England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHELMSFORD COUNTY COURT
HIS HONOUR JUDGE NEWTON

		Royal Courts of Justice Strand, London, WC2A 2LL
		27th July 2011

Lord Justice Thorpe:

1. This appeal raises a single point of significance, and that is the degree to which the judge in ancillary relief proceedings should reflect the origin of the family assets in a substantial damages award on the settlement of a personal injuries claim brought in the Queen's Bench Division. The history necessary to set that question in the context is therefore relatively brief.
2. The respondent in the court below received damages of approximately £0.5 million for his personal injury claim that was resolved in 1998 before he ever met his wife. They cohabited for a period of about 18 months before their marriage in September 2003. They separated in April 2008 and were then divorced. The marriage, if the prior period of cohabitation be included, therefore had a duration of about six years.
3. The husband, as I will now call him, invested his compensation in the purchase of two properties: 1) a bungalow known as The Orchards; and 2) an investment flat, a two-bedroom flat, which was let out for rent. Both properties are in Chelmsford, and the purchase and adaptation of these properties accounted for his award. No doubt that was a thoroughly sensible investment since the primary property provided a suitable home for a man with his disabilities, including a prosthesis, and the investment property provided a rent.
4. During the marriage twins were born to the couple and the twins are now some four years of age. On separation the husband remained in The Orchards and the wife has accommodated elsewhere in rented property with the two children.
5. Two short additions to those observations: the first is that to some extent The Orchards is a property which has been adapted to meet the husband's special needs; the second point is that the wife invested what seems to have been about £30,000 in the improvement of The Orchards, that sum derived from the sale of the flat which provided her premarital home.
6. Sadly, there has been a lot of litigation between this couple, partly in relation to contact but mainly in relation to ancillary relief. The wife's claims were essentially for sufficient capital to provide a home for herself and the children. The husband's resistance was based on his desire to retain The Orchards, specially adapted to meet his needs.
7. The issue was tried by District Judge Silverwood-Cope sitting in the Chelmsford County Court. She heard evidence and submissions over either three or four days and delivered her judgment on 6 May 2010. The conclusion comes in the ultimate paragraph where she said:

"However, in order to enable [the wife] to purchase a property suitable for herself and the children, taking into account that she has a mortgage potential of £42,000, I consider on balance that the husband should pay a lump sum £285,000. My order is that that should be payable in three months to enable the husband to consider how he may raise that money or whether he needs to consider other ways of raising it. However, I say that, in default, [The Orchard] should be placed on the market for sale and the wife is to receive £285,000 from the proceeds of sale, or 63% of the gross sale price, whichever is the greater."

That citation illustrates that the district judge was contemplating and allowing for the eventuality that the husband, in order to meet his obligation to pay a lump sum at £285,000, would have to sacrifice his home.

8. The husband was not satisfied with the district judge's conclusion and exercised his right of appeal to the circuit judge. The appeal came before HHJ Newton on 23 September 2010. The judge wrestled with the case, and particularly wrestled with the processes by which the district judge had arrived at her conclusion. I cite paragraph 16 of his judgment when he said :

"However, in my judgment, doing my own analysis of the figures, it seems to me that if £285,000 was paid to [the wife], that would leave £270,000 available to the husband from the two properties, that is to say having regard to the likely net equity of the former matrimonial home and of the rental property. That is using my own experience and using the usual deductions give or take. I accept that does not take into account capital gains tax, as to which there is no evidence. On any view, there is £20,000 or slightly more available in bank accounts, which takes it to £290,000 and there is significant argument about other issues. There were a number of motorcars and other enquiries in relation to activities, which the Judge did not make findings about and which, doing the best I can, I have been unable really to get to the bottom of, having spent some time going through the papers myself."

9. So in the end the judge, wrestling with the case, in paragraph 23 expressed the conclusion:

"This is a difficult case. I do not see that the Judge got anything wrong in law. The cases were cited to her. She applied those cases."

10. The husband was dissatisfied with the outcome of his appeal and endeavoured to bring a second appeal to this court. His application was considered by my Lady, Black LJ, on the papers, and on 8 December she referred the application for oral permission hearing on notice and sought further information as to the judgments in the court below. That resulted in a hearing on 3 February when the parties were represented by counsel who had appeared in the county court, Mr Barton for the husband and Mrs Bettle for the wife. At the conclusion of detailed submissions, permission to appeal was granted despite the fact that we were effectively constituting a second appeal, and we gave directions as to the preparation of that appeal and further directions for its conduct.
11. Shortly thereafter, the husband filed notice of change to represent himself and in mid-April the wife did the same. In our detailed judgments of 5 February we had made two observations; one was that there had been an inordinate outflow of family money on legal costs and that the family could hardly afford the costs of the appeal which we were directing. We accordingly invited them to participate in this court's ADR scheme. They did so in May, but sadly that venture failed and accordingly the appeal had to be listed.
12. Since then there has been a dramatic change in representation. Whilst the husband remains an appellant in person, the wife reinstructed her former solicitors on 16 July and, in the course of the following week, leading and junior counsel were instructed on her behalf. So, for the purposes of the argument before us today, there has been a note of disparity. Mr Mansfield has done his best; he has presented his arguments cogently and persuasively, particularly in reply. In a sense his task was hardly onerous, since in our judgments of 3 February we had identified the two points that would have to be met by the wife in response. Both arise on the direction which the district judge gave herself as to the law; directions which were expressly approbated by the circuit judge. Obviously considerable emphasis had been laid on the origins of the capital available to the family and, in consequence, the district judge had been referred to the decisions of Wagstaff vWagstaff [1992] 1 FLR 333, the earlier case of Daubney and the case of Pritchard v Cobden [1988] Fam 22.
13. The district judge summarised the effect of those cases in paragraph 19 of her judgment, when she says:

"I refer very briefly to the case of Wagstaff because that deals largely with what one should consider when a large part of the matrimonial assets have been provided by damages for personal injury. I think that this was an appeal from a judge who had overturned the district judge's order. In deciding this, Butler-Sloss LJ quotes from Scarman LJ in Daubney, a case again with injuries. It says:

'I think that the statute is capable of no other interpretation than that damages at this class fall to be considered as part of a resources or property, as the case may be, of one of the parties to the marriage. It is the duty, of course, of the court to have regard to all the circumstances and to conduct.'

In Prichard v Cobden:

'It is common ground that damages for personal injuries recovered by a spouse shall be included in the part which is to be shared.'

In summary, as Counsel for the wife said, the damages are available to the whole family and the needs are no different than any set out in Section 25."

14. As my Lady pointed out in paragraph 15 of her judgment of 5 February last, the proper citation from the judgment of Butler-Sloss LJ's judgment in Wagstaff should be to this effect:

"I do not understand Scarman LJ [in Daubney] as saying that no part of damages awarded under the head of pain, suffering and loss of amenity should be charged by the other spouse but, if he did, then I respectfully disagree. The reasons for the availability of the capital in the hands of one spouse, together with the size of the award, are relevant factors in all the circumstances of s 25. But the capital sum awarded is not sacrosanct, nor any part of it secured against the application of the other spouse. There may be instances where the sum awarded was small, and was specifically for pain and suffering, in which it would be unsuitable to order any of it to be paid to the other spouse. In some cases, the needs of the disabled spouse may absorb all the available capital, such as the requirement of residential accommodation. [Counsel] conceded that any calculations made in respect of the capital of the parties should reflect a substantial discount for the fact that the money was received as damages. In general, the reasons for the availability of the capital by way of damages must temper the extent of, and in some instances may exclude the sharing of, such capital with the other spouse. It is important to stress yet again that each case must be considered on its own facts."

15. The full citation demonstrates that the district judge correctly noted the first point, namely that the fact that the capital came by way of compensation did not exclude it from the court's consideration, but she seemingly omitted to apply the second and important qualifying part of the guidance, namely that each case must be looked at on its facts, and in many instances the application of the general sharing rule must be tempered to reflect the particular needs of the recipient and the very nature of the acquisition of the capital, namely by way of compensation for personal injuries.
16. So that misdirection on the part of the district judge, approved by the circuit judge, certainly entitles this court -- despite the fact that we are taking a second appeal -- to investigate and to exercise our own discretion in relation to two facets of the award below.
17. The first is the quantum of the lump sum to be paid by husband to wife, set by the district judge at £285,000. The question is whether that award is sustainable in the face of the misdirection as to law.
18. The second question that we have to address is as to whether the district judge was right to refuse the application of the husband for a charge back in his favour in the shape of what is known as a Mesher order.
19. In fairness to the district judge and to the circuit judge, the husband's case was positive on confining the present payment to the minimum possible sum; he advanced a figure of £130,000 against the court's award. He placed little emphasis on his alternative case that there should be charge back, but that he did make that case is plain from paragraph 2 of the district judge's judgment, where she says:

"The husband's closing position is a lump sum of £130,000, also proposing a clean break, and he suggests very latterly that I should consider a charge back."

20. On the first question, should this court interfere with the quantification of the wife's £285,000 lump sum, it must be said that there is a decided lack of clarity about a number of the ingredients in the recipe that results in that award. We have had the advantage of very skilful and expert submissions by Mr Richard Todd QC leading Ms Kabra, and he has produced for us a carefully prepared summary of assets and liabilities in conventional form. It can be said that the district judge in her award allowed for, even anticipated, a sale of The Orchards. By contrast, the circuit judge thought that that eventuality might be avoided if the husband were to sell the flat to raise about £120,000, if he had a collection of other assets (some not fully disclosed) amounting to some £80,000. The resulting gap to be bridged, about £80,000, could be achieved by his present cohabitee transferring a mortgage that she had on her independent property over to The Orchards.
21. I have been of a fluctuating mind during the course of argument, but in the end have reached the conclusion that the district judge went into the respective needs of the parties with considerable care. She came to the conclusion that £285,000 was the minimum required to meet the needs of the wife and of the children, whose needs are primary by the expressed language of the statute, and that the husband's needs could be met by the greater sum of £320,000 which she calculated would be left to him. Although the circuit judge was doubtful as to that last calculation he generally endorsed the discretionary conclusions of the district judge. £285,000 may be on the high side, and may be the wife was fortunate to achieve that quantification in front of the district judge, but it would be unprincipled were this court to interefere. Having heard none of the oral evidence, such interference would not show proper respect for the function of the trial judge.
22. On the other hand, on the second question I find the appellant's case is overwhelmingly made good. The need to give special reflection to the origin of the family capital and the special purposes for which it was provided, emphasised by Butler-Sloss LJ in the passage of her judgment in Wagstaff which I have already cited, can be properly reflected in converting the order below into a Mesher order. The rationality of that is obvious. There is a fixed amount of capital within the family. For the immediate future the wife's need for a substantial share rests upon her function as the primary carer. She is certainly not the sole carer, since the husband is closely involved in the lives of his children as he emphasised in reply, but she is the primary carer and she must provide the primary home, and that need has a reasonably obvious termination on the majority or the conclusion of tertiary education for these twins. Neatly, it is just at the stage, when she has achieved the task upon which her needs rest, that the husband's need for return of capital is likely to be augmented by the ordinary processes of ageing, which are in turn likely to accentuate his disabilities. This factor was clearly recognised by the district judge, who said in paragraph 16 of her judgment:

"I acknowledge that he does need assistance and that these needs will increase as he gets older."

23. So it seems to me that the exceptional factor in this case, namely the origin of the family capital or the vast majority of the family capital, makes it particularly suitable for the application of a Mesher order. Accordingly, I would quantify the extent of the husband's reversionary interest, or residual interest, at one third of the capital awarded to the wife, but particularly expressed in the bricks and mortar in which the money is invested. We have no information as to whether the wife has acquired, or whether she will shortly acquire, and all this will need working out with care and then expressed in an order which may be difficult to draft, but the essential intention is that the property to be acquired by the wife in an assumed purchase at about £285,000 will be charged as to one third of its equity in favour of the husband, that charge to be redeemed when the twins achieve maturity.
24. That is the order that I would propose.

Lord Justice Jackson:

25. I agree.

Lady Justice Black:

26. I also agree. In the event that the wife purchases a property at a different figure, then adjustments will have to be made to the way in which it is expressed in the order. The intention is that the amount should be of what is represented presently by one third of £285,000.

Order: Appeal dismissed