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Home > Judgments > 2008 archive

B v B [2008] EWCA Civ 543

Appeal by wife against ancillary relief orders in proceedings involving inherited wealth. Appeal allowed.

The wife had been in the UK since 1974 living off the proceeds of a substantial inheritance from her father and some part-time work. She owned two flats in Chelsea, one of which she lived in and the other she rented out. The husband arrived from Kosovo with no assets. The couple married in 1991, and had a child, and for the first seven years lived off the inherited capital supplemented by some casual work by the husband. They now lived in the matrimonial home purchased with funds from the inherited capital. In 1998, after a brief separation, the wife provided capital for the husband to set up a car wash business, funded by the sale of the Chelsea properties. The business did well and by the time of separation the turnover was £140,000, the husband taking out £45,000 p.a after paying rent to the wife who still owned the asset. The trial judge had transferred the car wash business to the husband and so effectively he received £750,000 out of the £1.3m assets available.

In the lead judgment, Hughes LJ had to consider whether it was fair to seek equality and a clean break in a case where all the assets had been inherited from an external source. After reviewing the authorities he concluded that fairness demands that the wife deserves greater security for her assets than was reflected in the original order and so ordered that the husband should continue to operate the car wash business but the asset remained with the wife with rent payable to her. The proceeds of any subsequent sale would then be split. Although this settlement prevented a clean break, the resulting relationship of landlord and tenant provided a better means of regulation than an order for periodical payments.

Wall LJ gives a supplemental judgment expanding on his thoughts about the principles of fairness and discrimination in ancillary relief cases. He also warns against the use of the instant case as a precedent.

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Neutral Citation Number: [2008] EWCA Civ 543
Case No: B4/2007/1035
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM KINGSTON-UPON-THAMES COUNTY COURT
Her Honour Judge Williams
KT 04 D00514
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 19 March 2008.
Before :

THE PRESIDENT of the FAMILY DIVISION
LORD JUSTICE WALL
and
LORD JUSTICE HUGHES
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Between :

B (Appellant)

- and -

B (Respondent)

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Mr James Turner QC (not below) and Mr Mark Lyne (not before District Judge)(instructed by Keppe and Partners) for the Appellant
Miss Annie Ward (instructed by Sherwood Wheatley) for the Respondent

Hearing date : 19 February 2008
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Judgment

Lord Justice Hughes :
1. This is an appeal by the wife in an ancillary relief case. Her case is that the orders made below did not take account of the fact that all the parties' assets had their origin in money which she brought into the marriage, having inherited it many years before she met the husband. Given that there is a child involved, I would order that nothing shall be reported which would identify that child, and that if reported the case should be entitled B v B (ancillary relief).

2. The parties married in 1992, having lived together for about 3 years before that. They separated in March 2004, so that they were together for about 12 years of marriage, plus the 3 years prior cohabitation. There is one child, a boy born in March 1992. He was not quite 15 at the time of the decisions in the county court, and he is now nearly 16.

3. The husband was born in 1964 and is now 43. He comes from Kosovo. He arrived in this country without assets in 1988 and met the wife (then a divorcee) soon afterwards. She was born in 1954 and so is ten years older at 53. She is American in origin with dual British/American nationality. She has lived in this country since 1974, that is to say from about the age of 20. Her father had died when she was a small child and she had inherited a substantial sum. When the parties met she was living partly on that inheritance and partly by working as a jazz singer. Exactly what the balance was between subsistence on capital and on earned income has not been in evidence. Apart from liquid capital, she owned a building in Chelsea, divided into two flats. She lived in one and rented out the other. The husband was working in a sandwich bar and earned about £250 per week; after a while he moved to a fruit and vegetable store.

4. In 1991, before the marriage and the birth of the son, the wife bought, in her own name, the former matrimonial home in Hampton Hill. There the family lived until separation in March 2004. The wife has continued to live in it since.

5. Between about 1992 and 1997 neither spouse was working, except for occasional jobs done by the husband. The District Judge found that, so far as the husband was concerned, that was not for want of trying. So far as the wife was concerned, such non-employment may in part have been because she then had a small child, and over the years she has also had health difficulties. She has been diagnosed to have fibromyalgia. Whatever the reasons, the family was supported for those several years by the wife's capital.

6. In 1997, after a brief period of separation, the parties set up a carwash business which the husband has run full time ever since. The wife bought the business premises in her sole name, selling the Chelsea flats to do so. The parties agreed that the husband would pay the wife rent for the premises. By the time of the ancillary relief proceedings the rent was £28,600 p.a., which, on any view, was well below what the market rent would have been. They also agreed that the wife would lend the husband £74,400 to set up the business, repayable at £5000 pa without interest. The wife had a small role in the business by acting as a bookkeeper, but it was run by the husband. It has done well. The husband's evidence was that he draws £45,000 p.a. (net of tax) from it, after paying the rent. His brother also works in it, and since the separation has been taken on as a partner; the evidence was that he drew £45,000, but we were told this was before tax. It follows that the income generated by the business must be something approaching £140,000 p.a. before rent and tax. There is some kind of living accommodation above the car wash, and the brother has lived there in the past; it does not appear to be occupied at present.

7. The wife has not worked since the son was born, and perhaps for rather longer. In 2003 she started a degree course in psychology, it would seem with a view to doing some counselling work, but she did not complete the course on health grounds. She had no earned income at the time of the hearings below. We were told that since then she has completed this course and now has limited work as a counsellor; we were told that she earns about £9,000 gross.

8. Both parties had been living beyond their means. The District Judge found that the wife had incurred expenditure of about £110,000 after separation without reasonable justification. He found that the husband had debts of some £122,000, but did not make the same adverse finding. It is likely that those debts are now greater. Moreover, costs beyond what either can properly afford have been incurred.

9. After the separation the husband bought a flat with the aid of a mortgage, although he sold it between the hearings before the District Judge and the Circuit Judge. We were told that he has now bought a house jointly with his brother. Its price was £550,000; the brother provided the only liquid contribution, otherwise the property is fully mortgaged; the husband also has a loan of £50,000 secured upon it, which we were told was designed to cover renovations. Apart from a very small equity in the flat, now apparently gone, and acquired after the separation in any event, all the capital of these two spouses is, and always has been, held in the name of the wife alone.

10. The available assets were thus these. The former matrimonial home, owned and occupied by the wife, had an equity after mortgage of £306,000. The husband's equity in his flat was (then) £29,000. The wife had liquid assets of £262,000. It was not suggested that the carwash business had capital value other than if carried on where it is sited. So the remaining asset was the value of the carwash premises, still owned by the wife, but occupied for the business by the husband.

11. There has been a running dispute as to the value of these premises. A jointly instructed valuer, with experience also as a developer, gave evidence before the District Judge. Subject to the tenancy of the husband, the premises are worth about £618,000. Sold with vacant possession and planning consent for ten flats and some offices, they would realise either £1,085,000, or £1,013,000 if allowance be made for stamp duty payable by the purchaser. The husband's contention has been that it is wrong to allow for any development value. It is accepted on his behalf that the plot would get planning consent. But his case is that on the figures, there would not be a viable development unless it were consent for ten flats, and it might well only get consent for eight. The expert was skilfully cross-examined to this effect in front of the District Judge. He accepted that on some assumptions put to him the project would not be viable, but he disagreed with the assumptions; his evidence remained that consent could reasonably be obtained for ten flats of some sort, and thus that the premises had development value. The District Judge accepted the value of £618,000, subject to tenancy, because he was ordering transfer to the husband. The Circuit Judge, on appeal, held that on the expert's evidence the plot had clear development value, and that £1,013,000 was the right figure to take as measurement of the asset. Although Miss Ward has boldly contended that the Judge was plainly wrong so to differ from the District Judge, I for my part think this part of her submission unsustainable. At the very least, on the evidence of the expert, the Judge was entitled to take the view she did. For my part, I think she was right. If and when these premises are sold, they have a clear development value which exceeds their value in their existing form. It is not a mere hope value, as was the case in Parra v Parra [2002] EWCA Civ 1886; [2003] 1 FLR 942. In that case, there was a jointly owned brownfield site which the parties had acquired for future business use. Its valuation was agreed without any allowance for a remote possibility that the site might get permission for residential development, because the experts agreed that this was a very unlikely eventuality. If, however, such unlikely permission were ever to be granted, the windfall profits would be enormous. In that situation, both Charles J and this court (and for that matter the husband) accepted the propriety of a charge-back in favour of the wife, to secure a sum payable if the highly improbable should come to pass. This case, by contrast, is one of an identifiable development value. If and when this land is disposed of, there will be available as one option its sale for development. In those circumstances, the appropriate value to take is what the land would then sell for, less of course costs and taxes. However, on the outcome which seems to me to be the correct one, the question of exact valuation does not, as will be seen, arise.

12. As at the time of the proceedings before the District Judge, the anticipated capital gains tax and US tax payable on transfer of the carwash premises were set out in his order, on the basis of a letter from the wife's advisers, at £90,000 in round figures. That of course was predicated on a sale price of £618,000. The wife's estimate of tax in the event of sale at the development value is of the order of £179,000. There would be other costs of sale; if they were to be the 3% which has been canvassed, they would add about £30,000 so that the potential net proceeds look to be in the region of £800,000. The Circuit Judge appears to have held that the net value of the premises was £707,000; neither party has attempted to explain how that figure was arrived at.

13. It follows that in round figures, and without attempting precision, the assets which fell to be dealt with at the time of the orders below were:

Former matrimonial home: £306,000
Wife's liquid assets: £262,000
Carwash: £800,000
Husband's flat £29,000

If one ignores the after-acquired, but apparently vanished, equity in the husband's flat, or alternatively takes it out of account on the very broad basis that the District Judge found that significantly more than that sum by way of the wife's expenditure had been unjustified, there was a total here of about £1.368m.

14. The lease between the parties provides for rent reviews which may be sought as often as annually, with a procedure for determination of rent, absent agreement, by a surveyor. We were told that since the hearings below this procedure has been invoked, no doubt by the wife. There was a difference of assertion between the two parties as to its exact outcome. The wife asserts that the rent has been fixed at £50,500. The husband asserts that that is the wife's figure, and no determination has yet been made; he contends for a rent of £34,000. But whichever it is, the present rent is well below the market rent, and the lease provides a means of bringing it up to that market rent.

15. The District Judge held, without addressing the issue now raised by the wife, that there was no reason to depart from the yardstick of equality. He thus ordered the transfer to the husband of the carwash. He sought for a clean break by providing for periodical payments for the wife to be capitalised on the basis of a five year term at £20,400 p.a., thus calling for a lump sum payment from husband to wife of £102,000. He also made mutual orders in favour of each spouse in the sum of half the son's school fees, payable directly to the school.

16. On appeal, the Circuit Judge declined to interfere with the aim for approximate equality, saying that the District Judge was not plainly wrong to adopt it, but making no further analysis. Accordingly she upheld the order for transfer of the carwash premises from wife to husband. Because she found that the premises should bear their development value, and took their net worth to be £707,000, she ordered a lump sum from husband to wife of £54,000 to reflect the additional capital which the husband was getting and with the aim of preserving approximate equality. She varied the order for capitalised periodical payments, finding that there was no proper basis for holding that the wife would not need income support after five years, or any other period. She also found that the husband's income could not support an order in the sum of £20,400 p.a. She substituted an order for periodical payments at the rate of £14,400 p.a. She varied the school fees order, leaving it in place only against the husband.

17. There was still about £30,000 outstanding on the business loan, payable by the husband to the wife. The orders below left this asset/obligation in place.

18. At the time of the hearings below the parties' son was living with the wife. Since then, he has moved to live with his father.

19. The key feature of the orders made below was thus the outright transfer from the wife to the husband of the carwash premises. Even on the husband's case as to the value of the carwash, this was a net transfer to him of over £550,000, after the lump sum ordered by the Circuit Judge to be paid to the wife; given the development potential of the land, it was in fact a rather greater transfer, nearer to £750,000.

20. The wife's principal complaint is that the search for equality was in this case misplaced. Says Mr Turner QC on her behalf, the principal rationale of the yardstick of equality is marital acquest and here there is none, for all the capital ever introduced into this marriage came from the wife's pre-owned assets, and it has diminished not grown during the marriage. For the husband, Miss Ward responds that this is to take much too narrow a view of matrimonial property. In reality, she says, the couple treated all the available assets, though their source may have been the wife, as joint property, and they set up the car wash as a joint venture. At one stage, she says, they lived mainly on capital deriving from the wife; later they lived largely on the carwash operated by the husband on premises provided by the wife. All that, she contends, points perfectly sensibly to a broadly equal division of assets. She reminds us additionally that neither of the Judges below added back into the available capital the expenditure by the wife which the District Judge had characterised as unreasonable. She points to the fact that about two-thirds of the wife's liquid capital (£262,000 at the time of the hearing before the Circuit Judge) is presently in the form of endowment policies fed by premiums paid during the marriage.

21. It ought to be recorded that the hearings before both the District and Circuit Judges were distorted by the wife's determined contention that the husband had been guilty of such misconduct that his application for ancillary relief should fail altogether. Broadly, she contended that he had married her for money, exploited her generosity for the benefit of himself and also his family, and treated her violently to boot. The evidence on this topic took several days before the District Judge, and there were detailed submissions upon it before the Circuit Judge also. In all respects, this part of the wife's case failed on the facts. We are not now concerned with it.

22. Mr Turner advances a 'reasons' challenge to the judgments of both Judges below. For my part, I do not think that that can provide an answer to the question in this appeal. It is however true that neither directly addressed the question of what significance should be attached to the source of the assets. The District Judge had had a hearing almost entirely dominated by the wife's fruitless pursuit of conduct issues, and this is what his judgment largely dealt with. It is nevertheless impossible to discern why he felt that equality was the proper outcome, unless he felt that it followed necessarily from his finding that the husband had, contrary to the wife's assertions, been genuinely committed to the marriage. The Circuit Judge's judgment was on appeal by review. It was quite proper for it to proceed by analysis seriatim of the grounds of appeal argued, but she confined herself to that and made no judgment herself on whether equality was the correct outcome given the source of the assets.

23. It does not seem to me that this case raises any new point of principle. Like most ancillary relief cases, it requires the application of well-understood principles to its own facts. Moreover, the facts of this case are unusual indeed. The combined features of (1) the entirety of assets being pre-owned by the wife, (2) a substantial period living entirely upon them and (3) a business generating a sizeable income but with no or no significant capital value except in its premises, and those provided by one spouse alone, are unlikely to be common.

24. We have been taken helpfully to the landmark cases of White v White [2001] 1 AC 596 and Miller v Miller; McFarlane v McFarlane [2006] UKHL 24; [2006] 2 AC 618. These cases do not establish any rule that equal division is the starting point in all cases. On the contrary, the starting point in all cases is the financial position of the parties and section 25 MCA 1973: see Sir Mark Potter P in Charman v Charman [2007] EWCA Civ 503, at paragraph 67. And in all cases the objective is fairness, which requires an individual assessment of each case: see White per Lord Nicholls at 604, and Miller per Lord Nicholls at paragraph 9, and Baroness Hale at paragraphs 134 & 136. As their Lordships explained in Miller, the process of distribution of assets after divorce is generally informed by need (generously interpreted), compensation and sharing: see Baroness Hale at paragraph 144 and Lord Nicholls at paragraphs 10-16. The sharing principle gives rise to the general proposition that no distinction is to be made, when considering the contributions of the spouses to the marriage (section 25(2)(f)), between monetary and non-monetary contributions. Thus there also follows the requirement to test the outcome of the exercise against the yardstick of equality, and to depart from it only if and to the extent that there is a good reason for doing so: see Lord Nicholls in White at 605f. Lord Nicholls there expressly adverted to the fact that, more often than not, it is necessary to depart from it; the commonest reasons are probably a disparity of need, especially of housing need where there are children to be provided for, and a disparity of potential financial resources in future, especially of earning capacity. The importance of the 'yardstick of equality' is twofold. First it underlines the necessity not to treat financial contributions differently from those in non-monetary form. Second, it underlines the essential fairness of equal division in a large number of cases of shared matrimonial life.

25. Nevertheless, one possible reason for departing from equality is recognised to be the case where assets are the product not of efforts of different kinds during the marriage, but of inheritance by one spouse alone: see Lord Nicholl in White at 610, dealing with property acquired before marriage or inherited during it:

"Plainly, when present, this factor is one of the circumstances of the case. It represents a contribution made to the welfare of the family by one of the parties to the marriage. The Judge should take it into account. He should decide how important it is in the particular case. The nature and value of the property, and the time when and circumstances in which the property was acquired, are among the relevant matters to be considered. However, in the ordinary course, this factor can be expected to carry little weight, if any, in a case where the claimant's financial needs cannot be met without recourse to this property."

In Miller Baroness Hale echoed this approach, although that case was not concerned with inherited property: see especially paragraphs 149 and 152. It seems to me that this approach will normally accord with the ordinary sense of fairness of people in general.

26. This is a case in which the whole of the capital available to the parties was brought into the marriage by the wife from a source entirely external to it. The marriage has played no part, however indirectly, in the acquisition of any of the assets now available. It is unlike the case where one spouse has been enabled by the support of the marriage to accumulate assets, or even has simply in fact accumulated them during the marriage. Nor is there any sense in which the husband has altered his position to financial disadvantage during the marriage; if anyone has, it is the wife, who has used up significant assets over the years not simply on herself but on both the spouses. Is it nevertheless a fair result to divide the present assets approximately equally ?

27. This is not, like the landmark cases, one involving assets well beyond the reasonable combined needs of the parties. Unlike a great many ancillary relief cases, however, it does involve assets beyond a single home and greater than the minimum requirements of both spouses. It is not a case in which the needs of the parties compel the court to disregard the source of the assets. Because the most valuable single asset, the carwash, is also the source of by far the majority of the income available to support the parties, that fact may affect the manner of distribution. The District Judge found that if he were not running this business, the husband's earning capacity would be no greater than about £250 per week (or £13,000 p.a.) and whilst that figure may have had little direct evidential basis other than what he earned in the sandwich bar some years ago, it is plainly right that the husband has no particular qualifications except the capacity for hard work, and would be most unlikely to achieve an income of the order of £45,000 p.a. (net) by any other means. It is fair to both parties, and thoroughly sensible, as it seems to me, to deal with the available assets in a way which permits him to continue to operate this business and to generate the income which both of them, as well as their son for the next few years, will depend upon.

28. The difficulty with the order made below, however, is twofold. The first is that it does not follow from the fact that the husband ought to be enabled to continue the business that it is fair that the beneficial ownership of the business premises should be transferred entirely to him. On the contrary, prima facie it seems to me that fairness requires recognition of the source of this asset, and indeed of all the assets, unless other considerations compel a different conclusion.

29. The second difficulty is that the outright transfer of the business means that if the husband were to elect to sell the premises, take the capital and work elsewhere, he may well not be able to keep up the periodical payments ordered. In those circumstances, the wife's security would be very much poorer than now, poorer than contemplated by the order, and unfairly so. That consideration is not confined to a scenario in which the husband might leave the UK, although no doubt that is one possibility; it could easily apply also if he chose to lead a different lifestyle whilst remaining here. The effect of the order below is to remove from the wife the rental income of £28,000 p.a. (and the entitlement to more) and to replace it with periodical payments of £14,400. Certainly the rental income was formerly available to, and used by, both spouses, but even then it was only a proportion of the income which the property would have generated for the wife if it had been let out at a rack rent. That is an illustration of the consequences of this order for the wife.

30. The parties have broadly similar housing needs. I do not think that the fact that their son is currently living with the husband significantly alters the distribution of capital which should be made. If he remains with his father, it may well be for something of the order of five years. Both spouses, as it seems to me, need a 2 or, if affordable, perhaps a 3 bedroom property, either rented or purchased, and a flat would be perfectly acceptable. The wife should be able to downsize somewhat from the former matrimonial home if she wishes to do so, and that would save her part of her current mortgage payments and thus somewhat increase her free income. The carwash income, even after market rent paid, however it be divided between the husband and his brother, ought to be sufficient to enable him to house himself suitably, particularly if he is relieved of the obligation to make periodical payments.

31. In all these cases, the essential search is for fairness. These considerations persuade me that it is not a fair distribution to aim for approximate equality of capital on the facts of this case. It does not follow from the fact that the husband was genuinely committed to the marriage, contrary to the past assertions of the wife, that equal distribution of capital is therefore fair, when all the assets were hers before they ever met. There should be recognition of the fact that all the assets were provided by the wife and that she has a reasonable claim to the greater security which preservation of more than half of them in her hands would bring. That can be achieved at the same time as enabling the husband to continue to generate a good income by using some of those assets, and at the same time as recognising that he too is entitled in fairness to some share in the capital which the couple has used together during this marriage.

32. The desirability of a clean break, as commended by section 25A Matrimonial Causes Act 1973, would certainly make a separation of finances preferable if it could be achieved. I agree with Miss Ward that if it could sensibly and fairly be avoided, it would be better if these ex-spouses were not tied to one another financially, either by maintenance obligations or by a continuing business association as landlord and tenant. There are always possibilities for further disagreement, and perhaps expensive disagreement, if they remain tied in either of those ways. No doubt, the outright transfer of the business to the husband, as ordered below, does effect a separation of capital assets. However, as the orders made below show, this is a case in which a clean break cannot be achieved at the same time as dividing the assets equally. That is because without a significantly larger part of the capital than half, it is not possible to predict a time when the wife can be expected to be self supporting. The Circuit Judge was clearly right to hold that there was no proper basis for a five year limit on the wife's call on the husband for periodical payments, at least if she were shorn of half the assets. The order of the Circuit Judge therefore necessarily leaves a continuing financial tie between the parties in the form of an indefinite periodical payments order from husband to wife, inevitably susceptible to claims for variation by one party or the other from time to time. So the order below cannot be justified on the basis that it provides a clean break, even if it would be right, as I do not think that on the facts of this case it would, to purchase a clean break at the price of an unfair distribution of the assets.

33. On the facts of this case, it seems to me that if there is to remain a financial link between these parties, it is better that it should be the business link of landlord and tenant than that it should be the matrimonial one of periodical payments. The possibility of painful disagreement cannot be altogether eliminated from either. But the machinery for determining the market rent of the carwash is simpler and cheaper than the process of application to the court for variation of periodical payments, and the wife's income is better secured as rent than it is as periodical payments.

34. We have had a number of possible ways of allocating these resources helpfully canvassed before us, both during oral argument and in later written submissions for which we gave leave. It seems to me that the objectives should be (a) to restore a fairer distribution of capital which gives proper recognition to its source, (b) to enable the husband to continue to operate the successful business which he has built up, (c) to preserve the wife's security of income as well as of capital and (d) to provide the husband in due course with some share of the assets used by the parties during their marriage. Given that there is unlikely to be a clean break, at least unless one spouse elects to attempt to buy the other out, objective (b) is not inconsistent with objective (a) and with the wife preserving all or part of her interest in the carwash premises. Objective (d) shows that it should be part, rather than all.

35. The wife contends that the husband has no claim in fairness to any of the capital, but only to the use of the carwash to continue his profitable business. The husband contends that fairness requires that he should receive "the vast bulk" of the carwash capital value, as well as the right to continue the business, and Miss Ward says that this would have the added advantage of achieving a clean break because the husband ought to receive enough capital to enable him to borrow sufficient to buy out the wife's remaining interest. I do not think that either of those extreme positions is right.

36. It seems to me that fairness will be done in this case if (i) the husband is permitted to continue in sole occupation of the premises for the purpose of his business for so long as he wishes, (ii) the proceeds of the carwash, if and when sold, are divided equally between the parties and (iii) in the meanwhile rent is payable from husband to wife at half the current market rent. That will mean that the wife's capital will consist (at present values) of the former matrimonial home (£306,000), her liquid assets (£262,000) and half the carwash (£400,000), a total of £960,000 or so. Her income will be half the market rent (£25,000 on her case) plus her earnings (say £10,000) plus what will be generated by her liquid capital (not on a Duxbury basis, which would assume exhaustion at the end of her life, but on a sensible investment basis geared to good income, perhaps about £11000-12000); that is a total income of around £46,000-47000, with housing provided at relatively modest cost if she downsizes. The husband's capital would then be about £400,000, less than half that of the wife, but a significant sum. His income would be more or less his present income of £45,000 net (say around £65,000 gross) because the half rent (£25,000) he will have to pay is broadly what he pays now, but he will have to house himself. How he and his brother organise their affairs and the income of the business must remain a matter for them.

37. But for one factor I would order transfer of the carwash into joint names now. However, if that is the order, there will immediately arise a liability to capital gains tax both in England and in the USA, which would be likely to make a sale necessary and thus defeat the objective that the husband carry on his business there. For that reason, the order which I would propose is that the husband's right to receive his share of the net proceeds of sale be deferred until sale and meanwhile charged upon the property. Without undertakings by the wife to preserve the continuity of the business and thus the good income it produces, it would probably be necessary to make his share appreciably more than half but we were told that she would give such undertakings if, contrary to her assertion, we were of the view that she should not maintain exclusive ownership of the whole of the assets. There is a need for two consequential undertakings from her. The first is that she shall not deal with the property in any manner without the consent of the husband or order of the court. That will prevent her borrowing on the property without his consent, but otherwise a sale might be forced at any time and the objective of keeping the business going thus frustrated. The second is that she will during her lifetime grant the husband successive leases on the terms of the present lease save that (i) the rent payable shall be half the market rent as determined in accordance with that lease, (ii) there be no increase in rent on the grant of a fresh lease but only upon review, and (iii) the right to rent reviews shall arise every three years and not annually.

38. On those undertakings I would therefore set aside paragraphs 2, 3 and 4 of the order of Her Honour Judge Williams made on 27 April 2007. I would substitute therefor an order that upon the sale of the carwash premises the wife shall pay to the husband one half of the net proceeds of sale after payment of costs of sale and any tax falling due on such sale, and that until such payment his entitlement to such payment shall be charged upon the property.

39. On that basis I would leave the school fees as the responsibility of the husband; no order to that effect is required as the son lives with him. The order that the husband pay child periodical payments to the wife (paragraph 5 of the Judge's order) should also be set aside. So too should the periodical payments order in favour of the wife (paragraph 4). Paragraphs 6 and 7, dismissing all other ancillary relief or inheritance claims which either may have against the other, should stand.

40. The husband's cross appeal, and renewed application for leave to add a further valuation point, should be dismissed.

Lord Justice Wall:
41. I have had the advantage of reading in draft the judgment of Hughes LJ. I entirely agree with it, both in terms of its reasoning and in terms of the result he proposes. I add a judgment of my own principally to reinforce what Hughes LJ says in paragraph 23 and the following paragraphs of his judgment, where he deals with the proper approach to a case of this nature.

42. It is, of course, highly unusual for what may be described as a "modest", as opposed to a "big money", case to reach this court. The reasons for this are self-evident. The overwhelming majority of applications for ancillary relief post divorce are dealt with, up and down the country, day in and day out, by the district bench, sitting in chambers in the county court. In most cases, a combination of five factors prevents appeals to this court from these decisions. They are: (1) the fact that any appeal to this court is a second appeal, governed by the stringent terms of section 55(1) of the Access to Justice Act 1999; (2) the high quality of most of the decisions reached by the district bench, which, over the years, has acquired both a great deal of expertise, as well as a wealth of local knowledge and experience in dealing with applications for ancillary relief; (3) the fact that the appeal in the county court usually lies to a circuit judge, whose experience of the work is, inevitably, much less than that of the district judge and who rarely, in my experience, has the confidence to disagree with the latter's exercise of discretion; (4) that the appeal to the circuit judge is not a re-hearing but by a review of the exercise of the district judge's exercise of discretion: - see Cordle v Cordle [2001] EWCA Civ 1791, [2002] 1 WLR 1441; and, of course (5) the high cost of litigation when measured against assets which are limited, and, as Hughes LJ points out, frequently inadequate to cater for the needs of either the parties or their children.

43. This case is thus an exception, and only reaches this court through the wife's persistence in making an oral application for permission to appeal after a paper refusal by a single Lord Justice, perfectly reasonably premised on the proposition that, on paper, the application did not reach the stringent standards required for a second appeal. It is in my judgment unfortunate that the system militates against modest appeals in this way, and I am concerned that it has not served these parties well. All that said, however, I anticipate that the overall costs of the case (with which we have yet to deal) will – as so often happens - prove disproportionate to the issues it raises.

44. In this latter respect there is, as it seems to me, considerable mitigation available to the district judge for the manifestly poor quality of his judgment. He dealt with the case as it was presented to him. He spent four days listening to and then adjudicating on factual issues raised by the wife, all of which, as she now accepts, are irrelevant to outcome. I have no doubt that this exercise distracted him both from the real issues in the case, and from the wise words of Lord Nicholls of Birkenhead in relation to conduct in paragraph 65 of his speech in Miller v Miller [ 2006] 2 AC 618 at 642: -

"Parliament has drawn the line. It is not for the courts to re-draw the line elsewhere under the guise of having regard to all the circumstances of the case. It is not as though the statutory boundary line gives rise to injustice. In most cases, fairness does not require consideration of the parties' conduct. This is because in most cases misconduct is not relevant to the issues on which financial ancillary relief is ordered today. Where, exceptionally, the position is otherwise, so that it would be inequitable to disregard one party's conduct, the statute permits that conduct to be taken into account."

45. Insofar as those words are a rebuke to myself in my quest to understand Singer's J award of £5 million to Mrs Miller, I, of course, accept it. Nonetheless, if ever there was a case in which four days of valuable court time should not have been spent investigating the wife's allegations, this is that case.

46. That said, the order made by the district judge was, in my judgment, plainly wrong in several material respects. Firstly, he was wrong on the facts as he found them to be not to depart from what he described as "the yardstick of equality"; secondly, he was wrong to take the valuation of the car wash business at £618,000; and thirdly, he was wrong to transfer the car wash business outright to the husband in return for a lump sum. Self-evidently, his erroneous valuation of the car wash business distorted his calculations, and resulted, as Hughes LJ has pointed out, in an order which not only did not achieve equality, but which was disproportionately favourable to the husband.

47. Most unfortunately, these errors were not rectified on the appeal to the circuit judge. Her assessment of the valuation of the carwash business is equally unexplained and, as Hughes LJ has pointed out, she declined to interfere with the district judge's aim for approximate equality, essentially treating that issue as an appropriate exercise of judicial discretion by the district judge, with which it was not open to her to interfere. Although she effectively allowed the appeal and varied the terms of the district judge's order, she left in place his outright transfer of the carwash business to the husband, and as a consequence, she both repeated and compounded the erroneous outcome achieved by the district judge.

48. Since neither party (rightly in my judgment) wanted a re-hearing, it falls to this court to exercise its discretion under section 25 of the Matrimonial Causes Act 1973 (MCA 1973) afresh, and for the reasons given by Hughes LJ, I would exercise it in the manner set out in his judgment. In order to save costs, I would propose that the parties should attempt to reach agreement both as to the form of the order to be drawn, and as to any issues arising out of this judgment. In default of agreement, any outstanding issues should, in the first instance, be addressed by the parties in writing, and only if all else fails should this court reconvene for further adjudication.

49. I wish to add only one particular caveat, which is addressed to the legal profession, rather than to the parties. I respectfully and entirely agree with Hughes LJ's statement in paragraph 23 of his judgment that this case does not raise any new point of principle. I do, however, wish to expand on this point, as I regard it as one of importance.

50. The "big money" cases which have reached this court and the House of Lords are, in my judgment, of only limited assistance in dealing with a case such as the present, and of even less assistance in dealing with smaller cases in which there is simply not enough money to go round. Thus, as I see it, the principal lesson to be learned from the leading case of White v White [2001] 1 AC 506 (White) is that the court's objective is to achieve an outcome which is fair. As Lord Nicholls puts it at page 604:

The purpose of these powers (that is, section 25 of MCA 1973) is to enable the court to make fair financial arrangements on or after divorce in the absence of agreement between the former spouses: see Thorpe LJ in Dart v Dart [1996] 2 FLR 286,294. The powers must be exercised with this objective in view, giving first consideration to the welfare of the children.

51. The only other principle of universal application which the House of Lords introduced in White and confirmed in Miller v Miller; McFarlane v McFarlane [2006] UKHL24, [2006] 2 AC 618 (Miller /McFarlane) is non-discrimination. As Lord Nicholls put it in White [2001] 1 AC 506 at 605c, under the heading "Equality":

"Self-evidently, fairness requires the court to take into account all the circumstances of the case. Indeed, the statute so provides. It is also self-evident that the circumstances in which the statutory powers have to be exercised vary widely. As Butler-Sloss LJ said in Dart v Dart [1997] 1 FCR 21 at 38–39, the statutory jurisdiction provides for all applications for ancillary financial relief, from the poverty stricken to the multi-millionaire. But there is one principle of universal application which can be stated with confidence. In seeking to achieve a fair outcome, there is no place for discrimination between husband and wife and their respective roles……..

If, in their different spheres, each contributed equally to the family, then in principle it matters not which of them earned the money and built up the assets. There should be no bias in favour of the money-earner and against the home-maker and the child-carer. There are cases, of which the Court of Appeal decision in Page v Page (1981) 2 FLR 198 is perhaps an instance, where the court may have lost sight of this principle."

52. It is, of course, in the application of MCA 1973 section 25 to the facts of the particular case, and in the search for fairness that the question of the judicial "check" against what Lord Nicholls calls "the yardstick of equality of division" arises. The relevant passage from Lord Nicholls' speech bears repetition: [2001] 1 AC 596 at 605-6 -

"A practical consideration follows from this. Sometimes, having carried out the statutory exercise, the judge's conclusion involves a more or less equal division of the available assets. More often, this is not so. More often, having looked at all the circumstances, the judge's decision means that one party will receive a bigger share than the other. Before reaching a firm conclusion and making an order along these lines, a judge would always be well-advised to check his tentative views against the yardstick of equality of division. As a general guide, equality should be departed from only if, and to the extent that, there is good reason for doing so. The need to consider and articulate reasons for departing from equality would help the parties and the court to focus on the need to ensure the absence of discrimination.

This is not to introduce a presumption of equal division under another guise. Generally accepted standards of fairness in a field such as this change and develop, sometimes quite radically, over comparatively short periods of time. The discretionary powers, conferred by Parliament 30 years ago, enable the courts to recognise and respond to developments of this sort. These wide powers enable the courts to make financial provision orders in tune with current perceptions of fairness…..

……. a presumption of equal division would go beyond the permissible bounds of interpretation of s 25…… A presumption of equal division would be an impermissible judicial gloss on the statutory provision. That would be so, even though the presumption would be rebuttable. Whether there should be such a presumption in England and Wales, and in respect of what assets, is a matter for Parliament.

It is largely for this reason that I do not accept Mr Turner's invitation to enunciate a principle that in every case the 'starting point' in relation to a division of the assets of the husband and wife should be equality. He sought to draw a distinction between a presumption and a starting point. But a starting point principle of general application would carry a risk that in practice it would be treated as a legal presumption, with formal consequences regarding the burden of proof. In contrast, it should be possible to use equality as a form of check for the valuable purpose already described without this being treated as a legal presumption of equal division."

53. Moreover, as Lord Nicholls himself acknowledged at the outset of his speech in Miller / McFarlane:

"[4] Fairness is an elusive concept. It is an instinctive response to a given set of facts. Ultimately it is grounded in social and moral values. These values, or attitudes, can be stated. But they cannot be justified, or refuted, by any objective process of logical reasoning. Moreover, they change from one generation to the next. It is not surprising therefore that in the present context there can be different views on the requirements of fairness in any particular case."

54. One of the frustrations of family law, as well as one of its fascinations, is that no two cases are ever the same. Since the essence of any judicial discretion lies in its application to particular facts, and since each case requires its own particular resolution, the concept of fairness becomes, essentially a matter of judgment. In this context I am reminded of the wise words of Ormrod LJ, in Martin v Martin [1978] Fam 12 at 20; words spoken more than 30 years ago on 10 March 1977, but still, in my judgment, as applicable today as when they were first uttered:

"….. I only want to add one or two observations arising out of Mr. Aglionby's submissions. I appreciate the point he has made, namely, that it is difficult for practitioners to advise clients in these cases because the rules are not very firm. That is inevitable when the courts are working out the exercise of the wide powers given by a statute like the Matrimonial Causes Act 1973. It is the essence of such a discretionary situation that the court should preserve, so far as it can, the utmost elasticity to deal with each case on its own facts. Therefore, it is a matter of trial and error and imagination on the part of those advising clients. It equally means that decisions of this court can never be better than guidelines. They are not precedents in the strict sense of the word. There is bound to be an element of uncertainty in the use of the wide discretionary powers given to the court under the Act of 1973, and no doubt there always will be, because as social circumstances change so the court will have to adapt the ways in which it exercises discretion. If property suddenly became available all over the country many of the rationes decidendi of the past would be quite inappropriate."

55. In Gojkovic v Gojkovic [1992] Fam. 40 (Gojkovic), I sought to persuade both Ward J (as he then was) and this court (in my capacity as counsel for the husband in that case) that it was unfair for the judiciary to criticise the legal profession for what the judiciary perceived as the excessive costs incurred in litigating applications for ancillary relief, when the judiciary itself had failed to lay down guidelines for the profession to follow. Unsurprisingly, I failed, both before Ward J and in this court. In giving his judgment in this court, Russell LJ said [1992] Fam 40 at 50: -

"In his opening submissions to this court, counsel for the husband invited us to lay down guidelines which would, he said, be of assistance to those charged with the responsibility of deciding what, after divorce, is the appropriate level of lump sum payments in cases where very substantial capital assets are available. I do not think that such an exercise is possible. The guidelines already exist. Section 23 of the Matrimonial Causes Act 1973 is the enabling provision for an order for the payment of a lump sum. Section 25, as amended by the Matrimonial and Family Proceedings Act 1984, in terms, requires the court to have regard to all the circumstances of the case and subsection (2), under no less than eight sub-paragraphs, sets out the matters to which the court in particular shall have regard."

56. I am entirely satisfied that were Gojkovic to be heard today post White, the result would have been quite different. The outcome in Gojkovic is plainly discriminatory. Much has changed since 1989, when Gojkovic was argued. I have in mind not only the decisions the House of Lords in White and in Miller / McFarlane, but also the sweeping reforms of ancillary relief procedure (a cooperative exercise between the judiciary and the legal profession) all of which I welcome, with their particular emphases on transparency and the need to control costs.

57. But what remains unchanged, and will remain unchanged for as long as these matter are governed by section 25 of the 1973 Act, is that the outcome of every case is a matter of judgment. This case is no exception to that universal rule. As Hughes LJ has stated, and I repeat, this appeal raises no new point of principle. The profession should therefore resist the temptation to treat it as a precedent. What it is, and this in my view is its only value, is a demonstration of the manner in which this court has exercised its judgment in relation to particular facts.

58. In order to settle, or for there to be an amicable, resolution, cases of this kind require objective assessments and good judgment on the part of both the parties and their advisers. Unfortunately, in the aftermath of marital breakdown, these qualities are, unsurprisingly, not always found in the parties to the former marriage. There is all the more need, therefore, for the legal profession and the judiciary to concentrate on the proper exercise of objective judgment. This is not, I recognise, an easy task.

59. In the instant case, both the district judge and the circuit judge, in my judgment, mistakenly sought to give effect to what they wrongly thought to be the need to achieve equality. In so doing, their decisions were plainly wrong and the outcome was, as a consequence and in each case, unfair. What this court proposes to put in its place is, in my view, both pragmatic and fair.

60. I would, accordingly, warn the legal profession against regarding this case as a precedent. In every case the court must ask itself the two questions: (1) is the outcome fair in all the circumstances of the case? and (2) is it in any way discriminatory? Of course, the court must follow White and look at the extent to which the court has departed from equality. But in my judgment, this latter exercise is a check: the primary objectives remain fairness and an absence of discrimination.

61. When that approach is applied to the order proposed by Hughes LJ, the answer seems to me to be clear. The result is plainly fair. It recognises both the source of the family's wealth, and the contributions past, present and future made and to be made by each. It does not discriminate. It departs from equality, but it remains fair.

62. For these reasons, I, like Hughes LJ, and for the reasons he gives, would set aside the orders made below and substitute the undertakings and orders identified in paragraphs 36 to 39 of his judgment.

Sir Mark Potter, P:
63. For the reasons advanced by Hughes LJ at paragraphs 23-26 of his judgment, the circumstances of the parties made this a most unusual case. The inheritance which the wife brought to the marriage and which had kept it afloat throughout had been in no way augmented by the contribution of the husband, which was limited to his profitable conduct of the carwash business in the later years of the marriage in premises which the wife provided for that purpose. It was a case which not only justified but demanded departure from the yardstick of equality, provided that a fair outcome could nonetheless be achieved by enabling the husband to continue to operate the business and to receive a fair but limited distribution of capital in recognition of his success in that respect.

64. In my view the solution proposed by Hughes LJ at paragraphs 36-39 of his judgment is appropriate to achieve the objectives set out by him at paragraph 34 and achieves overall fairness between the parties. I, too, agree with his judgment allowing the wife's appeal and I would dismiss the husband's cross appeal.