IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
PRINCIPAL REGISTRY OF FAMILY DIVISION
(HHJ DAVID TURNER QC)
Strand London, WC2 |
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B e f o r e :
LORD JUSTICE WALL
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KIM M ELLIS | Respondent/Applicant | |
-v- | ||
NEIL A ELLIS | Appellant/Respondent |
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The Respondent did not attend
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Crown Copyright ©
"My failure to pay the full amount of maintenance ordered by Judge Baron on 29 November 2004 did not amount to 'wilful refusal' or 'culpable neglect' and that:
1. The judge failed to take account of my means at the time that I reduced the payments (31 January 2005) focusing rather on my financial situation prior to that date.
2. The judge failed to take into account that I have continued to pay a significant proportion (25%) of my income in maintenance.
3. The judge failed to take account of the need to support myself as well as pay maintenance from my income.
4. The conditions under which the committal order would be suspended (full payment within 21 days) were inappropriate, and impossible to comply with given my lack of means at the date of suspended sentence (3 June 2005).
5. The judge failed the consider alternatives to imprisonment, such as variation of the order, or payments by instalment."
"2. In order to put this appeal into context, I will briefly describe the factual matrix. These parties were married in 1978. They separated finally after about 20 years of marriage in about 1998. This was a long marriage but the parties accumulated only a small amount of capital. It seems that the husband worked throughout the marriage primarily in a managerial capacity with British Telecom. The wife gave up her career in order to care for Miles and the family but eventually resumed working in a part-time capacity. By the time the case came before District Judge Seagle in August 1999, the wife had moved to the United States where she was working in the travel business. The husband had set up home with a Miss Stephenson, and she was expecting their child. Sam was born in about November 1999. He is approaching, or is already, 5 years old.
3. It seems that Miss Stephenson was a lady of some means. In 1999 she had a property which had been purchased costing £205,000. As a result of a cohabitation agreement, the husband was (and is) entitled to share in 30% of the profit after deducting the cost of purchase if they separated. Miss Stephenson also had an income which the District Judge found was £2,000 odd per month net.
4. District Judge Seagle found that both of these parties were honest and doing their best to tell the truth. He found that their capital assets were, roughly speaking, £70,000. He found that the wife's net income was just over £1,000 per month and that the husband's net income was £2,656 per month. The District Judge split the capital so that the wife received the lion's share, that is some £49,500. That left the husband with only £20,000, from which he had to pay debts of £13,000 together with his own costs. Those costs were assessed at £48,500. The husband therefore had a liability substantially in excess of his assets. In addition, the District Judge made the following orders for periodical payments: first, by agreement £400 for Miles' general maintenance; secondly, £700 a month towards his educational costs at private school; and finally, £500 per month towards the wife's general maintenance. That was a total of £1,600 per month. That left the husband with barely £1,000 to cover his own expenditure. He also made a pension earmarking order, whereby when the lump sum under the husband's British Telecom pension scheme fell in, the wife was entitled to received 50% of that sum, together with 50% of the pension in payment.
5. Within a short period of time it became clear that the husband could not afford to make all the payments that were due under that order. The wife did not receive the full amount of her lump sum, (as only some £30,000 was paid) moreover the husband failed to pay the monies that were due under the assessed costs. She issued an application for a judgment summons. The matter came before His Honour Judge Cryan in November 2000.
6. On that occasion the parties negotiated. The deal which they agreed was that the husband would pay £35,000 in full and settlement of the obligation that he had to pay the wife's costs. That left her with a bill of about £15,000 that she had to pay from her own resources, namely from the £49,500 lump sum. Therefore, in one fell swoop her lump sum was reduced to £34,500. As set out above the husband also owed some £18,000 of the lump sum. He agreed to make those monies (that is the £18,000 odd) to pay school fees for Miles. After paying her costs and school fees her lump sum was reduced to an effective £16,500.
7. In addition to that capital agreement, the parties agreed that the periodical payments order would be reduced. They negotiated a global figure for Miles of £750 per month and the wife's periodical payments were reduced to £100 per month, effectively making the total £850 per month. The wife thought she should accept a reduction to enable the husband to borrow the £53,000 odd that was still due under the capital aspect of the overall agreement. The husband thought that he had negotiated the reduction because he considered that private education could not be afforded.
8. Whatever the reasons behind the agreement, it is clear that the court sanctioned the terms that the parties had reached. His Honour Judge Cryan dealt with the capital aspects by way of an order made on 1 November. The capital terms were set out in Schedule B to his order but the income aspects were dealt with by District Judge Angel sitting in the Registry and that order was made by consent on 13 November 2000. That order contained the following recital:
"Upon the parties acknowledging that neither of them intend to apply for paragraphs 1 and 2 below, (that is the periodical payments) to be varied, save in exceptional circumstances or in the event that the respondent fails to make payments in accordance with the schedule marked B annexed to this order ...'
Thus the wife had agreed to a substantial reduction in her order for periodical payments in the hope and expectation that she would receive her lump sum in full and a large proportion of the costs that were owing to her solicitors. There is no suggestion but that the husband has paid the capital in full. He also began to pay the periodical payments, although it was necessary to have an attachment of earnings order."
"10. Although the husband was not seeing Miles, other aspects of his life were going well. He informed me that when he worked for Lucent Technologies (having moved from BT) his original job was to support the sales team. However after the hearing in November 2000 his job was incorporated as part of the sales department with the result that he was able to gain substantial bonuses arising from the success of the sales department itself. This enabled him to repay the monies that he had borrowed to pay for his wife's lump sum and costs totalling around £53,000 odd, and make very substantial savings.
11. Doing the best that can be accomplished using the documents that are now available, counsel on behalf of the wife analysed the husband's savings as at December 2003. This analysis showed that if the husband's withdrawals from his account are taken into account, his savings together with ISAs and the amounts of money he had paid over to the wife mean that between November 2000 and December 2003 the husband had a total of about £134,000 worth of savings. That indicates that he earned a substantial amount of bonus in a three-year period. The wife was unaware of this and so did not know that savings were being amassed. Therefore she was in no position to apply for an increase in her periodical payments or those of Miles. Had she been aware of the husband's true financial position, in my view there is little doubt that she would have applied for an increase in the order which she had only agreed to reduce as a result of her belief that the husband was in straitened financial circumstances.
12. Unfortunately the good times were not set to last. When the husband originally took up employment with Lucent Technologies, I understand (from the judgment of his District Judge Seagle) that the wife had been reluctant for him to move from BT to the new post because she anticipated that his employment with the new organisation would be much more precarious. So it proved to be. By March 2002 the company had been restructured yet again. The husband received a letter dated 4 March indicating that there was a risk of his redundancy. It noted that the company would wish to pursue alternatives, but that if no suitable alternative was found, then the company would have no alternative but to terminate the husband's employment on the grounds of his redundancy. The husband was made redundant and so received £48,000 from Lucent Technologies, which he put into his various bank accounts. I have already spoken of the £134,000 that passed through those accounts. If the £48,000 from his redundancy reduces that sum, it still means that over a three-year period he was able to accumulate from post-tax income somewhere in the region of £90,000 odd.
13. The husband tried to obtain new employment. It seems that for a period of a year, with the assistance of a head hunter employed on behalf of Lucent Technologies, he looked for alternative employment within his known speciality. Unfortunately, no worthwhile employment came along. He therefore decided to start up his own business. He thought that the best opportunity lay in valeting boats in marinas within the locality of his present home. He therefore bought a van and the necessary equipment and began to operate through an entity called 'Anglia Boat Valeting'. I have seen his statement of profit and loss in the bundle at page 151. The essence is that he put £7,500 worth of capital into the start-up of the business. He operates from an office in the home that he shares with his partner. He goes round in various marinas where he cleans boats. He says that the job is seasonal, but that he wishes to overcome that problem by entering into annual contracts with boat owners. So far he has seven contracts on an annual basis averaging £100 a month. That would total about £8,400 a year of income. On top of that he does odd jobs which give him about £100 and £500 a month."
"14. The presentation before the Deputy District Judge in March 2003 was that the business had been loss-making in its first year - that is April 2003 to April/March 2004 - but it was expected to break even in the next year and thereafter into profit. The husband has said that he has been unable to draw any income in the current year, but that he hopes to be able to draw £100 or £200 a month from the next financial year beginning in April 2005. Despite this, he is sure that this business will go well. He does not wish to stop operating the business. I am sure he would do if he thought for one moment that it was not going to enable him to have a reasonable lifestyle. He told me that he had a business plan, but could not precisely remember the figures, but that he hoped that he would draw £200 a month from April 2004.
15. I repeat I am quite sure that he believes that this business will earn a reasonable income within a short compass of time. He says that his finances have declined from March. Then he had £29,000 worth of savings. Now that figure is down to about £4,000. In the intervening period he has encashed his ISA policy and he has sold his car that was worth about £10,000. However, I note that he used the proceeds from that car to invest it, together with some funds from his partner, in the purchase of an Audi motorcar costing about £25,000. If he had really thought that things were bad and on a downward trend, I have little doubt that the £10,000 would have been saved for something rather more vital than a swish motorcar."
"In the intervening period the wife's own position had improved in the sense that she was earning about £30,000 per annum net. (The Cayman Islands does not operate a system of income tax so net and gross are the same.) She decided that, rather than have Miles attend day school in the Cayman Islands, it was better for him to go Florida to boarding school. Thus, from about August 2003, Miles has been attending a school in Florida where he is in the middle of his final course semester. He is due to leave in June 2005. It is hoped that he will then go on to university. In order to pay for his school fees, the wife raised a sterling loan, currently standing about £11,000 odd, and it had been her habit to use the maintenance of about £850 per month the repay that loan on a monthly basis."
The judge then described the course taken by the Deputy District Judge:
"[She] took into account all of the documents that were placed before her and she produced a judgment of modest length in which she dealt with her findings. Her findings were to the effect that the husband's situation had changed. His redundancy could be regarded as an exceptional circumstance. As a result she decided that a variation of the order of November 2000 was appropriate. She varied Miss Ellis' order to nominal and in the body of her judgment reduced Miles' maintenance to the sum of £600 per month, which means an annual total of £7,200."
She then records an oddity in the draft of the order that the figure had come out at £500. She then spent several pages dealing conscientiously with the law, which I need not read. But having dealt with that, she then summarised the parties' financial positions as they then:
"The parties' means appear to be as follows. The wife has no capital. The monies she received from the matrimonial pot in 1999 have been eroded largely by costs and school fees and went to augment her pretty meagre lifestyle during the first few years of the separation. She now has debts, including a school fees loan. Her average earned income is about £30,000 per annum. In accordance with her Form E, her budgetary needs were £2,200 per month for herself, including £910 for rent. She budgeted some £12,058 for her son Miles. In round terms his school fees are some £11,500 per annum. The total income needs were therefore £3,468 per month. When her own earnings were deducted from that budget, her monthly shortfall was about £1,000. She could, according to Mr Johnston, make ends meet when she was receiving £850, but £500 was a reduction too far.
27. The husband has a 30% interest in his current home, only to be realised if he separates from his partner. He had a number of payments to make, which he sets out in paragraph 3(1) of his Form E. They total £19,653 for himself, including mortgage payments of £3,275 and family gifts, personal care, holidays and clothing, which in themselves totalled another £3,400, and a contribution towards the upkeep of the family car of £3,000 per annum. Mr Johnston's submission is that those monies could easily be routed to pay for the shortfall between the order as it had originally been and the order that the District Judge permitted. In addition, the husband has child care costs for his second son, Sam, totalling £1,800 odd per month. At the date of the hearing his savings were £29,000.
28. Since [September] the wife's situation has been worsened by the tragic effects of the hurricane which passed over the Cayman Islands. Her home was destroyed. Until the infrastructure of the island is improved, tourism is at an all-time low. She has been effectively without pay since October 2004. She is staying with friends. Her outgoings have been reduced, but that is of no consolation to her because she has no income with which to pay any outgoings. It seems to me that she is concerned about how to ensure that Miles' education can be funded in the intervening period.
29. The husband has likewise eroded his capital base in circumstances where his business is yet to pick up. I have already set out the relevant details earlier in this judgment.
30. Thus it is clear there is not much money around for either party. It seems to me that the most important matter is to consider what Miles needs. Miles needs to be educated. The learned District Judge failed to take that fully and properly into account when she considered her order. The difficulty is cash flow. It seems to me that the figure which the District Judge gave in her judgment is probably about all that this husband can afford to pay at the moment. But that does not mean that he should not consider it as his duty to pay what he can to ensure that Miles remains at school. I consider that the District Judge was wrong to amend her order from the figure that she originally envisaged, that is £600 per month. I think that that figure should be reinstated as the appropriate sum to be paid. That sum will be paid from 1 March 2004 and will continue on until this child ceases tertiary education in order that there are basic funds to enable him to live while he is at university.
31. However, the loss of £250 a month from the earlier order will make a difference to the wife's overall cash flow. Thus to avoid a further hearing I am going to include a proviso that the sum of £850 a month will be reinstated in eighteen months from today, unless the husband can show that his business has not improved and he cannot afford it. Accordingly, my order will be £600 for the next eighteen months, then £850 a month until Miles ceases full-time education unless the husband is able to show that his business cannot pay him sufficient to cover that sort of sum. The nominal order will remain.
32. I do not consider that in the circumstances of this case there should be another application for a downward variation. I have taken the husband's current circumstances (as he outlined them to me) fully into account in my conclusion that £600 is the right sum for the next eighteen months. In my view this husband should have his finances sorted out by then. If he does not have sufficient funds with which to pay the maintenance in the short term, then it is as a result of decisions made, for example, to invest in an expensive motorcar when there are more pressing needs so far as his son is concerned. If he proceeds with this application for a downward variation, I would want a copy of this judgment to be available for the District Judge dealing with it at the first appointment."
That, as I say, was the outcome before Baron J. She was clear that there was not much money around but that Miles' education should take priority. She was satisfied that the District Judge had not taken that properly into account. She recognised that the difficulty was cash flow. It seemed to Baron J that the figure the District Judge had given in her judgment was probably about all that Mr Ellis could afford to pay at the moment, but that did not mean, she said, that he should not consider it his duty to pay what he could to ensure that Miles remained at school. She accordingly reinstated the figure of £600 per month. She went on to say that the loss of £250 per month from the earlier order - she was reducing it, of course, in Mr Ellis' favour - would make a difference to Mrs Ellis' overall cash flow, and to avoid a further hearing she included a proviso into her order that the sum of £850 per month would be reinstated in eighteen months unless Mr Ellis could show that his business had not improved and that he could not afford it. Accordingly, it was £600 for the next eighteen months, and then £850 per month until Miles ceased full-time education unless Mr Ellis was able to show that his business could not afford to pay him that sort of money.
"This was, I find, a piece of calculatedly shabby behaviour by which he hoped he might seize some tactical advantage over Mrs Ellis."
"He [Mr Ellis] told me he could not say what the business had made between January and May 2005, saying that he did not think this information would be necessary. This I find extremely surprising given the seriousness of his position. He did, however, say to me, as he said to Baron J, that the business is growing and this year's figures are better than last. He said that he has no intention to change the work he is doing, but he did not think he could get or service any flexi or other loans, that he did not want to live on credit cards, and he had not considered it appropriate to sell the family car. He considered £100 a month was all he could realistically afford."
"I remind myself that I must decide this matter on the basis that I have already set out. I can only make the orders sought if I am sure Mr Ellis has, or has since the making of the original order the means to pay the sum ordered and has neglected or refused to do so. I am sure that is so. Even on his own account in the December 2004 Form E, sufficient liquidity then existed to pay what was outstanding. He has, I conclude, not given me a satisfactorily full account of the operation and proceeds of his present business. I am, I confess, left with a good many questions about how much it really produces and what precise arrangements exist between him and Miss Stephenson. I am satisfied that he has had the money to pay these arrears and that if he does not now have it immediately to hand he can access it by borrowing it or realising other assets such as the car. That may seem a somewhat extreme conclusion but in my judgment it is warranted both by Miles' extreme need and by the past history of the matter, not least Mr Ellis' behaviour in December 2004/ January 2005.
Mrs Ellis' supreme concern was to encourage him to pay. She was not clamouring for imprisonment or punishment as such, and indeed could really see, I believe, the potential disadvantage of that course. She asks me to require payment from him in a week. I consider that is a little too soon and that a slightly longer period is reasonable. The existing order will continue unless or until a properly constituted variation application is pursued and determined. In so far as any of the present arrears may technically in any measure fall outside a year before the application, I give leave to enforce them, considering that just."
He therefore made an order for committal, suspended for 21 days, with Mr Ellis to pay the £2,605 by 24th June, that is three weeks from today, "in addition to all sums accruing hereafter under the original order".
ORDER: Appeal Dismissed.