discretion to the Court, in the absence of agreement.
Principle 9(1)(b) relates to balancing economic advantages and disadvantages. The typical use of this is to seek compensation for a wife who has followed the traditional child-rearing and housekeeping role throughout a fairly long marriage. The husband has been advantaged by her contributions to the household; the wife has been disadvantaged by her lack of career and pension at the end of the marriage. However, it is sometimes difficult to make a strong case under this principle – the claimant first has to prove that there has been an imbalance, and secondly that this imbalance would not be corrected simply by a fair sharing of the matrimonial property. [iv]
Section 9(1)(b) is generally used in addition to 9(1)(a), to justify a larger than 50% share. However, it can also be used where there is little or no matrimonial property which would fall to be shared under 9(1)(a).[v]
Maintenance post-divorce (termed “periodical allowance”) can only be awarded in terms of sections 9(1)(c), (d) or (e), and then only if a capital sum or property transfer would be inappropriate or insufficient to allow fair sharing.
Principle 9(1)(c) is intended to compensate for the economic burden of childcare. However, this was introduced prior to the Child Support Act, and so the CSA is seen to have taken over the function of regulating maintenance in respect of children. This principle can however be used to increase the amount of capital sought by the claimant on divorce.
Under principle 9(1)(d), periodical allowance can be awarded as an “adjustment allowance”, designed to allow a spouse to get back onto his/her feet after separation. There are fairly tight limits on this. The claimant must be financially dependent to a substantial degree on the other spouse (and so a claimant who gets back on their feet and finds a job in between separation and divorce may not qualify). Payment is limited to a maximum period of 3 years from divorce, and in practice is likely to be less than that in many cases.
Under principle 9(1)(e), maintenance can be sought for an unlimited period. However, to qualify the claimant would require to otherwise suffer “serious financial hardship as a result of the divorce”. Until very recently, this has been tightly construed by the Courts, with awards in only a handful a cases. A judgment from 2009, where maintenance was awarded a lengthy period (until the husband’s retiral), may indicate a change in policy from the Courts.[vi]
In summary, under Scots law, the wealth built up by the couple in the course of the marriage will usually be divided more or less equally, unless one of the spouses can come up with a compelling argument as to why a fair share should be an unequal share in their favour. While many cases settle at around more or less equal shares, there are a number which settle at around 55/45%, some at 60/40% and a very small minority at ratios in excess of that.
So that’s the law, what do I actually need to know?
As a practitioner, the most important question is which cases are dealt with more favourably under Scots law as opposed to English law (and vice versa)? I have attempted to set this out under the following headings.
In Scotland, we would attempt to provide for a spouse (usually the wife) who requires additional support, perhaps due to taking on the burden of childcare, via sections 9(1)(b) and (c). However, realistically, an exceptionally strong argument would be required to persuade a court to award more than 60% of the matrimonial property.
If the needs of the primary carer are greater than would be satisfied by equal sharing, English law may therefore be financially advantageous for that party. The hurdle of getting past equal sharing seems to be more easily overcome in England, despite the principle enunciated in Charman.
Spousal maintenance post-divorce
There is a strong emphasis on achieving a financial clean break under Scots law. Periodical allowance (i.e. maintenance post-divorce) is limited by the 1985 Act, s.13(2), to situations where it is justified by s9(1)(c), (d) or (e) of the Act, and where an order for payment of a capital sum or property transfer would be inappropriate or insufficient. In contrast, the English Courts are much more ready to award ongoing spousal maintenance post-divorce.
In Scotland, pensions are valued by obtaining a CETV of the fund as at the relevant date (i.e. separation) – and there may be situations where a relevant date value rather than a current value could make a significant difference. The CETV is then apportioned to the period of the marriage.
That apportioned CETV is then treated as being equivalent to liquid assets, with no discount applied to take account of the fact that the pension can only be accessed on retirement. Pensions can be shared or offset, as in England – however, there is no compulsion on the claimant spouse to seek a pension share. For example, if the husband had a pension with a CETV of £100,000, the wife could seek a capital sum of £50,000 - the husband cannot force her to accept pension sharing instead, or a discounted capital sum.
Accordingly, if one spouse has a particularly large pension fund, it may be worthwhile carefully considering matters and perhaps taking actuarial advice, because Scots law may be advantageous to the claimant spouse, if cash is the priority.
In Scots law, if an inherited asset is not “converted” to matrimonial property during the course of the marriage, it cannot be taken into account in the financial division. The certainty of this provision contrasts with the variety of approaches taken by the English courts in assessing the extent to which inherited wealth should be divided. Clearly, in some cases, this factor could make a large difference to the outcome.
Pre-marital and post-separation assets
In Scots law, if a pre-marital asset remains in the same form at the end of then marriage as at the start, it is treated as non-matrimonial and is excluded from division (unless a property bought pre-marriage as a family home - see above). An asset acquired post-separation (whether a lottery win, or a further employment-related bonus) is similarly non-matrimonial, and excluded. Again, the certainty of the Scottish position contrasts with the discretion left to the English judiciary.
Quick (and cheap) divorce procedure
In Scotland, the grounds of divorce were altered by the Family Law (Scotland) Act 2006 and are now:
- unreasonable behaviour
- 1 year’s separation with consent of other spouse
- 2 years’ separation without consent
It is possible to apply for divorce within the first year of marriage. A simplified divorce procedure is available if financial matters are agreed, the parties are divorcing on either of the separation grounds, and there are no children under 16. The procedure is simple and cost-effective (a tick-box form which can be completed by parties themselves, plus a court charge of £90).
In the English courts, divorce procedure is geared towards early disclosure and narrowing of the issues in dispute (by use of Forms E, Questionnaires, FDR Hearings etc). The court procedure in Scotland is quite different. Any divorce (other than under simplified DIY procedure) is commenced with formal legal pleadings which set out the pursuer’s case. The defender then responds and sets out his/her case in the same way. There is no equivalent of a Form E. There is no FDR. In the absence of settlement (or any interim matters, such as maintenance), the case will proceed straight from a procedural hearing to a final hearing.
In short, there is little procedural incentive for early disclosure in Scotland. Although the vast majority of cases are settled amicably, either without any court action or early in the action, if disclosure is not forthcoming, then the procedure for compelling this by recovering documents can be costly and time-consuming. The author considers that a Scottish version of Form E would be an excellent import into the Scottish system.
Framing the agreement
A formal separation agreement signed by both parties (a “Minute of Agreement”) is binding – there is very limited scope for overturning such an Agreement. If registered in a public register (known as the “Books of Council and Session”), the obligations in this Agreement can be enforced in the same way as a court order. There is no need for judicial rubber-stamping of these types of agreement. If parties settle matters outwith Court (as happens in the majority of cases) the Court does not need sight of the agreement. Pension sharing can also be dealt with in an appropriate Minute of Agreement, rather than requiring a court order, but can only be implemented upon divorce.
It is the author’s view that in the majority of cases, the Scottish framework produces a more predictable outcome, with less judicial flexibility. The benefit of this to clients is evident, given that the question they most often wish answered is “What will the Judge decide?”. Greater certainty often leads to cases settling through negotiation. The flipside of this is less flexibility. Much discussion could be had about where the balance should fall between these two principles.
In matters of procedure, it seems that both jurisdictions could usefully borrow some aspects from the other. Perhaps the most startling difference in approach is the facility within the Scottish system for parties to contract a binding settlement directly with each other, without the necessity of approval by the Court.
Perhaps the most frequent criticism of Scots matrimonial law by English practitioners is the emphasis on the “clean break”, and the absence of lengthy awards of maintenance. The Scots lawyer would counter that by emphasising the primacy of equal division of matrimonial assets in Scots law (rather than a lesser sum being awarded to satisfy the claimant’s perceived needs); the possibility of a greater award of capital to the claimant by utilising s.9(1)(b) and (c) of the 1985 Act; and the generous view of pensions. Again, much time could be spent theorising about the philosophical differences guiding the principles of both jurisdictions. It is undoubtedly the case that a claimant spouse can, in certain circumstances, obtain a more generous outcome in the English courts than the Scottish courts.[vii] However, it is hoped that this article demonstrates that in certain circumstances, the converse is also true.
Lucia Clark of Morton Fraser LLP, a solicitor qualified and practising in both Scots and English family law, provides a practitioner’s guide to matrimonial law and practice in Scotland, and the similarities to and differences from the law of England and Wales.
For any information on Family Law or English Services please contact Lucia Clark
[i] This was to correct a perceived flaw in the previous legislation, which arose at a (long-forgotten!) time of high property price inflation. Say a house rises dramatically in value since the separation. One spouse wants transfer of the house. The house (in terms of the old law) had to be valued at the date of separation. This means that the spouse seeking to retain the house could get a “windfall” benefit – e.g. keeping a house worth £1,000,000, which has been valued at £800,000 for the purpose of the divorce proceedings.
[ii] 1985 Act, s.8(2)
[iii] For examples, see Jacques v Jacques 1997 SC (HL) 20 and MacLean v MacLean 2001 Fam LR 118
[iv] See Coyle v Coyle 2004 Fam LR 2; De Winton v De Winton 1998 Fam LR 110
[v] Ranaldi v Ranaldi 1994 SLT Sh Ct 25; Wilson v Wilson 1999 SLT 249
[vi] Smith v Smith, decision of Court of Session on 6 January 2009 – available from www.scotcourts.gov.uk/opinions/2009CSOH02.html
[vii] But perhaps only if the claimant is a woman – see Radmacher…