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Home > Judgments > 2009 archive

Horne v Horne [2009] EWCA Civ 487

Appeal by wife against a decision that the fall in property prices necessitated a revaluation of the husband’s lump sum obligations on a Barder basis. Appeal allowed.

The couple had separated and sought to have equity of assets where the wife was to receive a lump sum of £180,000 and the husband to receive her shares in the loss-making family business. The bulk of the lump sum was to be paid from the proceeds of the former matrimonial home. When the wife sought enforcement of that sum the husband, now acting as a litigant in person, appealed on the basis that the lump sum should be revalued under Barder principles though the husband had not managed to turn the family business around.

Thorpe LJ allowed the appeal primarily because the judge had misdirected himself and that it was clear that the events were foreseeable. He also comments that the trial judge was right to raise the issue of whether the case of Heard v Heard did not “fit comfortably” with other cases as the analysis of Hale J in Cornick is consistently approved. He than adds a rider on the procedure followed in the case stating that the husband’s solicitors should have sought a variation under s31(7). 

Case No: B4/2009/0101
Neutral Citation Number: [2009] EWCA Civ 487
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM OXFORD COUNTY COURT
(HIS HONOUR JUDGE CORRIE)
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Thursday, 12th March 2009

Before:

LORD JUSTICE THORPE
and
LORD JUSTICE SULLIVAN


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Between:

JANE CAROLINE HORNE  (Appellant)

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STEPHEN JOHN HORNE  (Respondent)

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(DAR Transcript of
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Mr B Sefi (instructed by Blake Lapthorn) appeared on behalf of the Appellant.

THE RESPONDENT APPEARED IN PERSON.

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Judgment

(As Approved by the Court)

Crown Copyright©

Lord Justice Thorpe:

1. This is an appeal from the order of HHJ Corrie.  It reflects a judgment that he handed down on 8 December 2008 in the Oxford County Court after a one-hour hearing on 4 December.  Permission to appeal was given by the judge himself.  He said that there was a point of general principle and importance in the development of the substantive law.  He pointed to the fact that there was a tension between the need for certainty in litigation and the general collapse of the financial market, which was going to impact on a large number of specific cases.  Secondly he said that the case of Heard v Heard might be said not to fit comfortably with other reported cases in this area. 

2. Let me turn to the background.  Mr and Mrs Horne separated in November 2006 and their post-breakdown finance was the subject of a judgment delivered by District Judge Gatter on 14 November 2007.  The order that resulted provided for the husband to retain the family business on the basis that the wife should transfer her interest in the shareholding in the company to him.  The wife was to take the final matrimonial home, supplemented by a lump sum of £180,000.  The object of the District Judge’s scheme was to bring the parties to financial equality.  It is important to note the detail of the husband’s obligation to pay the sum of £180,000.  It appears in paragraph 4 of the order.  It is to this effect:

“A lump sum of £180,000 by instalments as follows:

a) £100,000 on the date of completion of the sale of the former matrimonial home; and

b) £80,000 on 14 May 2008 or date of completion of the sale, whichever is later.”

3. This approach to equality was not one that the District Judge herself would naturally have adopted absent the submission of the parties.  I take up a citation from her judgment at paragraph 47 to this effect:

 “However, both parties are absolutely adamant that they do not want that to happen.  Mr Horne is taking what the wife’s counsel calls the ‘liquid risk-bearing assets’ and Mrs Horne the ‘liquid non-risk-bearing assets’.  I am not really being given the opportunity to divide like with like.  I do take on board that the company on the face of it is illiquid and certainly while it continues in that there is then an argument for treating it differently.  On the other hand it is valued by its assets only and the main asset is that.  There is therefore unlikely to be much risk in that valuation.  This is not a valuation done on profit where it is subject to the profits going up or down.  I hope that the company will continue, as I said, because it provides not only an income for Mr Horne but also their son.  I have to accept that it may have to be sold.  In these rather strange circumstances where the parties do want it dealt with in this way, I think that therefore it is treated as a liquid asset.  In effect both parties agree that they should be treated equally and Mr Horne has to accept that it is a company not at the moment making a profit and valued on its assets only and therefore it could be sold.  I therefore propose to divide the non-pension assets broadly equally after payment of the debts”.

That rationalisation is of considerable significance when we come to weigh the merits of the present appeal.

4. The implementation of the order not surprisingly led to difficulties.  The husband, as the District Judge had noted, had been trading unprofitably in 2004, 2005 and 2006, accumulating what the District Judge described as huge losses.  The District Judge noted that the husband was struggling to turn the business round and concluded this aspect of the evidence by saying:

“Presumably the company has been surviving on its reserve funds from the good years and there comes a time when that runs out.  I think that time has probably been reached.  The husband does, though, hope to be able to continue to turn this around and he is hoping to turn it into profit.  He thinks that he can cut further back on truck racing although it has to be said that he has cut down on the cost of that this year as well.”

That second citation from the judgment of the District Judge also bears strongly on the outcome of this appeal.

5. The difficulties in implementation have of course flowed from the general economic decline that has besieged our economy and most other affluent world economies.  So the wife applied in August to enforce and the husband applied on 28 August for the variation of certain undertakings.  The husband’s notice of application of that date is of some significance and I point out that it was issued by his then solicitors and it sought only the release of his obligation to pay mortgage interest pending sale and that any arrears be rolled up and paid upon sale of the house.  What it did not seek was a variation of the lump sum order under section 31(7) of the Matrimonial Causes Act 1973. 

6. After the issue of those applications the husband ceased to instruct his solicitors.  As a litigant in person on 5 November, he issued a well-prepared Notice of Appeal seeking the revaluation of his lump sum obligation under the principles established in the House of Lords case of Barder v Caluori [1988] AC 20.  It is necessary to record the extremely worrying procedure that then resulted in the Oxford County Court.

7. The notice of appeal was bare.  There was no evidence in support nor was there any skeleton argument.  The husband did file or swear an affidavit on 10 November, but that purported to support his application to the District Judge of 28 August.  He filed no evidence in the appeal that he had initiated.

8. It seems that a letter was put before Judge Compston on 13 November. He had no representation and he simply ordered that the notice of appeal of 5 November be listed for oral hearing on 4 December with a one-hour time estimate.  He placed no obligation on the appellant to file a skeleton argument and gave him no opportunity to file evidence.  All he directed was a skeleton from the wife by 25 November.  That is clearly inapt, because the wife had no skeleton to which to respond.  Thus the case came on before the judge, HHJ Corrie, on 4 December and at the hearing the husband, as a litigant in person, sought to put in documents including a fresh report from the accountants whose evidence had been before the District Judge some 13 months earlier. 

9. Mr Sefi representing the wife was in a dilemma.  The last thing he wanted was a wasted day in the county court, which would be expensive for his client and would have only increased her stress as she waited yet longer.  So he presented his case in reliance on very clear principles established by authority.  The judge, in my view unwisely but no doubt motivated by a desire to give great latitude to a litigant in person, admitted the documents that Mr Horne had brought to court and investigated financial circumstances in part reliance on the accountants’ report and used that material to persuade himself that there had been such a change in financial circumstances as to amount to a Barder event and allowed the appeal. 

10. This procedure adopted in the Oxford County Court is casual in the extreme, plainly ignores rules that are clearly made to govern case management and, further, seems to ignore principles of natural justice that a respondent to an appeal should know what case he or she has to meet before the hearing and, further, will not be confronted with a lot of fresh evidence as to which application to admit has never been filed.  It is also completely inapt to give an application of this weight and moment a time estimate of only one hour.  So it seems to me that HHJ Corrie may have been led to an unsupportable conclusion, partly as a result of the disregard of procedural convention that brought the case to him completely ill-prepared and unprepared for a final hearing.  He should at the most have given directions on that occasion, perceiving that the case was in a procedural mess and having the opportunity to put it onto a proper footing before listing it for final hearing. 

11. However, I am in no doubt at all that the judge also wrongly applied established authority to such facts as he had discerned.  Of course there had been a sharp fall in the property valuations on which the District Judge had proceeded.  Not surprisingly the husband had failed to achieve the turnaround for which he had hoped but had continued to make trading losses.  All that was perfectly foreseeable, or within the range of the foreseeable, 13 months earlier. 

12. The principles that the judge should have applied are clear as day. First of all there is the speech of Lord Brandon in the classic case of Barder v Caluori, the citation for which I have already given. The passage in question, the classic passage is at page 43, where he says:

“My Lords, the result of the two lines of authority to which I have referred appears to me to be this.  A court may properly exercise its discretion to grant leave to appeal out of time from an order for financial provision or property transfer made after a divorce on the ground of new events, provided that certain conditions are satisfied.  The first condition is that new events have occurred since the making of the order which invalidate the basis, or fundamental assumption, upon which the order was made, so that, if leave to appeal out of time were to be given, the appeal would be certain, or very likely, to succeed.  The second condition is that the new event should have occurred within a relatively short time of the order being made.  I should regard it as extremely unlikely that it could be as much as a year, and that in most cases it would be no more than a few months.  The third condition is that the application for leave to appeal out of time should be made reasonably promptly in the circumstances of the case.”

That statement of principle was expanded and analysed in an influential judgment given by Hale J on 27 May 1994 in Cornick v Cornick [1994] 2 FLR 530.  My citation comes at 536:


“On analysis, therefore, there are three possible causes of a difference in the value of assets taken into account at the hearing, each coinciding with one of the three situations mentioned earlier. 

(1) An asset which was taken into account and correctly valued at the date of the hearing changes value within a relatively short time owing to natural processes of price fluctuation.  The court should not then manipulate the power to grant leave to appeal out of time to provide a disguised power of variation which Parliament has quite obviously and deliberately declined to enact. 

(2) A wrong value was put upon that asset at the hearing, which had it been known about at the time would have led to a different order.  Provided that it is not the fault of the person alleging the mistake, it is open to the court to give leave for the matter to be reopened. Although falling within the Barder principle it is more akin to the misrepresentation or non-disclosure cases than to Barder itself.

(3) Something unforeseen and unforeseeable had happened since the date of the hearing which has altered the value of the assets so dramatically as to bring about a substantial change in the balance of assets brought about by.  Then, provided that the other three conditions are fulfilled, the Barder principle may apply.  However, the circumstances in which this can happen are very few and far between.  The case-law, taken as a whole, does not suggest that the natural processes of price fluctuation, whether in houses, shares or any other property, and however dramatic, fall within this principle.”

13. In my judgment such matters as Mr Horne sought to rely on before HHJ Corrie clearly fell within the first paragraph of that analysis and not the third.  Accordingly HHJ Corrie, directing himself correctly in relation to the authorities, should have refused the appeal. 

14. I only add a word in relation to the case of Heard v Heard, which troubled the judge.  It is a decision of this court, given on 20 June 1994, the court consisting of the Master of the Rolls, Kennedy LJ and Millett LJ.  It is a matter of surprise to me that an ancillary relief case should have been listed before a constitution that did not contain a family specialist, but this was 15 years ago and there was not perhaps such a clear understanding as there now is that no family appeal can be listed before a court that does not contain at least one family specialist.  It is also to be noted that the court did not have available to it the judgment of Hale J in Cornick, which was then only some three weeks old.  The court allowed an appeal in circumstances where a valuation before the District Judge of a house at £67,500 subsequently diminished to a sale at approximately half that figure.  The court was satisfied that that constituted a Barder event.  Revisiting the case, it seems to me clear that that case, as this, fell within the first paragraph of Hale J’s analysis and not the third.  I am particularly of that view since the delay in the sale of the property resulted in part from the husband deciding that he would himself endeavour to buy out the wife’s entitlement but then failing to raise the necessary mortgage funds.  Of course at that time -- 1992, 1993 --  property prices were falling rapidly and this family got caught in that spiral.  But insofar as HHJ Corrie perceived the case of Heard as not fitting comfortably with the others, I share that perception.  Looking at the authorities as a whole, given that Hale J’s judgment in Cornick has being consistently approved in later decisions, I can only conclude that the true path to be followed by trial judges is the path set by Barder followed by Cornick.

15. So for all those reasons I would allow the appeal and set aside the order that the judge made.  However, I add this important rider.

16. In my opinion the husband invoked a superfluous procedure by the filing of his Notice of Appeal on 5 November.  I say that because this is a case in which the matrimonial home was not actually sold until 9 December 2008 and accordingly his obligation to make any payment under the lump sum order had not matured.  Even after 9 December it was still open to him, no money having been paid, to apply for the variation of paragraph 4 of the District Judge’s order.  So what his solicitors should have sought on 28 August was not just discharge from undertakings but the variation of the lump sum order intended to be by instalments under the court’s powers contained in section 31(7).  Those are statutory powers which are not directly governed by the decision in Barder.  They have been considered by this court in the decision of this court Westbury v Sampson [2002] 1 FLR 166, which considered the inter-relationship of the court’s jurisdiction under section 31(7) and the court’s application of the principles in Barder v Caluori.  The analysis of Bodey J, who delivered the leading judgment in Westbury v Sampson, was to the effect that the court exercising jurisdiction under section 31(7) in what was essentially a Barder situation should be almost as stringent as in determining a Barder appeal.  However, Bodey J recognised that there should be some marginally greater latitude given the fact that the statutory language requires the court to have regard to all the circumstances of the case. 

17. So it seems to me that it is still open to Mr Horne either to enlarge by amendment his application of 28 August or to issue a further application.  I would, were I in his shoes, seek to amend the application of 28 August.  Once that step is taken, it appears that he loses nothing by the outcome of this appeal.  The jurisdiction that he thought he had achieved by the order of 8 December was not dependent on that jurisdictional route.  There was already an apparent jurisdictional route under section 31(7) and, if there is any advantage to Mr Horne in one over the other, it must lie in the statutory route.  All that said, I would not want Mr Horne to leave this court with the sense that my rider encourages the issue of a further application or the amendment of an existing application.  His chances of success it must be for him to evaluate.  I would only point out that he faces a steep and high mountain in that this family is no more than a victim of market fluctuations, which were perfectly foreseeable in November 2007 and business losses which were specifically considered by the judge at that time.  Insofar as there have been property falls they bear both ways.  Not only has the business asset, the land on which the company trades, fallen in value, but so did the final matrimonial home, the ultimate sale of which was at a considerably lower figure than had been adopted by the District Judge.

Lord Justice Sullivan: 

18. I agree that the appeal should be allowed for the reasons given by Thorpe LJ and would merely add that HHJ Corrie does appear to have lost sight of the fact that if he were to grant permission to appeal in accordance with Barder principles he had to be satisfied, among other things, that the appeal would be certain or very likely to succeed.  He did not reach any such conclusion.  At its highest he said that:

“There seems to be a strong argument for some reduction in the lump sum.  It may or may not prevail.”

19. He said that, having said that the material before him:

“cannot be said to be entirely satisfactory and may not on further examination turn out to be right.”

That falls well short of the necessary conclusion that if he granted permission to appeal then the appeal would be certain or very likely to succeed. 

20. For that further reason I also would allow this appeal.

Order: Appeal allowed