Matrimonial - various ancillary matters and reasons thereto.
[2011]JRC186B
Before : |
Mrs J. M. O'Sullivan, Registrar, Family Division, sitting alone. |
Between |
A |
Petitioner |
And |
B |
Respondent |
IN THE MATTER OF ZZ
Advocate JM. J. Haines for the Petitioner.
Advocate N. S. H. Benest for the Respondent.
judgment
the registrar:
1. The petitioner and respondent were married in September 1990, and have four children, C born in 1992, D born in 1993, E, born in 1994, and F born in 2001. The parties separated on the 20th June, 2010, and the decree nisi was pronounced on the 6th April, 2011. The petitioner is aged 48 and respondent 49.
2. The petitioner and four children continue to live at the former matrimonial home, owned jointly by the petitioner and respondent. The respondent lives in one bed-roomed rented accommodation. There have been some health issues. The husband is an electrician; the wife is unskilled and in low paid employment.
The history of the marriage
3. The parties commenced a relationship in about 1979 and started living together prior to the marriage, although there was a brief period when they were not living together. In 1994, they jointly purchased the matrimonial home.
4. A schedule of assets, liabilities and income was provided and it is agreed that at present the net proceeds of sale will be £601,283. The respondent has agreed assets of £28,698. The petitioner has assets of £2,808.69 and she says, premarital pension of £16,805. It is submitted on behalf of the respondent that this should be included to give her total other assets of £19,613.69.
Agreed Terms
5. The parties have agreed terms which include a Mesher type order which will arise in 2015, on the basis that the wife has not remarried, cohabited for a period in excess of 3 months, died or there has been a voluntary sale prior to this. By that time, F will be 14. The terms are detailed and include works to be done on the property, levels of child maintenance and nominal spousal maintenance until 2015 or until the sale of the former matrimonial home, whichever is the earlier. The remaining issue is limited to how the percentage of the net equity in the former matrimonial home is to be divided.
6. Although there were agreed terms, the case lasted nearly two days and I heard from both parties and submissions from Advocate Haines for the petitioner and Advocate Benest for the respondent.
The Husband's Open Position
7. The husband's opening position was that there should be a 50/50 split of the net equity in the matrimonial home, as there was no reason to depart from equality, and that in 2015 following the sale of the house, his and the petitioner's respective housing needs will be the same. However during the hearing he informed the Court there should be a 55/45 split in favour of the petitioner.
The Wife's Open Position
8. The petitioner is seeking a 65% split to her of the net equity due to the respondent's significant income advantage; she says she will require a three bedroomed property for herself and the children whereas the respondent only needs one bedroom; she has to have a lodger to pay the mortgage and even so she will have a shortfall of income each month whereas by contrast the respondent has a good lifestyle including trips abroad.
The Evidence
9. The petitioner gave evidence of her limited earning capacity. She left school at 13 and has no qualifications. She works part time, 20 hours per week, at Durrell earning £7,075 per annum, 4 days a week which days vary from week to week. She is home when F finishes school and can take her to Durrell during the holidays. She is a lollipop lady every Friday for 15 minutes, earning £283 per annum. She would like more work in the health care system as an assistant - she is on the "bank" - and can earn £8 per hour, so her total earned income is less than £8,000 per annum. I accept her evidence that she cannot afford child care, for example at Centrepoint, and because of her lack of education will not be able to earn more than the minimum wage.
10. In terms of her expenditure, she was referred to her list of future expenditure at the back of her open position, and she confirmed her expenditure was £1,600 per month, so she has a shortfall each month, even taking into account the total maintenance of £725 per month, of at least £200 or more per month. The expenditure listed is a bare minimum and does not include contents' insurance, hairdresser, clothing and shoes for herself, entertainment, holidays, and doctors and dentist.
11. Even were she to be able to earn more in 2015 when F is 14, her finances are such that she cannot obtain a mortgage. She has to put up with a tenant in the house who will in effect pay the mortgage and the parish rates and building insurance. She is in the process of applying for income support.
12. Some time was taken in trying to establish what the respondent's income is. He has been a self-employed electrician for 10 years. The petitioner said that the respondent was a very good electrician which was not disputed by the respondent. The company, G, was run from the former matrimonial home but is now dissolved. The petitioner did do some work for the company such as taking messages, picking up materials and taking to the respondent, filing and writing cheques, and she was a director, company secretary and shareholder.
13. Accounts were provided for the business, for the year ending January 2009, which showed a gross profit of £78,818 and net profit of £30,545 and to January 2009 of £53,555 and net loss of £969. There are draft accounts for 2010 and 2011 which are unsigned. The petitioner agreed she refused to sign them and the respondent in cross-examination did concede he did not know if they were accurate and he has not been to the accountants to discuss them. His overheads are now small as the business is currently run from his van.
14. He said that in 2010 he had some mental health issues, "fell apart a bit" and used sub-contractors. He had lost an Avalon contract in June 2009, which was apparently 40% of his turnover, and therefore affected his 2010 and 2011 turnover. He had been hospitalised for back pain but he produced no medical evidence.
15. He did not disagree that an electrician could earn £15 per hour and some could earn £18 per hour "I guess so, but I don't know" and said he did not know if an employee would want overtime rates of a time and a half. When it was put to him that an employee earning £18 per hour could earn £37,000 gross, he said he wanted to work for himself. He was asked why, if on the 2011 accounts of £32,156 was spent on purchasing equipment, there were not more bills generated, he said this was due to the subcontractors. It was put to him that he will earn net £30,000 per annum but said he was hoping he could do a lot better.
16. The respondent gave evidence that the years 2008 and 2009 are a more accurate reflection of his earning capacity and Advocate Benest submitted that he has not sought to suggest otherwise. He said he could not afford to advertise his work but it was put to him that as he could afford to go on holiday with some cash, he could also afford to advertise the business. He did not advertise in 2008 and 2009.
17. With regard to his expenditure, his income needs were set out in his affidavit. It was accepted by him that the tenant at the former matrimonial home would pay £860 per month so would take up the payments he had stated he would have for the mortgage, parish rates and buildings insurance. As the petitioner is taking over the utility bills including the landline and her mobile, he will no longer pay for the items listed for the former matrimonial home. He will only need to pay the items listed from H onwards, and a figure of £1,443 per month excluding legal fees was put to him, rather than the £3,190.87 expenditure he had listed. He said that added to the reduced figure was an extra £75 per month for increased mobile and internet charges, and there was increased petrol and diesel, and the children come to eat on a Thursday. He will also be paying at present £525 per month maintenance from his earnings. He expected to help pay for the children and wants to see them get the best education.
18. It was put to him that he had a mortgage capacity. He said that it was not feasible for him to get a mortgage at present, but when the accounts were signed off, he would like to get a mortgage. It was put to him that because his expenditure had decreased he could start saving towards this and said that he would earn more but pay out more.
19. With regard to his expenditure on holidays, a list of trips provided by the petitioner showed he had been to Thailand a number of times since 2007 and spent three weeks in December 2010, two weeks in July 2010 and three weeks in January 2011. He said he could not remember some of his trips to Thailand. A trip costs less than £1,000. He had made a complaint to the Thai police about his money being stolen in January 2009. The complaint form referred to a figure of £3,000 but also £2,600 in cash. He said the correct amount was £2,600 but it was not all his money as he was carrying some for a friend. I do not believe that he was carrying it for a friend, given he told the police it was his money. He also said that his friend had paid for a flight to Thailand for him and he had paid the friend in cash. He is "not sure" if he will go back to Thailand this year but he may go to Bulgaria after the court case.
The Housing Needs
20. The housing needs of both parties in 2015 were examined. The petitioner gave evidence that C is at Highlands doing a one year course and then wants to go to university for three years and then wants to do a teaching course. She is therefore likely still to be studying in 2015 and although it is hoped she will get a grant she is likely to have debts of at least £20,000. D is doing a two year business course at Highlands and then wants to go onto university. E has failed to get into Highlands and is trying to get a job. F is 10 so in 2015 will only be 14. The petitioner said that she agreed to 2015 so the respondent would only have to wait four years for some money, but in 2015 she needed three bedrooms for herself and the children.
21. She was asked about properties in the bundle. There is a three bedroomed property in St Brelade for £357,000 advertised by Broadlands, which has been sold, included in the bundle, although she did say she does not want a flat. The petitioner did not agree that the respondent needed two bedrooms. She accepted that she never stopped the respondent from seeing the children, but she did not think F would want to stay with her father apart from the odd night.
22. The respondent was adamant he wanted a two bedroom property as he said it was awkward with F in terms of dressing and she has to walk through the lounge to go to the toilet. He wanted to have a life with the children and help E who has anger/depression problems. He did not think the petitioner needed more than two bedrooms in 2015 but did say he would not force the children out on the streets in 2015 if they were still living with their mother. He said he would "take it as it comes". He needs a property with secure parking. There was a purpose built two bedroomed apartment in the bundle with secure undercover parking for one at £260,000.
23. It was agreed by the petitioner in cross-examination, that in 2015, if the tenant continued to pay the mortgage, £19,693.56 would be paid off the mortgage.
The Law
24. I am required to look at section 25 of the Matrimonial Causes Act 1973 "first consideration being given to the welfare, while a minor, of any child of the family who has not attained the age of 18". The starting point for division of assets is the test of fairness. I was referred to the case of O'H-v-B [2007] JRC 069A, in which Registrar Obbard said:-
"an equal division of capital following the principles of fairness set out in White-v-White [2001] 1 AER 1 must be tempered by all the guidelines set out in section 25 of the Matrimonial Causes Act 1973."
25. In his leading judgment in Miller-v-Miller [2006] UKHL 24; McFarlane-v-McFarlane [2006] 2 AC 618 it is clear that for Lord Nicholls, the principles of fairness comprise needs, compensation and sharing, although in limited means cases, the only real relevant factor is that of needs. Indeed, Lord Nicholls states as follows:-
''In most cases the search for fairness largely begins and ends at this stage [ie needs]. In most cases the available assets are insufficient to provide adequately for the needs of two homes. The court seeks to stretch modest finite resources so far as possible to meet the parties' needs."
26. Advocate Haines referred to O-v-O [2005] JLR 535 in support of his submission for a 65% split of the net proceeds of the former matrimonial home. In this case the first consideration was to provide a home for the wife and the minor children. The children were 17, 14, and 9, the husband had a gross income of £45,600 per annum but substantial debts and the wife had an income of £15,912 per annum. The wife was 39 and husband 43. There was a net equity of £235,000. The house was sold and the husband received 10% to pay his creditors, with a charge back when the youngest was 18 or completed full-time tertiary education whichever was the later, amounting to 30% of the estimated net proceeds or a 70/30% split. In that case Advocate Haines said the wife had a mortgage capacity, which she does not have in this case. The court said that the wife had no prospect of being able to increase her income to a material extent - similar to this case - but the husband has a greater earning capacity. The wife was to transfer her share in the company to the husband for no consideration and each were to keep their own assets.
27. In the O'H-v-B referred to above, the wife was 39 and husband 43. It was a 10 year cohabitation/marriage with two children aged 6 and 2, and net equity from the former matrimonial home of £141,516. The wife earned more than the husband and had made contributions of £30,000 to it for which she was given credit. Registrar Obbard said that there was not enough money to go around, and considering all the guidelines set out in section 25 of the Matrimonial Causes Act 1973, ordered nearly 70/30% division bearing in mind the needs of the children, the ages of the parties and length of the relationship, ordering £30,000 to be paid straight away and £15,000 when the youngest finished full time education, the mother and children moving or death of the wife, whichever was the earlier. Advocate Benest in submission said that the differences between the above two cases and the present case is the size of the net proceeds of sale, as there is enough money for both on the basis of two bedrooms each.
28. I was referred to the case A-v-A (Financial Provision: conduct) [1995] 1 FLR 346 in which the elder daughter was over 21, the younger daughter 18 and son 14. The starting point was a joint entitlement to the former matrimonial home, which had a net equity of £50,000, but that was adjusted to reflect conduct, responsibility, needs and contribution. Conduct has not been argued in this case. It was said:-
"the wife has the overall responsibility for the care and upbringing of the children until they reach independence. The consideration is important, particularly by virtue of a statutory requirement that the court gives consideration to the welfare of any minor child."
29. In that case the wife was awarded £15,000 to be deferred until the wife had completed her responsibility for the children, although a date for payment was not specified. Advocate Benest submitted that the first consideration is for a minor child, although in the O-v-O case above, and O'H-v-B, the charge back did not arise until the youngest was 18 or completed full-time tertiary education whichever was the later.
30. In Newell-v-Sandford [2001] JLR 518, I was referred to the speech of Lord Nicholls in White-v-White , in particular:-
"There is greater awareness of the extent to which one spouse's business success, achieved by much sustained hard work over many years, may have been made possible or enhanced by the family contribution of the other spouse, a contribution which also required much sustained work over many years. There is increased recognition that, by being at home and having and looking after young children, a wife may lose for ever the opportunity to acquire and develop her own money-earning qualifications and skills."
However the circumstances of the parties in that case were quite different and the children were both adults.
31. In the case of S-v-G [2003] JRC 091A, it was a 9 year marriage, the children 10 and 11, the wife 50 and husband 44, both parties had substantial pensions and both good employment. The former matrimonial home had an equity of £313,366, but the husband had already purchased a two bedroomed property, and the wife was awarded 55% of the assets.
32. Since Charman-v-Charman [2007] 1 FLR 1246, the approach is to treat assets acquired prior to the marriage, and post-separation or by way of inherited assets as a contribution which may justify a departure from equality. The equal sharing principle applies to all of the parties' property, but to the extent that it is non-matrimonial, there is a better reason to depart from equality. I have considered the case of L-v-L [2008] 1 FLR 142, where the husband received a larger share of the assets because he had a larger amount of the pre-marital assets, but the court also looked at the wife's needs.
33. In S-v-S (Ancillary Relief: Importance of FDR) [2008] 1 FLR 944. I was referred to the following by Advocate Benest:-
"Given the background factor of the wife's possible inheritance and the parties' respective needs, it was wrong to ring-fence those assets. All of the assets which came into this marriage had to be available to cover the parties' requirements. Each party had made a full and proper contribution and there was nothing in the factual matrix which permitted a finding that the wife had made an additional contribution in circumstances where the husband had brought assets into the marriage and had worked extremely hard during its existence. It would be unfair and discriminatory to treat as other than equal the parties' contributions, whenever made. As time went by, all assets became amalgamated and it was inappropriate to omit any from overall consideration (see paras [47]-[53])."
34. The section 25(2) guideline factors of the Matrimonial Causes Act 1973 are as follows:-
"(a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire";
The wife has a limited earning capacity at present as she cannot afford child care and her job with Durrell, albeit four days a week and on different days of the week, does allow her to take F there during the school holiday. Even were she able to work full time when F is older, the most she can earn is likely to be at the minimum wage limit as she left school at 13, and she is unlikely to be able to contribute towards any further pension and to be able to raise a mortgage or take holidays abroad. By looking after the children, she has not been making contributions towards her state pension. On the schedule of income and expenditure given, she will find it hard to even make ends meet. She will also need to pay her legal costs.
35. I was referred to the case of McEwan-v-McEwan [1972] 1 WLR 1217, in which it was held that considerations of the husband's earning capacity include considering his ability to earn more by taking better paid work. In this case the husband has stated he hopes to earn more than he did previously and he will have earnngs in line with, if not more than, his 2008 earnings. He does not want to work as an employee and I consider that this is because he considers he has a good reputation for his work, and can earn more than if he was employed.
36. He conceded his accounts for 2010 and 2011 may not be accurate and having heard his evidence, I do not think he was being entirely truthful about the figures, and moreover he has the opportunity to earn cash sums which he can use on holidays. I accept that it has been a successful business and the reason he does not advertise it is because he does not need to do so rather than he cannot afford to do so. The company, once restored, can pay for his telephone and motor expenses. He will be paying £525 per month by way of child maintenance and will not have to contribute to utility accounts at the former matrimonial home nor to pay the mortgage. He should be able to set aside money towards a property purchase and to continue to take holidays abroad and pay towards outstanding legal costs as he is presently doing. His lifestyle will be better than that of the petitioner and whereas he can afford even now to go on holiday, she has difficulty meeting the bare necessities.
37. On the basis of the work being carried out as set out in the List of Works, the value of the property should increase. The estate agents valued it with works carried out (it is not clear if this equates in its entirety to the works in the agreed terms) to £725,000 rather than £675,000 and in 4 years' time some £20,000 of the mortgage should have been paid off so there should be an increase in the net proceeds of sale available to the parties even if property prices remain static.
"(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future";
38. In this case the element of fairness largely begins and ends at the stage of needs. Compensation and financial needs often overlap, so double accounting has to be avoided. I accept Advocate Benest's submission that the petitioner is "a fully entitled wife", but in terms of compensation for lost income, she is not in the same category as a professional women giving up her career.
39. The level of maintenance has been agreed. The wife says that in 4 years time she will still have F living with her, but may well have the other children as C will likely still be studying to become a teacher, D is likely to still be at university and E may still be at home. She will therefore need larger accommodation than the respondent, she says three bedrooms, and I accept that she will have at least one if not more of the children other than F still in full-time education who needs a home. She says she will try to help the children financially. F is now 10 and she may also want to go on to higher education. She has a limited pension with no prospect of saving more, and she needs to pay back her total legal costs of £12,400.
40. The husband does want a two bedroomed home so the children can stay with him if they wish to do so and would like somewhere for secure parking. It was accepted by the petitioner that the children love him. The husband has legal costs - no final figure was given - but has managed to pay some of his costs back from time to time and will no doubt continue to pay monthly instalments. He does not say that the children should be put on the streets in 2015. E is now 16 and if as it seems from the evidence he will not go to Highlands, the maintenance for him will cease in 2 years time. If one of the girls ceases full-time education, the maintenance will reduce to £420 per month, a saving of £105 per month, if the respondent only pays maintenance for two children.
"(c) the standard of living enjoyed by the family before the breakdown of the marriage";
41. Both parties accepted that they had a reasonable standard of living. They could afford a holiday abroad each year and in addition the husband went away without the family.
"(d) the age of each party to the marriage and the duration of the marriage";
42. The respondent is now 49 and petitioner 48.
"(e) any physical or mental disability of either of the parties to the marriage";
43. Although both the parties have been affected by the divorce, and the respondent argued it had affected his earnings and he did have back pain, he said that his 2008 and 2009 earnings would be a more accurate reflection of his earnings in the future, so he is hopeful his health will not impact on his earnings.
"(f) the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the children";
44. Both parties have made a full and proper contribution to the marriage, the respondent through his work, the petitioner by looking after the children, her work and assisting the husband in the business. It was argued by Advocate Haines that the petitioner should be compensated for leaving the husband in full control of the business. I was referred to the case of McGladdery [1999] 2 FLR 1102, CA, but this was in terms of transferring business assets and the other party receiving appropriate provision in exchange. In this case, the respondent has said it is his tools and van which are his business.
"(g) the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it";
45. Conduct is not being argued.
The Decision
46. In this case the parties have unusually agreed a Mesher type order to come into effect when F is 14, rather than when the youngest reaches 18 or finishes full-time education, whichever is the later. The petitioner said she agreed to this so the respondent would not be kept out of money for a long time. The respondent set out in his open position that the final hearing was limited to the issue as to the percentage of the net equity in the former matrimonial home to be apportioned to each party, and asked for a 50/50 split, but then did say that he thought a 55/45 split would be fair, which equates to £330,705.65 of the net proceeds and £270,577.35 to her.
47. In her submissions, Advocate Benest submits that all the petitioner's assets should be taken into account and her pension should not be ring-fenced. The pension is not the equivalent of savings which may have been put into a matrimonial home. Although there has been a long relationship I have to look at the petitioner's overall needs in deciding what split there should be of the net proceeds of sale. The petitioner is seeking a 65/45 split i.e. £390,833 to her and £210,449 to him which excluding her pension of £16,805 would give her 62.2% to his 37.8% split of the overall assets, excluding her pension.
48. I consider that 60/40% split of the net equity is fair considering all the matters referred to above, so on the present figures, the petitioner would get £360,769.80 of the net proceeds of sale and the respondent £240,513.20 of the net proceeds, with each party keeping their own assets. On the basis of the property particulars provided, the petitioner would just have been able to afford the three bedroomed flat, and the respondent would be £20,000 short of a two bedroomed flat with secure parking. However, I have noted that from the sale proceeds each party is to reimburse the HSBC bank account 294, approximately £4,800 each from the sale proceeds. Whilst the parties have not addressed me on the question of costs, neither achieved their open offer. I have therefore taken into account that each party will bear their own costs, and as the petitioner does not have any income with which to start paying this back. I understand that her costs amounting to £12,400 will be paid from her share of the sale proceeds. In 4 years time however, the respondent will have reduced payments to his outstanding legal costs, and will have a mortgage capacity. The maintenance payments may also have reduced. In 4 years time the mortgage should have reduced by £19,693.56 and on the basis that the work agreed is done, the price of the property is likely to have increased, possibly to £725,000 even if there is no increase in overall Jersey property prices. Each party should therefore be able to purchase a property to meet their respective needs. If one takes the figure of £725,000, less the then mortgage of £40,523.44 and costs of sale of £14,500 at 2%, the net proceeds will be £669,976.56 and on a 60/40 split she will get £401,985 and the respondent £267,990.
Authorities
Matrimonial Causes Act 1973.
Miller-v-Miller [2006] UKHL 24.
McFarlane-v-McFarlane [2006] 2 AC 618.
A-v-A (Financial Provision: conduct) [1995] 1 FLR 346.
Newell-v-Sandford [2001] JLR 518.
Charman-v-Charman [2007] 1 FLR 1246.
L-v-L [2008] 1 FLR 142.
S-v-S (Ancillary Relief: Importance of FDR) [2008] 1 FLR 944.
McEwan-v-McEwan [1972] 1 WLR 1217.
McGladdery [1999] 2 FLR 1102 CA.