Kate Bradbury: Foster v Foster – separation, shareholdings and a successful appeal
It is rare that family cases are heard by the Inner House, but in August 2023, Lord Tyre, Lord Pentland and Lady Wise heard the appeal in the case of Foster v Foster, writes Kate Bradbury.
On Friday 29 September 2023, the Inner House issued its decision, providing clarity on two points:
- the flexible approach open to the court in its aim to achieve fairness and a clean break between divorcing parties, and
- the ability of the court to look at parties’ future resources as well as current ones when considering a financial settlement.
Background to the case
The case originally went to proof in May 2022, with the lord ordinary issuing a draft opinion in November 2022. Final decree was delayed due to a late minute of amendment lodged by the defender, Mr Foster, with decree finally being issued on 3 May 2023 .
The pursuer, Mrs Foster, reclaimed.
Mr and Mrs Foster married in 2004 and have three children together, the youngest of whom is 15. They separated on 31 October 2019.
The reclaiming motion concerned the interaction of various provisions of the Family Law (Scotland) Act 1985, particularly in relation to assessing the present and foreseeable resources that may be available to implement orders for financial provision on divorce. The central issue concerned the treatment, in the context of fair sharing of the value of the matrimonial property, of Mrs Foster’s minority shareholding in a private limited company operated by Mr Foster.
At the date of proof, Mr Foster held a 70 per cent shareholding and Mrs Foster a 30 per cent shareholding in the company known as ‘RRR’. Mrs Foster’s proposal was that the court should order a capital sum be paid to her to reflect the value of her shares, in exchange for which she would transfer her shares to Mr Foster. It was acknowledged and accepted that payment would need to be made via instalments over a period of time. Neither party wished the company to be sold.
The lord ordinary found that Mrs Foster had various remedies open to her in relation to her shareholding, including petitioning for relief under s.994 of the Companies Act 2006, although it was accepted that would be expensive and complex. The lord ordinary considered that she could not, in the context of financial provision under the 1985 Act, require the company to purchase the shares; nor could the court order that a new company be created to purchase the shares. The lord ordinary did not consider that Mr Foster had, or would necessarily have, the resources to permit him to purchase Mrs Foster’s shares. Accordingly, she made no orders in relation to the parties’ shareholdings in RRR.
That left Mrs Foster in the unfortunate position of remaining as a minority shareholding in the company. On paper, this effected a fair sharing; however, the reality was that she had no straightforward way to access the value of her shares.
In its decision, the Inner House attached significant weight to the case of Murdoch v Murdoch 2012 SC 271. In that case, there had been competing claims in relation to the matrimonial home. Mrs Murdoch wanted Mr Murdoch’s interest in the title to be transferred to her but her husband sought an order for sale. The evidence before the sheriff supported the payment of a capital sum to Mr Murdoch on the basis that the transfer of property order would be granted, but he had refused to insert a crave for that. The Extra Division allowed an amendment to achieve the result supported by the sheriff’s findings.
In Foster v Foster, Mrs Foster had conclusions for both a capital sum and a 14(2)(k) order for any ancillary order which the court regards as necessary to give effect to the principles in section 9 of the Act or any order made under section 8(2). The Inner House appreciated the need for Mrs Foster to achieve a clean break, particularly when Mr Foster had a conviction for domestic abuse and was subject to a Non-Harassment Order, which had just expired. The Inner House held that there was a mechanism within the provisions of the 1985 Act for the court to make orders that would achieve that outcome if justified by the principles of the Act and were reasonable having regard to the parties’ respective resources.
Inner House decision in favour of Mrs Foster
The Inner House held that the lord ordinary had not given proper consideration to:
- Mr Foster entering into an instalment-based scheme to buy out Mrs Foster from her shareholding; nor
- Mr Foster’s foreseeable resources, not just his present resources.
It was for Mr Foster to demonstrate a lack of resources if his position was that he was unable to meet his wife’s claims over a period of time, but he produced nothing to show that he could not do so. The Inner House held that the absence of an analysis of how the lack of immediate available resources could be addressed was a sufficient basis for it to open up the matter for reconsideration.
In conclusion, the Inner House ordered Mr Foster to pay Mrs Foster the value of her shareholding in the company in four annual instalments. An ancillary order was made for Mrs Foster to transfer her shareholding to Mr Foster within 28 days of decree of divorce. That enabled the parties to achieve a clean break and move on with their lives.
Brodies LLP represented the appellant, Mrs Foster.
Kate Bradbury is an associate at Brodies LLP