England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHELMSFORD COUNTY COURT
HIS HONOUR PETER THOMPSON

		Royal Courts of Justice Strand, London, WC2A 2LL
		16th April 2003

 


Lady Justice Hale:

1. This began as a husband's application for permission to appeal, listed with appeal to follow if permission is granted, against an order made by HHJ Peter Thompson in the Chelmsford county court sitting in Ipswich on 27 September 2002. He allowed the wife's appeal and varied an ancillary relief order made by District Judge Silverwood Cope on 16 May 2002.
2. As this is a second appeal, permission can only be granted if it raises an important point of principle or practice or there is some other compelling reason. In our view the case does raise the important issue of the proper approach, in the light of White v White [2001] 1 AC 596 and later decisions of this court, to the parties' respective contributions in a short childless marriage where both are working. Accordingly we gave permission to appeal.
3. The parties are both aged 33. They married on 18 July 1997 after a long engagement. They separated in February 2000 and the decree nisi was granted on 25 July 2001. They have no children. Both were employed throughout the marriage, the husband as a computer engineer and the wife as an accountant. The differential between their earnings varied during the marriage, but the wife always earned more than the husband did and at the date of the hearing before the district judge the wife earned about £67,000 gross a year and the husband about £30,000.
4. It was accepted that this was not a case for income provision. Nor did the District Judge take account of various smaller assets and their pensions. The case was about the distribution of the surprisingly large amount of capital amassed as a result of property dealing and development during the marriage. During that time they had owned five properties, two of them as matrimonial homes:

i) 57 Rectory Lane, Chelmsford. This was already owned by the husband, who had bought it with a friend in 1990. It then went into negative equity. The friend bought himself out. The District Judge said that this was in 1994 but the husband says that it was in 1992 and produces a letter in support. There was a dispute between the parties as to the equity in 1997. The husband contended that it was worth £70,000, with a mortgage of £56,000. The wife contended that it was worth £60,000. The District Judge did not resolve this dispute. The house was sold in May 2000 for £91,000. The proceeds of some £33,500 were put into an account with the Halifax.

ii) 6F Dunwich Crescent, Surrey Quays. This was bought for £100,000 as a matrimonial home in contemplation of the marriage and put in the wife's name (because the husband already had a mortgage). The wife contributed £30,000 in cash, the husband £2000, and £70,000 was raised on mortgage. This was reduced to £65,000 by the wife within two months and paid off, according to the District Judge, at a considerable rate. The property was sold in August 2000 and the proceeds of £56,173 placed in a Cahoot account.

iii) 11 Park Vale Court, Brentwood. This was bought as an investment. It needed refurbishment. It was originally jointly owned but put into the wife's name when it was later mortgaged to buy another property (see (iv) below). The purchase price was raised by a remortgage of Dunwich Crescent and £10,000 proceeds of a Tessa owned by the wife. It was sold in April 2001 and the proceeds of £34,737 put in the Cahoot account.

iv) 6 Park Vale Court, Brentwood. This was also bought in joint names with money raised by a mortgage on 11 Park Vale Court. It remained free of mortgage and unsold. The District Judge valued it at £107,000. The husband was living there at the date of the hearing and wished to remain.

v) 7 Shenfield Place, Shenfield. This was the second matrimonial home, bought in the wife's name in August 1999. The husband remained there after the wife left. The District Judge held that the wife paid most of the outgoings until it was sold in May 2002. The proceeds were £178,318.

5. Hence the District Judge took the total proceeds plus the value of the remaining property at £410,409. Allowing for CGT she took the net total available for distribution as £394,813.
6. The District Judge's approach was that, as this was a short marriage, 'essentially, so far as possible, taking into account the other aspects of section 25, . . the parties should be returned more or less to the position that they were before the marriage was celebrated.' What she did, therefore, was to return to each party what they had brought into the marriage and what had been contributed to the outgoings on the property after the separation but divide the profits made during the marriage equally. She recognised that they had gone into buying, refurbishing, letting and selling property together, each contributing what they could, although the wife had contributed the lion's share of the money.
7. She held that the wife had contributed £45,000 out of her capital to the original investment (this would be the £35,000 towards Dunwich Crescent and the £10,000 towards 11 Park Vale Court). The husband had contributed £2,000 from the sale of his motorbike. They should each have these back. She originally held that the husband should have all the profit from the sale of Rectory Lane, as he had owned it before marriage, had managed it during the marriage, and it had paid its way. No doubt this is why she did not at that stage resolve the dispute about the equity in 1997. However, by a letter on her behalf dated 21 May 2002, she decided that given the date of the sale, this was a sum accruing to the parties within the marriage and should be divided equally. She also decided that the £42,000 paid by the wife towards the outgoings on the family home after the separation should be returned to the wife. The remaining sums she divided equally.
8. It does not matter for present purposes how that distribution was achieved. Originally, the husband kept 6 Park Vale Court and all the Halifax account, with a small additional lump sum. After the variation, he kept 6 Park Vale Court and roughly half the Halifax account. The first distribution had given some 56.6% of the total assets to the wife and 43.3% to the husband. After the variation, the wife had some 61% and the husband 39%. The wife was ordered to pay the husband's costs from 4 May 2002, as he had still achieved more than offered.
9. The husband had originally been contending for what the district judge first ordered, although he later argued for a full 50/50% split. He was, however, prepared to live with the district judge's decision. The wife appealed to the circuit judge. She argued that the district judge had not given enough weight to her much greater financial contribution to the capital achieved, not only from her initial investment but also from the payment and reduction of mortgages on the other properties.
10. The circuit judge accepted this argument. He said this:

"I can see from the learned District Judge's findings that she did treat the husband and wife as both persons with entrepreneurial flair, and with robust and intelligent application of their skills and abilities to property development. But in my judgment she did not give a proper adjustment to reflect the wife's vastly greater financial contributions. . . . Although the District Judge found that the parties had done what they could, and there is no question that the husband must also have made contributions, on the evidence it does seem to me that the wife's contributions were significantly undervalued."

Later he said this:

". . . I do find that the District Judge produced an unfair result, and the finding is based on, as I have said, my judgment that she did not give proper credit to the very substantial - indeed one might say overwhelming - contributions of the wife to the growth of the small property empire which this husband and wife had built up in what was a very short marriage indeed."

11. His conclusion was the distribution should be varied so as to give the wife 70% and the husband 30%. Out of the net total still taken to be £394.813, the wife was to receive £276,369 and the husband £118,443. Again, the mechanics do not matter very much, but the effect of his order was that the husband retained 6 Park Vale Court but taking account of an advance payment of £10,000, he had to transfer the whole Halifax account to the wife and received a lump sum of under £1000. This time the wife had achieved the better result and the husband was ordered to pay her costs from 4 May 2002.
12. The husband therefore appealed to this court. As he is now acting in person, he has had difficulty in understanding that this court cannot interfere with the factual findings of the district judge or admit fresh evidence which could have been put before her. His argument now is that this was a case for a 50/50% split. He came into the marriage with property, a three bedroomed house already with an equity at least as great as that contended for before the district judge and now worth £175,000. He also contributed in other ways, to the wedding and honeymoon. The wife brought in only money. He was the driving force behind the property empire. He contributed as great a share of his income as did the wife. He also contributed to the properties after their separation. Now he is left with only a leasehold property with a possible CGT liability. Even the district judge's objective of returning them to the positions they were in before the marriage has not been achieved. He is now worse off than if he had never been married. His wife, on the other hand, who had simply had money sitting in bank or building society accounts when they married, has achieved a much greater return than she could possibly have achieved in any other way.
13. The question arising on this appeal is whether the district judge had gone so far wrong that the circuit judge was entitled to intervene. As this court held in Cordle v Cordle [2002] 1 FLR 207, the principles applicable on an appeal from district to circuit judge in ancillary relief cases are now the same as those in any other appeal. The circuit judge can only intervene if there has been some procedural irregularity or if in conducting the necessary balancing exercise the district judge has taken into account matters which were irrelevant, or ignored matters which were relevant, or has otherwise arrived at a conclusion that is plainly wrong. That of course raises the question whether the approach of the district judge in this case was indeed plainly wrong.
14. As Thorpe LJ also said in Cordle, at para 34, the only universal rule is to apply the criteria in section 25(2) of the Matrimonial Causes Act 1973 to all the circumstances of the case (giving first consideration to the welfare of any minor children) and to arrive at a fair result that avoids discrimination. In White v White [2001] 1 AC 596, at pp 599 - 600, 603 - 606, Lord Nicholls explained that Parliament has declined to lay down any rules; it has given the courts a wide discretion to take account of all the relevant circumstances of the case; it has even repealed the original statutory objective of seeking to place the parties in the position in which they would have been had the marriage not broken down. Implicitly, the objective must be to achieve a fair outcome and there could be no presumption or starting point of equality of distribution. However, having conducted the statutory exercise,

"a judge would always be well advised to check his tentative views against the yardstick of equality of division. As a general guide, equality should be departed from only if, and to the extent that, there is good reason to do so. The need to consider and articulate reasons for departing from equality would help the parties and the court to focus on the need to ensure the absence of discrimination." (p 605)

15. He also pointed out (p 605) that in seeking to achieve a fair outcome there was no room for discrimination between husband and wife and their respective roles. Whatever the division of labour chosen by the husband and wife, or forced upon them by circumstances, fairness requires that this should not prejudice or advantage either party when considering their respective contributions for the purpose of section 25(2)(f) of the 1973 Act. Section 25(2)(f) refers to the contribution which each has made to the welfare of the family, including any contribution made by looking after the home or caring for the family. If in their different spheres each contributed equally to the family, then in principle it matters not which of them earned the money and built up the assets.
16. White concerned a long marriage in which both parties had been engaged in breadwinning as well as homemaking and childrearing. The principle has recently been reaffirmed by this court in Lambert v Lambert [2003] 1 FLR 139, where the parties' roles were more clearly demarcated, holding that it was unacceptable to place a greater value on the contribution of the breadwinner than that of the homemaker as a justification for dividing the product of the breadwinner's efforts unequally (although of course there might be other reasons for doing so, such as a disparity in the parties' needs).
17. Miss Boyd, on behalf of the wife, however, argues that these cases were concerned with the problem of evaluating the very different contributions of breadwinner and homemaker over a long marriage where there have been children to bring up. They are of no relevance to a short childless marriage where both parties have been working. The court has to consider the duration of the marriage under section 25(2)(d). Here the only contributions to be considered under section 25(2)(f) are those in money or money's worth and so the court is entitled to take account of the fact that one has contributed more than the other.
18. This is a surprising proposition. Although White was a long marriage with children, both parties had made a financial contribution as well. The Matrimonial Causes Act 1973 was designed to move away from the application of strict property law principles, with their dependence upon evaluating contributions in money or money's worth, towards the recognition of marriage as a relationship to which each spouse contributes what they can in their different ways. There can be no justification for treating differences in income any differently from differences between breadwinning and homemaking. These days things are rarely as simple as one breadwinner and one homemaker. Both may work equally hard but in jobs which are unequally remunerated. They may agree that one should work part time, or take a career break, in order to enable the other to move or take promotion. They may agree that one should work full time at the outset to enable the other to gain qualifications which will then enable the first to concentrate on domestic responsibilities. As it happens, differences in income and career progression are also frequently the result of inequalities in earning power between the sexes, although not always, as this case shows. If both go out to work and pool their incomes or spend a comparable proportion of their incomes for the benefit of the family, it would be a surprising proposition indeed if they were not to be regarded as having made an equal contribution to the family home or other family assets. Two of the homes acquired here were matrimonial homes and the others (with the possible exception of Rectory Lane) were obviously acquired as joint assets by their joint efforts.
19. The duration of the marriage will obviously be relevant in cases where one party's earning capacity may have been seriously affected by a long period devoted to homemaking and childrearing, but Miss Boyd eventually had to accept that where a substantial surplus had been generated by their joint efforts, it could not matter whether they had taken a short or a long time to do so.
20. This case, therefore, is all about contributions and whether each should be regarded as having made an equal contribution to the assets accumulated in a joint enterprise which should then be shared equally unless there are other considerations telling against this. Generally speaking, the most important considerations telling the other way are the parties' respective housing needs and the needs of the children. This is often a reason for departing from equality. It was also a principal reason for the reluctance of family lawyers in England and Wales to adopt the norm of equal sharing along Scottish lines (the other main reason was the very different approach adopted in big money cases south of the border, but that has been greatly modified in the light of Cowan v Cowan [2001] EWCA Civ 679 [2002] Fam 97 and Lambert v Lambert). But none of those considerations apply here. Each party is or can be adequately housed on their share of the assets and neither has any continuing needs for which the other party should take some responsibility. There is no comparable reason to depart from equality here.
21. However, another reason may be that the assets in question have been brought into the marriage from outside. As Lord Nicholls explained in White v White, at p 610, many legal systems do distinguish between property brought into the marriage or acquired by gift or inheritance during it. It comes from a source quite outside the marriage. In fairness, where this property still exists, the spouse to whom it belonged or was given should be able to keep it. But this is only one of the circumstances of the case. The nature and value of the property, the time when and circumstances in which it was acquired, should be considered. In the ordinary course, it will carry little weight, if any, in a case where the other party's needs cannot be met without recourse to it.
22. In this case, the district judge sought to give the parties back what they had brought into the marriage at the value it held at that date. Miss Boyd argues that the wife should have had the money which she put into the former matrimonial home and 11 Park Vale Court back with interest. The husband, on the other hand, understandably complains that the district judge did not resolve the dispute about what equity, if any, there had been in Rectory Lane at the date of the marriage. Furthermore, if the wife is entitled to her money back with interest, it would seem to follow that the husband is entitled to the inflationary gain on Rectory Lane.
23. There is a respectable argument that the judge should have left Rectory Lane out of the account altogether. It was property which the husband had brought into the marriage, having owned it for some years beforehand. It paid its way during the marriage. Had this been Scotland, the husband would have retained the inflationary gain during the marriage (see Eric M Clive, The Law of Husband and Wife in Scotland, 4^th edition 1997, paras 24.025 and 24.027). On the other hand, the matrimonial home acquired in contemplation of the marriage, albeit with the wife contributing the lion's share of the cash, would be regarded as matrimonial property, as would property bought during the marriage with the proceeds of sale. In Scotland, however, the net value of the matrimonial property would have been assessed at the date of separation and increases thereafter would be covered by the ordinary principles of the common law (para 24.028).
24. All this simply goes to show that there are many different ways of approaching assets brought into the marriage and contributions made after it. It certainly cannot be argued that the approach of the district judge was unfair to the wife. Nor was it seriously unfair to the husband. The district judge was entitled to treat the Rectory Lane property as part of the joint enterprise in which most of the inflationary gain had been made during the marriage. For us to interfere either in her findings of fact or in her exercise of discretion on this point would be to engage in just the sort of 'fine tuning' which was so deplored by the House of Lords in Piglowska v Piglowski [1999] 1 WLR 1360.
25. It follows that the circuit judge was wrong to interfere in what the district judge had decided. Not only had she not been plainly wrong, in my judgement her basic approach had been entirely right. This appeal should be allowed. And the order of the district judge restored. Subject to any representations to the contrary, it also follows that the wife should pay the husband's costs from 4 May 2002, both at first instance and on appeal.

Lord Justice Chadwick:

26. I agree.

Lord Justice Peter Gibson:

27. I also agree that this appeal should be allowed. As we are differing from the Judge on a point of some general importance, I add a few words of my own.
28. The Judge felt able to interfere with the decision of the District Judge because of what he felt was the significant undervaluing by her of the wife's financial contributions. S. 25 Matrimonial Causes Act 1973 requires the court, in deciding whether and how to exercise its powers under ss. 23, 24 and 24A to have regard to all the circumstances of the case (s. 25 (1)) and, in s. 25 (2), in particular to have regard to a number of specific matters including:

"(f) the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family."

29. The terms of para. (f) make clear that the contributions are not limited to financial contributions, though plainly they include such contributions. But when the court is looking at such contributions, is it limited to consideration merely of the amounts contributed or can it take into account such factors as the part each party played in acquiring and realising assets in the name of one or other of the parties and the fact that each party contributed what he or she could from his or her financial resources? In my judgment, the latter is clearly permissible. That is what the District Judge did and it is what she was entitled to do. It measures up to the yardstick of equality of division against which the court is advised to check its views.
30. It follows that in my opinion the Judge, with all respect to him, was wrong to interfere with the decision of the District Judge. For these as well as the reasons given by Hale L.J., I would allow this appeal and make the order which she proposes.
Order: As per draft order. (Order does not form part of the approved judgment)