England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EDMONTON COUNTY COURT
(His Honour Judge Riddell)

		Royal Courts of Justice Strand London WC2 Monday, 5th March 2001

1. LORD JUSTICE THORPE: Mrs Pasha, who I will call the wife, began to cohabit with Mr. Pasha, who I will call the husband, in the mid-1980s. They married on 16th August 1986. They had two children, S, who was born in 1990, and M who was born in 1996. The final matrimonial home in Radlett was acquired in July 1995, and it was a splendid home reflecting the husband's high status as a valued employee of the Swiss Bank Corporation and, more recently, of ING Barings. Towards the end of his employment with the latter firm he was earning something approaching £200,000 a year.
2. The parties separated in July 1998 and the husband petitioned for divorce, obtaining a decree nisi on his conduct petition on 12th October 1998. The wife has had considerable problems of health and stability over the years. She has had a tendency to depression and she has been treated for alcoholism. She also has limited mobility as a result of injury to her foot. No doubt within that scene the husband was well able to find material to justify a petition.
3. The wife's notice of application for ancillary relief was filed on 3rd December 1998 and led to a somewhat unsatisfactory hearing before District Judge Karet who was sitting in the Barnet County Court. I say unsatisfactory because there were four days of evidence, spread between 1st July 1999 and 28th January 2000. After that final day of evidence written submissions were lodged by counsel, Mr. McCourt for the wife and Miss Purkiss for the husband. The District Judge appointed 9th March 2000 to deliver judgment. The wife was represented at that hearing, but as a result of a mistake made by the husband's solicitors he was neither present nor represented for the judgment. The order made by the District Judge was that the wife should receive a lump sum of £185,000, together with continuing periodical payments on a joint life basis at the rate of £750 a month. He made an order for costs against the husband.
4. When served with that order, the husband lodged a notice of appeal on 20th March. For some reason, which we have not investigated, the case was transferred for the determination of the appeal to the Edmonton County Court and came before His Honour Judge Riddell. He heard submissions from counsel on 23rd June 2000 and delivered his judgment on 30th August. The wife lodged notice of application for permission in this court on 25th September. There seems to have been some delay in processing that application, no doubt because there were deficiencies in the documentation discovered by the Office. The papers were not put in front of me until the beginning of this year, and on 11th January I made a direction for an oral hearing of the application for permission, with appeal to follow if permission granted. At the outset of the hearing this morning we granted permission and proceeded at once to the hearing of the appeal.
5. The essential point raised by the appeal is simple enough. There was a lengthy hearing on oral evidence before the District Judge, at which the principal issue in dispute was the husband's credit and the reliability of his disclosure. Mr. McCourt for the wife mounted a powerful attack on the husband's integrity. He relied on an analysis of the husband's expenditure, particularly in the 18 months immediately preceding 31st December 1998, and he sought to prove, by the exceptional nature of the sums passing through the husband's hands, that he had dissipated and/or secreted assets in preparation for the court's investigation and to defeat or diminish the wife's statutory claims. Mr. McCourt achieved something of a forensic triumph, for the District Judge made some trenchant findings against the husband. In the course of his brief judgment, which has been transcribed, the District Judge found:

"I am in no doubt in this case that the petitioner husband has engaged in a lengthy plan to dissipate or, much more to the point, to secrete his capital and income."

6. In explaining that fundamental conclusion, the District Judge found:

"After eventual annotation of his bank statements in a poor and sketchy manner, unsupported by cheque stubs (which bore different, and I believe deliberately confusing information or in many instances no information at all), it became apparent on some careful forensic investigation by those advising [the wife] that the husband had for several years systematically withdrawn sums averaging in the region of £12,500 per calendar month without being able (or more realistically refusing) to account to the court how this money was spent or if not spent where, apart from two large sums stated to be gifts to members of his family to acquire properties, the money had been kept or invested."

7. Mr. McCourt, for the purposes of this appeal, has conceded that there is a measure of overstatement in that finding, in that this course of extraction had not been proved over a period of several years but over a period of about 18 months. The District Judge then considered a liability, asserted by the husband, to repay a loan said to have been obtained from a friend, a Mr. Chaudhry. Of that the District Judge said:

"I have strong suspicion that the agreement is a sham manufactured for the purposes of these proceedings."

8. It was also the husband's case before the District Judge that, despite the fact that he had very high continuing levels of expenditure, he was unemployed and with little prospect of employment. The District Judge did not accept that case either. He said:

"But I do not believe that he has been living entirely on capital. He may even be receiving an income which he has concealed."

9. In the next paragraph the District Judge said:

"He is eminently employable – if not employed – and mortgageable, though it was submitted on his behalf that it was not so."

10. On the same theme the District Judge said:

"I have not the slightest doubt that the husband will be able to find a reasonably sized mortgage (and may not need one at all if my suspicions as to his capital position proves to be correct)."

11. Towards the conclusion of his judgment the District Judge reverted to the issue of concealment, when he said:

"There is also, I firmly believe, a fund or funds of indeterminate size concealed or held on behalf of the petitioner by others."

12. Perhaps the District Judge's evaluation of the husband is most succinctly put during the course of subsequent submissions on costs from Mr. McCourt, when he said:

"Well, basically I did not believe anything he told me – even the fact that he was unemployed I am suspicious about."

13. In quantifying the wife's lump sum at £185,000 the District Judge founded himself, not only on assets which the husband admitted to, but also on the assets which the District Judge held to have been concealed, although the husband's obfuscation prevented the District Judge from quantifying the extent of the concealment.
14. It is important to record the grounds upon which the husband appealed to the circuit judge. The first ground of appeal is this: that the lump sum ordered to be paid to the wife is in excess of her needs and leaves the husband with insufficient capital with which to rehouse himself and the children of the family and, second, that the periodical payments order is, on the basis of the evidence, too high and/or should have been limited in time. Those are the only two grounds in the notice of appeal. It is to be emphasised that there is absolutely no attack on the District Judge's evaluation of the husband's credibility or of his fact finding.
15. The circuit judge clearly approached the case with great care and his transcribed judgment runs to some 61 pages. But I have to say that, in my opinion, he mistook his essential task, which was to evaluate and determine whether there was any validity in either of the grounds advanced. In making that evaluation he was inevitably circumscribed by the District Judge's assessment of the husband's credibility and by all his findings of fact. Although the circuit judge correctly directed himself as to his function, and specifically cited the approach fixed in Marsh v Marsh [1993] 1 FLR 467, he does thereafter seem to have regarded himself as free to re-evaluate the extent of the husband's misconduct, although he heard no evidence and proceeded on the submissions of counsel. I can demonstrate that conclusion by referring to the passages within the judgment of the circuit judge in which he considers the four aspects that I have already highlighted within the judgment of the District Judge, namely secretion of assets, the loan from Mr. Chaudhry, the husband's income and the husband's capacity to mortgage property.
16. In relation to the dissipation and secretion of assets he began to depart from the essential findings of the judge at page 28 of the transcript, where he criticised the District Judge's analysis by saying:

"But the obvious difficulty with this reasoning, particularly in the context of the husband's need to house and maintain the children, is that the £10,000 and the £40,300 have very very probably been spent to meet the husband's very heavy expenditure, and the £35,000 is unlikely to be readily available to him."

17. It seems to me implicit from that citation that the judge was ruling out the possibility of secretion. At page 47 of the transcript the judge, in recording the parties' financial resources, records only the assets that the husband admitted to or which had been specifically proved against him. There is no reference at all to undisclosed assets. That omission is repeated at page 53 of the transcript when, in considering the quantification of the wife's housing needs, the judge said:

"Nonetheless, given the assets available here, I do not see how it could be right to start off from the position that the wife should have £175,000 for her rehousing out of the net proceeds of sale of the former matrimonial home."

18. That passage seems to concentrate on the assets available and to ignore the clear finding of the District Judge that there were additional assets secreted. That is put beyond the smallest doubt by this passage, where the judge said in terms:

"It is not possible to conclude, on the balance of probabilities, that the husband actually has now undisclosed assets which were available to meet the needs of himself and his children."

19. In relation to the borrowing or asserted borrowing from Mr. Chaudhry, the judge's different approach is revealed by this sentence:

"Nonetheless on the evidence, there cannot be more than a strong suspicion that this is not an entirely genuine debt, and I cannot conclude that the husband does not owe any money to Mr. Chaudhry."

20. Once again, that conclusion is in direct contradiction with that of the District Judge.
21. In relation to income the judge said:

"I also tend to the same conclusion as the District Judge reached concerning the husband's earning capacity."

22. But on the following page he seems to fall into the same trap, when he says:

"But the evidence falls far short of enabling me to form any view of how much the husband has been earning."

23. Finally, in relation to his capacity to obtain mortgage finance, in contrast to the District Judge's clear conclusion, the judge said:

"I do not see how, on the evidence, a mortgage capacity could be attributed to the husband now."

24. These citations from Judge Riddell's judgment seem to me to demonstrate a general approach that, unless an asset or source of income could be established to exist, it necessarily had to be ignored. If that were the proper approach in ancillary relief litigation, it would be a licence for the unscrupulous respondent, who would only have to act, for the purposes of concealment, with sufficient skill to be able to defeat an attempt on the part of the applicant wife to prove the whereabouts of an asset or source of income. It is of fundamental importance that trial judges in this field should be acute to detect chicanery and to be forthright in dealing with it. The judge may find concealment where funds have passed through the respondent's hands without explanation. In appropriate circumstances he may draw adverse inferences.
25. Miss Purkiss has done her best to support the circuit judge, and she has placed great emphasis on one aspect of the District Judge's adjudication on costs. For when, in the absence of the husband and his team, Mr. McCourt pressed for a costs order on behalf of the legally aided wife, the District Judge said that he would be making an order against the husband and that there should be a detailed assessment. He went on to say:

"But I will say that in this instance anything towards the costs should not be paid out of the capital sum. If he does not pay, then the respondent must take such steps as she is advised to enforce any order for costs because there will be an inevitable delay in the assessment. He presumably will try to find a property to purchase and so attempts will have to be made either by Mrs Pasha or the Legal Aid Board to recover the costs from any assets that he has. I think that is the right way of dealing with my slight concern."

26. Miss Purkis says that the passage demonstrates that the District Judge had no real confidence in the existence of secreted money. That seems to me to attempt to build far too heavy an edifice on a very sketchy foundation. After all, the District Judge will have been conscious of the fact that he was moving towards an order without having heard contrary argument. Accordingly, he made such conditions and made such limitations as would give the best opportunity to the absent litigant to discharge the order.
27. Miss Purkiss has also sought to submit that the circuit judge rejected the District Judge's evaluation of the wife's reasonable housing needs at about £170,000. I do not think that that is a tenable justification for his conclusion to reduce the wife's lump sum from the figure ordered by the District Judge to the sum of £145,000. The judge does no more than say that, at his reduced award, the wife would either have to accept less than three bedrooms in the area of her choice or, alternatively, to move to some less expensive area in order to acquire the accommodation which she seeks. Implicitly, the judge has accepted the District Judge's evaluation of £170,000 for a three bedroomed property in the area of her choice.
28. Miss Purkiss's final point, which seems to me to be her best, is that, although in recording the assets of the parties the District Judge correctly recorded that the wife in her own name had approximately £28,000, which all derived originally from the husband, he did not, when he came to explain how he quantified his lump sum, bring that available asset into the account. All he did was to say, after lengthy consideration, that the wife should receive so much for her property, so much towards storage charges, so much towards arrears of periodical payments and so much in compensation for loss of future pension rights. At that point, says Miss Purkiss, he should have brought in, on the other side of the balance sheet, the money that was available to her in her own right. That criticism was no doubt made during the course of the appeal and is picked up by the judge in his judgment. However, there are two things to be said about it. The first is that, plainly, the District Judge was well aware of that asset and had himself recorded its existence in his short judgment. The second consideration goes, I think, to meet a somewhat ambitious submission advanced by Mr. McCourt, that this court should not just restore the adjudication of the District Judge but should substantially uplift it to reflect the fact that the property prices in the Enfield area increased by a factor of 20 per cent between the commencement of the hearing before the District Judge and the judgment of the circuit judge. He even says, I think, that there has been continuing inflation in the area over the course of the intervening months that the appeal has been waiting in this court. It does not seem to me to be necessary to have regard to that factor but if, in the mind of the wife, she feels that she has been depressed to a lower standard of housing as a result of the delay in the conclusion of this litigation, then she can take comfort from the fact that she has money of her own which she can put into the housing investment.
29. It seems to me, therefore, that the circuit judge clearly fell into error in regarding himself as being free to re-evaluate the husband's misdemeanours in advance of and during the course of the proceedings in the Barnet County Court. Had he properly brought into account the assets concealed, as well as the assets revealed, he would not have felt compelled to depart from the discretionary conclusion of the District Judge. The fact that the assets concealed could not be precisely quantified was not something that should have weighed with him. It is, after all, often an element of an asset concealed that it is difficult, if not impossible, to quantify.
30. This case is yet another of many that come to this court revealing the deficiencies in the appellate procedure, where ancillary relief is litigated in the county court and where there is a right of appeal in the court of trial. The reform of the appellate structure in ancillary relief, and indeed in family proceedings more generally, is currently with the Lord Chancellor's Department for consideration, and this appeal is yet another that proves the need for reform and will, I hope, give some urgency to the completion of the Departmental review.
31. For all those reasons, I would allow the appeal and restore the order of the District Judge, save that in paragraph 3 there should be deleted from the second part the words "£3,500 representing arrears of periodical payments under the interim order", and with the deletion of those words the paragraph will read simply: "In addition to the lump sum of £185,000 the Respondent's solicitors shall release to the Respondent a further sum of £1,500 the first and second months payment under paragraph 2 hereof." I would also for the moment delete the costs order since that is something that was also revived by the circuit judge. It is something as to which we have not heard argument.
32. LADY JUSTICE HALE: I agree.
Order: Appeal allowed as per judgment with costs here and below; appellant to have two thirds of her costs in the main trial. (Order not part of the judgment of the court)