Wallis v Wallis

Under the Family Law (Scotland) Act 1985, matrimonial property must be valued at the relevant date and, absent special circumstances, its net value must be shared equally. A later increase in an asset’s value cannot be included merely because one spouse transfers a jointly owned interest to the other.

The ownership of an asset at the relevant date does not affect the statutory calculation. Any financial order must both implement a principle in section 9 and be reasonable in view of the parties’ resources at the hearing.

Following separation, the husband sought divorce and both parties claimed financial provision. The sheriff valued the matrimonial property at the statutory relevant date. When ordering the wife to transfer her half-share in the matrimonial home, however, he awarded her half of the house’s subsequent increase in value as well as her share of its earlier net value.

The sheriff principal refused the husband’s appeal. The First Division allowed a further appeal and reduced the capital award from £31,450 to £19,450: 1992 S.C. 455. The wife appealed to the House of Lords. The central issue was whether the Family Law (Scotland) Act 1985 permitted the post-separation increase in value to be reflected in the payment accompanying the transfer.

1. Appeal dismissed unanimously. Lord Keith of Kinkel delivered the leading speech. Lord Jauncey of Tullichettle, Lord Lowry, Lord Slynn of Hadley and Lord Woolf agreed that the First Division had correctly reduced the capital sum to £19,450.

2. Per Lord Keith, sections 9(1)(a) and 10 of the Family Law (Scotland) Act 1985 require the net value of matrimonial property to be determined at the relevant date. In the absence of special circumstances, that value is shared equally. A change in value after that date forms no part of this calculation.

3. Per Lord Keith, it is immaterial whether an item was owned by one spouse or jointly at the relevant date. That ownership cannot enlarge the amount justified by equal division. The wife’s transfer of her half-share therefore did not entitle her to half of the house’s subsequent appreciation. Nothing in the Act justified division of that increase.

4. Per Lord Keith, section 8(2) imposes two limitations. An order must be justified by one or more section 9 principles and must be reasonable having regard to the parties’ resources at the hearing. The resources requirement may address some post-valuation changes, such as a serious fall in an asset’s value, but it cannot authorise an award exceeding the governing statutory principle.

5. Lord Keith observed that the Act might not produce a fair solution where an asset depreciated substantially and its owner lacked other resources. It was uncertain whether an ordinary change in value could constitute special circumstances under section 10(1). Lord Jauncey agreed that legislative amendment deserved consideration. He emphasised that the two section 8(2) requirements are cumulative and suggested that a limited discretion might be needed where equal division would fail the resources requirement but making no order would be unjust.

1. House of Lords: Dismissed the wife’s appeal and affirmed the First Division’s reduction of the capital sum to £19,450: [1993] UKHL 16.

2. First Division of the Court of Session: Allowed the husband’s appeal and substituted £19,450 for the sheriff’s award of £31,450: 1992 S.C. 455.

3. Sheriff principal: Refused the husband’s appeal against the sheriff’s interlocutor.

4. Falkirk Sheriff Court: Granted divorce and ordered the husband to pay £31,450 in return for the wife’s transfer of her interests in the matrimonial home and household property.