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 WOLVERHAMPTON COUNTY COURT
(HHJ BELLAMY)

		Royal Courts of Justice Strand London, WC2
		20th December 2005

1. LORD JUSTICE WALL: On 28th November of this year, I heard Mr Timothy Marc Warner in person on renewed applications for permission to appeal against two orders made by HHJ Bellamy. The first order which Mr Warner wished to appeal was the order as a result of which the judge made a residence order in favour of Mr Warner's former wife, Claire Susan Warner, in relation to their two children, O and Y. I refused that application. The judge had given a long and careful judgment and I was quite satisfied that it could not be impeached. The same judge, however, had gone on, in October, to hear the financial application made by Mrs Warner in their divorce proceedings against Mr Warner. In my judgment very sensibly, given his knowledge of the case and its complex history, the judge decided that, rather than release the ancillary proceedings to a district judge, he would hear them himself. He gives a number of reasons for taking that course in his judgment and, speaking for myself, I think it was the right one to adopt.
2. The difficulty faced by the judge was that, as he found, Mr Warner had disobeyed a number of court orders and had not given full, frank and clear disclosure of his financial position. Furthermore, although the judge had given Mr Warner a four-week adjournment in September 2005 in order to be able to prepare for the hearing, Mr Warner appeared on the first morning of the hearing seeking to persuade the judge to adjourn on the basis that he was not in a fit state to conduct the proceeding. I should say, of course, that Mr Warner has throughout, except for one occasion, represented himself and Mrs Warner has had the benefit of representation by solicitor and counsel.
3. The judge decided to go ahead, warning Mr Warner that if he did not stay the hearing would proceed in any event. Mr Warner took the view that he was not in a fit state to conduct proceedings and left. The judge accordingly proceeded. This left the judge in an extremely difficult position but in the first judgment which I gave, and to which I have already referred, I made it clear that in my view the judge was perfectly entitled to proceed on 20th October in Mr Warner's absence and that the material presented to him by Mr Warner was not sufficient to warrant the judge adjourning the proceedings. Mr Warner has this afternoon again raised that point but my view remains precisely the same. I also take the view that the judge was perfectly entitled to be extremely critical of Mr Warner for his lack of case preparation. The judge in the judgment goes very carefully through the various dates. He lists the various hearings and the various orders that were made and is rightly critical, in my view, of Mr Warner's lack of disclosure; first of all, his late filing of his Form E and the late disclosure of documentation and other material. So when the trial started, both Mr Starks, for the wife, and the judge were faced with the position which neither judge nor advocate ever likes, namely conducting an application without an opponent, without the opportunity for cross-examination and without full, frank and clear disclosure. So it was that the judge came to do his best. The situation was unsatisfactory and in my view it remained unsatisfactory but, as I say, the judge did his best.
4. The position as far as the parties were concerned is that they had of course separated. Mrs Warner had left the former matrimonial home and gone to live in the West Country, where she was renting accommodation in the hope that in due course, and as soon as possible, she could realise capital from the family assets in order to purchase a property for herself and the two children of whom she had residence. There had been previous proceedings as a result of which Mr Warner had been required to leave the matrimonial home, which is a property called Ventnor House, at 8 Station Road, Madelely, Telford in Shropshire (Ventnor House). However, on Mrs Warner's removal to the West Country, Mr Warner moved back in and he has, we are told, subsequently let part of the property. Moreover, he holds ambitions, he tells us this afternoon, to turn it into a guesthouse and also use it as a place for his business.
5. The judge's findings about Ventnor House were that it had been purchased in August 2003 for £315,000. The purchase had been funded by a further mortgage on a property which the parties already owned, at 87 Mortlake Road, Kew in south-west London (the Kew property). The question of valuation was in issue. Mr Warner had obtained a valuation in August 2005 in the sum of £285,000 on the basis that certain works to the kitchen, breakfast room and guest cloakroom, which the husband had begun, had not been completed. However, on the basis of the controversial works being done and completed, Mr Temperton, the husband's valuer, valued the property at £300,000.
6. There was also a valuation of Ventnor House from Mr Fisher, on behalf of the wife. He had inspected in December 2004. He had previously valued the property at £335,000 and, on completion of the works, he valued it at £375,000. He had reinspected in August 2005 and re-considered his valuation. The latest report from Mr Fisher, however, remained the same: £335,000 with controversial works uncompleted and £375,000 with them completed.
7. The judge anticipated hearing contested valuation evidence but, because Mr Warner did not attend the hearing, his valuer did not do so either and in the event the judge took the value of Ventnor House at £335,000 without works and £375,000 with them being done. Subject to the costs of sale, therefore, Ventnor House was valued unencumbered at something in the order of £335,000.
8. As far as the Kew property was concerned, this was tenanted and had been previously valued at £550,000, (subject to the tenancies) and £595,000 on a vacant possession basis. Again, that valuation was challenged by Mr Warner, who took the view that the property had a substantially greater value. However, the judge accepted that the valuation in its present condition, based on Mr Bianchi, the wife's valuer, was in the order of £625,000; and we are told that that property is currently go on the market for £650,000. The mortgages on the property in Kew total £436,000 and so the equity, subject to the question of costs of sale, was in the order of £189,000.
9. The judge came, therefore, to the view that the two properties, if sold, should or could realise in order of £475,000. Now, speaking for myself, I accept at once that these were figures which the judge worked out, doing the best he could on the available evidence. His clear view of the structure of the family's wealth was that, whereas Mr Warner's disclosure was obscure and whereas there were assets which he undoubtedly had and some which the judge thought he had and may have disposed of, the only really concrete assets in the family, the only assets really available to produce cash, apart from modest investments held by both husband and wife and modest CETVs in relation to pension, was the fund of £475,000, representing the proceeds of sale of the two properties or the potential proceeds of sale. There had been a series of disputes about contents. The wife recognised that she would be unlikely to be able to negotiate any further contents of Ventnor House. Mr Warner asserts that the wife had already removed a substantial proportion of the contents of Ventnor House. That is an issue into which the judge wisely did not go and nor shall we. The effect of it, however, as the judge found, was that Mrs Warner would need to furnish any property that she was able to acquire. Equally, the volume of litigation between the parties -- brought about largely by Mr Warner firstly defending the divorce, there then being proceedings for the occupation of Ventnor House and then proceedings in relation to the children -- made it reasonably clear that there was likely to be further disputes and further litigation between the parties. Mrs Warner was therefore likely to incur more costs and the judge took that into account when he made his final award. He also took the view that there would be difficulty in organising sales of the properties, particularly in the light of Mr Warner's objection to the sale of Ventnor House. So part of the structure of the judge's order, which I shall come to in due course, was that both properties were to be transferred, to Mrs Warner and she and her solicitors would have the conduct of the sales and the conveyancing in relation to both properties.
10. Mrs Warner's financial position, as found by the judge, was straightforward. She had obtained employment as a business and development work force officer for Salisbury College. She had satisfactorily completed her probationary period. She earned a modest salary of £1,858 a month gross and she received child benefit and tax credits, with a total of something in the order of £1,700 a month. She was not receiving periodical payments from Mr Warner, nor did she seek them, and she had not applied to the Child Support Agency for support in relation to the children. In relation to that, Mr Warner makes the point that, if she did, he would in any event be entitled to a fairly substantial discount because of the support he afforded to the children when they came to see him on contact. So that is an issue which has not been resolved and will not be, I think, the subject of an application to the CSO. The judge's view was that Mrs Warner would bear the substantial burden of caring for the children and she would do it without direct financial support from her former husband.
11. On her modest monthly budget, Mrs Warner was in deficit but that deficit was largely the responsibility of the substantial rent she was being obliged to pay. The judge found that, whilst she would clearly need to have alternative or permanent housing for herself and the children, she had produced evidence of a mortgage capacity of some £67,000. We have been read the letter this afternoon which sets that offer out and it is a feature of the case, and a curiosity of the case, that, having recorded that mortgage capacity, the judge then makes no further mention of it. It is a further curiosity, to my mind, that the judge recorded Mrs Warner's evidence that she would need in the region of £350,000 to £400,000 to buy a adequate three-bedroom property in an area close to the present schools; and that the judge went on toe comment that he was not impressed by the sales particulars because, as he said:

"I am bound to say that I found the evidence of housing costs in the area to be somewhat thin and unconvincing. I accept that there are suitable properties in the area in the price range the wife has given me. I am not satisfied that it is genuinely necessary for her to spend such a large sum".

12. Mr Starks, for Mrs Warner, says that that statement by the judge is consistent with his later award because the particulars which Mrs Warner showed him were at the top end of the bracket, £390,000 or thereabouts. Mrs Warner had a liability for costs in the sum of £57,700, of which £30,000 was unpaid. The judge catered for that by making no order for costs in the proceedings but, by importing the £30,000 into the lump sum he calculated for Mrs Warner, together with a sum of assessed costs which Mr Warner was in any event bound to pay, coming to in the region of £17,500. Mrs Warner had a modest pension fund and a very modest sum in investments and that was her financial position. It was, as the judge commented, transparent and straightforward. By comparison, he commented, Mr Warner's position was opaque and unclear.
13. What the judge did at this point, and, again, I do not criticise him for doing it, is that, with the assistance of Mr Stark, he endeavoured to construct the husband's financial position out of the inadequate documentary material that was available to him. These included looking at various accounts and other bank statements and documentation, including evidence that Mr Warner had been offered a mortgage on a property which he was intending to buy at £112,000.
14. I do not think it would be profitable for me to trawl through the judge's analysis of Mr Warner's financial position. The ultimate upshot of it was that the judge came to the conclusion that the family wealth, all in all, looked at together in the round, was something in the order of £683,180. That, he regarded as, if I may use the colloquialism, the pot. How was it to be divided, bearing in mind that on Mr Warner's side there was a great amount of obscurity and obfuscation?
15. Speaking for myself, it seems to me that the most sensible way to approach the case is to look at the assets which are immediately available for distribution to see how they can be distributed to enable the primary objective of the case which must be to ensure that Mrs Warner and the children are properly housed and that she is given as great a degree of financial security as is open in the circumstances -- and then see what balance can be properly left for Mr Warner to ensure, if possible, that he is also housed and is able to restore his financial position from the difficulties which have undoubtedly been brought about, emotionally and physically, for him by the breakdown of the marriage.
16. The judge came to the view, against that very rough analysis that I have given -- it was more subtle on his part -- that, despite his earlier criticism of the figures produced by Mrs Warner, she needed not less than £375,000, to include the inevitable expense of purchasing, furnishing and equipping and moving into a new house. He also took into account, when calculating a lump sum, that she would be likely to be the principal support for the children of the family. He also took into account the fact that there was likely to be future litigation in relation to both the children and the implementation of any order which he was going to make. Having gone through the various factors which are contained in Section 25(2) of the Matrimonial Causes Act 1973, he finally came down in favour of the submission which was made to him by Mr Starks on behalf of Mrs Warner, which was essentially that the wife should have, from the total of £683,180, a lump sum of £440,000. That appears to have been broken down as to the housing fund, to which I have already referred, £375,000, her costs in the sum of £30,000 outstanding and the remaining sum of £35,000 being made up of the factors which I have identified: capitalisation of the children's maintenance, as it were, future costs and deprivation of access to assets of the former matrimonial home. That meant, in practice, of course, that if the two properties were to sell for the figure which the judge anticipated, namely £475,000, £35,000 only was left for Mr Warner, of which £17,500, or thereabouts, would immediately disappear because of the costs which had already been assessed and which would be payable to Mrs Warner.
17. The way the judge structured the order has given rise to some debate this afternoon and certainly concerned me when I first read the papers because what the judge did was to direct the transfer of both properties from Mr Warner to Mrs Warner and to put her in charge of the marketing and conveyancing of both properties and, when it came to the proceeds of sale of the two properties, they were to be applied as to £440,000 to Mrs Warner; thereafter, in payment of the surplus, if any, as to the next £35,000 to the respondent, Mr Warner; then any outstanding balance as to one half each to the petitioner and to the respondent and, for the avoidance of doubt, Mrs Warner was entitled to set off the sum of costs, which I indicated earlier as £17,500, against the sum which Mr Warner was due to receive.
18. I find this a puzzling order. It has today been explained by Mr Starks as to how it came about, namely the judge at the end of the first day of that hearing, before, as it were, reserving judgment over night, appears to have indicated what was in his mind and invited Mr Starks to draft an order. Mr Starks duly did so and, in his judgment, the judge in terms says that he approves the draft that Mr Starks has put forward. Speaking for myself, I do not understand how it can really be argued that, if Mrs Warner is to receive a lump sum of £440,000, which takes into account her housing needs, her outstanding costs and the matters to which I have already referred - that is, as it were, her share of the assets - I do not understand how it can really sensibly be arguable that she should, in addition to that, have any part of the surplus which may arise if the properties sell for more than the figure of £475,000 which the judge indicated.
19. The argument, from Mr Starks, is that this is designed to provide an incentive for Mrs Warner, and indeed for Mr Warner, to ensure that the maximum sums are obtained and, if they are so obtained, then each will benefit. I would understand that if that were simply a division of proceeds of sale at a given sale price, with any additional funds being shared over and above that price. But where a wife is being given a lump sum in full and final satisfaction of her claims as a clean break and that lump sum is specified to meet identified needs, I frankly do not see how it could properly be said that any surplus over and above what is anticipated being received from the sale of the properties should be divided equally or to her benefit. Therefore, apart from any other aspects of the order, I would, speaking for myself, set aside that part of it.
20. The heart of this case, as it seems to me, and really the only critical point in the case, is: was the judge's division of the fund, which he identified as £475,000 as between the parties, fair in the overall context of the marriage and their respective financial positions given that there was a great deal of obscurity about Mr Warner's assets, for which he alone is responsible? The question, to my mind, was whether or not the judge's division of the £475,000 was fair and whether or not it enabled both parties, insofar as the funds were available, to rehouse themselves. Clearly the priority had to be on the rehousing of Mrs Warner and the children and her needs were substantial. Mr Warner's needs, despite the fact that he has the children regularly to stay, are less significant and the matter is complicated by his wish to remain in Ventnor House.
21. Speaking for myself, I regard the structure of what the judge did as eminently sensible in the light of the history as he knew it to be and, speaking for myself, I would not interfere with that essential structure. In my view, on the figures and on the facts found by the judges, both properties have to be sold and, if Mr Warner insists on attempting to remain in Ventnor House and resists a sale, it seems to me that all that will happen will be increased costs and further stress and agitation. It struck me, from his submissions this afternoon, that he was, to an extent, ambivalent about remaining there because, although he wanted to turn it into a guesthouse and although he has, rather unwisely I think, rented out rooms in the property, nonetheless he wishes to be nearer to the children and Ventnor House, of course, is in Shropshire and the children are now in Salisbury. So there is every incentive, in my view, for him to attempt to achieve, with Mrs Warner, the maximum price that can be achieved for Ventnor House.
22. In my judgment, the division which the judge made, which effectively left Mr Warner only £35,000 from the proceeds of sale of the two properties, was unfair. It was too heavily weighted in favour of Mrs Warner and not heavily weighted enough in favour of Mr Warner. In those circumstances, it seems to me that the judge's exercise of discretion in making that award is flawed. He put too much weight, in my judgment, on the needs of Mrs Warner and too little weight on the need for Mr Warner to have some money to be able to settle himself and to attempt to achieve a property.
23. The question, therefore, becomes: what do we do? In a world where costs were not an issue and emotions were not running high, this case would not have come so far but equally a retrial might be contemplated. But a retrial is unthinkable in this case, not least because Mr Warner, as I said at the beginning of this judgment, is largely responsible for the position which he currently finds himself. If he had cooperated with the court, if he had given proper discovery and given evidence and conducted himself appropriately, I very much doubt whether this order would have been made in the first place. It is not open to him, it does not lie in his mouth, in my judgment, to come to the court to say, "I put the judge in his difficult position; I do not like the order he made, can we please start all over again?" That is simply not an option.
24. The question, therefore, is what do we do? I approach it by indicating that, to my mind, it is unsatisfactory for the court to look in terms of concrete figures when making awards in this type of case. Mr Starks very properly accepted that if the proceeds of sale of the two properties were less than £440,000 then Mrs Warner would receive less, whatever that figure ended up as being and Mr Warner would receive nothing. I do not regard that as a satisfactory way of approaching what is a very uncertain area. I do not know what either property is going to sell for. I do not know how quickly either property is going to sell and it seems to me that in these circumstances the better course is to take proportions.
25. When one comes then to look at the figures and the proportions, one again has a somewhat inexact science because we are looking at an estimated pot of £475,000. It may not be. It may be more, it may be less. As I say, I do not know what these properties are going to sell for. Therefore, speaking for myself, I would leave the structure of the order intact, save that I would delete the references in paragraph 3(i) and (ii) to "first 40,000 to the petitioner" and so on, and I would substitute for them to say that the net proceeds of sale of the two properties should be divided as to 80 per cent to Mrs Warner and 20 per cent to Mr Warner. If the properties sell for £475,000, that will give Mrs Warner £380,000 and it will give Mr Warner £95,000. £380,000, in my judgment, is sufficient for her to house herself, pay her outstanding costs and have a modest figure left over. Alternatively, if wants to buy a more expensive property, she can buy it with the assistance of a modest mortgage. £95,000 is in my judgment a sum which Mr Warner can use to begin to put himself back on to the property ladder, although he will have, of course, the sum of costs which was properly attached by the judge, £17,500, which is attached to the surplus or to the payment which he receives from the property. But, in my judgment, an 80/20 split in that way, looked at in the overall context of the marriage and the overall assets, uncertain as they are, is fair as between the parties, it meets the needs of Mrs Warner and the children and it gives Mr Warner the opportunity to begin life again. That is the order therefore that I would substitute for the order made by the judge.
26. LORD JUSTICE SCOTT BAKER: I agree. The judge was placed in an unenviable position by the husband's disobedience to court orders and his failure to give full and frank disclosure of his financial affairs. The judge did his best to divide up the financial cake such as he understood it to be. The only two hard assets were Ventnor House and 78 Mortlake Road but their true value depends on the price for which they actually sell.
27. The primary need in dividing the assets in this case is to provide a house for the wife and children. The judge said, at paragraph 29 of his judgment:

"I find it difficult to arrive at any clear conclusion as to what her housing costs are likely to be. I have come to the conclusion that it is appropriate to allow for a figure of not less than £375,000 to include the inevitable expense involved in purchasing, furnishing, equipping and moving into a new home."

And he repeated, at paragraph 95:

"I have found that the wife needs a minimum of £375,000 to rehouse herself and the children."

The wife produced evidence of a mortgage capacity of £67,000. The judge referred to this in his judgment but neither specifically accepted nor rejected it. He made no finding about what the wife's mortgage capacity might be. She is currently renting a property at £650 per-month, which is said to be more than she can afford. On the face of it, it would be sensible to replace renting with a mortgage.

28. The judge ordered that the wife should have the first £440,000 out of the surplus of the sale of Ventnor House and 78 Mortlake Road. In my judgment, this figure is too high, bearing in mind an estimated total pot of £475,000. Whilst it would put the wife in a position to house herself and the children with something to spare, it leaves the husband unable to house himself unless he has substantial undisclosed assets, ie beyond the total family assets of £683,000 assessed by the judge.
29. I am therefore attracted by the solution proposed by my Lord that the wife should receive 80 per cent of the net proceeds of sale of the two properties, leaving the husband with the other 20 per cent. This seems to me a more satisfactory solution than that proposed by the judge, which includes paragraph 3(i) of the order, a paragraph adverted to by my Lord.
30. LORD JUSTICE THORPE: I agree, for the reasons given by my Lords, with whose judgments I concur.
31. Accordingly, permission is granted, the appeal is allowed and the stay is discharged. I would suggest that paragraph 2 of the order below be revised to substitute for 27th October the new date of 27th December 2005. Paragraph 3(i) is discharged and for it be substituted: "The remainder of the sale proceeds of Ventnor House and 78 Mortlake Road aforesaid be divided as to 80 per cent to the petitioner and 20 per cent to the respondent."
32. Paragraphs 5 and 6 of the order below will require revision. I would propose for the consideration of the parties that the date for vacation be rewritten to 20th January 2006. Further revision will be required to these paragraphs but, since a penal notice attaches to these two paragraphs, I would leave it to the parties to endeavour to agree sensible revision. The ultimate form of order should be submitted to the associate. Mr Starks will have to take primary responsibility. If the ultimate order cannot be agreed, it can be referred to my Lord Lord Justice Wall for his determination.

Order: Application for permission granted. Appeal allowed and the stay discharged. Paragraph 2 of the order below to be revised to substitute for 27th October the new date of 27th December 2005. Paragraph 3(i) to be discharged and for it be substituted: "The remainder of the sale proceeds of Ventnor House and 78 Mortlake Road aforesaid be divided as to 80 per cent to the petitioner and 20 per cent to the respondent." Paragraph 3(i)(c) is to be repeated. Paragraphs 5 and 6 to be revised, with the date for vacation to be rewritten to 20th January 2006, to be referred to Wall LJ if not agreed. The petitioner is to pay the appellant's costs in the sum of £1,500, to be the set off against the appellant's debt to pay £17,500 in previously assessed costs.