England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE FAMILY COURT AT BIRMINGHAM
His Honour Judge Rogers

		Royal Courts of Justice Strand, London, WC2A 2LL
		25/01/2017

Sir Ernest Ryder, Senior President:

1. On 6 May 2015 His Honour Judge Rogers, sitting as a judge of the Family Division of the High Court in Birmingham, made a financial remedy order between parties to a marriage that ended in divorce as long ago as 2005. For the purposes of this judgment, I shall refer to them as husband and wife. The order complained of ordered the husband to pay a lump sum of £1.6m to the wife in four instalments over two and a half years and to transfer to the wife 25% of his Standard Life pension, the Standard Life policy and his Standard Life shares.
2. The husband appeals with leave of the single judge and submits that the appropriate order should be a lump sum of £500,000 which this court should substitute on setting aside Judge Rogers' determination in its entirety. The court is very grateful to Mr Jonathan Cohen QC on behalf of the husband and Mr Justin Warshaw QC on behalf of the wife for the quality of their submissions.
3. The background circumstances can be taken shortly. The parties married in 1984. They were both teachers. In 1988 the husband began a sportswear trading business initially operating out of the garage at the former matrimonial home. He incorporated the business in the same year with the shareholding of 100 shares being divided between himself and the wife in the ratio of 99:1. In 1990 he ceased teaching to concentrate full time on the business. The wife continued to teach, helped in the business and looked after their three children.
4. In 2002 the parties separated and the husband moved out of the family home. The wife took no further part in the business but continued teaching and looking after the children.
5. The decree absolute was pronounced in 2005 after what were described as 'protracted negotiations' between them. In 2006 the husband paid £150,000 to the wife, in 2007 the wife became the sole owner of the former matrimonial home and in 2008 she transferred her share in the business to the husband. There were no orders made at that time concluding their financial affairs. In 2013 the wife issued her Form A applying for a financial remedy order consequent upon their divorce.
6. The key issues in the financial remedy proceedings were whether the parties had reached a full and final settlement of their financial affairs and, if not, what a fair distribution would be.
7. Judge Rogers found that there had not been a full and final settlement in the period between 2003 and 2005. In support of his conclusion he held that the husband had not given the wife full disclosure which the wife had said at the time she would require before agreeing a final settlement. He came to the conclusion that the negotiations were driven by the husband. By way of example, the husband chose the figure of £150,000, the wife did not sign a deed of settlement that was drafted, and although there was a joint meeting between the husband, the wife and a solicitor, the solicitor had previously worked for the husband and the note of the meeting recorded that the wife's acceptance of the proposed deal was conditional on the husband's full disclosure.
8. That might be said to be sufficient in an appeal which has to surmount the hurdle that the judge made a finding of fact that an agreement was not concluded. Unless that finding can be said to be perverse, the appeal would have no prospects of success. In deference to the careful and attractive submissions of Mr Cohen, although I have come to the conclusion that the hurdle cannot be surmounted, I shall deal with each of the grounds and submissions that he advanced.
9. The grounds of appeal are as follows:

a. The judge was plainly wrong in his conclusion that the parties did not reach an agreement in 2005;

b. The judge failed to have sufficient regard to the wife's delay in bringing the claim and the lack of any cogent explanation for the same;

c. The judge's determination was wrongly based on entitlement rather than need;

d. The judge failed to have sufficient regard to the value of the assets at the time of separation;

e. The judge failed to have sufficient regard to the husband's contribution to the business after separation;

f. The judge failed to have sufficient regard to the evidence that the business would not be sold and would be passed instead to the children so that its value would not be realised by the husband;

g. The judge failed to have sufficient regard to the risk attached to the business including from potential tax liabilities connected with the business.

The alleged agreement:

10. The first issue in the appeal is a question of fact. I need not repeat in this short judgment the well known principles that underscore the importance that is attached to a first instance judge's assessment of the oral and written evidence that he has heard and read and his impression of the witnesses. They are summarised in the most recent Supreme Court consideration of appeal principles: In the Matter of B (A Child) [2016] UKSC 4.
11. In this case, the question whether an agreement was reached was dominated by the evidence of the parties. So far as the wife was concerned the following examples of the judge's assessment and impression informed his conclusions:

a. "[12] …underlying her presentation was a vulnerability. She found the recollection of events painful … At times her recollection was incomplete …the overwhelming impression she made [was] of a woman doing her very best to give an honest and balanced account…

b. [15] …I have no doubt the wife is telling the truth about this example…

c. [9] …I accept the written and oral evidence of the wife as to the detail."

12. If one then compares that with the judge's assessment and impression of the husband, the difference could not be more marked:

a. "[9] …I have no doubt that he was the dominant personality and sought to prevail in the relationship psychologically…

b. [13] …The husband made a less favourable impression upon me…

c. [14] …I also found the husband under cross-examination could be dismissive or evasive of perfectly proper enquiries…the more those matters are explored closely and forensically, the more unconvincing became the husband's responses.

d. [15] …I am cautious about the husband's evidence because of its tendency towards unreliability.

13. The husband submits that the judge's finding of fact about there being no agreement is unsustainable. He relies upon the contemporaneous evidence. That includes:

a. the solicitor's note of the meeting on 16 March 2005;

b. the lack of any substantive objection from the wife to the detail of the proposal;

c. the unsigned separation agreement which included in its draft terms the proposed transfers that actually took place;

d. The wife's active participation in the negotiations including her request that the husband's suggestion that she receive a salary of £10,000 pa be included in the draft agreement as a variation;

e. The wife's acknowledgement in oral evidence that a consensus was reached;

f. The husband's execution of all elements of the agreement; and

g. The wife's acquiescence without disagreement from 2005 until 2013.

14. The husband's submissions are powerful and were attractively put. The evidence upon which the judge made his findings was however more nuanced and ultimately persuasive. The judge formed a robust view of the parties and their relationship and, as he explained, the dynamic between them is key to an understanding of the events that took place between 2003 and 2006. The husband was in psychological control and the wife's case which was accepted by the judge included the following:

a. The husband became increasingly dismissive of the wife;

b. The wife felt intimidated by the way the husband put his initial position for example the implied threat that any claim that included the business could lead to its liquidation;

c. The wife consulted her own solicitors who wrote to the husband in December 2002 asking for full and frank disclosure which the husband did not provide;

d. The wife was consistent (and in her own terms insistent) that the husband should provide full and frank disclosure which he never did;

e. The draft deed of separation was not a negotiated document: it was produced on the instructions of the husband's accountant by the husband's solicitor;

f. The husband misled the wife about the ownership of the property he moved into after separation;

g. The discussion at the meeting with the husband's solicitor was conditional upon the husband providing full and frank disclosure as the note of the meeting records;

h. No proper disclosure was ever made and accordingly no agreement was ever reached.

15. The judge made clear findings about the husband's failure to provide full disclosure to the wife and to the court. He accepted that the wife perceived herself as being bullied and intimidated. Given that the husband maintained to the judge that he had given full disclosure, the judge's finding represents serious adverse litigation conduct. Perhaps the most illuminating example of the husband's behaviour was his deception of the wife and his untruthfulness in evidence relating to the property into which he moved after the parties' separation. The husband told the wife that he had moved into a property that he was renting. In 2004 the wife discovered that he owned the property but the husband denied the fact. The husband's evidence to the court was that the wife's evidence about that was "pure fantasy and a cock-and-bull-story". The judge decided that the husband was lying.
16. The husband damaged his own case by the careless manner in which he sought to disagree with the wife simply for the sake of it. An example of that is the husband's recollection of the meeting with his solicitor on 15 March 2005. He denied knowledge of the solicitor or the firm. The judge thought that part of the husband's evidence was extraordinary, incredible and curious.
17. If one recollects the emphasis that the Supreme Court in Radmacher v Granatino [2010] UKSC 42, [2010] 2 FLR 1900 (per Lord Phillips at [69]) placed upon each party to an agreement having all the information that is material to their decision, the judge cannot be criticised for moving from his clear findings of fact to the conclusion that the wife in this case had not entered into a full and final settlement with the husband. She could not have obtained advice about it without the full disclosure that was missing and she had always expressed her own need for that disclosure before she came to an agreement. The wife's alleged concession in oral evidence about the agreement was itself rather nuanced as it contained an expression of the conditional nature of the same and an explicit explanation of the condition: the absent disclosure.
18. For these reasons, I am unable to accept that the first and primary ground of appeal is made out.

Delay:

19. If the facts are those determined by the judge, it is beyond argument that the wife had a valid claim to make under the Matrimonial Causes Act 1973. It is equally beyond argument that the significant delay in making the claim is one of the major factors in play in the subsequent assessment by the court. The judge met the point head-on in his judgment. He noted that the Supreme Court had handed down judgment in Wyatt v Vince [2015] UKSC 14, [2015] 1 FLR 972 on the second or third day of the hearing. He cited the critical passage from Lord Wilson's judgment at [62] which includes the fact that public policy is hostile to forensic delay, the effect on the financial affairs of the other party, prejudice to the other party and the explanation for the delay, among other factors, may "reduce or eliminate its provision for the applicant".
20. The judge's treatment of the factors is relatively short but certainly sufficient. He reminded himself of the statutory criteria and of the general principles arising out of the main authorities: White, Miller and McFarlane and Charman. He records the fact that the wife had no concrete explanation for the delay other than the pressing demands of everyday life, work and caring for the children. The judge accepted that had her own life taken a different turn, she might never have made (or by implication have needed to make) the application. The event he was referring to was the breakdown of the wife's subsequent relationship. To that extent, the husband could not have asked the judge to be firmer given the broad context provided by the findings of fact that were made.
21. The judge then considered prejudice and rejected it. There might have been two bases for prejudice, namely the recollection of witnesses and existence of documents and the ordering of the parties' affairs over time. As to the former, no submissions were made to this court and it is not, on the facts of this case, an issue of any significance. As to the latter, the judge acknowledged in his judgment that the husband had brought on the company single handed since separation, had taken all the risks and had assumed, understandably, that the parties' financial affairs were resolved. Likewise, the wife took on responsibility for the family.
22. The judge's subsequent treatment of the impact of delay was a textbook exercise. He did not accept that a delayed application requires an applicant to begin from a position where the burden of justifying any distributive remedy is on the applicant so that s/he receives nothing unless it can be justified. That hypothesis carries with it an elision of the concepts of entitlement sharing and needs provision which would be contrary to authority. In any event, that is not what was anticipated in Wyatt v Vince. The exercise to be conducted by the court is an inquisitorial exercise using judgment. Just because an application is delayed, even severely delayed, does not have the consequence that the court's function on an application for financial remedy is abrogated or curtailed. Delay, its explanation and effect, is an additional factor.
23. What the judge did was to look at the factors that existed on the evidence having regard to the fact that the company was an undivided matrimonial asset. He looked at the significance of that fact and found assistance in the wise words of Roberts J in Cooper-Hohn v Hohn [2014] EWHC 4122 (Fam), [2015] 1 FLR 745 at [195] where the learned judge explained that fairness in the overall context of a case includes consideration of entitlement and need and that even where there is no need and entitlement has to be considered in the context of both marital acquest and post-separation accrual, the genesis of the growth of an asset may still be as a consequence of the fact that it was a matrimonial asset.
24. The judge's ultimate exercise of judgment in a case where needs were conceded to be provided for was to discount the wife's share in an equality of division of the assets because of her responsibility for delay. The wife received between 27% and 30% of the overall assets. I do not accept that the judge's exercise of judgment in that regard was wrong.

Entitlement as against need:

25. To an extent, my conclusion as respects this ground is foreshadowed by my acceptance that the judge was right in his treatment of delay as a factor in the overall exercise that a judge has to undertake on an application for financial remedy. I do not for a moment disagree with the propositions culled from first instance authorities that delay may reduce the fairness of an entitlement or that the diligence of a party in prosecuting a claim may affect the proportion of any share that party receives. None of the first instance authorities can or does go so far as to suggest that the question of whether a non-matrimonial post-separation accrual can be shared is excluded by delay. Each case is of course dependent on its facts.
26. I have set out the factors that the judge took into consideration. The judge accepted that this was not a needs case and so all that was left was the question of a share in post separation accrual. I do not accept that the exercise conducted by the judge was flawed.

The valuation of the business and contributions:

27. The husband's attack on the judge's treatment of the business begins with an assertion of the husband's case which was that he started the business with £81 of his own money, that no family money went into the business and that the wife's involvement was negligible. The husband's remaining basis for challenging on the facts whether the business represented an undivided matrimonial asset arose out of his unsuccessful submission that an agreement had been concluded ie that the transfer by the wife of her share to the husband represented a concluded agreement.
28. On the facts the husband's submissions are unsustainable. Aside from the findings of fact to which I have previously referred which cut across the husband's concluding submission on this aspect of the case, the judge concluded that the parties made equal contributions to the marriage before their separation and that the wife played an important role in the business during its infancy. The judged then assessed the wife's contribution after separation as the primary carer of the children as against the husband's contribution to the business. That was an entirely appropriate analysis.
29. In the absence of there being a concluded agreement, the husband's case was that the wife should have no share in the post separation accrual. As I have set out, that begins with the hypothesis that the wife should have nothing in a delay case unless she can prove need. If that is wrong, she should have nothing because the asset is not an undivided matrimonial asset. If on the facts it is, then the parties' contributions, among other factors, can be weighed. That is what the judge did. On the facts of this case, the husband's risk included the wife's risk in the sense that he was trading with an undivided asset.
30. Once the logic of the judge's analysis is understood and rare though it might be to have a circumstance quite as stark as this, the judge was right to assess entitlement and to do that he had to take the valuation of the business at some point. To submit that the only relevant valuation is that which existed at separation would be to give no real effect to the wife's entitlement (however discounted) in the business as an undivided matrimonial asset. What the husband's offer or solution represents, as referred to at the beginning of this judgment, is an exercise in sharing using historic valuations to achieve equality at that time with the application of the retail prices index to any balance that would then have been due to the wife. I cannot accept that this is appropriate on the facts of this case. It is simply another way of devaluing the wife's overall contributions and her entitlement in the business.
31. Accordingly, it was correct for the judge to have taken the current valuation of the business and to have discounted the wife's entitlement in the way previously described. That exercise involved an appropriate consideration of each party's contributions both before and after separation.

The inheritance:

32. What each party does with his/here re-distributed share of the matrimonial assets is a matter for him/her. The wife's case was that she never agreed with the husband that the business would not be sold or that it would be inherited by some or even all of the next generation. The judge specifically took into account the husband's ability to obtain the lump sum that he assessed as being due to the wife by staging the same by payment in instalments. There is no realistic complaint about that conclusion which was one to which he was entitled to come.

Tax liabilities:

33. That leaves the judge's treatment of potential tax liabilities. The husband is challenging a liability in respect of one scheme and may be at risk of a tax liability in respect of another. The judge was clearly aware of the risk and there was some expert evidence on the point. The judge concluded on the evidence that the liability that was being challenged was as yet unquantified and would probably not arise. As to the second potential liability, it had not crystallised and it may never arise. Despite those conclusions, the judge cross-checked his overall judgment on distribution to make sure that if either or both liability materialised, the wife's share was still appropriate. He concluded that it was. I cannot fault the approach that he took given the conclusions to which he had come on the evidence.
34. In summary, therefore, I have come to the conclusion that the judge was right in the way that he approached the wife's application. His findings of fact are unassailable and his judgments on the section 25 factors were properly informed by a correct application of principle to the factual context that he had decided. None of the grounds of appeal has been successfully made-out. I would dismiss this appeal.

Lord Justice Lindblom:

35. I agree.

Lady Justice Rafferty:

36. I also agree.