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Home > Judgments > 2009 archive

Murphy v Murphy [2009] EWCA Civ 1258

Application for permission to appeal against an award dividing assets 65%/35% in favour of wife. Permission granted; application to adduce further evidence refused; appeal allowed.

The couple were essentially American, although the wife has an Irish heritage, Irish nationality and Irish assets.  The parties met in New York in 1997 where they were both then working.  There they became engaged.  When the husband was subsequently posted to London at the end of 1997 the wife gave up her work in the United States and followed the husband to Europe.  The parties were married in Ireland in August 1998. 

Throughout the marriage, until December 2004, the husband continued his career as banker and was a high earner.  However, he was made redundant in December 2004 and had not since obtained any salaried employment.  There were no children of the marriage and the marriage broke down, and the parties separated, after about seven-and-a-half years.

At first instance, Mrs Justice Parker delivered an oral judgment in which she ordered that the proceeds of sale of a property held on deposit pending judgment  be divided as to £2,555,914 to the wife, and £12,004 to the husband, in order to reflect the principle that there should be a division of assets in 65%/35% proportions in favour of the wife. Following objections from counsel for the husband in which, inter alia, he sought clarification and an extension of the judge’s findings in relation to a deferred compensation payment within a Merrill Lynch scheme, the judge delivered a second judgment in draft. Since that did not refer to a second objection of the husband which had been raised in a letter from counsel but had not reached the judge, she delivered a third judgment. That judgment rejected both objections of the husband and was drawn to reflect the terms of the original judgment.

The husband’s appeal raised five issues, namely: i) the judge had been inconsistent in her treatment of the deferred Merrill Lynch scheme in that she had recorded that it was not a liquid fund, but had brought it into the reckoning in order to achieve a division of the available assets; ii) the judge had erred in her consideration of the husband’s credibility in relation to an Irish fund: it was in connection with this issue that the husband sought to adduce further evidence; iii) the spending pattern attributed to the husband was inaccurate; iv) the wife’s needs had been afforded undue importance; and v) in the circumstances equality of division was the appropriate outcome.

In this judgment Thorpe LJ allows the appeal, finding: i) the deferred Merrill Lynch scheme was not a liquid asset and, following the husband’s objection, the award ought to have been adjusted accordingly; ii) fresh evidence could not be adduced to challenge the judge’s second finding and she was entitled to reach her conclusions in that respect; iii) the spending attributed to the husband had been exaggerated by a factor of approximately three; iv) the importance of the wife’s needs had been overstated; and v) whilst the overstatement of the importance of the wife’s needs and unjustified reliance on the husband’s wastage of funds required an adjustment to the original award, it was appropriate to depart from equality because of the parties’ disparity in their future earning capacity. 

Accordingly, the original order is varied so that the wife receives £1,521,895 and the husband £819,482.



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Case No: B2/2009/0798 & 0798(A)

Neutral Citation Number: [2009] EWCA Civ 1258
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE PRINCIPAL REGISTRY OF THE FAMILY DIVISION
(MRS JUSTICE PARKER)
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Friday, 18th September 2009

Before:

LORD JUSTICE THORPE
LADY JUSTICE SMITH
and
LORD JUSTICE PATTEN
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Between:

MURPHY (Appellant)

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MURPHY (Respondent)

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(DAR Transcript of
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Mr M Pointer & Mr S Trowel (instructed by Messrs Mishcon de Reya) appeared on behalf of the Appellant.

Mr N Francis QC & Mr N Bennett (instructed by Messrs Speechly Bircham) appeared on behalf of the Respondent.
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Judgment
(As Approved by the Court)
Crown Copyright©

Lord Justice Thorpe:
1. Two applications are listed.  An application for permission to appeal and an application for leave to adduce fresh evidence.  We indicated to Mr Pointer at the outset of yesterday’s hearing that we were granting permission to appeal and that he should proceed to argue the points in his skeleton. 

2. We gave an equally clear indication that we were not minded to grant the application to adduce fresh evidence.  So the appeal is from a judgment of Parker J given at the conclusion of ancillary relief proceedings brought by the wife against the husband and initially tried in July 2008.  The parties to the proceedings are essentially American, although the wife has an Irish heritage, Irish nationality and Irish assets.  The parties met in New York in 1997 where they were both then working.  There they became engaged.  When the husband was subsequently posted to London at the end of 1997 the wife gave up her work in the United States and followed the husband to Europe.  The parties were married in Ireland in August 1998. 

3. Throughout the marriage, until December 2004, the husband continued his career as a banker and was a high earner.  However, he was made redundant in December 2004 and has not since obtained any salaried employment.  There were no children of the marriage and the marriage broke down, and the parties separated, after approximately seven-and-a-half years. 

4. The ancillary relief proceedings were prepared over an extensive period    more than two years, between summer 2006 and summer 2008 -- and came for trial on 21 July.  A number of factual issues had been explored during preparation to the extent that leading counsel advised at the pre-trial review that they thought the time estimate should extend from five to seven days.  However, there was a general reluctance to vacate the fixture on the 21 July, and accordingly a recognition that the live issues would have to be compressed within that timetable.  So Parker J sat for all the days of that week and at its conclusion reserved her judgment.

5. A particular request was made of the judge by Mr Martin Pointer (leading for the husband) that the parties might know the result before the long vacation.  He said that his client was under financial pressure and the arrangement of his affairs would be difficult without knowing the outcome of the trial.  Accordingly, the judge committed herself to giving judgment on 1 August.  In the intervening ten days she had little opportunity to prepare a written judgment for handing down because in the last week of that term she had a contested five-day trial.  Accordingly, on 1 August she delivered an oral judgment which she emphasised was essentially extempore.  However Mr Pointer has emphasised that she had had ample time to reflect on the outcome and that she was clearly delivering her oral judgment from notes. 

6. The exchanges between counsel and the judge, after she had concluded her oral judgment, have been transcribed, and we see from the transcript Mr Pointer requesting the judge to clarify and extend her findings in relation to one asset of the husband’s, namely the deferred compensation payment within a Merrill Lynch scheme to which he was entitled.  Mr Pointer drew attention to the fact that the judge had seemingly fallen into inconsistency, if not contradiction, by recording in paragraph 99 of her judgment that the deferred compensation scheme was not a liquid fund, whilst at the conclusion of her judgment bringing it into the reckoning in order to achieve a division of assets between the parties to give the wife an enhanced 65% share. 

7. The judge at once acknowledged that she might well have fallen into error and would accordingly have to reconsider her judgment before it was to be regarded as delivered.  Accordingly she adjourned and requested from counsel a note of the evidence and submissions that had been given during the trial in relation to the deferred compensation scheme.  That note was duly provided and there was then a further hearing on 19 November 2008, at the conclusion of which the judge again reserved.  A second judgment was then delivered by the judge, first in draft and then in final form, on 20 March 2009. 

8. It seems that a transcript of the oral judgment of 1 August was not made available to the parties until 18 November, and that fact was relied upon by Mr Pointer to explain why a second objection to the judgment of 1 August was not raised until after the hearing of 19 November.  As a matter of record, the second objection is to be found in a letter written by Mr Pointer and Mr Stephen Trowel, his junior, and dated 25 November 2008.  The burden of the letter was to draw attention to the fact that the judge had relied in her judgment of 1 August on a schedule produced by Mr Francis QC in his closing submissions in support of an argument that the husband had effectively wasted £2 million of family money in the period May 2006 to May 2008.  The issue was raised by the husband’s team pursuant to the practice which, whilst originating in the decision of English v Emery Reimbold & Strick Ltd [2002] 1WLR 2409, was endorsed as being of general application in family appeals in the later case of T v T.  So it was under that practice that the husband’s team asserted the danger of the judge’s reliance on an advocacy schedule that was not agreed, that was not supported by evidence, and which was in some instances plainly wrong. 

9. When the second judgment was delivered in draft, as I have already recorded in March 2009, it made no reference at all to Mr Pointer’s second complaint or to the letter.  Despite the fact that Mr Trowel had handed the letter to the judge’s clerk on or about 25 November, it seemingly had never reached the judge.  Accordingly she was driven to compose and circulate a third judgment dealing with the second objection.  This was circulated in draft in April 2009 and was, I think, handed down on 19 June 2009.  In that third judgment she rejected Mr Pointer’s second objection and an order was drawn therefore to reflect the terms of her judgment of 1 August 2008 without any amendment, since of course she had by then rejected both the objections raised by the husband’s team.

10. The order was dated 18 June 2009 and perfected on 22 June and, for the purposes of this appeal, the crucial paragraph is the first, in which the proceeds of sale of a property that were held on deposit pending the judgment were to be divided as to £2,555,914 to the wife, and £12,004 to the husband.  That was of course intended by the judge to reflect the principle that there should be a division of available assets in 65% / 35% proportions. 

11. This review of the litigation is essential in order to understand the issues that have being argued in this appeal.  It is an unfortunate outcome to ancillary relief proceedings that have involved a very considerable expenditure of family money with specialist ancillary relief lawyers of the highest calibre and reputation. 

12. It is easy to see that this unhappy chapter is the consequence of a judge gallantly and conscientiously taking on a task and burdens that were simply excessive at the end of a long term.  She was faced with completion of a seven-day case within five days and then the obligation to not just pronounce an outcome but a fully reasoned outcome before the commencement of a long vacation which would have given her the opportunity to compose a written judgment with her usual skill and care.  It is perhaps unfortunate that the two objections raised under the practice were not raised simultaneously and certainly that the later of the two then got lost in communication. 

13. So I come now to the appeal as presented by Mr Martin Pointer.  His skeleton argument raises five issues.  The first is as to the treatment of the Merrill Lynch deferred compensation scheme.  This, of course, was the subject of Mr Pointer’s objection expressed on 1 August.  The judge, in concluding her judgment, had opted for this 65% / 35% division but she did not herself translate it into cash terms in her judgment.  She simply adopted Mr Francis’s final submissions, which included a schedule that contained the necessary calculation.  Mr Francis’ schedule included the deferred compensation scheme amidst the husband’s immediately available resources, as it were above the line in contrast to the wife’s interest in a family company, which Mr Francis had below the line on the basis that it was presently unrealisable.  However, as I have already recorded in the earlier paragraph 99, the judge had stated that the deferred compensation scheme was not liquid.  Hence Mr Pointer’s objection.

14.  As I have said, the transcript records the judge’s reaction, conceding that she had perhaps made a mistake.  The judge’s conclusion however, on reconsideration, following the hearing and argument on 19 November, is expressed in her second judgment. 

15. Before coming to that it is necessary to consider what the evidence was as to the deferred compensation scheme.   The rules of the scheme were before the court.  In the husband’s early description and in his Form E the scheme had been listed amongst his resources without any differentiation.  However, the nature of the scheme was probed in two questionnaires served by the wife’s team and was explained in terms that can be summarised thus: in answering the first questionnaire the husband had said that the investments were risky; that they were in illiquid; that there was no maturity date and nothing had been paid under the scheme.  Subsequently a payment was made out to the husband and so, in answering the second questionnaire, he described this scheme as being illiquid and without value unless making distributions.  Finally, in his affidavit, filed approximately five weeks before trial, he described the scheme as containing highly speculative illiquid investments.  In oral evidence in chief the husband said much the same, and it is important to note that there was no cross-examination from Mr Francis on this point.  However, in his schedule in opening and in his closing submissions Mr Francis included the deferred compensation scheme as an asset above the line, i.e. one available to the husband for encashment.  With hindsight it is perhaps reasonable to say that Mr Pointer did not sufficiently criticise this presentation in schedule form and, given the paucity of the evidence and submissions on the scheme, I can understand the judge’s adoption of Mr Francis’ schedule.   

16. However, I am in no doubt that the judge erred in principle.  Her immediate reaction when the point was raised by Mr Pointer was entirely sound.  Her refusal to correct her judgment is reasoned in her second judgment as follows.  She first of all considered whether Mr Francis’s failure to cross-examine was influential and said that it was not:

“The husband’s evidence was expressed in vague terms.  He did not say that the asset was illiquid and he did not produce any evidence to suggest that it was.”

I cannot agree with that rationalisation.  The husband was not, in fairness, vague in his evidence.  Albeit that the pre-proceedings disclosure had been imprecise and the Form E imprecise, he was extremely clear in his answers to the questionnaire, in his final affidavit and in his oral evidence.  Furthermore, there was abundant evidence to suggest the extremely limited nature of the value of the fund to him, namely the rules of the scheme. 

17. The judge continued her explanation in paragraphs 22-29, in which she made findings in relation to the deferred compensation scheme and considered whether those findings required an adjustment of the award.  I will not read them into this judgment.  Enough to say that I do not accept that her approach is sound on the evidence, and I equally reject her conclusion that adjustment to the award was not required.

18. It seems to me elementary that Mr Francis had to cross-examine if he sought to challenge the husband’s written evidence and oral evidence in chief as to the character and limitations of the asset.  He did not do so, and Mr Francis schedules were inconsistent with the evidence.  Yesterday he sought to justify his approach, and the judge’s acceptance of it, by reliance on the form of the early disclosure and the scheme rules, which allowed payment out in defined exceptional circumstances. 

19. The judge did not rely on those points and wisely since, first, the option to seek discretionary payment was never put to the husband; and second, it is perfectly apparent that the husband could not bring himself within the defined exceptions in the scheme rules. 

20. So, on this first and important point, in my judgment Mr Pointer succeeds.  The judge in paragraph 1 of her order incorrectly expressed her award of 65% of available assets in monetary terms. 

21. The second issue raised by Mr Pointer goes to the wife’s interest in the Irish fund, HL and M, which was decided by the judge against the husband and his valuer and his forensic accountant.  It was one of the big issues at the trial.  The judge made a very clear finding as to value at paragraph 42 of her first judgment when she said that she preferred the evidence and opinions of the wife’s expert over the opinions of the husband’s expert, who was a London practioner and did not have the specialist knowledge of the wife’s Dublin expert.  It does not seem to me that any criticism could possibly be made against that conclusion.  Equally sound are the judge’s findings as to the benefit of the asset to the wife.  Essentially, the judge accepted the analysis that the wife would realise the full value of this shareholding eventually, namely when the company was either sold by the wife and her two sisters or when it was put into liquidation.  In paragraph 120 of her judgment the judge thus summarised the interest: 

“I do accept that it is likely, if not inevitable, that the wife is going to have some significant benefit from that in the future, but it is likely to be very much in the future.”

22. So the debate in this court centred on a related finding of the judge as to the husband’s credibility on this area of the case.  The husband had asserted that the wife had presented a disingenuous case of having no involvement in, or knowledge of, the operation of the Irish company, and asserted that he himself had been directly involved in management decisions dating back to the year 2000.  He produced computer schedules which he suggested corroborated his evidence and which were plainly produced some time in the year 2000.  The judge rejected that and at paragraph 52 concluded:

“I suspect, although I cannot be sure, that these documents were created later rather than earlier in the chronology of events, and the fact that they were not produced until 17 July, which was about five weeks after the husband produced his s.25 affidavit, fuels my suspicion that these are late creations and that the detailed figures in these documents, some of which are correct, none of which are incorrect, are based upon material which the husband already had rather than being in any way attributable to information which he can only have had through discussion with the family.”

23. That was only one of a number of criticisms that the judge made of the husband’s case, and the candour of his forecasts as to his future career prospects. 

24. The fresh evidence that Mr Pointer sought to introduce was expert evidence directed to a CD Rom, which the husband asserted he had come upon by chance in April 2009.  Mr Pointer was embarked on a simple analysis.  Fresh evidence substantiates the husband’s evidence as to the date of creation.  It would therefore have rendered the husband proof against the judge’s criticism and, since this was the only area in which she had made direct criticism, the whole critical evaluation that the judge reached of the husband and his case might unravel. 

25. It was unnecessary to get into a dispute or any debate with Mr Francis as to the value of the expert’s opinion, since it seemed to me perfectly plain that the husband could not overcome the additional element of the ruling in Ladd v Marshall.  There was no sufficient explanation as to why this husband, without employment and with a huge investment in the litigation, had not carried out a thorough search and discovered the vital CD in proper time for the trial.

26. Once the application to adduce fails then there is nothing left in Mr Pointer’s second issue submissions.  The judge reached clear conclusions, which she was fully entitled to reach on the evidence then before her. 

27. The third issue is the issue raised by the husband’s team in their letter of 25 November.  Reverting to the first judgment, the judge had said first at paragraph 18:

“As a result of the enquiry which has taken place in the proceedings before me, it appears that the husband has run through an extraordinary amount of money over the last two years.”

28.   Moving to paragraph 92, she said:

“I should also deal with the husband’s spending pattern, which I have briefly referred to at the beginning of this judgment.  A number of analyses have been done by Mr Francis and his junior, Mr Bennett, and various schedules are before me, but I can really do no better than to look at p.7 of their written closing submissions which analyses in considerable detail the husband’s spending pattern for the two year period until April or May 2008.  The husband appears to have taken out of various accounts, including an increase in the original mortgage on Shawfield Street so that it now stands at £1.4 million rather than the £1.1 million, which it was originally.  He seems to have had go through his hands £1,958,619.”

29. Finally in paragraph 134, the judge says:

“Mr Francis also puts his case not only on the basis of need, but he says that it reflects the way in which the assets have been dissipated by the husband over the course of the last two years.  I have already referred to the figures which he put at p.7 of his skeleton argument, which is the £2 million which has gone, if not down the drain, certainly somewhere where it is no longer accessible and available to be divided.”

30. The schedule upon which the judge relied is to be found at page 186 of the appeal bundle.  It is a very detailed itemised schedule with the bottom line figure of £1.9 million referred to in paragraph 92 of the judgment.  The letter of 25 November was specific: 

“…we think it appropriate to draw to your attention that the schedule at p.7 of Mr Francis’s closing note referred to in paragraph 92 of your judgment is a schedule which is not accepted.  It was first produced in his closing.  A similar (but different) schedule was put to Mr Murphy in cross-examination.  He did not accept the figures in that schedule, they were, he said, either wrong, relating to the wrong period or double counted.  Further in oral closing this point was spoken to and the same points of mistake, wrong period of double counting were made.”

31. How did the judge reject that submission?  She does so in a further judgment, between paragraphs 9 and 13.  Again, I do not intend to consider the judge’s reasons for rejection at any great length.  She broadly regarded the schedule as being a fair review of the evidence.  She accepted Mr Francis’s submission’s in justification of the schedule and his submission that his reliance on the schedule was not to achieve what is known as a “add back”, but simply as a general circumstance.  The judge then added that her final conclusion was essentially founded on the magnetic importance of the wife’s needs. 

32. For the purposes of this appeal Mr Pointer prepared a schedule, which was essentially a critique of Mr Francis’s page 7 schedule.  I have reached the inescapable conclusion that Mr Pointer is justified in saying that the total of £1,958,619 advanced by Mr Francis is wrong by a factor of approximately 3.  Extracting figures that are duplicated, or which are plainly wrong, or which fall outside the stated period of analysis, the withdrawals sink to a figure of £694,315.  Further Mr Pointer is fully entitled to say that expenditure is not to be regarded as a waste if the use of the withdrawals is properly explained.  He points to the husband’s expenditure of some maybe £400,000 on Shawfield Street, the husband’s taking up Merrill Lynch options, amounting to some quarter of a million pounds, and the husband’s expenditure of some £224,000 in payment of solicitor’s bills delivered.

33. I find it impossible to support the judge’s reasoning in her third judgment.   I have some sympathy for her in that I do not believe that the point was put to her with the clarity that has been put to us.  Mr Pointer accepted that before the judge he had not prepared a schedule such as that which appears at page 16 of his skeleton for our benefit.  Had the judge had that document before her, with Mr Pointer’s further submission as to the application of the funds which were withdrawn, I am confident that she would have seen that her conclusion of waste was unjustified on the evidence and unfair to the husband.  Accordingly, Mr Pointer succeeds on this third issue.

34. The fourth issue is as to wife’s needs.  I can take this point comparatively shortly.  Amongst the judge’s findings we see, at paragraph 129, “the wife’s need is a pre-eminent factor in this case”.  At paragraph 134, “the way in which the husband makes his proposals simply does not address the overwhelming issue of the wife’s needs”.  And then, in her third judgment, the passage that I have already cited, which describes the wife’s needs as being “of magnetic importance”.  In my judgment all these three expressions are overstated.  This was an eight year childless marriage.  The parties are both aged approximately forty.  Each of them has a fresh start in life to make, certainly on an emotional plane.  The wife has retrained and is already developing a new career.  There are £3 million of assets to meet their respective needs.  This was essentially a simple case that was made unnecessarily contentious and complex.  The case had all the hallmarks of clean break and equality. 

35. I turn to the final and all-important issue, namely outcome.  Both the husband and the wife agreed yesterday that first choice for any reduction of the award would be the deletion of the nominal periodical payments for the wife, which is expressed in paragraph 5 of the order below.  That would be my first choice also.  The judge had already rejected equality of division to reflect the disparity in future earning capacity and to add a nominal order suggests duplication.  It should not be forgotten that in all these cases the judge has a statutory duty to achieve a clean break between the parties provided that that can be done without undue hardship.  It seems to me that that responsibility may have been overlooked in the present case.

36. It is, in my judgment, obvious that the deferred compensation scheme, or the attributed value of the deferred compensation scheme, must be taken out of the calculation of the respective shares of the parties.  Mr Pointer prepared a helpful schedule which showed that to lower the deferred compensation scheme below the line, as an asset not immediately realisable, would reduce the sums ordered in paragraph 1 of the order in favour of wife to £1,521,895.  Consequently, the sum payable to the husband would rise to £819,482.  Mr Pointer sought to go beyond that.  He wanted not only the deferred compensation scheme lowered below the line but he sought also to persuade us that equality was the right order, given that in departing from equality the judge had relied first of all upon the wife’s “overwhelming” need, and secondly had relied on the husband’s wastage of funds.  Whilst Mr Pointer is well-founded in that submission, and whilst I would not reason departure from equality as it was reasoned by the judge, it does seem to me that there is an alternative rationale for the departure from equality. 

37. I would not put it in terms of need or waste obviously; but I would put it as the price the husband must pay for the clean break, recognising the disparity in their future earning capacity and in their future capacity to generate capital.  That disparity is much emphasised by the judge on her assessment of the husband’s evidence, in which he sought to explain his early retirement in 2004 and to assert that he had no great prospects for the future.  The judge roundly rejected that as contrived for the purposes of achieving the best possible result in the litigation.  She held him to be an exceptionally able man with very bright prospects for the future; and from that assessment we cannot depart.  The wife sacrificed a career in a human resources field, and, while she had retrained, it is only in a field where ceilings are much lower. 

38. Accordingly, it does seem to me that the departure from equality is principled, given that this is to be a clean break and given that the clean break should reflect what each has sacrificed in the past, what each can aspire to in the future, and to their respective needs, within which is the judge’s assessment that the wife’s housing need in central London amounts to something like £1.2 million.  Whilst of course she has the freedom to arrange her finances as she pleases, once the varied order has been implemented some weight must be attached to that finding.  So, for all those reasons, I would allow the appeal.  I would vary the sum of £2,555,914 and the sum of £12,004 in line 3 of paragraph 1 to, respectively, £1,521,895 and £819,482.  I would delete in its entirety paragraphs 2 and 5 of the order.

Lady Justice Smith: 
39. I agree.

Lord Justice Patten: 
40. I also agree.

Order:  Application granted; application to adduce further evidence refused;
appeal allowed