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Grocholewska-Mullins v Mullins [2013] EWCA Civ 1121

Applicant for permission to appeal an order for capitalised maintenance in the context of an application to vary a maintenance order of £12,000 pa made in June 2011.

The parties had divorced in 1992, at which time the wife was awarded a lump sum of £50,000 and joint lives periodical payments of £24,000 pa. That sum was reduced to £12,000 pa in 2011 on the basis of the wife's cohabitation. The Wife then applied to vary upwards and capitalise.

HHJ Horowitz QC, hearing the application, found that the Wife would no longer receive a benefit from cohabitation and that accordingly her periodical payments should revert to the previous level of £24,000 pa, plus £1,000 pa to take into account inflation. The issue then arose as to whether that figure or a higher figure, taking into account the wife's liabilities and earning capacity, should be used.

At the time of the hearing, it was envisaged that the husband's business could be sold for over £2 million, albeit that payments were expected over a period of time rather than all at once. HHJ Horowitz QC ordered the husband to pay the wife a sum of £47,500 by March 2013, a further £25,000 by January 2014 and a further £225,000 by December 2014 in accordance with the timing of the husband receiving the proceeds of sale of his business.

The wife appealed, contending (inter alia) that the court had calculated the Duxbury figure wrongly, that the judge had wrongly ignored RPI increases and had not dealt adequately with the potential unfairness to her of changing the form of her provision from a periodical payments order to the payment of a series of lump sums. She asserted that the initial payment ordered by the Circuit Judge would only meet her debts and therefore leave her with no income until the second payment.

Patten LJ, hearing the application, rejected the wife's appeal that the overall sum was insufficient and on the question of RPI increases. Permission was however given on the ground that it was reasonably arguable that the court did not adequately take into account that the wife would be left with virtually no income at all until the second tranche was paid.  Permission was therefore granted to proceed on the basis of that aspect of the appeal alone.


Summary by Stephen Jarmain barrister, 1 Garden Court Family Law Chambers
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Case No: B6/2013/1296
Neutral Citation Number: [2013] EWCA Civ 1121

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE PRINCIPAL REGISTRY OF THE FAMILY DIVISION
(HIS HONOUR JUDGE HOROWITZ QC)

Royal Courts of Justice
Strand, London, WC2A 2LL
Friday, 26th July 2013

Before:

LORD JUSTICE PATTEN
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GROCHOLEWSKA-MULLINS  Appellant
 
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MULLINS Respondent
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(DAR Transcript of WordWave International Limited
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Mr Oriel Hinds (instructed by the Direct Access Scheme) appeared on behalf of the Appellant.
The Respondent
did not appear and was not represented.
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Judgment
(As Approved)
Crown Copyright©

Lord Justice Patten:   
1. This is an application by the wife in these proceedings for permission to appeal against an order of HHJ Horowitz QC made after a hearing in the Principal Registry of the Family Division on 19 and 20 November 2012 on an application by the wife for the variation of an order for periodical payments of £12,000 a year which had been made by District Judge Malik on 9 June 2011.  The exercise which HHJ Horowitz carried out and which is not in dispute as part of this application was to vary the order for periodical payments by making a capital commutation not previously possible so as to achieve a clean break between the parties.  There is a considerable history to these proceedings which I do not intend this morning to recite in detail, but which is set out in the judge's judgment.  For the purposes of today, it is enough to record that at the time of their separation and the petition for divorce which took place in 1992 there were insufficient assets to enable the court to make a clean break order.  That was complicated by the fact that at the time the children of the marriage were all infants so that the judge had, in addition to making an order for provision in favour of the wife, to deal with the education and maintenance of the children.  However, by 2011 all the children had grown up.  The husband had ceased to have to pay their school fees and maintenance and the only remaining issues were as to what form the provision should continue to take as between husband and wife.  The original order for ancillary relief so far as the wife was concerned which was an order made by District Judge Robinson was that she should receive £50,000 in the form of a capital sum and periodical payments until death or remarriage in the sum of £24,000 per year. 

2. The husband made an application for the periodical payments order to be varied and that was matched by a corresponding application by the wife for their increase.  In June 2011 District Judge Malik, after a two-day hearing, reduced the periodical payments to the wife to £12,000 a year, not as I understand it because he took the view that her income needs had significantly changed, but rather because he accepted evidence to indicate that she was cohabiting with an Italian doctor who either did or could be expected to contribute to those financial needs.  It was therefore on that basis that the payments were halved.  Permission to appeal against the District Judge's order was refused by Peter Jackson J.  But in January 2012 the wife, then acting in person on 13 January, issued a further application for a variation of the payment order.  The husband made a strike out application which was dismissed.  What HHJ Horowitz was left with, as I have already indicated, was to be treated as a section 31(7) application to include the making of a clean break capital commutation order bringing these ancillary proceedings to an end. 

3. The wife does not, as part of this application for permission to appeal, challenge the making of that order in principle; these parties have now been divorced for more than 20 years and it is clearly in their interests, and indeed in everybody else's, that this hostility which has continued for so long should be brought to an end.  But the issue is whether the way that the judge did that complies with the guidelines laid down by this court in Pearce v Pearce [2004] 1 WLR 68 and in the other authorities dealing with the exercise of the section 31(7) power.  What the judge held was that the husband's financial fortunes had improved considerably since the breakup of the marriage despite having become bankrupt and having entered into a composition with his creditors.  The husband was in due course able to restart a business which, by the time of the application in front of HHJ Horowitz, he was able to sell.  It is the capital that was and is to be released on that sale that has provided the means for making a clean break order. 

4. In order to calculate what the amount to pay should be, the judge went through the history of the matter since the divorce, considered the evidence relating to the financial position of both parties including their future earning potential and concluded that, on the basis that no foreseeable payments were likely to be forthcoming from the wife's cohabitation or former cohabitation with the doctor, the baseline figure of £12,000 per year which HHJ Malik had imposed should be restored to its original figure of £24,000 with an additional £1,000 added to it to take account of inflation.  The issue therefore arose as to whether or not that figure should provide the baseline for a Duxbury calculation of the capital sum or whether, having regard to the wife's financial liabilities and her own earning potential or lack of it, a higher figure should be used as the basis of calculation.  During the course of the hearing, particularly at the time when she was representing herself, some very high income figures were canvassed, but, following the intervention of Mr Hinds as her counsel, the bracket narrowed to between the £24,000 baseline figure by reference to the order to a figure in the region of £36,000.  The judge accepted that the wife had accrued significant liabilities in part as a result of her expenditure of moneys on a charity which she had been in the process of setting up, and partly, I think it is fair to say by, putting it bluntly, living beyond her means.  HHJ Horowitz accepted that notwithstanding the long period since the parties were divorced, the court did have power on a section 31(7) application to take some of that into account in the financial provision to be ordered, notwithstanding that it may involve a use of resources belonging to the husband which could not realistically be said to have been accrued through any efforts on the part of the wife.  But the judge also directed himself that he was bound to take into account in deciding on what was a fair calculation the husband's ability to fund a capital settlement of this kind and over what period.

5. The difficulties that the judge found with that aspect of the case are simply that the consideration payable for the husband's business was not a one-off cash payment, but was spread over a period of time notwithstanding that the total consideration could be expected to be in excess of £2 million.  Part of his calculation of the husband's financial position took into account a tax liability of several hundred thousand pounds which the judge accepted would have to be defrayed out of the initial capital sum payable to the husband from the sale. 

6. Mr Hinds, as part of his very helpful submissions to me this morning, has criticised various aspects of the judge's findings in relation to the husband's financial position.  He says that the husband has been extremely coy over the course of the litigation and in particular in relation to this application about his earning position, his business in relation to private clients, and the financial position of his new partner.  And he says that there has been inadequate disclosure and an over-lenient approach by the judge to enforcing various interlocutory orders of the court.  But I am afraid to say that I do not consider any of those points sufficient to justify a grant of permission to appeal in themselves.  It seems to me that the judge was entitled to form his own view on the evidence.  He was the master of the court's procedure.  I have not been persuaded that any of the orders or his failure on one view to take a tough line in respect of the enforcement of those orders strayed into areas in which it could be said that he had not properly exercised a judicial discretion.  Nor, although the wife clearly does not accept the judge's findings in relation to a number of key matters, do I think it can be said that there was no evidence on which the judge could properly come to the conclusions which he did; so that if that were all there was in this appeal, it would in my view not be a case in which permission should be granted. 

7. Similarly, I am not impressed by some of the subsidiary grounds of appeal such as, for example, that the judge failed to give the appellant her costs.  For this court to give permission for what would amount to a costs-only appeal there has to be a clear error of principle and that cannot be demonstrated in this case.  It seems to me the two main areas which I have to consider are whether or not the judge took too low a starting figure for the purposes of his Duxbury calculation and wrongly adjusted the final figure that that produced having regard to the husband's financial position and secondly, having done that exercise, whether the judge failed adequately to deal with potential unfairness to the wife from a change from a periodical payment order to a capital provision order in making a staged order for payments over a two-year period.  The order which the judge made was that the wife should receive £47,500 on or before 1 March 2013, a further £25,000 on 1 January 2014 and a further £225,000 on or before 1 December 2013.  Those payments are intended to reflect the judge's findings of when the husband would have the moneys from the sale of his business available to meet the capital payments.  But what Mr Hinds submits is that, given that on the judge's own findings the first £47,500 was likely to be largely absorbed in meeting existing debts, it has left the wife in the position of having no income during this year, a situation which will continue until the £225,000 is paid on or about 1 December 2014.  The same goes for this year, for the reasons which I have just explained. 

8. So far as the first of those two broad issues are concerned, I am not persuaded that the judge's calculation of what the overall capital sum should be can properly be made the subject of an appeal.  It is perfectly true to say that the reinstatement of the £24,000 figure was simply down to the judge's findings about cohabitation and that it therefore formed the baseline figure of what her minimum income needs amounted to.  The judge had and was entitled to and did take into account her earning potential on top of that, but Mr Hinds says he should also have taken into account that on the evidence she was unable to live on 24,000 a year until such time as her business started actually to generate some income which even the judge accepted was not likely to be immediate.  But I think that the judge was entitled, having restored the previous order for periodical payments, to take into account in calculating the baseline Duxbury figure, what was affordable, and that goes not merely for the baseline figure but also for the capital sum which it produces.  Mr Hinds points out that even using the £25,000 figure one gets to approximately £380,000.  But what the wife in this case got was £300,000 on the basis that the husband was unable to fund the totality of the capital provision in one payment. 

9. As I have said, once it is clear that there ought to be a clean break which this case cries out for it seems to me that in commuting the periodic payments the court is entitled to have some regard to fairness on both sides.  I have reached the view that an appeal challenging the £300,000 award in itself would not have a real prospect of success. 

10. I should also add for completeness that I am also for much the same reason not persuaded that the judge's failure to apply the RPI index increase to the periodical payments can itself be said to amount to an error of law. 

11. But I have been persuaded by Mr Hinds that there is a point of principle involved here when it comes to the staging of the capital payments.  It seems to me that although the judge was perfectly entitled to have regard to the husband's financial position in deciding whether it should be a single payment or in the event as it has turned out three, he had to and should have factored into that equation the wife's income position during the interim period until such time as the total capital payment had actually been paid.  Having regard to his findings about the wife's existing indebtedness which he seems to have been prepared to accept had to some extent to be taken into account and its likelihood to absorb most of the first tranche of capital, the wife has been left in the position under his order that she is required in effect to subsist throughout the remainder of this year with virtually no income at all. 

12. I think it is at least reasonably arguable that that involves an exercise of discretion which does not adequately take into account the unfairness to the wife in the transition from periodic to capital payments.  What the judge should have done (which at one point in his judgment he does seem to have contemplated) was continuing some form of periodical payment to cater for that interim position which could, if necessary, have been reflected in an adjustment of the final capital sum.  It may be that when this matter is fully argued out on an appeal -- and I express what I hope is not a forlorn hope that it may be possible for the parties to settle this aspect of the matter -- then on a full hearing it may transpire that the judge's order can be justified. 

13. But all I have to decide this morning is whether the relatively low hurdle for a grant of permission has been made out and, in respect of that aspect alone of the appeal, I propose to grant permission.

Order:  Application granted in part.