England and Wales Family Court Decisions (other Judges)

IN THE FAMILY COURT
SITTING AT BLACKBURN

		64 Victoria Street Blackburn BB1 6DJ
		13th April 2015

JUDGMENT

HIS HONOUR JUDGE BOOTH:

1. This is an appeal brought by Andrew C flowing from proceedings against his former wife, Rebecca C, whereby he appeals a series of orders made in the Family Court sitting at Blackpool culminating in a final order at the conclusion of contested financial remedy proceedings before District Judge Bryce on 1^st October 2014.
2. Mr C has been represented on this appeal by Mr Howling QC, and Mrs C by Mr Anderson of counsel. This appeal is Mr Howling's first involvement in this case. Mr Anderson has represented Mrs C at some but not all of the previous hearings, but was trial counsel at the final hearing before District Judge Bryce. Let me say straightaway I am grateful to both counsel for the written documents they have put in front of me today and for their very helpful oral submissions. I think it is fair to say that every point that could possibly be taken has been taken. I have had an opportunity of reading a substantial volume of papers generated by this case.
3. Let me set out a bit of the factual background. Mr C is 46 and Mrs C is 33. They began cohabiting in 2001 and married in July 2005. They separated on 1^st January 2014 when Mr C left the family home. Divorce proceedings were commenced immediately thereafter, and reached the stage of decree absolute on 9^th October 2014. There are three children of the family: the eldest is approaching his 7^th birthday, and twins aged 5, who all live with their mother.
4. The financial remedy proceedings were commenced on 9^th January 2014 when Mrs C issued her Form A and thereafter, as I have already indicated, there were a number of preliminary hearings ultimately leading to a final contested hearing. Mrs C is a school teacher. At the time of the final hearing, she was unemployed having taken voluntary redundancy from her previous employment but confident in her expectation that she would soon be re-employed in a similar capacity. Her earnings in her previous position had been £39,000 a year gross. From that, she made pension contributions, paid her taxes, and had to repay her student loan. I am told her net income was approximately £23,000.
5. Mr C has a number of business interests. He is a landlord with a portfolio of 22 rental properties. In addition, he has four companies. They are in the entertainment sector and trade, effectively, one with the other. Mr C has an income from three sources. He takes a salary from one of the businesses, he has dividends on his shareholding and he makes a profit from the rental income from his property portfolio. Inevitably, his income will vary year to year but, in broad figures, he has a total income of £56,500. He has no lability to income tax as he is carrying forward, and continues to carry forward, a very substantial loss in his property portfolio business.
6. I am not going to set out the history of the proceedings leading up to the final hearing. They included the making of injunctions against Mr C freezing a sum of money that he had in a bank account that he says is the working capital of his business. It was, in fact, the only asset that the parties had that could be turned into cash. Their family home was subject to mortgage. Because of the size of the mortgage relative to the value of the property, no formal valuation had been ordered or provided with both parties doing their best to put evidence before the court from market appraisals. They showed that either the property would break even on a sale, or might produce a negative equity. The mortgage on the family home was in joint names. That was of some significance. Mr C's property portfolio was in significant negative equity. Mr Howling has commented that at the time these parties appeared before the District Judge for their final hearing, they were technically insolvent.
7. How then did the District Judge deal with this conundrum? On the one hand, he had the needs of the parties for a home; the particular need of Mrs C to provide a home for the three children of the family, and for Mr C to be able to entertain them when he saw them on contact. There was, on the face of it, no money in the case apart from the frozen account and a solution was not obviously apparent. The District Judge heard the evidence of the parties. He accepted the accuracy and reliability of what Mrs C told him. He did not accept the accuracy and reliability of what Mr C told him.
8. The District Judge, consistent with the terms of the Matrimonial Causes Act, determined that his priority should be to provide a home for the children and that the way to do that was to utilise the funds that had been frozen. He reached the conclusion that in broad measure with £58,000 of the frozen funds, Mrs C would have enough for a deposit and that with her income and assuming she could raise a mortgage of three times her gross income, she could purchase a suitable home for herself and the children. He went on to provide that she should receive periodical payments from Mr C of £1,250 per month, but that figure should encompass her costs of running the household with the children in it and that she should give credit against that figure for any sums received by way of child maintenance assessment.
9. During the course of the proceedings, there had been adverse costs orders made against Mr C and in order to avoid further litigation about those matters, the District Judge provided that a further £6,000 should be paid to Mrs C to represent that liability of Mr C, the figure of £6,000 being less than she was owed.
10. Mr C was unhappy with the outcome. His perception of it was that it left him with nothing but debt with all the available cash going to Mrs C.
11. I have not yet mentioned the parties' pensions. Given their ages it was unlikely to have been a major consideration for the District Judge and, indeed, it barely gets a mention in his judgment. Mrs C was accruing a teacher's pension which had a greater cash equivalent value than the very modest pension that Mr C had saved for himself.
12. Mr C sought to appeal the order made on 1^st October straightaway and it is clear from email correspondence I have been referred to that he attempted to get from the court the appropriate forms and transcripts to allow him to pursue an appeal. In the event, his appellant's notice was filed either one or two days beyond the time allowed for the filing of an appeal. In those circumstances, I have no hesitation in saying that, in that respect, he should have permission for an extension of time in which to appeal. He had not made an application for permission to appeal to the District Judge and so he needs my permission before he can proceed with his appeal. In order to determine whether he should have permission, one of the factors I have to weigh in the balance is the prospects of success in any appeal. I have therefore effectively heard this appeal at the same time as I have heard the application for permission to appeal.
13. Additionally, as a product of the skeleton argument filed by Mr Howling, Mr C seeks an extension of time for appealing in relation to earlier orders involving the freezing order. I have listened with care to Mr Howling's submissions and read and re-read his written submissions on the point. There is nothing that I have seen or been told that comes any way near to meeting the explanations needed analogous with relief from sanction, as understood in civil cases following the Mitchell decision, that would allow me to extend the time for appealing and, indeed, there would be no merit in me so doing even if there were such sound reasons. The only part of the appeal that I extend time for is that relating to the final order made on 1^st October.
14. Let me remind myself of what I am doing when I hear an appeal. Part 30 of the Family Procedure Rules 2010 sets out quite clearly that my role is to review the decision of the lower court. In carrying out that review, I can only interfere if I am persuaded that the District Judge was wrong. Various phrases have been used historically from G v G (Minors: Custody Appeal) [1985] FLR 894, HL, [1985] 2 All ER 225 and 'plainly wrong' but now I must limit myself to the word 'wrong'. Only if I decide that the District Judge was wrong can I go on to consider how I should attempt to put right that which has gone wrong.
15. What does 'wrong' mean in this context? The Appeal Courts have deliberately refused to define 'wrong', but in this context it essentially means this: that either the District Judge has ordered something that he had no power to order, or arrived at a conclusion on the basis of no evidence, those being two examples, or in exercising the discretionary powers under the Matrimonial Causes Act in identifying the parties' assets and incomes, and in carrying out the re-distributed phase of the exercise, he has come to a conclusion that is so wide of the mark as to be outside the wide ambit of reasonable conclusions that would amount to a fair outcome. It is not sufficient that I might have reached a different conclusion - that is no test of the measure of the order being wrong.
16. What then are the particular matters that Mr Howling pursues on behalf of Mr C? The first two complaints relate to the consequences of a sale of the former matrimonial home. The District Judge's order provided for, initially, a transfer of the matrimonial home from joint names to the sole name of Mr C and that transfer would, of course, be subject to the existing mortgage for which the parties are jointly liable. Mr C gave evidence to the effect that he anticipated being able to release Mrs C from her liabilities under that existing mortgage. That is only likely to happen if there were a re-mortgage or the capital sum were re-paid. In the event that she was not released from her liabilities under the existing mortgage, there was a contingent provision for a sale of the home. If Mrs C's evidence as to the valuation of the home was accurate, then there may be no loss. If Mr C's evidence as to the value of the home was more accurate, then there may be a loss.
17. How was that loss to be dealt with and who was to be responsible for it? The District Judge made clear that it was to be Mr C who should stand that lability in the event that it arose. There are two bases on which Mr C objects to the form of order that was approved by the District Judge following his judgment. Firstly, it contains a recording that:

"The respondent [that is Mr C] shall indemnify the applicant in relation to all liabilities under the mortgage including any negative equity following a sale of the property."

Subsequently, at paragraph 5F of the order itself, the order says this:

"The proceeds of sale shall be applied as follows...

(iv) the respondent shall indemnify the applicant in respect of any negative balance...

(vi) if the respondent defaults in relation to the indemnities at recital 3 or any of them, a lump sum or lump sums shall be due to the applicant to the extent of his default."

18. Mr C argues that there is no power in the court to compel Mr C to indemnify Mrs C and, secondly, that the provision at paragraph (vi) that I have just referred to is, in effect, an additional lump sum which the court has no jurisdiction to make. Paragraph (vi) is a contingent lump sum. It was made in the same order as the lump sum providing Mrs C receives £64,000 from the frozen account and some other money that was in the same account. It is all part of the same order and there is nothing wrong, in principle, with making a contingent lump sum, the actual amount only being determined at some stage in the future so long as the amount is determinable by what is set out in the order.
19. The indemnity in paragraph 3 of the recitals is something that the court cannot order. Had that recital been worded to the effect that "… the respondent shall be responsible for paying …" and then listing the matters that he was to be responsible for paying, in my judgment, this point could not have been made.
20. The third point that was made on behalf of Mr C in his grounds of appeal is that it was wrong in principle for the court to provide for Mrs C to receive all the liquid capital from the marriage and to leave Mr C with all the debts. This is the heart of the appeal. This is really the matter I have to grapple with. I have to decide in reaching a conclusion which did, in fact, give Mrs C all the liquid capital and leave Mr C with all the debts, whether on the facts of this case that was a fair outcome, or whether it was so wide of the mark as to be outside the wide discretion available to the District Judge at the distributive phase of the ancillary relief process.
21. The important finding, in my judgment, was in relation to the District Judge accepting Mrs C's evidence in preference to that of Mr C. She had described to him how throughout their marriage, Mr C had been saddled with huge debt and, on paper, had always been without funds, yet during their marriage they had enjoyed all the trappings of a successful lifestyle with no suggestion while they were together that Mr C would not be able to make that state of affairs continue into the future.
22. Of course, the District Judge was hearing this case in Blackpool. District Judge Bryce is a vastly experienced district judge and cases involving small businesses, particularly rental businesses, are a regular feature of this kind of work in the Family Court in Blackpool. He would be very familiar with the issues raised in this case. That does not mean that, on this occasion, he may not have got it wrong. It is right to observe the history of Mr C in producing a profit on his business which allowed him to service his debts and to keep the ship afloat.
23. The priority, according to the statute, had to be the welfare of the children whilst they remain minors. That is traditionally interpreted by the courts as providing them with a home and it is that traditional approach that District Judge Bryce took in this case.
24. What are the alternatives? Mr C was arguing and has argued today that the fund that was frozen and the total amount in the account of some £64,000 was his working capital. He has argued today but did not argue in front of the District Judge that some of that money represented his tenants' deposits which he is obliged to keep. There was some evidence earlier in the proceedings that he had had other funds which he attributed as tenants' deposits.
25. His case today is that what the District Judge should have done was to take from the amount in the bank account a sum to represent funds that were not really his and then to take what was left and divide it in half so that each of them had some capital.
26. The difficulty with that approach seems to me to be twofold: either this is all his working capital or it is not. It is difficult to see how Mr C can have it both ways. However more fundamentally, anything less than the whole of the amount would not give Mrs C the chance of acquiring a property of her own. The District Judge decided that in the context of this case, Mrs C bringing up the children in owner occupied accommodation was an appropriate outcome. It is difficult to see how that as a broad proposition could possibly be complained about. The only way that could happen was to give her the only capital that was available.
27. One of the difficulties with this area of the law is that most of the decided cases are what are termed big money cases and it is only wealthy litigants who can afford to take their cases to the Court of Appeal and beyond. Indeed, a salutary tale is there in the case referred to by Mr Howling in his skeleton argument of Piglowska v Piglowski [1999] UKHL 27 where by the time the case had been to the House of Lords, the parties had spent every single penny that they had on their lawyers. So there is relatively little guidance on those difficult cases where there is not enough to go round and inevitably, when there is not enough to go round, one party will do better than the other simply by the application of mathematics to a very limited pot.
28. Is it necessarily unfair that one party comes out with nothing and the other party gets everything there is? Not necessarily; it will depend on the facts of the case. Is it necessarily unfair that one party comes out carrying a burden of very substantial debt as Mr C does here, and the other party gets the modest amount that is available for distribution? Again, not necessarily, as it depends on the facts of the case.
29. Mr C has raised the spectre of his own bankruptcy. Plainly, that has been an option throughout the parties' marriage. If he were to petition for his own bankruptcy there would be consequences. Mr Howling is correct to say that once this particular deck of cards starts to fall it will all fall away because, as a bankrupt, he will not be able to be a director of his limited companies, he will lose his income from his limited companies, and the whole edifice will fall down. However, plainly, the District Judge took the view given the history of the matter, given the history of funds held in the frozen account when they were examined at the final hearing, that there was no good reason for Mr C to cause this particular house of cards to fall down and, indeed, why would he when it was presenting him with an income of in excess of £50,000 a year tax free, as he was carrying forward capital tax losses?
30. The final point on this section of grounds of appeal is that the District Judge was wrong in principle to have ordered a default sale of the former matrimonial home. It seems to me that the whole scheme of the District Judge to provide a home for the children depended upon Mrs C being released from her liabilities under the existing mortgage. If Mr C was unable to achieve that by re-mortgaging or paying off the mortgage, then the only way it could be achieved was for the house to be sold, the mortgage repaid, and any shortfall satisfied.
31. Mr C complains about the maintenance that was ordered, firstly as to how and why the District Judge fixed the amount at £1,250 per month, and for the District Judge failing to give consideration to the possibility of either a clean break, or more appropriately a deferred clean break. On that latter point, counsel who appeared for Mr C plainly did not argue for a clean break or a deferred clean break. It is right that the Matrimonial Causes Act, as amended, requires the judge to consider whether he can, without undue hardship, terminate the parties' dependence, one on another, by bringing maintenance to an end, but given the ages of the children, it is hardly surprising that this was not a point of active consideration before the District Judge. It may well be in the future when the children are older that Mr C can perfectly properly bring the matter back before the court to seek a termination of Mrs C's right to receive periodical payments. He can, of course, at any time apply for a variation of that order on the basis either that she does not need the money anymore, or that he cannot afford to pay that amount. No doubt with full information about both parties' up to date finances, a district judge, ideally District Judge Bryce, would look again at the question of the quantum of periodical payments.
32. Is it a fair criticism to say that the District Judge failed to explain how and why he fixed spousal maintenance at £1,250 per month? Mr Anderson was able to explain, with the benefit of having been there, just what he had submitted to the District Judge in terms of the child maintenance assessment and how that worked and the limited figures that had been taken into account which emerged during cross-examination of Mr C so that the child support calculation and the assessment of maintenance were, in reality, two very different processes based on two very different figures for Mr C's income. The obligation on Mrs C to provide a home for the children would continue and it was, it seems to me, entirely right for the District Judge to look at the matter in the round and to not try to descend into figures as to how much different items in the budget might have cost.
33. The final point that Mr Howling advances on behalf of Mr C is that Mr C was inadequately represented by his counsel on 1^st October 2014 and the quality of his representation adversely impacted on the outcome. It is not the law that bad advocacy is a ground of appeal against a final order in ancillary relief proceedings. If it be the case that Mr C's counsel was so negligent in the way he conducted Mr C's case that Mr C had a wrong outcome, then Mr C had a civil remedy against his barrister for which his barrister is obliged to be insured and he would recover any amount that he could prove that he lost in this litigation; in other words, an amount by which he had to pay more than he should have done, or an amount by which he recovered less. That potential cause of action is a valuable asset of Mr C's because unusually in this litigation it serves the potential of adding to the family pot available for distribution not as is inevitably the case proceeding diminishing the family pot in the expenditure of legal costs.
34. I must stand back from the point that Mr Howling repeatedly and understandably made that throughout the preparation of this appeal and in preparing the paperwork and the grounds of appeal and so on, Mr C has acted as a litigant in person.
35. Are there any other matters that could potentially lead me to the conclusion that the order that was made in this case was unfair, unfair to the extent of being wrong, so that I should interfere? I am not persuaded that there is any basis on which this order was wrong. It may be that it could be categorised as harsh, but that does not make it wrong. It is right. It leaves Mr C with capital assets that have no value. They have no capital value if he chooses to close everything down now and as it were cash in his chips. But those assets that he has allow him to generate a significant income. It allows him a lifestyle that appears from Mrs C's evidence to go significantly beyond the figures. All of that will continue for Mr C. Those are all legitimate matters for the District Judge to weigh in the balance which he plainly did.
36. I bear in mind in my review of the District Judge's judgment that his judgment was an extempore judgment. He had the benefit of hearing the evidence. He had the immediacy of the submissions that were made to him and, inevitably, his reasoning will reflect all of what he saw and heard even though he may not have articulated it in a way that would be ideal. Similarly, this is an extempore judgment on the appeal. I hope I have dealt with all the points that have been raised, but I hope counsel will forgive me if I have not fully articulated every nuance within those submissions. I have attempted to get to the heart of the matter. Having undertaken that exercise, I am satisfied there is no merit in this appeal. I see no value in giving permission to appeal. So I refuse permission to appeal and dismiss the appeal.
[Judgment ends]