England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
FAMILY DIVISION
(MR JUSTICE HEDLEY)
(LOWER COURT No: FD04D05320)

		Royal Courts of Justice Strand, London, WC2A 2LL
		6th March 2008

Lord Justice Wilson:

1. Following my refusal of it on paper, a wife (or perhaps ex-wife) renews an application for permission to appeal against orders for ancillary relief made in favour of her husband (or perhaps ex-husband) by Hedley J. in the High Court, Family Division, Principal Registry, on 30 November 2007.
2. Mr Mahmood, instructed by NB Kohi, today represents the wife; neither of them did so in the court below. The husband has taken an unusual course in relation to today's application. For, although the letter sent by this court to his solicitors said, conventionally, that it had not requested that submissions be made on his behalf for today's hearing nor that he be represented at it, he has caused his solicitors, Lancasters, to instruct Mr Wise to write a note for my use today and to attend this hearing. Both Lancasters and Mr Wise represented him before Hedley J. In the event Mr Wise's note has been useful; and, since as I will explain, I have been considering whether to permit this appeal to proceed not on any of the pleaded grounds but on a ground as yet unpleaded, I decided this afternoon, exceptionally, to make use of Mr Wise's presence in order to hear briefly from him before deciding whether to do so. No doubt in circumstances in which he could hardly have anticipated, Mr Wise was therefore invited to respond impromptu to various questions; and his answers were very adroit and very helpful to me.
3. The judge's order followed a hearing of about four days, at which both parties were represented by counsel and in which, so the judge found, unsatisfactory evidence had been given by both of them. Nevertheless the judge was more critical of the wife than of the husband.
4. Both parties are by ethnicity Iranian but have lived in England for many years. The marriage took place in 1975; and there are three adult children of it. The matrimonial home is a property in the wife's name in Northolt; and the husband finally left it in 2005. Currently the wife remains living there, perhaps with some or all of the children.
5. The judge found, such being findings which are not and could not be challenged, that the wife had indulged in dishonest manoeuvres in order to diminish the husband's claim against her. For example, in 2002 in Iran there had been a small collusive claim brought against her by her brother, which had been settled upon the bizarre basis that she should transfer one half of the beneficial interest in the home in Northolt to the three children in equal shares. In the event no such transfer took place; but the legacy of the manoeuvre was an inability on the part of the judge to accept the integrity of the wife in other areas. Furthermore in 2003 the wife transferred each of three properties in Tehran, which she had inherited from family members (or at least one of which she had inherited from family members) to each of the three children, subject, so the judge found, to her retention of a life interest in them. The judge, in my view unchallengeably, made a notional re-attribution of the entire value of the three properties to the wife for the purposes of the proceedings. Insofar as in this proposed appeal the wife did, until this afternoon, challenge such a notional reattribution, she had no real prospect of success. For, by 2003, the husband and wife were living separately under the same roof and the wife had already instructed Iranian lawyers to take proceedings against him there. It would be conventional for the divorce court to make a notional reattribution of properties disposed of by one spouse without consideration in such circumstances. The three children have recently written a letter to this court in which they protest at the judge's treatment of what they contend to be their properties; they should understand, however, that the judge did not order the transfer of any of these properties to the husband but simply took their value into account in calculating the value of the other assets which the wife should transfer to him. The judge's order leaves undisturbed whatever in truth was the arrangement between the wife and them in relation to the properties.
6. The proceedings against the husband in Iran to which I have referred led to a judgment against the husband in favour of the wife in a sum equivalent to £50,000. In this proposed appeal, again until the point was abandoned by Mr Mahmood this afternoon, the wife wished to claim that the judge had no business to take that debt into account. Mr Mahmood was wise to abandon that point in the light, obviously, of s.25(2)(a)of the Matrimonial Causes Act 1973. I should, however, advert to the judge's apparent treatment of this debt from the husband to the wife under Iranian law and pursuant to the Iranian judgment. The judge said in judgment that "it may be that it is going to be better to be dealt with separately". I am not entirely sure what the judge meant by that; or how practicable any severance of the matter was. In his judgment he concluded that, in addition to a transfer of property to which I will refer, the wife should make a lump sum payment to the husband of £80,000. When I looked at this case for the purposes of my written decision, I noted that, as drawn albeit not even then apparently perfected, the order of the judge was, instead, that a lump sum of £130,000 be paid by the wife to the husband; and I noted that the order also contained a recital of the wife's refusal to waive the debt established against the husband in her favour in Iran. I had assumed, until Mr Wise explained to the contrary in this court this afternoon that, in the course of exchanges following judgment, the judge had approved an increase in the lump sum to £130,000 upon the basis that £50,000 would be the subject of a set-off referable to the husband's debt to the wife pursuant to the Iranian judgment and that the only cash payment to be made thereunder would, as before, be of £80,000 by the wife to the husband. Mr Wise tells me however that my assumption in that regard was wrong and, of course, I fully accept what he says. He tells me this afternoon, to my surprise, that the judge made clear that he expected the wife to pay a lump sum not only of £80,000 but also of the extra £50,000. Mr Wise says that such provision was on the basis that, as the wife was apparently insisting, the debt in Iran would still be enforceable against the husband in Iran, with the result that, were he ever to go to Iran, he might well be forced to pay £50,000 to the wife. Thus the judge was, in effect, equipping the husband in advance with £50,000 through the lump sum order in order that, were he ever to go to Iran and be forced to pay that sum to the wife, he would have the wherewithal, provided by her, with which to do so. It seems to me that this is possibly a curious feature of the order. It seems to me in particular that there may be grounds for concern that, having put the whole issue of the Iranian debt of £50,000 to one side, the judge, following exchanges in his court after judgment and perhaps a short supplementary judgment in this regard, was adding to the burden which he had already placed upon the wife an extra burden: namely to pay the extra £50,000 to the husband in England so that, possibly, were the husband to go to Iran and be required to pay her the £50,000, he should have already been equipped with the wherewithal with which to do so. It seems to me, arguably, to be wrong in principle for a judge to reach what presumably he intended to be a balanced conclusion as to the various transfers and payments which should be made in order to achieve justice and then, having done so and in addition thereto, to alter the terms of his disposal in order to require the wife to pay an extra £50,000 to the husband in order not only to eliminate the debt but also to give the husband an extra £50,000 which would be his, and for him to deploy, unless and until he chose to go to Iran and found himself obliged to pay that sum to her. This may be an area which Mr Mahmood will want to explore.
7. One feature which makes any appeal to this court particularly problematical for the wife is that the judge made a finding against her of litigation misconduct: namely that there had been a long spell during which she had taken no real part in the proceedings and that she had effected only tardy and incomplete compliance with directions dated 9 October 2007. This has a bearing on what, until this afternoon, was another of the grounds of appeal, namely a complaint that, in relation to the value of the four properties in Tehran (namely the three properties partially disposed of to the children and another property owned by the wife, namely 2 Kavousi Avenue), the judge proceeded upon valuations which were far too high. Mr Mahmood had stated in his skeleton argument on instructions that the valuations had been provided by the husband. Mr Wise, however, made clear in his note that the valuations were provided by a jointly instructed valuer and were not the subject even of attempted challenge on the part of the wife at trial. There would have been no arguable justification for any appeal based upon fresh evidence of the value of any of these properties.
8. The wife also made a general complaint that the judge's treatment of her Iranian assets ran counter to Iranian law; but, again, Mr Mahmood has withdrawn that aspect of the grounds of appeal and, in my view, wisely so. In principle we apply English law to the determination of applications for ancillary relief and, in the light of the long residence of both parties in England, this could not be an exceptional case in which (even if he was asked to do so, which is unclear to me) the judge should have had an eye also to Iranian law when conducting the exercise mandated by s.25. Thus, whatever the treatment of a spouse's inherited property following divorce under Iranian law, our law provides not only that all the property of both spouses should be taken into account but indeed that the sharing principle applies to all their property, albeit that, to the extent that their property is non-matrimonial, there is likely to be better reason for departure from equality: see Charman v  Charman No 4 [2007] 1 FLR 1246 at [66].
9. I should say that one ground of appeal, which is not obviously pleaded but was pressed upon me this afternoon and which, had it found favour with me in principle, would have no doubt needed an amendment of the grounds of appeal, is an argument that the judge failed to address evidence that only one of the three Iranian properties which he found to have been disposed of by the wife to the children, subject to the saving of her life interest, was, in truth, her property to dispose of. In that regard Mr Mahmood has drawn my attention to the contents of a legal opinion by Ms Sada, who I believe gave evidence at the hearing, in which she said that it seemed that only one of the title numbers of the properties represented a property transferred to the wife through inheritance. It may be however that Ms Sada was saying that the other properties had been transferred to the wife otherwise than through inheritance. On the basis of that straw in the wind, it would in my view be quite impossible for Mr Mahmood to bring an appeal to this court upon the basis, obviously totally contrary to the findings of the judge, that the wife had never been the owner of two of those three properties in Tehran at all; and I will not permit amendment of the grounds of appeal in order to enable that point to be taken before this court.
10. My view remains that none of the grounds of appeal, whether those presently pleaded or those urged upon me this afternoon by Mr Mahmood, has any real prospect of success.
11. Let me turn, however, briefly to survey the judge's orders on the basis of the findings both as to values and otherwise which he made.
    (a) He found that the home in Northolt had a value of £465,000 or, net of costs of sale, say £450,000, and that both parties owned it beneficially in equal shares.
    (b) It was common ground that the parties jointly owned a tenanted property at 156 Warwick Road in West Kensington. There was a valuation of it between £850,000 and £1 million, thus with a median value of £925,000, or, net of costs of sale, say £900,000, and thus, after deducting a mortgage of £83,000, with  an  equity  of  say £817,000.
    (c) He found that the three properties in Tehran given by the wife to the children, subject to the life interest, were worth £156,000, £94,000 and £224,000  (gross  of  costs  of  sale).
    (d) He found that the wife's property at 2 Kavousi Avenue was worth (gross) £112,000, subject to a debt of £30,000 which he appears to have found was, and  is,  owed  by  her  to  the  tenant  of  that  property.
    (e) He found that, on the disposal by each party of his or her half interest in 156 Warwick Road, each would suffer a CGT liability of £55,000.
    (f) He found that, although the husband claimed to have debts of £72,000, a not insignificant part of them were soft debts. Unfortunately the judge did not identify the figure for the husband's debts which he ultimately favoured. Might I arguably  for  this afternoon's  purposes  take  £30,000?
    (g) The judge found that the outstanding liabilities of the parties for costs were £82,000 in the case of the husband and £42,000 in the case of the wife.
    (h) Perhaps ominously for the purposes of any appeal on her part, he found that it was quite likely that the wife had undisclosed cash resources in Iran but that they were probably not particularly large.
12. The judge's assessment, not the subject of attempted challenge by the wife in this court, in relation to the needs of the parties was that each needed about £350,000 for accommodation (with the result that, upon the judge's findings, the wife did not need to be in accommodation as valuable as the home in Northolt); that capitalised income needs were in the sum of about £304,000 for the wife, who was aged 66; and that the sum put forward in this regard on behalf of the husband, who was aged 58, namely £373,000, was somewhat too high in that it made no allowance for his modest future earning capacity.
13. The judge's orders were that the wife should transfer her entire interest in 156 Warwick Road to the husband; that he should transfer his entire interest in the matrimonial home to the wife; that, as I have said, the wife should make to the husband a lump sum payment of £130,000; and that she should also make a contribution to his costs in the sum of £40,000. The above provisions were on the basis of a clean break between the parties.
14. I recall that, when I attended to this application on paper, I developed a sensation that the orders of the judge may perhaps have been very favourable to the husband but that the wife's manoeuvres in Iran, her litigation misconduct and the judge's conclusion that at any rate to some extent she had further undisclosed assets in Iran ruled out a successful appeal on her part, even on that simple, if then unpleaded, ground. My initial sensation may indeed prove to be correct. Nevertheless I have, even after hearing the robust submissions to the contrary made this afternoon by Mr Wise, developed a concern just sufficient to lead me to grant permission in the event that the wife chooses to amend her grounds appropriately. For -- yet again (see Vaughan v Vaughan [2007] 3 FCR 533) -- what is conspicuously lacking in the judgment is any attempt to calculate the total net assets of the parties by reference to the various figures for assets and debts which the judge favoured and then to calculate the effect on the parties of the capital adjustments which he proposed to order. In preparation for today's hearing, I made certain quick calculations of that character. I do not intend to refer to my calculations in this judgment, which is already overlong. But, when I put my generalised concerns to Mr Wise, he, with his knowledge of the case, sought, in effect off the cuff, to do calculations which might give me sufficient comfort that the orders made by the judge were within the parameters of his discretion in the light of the principles of needs and sharing. I must say that I found it significant that, when he did the calculations -- and I think, in fairness, that, in that he did them off the cuff, he must be entitled at the hearing of the appeal to go back on them -- it transpired that the net effect, according to him, of the judge's orders was that the wife was left with £849,000 and that husband was left with £841,000. But, I emphasise, the figure of £841,000 was upon the basis that the husband chose to go to Iran and was there required to pay £50,000. If that proves to be an unreal hypothesis, then the figure for the husband is not £841,000 but £891,000.
15. No doubt for the purposes of this appeal all these figures will need to be more carefully attended to; and the totals may turn out to be significantly different. Suffice it to say that I regard it as arguable that the award to the husband was plainly too high; arguable that it yielded him a share of the net assets of the parties which exceeded not only his needs -- such is conceded by Mr Wise -- but also and in particular his reasonable "entitlement" under the sharing principle, at any rate in the light of the fact that a substantial part of the wife's wealth had been inherited; and arguable that it paid no regard to the wife's ability or otherwise to raise the substantial cash sums required under the order. For, even were she to sell the matrimonial home and release some cash in that way, the order required her to find £130,000 for payment to the husband by way of lump sum, £40,000 for payment to him referable to his costs, £42,000 for payment to her own lawyers referable to her costs and £55,000 for payment by way of CGT on the disposal to him of her interest in 156 Warwick Road. When I put that point to him, Mr Wise indicated with great robustness that no point referable to liquidity had been canvassed by Mr Mahmood's predecessor before the judge and that in those circumstances he was perfectly entitled to assume that real property in Tehran was as easily disposed of, and its proceeds as easily deployable in England and Wales, as any other real property, even if situated in England and Wales itself. It may be, however, that in the light of his quasi-inquisitorial function, the judge should, even unprompted, have considered whether it was practicable not only for the wife's real property in Tehran to be sold but also for its proceeds (in respect of which he made no allowance for incidental costs of disposal or transfer) to be remitted to England in order to enable her to discharge obligations of the very substantial size ultimately cast upon her by the judge.
16. Thus I refuse permission to appeal on all the grounds set out in the Appellant's Notice. But, were the wife to apply to amend her grounds to add a further ground of appeal, I would grant permission for that further ground to be argued. The further ground of appeal would be:

"On the valuations and other figures adopted by the judge, and in the light of all the circumstances found by him, his award to the respondent was:

(a) plainly too high

(b) reached without any proper application of the principles not only of need but also, and in particular, of sharing (at any rate in the light of the fact that a substantial part of the appellant's wealth was inherited); and

(c) reached without regard to the ability or otherwise of the appellant to raise, and to deploy in England, the cash sums required by his order to be paid by her."

17. Since the appeal will proceed only on the values adopted by the judge, it must be possible for counsel for both parties to agree a detailed schedule of the assets, debts and, thus, the total net assets of each party and, to be set below that total, of the effect on each party's total of the various transfers and payments ordered by the judge. The suggested fresh evidence as to values contained in the bundle provided by my use today must be excised from the bundle prepared for the purposes of the appeal. Were the wife to consider it worthwhile to explore the possibility of a complaint to this court about the judge's treatment of the husband's debt to her of £50,000, she should in the first instance purchase a transcript of what was said in that regard during exchanges following judgment and in any short supplementary judgment. The transcript would enable her to receive advice on whether to apply to reamend her grounds.

Order: Wife to be permitted to amend her grounds of appeal in accordance with draft provided by court; permission granted to appeal on that ground; permission refused on the original grounds of appeal