McDonald v Newton or McDonald
| Jurisdiction | Scotland |
| Judgment Date | 11 August 2015 |
| Neutral Citation | [2015] CSIH 61 |
| Docket Number | No 8 |
| Date | 11 August 2015 |
| Court | Court of Session (Inner House) |
[2015] CSIH 61
Extra Division
Sheriff Court
Husband and wife — Divorce — Financial provision on divorce — Rights and interests of spouse in pension superannuation scheme — Proportion of the value of spouse's rights and interests referable to the period of marriage prior to separation — Family Law (Scotland) Act 1985 (cap 37), sec 10(5)
Section 10(5) of the Family Law (Scotland) Act 1985 (cap 37) (“the 1985 Act”) provides that the proportion of any rights or interests of either party under a life policy or similar arrangement and in any benefits under a pension arrangement which either party has or may have (including such benefits payable in respect of the death of either party) which is referable to the period during the marriage but before the relevant date shall be taken to form part of the matrimonial property.
Regulation 3 of the Divorce etc (Pensions) (Scotland) Regulations 2000 (SSI 2000/112) (“the 2000 Regulations”) provides for the method by which the value of benefits under pension arrangements must be calculated and verified for the purposes of the 1985 Act as at the relevant date. Regulation 4 deals with the apportionment of the value of the benefits for the purposes of sec 10(5) and provides that the value of the proportion of any rights or interests which a party has or may have in any benefits under a pension arrangement as at the relevant date and which forms part of the matrimonial property shall be calculated in accordance with the formula A multiplied by B over C where A is the value of the rights or interests in any benefits under the pension arrangement which is calculated as at the relevant date in accordance with reg 3(2), B is the period of C which falls within the period of marriage of the parties before the relevant date and if there is no such period, zero, and C is the period of the membership of that party in the pension arrangement before the relevant date.
In proceedings for divorce, it was agreed that the relevant date on which the parties ceased to cohabit was 25 September 2010. The parties had married on 22 March 1985 and the pursuer was found to be unfit to continue working as a miner due to having sustained a leg injury in the same year. He exercised the right to retire on grounds of ill-health and to start receiving a pension income at the age of 32 as from 10 August 1985. The pension income had commenced for life from that date and the cash equivalent transfer value of the pursuer's interest in the scheme had increased over time. The question arose between the parties as to what proportion of the pension value should be taken to form part of the matrimonial property.
Before the sheriff, the defender and appellant submitted that the whole of the period of marriage before the relevant date required to be taken into account. All periods of membership were included, including pensioner membership. The pursuer and respondent submitted that reg 4 of the 2000 Regulations was ambiguous and the ‘period of membership’ in relation to the C part of the formula required to be read as ‘active membership’, that therefore the period which should be considered as the relevant period for assessment of the matrimonial portion of the pursuer's interest was the period during which he had made savings in the form of pension contributions during the marriage, or the ‘active period’, and which was a period of some five months rather than the twenty-five and a half years of the marriage prior to the relevant date. The sheriff accepted the pursuer's position, thereby excluding from the pool of matrimonial property a large proportion of the value of the pension as at the relevant date. The defender and appellant appealed against that finding to the Court of Session.
Held that: (1) there had to be a pension in existence at the relevant date and to which contributions had been made in the course of the marriage for it to fall to be included as matrimonial property in terms of sec 10(5) of the 1985 Act, the relevant period for assessment of the proportion of it acquired before and after the date of marriage was in terms of the regulation formula the period when actual contributions towards the pension were being made and value created, thereby excluding periods of deferred or pensioner membership, and the sheriff had decided the issue correctly (per Lord Malcolm, paras 45, 46, Sheriff Principal IR Abercrombie QC, paras 48, 51; diss Lady Smith, paras 36, 37); and appeal refused.
Observed that if application of the 1985 Act provisions and the 2000 Regulations as determined by the court were to give rise in a specific case to unfairness, an application under sec 10(6) of the 1985 Act could be made, although no such application had been made here (per Lord Malcolm, para 45; Sheriff Principal IR Abercrombie QC, para 48).
Thomas Clark McDonald raised an action of divorce against his wife Annie Flockhart Moffat Newton or McDonald in the sheriff court of Lothian and Borders at Edinburgh. The sheriff (WH Holligan), on 12 December 2013, issued a decision dealing with, inter alia, the financial provision to be made in relation to apportionment of the pursuer's pension on divorce. The appellant appealed against that decision to the Inner House of the Court of Session.
Comhairle nan Eilean Siar v Scottish Ministers [2013] CSIH 45; 2013 SC 548; 2013 SLT 687
Gribb v Gribb 1996 SLT 719; 1995 SCLR 1007
Jackson v JacksonUNK 2000 SCLR 81; 1999 Fam LR 108
Jacques v Jacques sub nom Lightbody v JacquesSC 1997 SC (HL) 20; 1997 SLT 459; 1997 SCLR 108; [1997] 1 FLR 748; 1997 Fam LR 3; [1997] Fam Law 395; The Times, 6 December 1996
Little v Little 1990 SLT 785; 1991 SCLR 47
Scottish Executive, Divorce etc (Pensions) (Scotland) Regulations 2000: Explanatory Note (Scottish Executive, Edinburgh, April 2000) (Online: http://www.legislation.gov.uk/ssi/2000/112/note/made (5 February 2016))
Scottish Law Commission, Report on Aliment and Financial Provision (Scot Law Com no 67, November 1981) (Online: http://www.scotlawcom.gov.uk/publications/reports/1980–1989/ (5 February 2016))
The cause called before an Extra Division, comprising Lady Smith, Lord Malcolm, and Sheriff Principal IR Abercrombie QC, for a hearing, on the summar roll, on 8 May 2015.
At advising, on 11 August 2015—
Lady Smith—
[1] This appeal concerns a wife's claim for a pension sharing order under sec 8(1)(baa) of the Family Law (Scotland) Act 1985 (cap 37) (“the 1985 Act”).
[2] The issue is: what proportion of the value of her husband's rights or interests in the British Coal Staff Superannuation Scheme is referable to the period of their marriage which subsisted before the date they separated (see 1985 Act, sec 10(5))?
[3] The pursuer used to work as a miner. On 11 December 1978, he joined an occupational pension scheme, namely the British Coal Staff Superannuation Scheme (“the scheme”).
[4] On 22 March 1985, he married the defender. In 1985, he was found to be unfit to continue working as a miner due to having sustained a leg injury. The effects of his injury were such as to disable him from performing the duties of that employment and he thus acquired the right to retire from British Coal on grounds of ill-health and to start receiving a pension income considerably earlier than normal retiring age and without having had to survive until normal retiring age; at that time he was 32 years old and had only completed 6 years and 243 days of pensionable service. He decided to exercise that right. He stopped contributing to the pension scheme on 10 August 1985 and became entitled to receive a pension income, for life, from that date. He has received pension income since then.
[5] The pursuer has, in terms of the scheme, been a member of it since 11 December 1978 and remains a member, “member” being defined as “any person whether or not in Eligible Employment and whether or not for the time being a Contributor to the Scheme who is entitled to any benefits thereunder”. “Contributor” is defined as “a Member who is for the time being making contributions from his salary to the Scheme” (see British Coal Staff Superannuation Scheme (Modification) Regulations 1994 (SI 1994/2576), sch, para 48). In the period between 11 December 1978 and 10 August 1985, the pursuer was, accordingly, a contributor and a member. Thereafter he was a member in receipt of income benefits under the scheme.
[6] The pursuer's right to receive pension income as from August 1985 arose under the provisions of r 22 of the British Coal pension scheme. That rule, in effect, provides for acceleration of pension rights that would otherwise not arise until normal retiring age with the amount payable being calculated in accordance with the provisions of that rule read together with r 21, which allows for an additional benefit to be paid to a member who retires on ill-health grounds.
[7] While there is no need to consider the precise details of rr 21 and 22, as the provisions of the British Coal pension scheme demonstrate, occupational pension schemes may provide for a range of benefits including for pension income to be payable early in the event of ill-health retirement, for additional benefit to be payable in the event of such retirement and for a pension to be paid to a surviving spouse whether the member was a contributor at the time of death or was, at that time, in receipt of a pension income.
[8] Unlike the position in some cases, there is no dispute about the date on which the parties ceased to cohabit. It is agreed that, on 25 September 2010 (“the relevant date”), the parties separated. British Coal provided a figure for the notional value of the pursuer's pension rights that had, as at the relevant date, accrued in the scheme, known as the cash equivalent transfer value (“CETV”): £172,748.38. According to the schedule attached to a letter from the...
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