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 THE HIGH COURT
FAMILY DIVISION
(MR JUSTICE COLERIDGE)

		Royal Courts of Justice Strand London, WC2
		11 December 2006

1. THE PRESIDENT: This is an application by the respondent wife in relation to an appeal by the appellant husband from a judgment and order of Mr Justice Coleridge made on 27 July 2006 in ancillary relief proceedings. The judge ordered the husband to pay £40 million to the wife which, when added to almost £8 million of assets held by her, made overall capital provision for the wife of £48 million, which sum amounted to £37 million of the total assets available which the judge held amounted to £131 million.
2. In round terms, that figure was made up of the wife's assets, £57 million worth of assets held by the husband and £68 million worth of assets held by a Bermuda-based trust called Dragon Holdings Trust (Dragon). Those funds had been built up over the years by the husband in his extraordinarily successful career in the global insurance industry.
3. The proceedings have been notable not only for the size of the sums involved but for the determined resistance of the husband to the claims of the wife in what the trial judge described as his deployment of every available point to protect what he regards as his wealth generated entirely by his own efforts.
4. The order of 27 July 2006 provided for payment to the wife of a lump sum of £40 million; as to £12 million on or before 31 August 2006 and as to the balance of £28 million as should be directed by the court at a hearing to take place on 23 October 2006. The order provided that at that subsequent hearing the court would consider the date for payment of any remaining instalment of the lump sum; the interest on the lump sum payable by the husband from the date of the July order; provision by the husband of documentation relating to his extant tax liabilities arising from his employment by a company called Axis in which he held shares and options worth many millions of pounds, in relation to which the wife was to be subject to a liability to pay 36 per cent of the amount of tax due subject to a maximum contribution; and, finally, the husband's intended application for permission to appeal.
5. The husband failed to pay £4 million of the £12 million ordered to be paid by 31 August 2006.
6. On 13 September 2006 the wife obtained a freezing order in respect of the husband's assets, whether held in or outside the jurisdiction, up to the value of his outstanding liability.
7. On 23 October 2006 Mr Justice Coleridge extended the time for payment of £4 million to 14 November 2006 and ordered payment of the balancing lump sum instalment of £28 million on or before 1 March 2007, with interest to run on those sums at the rate of 8 per cent. He renewed the freezing injunction in a form modified to cover also sums outstanding from the husband on account of costs. On that occasion also the judge refused the husband's application for permission to appeal the order of 27 July. The timing of the payment of £28 million was then ordered and various other directions made by the judge.
8. In giving judgment, the judge observed that he considered that, in making arrangements for payment under his judgment of July 2006, the husband had taken a "somewhat cavalier" attitude towards the order the judge had made, and that he appeared now to be going out of his way to contest every aspect of that order, such that the judge felt uneasy about whether or not he was going to pay even if he was eventually given leave to appeal.
9. On 7 November 2006 the husband lodged a notice of appeal, accompanied by a very full skeleton argument - so called, although it ran to 233 paragraphs and 67 pages. On 16 November 2006 Lord Justice Wilson granted unlimited leave to appeal and granted a stay of execution in respect of the requirement to pay to the wife the balancing lump sum instalment of £28 million plus the interest due on that sum at the rate of 8 per cent on 27 July 2006 to the date of payment (such sum being over £1.3 million as at 1 March 2007). Lord Justice Wilson directed that the order for a stay should not come into effect in the event that the wife should, prior to 30 November 2006, have issued and served an application to show cause why it should not do so, and that the wife should in any event have permission at any time to apply on notice to the husband for a further order in respect of the stay.
10. By way of background, the principal matter in dispute between the parties below was whether or not the assets held by Dragon should be taken into account as part of the husband's assets. He contended that his intention was always that this trust should benefit future generations of the family and was not intended to benefit himself, his wife or the children for whom he had made separate provision.
11. The wife's case was that this was an insincere assertion, that the assets in Dragon were, and were intended to be, available to the husband whenever he wished and should be fully brought into account. The judge accepted the wife's case. He comprehensively rejected the husband's case as to the purpose of Dragon either as originally intended or subsequently treated. He found that the assets were held on a discretionary trust in conventional form and were in fact available to the husband on demand if he chose to make such demand. He therefore treated the assets in Dragon as properly to be included in the husband's schedule of assets for the purposes of the Schedule 25 application, thus producing the figures to which I have referred.
12. So far as the grounds of appeal are concerned, there is and can realistically be no direct challenge to the judge's finding of fact as to the purpose of Dragon or, at least at first sight, the availability to the husband of the assets within it to meet the wife's claim.
13. The way in which the judge treated Dragon is nonetheless the subject of a challenge in the appeal which is articulated in the grounds as (1) the failure to treat Dragon as a "non-family asset" or the husband's interest in Dragon and his income therefrom as a "non-family" asset. It is also asserted in the skeleton argument in support of the appeal that the judge wrongly ignored or brushed aside the status of Dragon as a trust and that he should not have made assumptions as to the trustees' willingness to advance sums to the husband to meet his liability.
14. Apart from that ground, there are two principal grounds to be advanced in the appeal which are of general importance and, when heard, will constitute the first examination and application by this court in a "big money" case of the principles expanded by the House of Lords in the cases of Miller and McFarlane. They relate to the question of -

(1) the general approach of the judge and whether he was correct (as he did) to use a starting point of 50 per cent for the wife's share of assets, thereafter discounting the wife's entitlement on account of various factors considered, or whether he should, as the husband contends, have built up the wife's award incrementally by reference to the individual factors set out in Section 25 of the 1973 Act;

(2) the husband's "special contribution" to the assets built up during the marriage. It is said that, rather than treating that contribution as an individual discounting factor, the judge should have analysed the extent to which it had resulted in the generation of resources and how that should be reflected in determining the wife's award. No doubt it will be contended that the fruits of that special contribution reside in the Dragon Trust.

15. In addition to the three heads I have mentioned, namely General Approach, Special Contribution and Non-family Assets, there are a number of grounds of appeal of a more limited, partly discrete, and partly overlapping nature. On this application, the wife does not challenge the grant by Lord Justice Wilson of permission to appeal on the above matters. She further concedes that the question of costs below, subject of the appeal, may well require to be revisited should the husband succeed in the appeal. However, she seeks an order that the remaining grounds of appeal be struck out. I shall turn in a moment to that aspect of the application.
16. I turn first to the terms of the application before us. Under paragraph 1, pursuant to CPR Rule 52.9 (1), the wife seeks that the grounds of permission to appeal be made subject to a condition that the husband provide security to the wife for the outstanding balance of the lump sum payable to the wife, namely the £28 million plus interest, ordered to be paid by 1 March 2007 and some £1.39 million accrued at the rate of 8 per cent on the £12 million so far paid; and, in consequence, that the contingent stay provided for by Lord Justice Wilson granting permission to appeal should not come into effect.
17. Under paragraph 2 of the application the wife seeks that various grounds of the appeal other than the three main heads of appeal to which I have referred should be struck out.
18. Third she seeks, pursuant to CPR Rules 25.15, 25.13 (2) (a) and 25.13 (2) (g), that the husband provide security for the wife's costs of the appeal. CPR Rule 52.9 (1) and (2) read as follows:

"(1) The Appeal Court may

(a) strike out the whole or part of an appeal notice;

(b) set aside permission to appeal in whole or in parts;

(c) impose or vary conditions upon which an appeal may be brought.

(2) The Court will only exercise its powers under paragraph (1) where there is a compelling reason for doing so."

19. There is a cautionary note at paragraph 52.9.2 of Vol I of Civil Procedure 2006 (the White Book) which expresses the need for a "compelling reason" to be demonstrated by a respondent seeking to impose a condition on a permission to appeal already granted. The note refers to various decisions of this court in the early life of the rule which appeared to indicate that, where permission to appeal had been granted by a single Lord Justice, the rule was simply there to cater for cases where the Lord Justice had overlooked some decisive authority or statutory provision or had, in some material way, been misled at the stage of his consideration. Such limitation is imposed for the purpose of avoiding tactical skirmishing and interlocutory satellite litigation once permission has been granted.
20. Lord Justice Laws stated in Barings Bank:

"It seems to me to be of the highest importance that this court should ..... discourage the bringing of satellite litigation under the guise of an application under CPR Part 52, r.9. The rule is there to cater for the rare case in which the lord justice granting permission to appeal has actually been misled. If he has, the court's process has been abused and that is of course a special situation. There may also be cases where, as Longmore LJ indicated in Nathan v Smilovitch [2002] EWCA Civ 759, some sizeable authority or statute has been overlooked by the lord justice granting permission. But where such a state of affairs is asserted, the learning in question must in my view be plainly and unarguably decisive of the issue. If there is anything to argue about, an application to set aside the grant of permission will be misconceived."

That statement has continued to govern applications of the kind before us.

21. Subsequent decisions, and in particular those in Hammond Suddards v Agrichem International Holdings Ltd [2001] EWCA Civ 2065 and Bell Electric v Aweco Appliance Systems GmbH & Co KG [2002] EWCA Civ 1501, referred to at paragraph 52.9.4, show that an order may properly be made in a situation where the appellant has (1) been ordered to pay an amount at trial and has deliberately failed to do so, and (2) it is clear, either explicitly from statements made on behalf of the appellant as in Bell Electric or by reason of the conduct of the appellant as in Hammond Suddards, that he will resist or avoid enforcement of the judgment if his appeal is unsuccessful.
22. The application by the wife in Paragraph (2) of the application to strike out various grounds of the appeal seems to me to be governed by the remarks of Lord Justice Laws which I have quoted, and I turn to deal with it now.
23. The grounds sought to be struck out are grounds 2 and 3 which relate to the treatment of Dragon. It seems clear to me that they inter-relate with the "family/non-family assets" point and proper treatment of the Dragon assets in that respect. There is no good ground for striking out those items. Ground 4 relates to the value of the financial instruments in Axis Capital Holdings held by the husband and Dragon, and concerns a dispute between the valuers. Ground 5 asserts a procedural and substantive error by the judge in calculating the husband's tax liability. Ground 6 relates to timing of the judge's order for payment of the lump sum. Ground 7 relates to the rate of interest ordered by the judge. Ground 8 relates to the judge's extension of the freezing injunction.
24. I would accept, on the limited consideration which I have given the matter, that there appears to be nothing in grounds 6 to 8 and not much more in grounds 4 and 5. However this application is not the point at which to hear argument on these questions. It may well be that the matters will not be pursued to any significant extent at the hearing in the face of a court by then familiar, and well prepared to deal, with the arguments. But in the light of the broad grant of permission to appeal it is not appropriate, in my view, to consider and resolve the arguability of the points here.
25. The second sub-paragraph of Paragraph 2 of the application includes an application to strike out that part of the notice of appeal in respect of Mr Justice Coleridge's order of 23 October 2006 which seeks the discharge of his order freezing the assets of the husband unless and until he provides security by payment of his outstanding liability into court. It seems most unlikely to me that such an appeal will succeed. However the matter is not unarguable and again it seems clear to me that it would be wrong to litigate that matter at this stage.
26. Accordingly, I would refuse the leave sought in paragraph 2 of the application.
27. Turning to paragraph 1 of the application, the applicant's reasons for seeking the condition as to security are put as follows. First, reliance is placed upon the hard-nosed manner, if I may so term it, in which the husband has conducted the proceedings prior to trial and the various steps he took and the resulting financial pressure which, it is said, he placed upon the wife in the course of the proceedings, designed, first, to achieve the hearing of the proceedings in Bermuda which the husband plainly thought to be in his own interests, and, second, to make the wife buckle and accept settlement at a figure offered by the husband. Reliance is also placed on the husband's opposition to the issue of Letters of Request in Bermuda in order to prevent inquiry into the conduct of Dragon relating to the question of whether or not it danced to his tune. Lastly an unpleasant and oppressive letter was written by the husband directly to the wife seeking to dissuade her from pursuing her claim which was alleged to involve risk to the husband of bankruptcy and a drop in the value of his Axis shares and a number of othe adverse effects, none of which bore examination or proved justified by events.
28. In this respect, and in the light of the authorities, I do not think it helpful to concentrate on events pre-judgment and, in particular, steps taken by the husband with a view to obtaining as low an award as he could or some other result satisfactory to him, as an indication whether security is appropriate post-judgment. It seems to me that, at best, that is background and what the court is concerned with is the extent to which the husband can be shown to be in breach of the trial judge's order and bent on non-compliance with any judgment of the Court of Appeal.
29. I am content to accept the view of the judge that the husband's attitude pre-judgment stems from his determination to protect what he regards as his wealth generated entirely by his own efforts, without assuming that such determination will necessarily extend to refusal to pay under a judgment of the Court of Appeal if his appeal is unsuccessful.
30. It is events post-judgment which are, on the authorities, of concern to this court, in particular whether (1) there has been a failure to pay under this judgment and (2) whether there is reason to suppose that if the appeal fails the judgment will not be paid and, if so, whether the judgment is amenable to the normal processes of enforcement, whether here or abroad. So far as (1) is concerned, there was a failure by the husband to pay the sum of £12 million by 31 August 2006, he paying only £8 million. On return of the matter before Mr Justice Coleridge, however, those moneys were paid once the date had been extended to 14 November and the date for payment of the balancing lump sum was set at 1 March 2007.
31. So far as that balance is concerned, the stance of the husband (see in particular paragraphs 20 to 21 of Mr Singleton's skeleton argument) is that, whereas it may be that he will have sufficient available assets to meet the order on 1 March without taking account of the Dragon assets, he may not. And, in any event, he should not be obliged to realise these assets because the risk of injustice to him of being required to realise his assets by that date, if in fact he is entitled to succeed in his appeal and exclude from his assets the assets of the Dragon Trust, is greater than any hardship to the wife, if she is successful, of having to wait for a matter of weeks or months before payment.
32. In this context therefore there is no breach of the order as at this date; however, the wife relies on the likelihood of the breach of order once 1 March 2007 arrives, which, the wife says, would justify an order for security that such sum should be paid. In that respect the wife does have the limited comfort, if not the security, of the freezing order covering the sums ordered to be paid.
33. So far as concerns the question of the amenability of the husband to enforcement in Bermuda should the wife succeed in resisting his appeal, this raises two further questions: whether there is compelling reason to think that the husband will oppose enforcement in Bermuda and, if so, whether it is likely that the Bermudan authorities will refuse to recognise and enforce the judgment once upheld by the Court of Appeal.
34. The matter has been argued before us at length by Mr Pointer QC and Mr Singleton QC. The husband's stance is as follows. While he has neither stated, nor instructed Mr Singleton to state on his behalf, that he will comply with the order for payment on 1 March, he should not be put to that particular sword. He says that, as of today, he is in compliance with the order of the court. While he may, but is unlikely to be, in a position to comply, by disposal or securing of his personal assets against payment of that sum, it is in principle wrong that he should have to do so, because he would then be in, effectively, a zero-asset position, leaving out of account the assets in Dragon, which, as he contends in the appeal, are not his, nor are they family assets, and should have been left out of account by the judge.
35. Mr Singleton says on his behalf that by his actions, despite being late in the payment of £4 million at one stage, he has recognised that he must comply with orders of the court but submits that he should not either have to pay the balance, or to dispose of or pledge all his assets to do so, before the outcome of the appeal due to be heard only a week after the date for payment when a successful outcome to this appeal might expunge his liability or, at any rate, very considerably reduce it. In these circumstances he should be permitted to pursue the appeal process before paying or being required to provide security. These seem to me powerful arguments. There is considerable dispute as to the value of the husband's personal assets, leaving out of account the Dragon assets. What is clear is that, if he is to make payment by 1 March, it will only be by realising shares and options in a manner which may trigger tax payments which might otherwise be deferred for years. Given that permission to appeal has been granted, there seems to me to be an undesirable tension between requiring the husband to meet his obligation by disposition of assets in a forced manner when the possible outcome might render such disposition unnecessary.
36. Against this position, Mr Pointer adopted a secondary position. He submitted that even if Mr Singleton is right in principle, in practice the husband has what he describes as liquid resources, out of which a partial or token payment could be made or secured, amounting to some £8.8 million, plus a bonus expected to be paid in 2006, the amount of which is also uncertain (see the items at paragraph 18 of Mr Pointer's skeleton argument), plus a further figure of £2.3 million, being the balance of a share sale in relation to Axis shares. It is right, however, to observe that £5 million of the £8.8 million is the value of properties in Atlanta and Florida which would require realisation, and the borrowing against them has another complication which has been made clear in an exchange between the husband's solicitor and his bankers which has been placed before us. Mr Pointer suggests that some form of security should be ordered, if only by way of a charge on the properties, a point made by him in reply.
37. Having considered the matter with care, I do not think that a position has been demonstrated in which the husband should be treated as in breach of any order of the court at this stage or that his likely failure to make payment on 1 March, which does seem on the cards, should be regarded as a compelling reason to make an order for security in the circumstances of this case.
38. Finally, I do not think that the second concern in cases of this kind, namely the difficulty of enforcement should the husband refuse to pay the judgment if upheld by the Court of Appeal, has been sufficiently established. Like the judge, I fear that the husband may raise difficulties; but I do not think that his conduct to date necessarily demonstrates that he will disobey the court's order when eventually made. Even if he does, we lack any evidence before us that enforcement processes in Bermuda are likely to prove abortive.
39. Accordingly I would refuse the application under paragraph 1.
40. So far as the application for security for costs is concerned, the case seems to be plainly one where security for costs should be ordered under CPR Part 25.13 (2) (a), namely that the husband is resident out of the jurisdiction but not resident in a Brussels or Lugano Contracting State. The matter is put also under sub-paragraph (g) of that rule, namely that the appellant has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him. That is disputed by the husband but it is unnecessary to decide. Suffice it to say that, in my clear view, the wife should be protected against the costs of the appeal. The amount in which security is sought is set out in summary form in a costs estimate provided to us and the estimated total of the costs is £227,000. The detailed make-up, in the sense of the individual items listed in that costs estimate, has not been attacked by Mr Singleton. He says that, on an earlier occasion, the estimate of costs was much lower. However we understand from Mr Pointer that, at the stage that estimate was given, the appeal was assumed to be a one-day appeal and the details of grounds had not been anticipated.
41. In those circumstances, while I am bound to say that the amount sought appears to be high, because we lack any assistance in relation to the appropriateness of the time involved or the rates charged I do not think it right to reduce the sum to any substantial extent by way, as it were, of informal taxation.
42. I would order that the husband provide security for the costs of his appeal in the sum of £225,000, to be paid into court by a date which it seems to me should appropriately be set at 31 December; but in relation to that, no doubt, submissions can be made. The order providing for such payment should allow, in my view, for some alternative means of security provided that it is acceptable to the respondent's solicitors.
43. LORD JUSTICE THORPE: I agree.
44. LORD JUSTICE WILSON: I also agree.

Order: Applications refused. Security for costs be provided by respondent in sum of £225,000. Minute be lodged with court