England and Wales Court of Appeal (Civil Division) Decisions

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

		The Royal Courts of Justice Strand, London WC2A 2LL
		26 July 2018

LORD JUSTICE MOYLAN:

Introduction

1. The husband (as I will call him) appeals from three orders made subsequent to a final financial remedy order of 10 December 2012. The husband's appeal from the latter order was dismissed by the Court of Appeal on 9 July 2013. That decision is reported at [2014] 1 FLR 997.
2. The matters in respect of which the husband has been given permission to appeal by King LJ are as follows:

(1) The provisions in the order of HHJ Wright of 23 September 2014 (a) giving the wife (as I will call her) permission to enforce arrears of periodical payments which were over 12 months old and (b) requiring the husband to pay at least part of the total arrears;

(2) The order of HHJ Tolson QC of 1 June 2015, by which he ordered the husband to pay the wife a lump sum "in substitution of her claims to periodical payments", in other words, to capitalise the periodical payments; and

(3) The order of HHJ Tolson of 11 January 2016 directing the payment to the wife of the sum of approximately £7,600 held by conveyancing solicitors pursuant to the order of 23 September 2014.

3. It is not clear to me, and we have not explored for the purposes of this hearing. why these appeals have taken so long to be listed for determination.
4. At this hearing the husband has been represented by Ms Bradbury who has only very recently been instructed. I am grateful to her for her submissions, although it was clear that her instructions were relatively limited. The wife has appeared in person. We have no skeleton arguments so the matters raised in support of the appeal are contained in the grounds of appeal, limited, as I have said, to those matters for which permission to appeal has been given.

Background

5. The background leading to the order of 10 December 2012 is set out in the Court of Appeal's judgment. I propose therefore only to set out a very brief summary of the history.
6. The parties married in 2000 and separated in 2010. They have one child. The order of 10 December 2012 divided the capital unequally in the wife's favour to enable her to purchase accommodation for herself and the child. In addition, the husband was ordered to pay the wife periodical payments at the rate of £1,070 per month, less any child support payments made by the husband, until the first of a number of events, one of which was 1 September 2020. From 1 September 2020 the rate of periodical payments was reduced to a nominal amount until 1 September 2027, subject as before to the earlier death of either of the parties or the wife's remarriage. A direction under s. 28(1A) of the Matrimonial Causes Act 1973 ("the 1973 Act") was made with effect from 1 September 2027.

Proceedings

7. The husband's application to vary the periodical payments order of 10 December 2012 is dated 9 October 2013. However, he did not pay the fee required so the application was not then issued. He paid the fee on 27 January 2014, leading to his application being issued.
8. On 31 January 2014, HHJ Wright directed that the variation application would be listed on 13 March 2014. By her order of that date the judge made a number of directions, including as to disclosure, and listed all outstanding applications for hearing on 6 May 2014. The outstanding applications included two, essentially, enforcement applications made by the wife in July and September 2013.
9. The hearing did not in fact take place until 3 June 2014. It is apparent from the subsequent judgment that, although the judge had ordered all outstanding applications to be listed, the husband had taken no steps to that end in respect of his variation application so that the judge had no documents relating to it, not even the application itself. At the end of the hearing the judge gave the parties permission to file written submissions.
10. The judgment is dated 30 July 2014, with an addendum dated 23 September 2014, which followed the receipt by the judge of further written submissions from the husband. The judge, as set out in the order of 23 September 2014, refused the husband's application that she recuse herself and made an order in respect of the distribution of the proceeds of sale of one of the parties' properties in Cambridge. The judge gave the wife permission to enforce all the arrears of periodical payments which she determined to be £16,340. We do not have the schedule produced by the wife which set out the arrears. It appears that, for some time, the husband paid what he calculated his CSA liability would be and he then stopped paying anything.
11. Part of the arrears, namely the sum of approximately £6,600, was ordered to be paid out of the husband's share of the proceeds of the sale of the Cambridge property. Payment of the balance, of approximately £7,600, was stayed until 24 November 2014 with this sum to be retained by the conveyancing solicitors, Withy King.
12. The order provided, by paragraph 3(b), that the stay would continue if, by 24 November 2014, the husband had produced for consideration by a District Judge a copy of his variation application and his evidence in support. If the husband failed to comply with that provision the stay would lapse.
13. The judge set out her reasons for giving the wife permission to enforce all of the arrears. The judge rightly said that the periodical payments order "continues until such time as it is varied by order". The judge found that there was "no good reason why (the husband) has failed to pay the (periodical payments) as ordered". Indeed the husband, as set out in the judgment, had not challenged the amount of the arrears nor provided any reason why he had not made the payments, nor made any proposals as to payment. The judge referred to the findings she had made as to the wife's needs and the husband's ability to pay in December 2012. She also took into account that it appeared that the husband had not made any contribution to nursery costs "as envisaged through the child care voucher system that he set up from his own salary".
14. In her addendum judgment the judge reconsidered whether to stay payment of the arrears. Although she had no documents relating to the husband's variation application she decided, on reflection, to stay payment of the sum of just under £7,600, as referred to above. These were the arrears which had accrued since October 2013 and the judge could see no reason to stay payment of the arrears which had accrued in respect of earlier periods.
15. It appears that the husband complied with paragraph 3(b) of the order of 23 September 2014. There is a document in one of the bundles prepared for this hearing which is headed "Evidence of respondent in support of application for variation". In that document he set out the matters on which he would rely in support of his application. He first seeks to question whether the periodical payments order should have been made at all. This was a hopeless argument, given that the husband's appeal from the order had been dismissed by the Court of Appeal. The other matters relied upon were, in summary, that the wife had become entitled to 15 hours' free nursery education in December 2012; that the wife's earnings had increased; that child care costs would decrease from September 2014; that his financial needs had increased; and that the wife had more capital than envisaged in December 2012.
16. Directions were given in respect of the husband's variation application on 14 January 2015. Both parties were present at that hearing, the husband by telephone. Since that date no substantive progress has been made towards the determination of that application. We were told during the course of this hearing that it remains undetermined even now.
17. On 1 June 2015 HHJ Tolson made his order capitalising periodical payments under ss. 31(7A) and 31(7B) of the 1973 Act. The order requires the husband to pay approximately £74,500 by way of capitalisation and just under £9,000 in respect of arrears of periodical payments as at that date.
18. The husband was neither present nor represented at the hearing but the judge was satisfied, as recorded in his order, that there had been "effective service of notice of the application". The order contains a number of recitals including the following:

"And upon the wife

1. Establishing by evidence that the husband has failed to pay periodical payments in accordance with the terms of existing orders and

2. Giving details of the highly unusual nature of the husband's conduct of past litigation and lack of regard for orders of the court.

And upon the court being satisfied that the husband had deliberately not paid periodical payments and would be highly unlikely to pay in future, and is likely to attempt to take any steps open to him to frustrate the wife's claims and entitlements to ancillary financial relief.

And upon the court considering that, in principle, the husband should continue to pay periodical payments at the levels fixed by … the order dated 10 December 2012, until 1 September 2020 as the order provides and … then discounting the sums payable in future to account for early receipt."

19. The order sets out how the judge calculated the amount which should be paid by the husband. He determined that the periodical payments which would otherwise be payable to 1 September 2020 would total just over £84,000. He then discounted that sum for early receipt, by reference to what are known as the Ogden tables, to just over £74,000.
20. In a short judgment HHJ Tolson set out his conclusion that since 2014 the husband "as part of an, it might be said, unparalleled history of non-cooperation has failed to make any periodical payments in accordance with" previous orders. The judge described the orders sought by the wife as "radical and unusual orders which it is uncommon for a court to make at one hearing". This referred, in my view, to his order providing not only for capitalisation but also, in default of payment, for the sale of a specified property and consequential provisions. The judge concluded that "the history of this litigation amply justifies" the orders he made. The judge also indicated that he would give the husband liberty to apply to set the orders aside. (I should add that I should not be taken to agree with the judge's assessment of the nature of these orders.)
21. The husband's applications for permission to appeal from the orders of 23 September 2014 and 1 June 2015 were determined by King LJ on 25 May 2016, following an oral hearing. It is clear from her judgment that the only reason permission to appeal was given was because the husband's variation application remained undetermined. King LJ had initially considered that the husband should apply to set aside HHJ Tolson's order rather than seeking to appeal from it. However, she ultimately decided to give permission, I repeat, because, and it is clear only because, of the husband's undetermined variation application. This also applied in respect of the permission she gave to appeal from HHJ Wright's order.
22. King LJ considered that it was arguable:

(i) that the resolution of the variation application was "critical" to HHJ Wright's assessment of the arrears; and

(ii) that the first step in any application to capitalise periodical payments would be for the court to consider any application to vary.

In saying the latter King LJ no doubt had in mind what Thorpe LJ had said in Pearce v Pearce [2003] 2 FLR 1144, to which I return below. King LJ's permission judgment sets the parameters for the scope of the husband's appeals.

23. On 11 January 2016 HHJ Tolson ordered that the sum, initially of approximately £7,600, held by Withy King pursuant to the order of 23 September 2014 should be paid to the wife in part satisfaction of the sums due under his order of 1 June 2015.

Determination

24. I propose to consider each of the husband's appeals separately although I bear in mind their relationship with each other when doing so. In so far as necessary, I refer to the relevant law and the parties' respective cases in the course of determining each appeal.

(1) Order of 23 September 2014

25. The husband's appeal from the order of 23 September 2014. The wife required leave to enforce some of the arrears because s. 32 of the 1973 Act stipulates that a person is not entitled, without leave, to enforce arrears which "became due more than 12 months before proceedings to enforce the payment of them are began". The arrears, as found by the judge, up to the end of July 2014 were £16,340. This represented just over 15 months at the rate initially ordered, i.e. from approximately May 2013.
26. The relevant date for the purposes of determining whether arrears are more than 12 months old is the date of the "proceedings to enforce". What was that date in this case? It is apparent that enforcement of the arrears was raised at the hearing on 3 June 2014. There is some subsequent correspondence with the court which indicates that the wife had been unaware of the need to obtain leave. The wife refers in one e-mail to filing two applications and paying a fee. Whether the wife actually issued an application is not clear. What is clear is that HHJ Wright treated an application as having been made and dealt with it in her judgment and order.
27. Taking, therefore, the hearing date as the date of the application to enforce, this would mean the wife needed permission to enforce no more than 1 or 2 months of arrears. The judge dealt with that issue and set out her reasons for giving the wife leave to enforce all the arrears as referred to above.
28. The husband's grounds of appeal include matters in respect of which he was not given permission to appeal. When confined to the single issue on which he was given permission they appear to be as follows:

(i) the court erred in law in determining the wife's application to enforce prior to the determination of his variation application;

(ii) the wife had not made any formal application for permission to enforce arrears more than 12 months old; and

(iii) non-payment was reasonable because the order was still subject to a stay granted by the Court of Appeal.

29. Dealing with these points in reverse order.
30. (iii) On 14 March 2013 Aikens LJ had ordered a stay of the periodical payments order in the context of the husband's appeal from the order of 10 December 2012. Once that appeal had been determined on 9 July 2013 the stay lapsed. This point is therefore without merit.
31. (ii) No formal process is stipulated by which an application under s. 32 of the 1973 Act must be made. Indeed, in my experience, such applications are frequently made informally because they arise in the course of the court's determination of other more substantive applications. What is procedurally required will depend on the circumstances of the particular case. In the present case, when the relevant arrears were, as I have said, at most 1 or 2 months, there was no need for a formal application. I would add, for the avoidance of doubt, that even if the period was longer, the judge was plainly entitled to decide, as a case management decision, to deal with it as she did.
32. (i) Turning then to the first ground of appeal, namely that the judge should not have determined the wife's application to enforce until his variation application had been determined. In my view there is no principle which requires a judge to adjourn an enforcement application pending determination of a variation application. The objections to such a principle are obvious. It would enable the process to be too easily manipulated, if not subverted. It is a question for the judge to determine having regard to the circumstances of the individual case. In this respect I would agree with the comment made in the Law Commission's Report on Enforcement of Family Financial Orders (Law Com. No. 370), paragraph 2.47:

"... we think it is important to emphasise that a variation application should not inevitably lead to an adjournment of any enforcement proceedings; the appropriate action will depend on the circumstances of each case."

That observation was based on concerns which had been expressed in consultation responses (as referred to in paragraph 2.45).

33. The judge dealt with the existence of the variation application by staying payment of part of the arrears. In my view, this was a decision which she was entitled to make and for which she gave sound reasons. There is, as I have said, no legal principle involved and there is nothing in the circumstances of this case which meant the judge should have stayed enforcement or payment of all the arrears until the variation application had been determined.

(2) Order of 1 June 2015

34. The husband's appeal from the order of 1 June 2015. Ms Bradbury's instructions in respect of this appeal were confined to procedural issues arising from the fact that the husband was not present or represented at the hearing. Permission to appeal was not given in respect of those issues. King LJ only gave permission to appeal "in relation to the capitalisation of the periodical payments". The proper route, in any event, by which the husband could have raised such procedural issues was by applying to set the order aside.
35. The two grounds advanced by the husband in respect of the capitalisation issue are: (i) that the order effectively predetermined his variation application, which was an error of law; and (ii) that the judge was wrong to determine the lump sum should be £83,488.
36. Section 31 of the 1973 Act addresses the court's powers to vary or discharge orders for periodical payments. They are set out in s. 31(7A) and s. 31(7B). These provisions were considered in Pearce v Pearce which describes the approach which the court should adopt when determining an application for capitalisation. Thorpe LJ said at [37]:

"Both as a matter of principle and as a matter of good practice, in my opinion the judge had to decide three questions in the following sequence. First he had to decide what variation to make in the order for periodical payments agreed in 1997... The judge's second task was to fix the date from which the increased order was to commence. That would dispose of the past and present account between the parties. Then, and only then, should he have moved to the future, substituting a capital payment calculated in accordance with the Duxbury tables for the income stream that he was terminating."

Importantly for the purposes of this appeal, Thorpe LJ went on to say:

"38. Of course I do not seek to put the trial judge in a straightjacket. He exercises a broad discretion at the first stage. Equally at the third stage he exercises a discretion, albeit a narrower one, in departing from the mathematics of the Duxbury tables to reflect special factors which individual cases will regularly generate.

39. I believe that this discipline is necessary as a safeguard against the temptation to further adjust the capital division between the parties to reflect the factors which were not foreseen or which did not pertain at the date of the original division. This abstinence is required not only by authority but also as a matter of policy. Families with not inconsiderable assets are obliged to achieve division, by one means or another, once the marriage has foundered. They are entitled to know that that obligation once completed does not revive. In cases where a complete clean break cannot be achieved at the date of redistribution of the family assets it is important that the parties should be encouraged to take advantage of any subsequent developments that permit the dismissal of the outstanding periodical payments order. The court has its duty under section 31(7A). Therefore a relatively simple, certain and predictable method for the calculation of the capital sum that can fairly be substituted for the periodical payments order is of great importance. It enables parties to see where they stand and to weigh the relative advantages and disadvantages of finality. It contributes to the compromise of the issue and thus to a reduction in contested cases."

37. In Vaughan v Vaughan [2010] 2 FLR 242, another case dealing with the capitalisation of periodical payments, Wilson LJ (as he then was) said at [28]:

"The judge correctly recognised that the issue whether the husband should be ordered to pay a lump sum to the wife under s.31(7B) of the Act, by way of capitalisation of any obligation to continue to make periodical payments to her, fell to be resolved by application of the principles set out in the decision of this court in Pearce v. Pearce ... It is a decision which has rightly received wide approbation, no doubt because, in the words of Thorpe LJ, at [39], it identifies 'a relatively simple, certain and predictable method for the calculation of the capital sum'. So the first enquiry is to identify the level of periodical payments which should in principle continue to be made by the payer to the payee (including, in the present case, whether they should continue to be made at all and thus whether the payee can – within the meaning of s.31(7)(a) – adjust without undue hardship to their termination): per Thorpe LJ, at [37]. If the result of the first enquiry is a conclusion that periodical payments at a specified level should in principle continue to be made, the second... is to calculate their capital equivalent according to the Duxbury formula: per Thorpe LJ, again at [37]. For the sake of completeness, I would add that the court must finally survey whether it is fair to both parties to capitalise the periodical payments and, no doubt in particular, whether it is reasonably practicable for the payer to pay the capital sum rather than to make the periodical payments. At all events the court has, thank goodness, only a narrow discretion to arrive at a capital sum otherwise than by application of Duxbury formula and it should exercise it in order only to reflect special factors ..."

38. We were not referred to the decision of Cobb J in HC v FW (Financial Remedies: Assessment of General & Special Needs) [2018] 2 FLR 70. He specifically considered whether he should use the Ogden tables or Duxbury. The wife/applicant in that case had a combination of neurological conditions and cognitive disabilities. Cobb J referred to the differences in the underlying assumptions used in the Ogden and Duxbury tables. The former, the Ogden tables, "contemplate virtually no growth on an investment of virtually no risk, whereas Duxbury contemplates an element of risk", at [79]. The judge recognised the "quasi-personal injury character of the wife's claim" in that case but, nevertheless, calculated the relevant part of his capital award by reference to Duxbury.
39. Dealing with the husband's first point, namely that the judge should have adjourned determination of the wife's application until his variation application had been determined. Whilst there might have been some force in that submission in 2015 and 2016, I do not consider that there is any force in it now. The husband has had more than sufficient time to procure the determination of his application. When Ms Bradbury was asked why the application had not yet been determined she was, with all due respect to her, unable to provide any substantive explanation. She told us that the husband had written to the court on several occasions, the last apparently being on 4 July 2016, and she referred to the hearing which had taken place in January 2015. It has been the husband's responsibility to progress his application. In my view, he must bear the consequences of his failing to do so.
40. I now turn to the second ground. Although this refers to the sum of £83,488, there can be no appeal from the judge's decision to order payment of the arrears of just under £9,000. I therefore treat the appeal as effectively one from the capitalisation sum of £74,500.
41. In support of the husband's appeal it can be said that the judge adopted a robust approach when determining this aspect of his award. The first question is whether the judge, to quote from Vaughan, identified "the level of periodical payments which should in principle continue to be made". As I have said, he adopted a robust approach. However, although it was robust, and save for one point in respect of CSA payments which I deal with later, no argument has, in my view, been advanced which effectively challenges the judge's prospective calculation of just over £74,000. The judge's calculation was in respect of the period to 1 September 2020 only and he did not, in the husband's favour, add any further amount in respect of the husband's potential continuing liability to 1 September 2027. The judge assessed the level of periodical payments which should continue to be made, thereby effectively complying with the guidance in both Pearce and Vaughan. His evaluative determination in this respect has not been undermined at all.
42. The second aspect of the judge's calculation was his decision to use the Ogden tables rather than Duxbury. Following Pearce and Vaughan, it is clear that the court should use the latter rather than the former. But, is the use of the former an error of law or an error which means the judge's award was wrong? Must a judge use Duxbury? In my view, the answer to all these questions is "no". Although I would expect judges typically to use Duxbury, a judge can decide to use a method of calculation other than Duxbury. To do so is not, in my view, an error of law.
43. Further, although we were not provided with any alternative calculations, I doubt whether the amount calculated in this case by reference to Duxbury would be sufficiently different to that calculated by the judge, by reference to Ogden, to warrant interfering with his award. I would point out, in this context, that the judge was using the Ogden tables as they were before the more recent changes referred to in HC v FW.
44. I now turn to the CSA issue. As referred to above, the rate of periodical payments ordered was subject to deduction for CSA payments. This factor does not appear to be reflected at all in the judge's calculations. Neither party had raised this point, but it was raised by the court during the hearing. In response, the wife immediately acknowledged that she has received some CSA payments. Indeed, it was documents which she produced for this hearing which alerted the court to this issue. The wife also made clear that she was not seeking what might be described as double payment. After some discussion the wife invited this court to resolve this issue thereby avoiding the need for any further hearing.
45. Ms Bradbury did not advance any arguments against the court taking this course. In any event having regard to the sums involved and the likely cost of any further hearing, it is clearly the right course to take.
46. The wife told us that she has received approximately £3,500 by way of CSA payments to date and expects to receive further payments between now and 1 September 2020. Making a broad assessment, I propose to allow the appeal to the extent of reducing the lump sum ordered by the judge by the sum of £6,000.

(3) Order of 11 January 2016.

47. This appeal was entirely dependent on the husband's appeal from the order of 1 June 2015. Having substantially dismissed that appeal, there is no continuing merit in this appeal. I would add that HHJ Tolson was entitled to vary or discharge the stay granted by HHJ Wright. The husband's arguments that HHJ Tolson had no jurisdiction to do so and that a more formal process was required are totally without merit.

LORD JUSTICE LEGGATT:

48. I agree.

LORD JUSTICE FLAUX:

49. I also agree.