England and Wales High Court (Family Division) Decisions

IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
PRINCIPAL REGISTRY

		Royal Courts of Justice Strand, London, WC2A 2LL
		7 December 2011

1. This is an appeal from an order in financial remedy proceedings made by Greene DJ on 30th June 2011, following a hearing on 13th and 14th June 2011. Submissions were delivered on 30th June. The District Judge then gave an extempore judgment.
2. The Appellant is the Husband. The Respondent is the Wife.
3. In the court below, the Wife was represented by counsel, Miss O'Driscoll but she now appears in person. The Husband was in person before the District Judge but is now represented by Miss Kabra.
4. On 22nd July 2011, Ryder J listed the case for permission to appeal with appeal to follow if permission was granted. I heard the appeal on 17th November 2011. I granted permission to appeal but then reserved my judgment on the appeal itself.
5. This case was difficult for the District Judge and it has been difficult for me. There is simply insufficient capital and income available to cater for the needs of both parties. The court has to be fair to both parties but, in one sense, the only way to do that is to balance the unfairness.
6. Before turning to the facts, I should set out the new framework for such appeals set out by the FPR 2010. Pursuant to r30.3(7), permission to appeal should only be given where:-

(a) The court considers that the appeal would have a real prospect of success; or

(b) There is some other compelling reason why the appeal should be heard.

7. I considered that the appeal had a real prospect of success and therefore gave permission to appeal.
8. I then had to consider r30.12. Subsection (1) provides that the appeal is limited to a review of the decision of the lower court, unless the court considers that, in the circumstances, it would be in the interests of justice to hold a re-hearing. I did not consider it appropriate for there to be a rehearing so it follows that this appeal has been conducted by way of review.
9. Subsection (2) states that the appeal court will not receive oral evidence or evidence which was not before the lower court. I did not hear oral evidence but, as both parties had been in person at some point in the case, I was more tolerant than might otherwise have been the case in relation to their respective submissions.
10. Finally, subsection (3) provides that the appeal court will allow an appeal where the decision of the lower court was –

(a) wrong; or

(b) unjust because of a serious procedural or other irregularity in the proceedings in the lower court.

11. Prior to these rules coming into force, the law was that an appeal could not be allowed unless it could be shown that the District Judge was "plainly wrong" or had "erred in law". I am satisfied that this remains the position under the new rules. The District Judge was exercising his discretion in the way he applied the MCA 1973. He can only have been "wrong" if the way in which he exercised his discretion was outside the band of reasonable decisions that he could have taken. In other words, to be "wrong", he must have been "plainly wrong" or have erred in law.
12. I take fully into account the fact that the District Judge (now a Circuit Judge) is extremely experienced in such cases and that he was giving an ex-tempore judgment. My approach is to apply the dicta of Thorpe LJ in Re B (Appeal: Lack of Reasons) [2003] 2 FLR 1035:-

"The more experienced the judge, the more likely it is that he may display the virtue of brevity. Certainly, it is not incumbent upon the judge to adopt some formula for judgment or simply to parrot statutory provisions. For my part, I would say that the essential test is: does the judgment sufficiently explain what the judge has found and what he has concluded as well as the process of reasoning by which he has arrived at his findings, and then his conclusions."

13. As noted above, I decided against a rehearing. There were no procedural errors or irregularities in the proceedings in the court below. There was evidence for the findings of fact that the District Judge made. It therefore follows that I am bound by those findings and I adopt them in this judgment.
14. I now turn to the facts of the case. The Wife was born in June 1962 (aged 49). She is a housewife and mother. She has done some work as a carer since 2004 but is currently without employment. She is suffering from some health issues at the moment although the District Judge found that she has an earning capacity, albeit a relatively modest one.
15. The Husband was born in Egypt in May 1954 (aged 57). He qualified as a doctor there before he came to this country. He has never practised as a doctor in the United Kingdom and is not authorised to do so. He works as a self-employed letting agent. One of the issues before the District Judge was his true income. He also suffers from ill-health. I was told during the appeal that he is now working only part-time.
16. The parties married in September 1986. They have two children. Their son, S was born in June 1990 (aged 21). He is studying law at University. His base is with his mother during University vacations. Their daughter, C, was born in May 1993 (aged 18). She is living at home and is, in effect, on a gap year. She has also had ill-health and has recently been referred to an ENT surgeon.
17. The marriage broke down as long ago as 1999 and the parties separated in August 2000. The marriage was dissolved by Decree Absolute as long ago as January 2002 but neither party brought the financial aspects before the court for final determination.
18. When she met the Husband, the Wife was living in a cottage in the Peak District. The deposit had been provided by her parents and I am satisfied that she was securely housed there. The property was sold following the marriage. Although the net proceeds of £12,000 were returned to her parents, they gave the money back to her with interest (total £14,000) at the time of the purchase of the matrimonial home to be used as the deposit.
19. The matrimonial home is situated in Surrey. It has a gross value of approximately £280,000 and is subject to a mortgage of (£58,892). The net equity was taken at £216,908 before the District Judge. It is occupied by the Wife and C, together with S in University vacations. The Husband has been in rented accommodation since the separation. He currently pays rent of £820 per month.
20. The only other asset of significance is property held by the Husband in Cairo which is jointly owned with his mother and five/six siblings. In his Form E, he calculated these assets as being worth to him £45,833. There has not been a valuation. The position is unclear but the investments fall into two categories – investment properties on the one hand and personal flats occupied by the family on the other. In the first category is a large block that consists of an empty soap factory on the ground floor with around 30 flats above. The Husband says that the flats are occupied by protected tenants on very low rents. He presents this building as more of a liability than an asset. The second is a block that consists of a number of flats, of which six are available for the use of the various family members. The Wife says that these flats are of high quality and that the Husband returns there around four times a year. Indeed, the parties lived in one for around 18 months during the marriage and the District Judge seems to have accepted the Wife's evidence that this property was luxurious.
21. One criticism of the District Judge's judgment is that it is said that he did not make findings as to the assets in the case. It is correct that he did not produce an Asset Schedule but, by inference, it seems clear that he was accepting the Schedule provided by the Wife's counsel, Miss O'Driscoll but adding a further liability of £15,000 to the Husband's debts to take account of a Lloyds loan taken out by the Husband in the run up to the hearing. I have to say that it is not entirely clear to me how that loan has been utilised but it seems that the Husband had other liabilities, such as income tax to HMRC that had not been included in his Form E. I assume he had also incurred further debts in the run up to the hearing. In any event, the District Judge made a clear finding that the debts had to be taken into account as the Husband had not incurred them "recklessly".
22. This means that the District Judge took the Husband's debts as being £20,789 which was the figure in Miss O'Driscoll's Schedule plus the additional loan of £15,000 making total liabilities of £35,789. I accept that this figure does not appear to tally with a later paragraph in the District Judge's judgment that seems to suggest that the debts were in the order of £50,000 but I consider the judgment as a whole supports a finding of the lower figure (see Paragraph 14 of the judgment).
23. Equally, the District Judge rejected the Husband's contention that the Egyptian properties should not be taken into account at their full value. The Husband had argued that they are illiquid and cannot be sold without the consent of all the other owners which consent is not forthcoming. This finding is one of the matters relied on in support of the appeal. Indeed, it is said that the District Judge should have discounted the value to reflect illiquidity.
24. I reject this aspect of the appeal. I begin by reminding myself that the valuations are only the Husband's personal valuations in any event. The Egyptian properties are clearly a valuable resource available to him. Any discount would be entirely arbitrary. The simple fact of the matter is that these assets are owned by family members and arrangements have to be made to assist other members of the family who face hard times or are confronted by divorce proceedings. I strongly suspect that the Husband will retain these assets and make good use of them when in Egypt. This is a matter for him but the District Judge was entitled to take the properties as being worth the amount the Husband himself included in his Form E.
25. It follows that the Assets /Liabilities in this case are as follows:-

The Matrimonial Home	£216,908
Egyptian properties	£45,833
Wife's accounts	£752
Husband's accounts	£5,811
Husband's debts	(£35,789)
Total	£233,515

26. The Husband had tried to argue that the contents of the former matrimonial home had a significant value. It is quite clear that this was not the case. In fairness, this aspect was not advanced by Miss Kabra on the appeal.
27. The Husband had alleged that the Wife had an interest in various assets inherited by her Mother. The Mother was called to give evidence but not cross-examined by the Husband. The District Judge found that the Wife had no interest in any such assets and her inheritance prospects were too vague and remote to take into account. Again, this part of the judgment is unappealable.
28. The next issue was the income of the parties. In this regard, the District Judge made some preliminary findings of fact that are important. First, he found that the Wife was an honest witness who gave clear and persuasive evidence. Second, he found that the Husband was a flamboyant character whose evidence was unconvincing in certain aspects and at times conflicted with what he had said earlier.
29. The District Judge found that the Wife had been doing what she could to try to make herself self-sufficient but that she had encountered difficulties in doing so. He was unable to say what level of earnings she would be able to achieve nor when she could do so but he made a clear finding that the income was now very low and was likely to remain very low.
30. Turning to the Husband, the District Judge referred to his Form E where he set out a gross business profit of £26,694 and a net income after tax of £22,286 pa. The Husband argued before me that this was too high. I was referred by Miss Kabra to the Husband's tax assessments which suggest that his profit before tax was £22,076 with tax of £4,507, giving a net income of only £17,569. I have not, however, seen any business accounts for the Husband.
31. The District Judge refers at Paragraph 24 of his judgment to the Form E showing his income at £28,000 before tax. I assume this is an error. He goes on to reject the Wife's contentions that the Husband has additional income from other businesses (saying this was available in the past but the businesses become uneconomic) and to reject the suggestion that the Husband had additional cash income not declared in his accounts. However, he found that the Husband did have a number of household and living expenses paid out of his business income before tax and that the income was higher than that declared in the Form E. He specifically mentions motor and telephone expenses but nothing else. He also mentions money received in the past from a rich Uncle.
32. It is very difficult to conclude from this exactly how much income the District Judge found the Husband to have. The District Judge was clearly entitled to draw inferences given his finding of fact that the Husband's evidence was unconvincing in certain respects but, in fact, his only such finding is that he had put certain personal expenses through his business accounts.
33. It is then necessary to factor in the Husband's health. The District Judge complains that the Husband had not put medical evidence before the court as to his ability to work. In fact, Miss Kabra points to a letter from a private doctor who is not the Husband's GP, dated 13th June 2011. I assume it was produced on the second day of the hearing. It says as follows:-

"the above-named patient is suffering from supraventricular tachycardia. This condition is exacerbated by stress and exertion associated with working long hours which almost certainly increases the frequency of the attacks. An attack can cause death by deteriorating into ventricular fibrillation, heart failure or stroke. I strongly recommend that he needs to work less hours and do lighter work".

34. The District Judge found that this medical condition flared up from time to time and was painful and life threatening when it happened. He said, however, that there was no evidence on which he could conclude that it affects the Husband's ability to work. This seems to be in conflict with the letter from the private GP but it may have been that the District Judge refused to admit this very late evidence.
35. Two things are, however, clear from the findings made by the District Judge. First, even allowing for his medical condition, the Husband's income/earning capacity is far higher than the Wife's earning capacity. Second, despite this, he has been getting into significant debt. An important component of this situation is undoubtedly the fact that he has had to pay rent and that he has been making payments in relation to the former matrimonial home and children. So far as the former is concerned, it may be that he could have obtained a slightly cheaper property than one costing £820 per month but it will have been a substantial expense wherever he lived. I will deal with the question of the maintenance he has been paying later in this judgment.
36. The District Judge's findings on contributions could not be clearer. He finds that both have made a full contribution with no major disparity between them. He refers to the Wife's contribution to the children and the home as well as her financial contribution to the purchase of the property via her parents, without which he doubts that the matrimonial home could have been purchased. He then refers to the Husband's contributions, primarily by working throughout the marriage. He specifically states that there is nothing in the respective contributions that would lead to a substantially different outcome than would otherwise be the case.
37. The next important issue relates to what has happened since the separation in 2000. There are two aspects. First, there was an issue as to whether the parties had reached a financial agreement. Second, there is the question of delay. As will be seen, the two issues are interrelated.
38. Both parties appear to have argued that they reached an agreement but in very different respects. The Husband alleged that the parties had agreed that the matrimonial home would be sold when both children had attained the age of 18 whereupon the proceeds would be split equally. He says that this explains the delay.
39. The Wife's case is that there was an agreement as to maintenance (which she says the Husband broke) but no agreement as to the capital split. As to maintenance, she says that the Husband agreed to pay £500 per month and the household bills. She adds that the Husband broke this agreement and gradually reduced the maintenance prior to 2003 when he stopped altogether. She adds that she agreed at that point to allow him to cash in the endowment policy (£9,000) on the basis that he would use it to reduce the mortgage on the matrimonial home and discharge debts. She says he did not do so but kept the money for himself.
40. The Husband has, in fact, paid the mortgage interest throughout. This has reduced from £385 per month to £205 per month as interest rates have fallen. At an earlier stage, he additionally paid various other items. More recently, he has also paid £156 pm towards C's car, £86 pm for S's car and £59 pm for C's Gym. His total contribution has therefore been £506 per month of late, although the Wife says that the contribution to S's car ended in June 2011.
41. Miss Kabra criticises the District Judge for failing to make clear findings as to whether or not there was an agreement and if so what it was. She also criticises him for not dealing with the issue of delay. I do not consider that these complaints are made out. The District Judge found that there was no evidence of any such agreement and that, if there was, it was on an informal basis. It is right that he says he will return to this later and that he does not appear to have done so but his finding of no formal agreement is clear.
42. This does, of course, mean that neither party had any reason to explain the delay. Miss Kabra drew my attention to the decision of Rossi v Rossi [2006] EWHC 1482; [2007] 1 FLR 790 in which Mr Nicholas Mostyn QC (as he then was) sets out in detail the law as to delay. I do not find that this assists me in this particular case. The Husband might have a point if he had only delayed because there was an agreement that he would get half the proceeds of sale when the children grew up but the District Judge has rejected that. Each party is therefore equally to blame for the delay and I cannot see that it helps (or hinders) either. The matter has to be dealt with. Moreover, the law is that this must happen on the basis of the facts as they are at trial.
43. There was one aspect in which the District Judge did make a finding and that was in relation to the surrender of the policy. He accepted the Wife's evidence that the Husband was to use the proceeds to pay down the mortgage (at least in part) but that he did not do so. He reminds himself that half the value of the policy (£4,500) was the Husband's anyway and says that it is not therefore appropriate to take the full amount into account.
44. The penultimate finding of fact that needs to be recited relates to the Wife's need for periodical payments. I have already dealt with his finding as to her earning capacity. She is, in fact, surviving somehow on an extremely modest amount of state assistance. Not surprisingly, the District Judge found that the Wife was not able to be self-supporting for the foreseeable future and that it was thus a case where it was appropriate for there to be a periodical payments order.
45. The Husband criticises this finding in his Notice of Appeal arguing that because he has not maintained the Wife directly for several years, she can adjust without undue hardship to the termination of maintenance. In fact, the Husband has been maintaining her, if only by paying the mortgage instalments. It is, however, quite unrealistic to try to argue that a woman with a very modest earning capacity who is currently on state benefits can adjust without undue hardship to the termination of maintenance. It may, in fact, be that there cannot be periodical payments for other reasons but it is clear to me that there is significant hardship on both sides in this case.
46. Finally, he reminded himself that the children were no longer the first consideration of the court, given that both have now attained the age of 18 but took into account the fact that C was still a responsibility of the Wife which he should take into account as one of the factors. He said he had the section 25 criteria in mind throughout. It is quite sufficient for an experienced judge to deal with it in this way. It would be entirely superfluous to expect the list to be repeated verbatim in every judgment.
47. I therefore turn to consider the District Judge's order. He decided that:-

(a) There was no reasonable alternative but to allow the Wife to remain in the matrimonial home for a short period to give her time to adjust. He determined that this should be two years whereupon the property should be sold.

(b) On sale, the proceeds should be divided as to 70% to the Wife and 30% to the Husband. This would give the Wife approximately £151,835 and the Husband £65,072 out of which he would have to pay his debts. He did indicate that, on the basis of the property particulars put before him, this would leave the Wife around £100,000 short of what she would need to acquire an alternative property in the area. He said, though, that it would be wrong to accede to her request for an outright transfer as that would deprive the Husband entirely of capital funds and leave him in a negative capital position.

(c) The Husband should pay the Wife £500 per month periodical payments for four years without a section 28(1)(a) bar on extension. He said he came to the conclusion that this was as much as the Husband could afford on his findings of the evidence.

48. The Husband's preliminary Skeleton Argument was drafted by previous counsel, Mr Brunsdon Tully. It makes a concerted attack on the judgment. I have already indicated that I have rejected many of the criticisms (such as that the District Judge did not compute the capital pot). I have great sympathy for the Judge who makes it clear that he is doing his very best to achieve fairness. I have, however, reluctantly come to the conclusion that the Husband is right in saying that the judgment is subject to justified criticism in three respects:-

(a) It does not sufficiently reason the very significant departure from equality that is the effect of the order. Indeed, the judgment does not mention the need to justify a departure from equality.

(b) In so far as there is a needs justification for departure, it does not explain how the resulting capital order will fairly meet the needs of both parties, as opposed to the Wife alone.

(c) It does not adequately explain the interplay between the periodical payments order and the capital order.

49. The law in relation to financial remedy cases, as set out in the MCA 1973 is, of course, exactly the same for everyone, whether rich or poor. Following White v White [2000] 2 FLR 981, the obligation in all cases is to be fair but, in so far as there is to be a departure from equality, there has to be good reason for so doing.
50. I entirely accept that needs can justify a departure from equality but, if the court is to do so, it is necessary to consider the needs of both parties. I equally accept that disparity in earning capacity can justify departure but again this has to be considered in the context of the needs of both parties not just the wife. In particular, there has to be consideration of how such a departure can be justified if there is also a substantive periodical payments order. With the greatest of respect to a very experienced judge, I do not consider that the judgment sufficiently did so.
51. Having found that the District Judge was wrong, I could do one of two things. I could send the matter back for a rehearing before a District Judge or I can impose my own solution using the District Judge's findings of fact. I am quite sure that I should not send the matter back for a rehearing. The costs of the case are already out of all proportion to the assets involved. The parties desperately require finality and I will have to do my best to achieve that now.
52. In this case, the resulting order left the Wife with approximately £152,587 or 65% of the assets. The Husband was left with £80,928 of which £45,833 is his share of the Egyptian properties. After paying off his current debts, he would have £35,095 in this jurisdiction. Indeed, I consider his debts are bound to increase further between now and the sale of the property in two years' time. Finally, the capital disparity might well be justified in terms of the income disparity between the spouses but, over and above the capital split, there is also a periodical payments order. It cannot therefore be argued that the capital split was justified because there was a clean break.
53. I appreciate entirely that the District Judge found the Husband to be an unreliable witness but I have to deal with the case on the basis of the findings of fact actually made. The District Judge did not find that there were non-disclosed assets and his findings as to earning capacity amount, in reality, to the Husband putting certain personal expenses through his business accounts. Indeed, the two examples he gives (motoring expenses and telephone) may be entirely legitimate business expenses (albeit containing a benefit not available to those who are employed).
54. Moreover, the Husband has been getting into ever increasing debt. I am sure he has a considerably better lifestyle than the Wife who clearly lives at subsistence level. For example, the Husband regularly travels to Egypt on holiday. The District Judge did not, however, find that he has accrued the debts recklessly. It follows that the Husband has got into debt because he cannot afford the rent he is paying combined with the payments he is making on the mortgage and to the children.
55. It follows that it is impossible to see how he can afford to pay periodical payments of £500 per month to the Wife, particularly if he continues to make payments to the children. This would be an increase of some £300 per month on what he is paying at the moment. He could, of course, stop the payments to the children even though his son is still in tertiary education and it is hoped his daughter will follow in due course. Even if he did that, he would, in my view, still be in deficit and his debts would increase further. Finally, I must remind myself that the Husband is aged 57 and not going to be able to work for ever, particularly given that it is not disputed that he does suffer from ill-health.
56. I have come to the clear conclusion that the disparity in earning capacity, notwithstanding the Husband's ill health, combined with consideration of the parties' respective needs are good reasons to depart from equality but only on a clean break basis.
57. I did, at one point, consider whether or not the Wife should be allowed to remain in the matrimonial home indefinitely with a charge in favour of the Husband. There is, after all, no point in just making both parties homeless. I decided, however, on balance, that I could not come to that conclusion and do justice to the Husband. He has large debts which he would simply be unable to discharge without a sale. Moreover, I am by no means satisfied that the Wife would be able to maintain the property and, in particular, the mortgage, in the absence of financial support from the Husband, even taking into account the availability of state benefits.
58. I have also come to the conclusion that the two year delay on the sale of the matrimonial home is arbitrary and unjustified. If C goes to University, she will still be at University in two years' time. Indeed, S may also remain dependant at least to some extent in two years.
59. It follows that I have concluded that the home should be sold as soon as possible. I consider it should be placed on the market in the early spring (say 1st March) with the intention of it being sold as soon as possible thereafter. The Husband must continue to pay the mortgage until sale. If he will not undertake to do so, I will make a periodical payments order in that sum which will terminate on sale with a section 28(1)(a) direction to prevent extension.
60. I must now turn to the distribution of the proceeds of sale. In my view, there are good reasons for a departure from equality in favour of the Wife. Some are obviously more significant than others but broadly they are as follows:-

(a) The income disparity between the parties, although I make it clear that, for this to justify departure in this particular case, there has to be a clean break;

(b) The Wife's remaining responsibility for the two children, even though they are no longer the first consideration of the court;

(c) The availability to the Husband of the Egyptian resources and, in particular, the flat in which he can stay in that country; the Wife has no such available accommodation;

(d) The fact that the Wife was securely housed at the outset of the marriage; and

(e) The fact that the Husband did have the proceeds of sale of the endowment policy.

61. I consider that (a) above is the most important ground for departure from equality in this case. I would have added a sixth ground, namely the contribution to the purchase price of the matrimonial home that came from the Wife's family, were it not for the fact that the District Judge found the contributions overall to have been equal.
62. I agree with the District Judge that the above factors do justify a significant departure from equality. Although I might have come to a slightly different conclusion as to the split, it would have not have been far removed from his division and it follows that I can see no reason to vary the 70/30 split on which he alighted. I will therefore not interfere with that part of the order but it will be on a clean break basis on sale. I entirely accept that, with resources of around £150,000, the Wife will find it very difficult to buy anything other than a very small flat in the South East of England. I also accept that, with resources of around £35,000, after he has discharged his debts, the Husband will not be able to buy even that without a large mortgage.
63. It is certainly not the job of the court to tell the parties what to do in the future. For example, it would not be reasonable for the court to say to the Husband that he should return to Egypt nor to say to the Wife that she should buy a property far from where she now lives, in a much cheaper part of the country, such as closer to her mother. Of course, each could do that if they so wish. Equally, they could rent and use their capital to subsidise their income. Alternatively, they may be able to purchase a modest home as postulated in the previous paragraph. It will be for them to decide. I am however satisfied that this is a suitable case for the departure from equality for the reasons given and that the departure, which I accept is significant, is fair.
64. It does, however, follow that there must be a clean break on sale of the matrimonial home. This will mean that the Husband's earnings will be his without obligation to his Wife. Equally, she will have to manage on whatever she can earn combined with her share of the net proceeds and any entitlement she has from the State.
65. I have made it very clear from the outset that this was a very difficult case because no outcome is in the least bit satisfactory. It will not be easy for either party. I am, however, satisfied that the order I make is as fair as it can be and is justified on the facts of this case taking into account fully section 25 of the MCA 1973.