England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIS HONOUR JUDGE GRAHAM JONES
(sitting as a High Court Judge)

		Royal Courts of Justice Strand, London, WC2A 2LL
		Friday 23rd March 2001

MR. JUSTICE BODEY :

1. This is an appeal by the Claimant / Appellant against a decision of Judge Graham Jones dated 21st October, 1997 when the Judge dismissed the Claimant's claim in negligence against the Defendant , the Claimant's former Solicitor.
2. The matter arises out of a consent order dated 4th September, 1990 made in ancillary relief proceedings by Judge MacLaren Webster QC at the Salisbury County Court. It turns on the impact of the Defendant's admitted failure to advise the plaintiff as to the variability of a lump sum order by instalments.
3. By way of background, the Claimant and his former wife (whom for convenience, I shall call "the wife") were married on 5th May, 1984. They had one child a daughter who is now aged 16.
4. During the course of the marriage, the Claimant & the wife purchased a valuable property "The Manor House" and also ran an antiques business together.
5. Unfortunately, the marriage broke down, following which negotiations took place between the parties' respective solicitors to deal with the various financial issues arising.
6. This led to the consent order mentioned above, dated 4th September, 1990, within which many financial matters were covered; but in particular it was ordered that the wife should pay the claimant £42,500 by way of two instalments, £2,500 within 28 days and £40,000 within six months, whereupon the Claimant's interest in "The Manor House" should be transferred to the wife, subject to the outstanding mortgage. In the event that the instalments were not paid, there was an order for the sale of the property with a corresponding distribution of the net proceeds of sale. In addition the wife was to take over that part of the antiques business which had not already been divided up by agreement. Various other matters were covered and the entire package was expressed as a "clean break".
7. At the time of that consent order, the gross value of "The Manor House" was taken as being about £275,000 which, after various deductions for the mortgage and so on was reduced to an anticipated equity of about £118,000.
8. It therefore appeared that there was ample equity from which the lump sum could be paid by the wife to the claimant, if necessary by way of a sale of the property. In addition, there was evidence from the wife's adult daughter by a previous marriage that she (the daughter) and her husband were intending to sell their home, thereby raising capital, with a view to buying into "The Manor House" and living there with the wife. That was in fact the main way in which the wife was expected to have been able to come by a capital sum to assist her in paying out the claimant .
9. The first instalment of £2,500 was duly paid by the wife to the Claimant. However, the date for the second instalment (4th March, 1991) came and went without the wife paying. It transpired that the proposed arrangements between the wife and her adult daughter had fallen through, following the unexpected failure of the daughter's marriage and that the house proved impossible to sell at the sort of price which it had been expected to obtain for it.
10. Shortly after March 1991, the Claimant sought & obtained directions regarding the outstanding £40,000, which led to the house subsequently being placed on the market.
11. In January 1993 (two and a quarter years after the consent order) the wife served on the Claimant an application to vary the consent order but later, for some reason which is unclear, withdrew it. Certainly the Judgement below mentions negotiations going on during 1993, with the aim of redefining the Wife's financial obligation to the Claimant, so that may have had something to do with her holding back from further recourse to the Court.
12. In November 1993, three years after the consent order, the wife made a second application to vary it, those negotiations having come to nothing.
13. In December 1993, following a directions hearing regarding the wife's application to vary the consent order, the claimant terminated his retainer with the Defendant - being of the view that Counsel briefed by the Defendant for that hearing had not fought his corner sufficiently strongly.
14. Shortly thereafter, in January 1994, a sale of "The Manor House" was finally achieved. However, the equity turned out to be not £118,000 as anticipated, but only about £18,000. As can be seen , there was thus a reduction of about £100,000 in the expected net proceeds of sale. Of this reduction, about £60,000 was comprised of (a) a reduction of about £40,000 in the anticipated gross sale price (b) an increase of about £5,000 in the anticipated costs of sale and (c) an increase of about £15,000 in the mortgage liability being for reasons other than the wife's default. The remaining £40,000 of the reduction in the expected net proceeds of sale was comprised of (a) an increase of about £10,000 in the mortgage liability through the wife's having stopped paying the instalments in December 1992 and (b) an increase of about £30,000 in the liabilities of the business, which business had gone to the wife by the consent order and which liabilities were charged on the property.
15. Thus, of the reduction in expected net proceeds of sale, £60,000 was clearly not the fault of the wife; although (as between the claimant and the wife) £40,000 may or may not have been her fault, depending on precisely how and why she caused or permitted the charged liabilities to increase. This is not an area which seems to have been investigated below and no findings were made; although in his affidavit sworn on 3.4.91 seeking directions as regards the order for sale, the Claimant asserted that the wife was at that time "…experiencing great financial hardship" and had insufficient income either to service the debts secured on "The Manor House" or to support herself and the child of the family.
16. The wife's application to vary the consent order was finally resolved by Judge Shawcross on 24th October, 1995 when he acceded to her application. He found the husband's presentation to be honest and reliable, but the wife's to be dishonest & unreliable as to her income from the antique business.
17. Nevertheless, he felt that the changes in the underlying assumptions of the consent order caused, for example by the diminution in the expected value of "The Manor House" and by the overall reduction in the equity, made it just and necessary for the amount of the second instalment of the lump sum (£40,000) to be varied downwards. He did therefore so reduce the £40,000 namely to £25,000, of which the wife had already paid the first £2,500, leaving £22,500 still to be paid.
18. Judging by the text books, the propriety of such an order varying the overall quantum of such an order would appear to be in some doubt; but in my judgement, the cases of Tilley v Tilley 1979 10 Fam Law 89 and Penrose v Penrose 1994 2 FLR 621 make it clear that the jurisdiction created by S31(1) MCA 1973 (below) not only empowers the Court to re-timetable / adjust the amounts of individual instalments, but also to vary, suspend or discharge the principal sum itself, provided always that this latter power is used particularly sparingly, given the importance of finality in matters of capital provision.
19. Part of the net proceeds of sale of £18,000 (viz £6,000 odd) were directed by the order of Judge Shawcross to be used to pay off the wife's liability to a builder who had been doing work at the house shortly before September 1990 and who had obtained a Charging Order over the house. The remainder of the net proceeds (ie £12,000 odd) were ordered to be paid to the Claimant. The final balance of the redefined lump sum due to the Claimant (i.e. £10,000 odd) was to be found & paid by the wife out of whatever resources she had and / or with the help of her family.
20. As a matter of pure arithmetic therefore, the claimant was worse off through the variation application, by about £17,500 (being £42,5000 less £25,000). The Wife too was, incidentally, worse off having been expected to come away from the proceedings with about £75,500 worth of equity (£118,000 less £42,500 paid to the Claimant) and having in fact come away:- with £30,000 worth of business liabilities taken care of and with a (presumably) debt-free business of unknown value; but with no capital sum, and with an obligation to find the last £10,000 of the Claimant's redefined lump sum, as just mentioned.
21. In the result, the Claimant (then acting in person) brought proceedings in negligence against the Defendant, his former solicitor, alleging that he had not been properly advised about the variability of lump sum orders payable by instalments under S.31 Matrimonial Causes Act 1973 – see below.
22. As I have said, it is from the Judgment against him in those proceedings that the Claimant now appeals.
23. There is a preliminary point with which I must shortly deal, being an application by the Claimant for leave to amend his Notice of Appeal, originally drafted by him when he was acting in person. This would be to augment the original Notice with allegations of negligence arising before 3.9.90, namely the Defendant's not having advised the Claimant from March 1990 to September 1990 as to the variability of lump sum orders by instalments.
24. The Defendant opposes this leave on the basis that such earlier allegations were not pleaded below and that to allow argument in this Court on such matters (upon which the Defendant would have wanted to call evidence) would be wrong
25. I have re-read the pleadings, which were also prepared by the Claimant when he was acting in person. They run to a Re-Re-Re-Amended Statement of Claim and I am satisfied that in reality they focus exclusively on events on and after 3.9.90.
26. In such circumstances, I accept the Defendant's submission just summarised and do not consider it would be right to let the earlier matters become a part of the material for argument at this stage, although I am also satisfied (as will appear) that this refusal will not impact upon the outcome of this appeal.
27. S 31(1) of The Matrimonial Causes Act 1973 provides that the court "... shall have power to vary or discharge [an order for the payment of a lump sum by instalments] or to suspend any provision thereof temporarily and to revive the operation of any provision so suspended".
28. The Defendant admits that, at all material times when advising the Claimant, he was unaware of this Section. Hence he did not advise the claimant of it, nor specifically of the fact that jurisdiction would exist for the court to vary any lump sum order worded as being payable by instalments.
29. If minds had been addressed to this point, then alternative possibilities existed which would (or would arguably) have taken the order out of S31. For example, there could have been an attempt to negotiate an order phrased as requiring the payment of two lump sums, following the wording of S23(1)(c) Matrimonial Causes Act; or an attempt to negotiate an undertaking by the Wife regarding the first tranche of £2,500, turning the £40,000 into a single lump sum (and not therefore caught by S31); or indeed the Claimant could have chosen simply to take £42,500 after six months, so avoiding an 'instalment situation' altogether.
30. The Claimant's case in the negligence action was that he had specifically instructed the defendant that any consent order must be incapable of change or variation, so that the wife could not get out of her obligations.
31. Having heard both parties on this point and having carefully considered all the evidence, Judge Graham Jones found against the Claimant and in favour of the Defendant, namely that such instructions had not been given to the Defendant, although the Judge did stress that he was satisfied the Claimant had come to convince himself as to this point and was not intentionally lying about it. From this finding there can be and is no appeal.
32. Nevertheless, the Claimant had undoubtedly informed the Defendant of his considerable concerns that the wife was not to be trusted. For example, he referred to her in letters as 'fiddling' regarding the business, creating false documents, and as lying and cheating. He also supplied the Defendant in April 1990 with a copy of a dossier which he lodged with the Police purporting to demonstrate that the wife had been dishonest in her part of the management of the antique business.
33. This is not to say that these allegations were true, but simply that they were exercising the mind of the Claimant so that he was anxious for any order, whether by consent or not, to be as watertight as the law would permit.
34. The Defendant for his part accepts, in his Statement at p.137, that he knew the Claimant wanted to achieve a clean break settlement, which is clearly synonymous with finality .
35. In such circumstances, there has been a measure of debate in this court as to the precise extent of the duties of the Defendant and Counsel respectively on the 3^rd and 4^th September, 1990; as to how it those duties interrelated; as to whether either of the Defendant and / or Counsel was in breach; and as to the circumstances within which Counsel's involvement may absolve a Solicitor from any duty to proffer advice.
36. What happened on 3^rd September 1990 was that, in the early evening, the Defendant discussed with the Claimant over the telephone a Calderbank letter just received from the wife's solicitors proposing, not for the first time, a lump sum by instalments.
37. It is common ground that no advice was tendered then as to the variability of such an order. The Claimant says that the Defendant, an experienced matrimonial Solicitor, well knew that he was anxious about finality and that if he (the Defendant) had only been aware of the variability point, then he (the Defendant) would have realised that he (the Claimant) could not have known about it, unless advised of its existence. However, the Defendant would have known that he would be meeting the Claimant at court the next day, when the whole question of settlement was going to be considered in detail with the help of experienced Counsel.
38. The next morning the Claimant, Counsel and the Defendant, together with his secretary of many years, duly attended court for the hearing. The Defendant says in one of his Statements: "It was my practice that once either the hearing had commenced or terms of agreement had been reached between the parties and their respective counsel, and I was quite confident that there were no outstanding problems and my client was happy, I would leave counsel with Mrs Maple in attendance and return to the office... this is what occurred on the morning of 4th September, 1990... once it was clear that the parties were agreed on the principles of the financial settlement... I left [counsel] to draft the consent order ".
39. Sometime during the morning, with the consent of the Claimant, the Defendant did indeed leave to go back to his nearby office, being able to return at short notice in the event of any difficulties. The parties remained at court for most of the day.
40. The two Counsel involved (the Claimant's and the wife's) drafted up the consent order, this being the stage in the process when it would be normal practice for the precise wording and mechanics of the agreed provisions to be finalised.
41. Thereafter it would be normal practice, as the Claimant's Counsel says occurred here, for Counsel to take the client through the draft order in detail.
42. The Claimant's Counsel who drafted the consent order said in evidence at the hearing below that she could not recall whether she was asked to give advice on the variability point and would not have done so unless asked. If asked, she said that she would have advised that all orders are capable of being altered on appeal, for example in the event of an unforeseen change of circumstances.
43. There was no claim against Counsel here (and perhaps there could not have been at the material time); so the only question in these proceedings was as to the Defendant's duty and whether he was in breach of it.
44. The way in which Judge Graham Jones dealt with this issue was as follows: "... ought the advice [on variability] to have been given, even if it was not sought? I do not think so. As I have already said, there was every reason to think that the order made by consent would be implemented without difficulty. There was ample equity in The Manor House. Everyone, including [the Claimant] expected that the £40,000 would be easily realised, I am satisfied. In all the circumstances advice as to variation of the order was not called for; and it was certainly not negligent in my judgment not to volunteer it."
45. Subsequently, referring to the approach (para. 42 above) of the Claimant's Counsel who had dealt with the consent order, he said "... that is a proper practice for a matrimonial practitioner to adopt, where the circumstances at the time were such (as here) as not to suggest a realistic possibility of a variation of the order.... an experienced Clerk was left with Counsel and Counsel was an experienced and competent family practitioner. Furthermore, it was not [the Defendant] but Counsel who drafted the consent order…..".
46. The Defendant clearly owed the Claimant a duty of care and, with the benefit of hindsight, it would of course have been a wise precaution to have advised him about S31(1), had the Defendant been aware of it. However that is not the same as saying it that it was a breach of the Defendant's duty not to do so; nor that loss from a subsequent variation application was sufficiently foreseeable; nor that the failure to give the advice in question was causative of loss.
47. Since all these considerations are essential factors in the establishment of negligence, it is convenient to consider the issues as to foreseeability and causation first.
48. In these respects the Claimant makes essentially straightforward submissions: that the possibility of loss by a later variation application by the wife was reasonably foreseeable, particularly given her track-record of alleged 'trickiness' and that such reasonably foreseeable loss which in fact occurred was caused by the Defendant's failure to be aware of and advise him about S31(1) of the Act.
49. The Defendant makes two submissions in response: first, that everyone thought the £40,000 instalment was going to present no problem; that the money would either be paid out of the monies coming from the adult daughter (described by the Claimant in a Statement as "…a key part in my decision to accept the settlement…"); or else out of a re-mortgage by the wife; or ultimately by a sale.
50. The Defendant points out that the anticipated equity (£118,000) was nearly three times the outstanding lump sum (£40,000) and that additionally, as is the case, the husband was convinced that "The Manor House" was in fact worth more than the valuation of £275,000 used for the purposes of reaching the compromise.
51. Accordingly the Defendant maintains that the events which subsequently occurred were not reasonably foreseeable; or to put it another way, that the risk of what eventually happened was so minimal as to be properly described as hypothetical, such that any reasonably competent Solicitor aware of section 31 would not have thought it necessary to raise with the lay client the "lawyer's" distinction between an application to vary under that Section and an application for leave to appeal out of time. This is an argument which has considerable force.
52. The Defendant's second submission is that, even if it had been possible to achieve an agreement with the wife (or an order after a contested hearing) for an equivalent lump sum order expressed other than by instalments, then such an order would still have been vulnerable to being upset by way of an application by the wife to the Court of Appeal for leave to appeal out of time.
53. It is the fact that many such applications have been before this Court, necessarily involving the resolution of a tension between (a) the need for finality as regards capital provision and (b) the need for review in those exceptional cases where justice so demands.
54. Accordingly, strict conditions have to be met by the applicant before the court will grant such leave. In the leading case of Barder v Calouri 1988 AC 20, Lord Brandon of Oakbrook at p. 43A to E formulated these conditions as follows: "……A court may properly exercise its discretion to grant leave to appeal out of time from an order for financial provision... provided that certain conditions are satisfied. The first condition is that new events have occurred since the making of the order which invalidate the basis, or fundamental assumption, on which the order was made, so that, if leave to appeal out of time were to be given, the appeal would be certain, or very likely, to succeed. The second condition is that the new events should have occurred within a relatively short time of the order having been made. While the length of time cannot be laid down precisely, I should regard it as extremely unlikely that it could be as much as a year, and that in most cases it will be no more than a few months. The third condition is that the application for leave to appeal out of time should be made reasonably promptly in the circumstances of the case... [The] fourth condition is that the grant of leave to appeal out of time should not prejudice third-parties who have acquired, in good faith and for valuable consideration, interests in property which is the subject matter of the relevant order".
55. As to variation applications under S31, on the other hand, there are no such preconditions. The only guidance as to the exercise of the power contained in S31(1) is to be found in S 31(7) whereby "... in exercising the powers conferred by this section the court shall have regard to all the circumstances of the case, first consideration being given to the welfare [of any child of the family] and the circumstances of the case shall include any change in any of the matters to which the court was required to have regard when making the order to which the application relates..."
56. So far as Counsel have been able to find, there are no decided cases stating any principles on which the Court should act when applying S31(1) and (7) to orders for a lump sum payable by instalments.
57. Nevertheless, given the constant emphasis in the authorities generally on the need to uphold the finality of orders intended to be final, including orders as to capital, it seems to me that very similar considerations ought in practice to be applied under S31 as those laid down in Barder, at any rate as regards varying the overall quantum of a lump sum order by instalments (as distinct from re-timing or 're-calibrating' the instalments).
58. The re-opening under S31 of the overall quantum of lump sum orders by instalments, especially when made as part of a package intended to be final (and all the more so when ordered by consent following an agreement) should only be countenanced when the anticipated circumstances have changed very significantly, and / or for cogent reasons rendering it quite unjust or impracticable to hold the payer to the overall quantum of the order originally made.
59. This formulation gives a little more latitude as regards S31 than do the Bader conditions for the grant of leave to appeal out of time; but that must I think follow from the statutory requirement under S31(7) that the Court is to consider "all the circumstances".
60. It follows that, whether by agreement or by fighting the case, the Claimant would never have been able to obtain an order which was not vulnerable to the risk of being reopened - either by an application to vary or else by application for leave to appeal out of time - if the circumstances changed enough, if the justice of the case so required and if the wife moved reasonably promptly.
61. Thus, if the question be asked as to whether the Claimant has succeeded in showing it to be more likely than not that, but for the Defendant's failure to give the advice in question, he (the Claimant) would have been able to have achieved an order giving true finality, then the answer must be no.
62. The most that could be said is that it was reasonably foreseeable that a variation application under S31 regarding an instalment order would (or might) have met with a rather more 'broad brush' approach than would (or might) have been applied by the Court of Appeal on an application for leave to appeal out of time against an order for a single lump sum. (There was however no reason to anticipate that any such application would be made, and good reason to think that it would not).
63. However such possible differences of approach just referred to seem to me to be matters of degree and not of kind. It is very difficult to see circumstances in which the Court of Appeal would not grant leave to appeal out of time as regards an order for a single lump sum but in which the justice of the case would nevertheless justify a variation of the overall quantum of a lump sum by instalments. Comparable public policy considerations as mentioned above are relevant to each type of application if the overall quantum of a lump sum order by instalments is 'under attack'; and it would be logical and just for a similar approach to be applied regardless of the differing procedural routes involved.
64. When asked to suggest circumstances where a S31 application would probably succeed as regards the overall quantum of an order for a lump sum by instalments, but where an application for leave to appeal out of time against an order for a single lump sum would probably fail, Counsel for the Claimant was really driven to put forward only the example of the facts of this very case. However that presupposes that the wife would have been just as slow in getting to the Court of Appeal (had she needed to do so) as she was in mounting her application to vary, which – although this can only be speculative – would surely have been seen as most improbable, if the point had in fact been addressed on the 4^th September 1990.
65. Whilst there are many authorities which suggest that changes in house prices are insufficient to justify the grant of leave to appeal out of time, there are others which go the other way (see for example Heard v Heard 1995 1 FLR 1970) and I am by no means persuaded, particularly if the wife here had applied more promptly to the Court of Appeal to seek leave, that the Court of Appeal would not have granted her application, given that the available resources had reduced or were reducing to such an extent that for a combination of reasons, she was (as found by Judge Shawcross) quite unable to pay the full amount which she had earlier agreed to pay, at a time when the anticipated circumstances were wholly different from the circumstances as they in fact turned out.
66. Accordingly it seems to me that in effect the Claimant did not succeed in establishing the necessary ingredients of foreseeability and causation of his loss through the Defendant's failure to proffer advice as to S31 on 3^rd & 4^th September 1990. Even if advised as regards S31, he would nevertheless have been likely (if justice subsequently demanded a re-evaluation in the light the new and reduced equity figure) to have ended up with the capital settlement reduced one way or the other, whether he had settled for the instalment route or held out for and achieved an order for a single lump sum payment.
67. In these circumstances, it is unnecessary to consider further the issues as to the precise demarcation of responsibility (if any) as between Counsel 'who drafts' and his / her instructing Solicitor. I would in any event be slow to reverse the findings of the Judge below, who had a much better chance over several days to get a feel for the case (especially as to the precise roles played by the respective lawyers on the 4^th September 1990) and who came down clearly against liability in the firm language set out above.
68. For the reasons set out above, therefore, I would dismiss this appeal.

LORD JUSTICE SEDLEY: I agree.

LORD JUSTICE SCHIEMANN: I also agree.

ORDER:
69. Appeal Dismissed with costs.
70. Permission to amend notice of appeal refused.
71. Permission to appeal to the House of Lords refused.
72. Payment out of monies in court to Respondents solicitors with interest.
(Order does not from part of approved Judgment)