ON APPEAL FROM THE HIGH COURT OF JUSTICE
MANCHESTER DISTRICT REGISTRY
HIS HONOUR JUDGE RAYNOR QC (sitting as a Judge of the High Court)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE RIMER
LORD JUSTICE MUNBY
| ERIC KEITH RICHARDSON
|- and -
|FRASER RICHARDSON (Executor of HARRIET ANN RICHARDSON deceased)
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Ms Sally Harrison QC and Ms Lorraine Cavanagh (instructed by Pannone LLP) for the Respondent
Hearing date : 10 November 2010
Crown Copyright ©
Lord Justice Munby :
"However, I do not consider that it would be fair to the husband to make an award (£3,763,565) which would allow the wife a full 50% of the net assets. The effect of my order will be to leave him with 9 blocks of loss making flats with negative equity (and secured indebtedness of approximately £10m exclusive of the early redemption penalty), which no-one contends could or should sensibly be disposed of forthwith … There are no grounds for optimism as regards to the recovery of the Manchester residential flat market any time soon, nor any guarantee that the flats would realise their agreed value if sold in the immediate future. The hotel business that he will retain has considerable potential for growth as well as inherent risk and whilst it is encumbered by substantial secured indebtedness, it is possessed of assets of a gross value very substantially in excess of this …
I have concluded that a settlement, fair to both parties, will be achieved by the award of a lump sum of £3,500,000 together with the assets mentioned above, which will result in the wife obtaining approximately 47.5% of the net assets …
Notwithstanding her objections, I am of the view that such an award in the circumstances will result in a fair outcome for the wife, as well as the husband. She will retain the hotel she is devoted to … ; she will be able if she chooses to discharge the mortgages on that hotel and her home, together with her debts, and will be secure both as regards her capital and income positions … Alternatively, she may choose to invest in a new business, although I accept that probably not at rock bottom prices given the period of time for payment of the lump sum … True it is that the husband will have retained assets providing far greater potential for growth, but he will also have paid her a very substantial lump sum and accepted all of the risk-laden assets and assumed responsibility for the losses associated with the flats and SWAPS contract, in a situation where the wife was not in any event able to demonstrate that she was able to fund her proposals."
The death of the wife
The insurance – limit of liability
"the valuations relied upon by the registrar were never properly tested by the husband. It does not lie in his mouth today to seek to rely on that absence of expert evidence. Further, in none of the cases cited by Lord Brandon, nor on the facts of Barder itself, did the party applying for relief have the opportunity to avoid the false assumption."
Nourse LJ agreed, saying (page 210):
"the husband, having omitted to call expert evidence and thus to take the only step which could have questioned the assumption beforehand, cannot afterwards say that it has been invalidated".
"it is apparent that the essential facts were available to the wife and her advisers at the time of the registrar's order. When I say 'the essential facts', I mean all the relevant information which it would be necessary for them to have in their possession to enable them to investigate and assess the complete position."
"If in those circumstances he puts before the court figures for his prospective tax liability which prove, in the event, to be much too low, … he can only have himself to blame."
"… the party seeking to impugn the order cannot rely on an event that could have been established in evidence by him or, which may come to much the same thing, that could with diligent enquiry have been ascertained beforehand; see the decisions of this court in Edmunds v Edmunds  2 FLR 202 and Worlock v Worlock  2 FLR 689 … I remain wholly unconvinced that the husband could not, with due diligence, have ascertained and established in evidence in April 1992 the likely extent of his own tax liability for a series of fiscal years ending with 1987/88."
"In the event there was no attempt by either side to explore with the husband in oral evidence whether he might be able to claim that his gifts to the charity were conditional; and no further reference was made at the hearing to the possibility of the defence. But it seems to me that the makings of the defence were there for all to see and further to have explored had they had any appetite to do so."
Explaining why, in his judgment, the order was not vitiated by mistake (para ), Wilson LJ said:
"In the proceedings in 2001 the size of the liability was, in Mr Seabrook's phrase, a known unknown and the judge found that the spectrum within which it might possibly fall was vast … In those proceedings the makings of a conditionality defence, which would dramatically reduce exposure to the charity albeit not to the Revenue, were there for all to see and further to have explored."
Yet the fact was that neither party had sought to do so. Lawrence Collins LJ and Longmore LJ agreed, Lawrence Collins LJ observing (para ) that "the possibility that there might have been no liability was in the arena."
"The argument advanced is simple; all proceeded on a mistaken premise, namely that the husband's shares were worth the sum which, although not certain, was on the husband's evaluation, about 10% of what they fetched 3 months after the order. That contention is unpersuasive for the very simple reason that there was no consensus as to the value of the shares. Throughout years of effort to enhance her share of the assets, the wife had emphasised the potential and the high field of the possible value of the shares. Inevitably the husband had countered that, stressing that a sale was possible anywhere between £1m and £1. This was the area in which the parties and their solicitors most regularly fenced and in reaching a compromise in January 2007 each must have taken a view as to this dominant unknown and each must have been satisfied that the highly speculative value of the shareholding was duly reflected in the compromise."
"As to the mistake argument, there seem to me to be two inter-related problems. The first is that there never was any agreement as to the value of the shares … On the contrary, there was a clear recognition that the parties were at odds over the true valuation …
A second and related problem is that the possibility that the shares may be sold at a higher price was foreseen at the time. In my judgment, that is as much an answer to a claim in mistake as it is to a claim based on the Barder principle. In Edmonds v Edmonds  2 FLR 202 a consent order was made on the assumption that a house was worth £70k. That figure was identified after the judge had heard expert evidence from the wife. The husband contended that the house was worth significantly more but did not obtain his own expert evaluation. Subsequently the house was sold for £110k and he sought to have the settlement reopened, either on Barder grounds or mistake. The action failed. Butler Sloss LJ, with whose judgment Nourse LJ agreed, noted that the husband had been in a position to influence the valuation but he had chosen not to obtain the relevant evidence. In those circumstances he could not challenge the value placed on the property by the judge. Similarly here; it is true that no value was ever placed on the shares at all either by the parties or by the judge when he made the order in April, but in my view, the wife cannot be in a better position because she was prepared to reach a settlement without any formal figure being assessed at all. The parties took their chance on the value but that is quite different from saying that they were mistaken about it."
The insurance – avoidance by the insurer
"If this is a valid claim on which liability is admitted, it could be for considerably more than £2m and Mr Richardson would need to consider his position. It was agreed that this would be mentioned to the Insured. I spoke to David Plant about this and it was agreed that he would take this up with Mr Richardson."
The husband's evidence is that Mr Plant did not tell him about this. Mr Plant in his evidence does not assert that he did.
"In supervening event cases the law is clear thanks to the speech of Lord Brandon in Barder and the subsequent decision of this court in Smith. However how the court undertakes the determinations required by those two cases should not be too rigidly prescribed. Great flexibility is necessary to accommodate the widely differing facts and circumstances that inevitably arise. Much will depend upon the impact of the supervening event."
Lord Justice Rimer :
Lord Justice Thorpe :