England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CARDIFF CIVIL JUSTICE CENTRE
(HIS HONOUR JUDGE C MASTERMAN)

		Royal Courts of Justice Strand, London, WC2A 2LL
		15th August 2011

Lord Justice Hughes:

1. This is a husband's application for permission to appeal in what Thorpe LJ has previously described as "fiercely fought ancillary relief proceedings". Even in a field notorious for its temperature, that is something of an understatement. At the time of the trial, the husband was represented by leading counsel. He has since parted company with his solicitors and counsel. He was acting in person in relation to this application until, it would seem, extremely recently; but Mr Barrett and new solicitors have been extremely recently instructed and I have had considerable help from them this morning.
2. It is to be observed that there has been a previous history of the termination of instructions to solicitors, as also sadly of a deliberate failure to attend. Today Mr Hutchings is here, and so as I have said are his new legal representatives. This needs only an outline history at this stage. There was a 20-year marriage; there are three children, all now grown up; the spouses parted in 2000; ancillary relief proceedings ensued; and they were settled by a consent order made on 16 February 2004. Its terms were detailed, but its gist is as follows: the husband, as I shall call him, was ordered to pay a lump sum of £176,000 to the wife, as I shall call her, on payment of which the former matrimonial home, a property known as Field View, was to become the sole property of the husband. If the lump sum was not paid, the matrimonial home was to be sold in order to raise a similar sum for the wife.
3. It was known at the time that the husband had some property dealings in addition to his other trade, which appears to have been connected somehow with the motor trade. That lump sum was, as I understand it, paid; however, the wife subsequently learned that the husband appeared to have sold an investment property, address 106 Commercial Road, Risca, for a sum of £1.3 million, and was clearly extremely flush with funds, having among other expenditure acquired himself an expensive new Bentley costing something over £120,000. The husband had disclosed no interest whatever in that property at the time of the ancillary relief proceedings and the consent order, although it had already been acquired.
4. To cut a long story short, on 3 March 2009, on the application of the wife, the judge set aside the consent order on the ground of the husband's non-disclosure; this, in passing, was the occasion on which the husband withdrew instructions from his then solicitors and, plainly deliberately, failed to attend the hearing. The judge directed that the ancillary relief application be heard afresh. The husband attempted to appeal those decisions, but that attempt perished when Wall LJ, as he then was, refused permission on 30 July 2009. There then ensued a series of directions hearings; necessarily, it is fairly clear, because the husband's disclosure remained reluctant, and indeed there was at least one application, perhaps more, to commit him to prison for non-compliance with orders, and at one stage a suspended order of committal was made against him.
5. All that, however, having been negotiated, the revisited trial of the ancillary relief claim took place over a period of not less than five days in July 2010. At that retrial, it was the husband's case that the Risca property had been a transaction undertaken not by him but by the parties' middle child, their second son, Harry. He had received an award of damages as a child, and in accordance with the usual procedure they had been paid to him when he got to 18; and the husband's case was that this property venture had been Harry's with his capital from the damages. Harry gave evidence before the judge to the same effect. The judge investigated those contentions in detail, and also investigated in considerable detail a large number of other property transactions undertaken by the husband, some alone, some through nominees, some with money advanced on a more or less informal basis by friends, and some capitalised by borrowings from commercial lenders, to whom it was clear on the judge's findings that the husband had comprehensively lied about his financial position.
6. As to the Risca property, the judge concluded that Harry, the son, had been but a bare nominee for the husband, although some of his damages may well have been employed in the initial purchase, but the judge concluded that that sum had subsequently been repaid. The judge did his best, on the material available to him, to form conclusions as to the other property transactions and financial dealings of the husband, but as he observed it was simply impossible to come to any final conclusions, largely because of the husband's persistent determination to conceal the true picture. However, he ordered a further lump sum of £384,000, with provision for alternative orders if that sum was not paid. That represented a portion of the profit made by the husband on the Risca property, and a portion of other profit made on other properties, particularly a previous investment property at Tyr Winch Road. It is against the order for the further lump sum that he husband now seeks leave to appeal.
7. It is necessary to say something more about the chronology of the decision. The hearing had been complex; the judge reserved judgment. His judgment is dated 18 October 2010. It was sent in draft to all three parties -- that is the husband, the wife, and their son, Harry -- via their solicitors. That was done in order to enable the parties to offer any purely technical, typographical or factual corrections, and also in paragraph 60 the judge invited submissions as to costs. As things turned out, both the husband and Harry appear to have parted company with their solicitors some time either just before or just after the draft judgment was sent out. When the time came for the judgment to be handed down on 21 December 2010, neither the husband nor the son was present. When this application for permission to appeal was received, Thorpe LJ saw immediately that it was possible that there had been an absence of notice to the husband, and he directed further enquiries to be made. They have been made; the judge has himself initiated some in the County Court, and it is not necessary to recite the evidence but it is necessary to say what the outcome is.
8. The outcome is this: first, the husband had undoubtedly seen the judgement. He had sent of his own initiative an email of 16 December 2010 to the court; I have not seen that, but it is apparent that it contained some of the same submissions as he now seeks to rely upon. In other words, he raised a number of factual queries about the judgment suggesting that the judge had fallen into arithmetical error in some respects. Next, when neither father nor son appeared on 21 December, it looked to the judge as if that was a deliberate tactic; it is not surprising that it looked like that, because there was a history of such a similar tactic being employed. That impression was probably somewhat compounded when the erstwhile solicitor for the son was contacted, agreed to come at short notice, and revealed that he had had his instructions withdrawn, but not before he had spoken both to the son and also to the father, with the son's consent, about the terms of the judgment. Nevertheless, thirdly, the email which the husband sent on 16 December was mislaid or misfiled in the court, and did not reach the judge's consideration. Moreover, notice of the hand-down hearing on 21 December had been sent to the husband, it being known that the solicitors were by then off the record, but it went to an address at which he seems he no longer lived. Although a close business associate of his, a Mr Dring, who had plainly been a confidant of the husband's for years, did live there, it is not possible to know whether the notice ever reached the eyes of the husband, and the only safe assumption to make is that it did not.
9. The conclusion I derive from that is that the husband did not have the opportunity to suggest to the judge on 21 December that there were a number of arithmetical or other errors of fact; and secondly, and more significantly, he did not have the opportunity to make any submissions as to costs, none of which had yet been made on his behalf by leading counsel at the trial. It needs clearly to be understood, however, that the hearing of 21 December was a hearing for the handing down of a judgment at which the judge had already arrived; it was not an opportunity for further submissions as to what the order ought to be.
10. Lastly, by way of preliminary, there is at least a possibility that the present Notice of Appeal is out of time by a few days; that depends on the correct date on which it was received. If it is out of time, I extend time as necessary.
11. The potential grounds relied upon are derived from an amalgam of those settled by the husband in person, although one has to say by the look of it with the assistance of at least somebody who has some legal experience, and Mr Barrett's helpful skeleton lodged today, together with his equally helpful oral development of them. I do not take them quite in the order in which they are presented by the original grounds, but I hope I can cover all points in what follows. First and fundamentally, the husband wishes to assert that the judge was plainly wrong to conclude that his son, Harry, had no beneficial interest in the Risca property. He says that such an interest must have derived from the use, which the judge appears to have accepted was made, in the initial purchase of approximately £66,000 derived from Harry's award of damages.
12. That, I am satisfied, is unarguable. The judge investigated this on the facts; he concluded on the clearest possible evidence that Harry was a bare nominee for the husband, who chose to operate through him precisely because he wished to conceal from the wife what he was doing. The judge concluded, and he was entitled so to conclude, that the use of Harry's damages money had been a loan which had been repaid along the way. In those circumstances, his conclusion that Harry had no interest in the property is unassailable; and as a matter of additional fact, it is to be observed that Harry does not attempt to assail it.
13. Secondly, the husband seeks to contend that it was wrong in principle, in any event, to contemplate making any additional lump sum award to the wife to reflect the profit that had been made on the Risca property because, he asserts, as at the time of the original consent order the Risca property was worth no more than had been paid for it, and possibly a little less. That, I am satisfied, is unarguable. The short answer to it is that the property had substantial development potential; if it had not had, the husband would not have bought it and hidden it.
14. Thirdly, the husband seeks to contend that the judge departed from equality without explanation. That is unarguable; the judge did not approach this case by way of an attempt to achieve equality. He had in mind that the profit on the Risca property had emerged after the separation, and he calculated his lump sum award by taking a third of the profit on the Risca property and half of the profit on the Tyr Winch property; taking into account along the way a large number of complicated dealings in other properties as well. It is correct that as at the time of handing down, the transcript demonstrates a series of exchanges between leading counsel for the wife and the judge, initiated by counsel inquiring of the judge whether he had meant to achieve equality, and pointing out if he had, he had not arithmetically achieved it. Initially, coming back to the case some months after he had written his judgment, the judge thought that there was something in that submission, but the transcript at 8C to 9C plainly demonstrates that when the judge went away, re-read his judgment and re-thought what he had done, he resolved the question; he had not sought equality, he was rather attempting to redress non-disclosure. He had taken into account not only the assets which were demonstrated to be in the husband's hands, but also substantial expenditure of approximately £300,000, which must have been made by the husband but which was not admitted, in the meantime. There is, I am satisfied, nothing arguably wrong with the judge's general approach, and if it did not achieve equality of existing assets, as distinct from those that had clearly passed through the husband's hand and disappeared without explanation, there is nothing wrong with that either.
15. There are then a number of arithmetical questions which are raised by the grounds of appeal. First, submissions are made by the husband in his skeleton argument at paragraphs 3 and 4 suggesting that the judge has erred in his treatment of financial dealings between the husband and a family of travellers called Connors. It is quite apparent that very large sums passed in both directions between the husband and the Connors, sometimes in cash and sometimes by way of cheque, almost entirely without any explanation at all. The evidence from the husband about this was wholly unsatisfactory and included the assertion that he simply could not remember whether a loan of £90,000 made by him to the Connors had been repaid or not, or if it had in what form it had been repaid. There is nothing in this point. Whilst it may well be that some of the money received from the Connors was repayment of advances or money previously paid to them for some reason, that does not alter the fundamental approach of the judge in any way. The husband's evidence about this was so unsatisfactory that the judge was quite entitled to deal with it in the way he did.
16. Next, the husband takes issue with the judge's figures at a number of points in his judgment in relation to a particular transaction of remortgage in relation to a property called Priory View, where the husband was at one time living; whether he is or is not at present I am not quite sure, but yes, I understand he may still be. The husband's complaint is that the sum actually received on remortgage was £150,000, whereas the judge assumed that it was £250,000. The husband has misunderstood the judge's approach in this. The judge was not looking at any particular remortgage; most of these properties have been mortgaged, remortgaged, remortgaged again, as well as being the subject of highly informal loans between Mr Hutchings and a variety of friends. What the judge was looking at, as is apparent from paragraphs 49, 51 and 59 of his judgment, was the elementary proposition that the husband had started with a loan of £350,000 on Priory View, and he was told by leading counsel on his behalf that as at the date of trial it was charged with £600,000. The judge's conclusion that that meant that the husband had raised an additional £250,000 which had become available to him was a perfectly legitimate conclusion, and there is no prospect of it being challenged in this court.
17. The husband complains that the judge failed to take into account money that he owed to the Hong Kong & Shanghai Bank; the judge positively did take that into account, though he observed that the husband appeared to feel no need to redeem it. The husband complains that the judge wrongly concluded in relation to the Tyr Winch property that the eldest child of the family, Michael, had had no interest in the property, and did so wrongly says the husband, when Michael had not been joined as a party to the proceedings. That is unarguable; the judge's conclusions at paragraphs 36 to 37 that Michael was all too plainly another nominee for the husband was wholly justified; if anybody was going to complain about that it would have been Michael, who has not, but he would not have any prospect of doing so successfully either.
18. In two minor respects, the judge did fall into error; but it had no impact whatever on his conclusions. He made a passing reference to the fact that the husband had elected not to sell the Bentley; in doing so, he overlooked that a comprehensive injunction under section 37 of the 1960 Act prevented sale of the Bentley, and the same was true of a property at Skenfrith, which could not in fact be sold. However, neither of those minor factual errors of the judge had any impact on his overall findings.
19. In short, I am satisfied that there is no basis for challenging the judge's conclusions that these various property transactions were undertaken by the husband through the variety of nominees; some family, some friends. Secondly, I am satisfied that there is no prospect whatever of the husband successfully challenging the judge's conclusion that the husband is still doing his best to conceal his true financial position. Thirdly, it is plain that there is no basis for challenging the conclusion of the judge that the husband cannot be relied upon to be even partially honest about any financial dealings, when it suits his book not to be.
20. Accordingly, one must approach this application on the basis of the judge's findings of primary fact. There are only two errors, with one very minor makeweight, in which it seems to me that there is any arguable prospect of the judge's overall conclusion being challenged. The first is this: the judge took as a starting point for the calculation of the profit on the Risca property the sum of £1.066 million. That allowed for the purchase costs or, which amounted to the same thing, the outstanding loan at the time of sale to a commercial lender. It did not, however, take into account at all what the judge found to have been substantial payments made by the husband of interest on informal loans made to him by friends. One was some £40,000 paid to a man called Smart; by way of interest, the difference between £200,000 borrowed and £240,000 repaid. Another was £96,000 paid by way of interest to a Miss Coffey; the difference between £100,000 borrowed and £196,000 repaid. The judge appears at paragraphs 30 and 31 to have accepted that those sums were paid out by way of interest to help finance the Risca transaction, but he has not at any point taken them into account. There were other similar payments of interest to a Mr Gammell and perhaps to Mr Dring; the amounts of those were not quantified by the judge, but they have not been taken into account either. In addition, there would have been no doubt some expenses on planning consultants, clearance of the site and the like, and none of that appears to have been taken into account. The judge's method was to take the profit on this Risca property and then look for a suitable proportion of it to order the husband to pay by way of lump sum to the wife. It seems to me that it is arguable that he has started with a figure from which further deductions needed to be made.
21. For the same reason, there are two smaller sums which it is I think just arguable that the judge can be criticised for not bringing into account. The judge, it appears, did have evidence that the husband had incurred costs in refurbishing two properties at Greenway Road and Danesbury in the total sum of just under £20,000, £19,628; see file 4, pages 399 and 400. At paragraph 51, however, of his judgment the judge referred to the fact that the costs in relation to Danesbury were "not in evidence", and he made no allowance for Greenway Road at all.
22. Lastly, a very small point; the judge took as the value of a bracelet which the husband had bought when he first sold the Risca property its purchase price, which was £50,000; there was in the papers at bundle 4, page 394, a valuation of £35,000. It is asserted that it was not challenged; whether that is right or not, I do not know. In any event, whether it was reliable or not, I do not know. I would not have dreamed of giving leave to appeal based upon that by itself, but given that I think the husband is entitled to make the two points that I have just adverted to in relation to the interest payments and costs of development of Risca, and of the refurbishment costs of Greenway Road and Danesbury, I see no reason why he should not be entitled to assert, if he can make the contention good, that the judge erred in relation to the jewellery as well.
23. With those points, it seems to me that husband is entitled to ask this court to look at the overall figure awarded, although I am not to be taken as suggesting that there is any strong prospect of challenging the judge's basic approach, namely to arrive at a suitable proportion of the profits which the husband made and concealed to be awarded to the wife. Mr Barrett has sought to persuade me that the judge erred in failing to take account of the real possibility that what would happen in the long run was that these properties would suffer a forced sale at the hands of the mortgagees, and raise considerably less than the values which were properly put upon them at the trial. There is nothing in that; the order permits the husband to sell the properties in order to raise the lump sum. True, he has to ask the wife's consent, but that is a perfectly proper step; if she were unreasonably to refuse it, he could apply to the court for a direction in the working out of the order. I refuse leave to appeal on the question of the value of the properties.
24. The remaining question is costs; as I have already indicated, the husband did not have the opportunity that he should have had to make submissions as to costs. For that reason and that reason alone, I give permission in relation to costs. But I say as clearly as I may that as far as I can see, the conclusion that the husband had to pay the costs of the retrial was one which it will take a considerable explosion to unseat. Mr Barrett wishes to submit, as I understand it, that had there been full disclosure back in 2004, the costs then would have been greater than they actually were, and that some allowance ought now to be made in an order for costs against the husband. Since that has not ever been ventilated before the judge, I accept that it is a submission which the husband is entitled to ventilate before this court; whether it has the remotest prospect of success, given that it was the husband's concealment of these transactions which gave rise to the whole of the 2009/2010 proceedings, is a matter which will have to be adjudicated upon not by me but by the full court.
25. For those reasons, I give permission to appeal strictly limited to the following: (1) the £1.066 million starting point for the profit on Risca; (2) the suggested omission of £19,600 refurbishment costs of Greenway Road and Danesbury; (3) the suggested overvaluation of the bracelet by £15,000; and (4) in consequence, the level for the overall figure for a lump sum; plus (5) costs. Giving leave for appeal limited to that extent means, I think, that the stay which currently has been imposed on the enforcement of the judge's order should be continued as it was by Thorpe LJ, except as to £200,000, which I am quite satisfied is well below the minimum that Mr Hutchings is bound to have to pay. So I shall continue the stay only in respect of any sum over and above £200,000.
26. To that extent and that extent alone, I give permission to appeal.

Order: Application granted.