England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM DARTFORD FAMILY COURT
HHJ Scarratt
DA12D0772

		Royal Courts of Justice Strand, London, WC2A 2LL
		04/02/2016

Lord Justice McFarlane :

1. This appeal is a second appeal arising from financial provision orders made following divorce proceedings in the Family Court at Dartford. The narrow issue before this court relates to one element in the initial order made by a deputy district judge providing for an automatic increase in the level of periodical payments payable to the wife following the date upon which the youngest child ceased privately funded secondary education.

Background

2. Given the narrow compass of this appeal, it is not necessary to rehearse the background details of the parties or their finances to any great degree. The husband is a general practitioner and the wife is a qualified nurse and midwife. They met in l991 and were married in August 1992. In order to avoid confusion I will state the ages of the parties and their children as at the date of the hearing before the deputy district judge who made the original order on 18^th August 2014. At that date the wife was 47 and the husband 54 years old. There are two children of the family, a boy, J, born December 1994 and therefore aged 19 at the date of the hearing and a girl, H, born February 2000 and so then aged 14.
3. The marriage lasted some 20 years before the wife issued her divorce petition on 25^th July 2012. Decree nisi was pronounced on 13^th February 2013.
4. At the hearing before Deputy District Judge Martynski on 18^th August 2014 both parties were represented by counsel and, effectively, all issues relating to capital and income were at large. The husband continued to be a partner in a local GP practice but the wife had not worked following the birth of the first child during the second year of the marriage. The matrimonial home was valued at around £500,000 and was effectively mortgage free. There was additional capital of approximately £80,000 together with the husband's capital share in the practice, payable on retirement, of around £235,000. Finally, each had a pension, his, understandably being of substantially greater value than hers.
5. So far as income is concerned once tax, superannuation and other deductions were made, the husband drew £84,900 per year from the practice. The deputy district judge recorded the husband's view that, because of forthcoming changes in the partnership, his income would reduce to around £78,000 per annum. The only income available to the wife amounted to child benefit of £1,066 per year.

Deputy District Judge's order

6. The basic elements of the deputy district judge's order were as follows:

a) The family home was to be sold with the net proceeds split so that 78% went to the wife and 22% to the husband;

b) Upon his retirement, the husband was to pay a lump sum to the wife equivalent to 50% of the payout he received from his GP practice;

c) The husband was to pay periodical payments to the wife of £1,000 per calendar month until the first of the following events occurred:

(i) Death of either party,

(ii) Wife's re-marriage, or

(iii) Further order;

d) The periodical payments were subject to an automatic upward variation in line with the retail prices index each year;

e) Upward variation of the wife's periodical payments upon the youngest child completing her secondary education (full terms set out below);

f) A pension sharing order;

g) Orders providing for a clean break (subject to the continuing periodical payments order).

Wife's periodical payments

7. As I have indicated, the focus of this appeal is entirely upon the provision made with respect to the wife's periodical payments. The background to the point is that at the time of the hearing before the deputy district judge H was in the early stages of her secondary education at a private school. Both parties were in agreement that she should continue in private education until the end of her A level year in the summer of 2018, four years after the hearing before the deputy district judge. In his judgment and order, the judge set the rate for periodical payments at £1,000 per month, subject to an annual inflation increase, but he also provided for a further increase once H completed her secondary education. The relevant part of the order reads as follows:

"18. Variation of periodical payments upon the child of the family H completing her secondary education.

a) with effect from the payment due in accordance with paragraph 17 above [ordinary periodical payment order] in the month following the month in which the child of the family H completes her secondary education the periodical payments due from the respondent to the applicant shall be increased in accordance with the formula set out in sub-paragraph b) below;

b) the said periodical payments due each month shall be increased by a sum equivalent to 50% of the total private school fees and associated charges paid by the respondent in respect of the child H in the last completed school year of her secondary education, divided by 12."

8. It is against that provision that the husband now appeals to this court, having had an earlier appeal on this point dismissed, as I shall describe, at a hearing before HHJ Scarratt on 11^th March 2015. Permission to bring this second appeal was granted by Vos LJ on paper on 22^nd July 2015.
9. Before turning to the deputy district judge's decision as to the automatic increase in periodical payments upon H ceasing secondary education, it is necessary to describe his approach to the ordinary periodical payments order that he made.
10. The deputy district judge found that the wife was clearly capable of working and that it was entirely reasonable to expect her to do so. He accepted that her return to work may not be immediate and might have to be phased over time, developing from part time to full time employment. He assessed her general earning capacity to be £15,000 per year which should produce a net take home pay of £13,155 which, when added to child benefit, amounted to a monthly income figure of £1,185.
11. As I have indicated, the deputy district judge held that the wife was entitled to some 78% of the net proceeds of sale of the family home in order that she could purchase a suitable alternative home without a mortgage. The husband, despite his age, retained a mortgage potential which would enable him, on the judge's findings, to re-house himself adequately.
12. When turning to the topic of periodical payments, the deputy district judge took account of the impact of the capital provision stating:

"40. The decisions I have made regarding (wife's) earning capacity and the parties need for housing and the share of the proceeds of the sale of the family home, necessarily drives the figure for periodical payments."

He then rehearsed in headline terms the income and outgoings that each side had presented to the court. In his judgment the judge trimmed the wife's projected monthly outgoings of £2,979, by a reduction on clothes, holidays, presents and the current mortgage, to a figure of £2,427 from which he deducted her projected income figure based on earning potential of £1,185 per month leaving a sum of £1,242 to meet her needs.

13. The deputy district judge then explained the reasoning behind the £1,000 periodical payments order upon which he fixed in the following terms:

"43. If I then allow the same projected need figure to (husband) and deduct that from the balance of £3,540 set out above, we arrive at a figure of £1,113 that would be available to pay to (wife) in respect of periodical payments. I have rounded that figure to £1,000. This should be increased each year for inflation.

44. Looking at this another way in terms of total income, the figures fall out as follows:


Total joint income:

(Husband) £6,900

(Wife) £1,185

£8,085

Essential outgoings:

Mortgage £1,260

School fees £1,750

(Child J) £ 350 _________

£3,360

Balance £4,725 ÷ 2 + £2,362.50

On my calculations and awards, (husband) in fact ends up with more disposable income than (wife) (£2540 as against £2185). I keep this disparity bearing in mind (husband's) evidence regarding his anticipated fall in income from January 2015."

14. The topic of an automatic increase upon H ceasing secondary education is dealt with in one paragraph which immediately follows on from his description of the periodical payments order calculation:

"45. Given that school fees form such a large sum in relation to the parties' finances and given that these fees should only be payable for another 4 years or so, it is right that upon H ceasing full-time secondary schooling there should be provision for a review upon H completing her secondary schooling so that the resulting saving on education fees be split equally between the parties by way of an increase in Periodical Payments. I have not made a similar provision in terms of the money given to J given that it is a relatively small sum and given that in all likelihood, one or both children will continue to need financial support for many years to come."

Appeal to HHJ Scarratt

15. The husband appealed in respect of three points from the deputy district judge to a circuit judge, HHJ Scarratt. The appeal related to the following three topics:

a) The 78%/22% division of proceeds of sale of the former matrimonial home;

b) The absence of any final term (other than death or re-marriage) on the wife's periodical payments;

c) The automatic rise in periodical payments following H ceasing secondary education.

16. HHJ Scarratt allowed the husband's appeal on points a) and b). As a result of the appeal the balance of the proceeds of sale of the matrimonial home was to be shared so that the wife received 70% and the husband 30%. So far as the wife's periodical payments were concerned, in addition to the three events currently specified in the court order, payment would cease upon the wife attaining statutory retirement age. The husband's appeal with respect to the automatic upward variation upon H ceasing secondary education was, however, dismissed.
17. HHJ Scarratt dealt with the husband's appeal against the automatic increase in periodical payments as follows:

"40. I now turn to the periodical payments. As far as the periodical payments are concerned I have thought long and hard about the particular provision for maintenance to be fairly substantially increased to the wife when H leaves school. It is my understanding of the Order and the judgment that the learned deputy district judge took into account the fact the husband will have much more available cash once school fees do not have to be paid. The judge had in mind the disparity in earnings and I take heed of Mr Johnson's submission that this is a case where whatever the wife is going to earn she is never going to earn anywhere near the husband's earnings.

41. In my judgment whilst it is an unusual Order I ask myself, is it fair in the circumstances of the case? The learned deputy district judge had in mind all the s.25 factors. I have come to the conclusion that whilst it is unusual it is not wrong. Therefore I dismiss the ground of appeal against that head because it seems to me that there will be a substantial amount of money available to this husband when H leaves school, and that the wife should share in that in the sense that her £1,000 per month at the moment takes into account the fact (no doubt because both parties wished their daughter to have a private education) that the husband has that termly outgoing. Therefore I think it quite fair and proper that the wife receives more maintenance once H leaves school and the husband has more disposable income. The judge had all of this well in mind in his judgment and I am not going to interfere with his findings or his Order in this respect."

This appeal

18. This court has had the advantage of the appearance of experienced family counsel, Mr Mark Love for the husband and Mr Simon Johnson for the wife, who have appeared for their respective clients at each stage of the proceedings in the lower court. They have marshalled the arguments on each side of the appeal in a crisp, focussed and highly effective manner. In support of the appeal Mr Love relies upon the following grounds (in summary):

a) Failure by the deputy district judge to address what were going to be the wife's apparent needs once H ceased secondary education;

b) The expenditure that the husband was likely to incur on H's tertiary education;

c) In general, the future financial circumstances of both parties in and after 2018;

d) If, which is not accepted, some form of upward variation was within the court's discretion, the figure of 50% was arbitrary and unsupported by reasoning.

19. Mr Love submits that the deputy district judge's order was both plainly wrong and unfair. He, understandably, draws attention to HHJ Scarratt's categorisation of this order as "unusual" and he submits that that is so because usually the process of assessing periodical payments is grounded upon the needs of the recipient. He gained support for that submission from dicta of Mostyn J in B v S (Financial Remedy: Marital Property Regime) [2012] EWHC 265 (Fam); [2012] 2 FLR 502 at paragraph 79 as follows:

"Save in the exceptional kind of case exemplified by McFarlane v McFarlane [2006] 2 AC 618 a periodical payments claim (whether determined originally or on variation) should in my opinion be adjudged (or settled), generally speaking, by reference to the principle of need alone. Of course needs are elastic in concept and there is much room for the exercise of discretion in their assessment. But to allow consideration of the concept of sharing to intrude in the assessment of a periodical payments award seems to me to be based on a doubtful principle, and is replete with problems of quantification by any sure standard. The sharing principle in relation to matrimonial property is simple enough: it is usually 50/50, because in the division of the marital acquest equity (or fairness) is (usually) equality. But if the concept of sharing is going to uplift above the assessment of need a periodical payments award which will be paid from post-separation earnings how does a judge set about doing it? Is it a third? Or 40%? Or 20%? There are not even any signposts along the road to a fair award."

20. Mr Love reports, and this is accepted by Mr Johnson, that the idea of increasing the wife's periodical payments at the stage that H ceased secondary education was not canvassed by or with either party during the course of their evidence or submissions. Mr Love argues that the deputy district judge fixed the wife's needs as being met by an order of £1,000 per month and, in consequence, his decision to provide for an automatic upward variation when H leaves school is to be seen as wholly arbitrary and unsupported by any evidence of need. In this regard the scale of the likely uplift, which in round terms will double the wife's periodical payments from £1,000 to £2,000 per month, only goes, says Mr Love, to underline the point.
21. Finally, in support of the husband's appeal, Mr Love points to the fact that the deputy district judge gave no reasons for his decision on this point and it is therefore impossible to know what account, if any, the judge took of other variable factors which may or may not be in play by the time that H leaves school. Amongst these are the possibility that the husband will reduce his working hours, or seek early retirement, income for the wife from her employment, the cost of H's tertiary education and the need to provide support for her, and other reasonable changes in the financial circumstances of each of the two parties.
22. The appeal is opposed by Mr Johnson on behalf of the wife. He, rightly, reminds this court of the limited role of a circuit judge hearing appeals in financial provision cases from the district bench as described by Thorpe LJ in N v N (Financial Orders: Appellate Role) [2011] EWCA Civ 940; [2012] 2 FLR 622 in the following terms:

"15. In the skeleton argument written by counsel for the hearing of the appeal below, the function of the judge was correctly described thus :

"The court will be aware that 8.1 appeals against decisions of ancillary relief are subject to the general rules on appeal.  Accordingly the general basis for allowing an appeal is that the decision of the court below was 'wrong' (CPR 1998 R52.11(3)) with respect to:

[i] the law


[ii] the facts, albeit to a restrictive degree (Piglowski v Piglowska [1999] 2 FLR 763); and,


[iii] where a decision is based on judicial discretion the discretion must be shown to be "plainly wrong" only if the decision made is so plainly wrong that he must [have] given far too much weight to a particular factor is the appellate Court entitled to interfere [ G v G [1985] FLR 894 and V v V  [2005] 2 FLR 697.]"

"21. It is very important that the limited function of the circuit judge in hearing appeals from the district judge should be recognised and honoured.  This is not a process that allows any rehearing de novo.  It is not a process that allows for the admission of fresh evidence unless exceptional circumstances demand that.  Essentially much of the speech of the wife on that occasion was an endeavour to introduce a fresh view of the history and fresh evidence as to subsequent proceedings and prospects.  That could not be admitted in any principled way and in that lies the explanation for a variation which is particularly substantial in that the election for a joint lives order is a fundamental departure from what the parties had agreed in front of HHJ Levey in 2005."

23. For my part I readily accept that both the circuit judge, and now this court, must approach the husband's appeal on the basis described by Thorpe LJ in N v N.
24. Although he accepts that the deputy district judge's order in this regard is, indeed, "unusual", Mr Johnson submits that in order for the appeal to succeed this provision must not only be unusual but one that was simply not available to the district judge to use in a proper exercise of his discretion. The width of that discretion is emphasised by Mr Johnson by reference to the speech of Lord Nicholls in White v White [2000] UKHL 54 (paragraphs 35 and 36) and in Miller v Miller and McFarlane v McFarlane [2006] UKHL 24 (at paragraphs 30 to 34) and the speech of Baroness Hale in Miller at paragraphs 154 and 155. The purport of Lord Nicholls' and Baroness Hale's judgments at those points is that in some cases (and all three of these cases were big money cases) determination of a periodical payments claim may take account of factors over and above the assessment of "need".
25. In both his written and oral submissions, Mr Johnson relied upon the careful evaluation of this couple's finances undertaken by the deputy district judge. It was, to use my phrase, a "known known" that a significant part of the husband's income would no longer be required to fund secondary education once H left school and, submits Mr Johnson, the deputy district judge was entirely justified in relying upon that ascertainable change of circumstance to justify an increase in the periodical payments to the wife.

Discussion

26. Interesting though the debate generated by the judgment of Mostyn J in B v S, on the one hand and the judgments in White, Miller and McFarlane on the other may be, that debate has no relevance to the present case. Both counsel accept that the valuation of periodical payments in this case was undertaken entirely on a "needs" basis. Although the deputy district judge uses the phrase "split equally" to indicate the proportion to be attributed to each party from the element of the husband's income that is liberated following H's departure from school, Mr Johnson accepts that this was not a "sharing" case. Fairness was to be achieved within the proceedings by apportioning the capital and income resources of the parties in order to meet their respective needs for housing and ordinary maintenance.
27. On the basis, therefore, that this is a "needs" case, and on the basis that the deputy district judge had reached an assessment of the wife's need for periodical payments, which he fixed at the round figure of £1,000, the question arises as to the basis upon which he then concluded that she should then be entitled to an increase, after a period of some four years, which would effectively double that payment. Unfortunately the answer to that question is not to be found within the deputy district judge's judgment. As the point was not apparently canvassed with either of the parties or their counsel at any stage during the hearing, it is also not possible to identify the principle being relied upon from anything that the judge may have said during the hearing.
28. Mr Johnson is right in pointing to the "known known" change in the husband's outgoings once H left school. Looking at paragraph 45 in the deputy district judge's judgement if that paragraph had ended at the conclusion of phrase "it is right that upon H ceasing full time secondary schooling there should be provision for a review" with a full stop and without the remainder of that paragraph, the judgment would be unexceptional. A review may well be justified at such a stage. But it must be impossible to predict, as the deputy district judge sought to do, in August 2014, what the result of that review would be in the summer of 2018.
29. This element of the deputy district judge's decision is, in my view, plainly within the parameters which rightly limit the scope for appellate intervention in financial provision cases described by Thorpe LJ in N v N. If a district judge in an ordinary financial provision case determined current periodical payments solely by reference to only one element in the needs versus resources equation there would be little dispute that the exercise of judicial discretion was "plainly wrong". In like manner such a decision, based upon only one element in the equation, would be "wrong" as a matter of law in that it would not be possible to demonstrate that the court had had regard to each of the relevant factors set out in the checklist in Matrimonial Causes Act l973, s 25.
30. As Mr Love submits, the point at which H leaves school may generate or coincide with other significant changes in the parties' respective financial circumstances. For example, H, who currently lives at home and who is no doubt a draw upon the wife's income, may go away to university thereby, in that respect, reducing the wife's needs to an extent. The wife's earning capacity, which was necessarily a matter for informed conjecture at the 2014 hearing, will be more readily identifiable. The husband's finances may have changed either as a result of systemic alterations in the NHS or through personal choices he may make.
31. In addition, I consider that the deputy district judge was wrong to regard the cessation of school fees payments as a 100% net gain to the family finances to be split by a calculation entirely limited to the size of the previous year's school fees bill, and without any regard whatsoever to the likelihood (as it surely is) that H will require further financial support in the period that then follows.
32. At the conclusion of his submissions Mr Love summed up the central point in the appeal as follows:

"If a court is going to exercise discretion, it has to do so on an informed basis. The only known fact here was that H's education would cease and the school fees bill would no longer need to be paid. The rest is pure speculation."

I found myself in complete agreement with that submission.

33. For the reasons that I have given, I conclude that the deputy district judge was wrong as a matter of law and plainly wrong in the exercise of his discretion, by making an advance variation order based upon only one known element with respect to the parties' finances, and the needs of H, some four years hence. I would therefore allow this appeal so as to strike out paragraph 18 of the order of the deputy district judge dated 18^th August 2014 in its entirety. Should the circumstances justify it, it remains open to the parties, either upon H leaving school or, indeed, at any other point, to apply to the court to vary the periodical payments order. Should they do so, the court will evaluate that application in the light of all of the known relevant factors at that time.

Lord Justice Vos

34. I agree.

Lord Justice Simon

35. I also agree.