Coia Hamilton or Wallace v Wallace [2025] CSOH 73 (Outer House, Court of Session)
Fair sharing of wealth held in a private company: extraction costs scrutinised, and only a limited adjustment from equality allowed.
Background
The parties, both solicitors, married in 2003 and separated in June 2024. There are three children of the marriage. The net matrimonial property was worth a little over £9,250,000, and by far the largest asset was the husband’s 100% shareholding in the holding company of his legal practice, valued at £3,638,693 at the relevant date. It was agreed that the husband’s interest in the former matrimonial home, valued at £1,275,000, would be transferred to the wife.
The wife, a general counsel in private practice, sought equal division of the matrimonial property, which on the arithmetic pointed to a balancing capital sum of approximately £1,478,000. The husband argued for an unequal division on three grounds: that extracting funds from the company by dividend to pay a capital sum would trigger substantial tax; that a bad debt arising after the relevant date had reduced the company’s value; and that he had suffered an economic disadvantage through the support he said he had given to the wife’s career.
The decision
Lady Carmichael granted decree of divorce, made a residence order in the agreed terms, ordered the transfer of the former matrimonial home to the wife, and ordered the husband to pay a capital sum of £1,200,000 within 28 days of decree, with interest running on late payment.
Most of the husband’s arguments were rejected. The court was unpersuaded that the latent tax cost of extracting company wealth justified the substantial discount he sought: tax of that kind arises only if and when dividends are actually declared, its scale is partly within the shareholder’s own control, and the husband had contributed to his own funding difficulty by using more than £700,000 of readily realisable assets to buy a new property for himself after separation. The wife’s claim of economic disadvantage from her career pattern was addressed through equal sharing itself rather than by any additional award. The modest difference between the sum awarded and strict equality reflected a limited allowance for the realities of realising value locked in a private company.
Why this decision matters
The case is a clear illustration of how the Scottish courts approach business wealth on divorce. The starting point of fair sharing under the Family Law (Scotland) Act 1985 is not easily displaced. Potential tax or extraction costs may be relevant as a special circumstance, but they will be scrutinised closely and may justify only a limited adjustment rather than a wholesale departure from fair sharing. A spouse who holds substantial wealth through a private company should not expect the corporate wrapper, or the notional cost of unwrapping it, to reduce the other spouse’s entitlement by more than a margin.