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N v N [2006] EWHC 3269 (Fam)

Appeal by husband arising from wife's application to vary a 1981 consent order which provided for her to receive nominal periodical payments. Appeal dismissed.

At first instance, the District Judge found that s.31 (7) permitted an exercise of his discretion so as to order an increase in periodical payments. In the Court of Appeal, Charles J found that, whilst the wife's position had "been brought about by a failure to help herself, some extravagance and losses on her investments", her behaviour of itself could not act as a bar to prevent the exercise of the court's discretion so the District Judge had not been plainly wrong.


Case No: SE 78 D 01399

Neutral Citation Number: [2006] EWHC 3269 (Fam)

Royal Courts of Justice
Strand, London, WC2A 2LL

19th December 2006

Before :

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Between :

N Applicant
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N Respondent

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Ann Hussey (instructed by Jones Myers Partnership) for the Appellant (the named Respondent)
Deborah Bangay QC (instructed by Addleshaw Goddard) for the Respondent (the named Applicant)

Hearing date: 9 November 2006
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Judgment Approved by the court
for handing down
(subject to editorial corrections)

Charles J :

1. This is an appeal from a decision of DJ Greene (the DJ). For convenience I shall refer to the parties as the husband and the wife. The application before the DJ was made by the wife under s. 31(7) MCA 1973. She sought variation of a nominal order for periodical payments contained in an order made in March 1981 (the 1981 Order). That order was based on an agreement between the parties.

2. The DJ decided that the periodical payments order should be varied to £16,500 per annum and capitalised in the sum of £202,000 under s. 31 (7B) MCA 1973. On that basis a clean break was achieved. The DJ ordered the husband to pay £45,000 costs to the wife. This was below the costs she had incurred.

3. The husband's contention before the DJ was that the wife's application should be dismissed, that she should receive no uplift of the nominal order and that that order should be discharged. The wife did not resist capitalisation of any uplift awarded and thus a clean break.

4. The husband appeals and there is no cross appeal.

The approach on appeal
5. Relevant possible grounds for appeal in this case are:

i) a failure to give adequate reasons,
ii) error in law by failing to apply the right legal approach or test,
iii) error of law in the exercise of the right test or approach (and thus here in the exercise of the balancing exercise introduced by s. 31(7) and (7B) MCA 1973) by taking into account matters which were irrelevant, or ignoring matters that were relevant, and
iv) that the conclusion reached in the exercise of the relevant judicial discretion having applied the right test (and thus having had regard to the right factors) is plainly wrong.

6. This is well established (see for example CPR 52.11.3 and 11.4, the cases referred to therein and Cordle v Cordle [2002] 1 FLR 207 which relates specifically to this jurisdiction). There is an overlap between grounds (ii) and (iii). Ground (iv) is reached when the other grounds have failed. It presents a high hurdle for an appellant.

7. My attention was also specifically drawn to Piglowska v Piglowski [1999] 2 FLR 763 and in particular to the headnote at paragraph (4) and the speech of Lord Hoffmann at pages 784/5. Those passages emphasise the points that the appellant court (a) should resist the temptation to subvert the principle that it should not substitute its own discretion for that of the judge, (b) should not take a narrow textual analysis when considering a judgment concerned with the exercise of a judicial discretion, and (c) should have regard to the principle of proportionality. They therefore also highlight the difficulty that an appellant has in demonstrating that the conclusion of a judge exercising a judicial discretion (who has applied the right test and taken into account the right factors) is plainly wrong. To borrow from the approach in judicial review it seems to me that to be plainly wrong such a conclusion must be outside the range open to a decision maker applying the correct approach in law.

Failure to give reasons
8. This was not raised in the notice of appeal as a ground of appeal but was advanced in argument as a second or final string to the husband's bow. I deal with it first because it can be dealt with shortly. The argument was that the DJ did not properly explain how he arrived at the figure for periodical payments by reference to his findings on budget and his bringing into account of the capital retained by the wife. It was said that when that capital was brought into account, and a Duxbury approach used, the award exceeded the relevant budget.

9. The answer to this point is to be found in an earlier part of the judgment in which the DJ records the income return on the capital retained by the wife. When that figure is taken, the figure for periodical payments selected by the DJ falls below the budget. That return was not a Duxbury return and in my judgment the DJ was entitled to have regard to an actual income return rather than to a Duxbury return.

10. That subsidiary argument of the husband therefore fails.

11. At this point I pause to pay tribute to the judgment of the DJ which it seems to me sets out his findings and reasoning clearly and appropriately in what he correctly describes as a difficult case.

The 1981 Order
12. This was made against the background of the decision in Dipper v Dipper [1980] 1 FLR 286. This case settled controversy that existed at the time as to whether the court could dismiss a claim for periodical payments. It was held that the court had no such power unless the applicant (wife or husband) consented. The Court of Appeal indicated that there were four ways of dealing with an application for periodical payments. In this case, as the applicant (wife) did not consent to the dismissal of her application for periodical payments, the course taken accords with the second approach set out in Dipper which was expressed as follows: "by making a nominal order, so the party obtaining it may obtain a variation without undue difficulty".

13. No evidence is available as to the precise thinking of the parties concerning the nominal order for periodical payments but it seems to me that their intentions (or those of their advisers) must have, or must be taken to have, reflected the recent guidance given by the Court of Appeal in Dipper.

14. The view that both parties thought that the effect of the nominal order was that it enabled the wife to seek a variation to a substantive order is confirmed by the discussions recorded by the DJ in respect of the transfer to the wife in the early 1980s of further ground rents by the husband. I return to this. The precise date of this transfer was not in the evidence.

15. The substantive provisions of the 1981 Order were that the wife transferred her interest in the matrimonial home to the husband (where he lived with the three children of the marriage then aged 12, 10 and 6) and that the husband was to provide the wife with a sum to enable her to purchase a home and to transfer ground rents totalling £6,000 per annum.

16. The marriage had lasted 13 years. At the time of separation the wife was 32 and she left the children in the care of the husband. It was not disputed that he was left in a difficult position in caring for the children and was facing (as were many others) a difficult working environment in connection with his business as a builder. This was affected by the miners' strike and other prevailing conditions at the time.

17. It was effective common ground that the award to the wife provided her with a comfortable lifestyle at the time.

18. To my mind there is at least a very strong possibility that if the order for ancillary relief in this case had been made after the amendments to the MCA 1973 in 1984 (which changed the position as set out in Dipper and gave the court power to dismiss an application for periodical payments – see s. 25A(3)) that order made would have provided for a clean break.

Further provision by the husband
19. On three occasions the husband made transfers of ground rents. One for ground rents of £3,000 (when told by the wife of difficult payers amongst those transferred as a result of the 1981 Order), another for ground rents of £6,000 per annum and another for ground rents of £624 per annum. He also from the mid 1980s until about 1989 paid the wife commission for the collection of other ground rents.

20. In connection with the transfer of ground rents totalling £6,000 which took place in the early 1980s there were discussions between the parties which are referred to in the judgment of the DJ. The DJ found the husband's evidence to be far more credible than the wife's in every respect in which they conflicted and concluded that:

i) the conversations that took place led the wife to believe that if she had the provision relating to nominal periodical payments removed she would receive satisfactory consideration for doing so,
ii) what the wife said in a later conversation led the husband to the conclusion that the provision for nominal periodic payments had been removed from the order,
iii) there was no real consensus, and
iv) notwithstanding the finding in (ii) the totality of his findings brought him back full circle to the fact that the provision for nominal periodic payments remained.

21. These findings show that after the 1981 Order was made the parties were aware that the nominal order had been made and that it provided a means through which the wife could return to court for a substantive order for periodical payments. Also in my view and notwithstanding the finding recorded in paragraph 20 (ii) both husband and wife could have easily checked and discovered that the provision for nominal periodic payments had not been removed. This accords with the conclusion of the DJ recorded in (iv). Also as the DJ found regardless of the husband's understanding of whether the 1981 Order had been amended his later payments (recorded above and in paragraph 23 below) indicate an acceptance on his part of some level of responsibility for the wife over the period they were made.

22. Further these findings are not challenged. In my view correctly, it was accepted that the husband could not rely on an agreement or an estoppel based on them.

23. Later (in 1991) the husband gave £23,000 worth of investments to the wife from an inheritance from an aunt. The husband said that this was as recompense for the wife's efforts with their son and that he did not believe in giving something for nothing. He also paid half of her legal costs of proceedings she instituted for a residence order in respect of their granddaughter. Such an order was not made.

The wife's position after and as a result of the1981 Order and the subsequent payments.
24. The wife never attempted to obtain paid employment and the DJ found she could have done. In this context it will be remembered that she did not look after the young children of the marriage who lived with the husband. The DJ recorded that he had the clear impression that she could and should have taken steps to acquire an earning capacity by 1982/3 and found that she made a life-style choice not to work.

25. The DJ recorded that the 1981 Order provided the wife with an income that was higher than average. The amount of that income was increased by the later transfers of ground rents I have referred to and the DJ recorded that it was more than twice the salary of the husband's sales manager.

26. The DJ found and recorded that at and prior to December 1998 (a) the wife had a mortgage free house and investments that produced an income equivalent to a good living wage, and (b) had not sought paid employment since the breakdown of the marriage in 1977.

The wife's move to Australia
27. At the end of 1998 the wife decided to emigrate and did so in October 2000 having sold up in this country. The sale of her home, the grounds rents and the product of the gift of investments worth £23,000 in 1991 totalled about £328,000 when she moved to Australia. The source of all of this was therefore the husband pursuant to the 1981 Order and the subsequent transfers and gifts.

28. She did not buy a home in Australia but rented in an expensive part of Sydney. She invested on advice and made losses. The possibility of suing her advisers for breach of her instructions (and / or on other grounds) was investigated but she has not done this. At the commencement of this application her investments were put at £255,800. Her expenditure from income and capital and her losses were not closely particularised to show how the £328,000 in 2000 had become £255,800. The DJ did not accept the wife's evidence that her losses were between £100,000 and £130,000 but recorded her evidence that "she would not be here now if I had not lost all the money I invested" (I pause to comment that this appears to be an exaggeration).

29. She did not and does not work in Australia.

The husband's increase in wealth
30. Since the breakdown of the marriage through a combination of factors including hard work, opportunities, changes in the economic environment, and assistance from his present wife the husband's wealth has increased greatly and he has made provision through settlements for his children.

31. There was a dispute as to his available wealth. He put it at around £5 million, the wife put it at over double that.

Sad features of this case
32. In my view sad and avoidable features of this case include:

i) the dispute as to the husband's wealth and the associated costs thereof, and
ii) the introduction into the issues by the wife of allegations that the husband had used pressure, threats and other inducements.

The husband's main arguments
Alleged Errors of Law
33. It was argued on behalf of the husband that the correct approach at law was one that involved the wife satisfying a condition precedent or trigger to the exercise of the court's discretion. This was put in a number of ways but at the heart of the condition or trigger was the assertion that before any increase of the nominal periodical payments could be considered the wife had to establish that despite her best endeavours her attempts at self help had failed. It was said that without establishing that the wife was not entitled to take advantage of the safety net that the possibility of varying the nominal order for periodical payments gave her. In this context, and in the context of the alternative submission that the DJ was plainly wrong, it was said in the husband's skeleton argument:

"By what possible criteria, legally or morally, can it be fair to activate such an order where a spouse's requirements are wholly of her own making in that she made investment and life style choices over which the husband had no control which have resulted in a financial need"

34. On that basis of that argument it was said that the DJ had erred in law because the wife had failed to establish that condition precedent or trigger to the exercise of discretion.

35. I do not accept that approach in law and thus the argument that the DJ so erred in law.

36. In my judgment such an approach cannot be found in the statutory provisions or the authorities relating to them. Section 31(7) expressly refers to "all the circumstances of the case" and "to changes in the matters to which the court was to have regard when making the order" (and thus to the matters to which the court is directed to have regard by s. 25 MCA). That statutory language demonstrates that the court is to have regard to all the relevant circumstances and within them matters listed in the statute. To my mind that precludes the condition precedent or trigger approach advanced on behalf of the husband. This is because such an approach would isolate a relevant factor or factors and would demand that it (or they) are assessed in isolation and without any balancing with, or overview taking account of, all relevant factors whereas in my view the statutory provisions demand such a balancing exercise and overview.

37. In my view that conclusion is confirmed by the cases relied on by the husband concerned with delay (namely M v L [2003] EWHC 328 (Fam), Fraser v Fraser [1982] 3 FLR 98, Chambers v Chambers [1980] 1FLR 10 and McGrady v McGrady [1977] Fam Law 15.

38. That conclusion of course does not mean that one or more of the relevant circumstances and the matters listed in the MCA are not more important or magnetic or outweigh other factors (and are therefore determinative).

39. I reject the argument that the DJ fell into the trap warned against by the Court of Appeal in Pearce v Pearce [2003] 2 FLR 1035 of succumbing to the temptation to adjust the capital provision. Both parties relied on that case as setting the approach to be adopted to a variation of a maintenance order and capitalisation. In my view it is clear that the DJ did so too. He was also referred to and properly took account of Primavera v Primavera [1992] 1 FLR 16. By referring to the evidence of the wife that she "would not be here now if I had not lost all the money I invested" the DJ was not revisiting the capital award. Rather he did so as part of his account of the background and to record the reason advanced by the wife in her evidence for seeking through her counsel (and thus for the reasons argued by counsel) a variation of the maintenance award and capitalisation applying Pearce. Indeed it seems to me that the DJ made clear that, as was accepted by the wife's new advisers, the original approach of the wife to that end was incorrect. For example in paragraph 47 of his judgment the DJ refers to the Court of Appeal's guidance in Pearce that there is simply no power or discretion to embark on further adjustment of capital to reflect the outcome of unwise or unfortunate investment on the one side or prudent or lucky investment on the other. Also in paragraph 56 he said that the husband should not be ordered to make up the deficit resulting from the wife's capital losses.

40. In Pearce the Court of Appeal roundly rejected my views in Cornick v Cornick (No 3) [2001] 2 FLR 1240 that the breadth of the approach that could be taken in exercising the power in s. 31(7B) included an ability to exercise a wide discretion and not to regard the original lump sum order as an inviolate provision (see paragraphs 109 to 127 and in particular paragraphs 113, 114, 124, 125 and 126). In my view here (as in Cornick (No 3)) the proper approach to be taken accorded with that taken in Harris v Harris [2001] 1 FCR 68 and confirmed in Pearce, namely setting a level of periodical payments and capitalising. If follows that, although of interest to me, the point I raised with the parties as to the status of the rejection of Cornick (No3) in Pearce in the light of the approval of an earlier paragraph in my judgment (namely paragraph 106) by Lord Nicholls in Miller v Miller; McFarlane v McFarlane [2006] 1 FLR 1186 at paragraph 34, is not a live issue in this case. (Paragraph 106 in Cornick (No 3) is based on the same approach to statutory construction and application as the later paragraphs on the ambit of the statutory discretion conferred by s. 31(7B) which was rejected by the Court of Appeal and is part of the lead in to those paragraphs.)

Error of law by a failure to take factors into account or by taking incorrect factors into account
41. It was correctly accepted that delay of itself does not debar a claim. But it was argued that the DJ erred in the way he took account of the delay, or the time that has passed since the 1981 Order, on the basis that in paragraph 53 of his judgment the DJ rejected the argument that the application should be rejected on the grounds of delay solely on the basis that there was no prejudice. I do not agree that that is a fair reading of paragraph 53 alone, or in its context, or that the DJ so erred in his approach. The reference in that paragraph to various payments, or acts of financial support, keeping the husband's financial liability as a live issue links the paragraph to a number of other parts of the judgment and in particular (a) to those acts and the DJ's findings on the discussion relating to them, and thus (b) the findings recorded in paragraph 20 hereof. This shows that the DJ considered delay, and its effect, in all the circumstances of the case and in the light of those findings. On that basis, as he was entitled to do, the DJ concluded that there appears to have been no prejudice to the husband.

42. Otherwise, and in my view correctly, this ground of appeal was not argued. I record that in my view it was properly accepted by both sides that when, in paragraph 50, the DJ referred to the arguments of counsel for the husband as going to quantum he was using that description to encompass her submission that there should be no upward variation, and that the application should be dismissed and the nominal order discharged.

Plainly wrong
43. This was argued vigorously and clearly had a considerable degree of overlap with the condition precedent or trigger argument referred to earlier. This is because the failure of the wife to satisfy that condition or trigger is forcefully advanced as a factor of great weight in the exercise of discretion and one that, together with others, demonstrates that the DJ was plainly wrong (see the citation in paragraph 33 above).

44. I agree that the findings made by the DJ show that the wife did not satisfy the condition or trigger of demonstrating that her present situation had arisen notwithstanding her best endeavours to help herself. Plainly she has not taken this course by, for example, seeking employment and living in a less expensive area in Australia albeit that her budget advanced by the time of the hearing had reduced to a reasonably modest one. Her present financial position, on which she based her argument for a variation of the nominal periodical payments, has been brought about by a failure to help herself, some extravagance and losses on her investments.

45. Other factors relied on by the husband include:

i) the circumstances at and around the time of the separation and the difficult position the husband was in both financially and in respect of the day to day care of the children,
ii) the findings as to the financial position of the wife as a result of the 1981 Order and the later payments and transfers by the husband,
iii) the point that the husband is worse off by taking the generous approach he did by making those transfers and not returning to court to obtain a clean break, which it is likely he would have obtained at the time he made them without payment or transfer of more,
iv) the DJ's finding that the wife led the husband to think that the provision for nominal periodic payments had been removed from the 1981 Order,
v) the false allegations made by the wife, and
vi) the present approach of the courts and the public policy relating to it of seeking a clean break and the point that this was not possible in 1981 without the wife's consent which resulted in the safety net in the 1981 Order.

46. I agree that these combine to found a powerful case that this wife is undeserving of an exercise of the statutory discretion to vary the nominal periodic payments. Indeed I have concluded that if I had been trying this case at first instance it is likely that I would have concluded that no such variation should be made notwithstanding the consequences to the wife of that decision.

47. However I recognise the existence of factors in favour of the decision made by the DJ in the exercise of the statutory decision and having regard to them I have concluded that it cannot be said that the DJ was plainly wrong or that his decision was outside the range of discretionary decisions that was properly open to him. Those factors include:

i) the existence of the nominal order and thus the possibility that the wife could seek an upward variation and the point that certainly at the outset both parties knew this, and thus the existence of the safety net,
ii) the findings of the DJ recorded in paragraph 20 above, and the points made in paragraph 21 above which support the conclusions of the DJ that notwithstanding the finding recorded in 20(ii) the correct approach was to proceed on the basis (a) that the order for nominal periodic payments (and thus the possibility for its variation) remained, and (b) that despite the argument on behalf of the husband that there was not a clean break at any stage,
iii) the problems in this area of law concerning agreements or estoppels because of the statutory requirement that court makes the order (see for example Edgar v Edgar [1980] 1 WLR 1410 and Rose v Rose [2002] 1 FLR 978),
iv) the matters listed in s. 25 (2)(a) and (b) MCA which are part of all the circumstances of the case and the changes in them since 1981 and thus the changes in the financial positions of the husband and wife and the differential between them that has arisen over the years. That differential is now very considerable albeit that (a) it is the product of the choices they have made and their activities and the assistance they have received during the period that they have led separate lives, and (b) there is no contribution by the wife to the husband's increase in wealth or by him in her losses and lifestyle decisions. In this context I note that the passage from the skeleton argument of the husband, quoted in paragraph 33 above, correctly in my view refers to there being a financial need, and
v) part of the wife's present problems, and thus that financial need, arise from the losses on her investments and in my view it would not be reasonable to discount this on the basis that she should have sought to mitigate or recover the loss by litigation, and in my view such losses are within the range of factors that the parties, and the court in 1981, would have said could trigger an application to vary the nominal periodic payments order.

48. In my view when those factors are taken into account the position is reached that:

i) the conclusion that the DJ reached which was based on a reasonably modest budget and resulted in a capital award that related to a small percentage of the husband's assets, and
ii) the conclusion urged by the husband before the DJ and me,

are both within the range of decisions open to a court taking the correct approach to the judgmental exercise given to it by the MCA.

49. For the reasons set out above I dismiss this appeal.