England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
FAMILY DIVISION
PRINCIPAL REGISTRY
(HONOURABLE MR. JUSTICE JOHNSON)

		Royal Courts of Justice Strand London WC2
		2 July 1996

LORD JUSTICE THORPE :

1. Mr and Mrs Dart are aged 37 and 38 years respectively. They both come from Michigan and married on 25th October 1980. There are two children of the marriage, William who is 13 years and Arianna who is ten. The Dart family has made a great fortune by manufacturing foam cups. The husband's father has been the principal architect of this success. It enabled the husband and the wife to live to a higher standard than any of their Michigan friends and associates. The husband bought a substantial site and on it built a lavish home. It was ready for their occupation in September 1989. In the following two calendar years their family expenditure averaged £225K per annum. In 1992 that expenditure rose to nearly £350K. In 1993 the husband and the wife debated tax exile in furtherance of a scheme to vest a substantial part of the Dart fortune in the husband. In the end England was the chosen haven and in August 1993 the family arrived in London with the intention of taking up permanent residence in this jurisdiction. An expensive house was chosen in Upper Phillimore Gardens and large sums were spent on its lavish improvement. It was conveyed into the joint names of the husband and the wife. Shortly thereafter the husband renounced his US citizenship. In 1993 the family's annual expenditure amounted to just over £400K. By the beginning of 1995 the marriage was in difficulty. On 3rd February 1995 the husband petitioned for divorce in the Principal Registry on the grounds of the wife's conduct. Four days later the wife filed a petition for divorce in Michigan. On 3rd March 1995 the wife filed an answer in London challenging the court's jurisdiction, alternatively seeking a stay under paragraph 9 of Schedule 1 of the Domicile and Matrimonial Proceedings Act 1973. However the prayer of that answer sought the full range of ancillary relief for herself and the children rather than the narrow range of ancillary relief which the court has power to order on imposing a stay under Schedule 1. There were Children Act proceedings but on 30th May 1995 the husband agreed to the wife returning with the children to the former matrimonial home in Michigan.
2. Of course a hazard for very rich families in tax exile is that when the marriage breaks down the first round of contested litigation results from the determination of each of the spouses that the financial litigation should be in the jurisdiction of his or her preference. After taking independent advice each may have a broadly similar perspective as to which of the available jurisdictions is most likely to prove favourable to an applicant and which to a respondent. It is plain that Mrs Dart decided that she would do better in Michigan whilst Mr Dart thought he would do better in London. The result was competing proceedings in the Principal Registry and in the Ingham County Circuit Court,Michigan. As the jurisdictional race developed the wife applied by a notice of application of 17th May 1995 for the dismissal, alternatively stay, of the husband's petition. On 14th June 1995 Mr Justice Johnson dismissed that application declaring that the husband's petition was well founded on his habitual residence and in the exercise of his discretion rejecting the application brought under paragraph 9 of Schedule 1 of the 1973 Act. The wife's costs in the application of 17th May dismissed 14th June are stated to be £406K. Mr Justice Johnson ordered the wife to pay the husband's costs of the summons. They amount to £144K and are estimated to tax at £120K. Thus the probable extent of the wife's liability as a result of her challenge to the jurisdiction amounts to some £526K.
3. Having defeated her jurisdictional challenge the husband issued a notice of application on 28th June 1995 for the court to determine his financial liability to the wife. The wife, despite the judgment of Mr Justice Johnson of 14th June, continued to pursue competing proceedings in Michigan and on 23rd August 1995 the Michigan court took jurisdiction on marital property. In September 1995 a decree nisi was pronounced on the husband's London petition and in October that decree was made absolute. In the London ancillary relief proceedings the husband naturally took the Thyssen defence to applications for disclosure saying, with evident justification, that since he recognised that he was rich enough to comply with any order that the court might make, detailed financial disclosure was superfluous. Despite the clear and settled law upon which that position rested, the wife's London solicitors on 21st September 1995 served a most detailed questionnaire and threatened that if the husband persisted in his assertion of the Thyssen defence the point would be taken to the House of Lords. The husband, no doubt with resignation, submitted and on 20th October 1995 he served his answer backed by 19 pages of schedules and 35 ring binders containing approximately 7000 pages of supporting documents. At about the same time he wrote an open offer to the effect that in an endeavour to end the attrition of the litigation war he would pay her a lump sum of £10M on the basis that she would transfer to him her share of the London house but would retain in her sole name the former matrimonial home in Michigan valued at £1M. The wife did not accept the offer nor did she even respond to it. From 13th February 1996 she served a supplemental questionnaire and what was called a schedule of deficiencies. By then Mr Justice Johnson had a firm grasp of the ancillary relief proceedings and at a pre-trial review on the 15th February counsel on the wife's behalf was obliged to concede that most of the further information sought had in fact already been supplied.
4. The hearing of the husband's application for the determination of his financial liabilities was fixed for hearing before Mr Justice Johnson on 11th March 1996 with a time estimate of five days. In the preceding week skeleton arguments were lodged. The wife sought for herself £122M in addition to the Michigan house. The husband offered approximately £5M in addition to the Michigan house. At the conclusion of the trial Mr Justice Johnson reserved for a few days and delivering judgment on 21st March ordered the husband to pay a lump sum of £9M in addition to the Michigan house. There was no Calderbank correspondence, the husband's only offer being the open offer of 15th October 1995, never formally withdrawn but implicitly by the delivery of his skeleton argument. The only proposal from the wife was her skeleton claim to a total of £123M. Since by his judgment Mr Justice Johnson required the transfer to the husband not only of the wife's half share in the London home but also her shares in the Dart Company, the offer exceeded the judgment by £1M in cash and the value of the shares, £150K. Mr Justice Johnson ordered the wife to pay the husband's costs of the ancillary relief proceedings, not only from the date of the offer but throughout in condemnation of her unjustifiable insistence on superfluous detailed disclosure. Subsequently the husband applied to the Michigan court to accord comity to the order of Mr Justice Johnson but his application was refused on the 7th April. However the husband immediately appealed that refusal and the Michigan Court of Appeals on the same day stayed the financial proceedings due to commence on the following day pending determination of the husband's appeal. We were told that that appeal is unlikely to be listed before October and beyond lies the spectre of an appeal to the Michigan Supreme Court and beyond that, subject to leave, to the Federal Court.
5. In addition to the costs incurred by the wife in challenging jurisdiction in London she has incurred costs in Michigan stated to amount to £1M. Her solicitor own client costs in the London ancillary relief proceedings are stated to total £877,025. Of her total solicitor own client bill in London put at £1.4M only £30K has been paid on account, the rest of the work being done on credit. The husband's ancillary relief costs amount to £477,127. Mr Justice Johnson in his judgment described the preparation of the case in these terms:

"The extravagance of the preparations in this case defies moderate description. The husband's initial disclosure was in my view adequate, I would say more than adequate, for the purpose of these English proceedings. Nonetheless on the wife's behalf repeated requests were made for yet further information and yet further documents. The result is that there have been in court an astonishing 72 ring binders all of substantial size. The wife's repeated questions and demands for information were aimed at challenging the husband's present wealth and the various routes by which it came to him; and the past expenditure of the family. The information and documents which were provided by the husband were provided voluntarily and the court was never asked to adjudicate on the justification for the wife's demands. No doubt the husband was advised that to make an issue about the matter would create delay and perhaps even more expense; and that in any event the information might have to be forthcoming in proceedings in the United States.

Be that as it may the consequence has been that the wife's legal costs in the various English proceedings have been a staggering £1,336,400 of which £877,025 is attributable to her costs in this application. The husband's total costs are £801,699 of which £477,127 is attributable to this application.

The responsibility for this extravagant, and indeed scandalous, waste of money does not, I suspect, lie with the wife's English lawyers but rather with her attorneys in the United States. I note from the bundle of correspondence that when an open offer of settlement was made on behalf of the husband, the wife's solicitors made no effective response but asked only that any proposal for settlement should be directed by the husband's English solicitors to the wife's attorneys in Michigan."

6. I agree with every word of the quoted passage save that I have to wonder whether the exoneration of the wife's English lawyers is not over charitable. Whilst it is of course impossible to allocate responsibility for such scandalous expenditure there is at least a presumption of responsibility in the wife's English lawyers that would not be easily rebutted. Costs of this magnitude are almost unknown in this jurisdiction. They are a condemnation of our present procedures. On 1st October next new procedures are to be put on trial. These new procedures are designed to ensure amongst other objectives that the court and not the parties controls the escalation of costs.
7. Certainly the argument addressed to this court on the wife's behalf does not suggest a new moderation. Mr Munby submits that Mr Justice Johnson should have awarded his client not £10M but £100M. I will deal with his various submissions in turn.
8. First he seeks leave to admit fresh evidence by an affidavit sworn by his instructing solicitor. He submits that the evidence in the Michigan proceedings shows that the husband has a net worth not of £400M as found by Mr Justice Johnson but of £800M. It did not seem that the application passed the Ladd v Marshall test in that the material was apparently available to the wife prior to trial. Beyond that Mr Singleton demonstrated that in so far as the exhibited schedules emanated from the husband they contained no assets or valuations that were not available to Mr Justice Johnson. In so far as the affidavit exhibited another schedule from the wife's forensic accountant Mr Cendrowski, Mr Singleton emphasised Mr Justice Johnson's finding:

"That he had approached his task in too partisan a manner and had set himself, or more probably had set for him, the task of arriving at as big a figure as was sustainable."

Further in the exhibited schedule Mr Cendrowski continued to advance a basis of valuation that had been specifically rejected by Mr Justice Johnson. In the circumstances it was not surprising that Mr Munby did not pursue the application in reply and I would unhesitatingly reject it and determine this appeal solely on the evidence in the court below.

9. Mr Munby's first criticism of Mr Justice Johnson is that he was wrong to apply English domestic law rather than Michigan law. That is a manifestly hopeless submission. If the Family Division takes jurisdiction on the application of the principles in De Dampierre v De Dampierre [1988] AC 92 then, no matter where the parties originate and no matter what other State has concurrent jurisdiction, the court must carry out its statutory function arising under the Matrimonial Causes Act 1973 as amended.
10. Alternatively Mr Munby submits that Mr Justice Johnson should, in having regard to all the circumstances of the case, have reflected the scale of the award that would be the wife's due by equitable distribution in Michigan. Mr Munby claims that the judge in Ingham County would award the wife a minimum of £100M and probably nearer £200M. This quantification seems to me far from proven. Neither party had difficulty in recruiting an expert Michigan lawyer. Whilst Mr Feldman for the wife would endorse Mr Munby's quantification Mr Prather for the husband asserts that under Michigan divorce statutes, when a party receives inherited or gift property, the non-donee spouse, in order to claim an interest in the property, must show that he or she has contributed to the acquisition, improvement or accumulation of the inheritance or gift property or that the potential marital estate and effects awarded to him or her will be insufficient for his or her support. This proposition says Mr Prather puts the husband's share of the Dart fortune substantially beyond the wife's reach. In the absence of authority I would have concluded that the circumstances to which the judge may have regard under section 25 are so unbounded that the scale of the award in a concurrent jurisdiction in waiting cannot be entirely excluded. In very broad terms it might be equated to pre-nuptial contractual arrangements made by the parties in their country of origin that did not contemplate the subsequent development of a London jurisdiction. But there is authority directly in point. In the case of Thyssen-Bornemisza v Thyssen-Bornemisza (No 2) [1985] FLR 1069 the wife urged that any award should reflect the consideration that under Swiss law if, during the subsistence of the marriage, one of the spouses died, the survivor was entitled to one quarter of the fortune of the decedent. The court accepted that that was a relevant consideration since section 25(1) enjoined the court to have regard to the value of any benefit lost by reason of the dissolution of the marriage. However Sir John Arnold P continued:

"It has also been urged upon us, as it was urged upon the judge, that by extension the court should also have regard to the Swiss law of divorce whereby it is said that a Swiss court, in exercising its jurisdiction as regards financial ancillary relief in consequence of the dissolution there of a marriage, would make some order for compensation, presumably to each of the spouses, for the loss of their chances respectively of inheriting from the other. It seems to me that by no possible construction of section 25(1) or interpretation of all other relevant circumstances would that matter of what the Swiss courts would do in such a contingency fall to be regarded by the English court, and I ignore that aspect of the matter."

11. Mr Munby's further submission that regard to the scale of the award in the concurrent jurisdiction is necessary to achieve harmonisation and to avoid discrepancy between jurisdictions drawn from the same common law root ignores the reality that such harmonisation of family justice systems, whilst desirable in theory, has proved elusive in practice. Chauvinism is universal and international negotiation that aims for uniformity seldom meets a smooth path, particularly in the field of ancillary relief. Furthermore it is arguably more appropriate for the UK to seek greater uniformity within the Council of Europe. Moreover harmonisation is not achievable by means other than international convention and the impracticalities that would result from the adoption of Mr Munby's contention are too manifest to be stated.
12. Mr Munby's next submission was that Mr Justice Johnson was wrong in law in holding that the husband was entitled to apply for an order against himself. Again this is to my mind a hopeless submission. The point was raised in 1979 in the broadly similar case of Jagger v Jagger. There the wife set up competing proceedings in an American State which she conceived would treat her more generously. The only material distinction is that her chosen State was California. In his endeavour to forestall her the husband applied for the determination of his financial liability to her. Mr Justice Eastham rejected the wife's submission that he had no right to make such an application. At page 35 of his unreported judgment he said:

"Now there is an interesting point which I would have delivered in open court had not both parties asked me, for understandable reasons, to give this judgment in chambers. The husband has got an interesting application for interim financial provision. The relevant section in the Matrimonial Causes Act is section 21. Having read that section I am satisfied that the court does have power on an application by a husband to order him at his own request to make interim financial provision for the wife. Rule 73 cannot take away that power. That rule was designed by the Rules committee to meet the ordinary case, and in the vast majority of cases it is wholly apposite to control the situation. However, in the exceptional case such as this, where the husband is paying a voluntary amount which he thinks is enough, and his wife does not think is enough but is presently unwilling to proceed under section 21 and is trying to proceed for support in California, I am of opinion that although the matter cannot be brought into the provisions of Rule 73 that the court of its own motion can give directions so as to enable it to exercise its undoubted powers under section 21."

The point was not pursued on the appeal to this court which was dismissed by judgment on 18th October 1979.

13. This jurisdiction to entertain an application by a respondent for the determination of the extent of his liability is essentially required in these cases where very rich people indulge in competitive litigation concurrently in two jurisdictions. Were it otherwise the wife could frustrate a determination in the forum conveniens if she conceived it ungenerous simply by declining to make any application.
14. Mr Munby next submits that the husband had failed to make full, frank and clear disclosure in a contentious paragraph of his skeleton. Its fallacies were fully exposed by Mr Singleton's response. The husband was consistent in his self assessment of his net worth of £400M throughout the proceedings from his affidavit of June 1995 to his oral evidence at trial. The contention that he was worth £489M was specifically rejected by the judge.
15. In the following paragraphs Mr Munby contended that the Thyssen defence is bad in law. I do not understand how that submission is relevant to this appeal since the husband, under protest, abandoned that shield and gave comprehensive disclosure. The argument that the defence is bad in law is simply not open in a court which upheld the shield by its judgment in Thyssen-Bornemisza v Thyssen-Bornemisza (No 2) [1985] FLR 1069. In fairness to Mr Munby he conceded that this submission was appended to his principal submission and did not stand independently if the principal submission failed.
16. Turning now to that principal submission Mr Munby challenges what he calls the conventional jurisprudence, by which he means the judicial development of what appeared as section 5 of the Matrimonial Proceedings and Property Act 1970 on the 1st January 1971. He supports with enthusiasm the judgment of this court in Wachtel v Wachtel [1973] Fam 72 but challenges the entire corpus of subsequent decisions in this court on the application of the section 25 criteria to what are known as big money cases. Again in my judgment this is a hopeless submission. However since this judgment may be considered in due course by the courts of Michigan it might be helpful if I demonstrated its elementary failing. According to the law of England and Wales developed from the Ecclesiastical law by statute in and after 1857 financial provision for wives after divorce could only be in the form of income payments, variously known as alimony, maintenance or periodical payments, albeit in certain circumstances secured by a charge on some identified capital asset. The power to award a capital sum, labelled a lump sum, was first introduced by statute in 1963. Thus the Matrimonial Proceedings and Property Act 1970 was a most significant landmark in the development of the court's power to make financial provision for an applicant following a decree of divorce, judicial separation, or nullity. By adding to the existing powers a power to order the transfer or settlement of any realty or personalty Parliament introduced a remedy of equitable distribution. The enactment reflected profound social change and met compelling social need. Divorce had become common place and equality of rights for men and women had become a reality. Within that reality women were more and more producing wealth as well as children. The manner in which this new power was to be exercised was defined by section 5 of that statute. That section has developed, with one significant subsequent amendment introduced in 1984, into section 25 of the Matrimonial Causes Act 1973 which regulates the outcome of this case. The statutory design was to give the judge exercising the power of equitable distribution the widest discretion to do fairness between the parties reflecting considerations and criteria laid out within the section. Parliament might have opted for a community of property system or some fraction approach. It opted instead for a wide judicial discretion that would produce a bespoke solution to fit the infinite variety of individual cases. The scheme of the Act must also be set in the wider perspective of history and of the general civil law. In this jurisdiction rights of property are not invaded or reduced by statutory powers save for specific and confined purposes. The purpose of this statute was to make fair financial arrangements on or after divorce in the absence of agreement between the former spouses. Beyond that the power was not introduced to re-organise proprietary rights within families. After commencement on 1st January 1971 there was obvious curiosity and speculation amongst practitioners as to how this new power would be interpreted and utilised by the courts. In 1973 Lord Denning MR chose the case of Wachtel v Wachtel as a vehicle for the pronouncement of guidelines. He proposed a mathematical solution. If the applicant was to have periodical payments her capital share should be one third. If she were not to have periodical payments then her capital share should be one half. Nearly 25 years later it seems curious that he should have proposed a mathematical application when the statute itself not only did not speak of fractions but had clearly preferred the alternative approach. But practitioners and judges had been used to deciding the level of income support by reference to fractions prior to 1st January 1971. So the language of the Master of the Rolls was familiar if not innovative. Second the approach produced a manifestly fair result on the facts of that case which was not just a typical case but the essentially typical case of a middle class family that had prospered through a long marriage in an inflationary era. Of course the decision was binding on this court and subsequent judgments have acknowledged its application in similarly typical cases. But behind those deferential acknowledgments lies the reality that it has been consistently rejected as an authority of general application. The real interpreter of section 25 and its predecessor was Ormrod LJ who between 1976 and 1981 demonstrated in a series of judgments in this court how section 25 should be utilised by practitioners in negotiating or judges in determining the fair result. This was one of his major contributions to the evolution of family law. In O'D v O'D [1976] Fam 83 he considered the limitations of Wachtel v Wachtel. He continued:

"In other cases the situation is different. One or other, or perhaps both, spouses may bring in to the marriage substantial capital assets, or may acquire such assets during the marriage, by inheritance or by gift from members of their family. In such cases the expressions quoted above from the judgment in Wachtel v Wachtel and others to be found in it, cannot be applied without modification. In these cases it is necessary to go directly to the terms of section 25 of the Act for guidance."

That was his simple but important insistence. The judge must direct himself by reference to the section 25 criteria and not use fractions other than within the context of a broad analysis of outcome.

17. The greatest professional uncertainty was as to outcome in big money cases. The larger the figures the wider the band of possible discretionary conclusion. O'D v O'D was the first of the substantial cases to reach the Court of Appeal and it initiated a judicial evolution that culminated in the case of Preston v Preston [1982] Fam 17. Between O'D and Preston two other substantial cases had reached this court, namely Sharpe v Sharpe (unreported 16th July 1980) and Page v Page [1981] 2 FLR 198. Lord Justice Ormrod delivered the telling judgments in all four cases. In Preston v Preston he reviewed the evolution over which he had presided in these terms:

"It is only in the rare cases where the assets are very large and there is no serious liquidity problem that it becomes necessary to consider the ultimate limits of the court's discretionary powers under this section.

Hitherto, only three cases involving very large sums have reached this court, and one of them has not been reported."

(He then reviewed O'D, Sharpe and Page.)

"Although the decision in each of these cases depended largely on its individual circumstances, some general propositions can be extracted from them. In the first place the court should approach the problem by following the direction set out in section 25(1), ie by considering all the circumstances of the case and, in particular, the factors set out, seriatim in paragraphs (a) to (g) ....

It is therefore wrong in principle to adopt a purely arithmetical approach by considering what proportion of the total assets should be allocated to the wife. The judgments in all three of the cases are agreed on this point. The suggestion in Wachtel v Wachtel of one half or one third of the total assets is, therefore, no more than a guideline, though it may be a useful check on the tentative figure which emerges from working through the considerations set out in the section."

18. He then went on to consider propositions two, three, four, five and six, to some of which I will return later in this judgment. These citations demonstrate how hopeless is Mr Munby's submission. For it flies in the face of the clearest authority which is binding on this court. Authority apart, Mr Munby's submission demonstrates how sound was the guidance provided by Ormrod LJ through that era and how adrift would be the judge without that guidance. Mr Munby was pressed by my lady to demonstrate how the judge would determine the outcome in the present case were Preston wrongly decided and were Wachtel strictly applied to big money cases. Mr Munby's response was that the judge would adopt the Preston approach and arrive at a figure, on his submission, in this case of about £20M. He would then divide the available capital by two to produce a figure of £200M. Finally he would work up from the bottom and down from the top to arrive at his conclusion. How this third and vital stage would be conducted Mr Munby was quite unable to explain. He simply said that the result of the third stage would be an award to his client of £100M. When asked what would be the outcome if the husband's fortune were £500M he responded, without much conviction, £110M. When asked what the award would be were the husband's fortune say £600M or £800M or £1000M he ceased to offer conclusions. The exercise only demonstrated that there is no basis for a judicial exercise of discretion in such uncharted waters.
19. Mr Munby's alternative submission was that if the statutory criteria offer the only guide then the courts have fallen into error in big money cases in treating the applicant's need as the paramount or determinative consideration when it should have no greater weight than the first consideration, namely the extent of the assets which each has or is likely to have in the foreseeable future. There is obviously more force in this alternative submission. It may have its origin in an elegant paper presented to the Family Law Bar Association by Mr Peter Singer QC (before his elevation to the bench) in May 1992 and it deserves careful consideration on the authorities. Again the all important judicial guidance is to be found in the judgments of Ormrod LJ in the cases already cited. In O'D v O'D he said this:

"The next stage is to consider the wife's position, not from the narrow point of 'need', but to ascertain her reasonable requirements, bearing in mind that she will have to provide an appropriate home and background for herself and the children."

Then in Preston v Preston he said:

"Secondly the word 'needs' in section 25(1)(b) in relation to the other provisions in the sub-section is equivalent to 'reasonable requirements', having regard to the other factors and the objective set by the concluding words of the sub-section."

20. From those passages it is implicit that reasonable requirements are more extensive than needs. As a matter of ordinary language what a person requires is likely to be greater than what that person needs. So the check on what the applicant subjectively requires is the word reasonable. There must be an objective appraisal of what the applicant subjectively requires to ensure that it is not unreasonable. But the objective appraisal must have regard to the other criteria of the section, obviously including what is available, the standard of living to which the parties are accustomed, their age and state of health and, perhaps less obviously, the duration of the marriage, contributions, and pension rights both as affected by the marriage and as accrued or likely to accrue. Used thus the consideration of needs ceases to be paramount or determinative but an elastic consideration that does not exclude the influence of any of the others. As Mr Singleton rightly submitted in a big money case where the wife has played an equal part in creating the family fortune it would not be unreasonable for her to require what might be even an equal share. Therefore in my judgment the essential function of the judge in the big money case is to declare the boundary between the applicant's reasonable and unreasonable requirements applying all the statutory criteria to the myriad relevant facts of the individual case.
21. The next point that must be considered in this area is whether the court has power to make provision for a need that cannot be founded upon homes, children and lifestyle. Mr Munby by further alternative submission contends that there is no limitation to the purpose for which capital can be provided whilst Mr Singleton supports the limited jurisdiction. Again I conclude that authority is on Mr Singleton's side. In Page v Page the applicant advanced additionally what might be said to be a requirement extraneous to her personal needs. Lord Justice Ormrod said:

"I do not, however, think that under section 25 it is legitimate to take into account, as the judge did, the wife's wish to be in a position to make provision by will for her adult children who are in no way dependant on their parents or either of them."

Later this limitation appeared as the third of his propositions in Preston v Preston when he said:

"Thirdly, the powers of the court ought not to be exercised for the benefit of adult children, by enabling the wife to set up a child in business, Sharpe v Sharpe; or to provide by will for a child who is unlikely to benefit under the husband's will or otherwise, Page v Page."

Later in Preston v Preston he said:

"I think that on the true construction of section 25 there does come a point in cases where the available resources are very large, as counsel submitted, when the amount required to fulfil its terms `levels off', and redistribution of capital as such, in some unspecified ratio begins, which is outside the section."

22. That principle was applied by this court in the case of O'Neill v O'Neill on 29th March 1983. The case was not contemporaneously reported but is now available at [1993] 2 FCR 297. The parties were rich. During the marriage the husband had transferred to the wife investment monies that provided her with sufficient independent income. But when she left the former matrimonial home in Eaton Square she would need a home of her own. To meet that need the President awarded her £200K. He then said:

"But that is not the end of it. It is very nice to have, and reasonable that a person in her position should have, some not vast but nevertheless adequate capital resource and I put that at £50K in this particular case."

This court struck out that surplus. Cumming-Bruce LJ said:

"Therefore, at that point I would hold, with respect to the President, that having regard to the wife's capital resource, there was no good ground to impose upon the husband as an addition to the £200K which he had to provide for the purpose of accommodation, another £50K against a rainy day (if that is the right way of putting it) if the wife felt that she needed liquid capital."

Sir David Cairns expressed himself in very similar terms:

"With great respect to the President, in the circumstances of this case, I do not consider that the husband should be called upon to pay to his former wife who,on the President's finding already has enough capital to furnish her income needs, a sum which is sufficient to provide her with not only a home but a further capital resource."

23. In October 1982 another division of this court had taken a different position in the case of In re Besterman,deceased [1984] 1 Ch 458, the court reviewed a claim under section 1 of the Inheritance (Provision for Family and Dependants) Act 1975 but, since it was a claim by a surviving spouse, applied the criteria of section 25. In the leading judgment of Oliver LJ there is this passage:

"It has been pointed out more than once that the calculation in cases of this sort is, of necessity, not one where any precision is possible, but for my part I take the view that reasonable provision in this case would dictate that, in addition to the secure roof over her head, the widow should have available to her a capital sum of sufficient size not simply to enable her purchase an adequate annuity according to present day needs, but to provide her with the income which she needs and a cushion in the form of available capital which will enable her to meet all reasonably foreseeable contingencies."

Later in the judgment he said:

"I desire to emphasise what has been said, no doubt, many times before, that each case in this jurisdiction depends upon its own particular facts and I think it would be a pity if this case should be used as a basis for drawing general deductions of principle to be applied in other and probably quite different cases, whether of large or small estates."

24. Lord Justice Oliver must be disappointed by subsequent developments. From the passage that I have cited has been extracted the phrase 'The Besterman cushion'. It is an authority invariably cited by applicants where the assets are substantial. Besterman was not cited in O'Neill and, in so far as there is any conflict between them I consider that O'Neill sits more comfortably in the range of the decided cases. Since Besterman was an Inheritance Act case, none of the three judges in the court had had experience of the application of 25 at first instance. In any event I regard the distinction between the two cases more one of terminology than outcome. In one the additional capital sum can be said to be within the applicant's reasonable requirements and in the other without.
25. In relation to the instant appeal, Mr Justice Johnson walked elegantly over this rough terrain. Having referred to both Besterman and O'Neill he said:

"In the present case however, emphasising that need is only one of the statutory criteria, it seems to me that, as a matter of justice, this particular wife has reasonable requirements over and above those which I have accepted as being necessary for her annual routine expenditure."

He then went on to award her an additional £3M.

26. Before leaving this area of the appeal I wish to record for completeness that the propositions evolved by Ormrod LJ were not affected by the substantial amendment of section 25 introduced by the Matrimonial and Family Proceedings Act 1984. In Thyssen-Bornemisza v Thyssen-Bornemisza (No.2) this court considered the proper approach to the resolution of a case which had certain similarities. The husband put his fortune at £400M and there had been a substantial battle to establish which jurisdiction would determine the financial claims. In determining the extent to which the husband should be obliged to disclose his financial circumstances the President said:

"One knows, however, from the cases of Preston v Preston and Page v Page, both in this court, that the ambit of sections 23 and 24 does not extend so far as the making of an order for the purpose of enabling the recipient to benefit from the order himself or herself by being in a better position to make testamentary dispositions in favour of a third party or, as it is said, purely for the purpose of the redistribution of capital as an individual motive.

It seems to me that those limitations lead to the view that the largest amount which could legitimately be provided for, whether by a lump sum order under section 23 or an adjustment of property order under section 24 or by a combination of the two mechanisms, is not so large that it could increase over and above what would be justified by the husband of a fortune of £400M by the proof of a larger fortune than that."

Griffiths LJ added:

"Accordingly I believe that we should do a service to (the wife) if we were to state here and now that under English law she has no prospect of receiving a significantly higher award because her husband might turn out to have a fortune in the order of £1,000M rather than of £400M."

That this approach is still consistently applied a decade later is demonstrated by the case of Flick v Flick reported at first instance at [1995] 2 FLR 45.

27. I come at last to what might be termed Mr Munby's last ditch argument. For me it is the only one that has any reality or substance. He submits that even if Johnson J adopted all the right principles he manifestly fell into error as he drew his final conclusions. Although he made passing reference to the wife's liability for costs he clearly ignored that consideration when calculating what would be available to her after his judgment had been implemented. At page 27 he recorded:

"The wife already has the house in Okemos which I take as representing £1M and I have had regard to her outstanding liability for her own legal and other professional costs."

On the following page he then reached this conclusion:

"Rather does it seem to me that it is a reasonable requirement of this wife, particularly given the financial assets available, that she should have available to her a capital sum to enable her to indulge herself in terms of capital expenditure or additional annual commitment over and above those for which I have provided for her annual routine support. Such items might include some particularly splendid outfit for some particular event, the occasional use of chartered planes, the purchase of a picture, or even of a small second home."

He reiterated this conclusion on the following page in these terms:

"However I am firmly of the view that it is a perfectly reasonable requirement of this wife that she should have available a fund out of which she can chose to meet some occasional expenditure, perhaps even luxury, over and above what I have regarded as her reasonable routine need."

28. Mr Munby's simple submission is that the judge, having recognised that it was appropriate for her to have a capital fund to provide for exceptional luxury expenditure and having put a figure of £3M on that fund, failed to perceive the reality that the wife's costs liabilities would consume the fund to deprive the wife of what the judge had held to be her appropriate entitlement. As a matter of arithmetic he put the wife's liability to her London solicitor at £1.4M, her liability to her Michigan attorney at £1M and her liability to meet orders for costs in favour of the husband at about £0.6M. Of course at that stage the judge should not anticipate what order he might make in relation to the ancillary relief costs since he would not know what negotiations had taken place or what other arguments might be specifically advanced on costs. Equally the wife's liability to her Michigan attorney could not be said to be a concrete liability until the judge in Ingham County had ruled upon them and I cannot think that that observation is met by Mr Munby's assertion that in Michigan the courts do not make orders inter parties. However that may be the wife's debt to her London solicitor together with her liability to pay the husband's costs of the unsuccessful stay application together exceed £1.5M. Therefore, even if Mr Munby has put the point high, the fact remains that the very substantial addition for extraordinary expenditure will be eliminated or substantially eroded by a liability to which the judge made only passing reference. Mr Munby's contention is that at the barest minimum the judge's award must be increased by £3M to ensure that the ability to afford extraordinary items is preserved. In this submission there is, of course, a fundamental fallacy. If there are outstanding orders for costs in previous proceedings between the parties and if the court concludes that the applicant has incurred costs in the application before the court to a scandalous degree, the court's power to control abuse by sanction would be emasculated if the applicant could include a costs liability, actual or potential, as a factor to be reflected in the lump sum award. However the fact remains that in his judgment he failed to make any reference to the consequential effect upon the wife's economy of the liability to which he briefly referred. This criticism does establish a deficiency in the judgment. It was clearly open to Johnson J to have expanded his judgment in such a way as to demonstrate conclusively that he had overlooked nothing. Having found in the passages at pages 28 and 29 that she was entitled to a capital fund to enable her to indulge herself, he might have continued by recording that she had forfeited that entitlement by her prodigal conduct of the litigation. His failure to do so is an error but it is in the end an immaterial error if this court concludes that in exercising its appellate discretion it would only expand the words of judgment without altering the ultimate award. Put another way was this an arithmetical error, as Mr Munby submits, or was it compressed rationalisation within which the judicial intention is plain? In my judgment it was plainly the latter. The prodigal person often anticipates an expected receipt and spends it before it comes. I see no reason why the wife, having wasted a part of her entitlement in advance of receipt, should be able to contend with any merit that she should have it paid twice.
29. A distinct but inter-related question is whether it was a justifiable exercise of judicial discretion not only to deny to the wife her costs of the application but also to condemn her in the husband's costs. Undoubtedly the order that he made was a very unusual one but he justified it on two specific grounds, first that the wife had prolonged the litigation unnecessarily by refusing the open offer that substantially exceeded the award and second that she had caused the case to be conducted in an extravagant way to the husband's prejudice. Both considerations are in my judgment valid and I am satisfied that the order does not exceed the judge's wide discretion in the field of costs and is consistent with the principles stated by Nourse LJ in re Elgindata Ltd (No.2) [1992] 1 WLR 1207.
30. Accordingly it is my clear conclusion that in all the circumstances of this case it is just that the wife's entitlement to extravagant expenditure should be forfeit or largely curtailed by the costs liabilities that were in Johnson J's contemplation as he composed his judgment and those which subsequently resulted from his determination of the application for costs.
31. There is no judge of the Division better qualified than Johnson J to decide a case of this order. He appeared as Queen's Counsel in four of the evolutionary cases to which I have referred. His judgment reveals his complete grasp of the field and his clear understanding of the judicial task to apply the statutory criteria to the facts as he found them. Mr Munby's comprehensive attack has revealed only one flaw and the correction of that flaw, which is essentially a flaw of expression, does not lead to a different result. I do wish to add one general observation on Mr Munby's bold attack on the case law. As he conceded, this court is not free to accept a submission which could only realistically be addressed to the House of Lords. But as I have demonstrated the law in the field of big money cases has been settled for over a decade. That certainty has enabled practitioners to negotiate settlements in a large number of cases. Those that have the misfortune to reach the Court of Appeal are happily only a tiny minority. But manifestly even the greater number that are concluded without substantial litigation are insignificant in number and importance to those who legislate and those who form social policy. The statutory basis upon which the financial affairs of divorcing couples are decided has now been in place for a quarter of a century. It has been well tried, its operation is well understood by practitioners and it has in my estimation served society well. If a fundamental change is to be introduced it is for the legislature and not the judges to introduce it. Not only is the legislative process the democratic process but it enables the route of future change to be surveyed in advance of adoption by extensive research and consultation. That such a process may be in embryo is demonstrated by the Government's response to an amendment laid down to the Family Law Reform Bill currently in Parliament. The amendment sought to replace section 25 of the Matrimonial Causes Act 1973 with the statutory code currently in force in Scotland. Hansard for 16th May 1996 shows that the Lord Chancellor has agreed that he will initiate a consultation process to evaluate the merits of adopting the Scottish system by referring the issue to his Ancillary Relief Advisory Group at the beginning of 1997.
32. For all these reasons I would dismiss this appeal.
33. LORD JUSTICE PETER GIBSON : I also agree that this appeal must be dismissed for the reasons given by Thorpe L.J. But in deference to Mr. Munby's argument, I would add a few words on his main submission that Johnson J. adopted an incorrect approach to the application of s.25 Matrimonial Causes Act 1973. I have to say that for me that submission had somewhat greater force than it has for Thorpe L.J. with his incomparably greater experience in this field. Mr. Munby frankly acknowledged that his submission ran counter to the long-standing practice of Family Division judges over many years and he recognised that it might need to be addressed to a higher court than this court to gain acceptance.
34. Looking at the statutory provision in the absence of authority and leaving aside those provisions which relate to children, I observe first that by s.25(1) a duty is imposed on the court in deciding whether to make a property adjustment order to have regard to all the circumstances of the case. That could not be wider. By sub-section (2) regard is in particular to be had to matters included in the 8 lettered paragraphs. Para. (a) includes "the .... property and other financial resources which each of the parties to the marriage has". That to my mind casts doubts on the correctness of an approach in a "big money" case that treats as immaterial the actual amount of the property and other financial resources of the respondent once it is shown that they are sufficient to meet the reasonable requirements of the applicant. Para. (b) refers to the financial needs, obligations and responsibilities which each of the parties has or is likely to have in the foreseeable future. An approach which determines the quantum of the award by reference only to the reasonable requirements of the applicant again seems to me to be arguably incorrect.
35. I of course appreciate that in the present case the Judge expressly disclaimed feeling limited by any ceiling or arbitrary limit to the amount which he could award the applicant wife and said that he was not limited to her reasonable requirements. However when putting together his award, the Judge added to the £6 million which was his assessment of her "reasonable annual routine needs" a further capital sum which it was "a reasonable requirement of this wife" to have available to her. And a little later he said that it seemed to him that this particular wife had "reasonable requirements" over and above her annual routine expenditure. By that route he arrived at the overall figure of £10 million and in doing so he faithfully followed the practice of the Family Division.
36. But the statutory discretion, it seems to me, might have been differently interpreted by the courts to allow a more generous approach to the applicant in a big money case, so that the award was not in effect limited by the applicant's reasonable requirements. Para. (b) is but one of the paragraphs to which particular regard is to be had, and both parties' reasonable requirements must be taken into account. Other paragraphs refer to matters which have had nothing to do with the applicant's financial needs, for example para. (d) with its reference to the duration of the marriage and para. (g) with its reference to conduct. And I come back again to the width of s.25(1). I entirely accept that in a big money case it is a relevant and important consideration whether the wealth of the respondent is largely attributable to his inheritance and whether the applicant contributed to that wealth. I also accept that once one goes beyond the reasonable requirements of the applicant, the exercise of discretion becomes more difficult to explain in a way that can ensure consistency of approach by the courts. Nevertheless standing back and looking at the position overall, were I unconstrained by authority I would have to say that I regard an award of £9 million to a good wife in a marriage of 14 years and a good mother to the respondent's children out of the respondent's resources of £400 million as on the low side.
37. However for the reasons given by Thorpe L.J. and in the light of the authorities to which he refers, I do not think it open to this court to hold that the "millionaire's defence" is wrong in law or that an award based on the wife's reasonable requirements can be impugned. Preston v Preston [1982] Fam.17, Thyssen-Bornemisza v Thyssen-Bornemisza (No.2) [1985] F.S.R. 1069 and O'Neill v O'Neill [1993] 2 F.C.R. 297 seem to me to be particularly significant decisions of this court binding on us.
38. I too would dismiss this appeal.

LADY JUSTICE BUTLER-SLOSS :

39. I agree with the judgment of Thorpe LJ which I have read in draft.
40. Two main issues arise in this appeal. The first is the form of discovery of documents and whether it is necessary to have detailed information about the assets of a husband who is able to pay any sum ordered by a court in ancillary relief proceedings. The answer to that question can, in my view, better be determined by an answer to the second question, that is to say, whether the judge correctly exercised his discretion in awarding the wife a lump sum order of £9 million when the assets of the husband were about £400 million. If the judge`s approach to his task was correct then it was entirely unnecessary to investigate his assets and vast sums of money were wasted on a fruitless exercise.
41. The Matrimonial Causes Act 1973, as amended in 1984, provides the jurisdiction for all applications for ancillary relief from the poverty-stricken to the multi-millionaire. It is obvious that a court, in the exercise of the discretion provided by sections 25 and 25A, will apply the relevant criteria according to the widely differing facts of each case before it. In the low income cases the assessment of the needs of the parties will lean heavily in favour of the children and the parent with whom they live. If, therefore, the only asset is the house, and the mother is caring for the children, she will get the house and probably outright, even though the effect of that order is to deprive the husband of the whole of the capital accrued during the marriage and directly financed from his resources.
42. At the other end of the scale, the affluent and the very rich families may have acquired it all during the marriage and by the efforts of both spouses by way of a working as well as a marriage partnership, see for instance Gojkovic v Gojkovic [1992] Fam. 40. In the case of a wife whose contribution to the marriage is indirect by way of keeping the home and bearing and bringing up the children, the well-known observation of Sir Jocelyn Simon, President in a lecture in 1965, and recorded in the judgment of the Court of Appeal in Wachtel v Wachtel [1973] Fam 72 at page 92 is apposite. He said:-

"The cock can feather the nest because he does not have to spend most of his time sitting on it."

It is however useful to remember the context in which he said it. Ancillary relief orders prior to the 1960s did not provide for any capital distribution unless there was a trust. In 1963, for the first time, the courts were given the power to award lump sums, which were modest. It was not until the Matrimonial Causes Act 1970, re-enacted in the 1973 Act, that an order for transfer of property was introduced. The President was speaking at a time when the indirect contribution of a wife was not widely recognised and the normal order was a maintenance order for the wife during the joint lives of the former spouses or secured for her life.

43. Gradually the importance of the different contributions made by the spouses during their marriage has been recognised in a series of cases since the 1970s. The approach of the courts has inevitably reflected the type of case coming before them. Orders vary from the applicant spouse receiving the whole or the larger part of modest assets to receiving a small proportion of a large fortune. The exercise of discretion and the criteria laid down in section 25 of the 1973 Act as amended have to encompass the enormous variations in the circumstances of each case coming before the courts.
44. This appeal relates to a `big money case`. Although such cases do not arise in the English jurisdiction frequently, in the last 20 years or so, side by side with the working out of the principles extracted from the matrimonial financial legislation in cases of moderate or modest available capital, there has grown up, as Thorpe LJ has explained in his judgment, a body of decisions on `big money` cases which bind this Court. Mr Munby QC has, with great skill and much ingenuity sought to set aside those decisions in favour of a broader brush approach which would result in far larger orders being made to spouses of millionaires.
45. Mr Munby suggested that the wording of section 25 implied a starting point of one half. Not only is it clear from the decided cases that such is not the case, but interestingly it is clear from proposed legislation to which we have been referred in Hansard that in Parliamentary debate, at least, such a starting point was not even contemplated by those arguing from whichever point of view of the existing legislation.
46. In the process of applying the section 25(2) criteria to the facts of this case, the needs of the wife is a highly relevant factor. Needs has been defined by Ormrod LJ in Page v Page [1981] 2 FLR 198 at page 201 as the `reasonable requirements` of the spouse seeking an order. Where the resources are great Ormrod LJ in Preston v Preston [1982] Fam 17 said at page 28 that there had to be a levelling off or a ceiling on the amounts to be taken into account.
47. Although Mr Munby does not accept the principle of a ceiling as such, he does recognise that the starting point is far below the 50-50. He suggested £100 million as the starting point, well below half of the figure found by the judge to comprise the assets, and he recognised that, in the Michigan court the wife might be awarded substantially less. I have no doubt, however, that we are bound by the line of decisions in which Ormrod LJ gave the leading judgments and that we have to recognise a levelling off in a case with capital of this size.
48. The court is not bound by any percentage but must have regard to all the relevant criteria in section 25(2). The judge considered the wife`s reasonable requirements together with all the other relevant factors in coming to his decision. In doing so he also took into account that the wealth has been generated by the husband`s family and the wife has made no direct contribution to that family business which is another highly relevant factor both in our jurisdiction and, we understand, in the Michigan legislation. Within the principles enunciated in the line of cases set out in the judgment of Thorpe LJ there is no ground upon which this appellate court might interfere with his exercise of discretion or substitute a higher figure than the award made by the judge in his excellent judgment.
49. I agree with Thorpe LJ, for the reasons which he has given, that we should not interfere with the effect of costs upon the lump sum awarded.
50. I would however add one further matter. I am glad to see that a consultation process is proposed to reconsider the existing the criteria laid down in section 25. I am sure that any change in the way in which the courts should decide money cases ought to be by legislation. The practice in ancillary relief has become settled. It is well known among practitioners and clear principles are essential in order to assist large numbers of spouses and their legal advisers who make post-divorce financial settlements and apply for consent orders. The Court of Appeal must not set the cat among the pigeons.
51. I should however like to feel that within the consultation process the views expressed by Peter Singer QC in 1992 were carefully considered. I share the doubts raised by Peter Gibson LJ in his judgment. I wonder whether the courts may not have imposed too restrictive an interpretation upon the words of section 25 and given too great weight to reasonable requirements over other criteria set out in the section. On the present state of the law as interpreted in the authorities Johnson J`s order is clearly right. If this appeal was not bound by authority I would not wish to make an order of a kind suggested by Mr Munby, but as the sums with which the courts are asked to deal become very large indeed, it may be that we are now perhaps somewhat over-modest in our awards.
52. On the first issue of discovery, I have no doubt that the Thyssen defence to detailed requests for discovery is entirely appropriate even if the award had been substantially greater than £9 million. I too would dismiss this appeal.

Order: appeal dismissed with costs; stay refused; application for leave to the House of Lords refused.