England and Wales High Court (Family Division) Decisions

IN THE HIGH COURT OF JUSTICE
FAMILY COURT

		Royal Courts of Justice Strand London WC2A 2LL
		3rd October 2014

1. THE JUDGE: This is an application for maintenance pending suit made on 10^th July 2014 by a wife in the course of her substantive application for financial remedy orders. At this hearing the wife has been represented by Mr Howard QC and Mr Castle and the husband by Mr Posnansky QC.
2. The wife's case is that the husband should pay maintenance, for herself and the children, of not less than approximately £270,000 per year but that a proper sum is £392,000. The husband offers global payments of £202,000. If the wife's substantive claims are not resolved for a year, which is likely if they are not settled, the sum at issue is between £70,000 and £190,000.
3. The parties have together spent a sum approaching £100,000 on this application. Some of this expenditure might have been incurred in any event, because this hearing has also been listed to determine some directions, but it is clear to me that the bulk has been spent on the application for maintenance pending suit. One of the issues this inevitably raises, and which I address below, is whether this has been a proportionate application.
4. Each party has filed a statement and I have read and heard submissions on behalf of each of them.
5. Dealing briefly with the background, the parties married in 2002. The marriage came to an end in 2013 and the parties separated finally in February 2014. There are four children of the marriage aged between 3 and 8. Following the breakdown of the marriage an alternative home was, by agreement, purchased for the wife and the children. It is not far from the former matrimonial home and cost £2.9 million.
6. The parties' resources, broadly expressed, are as follows. The husband has non-trust assets with a combined value of approximately £49 million. The former matrimonial home is valued at approximately £2.6 million; its value depends on the amount of land included with it. The husband also has an interest in assets held in trust. The total value of these assets is approximately £130 million but the husband's life interest is confined to approximately £100 million.
7. The wife has resources of approximately £4.5 million, £2.9 million being the property to which I have referred with approximately £1.4 million in cash and investments.
8. The husband has a very substantial income of up to approximately £1.7 million net per year. A significant proportion of this is retained, in the trusts or businesses, to meet expenditure and for re-investment. However, on a broad analysis, and the contrary has not been argued, I am satisfied that the husband could afford to pay what the wife seeks if I conclude that it is reasonable for him to do so.
9. Following the separation, the parties sensibly agreed that the wife would transfer to the husband certain assets which were in her name to avoid adverse tax consequences. As part of this agreement the husband paid the wife a sum of £1 million (now reduced to £960,000) which forms part of the £1.4 million referred to above. By letter dated 3^rd April 2014 the husband, through his solicitors, confirmed that he did not expect the wife to use the sum of £1 million to fund her legal costs or her living expenses.
10. Until July 2014 the husband continued to pay the wife the sums he had paid during the marriage with some additional expenses. Combined, the husband was paying to or for the wife approximately £9,600 per month from which sum she was paying certain household utility bills. As from 23^rd July 2014 the husband began paying the wife £13,900 per month or £167,000 per year. In addition, he has been paying additional expenses, now confined or to be confined by him, to staff costs of just over £35,000 giving a combined total of £202,000. As referred to earlier in this judgment, this is the annual sum he proposes by way of maintenance pending suit.
11. The husband has also been paying the wife's legal costs but by letter dated 22^nd September of 2014 it was indicated that this was to end. It was asserted that he was simply underwriting the wife's costs and he did not intend to continue doing so.
12. Pursuant to an Order I made in August, the parties have exchanged open proposals. These followed an unsuccessful private FDR. The wife seeks £9 million for housing (split between two properties) and further capital of £12 million as an income fund and of £760,000 for certain specified items. Accordingly, she seeks total resources including her present wealth of, broadly, £22 million. The husband offers £10 million whilst asserting that the wife's housing needs could be met at £3.5 million and her income needs with a fund of £4.3 million.
13. Looking at their respective offers, the sum at issue before me (at its highest) represents under one per cent of the wife's proposals and under two per cent of the husband's proposals.
14. In her Form E the wife asserts that the family enjoyed an extremely high standard of living, although she adds that this was entirely dictated by the husband and that she would have liked to spend more money on certain things, such as holidays, than the husband permitted. The budget with her Form E, for herself and the children, totals £518,000 per year. Very recently the wife has produced a specific budget for her maintenance pending suit application. This gives the total to which I have referred, namely £392,000.
15. The wife's statement in support of her application is undated but was clearly completed in July 2014. In this, the wife repeats that her accounts were always overdrawn during the marriage and that meeting those family expenses for which she was responsible, on the sums paid to her by the husband, was a constant struggle.
16. The husband's annual budget in his Form E is £610,000. A considerable part of this is not in respect of living expenses (or what might properly be called living expenses for the purposes at least of assessing interim maintenance) as it includes, for example, £135,000 for life insurance and family protection insurance and £40,000 for pension contributions. The amount for general living expenses including the children, save for school fees, is closer to £200,000.
17. A major part of the husband's case is that the family lived on approximately £230,000 to £265,000 per year including school fees. With his statement he has produced spreadsheets prepared by his accountant setting out his income and the family's expenditure for the tax years 2011, 2012 and 2013. Based on these schedules the husband contends that the total annual family expenditure was, on average, £245,000 including school fees of approximately £40,000. He additionally contends that the wife's reasonable income needs are £156,000.
18. Turning now to the parties' submissions, which I propose only to summarise, Mr Howard submits that in assessing the wife's maintenance claims at this stage of the proceedings I should err on the side of caution or generosity. He submits that, as an absolute minimum, the wife should receive for herself and the children a total of £280,000 but that the amount she seeks, namely £392,000, is a reasonable and fair sum.
19. During the course of the hearing Mr Howard submitted that if I did not award the wife maintenance at this level, or either of these levels, she would be unable to meet her reasonable income needs. I questioned this, having regard to the fact that the wife has £1.4 million in available resources. In response, Mr Howard referred to two principal matters. First, the husband's agreement in the letter of 3^rd April 2014 that he did not expect the wife to use the sum of £1 million to fund either her legal costs or her living expenses. Secondly, that the wife wishes to sell her present home and move to a property in Surrey costing in the region of £5.5 million. This is referred to in the wife's Replies to Questionnaire.
20. In her Replies the wife says that, in order to purchase the property she wants, she would need to use the £1 million she received from the husband as well as obtaining a mortgage (to be guaranteed by her uncle) and a bridging loan. There is no reference in the wife's Replies to her investments of just under £400,000.
21. I have considerable doubts as to whether the £1 million should be treated as being unavailable to meet even part of the wife's income needs, as asserted by her, but even if I do, in my judgment Mr Howard's submission is not sustainable because the wife can use her investments for this purpose.
22. Mr Howard additionally refers to the husband's withdrawal of his agreement to fund the wife's legal costs. By letter dated 22^nd September 2014 it was stated that, because the husband was concerned he was simply underwriting the wife's legal costs, he would stop paying her costs in respect of the financial remedy proceedings after September 2014. Mr Howard contends that this was an attempt to intimidate or pressurise the wife in the run up to the FDR and to compel her to erode her relatively limited capital base. When determining this application, I take into account that the wife may well have to use her investments to meet her legal costs.
23. Mr Howard submits that the interim budget advanced by the wife is a reasonable and fair one. The wife does not accept that the family's annual expenditure was as contended by the husband. Mr Howard points to the fact that the schedules contain, in part, estimates and do not include ad hoc transfers made by the husband to the wife to discharge accumulated indebtedness. Mr Howard made clear that the wife does not seek a higher standard of living than that enjoyed by the family during the marriage. She merely seeks a different standard of living which includes more expensive holidays and other additional expenditure because she no longer has the use of the husband's estate or trust assets.
24. Mr Howard also submits that the sum proposed by the husband specifically in respect of the children is too low in any event. I accept that, if looked at separately, the sum for the children is significantly too low but when determining this application I propose to do so by reference to the global sums concerned.
25. As referred to above, Mr Howard submits that the minimum award should be £264,000 (as expressed in his written submissions) or £280,000 (as expressed in his oral submissions) but that the sum the wife seeks in her interim budget, of £392,000, is fair and reasonable.
26. Mr Posnansky submits that the wife's case is unsustainable because it is manifestly exaggerated and unrealistic. He submits that the maintenance sought by the wife is so far in excess of the standard of living during the marriage that it is unprincipled and unreasonable. He makes the following additional points: that the application does not stem from any need; that it is not made because the husband is keeping the wife short of funds; and that it is a litigation tactic seeking to establish a high benchmark in respect of the wife's long-term claims.
27. During the course of his submissions Mr Posnansky referred to specific items in the wife's budget, including holidays and weekend breaks; clothes, shoes and jewellery; and outings, restaurants and entertaining, which he submits bear no reflection to expenditure incurred by the family during the marriage. The wife seeks, he submits, not a marginal change from the marital standard of living but a transformation from it. In making this submission, Mr Posnansky relies on the schedules prepared by the husband's accountants.
28. Turning now to the legal framework, the court's power to award maintenance pending suit is contained in s.22 of the Matrimonial Causes Act 1973. The section provides simply that on a petition the court may make an:

"order requiring either party to the marriage to make to the other such periodical payments for his or her maintenance … as the court thinks reasonable."

The purpose of this provision is clear as, for example, expressed in the Family Court Practice 2014 where it is said:

"The section is intended to address the immediate needs of a spouse by making income-based orders. Issues of capital or long-term expenditure are better dealt with at the final hearing."

I would endorse, indeed emphasise, the word "immediate". The purpose of the section is to give the court the power to address income needs which cannot await the final resolution of the substantive claims either by agreement or court determination.

29. I propose to refer briefly to the following authorities: F v F (Ancillary Relief: Substantial Assets) [1995] 2 FLR 45, M v M (Maintenance Pending Suit) [2002] 2 FLR 123, TL v ML & Ors (Ancillary Relief: Claims against Assets of Extended Family) [2006] 1 FLR 1263 and G v G (Child Maintenance: Interim Costs Provision) [2010] 2 FLR 1264. I have also been referred by Mr Howard to my decision of AR v AR (Treatment of Inherited Wealth) [2012] 2 FLR 1 and, in particular, paragraph 71 of that judgment. My judgment in that case was given at a final hearing. What I said about future income needs and their assessment was not directed to the assessment of maintenance pending suit and has only slight relevance to it.
30. In F v F the parties were a long way apart in their submissions. The wife in that case was seeking approximately £540,000 and the husband was proposing £220,000 plus other expenses. In the course of his judgment Thorpe J, as he then was, commented that, in his experience, contested interim maintenance hearings were almost unknown. In his view this reflected what he called the practical considerations which he set out on page 49 C:

"I suspect that a disproportionate significance is attached by the parties and possibly by their advisers to the judgment that I give upon the issue. It does seem to me that the determination of the wife's reasonable needs for herself and the children, both present and prospective, depend crucially upon the investigation of a variety of issues raised not only in the interim provision affidavits but also in the substantive case affidavits which cannot be resolved without full discovery and oral evidence. Therefore, if I decide a figure within or approaching the high ground, the wife would be foolish to assume that the same conclusion would have emerged from a substantive hearing. Equally, if I decided a figure in the low ground, the husband would be rash to assume that that same result would flow at the substantive hearing.

It seems to me that in these cases involving very large sums of money it is, generally speaking, superfluous for there to be a full scale investigation of the interim provision. The discipline imposed by the parties and the preparation of the case should ensure that the duration of the interim period is a matter of months rather than years and any under provision or over provision can always be corrected when the account comes to be taken at the substantive hearing. During the course of the substantive hearing the account that the judge takes is principally an account of the applicant's prospective future needs but there is no reason why account should not be taken of the much less significant reckoning of her needs and the needs of the children over the interim period. If that account reveals that there has been over provision and if that over provision is the product of excessive demands and estimates on the part of the applicant, then there is every opportunity to do fairness by set-off."

31. Thorpe J then addresses the considerations which, in his view, should "bear upon the exercise of my discretion". I do not propose to repeat these, save in respect of his reference to the standard of living and its place in the discretionary exercise. He said at page 50 C/D:

"I think that it is necessary to establish a yardstick that more nearly reflects the standard of living which has been the norm for the wife ever since marriage and for the husband for considerably longer."

This comment was in the context of cautioning against reasonableness being determined, not by reference to the specific marriage, but by reference to some abstract concept of what might "seem generous" to society as a whole.

32. In M v M Charles J was referred to F v F. He said at paragraph 123:

"In my judgment, the wife is seeking to read too much into F v F when she relies on it to found an argument that the award in this or most cases concerning the super rich shall be designed to maintain the status quo or to establish a yardstick that more nearly reflects the marital standard of living and, thus, the status quo. In my judgment, such a restriction on the judicial discretion in the determination of what is reasonable in any given case is not something Thorpe J intended."

Then in paragraph 124:

"Having said that, I accept that the standard of living during the marriage is a very relevant factor but it seems to me that in determining what is reasonable in any given case the rival contentions of the parties, both as to the interim and final position, cannot be disregarded and this is particularly the case when, as here, one of the parties is asserting a change in circumstances relating to the funding of that expenditure."

33. In TL V ML Nicholas Mostyn QC, as he then was, sought to summarise the principles applicable to applications for maintenance pending suit. He says at 124, after referring to F v F and M v M:

"From these cases I derive the following principles:

(i) The sole criterion to be applied in determining the application is 'reasonableness' (s22 Matrimonial Causes Act 1973), which, to my mind, is synonymous with 'fairness'.

(ii) A very important factor in determining fairness is the marital standard of living (F v F). This is not to say that the exercise is merely to replicate that standard (M v M).

(iii) In every maintenance pending suit application there should be a specific maintenance pending suit budget which excludes capital or long term expenditure more aptly to be considered on a final hearing (F v F). That budget should be examined critically in every case to exclude forensic exaggeration (F v F).

(iv) Where the affidavit or Form E disclosure by the payer is obviously deficient the court should not hesitate to make robust assumptions about his ability to pay. The court is not confined to the mere say-so of the payer as to the extent of his income or resources. In such a situation the court should err in favour of the payee ..."

34. I would add to these principles what I said in G v G, when determining an interim application under Schedule 1 of the Children Act 1989.

"[51] … Interim hearings are an expensive exercise and, in my view, they should be pursued only when, on a broad assessment, the court's intervention is manifestly required. The jurisdiction to make an interim award is a very broad jurisdiction…

[52] It is a very broad jurisdiction but it is one which, as I have said, should be exercised when on a broad assessment the court's intervention is manifestly required. Otherwise parties will be encouraged to engage in what can often be an expensive exercise in the course of the substantive proceedings when the proper forum for the determination of those proceedings, if they cannot be resolved earlier by agreement or otherwise, is the final hearing when the evidence can be properly analysed and the parties' respective submissions can be more critically assessed."

In my view, my remarks apply equally to applications for maintenance pending suit or interim maintenance under the Matrimonial Causes Act 1973.

35. I also need to refer to the overriding objective, in particular the specific objectives of dealing with cases proportionately, of saving expense and of allotting to a case an appropriate share of the court's resources.
36. The costs of this application appear to be not less than £80,000/£90,000. Taking the lower amount sought by Mr Howard, the costs exceed the amount being sought. This cannot be a proportionate use of the parties' resources. Further, however, even if I take the wife's maintenance pending suit budget as put forward by her, making the difference in the parties' positions £190,000, can it be proportionate to have spent nearly 50% of that sum on legal costs? In my judgment, in the circumstances of this case, the answer is clearly that it cannot.
37. Looking at the position more generally, costs in litigated financial remedy proceedings involving large wealth are too often disproportionate; disproportionate in the amount spent on legal costs and disproportionate in the court resources allocated to them. This has been expressed forcefully in a number of reported cases. To state the obvious, the overriding objective puts proportionality at the centre of litigation. Courts, in the past, might have been more willing to provide an opportunity for parties to have interim issues addressed. The climate has changed. Courts are more aware of and more focussed on the need to protect their own resources and on the need to seek to ensure that legal costs are not disproportionate.
38. Turning now to other aspects of the wife's application: first, in my judgment the wife's budget, even her maintenance pending suit budget, includes a significant element of forensic exaggeration. I am satisfied, on a broad assessment for the purposes of this interim hearing, that the annual sum sought by the wife of £392,000 very substantially exceeds the marital standard of living. That standard is not necessarily a ceiling but, in my view, there would need to be some specific, powerful, justification for that standard being exceeded on an interim basis. No such reason exists in this case.
39. Secondly, is there in this case, again on a broad assessment, a need which manifestly requires the court's intervention? In my judgment, the court's intervention is neither required nor justified in this case. On any view, with maintenance being paid as proposed by the husband, the wife will have available to her resources which will enable her to meet her income needs. She will have available to her, from her own resources, such sum which she might choose additionally to spend on meeting her and the children's living expenses between now and the final hearing. To put it another way, the sum which the husband is paying is reasonable because it is sufficient to enable the wife to meet her reasonable income needs for herself and the children over the course of the next twelve months.
40. At the final hearing, if the case has not been resolved by agreement before then, the court would be in a position to determine, after a more detailed consideration, the wife's income needs. The purpose of an interim hearing is simply to ensure that one party has sufficient resources to meet their interim needs and to meet them in a way which does not prejudice their longer term position or place them at a significant disadvantage, for example if the wealthier party was seeking to erode the resources located in this jurisdiction when enforcement might be an issue. The wife in the present case is neither prejudiced nor disadvantaged if she chooses to use part of her resources to meet her reasonable interim income needs. I would anticipate that the final award would be calculated by reference to her actual resources unless the husband can deploy an add-back or reattribution argument.
41. I propose, therefore, to make an order in the sum proposed by the husband. In my judgment this is a reasonable sum by way of maintenance pending suit. It might not be the sum which I would have awarded if, for example, no substantive payment was being made, but it is certainly within the bracket of reasonableness for the purposes of s.22 of the Matrimonial Causes Act 1973. In coming to this conclusion, I do not consider that I should either err on the side of generosity or parsimony; I should simply determine what sum it is reasonable for the wife to receive to enable her to meet her interim income needs from the resources available to her.