England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE PRINCIPAL REGISTRY OF THE FAMILY DIVISION
HHJ Harris
FD12DO1231

		Royal Courts of Justice Strand, London, WC2A 2LL
		3rd December 2014

Lord Justice McFarlane:

1. This appeal relates to the distribution of property and allocation of spousal maintenance following divorce. The husband and wife, who are still aged in their mid-thirties, were married for some four and a half years. They have one child who is now aged three years. Both are intelligent and well-qualified professionals; she is an actuary and he is an intellectual property lawyer. Following the sale of the only available assets, the matrimonial home and a small flat, a pool of capital in the sum of £321,159 fell to be distributed. Given those shortly stated background circumstances it might have been anticipated that this husband and wife would reach an early agreement as to the division of capital and the payment of any spousal maintenance. Sadly the opposite is the case. At the conclusion of the first instance proceedings in the Principal Registry of the Family Division, the wife had spent an astonishing sum of £174,000 in legal costs which were divided between proceedings relating to the arrangements for the care of the daughter and upon the financial remedy proceedings. In contrast the husband had spent some £60,000 on those proceedings. Since then there has been further litigation regarding the child and, of course, the prosecution of the current appeal by the wife to this court in relation to financial matters.
2. The order under appeal, which was made by Her Honour Judge Laura Harris and is dated 13^th September 2013, provided that the wife should receive £113,329 and the husband should receive £207,830 of the capital sum that was held, pending the resolution of the dispute, in various solicitors' accounts. The balance of any remaining capital was to be divided equally between the parties. On the basis that the husband was to continue to pay statutory child support together with one half of all nursery school fees and reasonable extras, the judge ordered that he should pay to the wife periodical payments at the rate of £700 per calendar month until December 2015, a period of 24 months. Thereafter the order provided for a clean break between the parties with respect to any other financial claims.
3. The wife issued her Notice of Appeal on 4^th December 2013. Civil Procedure Rules 1998, r 52.4 (2) provides that an appellant's notice must be filed with the Court of Appeal "21 days after the date of the decision of the lower court that the appellant wishes to appeal." The judge gave her judgment on 12^th September 2013 and, as I have said, the court order is dated 13^th September 2013. However, the order was not issued until 18^th November 2013. The effect of r 52.4 (2) is that if the 21 day window for filing an appellant's notice runs from the date upon which the court order was issued, 18^th November 2013, the notice that was filed on 4^th December is just in time. If time started to run on any date earlier than 18^th November, the appellant wife applies under r 52.6 (1) to this court for an order varying the statutory 21 day time limit. At an earlier hearing to consider permission to appeal, Lord Justice Rimer adjourned the issue of permission and the possible extension of time to the full court and stayed the order on the basis that if an extension and permission were granted the appeal would be heard on the same occasion. We have therefore heard the submissions of Ms Joanna Toch, counsel appearing for the appellant wife, as she did at first instance, on the question of the time limit together with submissions made in response by Mr Gillon Cameron, counsel for the husband who also appeared below, in response.
4. It is common ground that time starts to run from the date upon which the judge below made her decision, rather than the date when the order reflecting that decision is drawn up (see White Book paragraph 52.4.2 relying on Sayers v Clarke Walker [2002] EWCA Civ 645). Ms Toch's primary submission is that time should run from 18^th November 2013, being the date that the order was issued on the basis that the period between 12^th September 2013 when judgment was given and the date that the order was issued was taken up in further discussion and submissions conducted between the parties and by email with the judge prior to the judge finally deciding those matters and making the order in mid November. Whilst Mr Cameron agrees that there was discussion about the fine tuning of the order and, indeed, it is common ground that the judge had to correct an error relating to some of the husband's outgoings in the maintenance calculation, he submits that all substantive matters were concluded when the judge circulated an addendum judgment on 23^rd September. Thereafter any further discussion was simply about the mechanics of releasing the money from the various solicitors' accounts and did not involve the judge making any "decision".
5. We were taken to the documents showing the detailed discussion as to the drafting of the order and, for my part, I consider that the judge was still involved in considering the detail of her "decision" right up until the end of that process so that no extension of time is needed. Be that as it may, the period of time involved is relatively short and, as Mr Cameron conceded, his client did not initially oppose the grant of an extension of time and was not unduly prejudiced by the two or three week delay that occurred if the clock is taken to have started on 23^rd September. For the avoidance of doubt, therefore, I would grant any extension of time that is needed.

Background

6. In addition to the circumstances that I have already described, it is now necessary to explain one or two other aspects of the background detail dealing firstly with a sum, taken to be £94,500, that was transferred by the wife from her own savings to the bank account of her father during the final stages of the breakdown of the marriage. The wife's case with regard to that money was twofold. Firstly she asserted that the transfers were no more than the repayment by her of debts for loans and other payments made on her behalf by her father and for rent to her father for staying with the parties' child at her parents' home. Secondly it was accepted that subsequently her father had transferred back to her £67,978 to assist in funding her legal costs and other liabilities; the wife argued that that, in part, cancelled out the original transfer.
7. We were told that a large part of the 3 day oral hearing before HHJ Harris was involved in evidence from the wife and her father relating to these various payments. In the event the judge concluded that any loans that pre-existed the payment to the father had been "soft" loans that the father had subsequently converted into gifts. She therefore rejected the wife's assertion that the transfer of funds to the father was a repayment and she held that the wife had in fact made the transfer in order to protect her savings from consideration within the divorce proceedings. Secondly the judge found that the subsequent payment of £67,978 was a fresh transaction and that that too was "a soft loan" with the wife's father having no expectation of repayment.
8. A second significant background feature was that the wife owned two flats, one in Swansea and one in Dundee, which had been purchased with assistance from her father together with a mortgage for the purpose of letting to students. At the time of the hearing the size of the mortgage on each of these two flats exceeded its value by some £20,000 in each case. The income from the flats, however, covered the monthly mortgage payments and produced a small profit.
9. The third and final background feature relates to the income and earning capacity of the two parties. Prior to the birth of the child, which occurred shortly before the couple separated, the wife had been earning at a higher level than the husband. By the time of the hearing the husband, who had continued to be a member of a firm of intellectual property lawyers in Brighton, had been made a partner and had earnings of approximately £94,000 per annum, including profit share. The wife had returned to her previous employment as an actuary but on a part time basis working only some 7 days per month for which she received £32,300 per annum. At the time of the hearing the child was aged just 2 years and had only recently begun to attend nursery. Although the father was seeking to spend more time with his daughter, the wife was the primary carer and it was established that she would not be able to return to full time work until the child was able to spend more time at nursery and/or had begun to attend school.
10. Although, inevitably, the judge considered other matters of detail, for the purposes of this appeal the matters that I have described are sufficient to explain the issues that remain live before this court.

The judge's decision

11. Having found that the wife's payment to her father was a subterfuge to remove £94,500 from the matrimonial equation, the judge concluded that that sum remained available to the wife from her father and should be taken into account directly alongside the capital realised by the sale of the matrimonial home and small flat (£321,159) making a total capital pot for distribution of £415,659. The judge ignored other small assets, such as cars, and she ignored the two student flats in Dundee and Swansea despite holding that, although they had a nil or negative equity, "both produce a rental profit and are not going to be sold." The respective pension provision of this young couple was also excluded from the judge's calculation. The judge did, however, take account of the outstanding liability for costs to a solicitor that the wife had evidenced and the husband claimed to owe. In the wife's case she had made a costs agreement to pay her previous solicitors £33,227 and claimed to owe her father monies for the balance of her costs. The figure for the husband was £46,000.
12. So far as capital needs are concerned the judge concluded that both required similar housing, namely a two bedroom flat in which they could live and provide a separate room for their daughter.
13. A feature of the background history was that some 15 months or so prior to the hearing the wife had moved out her parent's home near Croydon, where she had been living, and took up residence on the other side of London in a flat in Northwood. The judge did not accept the wife's case which was that she now required to live in the Northwood area, but, on the basis of a batch of property particulars provided to the court, the judge concluded that a two bedroom flat in Northwood could be purchased for £300,000.
14. With these features in mind the judge expressed her conclusion as follows in paragraph 44 of her judgment:

"Bearing in mind the parties' equal needs for capital I see no reason why there should be any departure from equality in this case and the £415,659 should be divided equally. That produces a figure of £207,830 for each party. The wife would therefore received £207,830, less her outstanding costs of £33,237, producing a net figure of £174,593. If you add to this her mortgage capacity, the maximum mortgage capacity of £155,000, this produces a total of £329,593. If the husband receives the same sum and deducts his costs of £46,000, he will have £161,830 coupled with a mortgage capacity which I have rounded up to £170,000, he would have a sum of £331,830."

The figure, in the final order, £113,329 for the wife and £207,830 for the husband, give credit for the fact that £94,500 of the overall pot of £415,659 was attributed to the money that the judge found was available for repayment to the wife from her father.

15. The judge concluded that there was no need adjust the 50/50 distribution that she had described to take account of either the needs of one or other party or the contributions that they had made to the marriage which she concluded were effectively equal.
16. So far as maintenance is concerned, the judge concluded that it would be inappropriate for there to be an immediate clean break but she was satisfied that the wife could adjust to independence within a period of two years, particularly as the childcare costs were to be shared with the husband. The judge's reasoning was not confined simply to financial calculation. At paragraph 45 she described her approach as follows:

"I also consider that psychologically it would be hugely valuable to both parties, bearing in mind the nature of this litigation, if they can be financially independent. I consider that whilst the wife builds up her hours, and as I have said that cannot take place overnight, it may take some time, and should take some time, as [the daughter] is still very young, that the husband should pay £900 per month periodical payments for a period of 24 months."

17. The figure of £900 fixed upon by the judge in her original judgment was based upon an erroneous understanding of the husband's total outgoings which the judge in her judgment had taken to be £3,265 per month, including CSA payment and half of the nursery fees. Following further submissions, and having made some deductions from the raw figures put in on behalf of the husband, the judge adjusted his total monthly outgoings to £3,878. In consequence she then reduced the monthly periodical payments from £900 to £700 per month. On the judge's figures that would produce a shortfall of income against expenditure for the husband of £169 per month and for the wife of £166 per month.

Grounds of appeal

18. The grounds of appeal relied upon by the wife are loosely drawn and range widely over the issues in the case. They can be summarised as follows:

(i) The order does not enable the wife to house herself and the child:

(a) The judge erred in attributing a multiplier of 4.8 to the wife's salary to estimate her mortgage potential, but only applied a multiplier of 1.8 to the husband's;

(b) The capital awarded is insufficient to buy a house for the wife and the child;

(ii) Account should have been taken of the negative equity in the two student flats.

(iii) The judge was wrong to find that £46,000 paid in deposits for the student flats had been gifted to the wife by her father.

(iv) The judge was wrong to find that the £94,500 transferred by the wife to her father was still available to her as a resource.

(v) The judge was wrong to divide the capital equally when this was plainly a needs case.

(vi) The judge was wrong to treat both parties' legal costs in the same way.

(vii) The assessment of spousal maintenance was too low.

(viii) Spousal maintenance was awarded for too short a period and a clean break was plainly wrong.

19. A final ground of appeal drew attention to the fact that the order failed to record the judge's provision for the husband to pay half of the nursery and childcare costs. Both prior to this hearing by letter and before this court, this point was conceded and the order is to be varied to reflect the judge's judgment.

Discussion

20. Despite the clarity and force with which Ms Toch sought to present the wife's appeal, for my part grounds (ii) to (iv) and (vi) failed to persuade me that the wife had even an arguable case. I will therefore take these points shortly.
21. Although the judge might have made some adjustment for the negative equity in the student flats, her decision to ignore it on the basis that it was currently producing a small profit and the wife would be highly unlikely in the circumstances to sell the property and thereby sustain the loss arising from repaying the mortgage, was a conclusion that was entirely open to the judge and fully justified.
22. The finding that the deposit on the two flats was a gift from the father arose from the judge's findings of fact having heard the oral evidence of the wife and her father, each of whom were found to be unsatisfactory and unreliable witnesses.
23. In like manner the judge's finding that the transfer of money by the wife to her father after the separation was a sham arose naturally from the judge's findings on the evidence. None of the submissions made to this court establish grounds for concern that the judge's finding was not justified on the evidence that she heard.
24. Ground (vi), relating to unpaid legal costs, amounted to a submission that the wife would have to settle her legal bill immediately out of any lump sum, whereas the husband had the capacity for obtaining credit and thereby spread the burden of paying his legal fees over a period of time. Taken at face value, I am afraid that submission is hard to justify, but, in any event, the judge does not add in or compensate the respective parties for their legal fees in her calculation. Rather, her reference to legal fees is no more than a cross check to see what capital each would have left if they paid their legal fees now. Having conducted the exercise, the judge was satisfied that each would still be able to buy appropriate housing. That is as far as the point goes.
25. The remaining grounds, grounds (i) and (v), and grounds (vii) and (viii) relate, respectively, to the overall capital provision and the periodical payments order. I shall take each in turn.
26. In relation to the capital provision, Ms Toch first of all makes a discrete point about the differing multipliers used by the judge to establish the mortgage capacity of the husband and wife, respectively 4.8 and 1.8. The submission arises because the judge took the wife's mortgage capacity as being "between £112,500 to £155,000", whereas she attributed a figure of £169,000 to the husband, who of course, currently has a substantially higher salary in comparison to the wife. At no stage, however, did the judge refer to any multiplier in the course of her judgment. The judge apparently took the figure of £155,000 for the wife from an open offer of settlement made by her in July 2013 when she was unrepresented and acting in person. The lower figure of £112,500 was the figure put forward on behalf of the wife in her section 25 statement and at the hearing. The figure for the husband is apparently drawn from a financial adviser's letter of August 2013 which indicates that a mortgage in that sum might be available to him.
27. It is correct that during her closing submission to the judge Ms Toch put forward a multiplier of 3.5 for each party which would produce a mortgage potential for the husband of £329,000 and for the wife of £113,050. The judge makes no reference to that submission in her judgment.
28. The point made by Ms Toch is that in taking mortgage figures for the two parties as she did the judge was not comparing like with like. In his submissions in response, however, Mr Cameron argues that the point is irrelevant. What matters is whether the judge's conclusion that the wife could re-house herself on the lower mortgage figure that is plainly accepted to be available to her, is open to challenge. Adopting that lower mortgage figure, Mr Cameron submits that the resulting capital sum that would be available to the wife, namely £286,593, is enough for her to purchase a two bedroom flat either in Northwood, or nearby, or near to her parents in Croydon, where property prices are apparently slightly lower.
29. The more general submission that Ms Toch makes with regard to the capital division is that a simple 50/50 split, on the basis undertaken by the judge, failed to meet the wife's needs. This submission, made in the grounds of appeal, is, however, in reality not supported by any hard evidence or findings of the judge. The submissions made to this court in respect to grounds (i) and (v) boil down to an assertion that the wife, as the primary carer of the child, needed "slightly" more than the judge awarded as she needs a better flat in a better area. Ms Toch asserts the judge treated the husband and wife's needs differently because the husband was in fact able to raise more by way of mortgage than the wife and therefore was in a position to afford better housing and the judge did not in fact intend this.
30. In reply Mr Cameron drew our attention to the detail of the judge's findings on this point. He was right to do so. Although the judge noted that a two bedroom flat in Northwood could be purchased for £300,000, she did not find that it was necessary for the wife to buy a flat in that area. Indeed, at paragraph 34, the judge was not satisfied with the wife's explanation that the move to Northwood was justified on the grounds of harassment and she described as "odd" the wife's explanation that she was "moving nearer to work" when Northwood is in the outer suburbs of North West London and the wife works in the City. She did accept, however, that there was a direct tube line. I therefore accept Mr Cameron's submission that the judge did not stipulate a precise figure that was the minimum required to house the wife; the judge was simply looking at illustrative costs. I also accept Mr Cameron's submission that the figure of £286,593 which the wife will be left with on the lower mortgage figure available to her, is enough to purchase a suitable two bedroom flat.
31. It therefore follows that, in my view, the judge was justified in declining to vary the result of her equal distribution of the assets to accommodate a greater figure to meet a perceived "need" on the part of the wife. Grounds (i) and (v) of the appellant's case therefore fall away.
32. Finally, so far as periodical payments are concerned, I can take the matter shortly. As I have explained, once the judge was required to re-visit the figures, the sum of £700 per month fixed upon in her final determination, visits a shortfall on each of the two parties in almost precisely the same figure (£169 for the husband and £166 for the wife). They will each have to trim their financial sails to that degree to live within the budget set by the judge. Contrary to the submissions made by Ms Toch, it is plain that the judge did indeed take account of detailed figures put in on behalf of the wife based upon an analysis of the husband's account. That, in part, was the basis upon which the judge felt it right to cut down some of the husband's figures.
33. In the end, so far as the quantum of £700 is concerned, in a case such as this, there is plainly no overtly right or wrong answer subject to the judge fixing a figure within a reasonable band. This court will only interfere if the figure chosen by the judge is established to be outside that band. For the reasons that I have given, the difference between the sum awarded and the wife's expenditure is not such as to say that £700 is too low. I therefore reject the challenge to the figure chosen by the judge.
34. At the commencement of the hearing I was concerned that a strict cut-off twenty four months into the future was to a degree arbitrary, and that it would bite at a time when the child was still only four years old. I am now, however, persuaded that the judge was justified in taking this course and expecting the wife to be in a position to make up the loss of the periodical payments order at the end of that period. As Mr Cameron has pointed out, the wife currently earns £1,900 net per month for seven days' work. In order to raise her monthly income by the sum of £700 so as to replace the periodical payments provision the wife would only have to work an additional three days per month. Put that way, the target chosen by the judge seems readily achievable for this intelligent individual who has a valuable and marketable qualification. Finally, although not attractive in the context of a relationship which has already been characterised by extortionate resort to litigation, it remains open to the wife at the end of the two year period to apply under Matrimonial Causes Act 1973, s 31 for the order to be varied or extended if she has evidence to justify such an application.

Conclusion

35. Despite the best efforts of Ms Toch to present her client's potential appeal in a favourable light, for the reasons that I have now given, none of the grounds of appeal persuade me that the judge was in error either in the internal elements of the analysis that she undertook or in the overall conclusions to which she came. We have, however, heard Ms Toch's submissions in full and, as I have indicated, grounds (i), (v), (vii) and (viii) were plainly arguable. In the circumstances I would grant permission to appeal, but go on to dismiss the appeal in its entirety.

Lord Justice Beatson:

36. I agree.

Lord Justice Moore-Bick:

37. I also agree.