England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
FAMILY DIVISION

		Royal Courts of Justice Strand London WC2A 2LL
		21 October 2013

1. LORD JUSTICE RICHARDS: Mr Matthews, we are going to dismiss this appeal. I am going to ask Tomlinson LJ to give the first judgment.
2. LORD JUSTICE TOMLINSON: This is an appeal against one part of an order made by Mostyn J in financial remedy proceedings. The order was made on 15 April 2013. The facts giving rise to those proceedings are very broadly as follows. The parties to this litigation started cohabitation in 2006 and, after various separations and reconciliations, were married in June 2009. They had two children, F, who is now little more than six and a half, and N, who is little more than three and a half. The marriage was unfortunately not a happy one. The parties separated in February 2010, that is to say, therefore, within eight months of their having been married, and they were divorced in 2012. For convenience, despite the dissolution of their marriage, I shall simply refer to them as "the husband" and "the wife" respectively.
3. The husband is a self-employed plumber. The judge assessed his earning capacity as around £27,000 per annum. He now lives in West London with his new partner. The wife works in the compliance aspect of the financial sector. She did at one time work for a major high street bank in its compliance division. That was until February 2012, at which stage she was earning £43,000 per annum. She was, unhappily, made redundant from that post but since then she has been able to obtain employment, or has at any rate worked, as a self-employed contractor in compliance, albeit in the insurance sector and that is a matter to which I will return. The judge assessed her earning capacity as around £40,000 per annum. She lives in a rented house in Berkshire. The two children live with the wife. The husband has abandoned all contact with them.
4. During the marriage, the husband and the wife between them owned four properties. For convenience I will refer to them as "Flat 2", "Flat 3", "Flat 3A" and "Flat 4". Each of those properties was subject to a mortgage. Flat 2 is owned by the wife and is let to tenants. On the judge's findings, the net equity in that property is about £39,000. Flat 3 is also owned by the wife and is let to tenants, and the net equity the judge found was about £25,000. Flat 3A is owned by the husband. It too is let to tenants. The net equity is about £38,700, as found by the judge. Although Flat 3A is owned by the husband, the wife is party to the mortgage on the property. Flat 4 was purchased by the husband and wife jointly. It too is let to tenants. On the judge's findings there is negative equity there of between £3,000 and £4,000.
5. When the matter came before the judge, both parties were able to demonstrate that they had substantial debts, which the judge analysed in some detail in his judgment, of which we have an approved transcript. Having analysed the debts and the asset position of each of the parties with some considerable care, the judge made his disposition broadly as follows. He accepted an undertaking from the wife that she would use her best endeavours to procure the husband's release from his obligations under the mortgage secured on Flat 4. He accepted an undertaking by the husband to use his best endeavours to procure the wife's release from her mortgage obligations in respect of Flat 3A. He ordered that the husband should transfer his interest in Flat 4 to the wife. He ordered that the husband should pay a lump sum of £10,000 to the wife, leaving him solely responsible for his own debts but, in default of timely payment of that £10,000, Flat 3A was to be sold with the £10,000 to be paid out of the proceeds in priority to any claim the husband would otherwise have had for the balance, that property, it being remembered, being owned by the husband.
6. The judge also ordered that the husband should pay maintenance of £156 per child per month until the relevant child attained the age of 17 or completed full-time secondary education. That calculation was based upon an assumption that each child would spend 100 days of the year with the father, which assumption has of course proved unfounded as the father has abandoned contact with the children and, accordingly, there are separate proceedings directed to ensuring that the maintenance payments should be adjusted so as to take into account the wife's increased burden in that regard. That is of no direct relevance to the current appeal. The judge also remitted certain arrears of maintenance which were due to the wife under orders made by the Child Support Agency.
7. The net effect of the judge's order, once fully complied with or dealt with in accordance with the default provision to which I have already referred, would be that the wife would own Flats 2, 3 and 4 outright and the husband would own Flat 3A outright, unless of course that had been sold in accordance with the judge's default order.
8. As I have indicated, the judge dealt in some detail with the debts. He found that the asset position of the wife was effectively that she was in debit to the extent of £6,000, whereas the husband had around £30,000 in assets. He recorded at paragraph 19 that, of the wife's debts, £10,000 can be attributed to the husband and around £29,000 regarded as soft loans. The judge made the finding to which I have already referred as to the wife's earning capacity and the husband's earning capacity. The judge recorded that the wife should not be left financially insolvent and, to that end, he made the orders that I have indicated, including a payment of £10,000 by the husband to the wife within three months, and, of course, allied to that the release of the wife from the obligations under the mortgage secured on Flat 3A to the extent that the husband was able, using his best endeavours, to achieve that.
9. There was an application before the judge for a nominal periodical payment order to be made to be effective at any rate until such time as the children achieved their majority. The purpose of that, as put to the judge, was in order to deal with the vicissitudes of life and, in particular, the possibility that the wife might not be in a position to secure permanent employment for the balance of the children's minority, having regard to the fact that she would find it difficult to secure employment in the banking sector because of her impaired credit rating and the consequent need, therefore, to look to the insurance sector for less remunerative work. The judge dealt with this aspect at paragraph 24 of his judgment and he said this:

"Although Mr Buck has said this is a case for nominal spousal maintenance I find there is no reason for this as I have found that the wife has a higher earning capacity than the husband. In my view the statutory steer to a clean break in section 25A of the Matrimonial Causes Act 1973 should be followed. Further I will order the husband to make periodical payments to her for the children, so she will receive monthly subventions to her household which given the young age of the children will endure for many years."

10. The wife appeals against that determination of the judge in relation to nominal spousal maintenance and the grounds of appeal for which permission has been given is that the judge was wrong to dismiss the application for nominal spousal maintenance in circumstances where the appellant has two dependent children living with her of the ages that I have indicated. On this appeal the wife has been represented by Mr John Buck and his submission is, quite simply, that the judge was wrong in principle to decide that there should here be a clean break. In particular, Mr Buck submits that the judge failed to take into account that the wife might struggle to obtain full-time work and he should have found that there is a significant risk that, because of her need to look for work only in the insurance sector, as opposed to the banking sector, she might be without work for substantial periods of time.
11. Dealing with that last point first, it seems to me that the judge has indeed taken into account in his overall assessment the circumstance that the wife is not necessarily in a position to obtain full-time employment in the banking sector. As I have already indicated, the evidence before the judge was that, in her post at the bank, she earned £43,000 per annum. That was until February 2012. The evidence before the judge was also that, over the last 12-month period before the hearing -- the last 12-month period for which there were accurate records -- she had earned in the region of £23,000 per annum net, which in fact she had managed to earn in only six months out of the 12, since she had unfortunately been unemployed for six months of that financial year. It seems to me that, when the judge made his explicit finding that the wife's earning capacity was around £40,000 per annum gross, he was evidently taking into account all of those considerations to which Mr Buck has referred, since it is obvious that, if the wife had been able to continue to secure full-time employment in the banking sector, her earnings could be expected to be by now quite substantially in excess of £40,000 per annum and probably a little in excess of the £43,000 which was the amount that she earned in the year up to February 2012.
12. Bearing in mind that the precarious nature of her ability to obtain employment and the extent to which she was handicapped by an adverse credit rating were put in the forefront of the argument before the judge and featured in the evidence given by the wife, not only her written evidence but also her oral evidence, it is, I think, inconceivable that this experienced judge can have overlooked the point that was being made on her behalf and, as I have already indicated, it is in my judgment inherent in the judge's finding as to her earning capacity -- and I underline the word capacity -- that the judge had these circumstances well in mind.
13. In those circumstances, Mr Buck is driven back simply to his submission that the judge was wrong in principle to decide that there should be a clean break, subject only of course to the payments for child support. That is a difficult submission to sustain for a number of reasons. Section 25A of the Matrimonial Causes Act 1973 was inserted into the statute in 1984. The circumstances in which that was done are set out by Lord Nicholls of Birkenhead at paragraph 130 of his judgment in Miller v Miller & McFarlane v McFarlane [2006] UKHL 24, as follows:

"Thirdly, several provisions were inserted in 1984 to encourage and enable a clean break settlement, in which the parties could go their separate ways without making further financial claims upon the other. One such provision has already been mentioned: the expectation that each party would take reasonable steps to increase their earning capacity. Three others are now contained in section 25A, which was much debated in argument before us."

Then Lord Nicholls sets out section 25A(1)to which I have already referred, which provides:

"Where on or after the grant of a decree of divorce or nullity of marriage the court decides to exercise its powers under section 23(1)(a) [periodical payments], (b) [secured periodical payments] or (c) [lump sum], 24 [property adjustment] or 24A [property sale] or 24B [pension sharing] above in favour of a party to the marriage, it shall be the duty of the court to consider whether it would be appropriate so to exercise those powers that the financial obligations of each party towards the other will be terminated as soon after the grant of the decree as the court considers just and reasonable."

It is that to which the judge here referred as the statutory steer to a clean break.

14. Mr Buck took us also to a decision of Wilson J, as he then was, in S v B (Ancillary Relief: Costs) [2005] 1 FLR 474; [2004] EWHC 2089 (Fam). The facts of that case are very very far removed from the facts of the present, in that it was a case where the husband had a very significant income and where the wife's ability to earn was severely compromised by circumstances attending the breakdown of the marriage, which it is unnecessary for me to go into here. However, Mr Buck took us to the judge's discussion of the point of principle, which appears at paragraph 36 of his judgment, where the judge was concerned with an appeal against the making of an order for periodical payments of the type which Mr Buck says ought to have been made in this case, that is to say a nominal order thereby keeping alive the possibility of an application for a variation in the event that the wife's circumstances deteriorated during the minority of the child of the marriage. Wilson J said this at paragraph 36:

"Let me be frank: had I been the judge, I would have dismissed the wife's application for periodical payments. The marriage was, in real terms, so short; the wife is young and able-bodied and, even allowing for her responsibilities towards the child, so fully employable; and the capital award, particularly allowing for the purchase in West London and a third bedroom to assist in childcare (and later perhaps, if necessary, to generate income from a lodger), so large; that I would have considered it as appropriate for the court's powers so to be exercised as to terminate the husband's further obligations towards the wife forthwith. Until the dying moments of Mr Scott's submission, I was minded to allow the appeal in this regard. But he has driven me reluctantly to the conclusion that the nominal order is not appealable: for, although not my preference, it is not plainly wrong. I must accept that a fair number of my colleagues -- be they High Court judges, circuit judges or district judges -- would reasonably have exercised their discretion in favour of keeping alive, at least until the child was a teenager, the wife's right to seek to inflate a nominal order for periodical payments to a substantive level. They would regard it as a reasonable precaution against unforeseen developments, taken primarily for the sake of the child. I stress, however, that the circumstances in which it would be apt to vary the order are indeed unlikely to arise: if, for example, the wife fell seriously ill and if, by then, the husband was again a substantial earner, then, yes, there might be a needs-based variation of the order, providing always that the court bore in mind the amount of capital for which, after so short a marriage, the wife had by order relieved the husband."

15. It seems to me that the corollary of what Wilson J there said is that, whilst the nominal order in that case was not appealable, so too ordinarily the refusal of a judge to make a nominal order will not be appealable because it cannot be shown to be wrong in principle. We are here concerned with an exercise of discretion but it is an exercise of discretion in which Parliament has indicated that there should be a clear presumption in favour of making a clean break, in the sense that that is something which the court is mandated to consider, whether it would be appropriate to bring about a complete break between the parties, so far as concerns financial matters, as an initial consideration.
16. Just as Wilson J was unable to regard the order made in that case as not plainly wrong, or not wrong in principle, so too in my judgment it is simply impossible to suggest that the order made here by the judge, which as it happens goes in the other direction, is itself wrong in principle. I can detect no failure by the judge to take into account the relevant circumstances. The only circumstance, as I have said, which Mr Buck was able to suggest had been overlooked was the circumstance that there is a foreseeable risk that the wife will be unable to secure full-time employment during the minority of the children. As I have already indicated, it is clear to me that the judge had that well in mind when he assessed her earning capacity. It is true that, in paragraph 24 of his judgment, he does not refer expressly to the possibility that the wife might be unable to secure full employment during the children's minority, but it is to my mind inconceivable that a judge of his experience in this field will have overlooked that point, particularly as it loomed so large in the arguments addressed to him on behalf of the wife.
17. For all those reasons, therefore, I am quite satisfied that it would not be appropriate to interfere with the judge's exercise of his discretion. I would merely add that, in any event, it seems to me that where a judge in a case of this sort has gone to such trouble to take into account all of the parties' debts, assets, earning potential and needs, it would be wrong in principle to interfere with one aspect of the judge's disposition without carefully considering the impact that that might have upon the other parts of the overall settlement which the judge imposed upon the parties, bearing in mind that these points are plainly interrelated.
18. For all these reasons, therefore, I would dismiss the appeal.
19. LORD JUSTICE LEWISON: I agree.
20. In C v C (Financial Relief: Short Marriage) [1997] 2 FLR 26, Ward LJ set out the general approach which judges should follow. He said at page 45:

"(1) The first task is to consider a clean break which pursuant to section 25A(1) requires the court to consider whether it would be appropriate to exercise its powers so that the financial obligations of each party towards the other will be terminated soon after the grant or the decree as the court considers just and reasonable."

21. Immediately after the passage from the speech of Lord Nicholls in Miller v Miller, which my Lord, Tomlinson LJ, has quoted, Lord Nicholls went on to say of section 25A:

"This is a clear steer in the direction of lump sum and property adjustment orders with no continuing periodical payments."

Likewise, in VB v JP [2008] EWHC 112 (Fam); [2008] 1 FLR 742, Sir Mark Potter PFD said that:

"A clean break is to be encouraged wherever possible."

22. That was the first question which the judge set for himself and he answered it in favour of a clean break. The decision of Wilson J in S v B, to which Tomlinson LJ has referred, simply demonstrates that different judges might take different views and none would be plainly wrong. In my judgment this is one such case where the judge was plainly entitled to take the view that he did.
23. Accordingly, for the reasons given by Tomlinson LJ, I too would dismiss the appeal.
24. LORD JUSTICE RICHARDS: I agree that the appeal should be dismissed for the reasons given by my Lords.