England and Wales High Court (Family Division) Decisions

IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		25/01/2012

MR. JUSTICE MOSTYN:

1. Before the court is an application for permission to appeal, with appeal to follow if permission is granted, against a decision of District Judge Malik incorporated in a judgment dated 27th May 2011. The order reflecting the judgment was not made until 28th July 2011. This hearing was fixed by order of Holman J dated 6th July 2011 and three days was allowed for its disposal. On that day Holman J had before him the appellant's notice of appeal, which is undated, and the grounds of appeal, then seven in number. Holman J allowed the appellant to add further grounds and in due course a further five were added. In this judgment I shall refer to the parties as respectively wife and husband.
2. The judgment is a very full and comprehensive analysis of the issues presented to court at first instance. It runs to 162 paragraphs over 56 pages. It is often said that the court conducts an inquisition and that it has a duty independently to investigate relevant issues not presented to it by the parties, see for example Parra v Parra [2003] 1 FLR 942 at paragraph 22. This admirable principle has to yield to practical reality. If the parties choose to run the case within certain confines and present evidence only relevant to the issues as defined by them it is difficult, if not impossible, for the court independently to gather evidence about other issues and to adjudicate them. Short of adjournment with consequential costs and delay the court is generally fixed with the investigation of issues as presented to it by the parties.
3. I say this because there was an aspect of the judgment that initially troubled me. In paragraph 31 the district judge stated that he had to apply the familiar distributive principles of sharing and need, yet when he came to render his decision in paragraphs 158 to 160 he applied only the sharing principle and nothing was said about need. Indeed the only reference to need is within paragraph 141 where the district judge deals with housing need and this records merely that each party wished to retain a property called BFD Farm which comprises a bungalow and four tenanted flats worth in all £800,000 but subject to a mortgage of £828,000.
4. Judicial brevity is not to be condemned: See Re A and L (Fact-Finding Hearing: Extempore Judgment) 2011 EWCA Civ 1611 at paragraph 48 where Munby LJ stated:

"Thorpe LJ has emphasised the virtue of brevity. It would be worse than unfortunate if the impression were to gain ground that experienced judges who have the gift of brevity should be deterred from displaying it by an inappropriate readiness on the part of appellate courts to interfere."

However, I was concerned that I was not so much facing brevity on this topic as almost total silence.

5. I am persuaded, however, that this absence of reasoning concerning the needs principle does not undermine this judgment for the following reasons:

(a) The wife never advanced a case on need. Her Form E failed to include any information at all in box 3.2 (capital need). Box 3.1 merely stated an income need of £3,025 per month.

(b) The wife's two section 25 affidavits did not advance any case of need.

(c) There was no evidence adduced at the trial about need. There were no budgets or estate agent's particulars supplied nor was there any oral evidence on the subject. The wife's only needs case was that BFD Farm should be transferred to her. She could live in the bungalow and receive the rental income of £2,400 per month.

(d) In the notice of appeal needs are but faintly advanced within ground 6 and the complaint is in truth confined to the issue of the transfer of BFD Farm.

6. In his judgment the district judge on the application of the sharing principle gave the wife £1,317,304 which, after deduction of unpaid costs and the addition of £100,000 contribution to costs (which I will refer to below), left her with £1,154,141. Although there is no explicit analysis of whether this sum would meet the wife's needs on the clean break basis it can be safely deduced that the district judge was satisfied that this was the case, a view conclusively fortified by the wife's positive case that BFD Farm, worth £800,000, would meet all her housing needs and, from its rental income, her revenue needs.
7. The background to this case is as follows. The husband and wife commenced cohabitation in 1982. Their daughter CS was born in 1986. She is now independent. The husband and the wife did not get around to getting married until 22nd December 2007. However, they separated but four months later on 25th April 2008, and because they had not been married for more than a year, the only matrimonial relief that was available to them was judicial separation. Thus a judicial separation petition was presented by the wife on 9th July 2008 and a degree of judicial separation was pronounced thereafter. There has not yet been a divorce between the parties. In my opinion there ought to be in order to allow these parties to move on in their future lives.
8. The husband is a builder by training but long ago moved into property development and ownership. The wife is not employed.
9. The wife issued Form A on the 28th July 2008. It took nearly three years to come to trial. In the course of that period the parties ran up total costs of £490,000. This represents just under 20% of their assets. The wife says that the delay and the costs are exclusively referable to the husband's extreme litigation misconduct in giving misleading and false disclosure; in failing to comply with orders; and in raising and pursuing issues unreasonably. The husband, while accepting that his presentation was not either a paradigm of transparency or a model of amplitude accuses the wife of obsessive zeal in her pursuit of him. Both points of view were vindicated, up to a point, in the judgment of the district judge.
10. In his judgment the district judge was faced with a case for the wife which argued as follows:

(a) that stern findings as to litigation misconduct should be made against the husband which should colour or influence all necessary factual findings;

(b) that the sum of £406,000 should be added back or reattributed to the husband under the applicable principles which I have recently summarised in my decisions of N v. F (Financial Orders: Pre-Acquired Wealth) [2011] 2 FLR 533 and BJ v. MJ (Financial Order: Overseas Trust) [2011] EWHC 2708 (Fam);

(c) that the net assets should be divided equally;

(d) that a further £80,000 should be paid in respect of the husband's modest Isle of Man trust;

(e) that the husband should pay £37,500 in arrears of maintenance pending suit; and

(f) that the husband should pay a total of £204,000 in costs to include costs orders previously made.

After correcting a mathematical error in the presentation of the wife's counsel at first instance it appears that the wife's claim was for a total of £1,829,000.

11. Given that, on the findings of the district judge, the net assets were, after deduction of unpaid costs, £2,028,000, the wife's aspirations were ambitious to say the least.
12. The district judge took a great deal of time over his judgment and it is a model of clarity and thoroughness. He heard a substantial body of oral evidence. As I have said earlier in his findings he judged the husband to have been a far from perfect litigant, but he also judged the wife to have been in certain respects an unreasonably zealous litigant who had not pursued issues proportionately. He very carefully judged the eleven separate components of the claimed overall add back comprising £406,000 and found some proved and others not proved. In total he found £68,800 to be proved. That is a finding of fact which is impossible to disturb.
13. Having made those findings the district judge went on to undertake the distributive phase of his analysis. He found the assets to amount to a total of £2,326,299. That sum did not include the add-back of £68,800 or the negative figure referable to the parties' unpaid costs of £297,478. The district judge on the application of the sharing principle awarded the wife 55% of £2,326,299. The departure from equality was justified by him by reference to the fact that the husband had an earning capacity, but the wife did not. The district judge then deducted half of his found add-back figure of £68,800 from the husband and added that same sum to the wife giving her a total of £1,317,304. It can be seen that the wife in fact received 56.6% of the actual assets as found by the district judge.
14. As I have said, the district judge did not take the unpaid costs off the top. He considered the husband's litigation misconduct and ordered him to make a payment of £100,000 towards the wife's costs inclusive of the value of costs previously ordered.
15. Thus the net effect of the award to the wife was as follows. The wife received £1,317,304 from which was deducted her unpaid costs of £263,163 (I have corrected the figure that appears in paragraph 9 of the district judge's judgment) to which was added the £100,000 contribution to the wife's costs as ordered. The total net receipt by the wife was £1,154,141.
16. Although there are twelve grounds of appeal Mr. Buswell has effectively distilled his argument to two points. First, that the judge erred in the exercise of his discretion in failing to transfer to the wife the property at BFD Farm. Second, that the judge failed properly to reflect the husband's litigation misconduct in his costs award: the sum awarded should have been £170,000 and not £100,000. In his skeleton argument for this application Mr. Buswell said this:

"If the district judge had transferred BFD Farm to her sole name to provide a future income and made costs orders that reflected that the husband's conduct had driven up the costs on both sides as well as her own, there would have been no appeal. In terms of costs what she argued for was reasonable and what was ordered was plainly unfair in the circumstances."

17. Under Family Procedure Rules 2010, rule 30.3(7):

"(7) Permission to appeal may be given only 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."

18. In considering this test I say immediately that for neither of the two grounds advanced by Mr. Buswell could paragraph (b) be engaged. Paragraph (b) is engaged, generally speaking, for cases that give rise to important points of law. So the question is in relation to the two aspects argued by Mr. Buswell whether I consider that the appeal would have a real prospect of success.
19. I turn first to the issue concerning BFD Farm. In his judgment at paragraph 141 the district judge said this:

"Like the wife the husband also wishes to retain BFD Farm. His reasons for doing so are because he has lived in the area all his life and personally pushed to purchase the land on which it is situated. Further it has sufficient land and buildings, etc. to house the various building materials for his business."

In his decision at paragraph 158 he said this:

"The wife seeks to retain BFD Farm so she can undertake some small building works. I do not think this is a realistic option on her part. It seems to me the husband is in a better position to retain BFD Farm and to develop any future business using that as a base and springboard."

That is a decision squarely within the district judge's legitimate discretion. It is impossible for me to say that it is plainly wrong. I conclude there is no prospect, let alone a real prospect, of disturbing that disposition. I therefore refuse permission on that ground.

20. I now turn to the issue of costs. I have explained that the district judge made his award against an assessed pool of assets which did not include the liabilities of the parties in respect of their unpaid costs. In the 2011/2012 edition of At a Glance at page 81 in the editorial note about costs it is stated as follows:

"The starting point is that at the final hearing unpaid costs will be 'taken off the top' as a debt of the parties in question. For this purpose a much more detailed costs estimate in form H1 is now required at trial. The approach in Leadbeater v. Leadbeater [1985] FLR 789 (of adding back costs already paid) is now outmoded"

Not very surprisingly I consider that editorial contribution to be well founded. So in making his division without taking costs off the top the district judge was acting in an unconventional way.

21. It is instructive to analyse what the position would have been had the district judge proceeded to take unpaid costs off the top in the conventional way. With the add-back the pool of assets was £2,395,099. The unpaid costs were £297,478. Therefore the pool of net divisible assets was £2,097,621. A 55% division in favour of the wife would give her, on that basis, £1,153,692. This is only a mere £450 more than her net effect of £1,154,141 as explained by me above at paragraph 13. So on a superficial analysis Mr. Buswell makes a good point when he says that in the disposition of the district judge the husband's litigation misconduct was not properly reflected. Indeed, he would say that it was not reflected at all.
22. Whilst attractive this argument is flawed for reasons which I will now explain. The At a Glance costs commentary goes on to state:

"What of the position where there is a striking disparity in the costs each party incurs? In RH v. RH [2008] 2 FLR 2142 a case proceeding under the old rules, the wife had incurred £265,000 costs and the husband £486,000. When calculating the relevant assets and the award, Singer J had in effect notionally increased the husband's assets by £225,000 (by disregarding his unpaid costs of £65,000 and adding back £160,000 of costs already paid). The lump sum awarded to the husband would otherwise have been greater. In the judgment leading to the award he had stated: 'This is intended as an entirely neutral adjustment and is subject to the submissions I will no doubt hear about costs. At this stage I can only attempt to mitigate the distorting effect on my award of the unequal costs burden as the reasons for this very large difference between the liabilities incurred on each side have not been fully explored.' In the reported costs judgment Singer J concluded that the disparity had not been justified, and therefore that the approach adopted was not unfair to H, 'nor to W who would otherwise be saddled with a half share of what I do now conclude was his unreasonable and excessive costs expenditure'. Whether this approach of adding back excessive costs applies under the current regime will have to be decided but there would seem to be no reason why it should be not be adopted where warranted."

23. In this case there is a striking disparity between the costs incurred. The wife's overall costs, both paid and unpaid, are £365,564. The husband's are £124,472. The total is £490,036. It can be seen that of the total, 75% of the costs have been incurred by the wife and 25% by the husband. The effect of a 55%/45% split is that, obviously, the wife pays 55% of the husband's total costs or £68,460 and the husband pays 45% of the wife's total costs or £164,504. Thus the effect of (a) the disparity and (b) the 55%/45% split is that the husband is, by virtue of these facts alone, making a net payment to the wife's costs of £96,044.
24. I would suggest, deferentially, that where there is a striking disparity in the costs, as here, an alternative to Singer J's technique is to calculate, as I have done, the true net payment by one party to the other in respect of costs. Once that has been done then it requires only a monetary or liquidated adjustment in the opposite direction to split the costs in the proportion of the main division rather than leaving them as they are. So if the judge here had wished that the costs burden should fall 55%/45% he should have adjusted his final figures by a payment of £96,044 from the wife to the husband to achieve that.
25. Although the district judge did not perhaps appreciate the effect of his order it was, as I have explained, to require the husband to make a net payment of £96,044, together with the £450 to which I have earlier referred, towards the wife's costs, a total of £96,494.
26. I cannot judge that contribution to be unreasonable on the district judge's findings. Had I been sitting at first instance I may have taken a different view. Under FPR 2010 28.3 the starting point is no order as to costs. Where the combination of a disparity of costs and the division already means or effects a significant net costs shift between the parties I have to suggest that the conduct referred to in that rule would have to be very poor indeed to warrant any further adjustment.
27. On the facts presented before me I cannot judge this ground, namely insufficient reflection of litigation conduct within the costs award, to have any real prospects of success for the reasons I have given, and I therefore refuse permission in that regard also.
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