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Home > Judgments > 2007 archive

North v North [2007] EWCA Civ 760

Appeal by husband against an order varying and capitalising a nominal periodical payments order, made in 1981, after the wife lost money on investments made after selling ground rents that were part of the original settlement. Appeal allowed.

In the order that was subject to the appeal the periodical payments had been capitalised to a lump sum of £202,000. Counsel for the husband argued that the district judge ordering the variation had erred in law and that there was no logical reason in the judgment that justified the variation, given the findings that the husband's conduct since the divorce had been irreproachable and that he had no control over the wife's failed investments. In allowing the appeal, Thorpe LJ broadly agreed with this argument but did not reject the idea that there might be some level of payment that could be justified.

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Neutral Citation Number: [2007] EWCA Civ 760
Case No: B4/2007/0042
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE FAMILY DIVISION
MR JUSTICE CHARLES & DISTRICT JUDGE GREENE
SE 78 D 01399
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 25/07/2007
Before:

LORD JUSTICE THORPE
LORD JUSTICE MAY
and
MR JUSTICE BENNETT
- - - - - - - - - - - - - - - - - - - - -
Between :=

DENNIS FRANK NORTH (Appellant)

- and -

JEAN NORTH (Respondent)

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Mr P Moor QC & Miss A Hussey (instructed by Messrs Jones Myers Partnership) for the Appellant
Miss D Bangay QC & Mrs R Bailey-Harris (instructed by Messrs Addleshaw Goddard) for the Respondent

Hearing date: 27th June 2007
- - - - - - - - - - - - - - - - - - - - -
Judgment
Lord Justice Thorpe:

1. On the 23rd July 2004 Jean North (hereinafter called the wife) issued an application for the variation of a nominal order for periodical payments against Dennis North (hereinafter called the husband). The application was subsequently tried in the Principal Registry of the Family Division by District Judge Peter Greene on three consecutive days, 8th – 10th March 2006. His reserved judgment delivered on the 6th April 2006 granted the application and ordered the husband to pay a lump sum of £202,000 for the capitalisation and dismissal of wife's periodical payments claim.

2. An appeal against that order was dismissed by Charles J on the 9th November 2006. The husband's application for permission to bring a second appeal was granted by Lord Justice Wilson on 31st January 2007.

3. For reasons which I will explain, I do not agree with the District Judge's conclusion. However, he performed the important task of assessing the credibility of the parties and of finding the essential facts carefully and comprehensively. The appeal to Charles J did not challenge those findings. Equally, we approach the case on the basis of his findings and accordingly I cite extensively from his judgment in order to establish the issue which we have to decide.

4. The wife is now aged sixty-two and is a resident of Sydney, Australia. The husband is seventy and still lives in the former matrimonial home outside Sheffield. The history of the marriage and the its subsequent failure are thus recorded in District Judge Greene's judgment: -

"9. The parties were married in October 1964 and had three children who are now all adult: Andrew born in November 1964, David born in 1967 and Catherine born in 1970. Mr North's building company had become profitable and the parties had a fairly affluent lifestyle. However in 1977 the husband discovered that his wife was having an affair with the Co-Respondent who I understand was a friend of the husband. Mrs North left to be with the other man leaving the three children with Mr North.

10. Mr North petitioned for divorce and a Decree Absolute was pronounced on 7th December 1978. The wife's relationship with the co-respondent was fairly short-lived. Around the time that it ended Mrs North's alcohol consumption became a major problem. She committed two drink/driving offences and was on her own admission alcoholic. She received in-patient treatment on two occasions in 1980. There is a medical report in the bundle which summarises the position from the medical records.

11. The children remained living with Mr North throughout until they became independent and left home. It seems that Mrs North's involvement with the children was limited."

5. Although the Decree Absolute was pronounced on the 7th December 1978, the financial order was not made until the 24th February 1981. The order was made in the Sheffield County Court and was probably drawn by the court. It settled all the wife's claims to capital by the provision, at the husband's expense, of a house for her in Sheffield. It also provided for the transfer of ground rents to the wife to provide her with an annual income of £6,000. There were orders against the husband for periodical payments to the children, presumably designed to gain him tax relief on payments. The final provision was for a nominal order of periodical payments to the wife on the traditional terms namely "at the rate of five pence per annum during their joint lives or until she shall remarry or until further order." Both parties were represented by solicitors and the drafting could be criticised on the basis that the order is not expressed to be by consent nor does it contain any express dismissal of all the wife's capital claims.

6. Subsequent events relevant to the wife's application are carefully recorded in District Judge Greene's judgment as follows: -

"17. Mrs North's income from the ground rent was initially £6000. There was some problem with non-payers which husband acknowledged by changing the ground rents she had. £6000 was an above average income in 1981. When the wife informed the husband that she was not receiving the full amount because of difficult payers he transferred a further £3000 worth of ground rents to her.

18. Later in 1981 there were conversations between the parties concerning the continued existence of the provision for nominal maintenance. Mrs North says that husband was putting pressure on her to "do away" with the clause. Mr North accepts that he spoke to her more than once to ask her to see her solicitor and apply to have the clause removed.

19. Mrs North did in fact see her Solicitor. She says he advised her not to agree. Certainly the clause was not removed. Mrs North denies that there was any follow-up conversation in which she confirmed that the clause had been removed. Mr North alleges that there were further conversations soon afterwards in which the wife confirmed she had asked her Solicitor to have the clause removed.

20. A further £6000 worth of ground rents was transferred to Mrs North shortly afterwards. Mr North says that it followed Mrs North telling him that the clause had been removed but was largely in recognition of work she had done for his Company. Mrs North says that the extra ground rents came as a surprise to her and she did not know why she was given them.

21. In 1984 Mr North remarried his present wife. His evidence was that she took a very active part in the business and was responsible for rejuvenating the sales of houses in a very difficult period when the company was "almost bust". They have been married for 22 years now and have two children aged 17 and 19.

22. Also in 1984 Mr North gave Mrs North the right to collect rents on three garages which increased her income by a further £624 p.a.. Over the next two or three years Mrs North moved house twice, each time buying from husband's Company at a discount. Moreover from the mid 1980s until about 1989 Mr North arranged for the wife to receive commission for some of the ground rents in addition to he (sic) own. He says he did so partly to give her an increased income but mainly to encourage her to work and be self-sufficient.

23. In about 1991 Mr North inherited some investments from an Aunt and informed Mrs North that he was going to give her half. Mrs North says that this was "out of the blue". She received £23,000 worth of investments on that occasion. Mr North said that he gave her the money as recompense for the efforts she had made to help their son Andrew. He indicated that he did not believe in giving something for nothing. A couple of years later the husband installed central heating for the wife's mother without charge and decorated her bungalow.

24. Mr North's financial assistance to Mrs North did not stop there. In 1998/9 she had been looking after their daughter's son and daughter and decided to apply for a Residence Order in respect of her granddaughter. Mr North paid half the legal costs of several thousand pounds.

25. Since separation in 1977 Mrs North has not attempted to obtain paid employment. She says she was not well enough for the first few years. The medical evidence indicates that she was fit to do so from early 1981. She said that the collecting of ground rents took up most of her time although the evidence left me in no doubt that it could have been computerised or delegated to an Agent on commission. For comparatively small cost therefore she could have been free to seek work and have an earned income in addition to a substantial income from the ground rents. She would have been fully aware that ground rents would not keep pace with inflation. It was clear to me from her evidence that she simply chose not to work. She said that she spent much of her time looking after her mother. Mr North disputes this saying that in reality she simply visited. I am satisfied that she was not a full-time carer and that she could have combined what she did for her mother with gainful employment as many people do."

7. The District Judge then recorded her financial circumstances as they were in December 1998 immediately prior to emigration to Australia. Again I cite from his judgment: -

"26. To summarise Mrs North's position prior to December 1998, she had a mortgage free house and investments which produced an income equivalent to a good living wage. That date in 1998 is significant because that is when she decided to sell the ground rents and her house with a view to emigrating to Australia. She did indeed sell them. The few she had been unable to sell on the market were bought back from her by Mr North. She left for Australia before her house had sold and left Mr North to deal with that for her through a Power of Attorney. She realised £224,000 for the ground rents with another £6450 from Mr North. Together with the £23,000 she had received from him earlier and £75,000 later, on the sale of her house, she had a total in the region of £328,000 around the time she moved to Australia. It was almost all put into investments through a firm of investment advisers. To place in context the amount that Mrs North received for the ground rents, it is worth noting that the proceeds would have purchased, mortgage-free, three additional detached houses similar to the one in which she had been living."

8. The financial consequences of her move were relatively disastrous, as District Judge Greene records: -

"27. She moved to Australia in October 2000. The circumstances and reasons were a little difficult to understand. Mrs North had two children and several grandchildren and her mother living in this country and one son, without children, in Australia. She said her life had been devoted to looking after her mother and from 1998 to 2000 to caring for her granddaughter who was living with her. She had applied not just for residence but also for leave to take the little girl to Australia with her. She said that the move was brought about by her exhaustion at caring for her parents and that the speed of her departure in 2000 – leaving Mr North to sell her house for her – was because she was upset that her applications in respect of her granddaughter were refused. To have made the applications she must have considered that she and her granddaughter had a close relationship. It appears that her mother lived until December 2003.

28. When Mrs North arrived in Australia she did not buy a property or settle down near her son initially but instead spent a period of time touring the country and Tasmania. Eventually she rented an apartment in one of the most expensive areas in Sydney Harbour.

29. Over a two year period straddling her move to Australia she is said to have sustained substantial losses to her investments. It is difficult to be sure of the extent of her losses; it was stated in the chronology submitted on her behalf that she lost 75% of an investment of £230,000. In her evidence she said the amount lost was between £100,000 and £130,000. However a letter produced from the Solicitors who had advised her on a potential claim against her financial advisers (at C1d in the bundle) stated that the capital value of her investments had reduced by £80,000 over a two year period and that "£90,000 represents the high water mark of the losses which our client says she has suffered.

30. When her Form E was filed at the commencement of these proceedings it disclosed investments remaining of £255,800 and an income from them of £8953 as at 11th October 2004. I was appalled to learn that her legal costs incurred in this application and living expenses have reduced her capital by about £100,000 and her income to around £5000."

9. By contrast the husband's financial circumstances waxed between 1981 and the hearing. Their respective positions before the District Judge are thus recorded in paragraphs 31 and 32 of his judgment: -

"31. Over the years since the Consent Order in 1981 and his remarriage in 1984 Mr North's financial position has improved significantly. He attributes this in part to hard work put in by him and his wife and to changes in market conditions. He says he decided in 2002 to retire and the children of his first marriage would have known about it. The wheels were set in motion for the company to be wound up and it was apparently a fairly drawn out business. In about 2003 he was found to have a serious medical condition which eventually required surgery on his throat. He is now retired and his Form E put his net current assets at £4,731,600 plus pension and his income at £60,000. Various trust funds have also been created for his second family. He has bought a house for his daughter from his first marriage and is in the process of setting up financial arrangements for his sons of that marriage. I restricted evidence on those aspects as I did not consider that it assisted me in my task. Miss Bangay's asset schedule on behalf of the wife puts the husband's worth at well over £10,000,000. In view of the nature of the application before me I concluded that it was not necessary for me to know the precise worth of the husband. Clearly he could afford to meet any reasonable Order. Regrettably significant costs seem to have been incurred in attempts to ascertain the true level of Mr North's worth following his Solicitors failure to give a clear acceptance of that.

32. Mrs North's status in Australia is that she is there on a temporary Retirement Visa. There were financial requirements that she had to be able to meet in order to obtain that and for it to continue although it was a little unclear as to whether she may need to provide evidence of her continuing to meet the requirements – which have altered since she was first granted a Visa – or whether she can self-certify her compliance. It would appear that she may no longer be able to demonstrate compliance and accordingly some degree of doubt exists as to whether she will be able to remain there for the rest of her life as she says she wishes. However, she is determined that she will stay and I have viewed the case on that basis."

10. Having next recorded the submissions of Miss Bangay for the wife and Miss Hussey for the husband, District Judge Greene made an important assessment of credibility and some findings, as follows: -

"35. I heard both parties at some length. Mr North impressed me as a straightforward man who had done his best over the 26 years between their separation and this Application to be fair and honourable in his dealings with his former wife. My conclusion is that on any view he has been both generous and considerate in circumstances in which many would have found it difficult to be either. He is a man who has worked very hard all of his life for the rewards he has achieved. He did himself a disservice when he referred to himself as "just a mucky-boots builder" but it rather sums up his approach which I found to be one of down-to-earth honesty.

36. Mrs North was rather less impressive as a witness. Her evidence was in parts vague and contradictory and in parts a catalogue of excuses and explanations which were unconvincing. I was left with the clear impression that she could and should, by 1982/3 have taken steps to acquire an earning capacity. She made a life-style choice not to work. She was still only 37 in 1982. She had a paid-for house and capital sufficient to produce a substantial income with a small amount of effort, or a slightly reduced income by appointing a commission Agent leaving her entirely free to work."

11. He then continued to make findings on a range of issues that were then live before him. The majority of his conclusions are not now the subject of either appeal or cross-appeal. However I record his conclusion on two issues which have some continuing relevance to the appeal before us.

12. On the husband's part it had been asserted that he had bought off the nominal order and had simply failed to formalise its termination. District Judge Greene's findings on that part of the husband's case are as follows: -

"42. Even Mr North's own evidence, which I find far more credible than Mrs North's in every respect in which they conflict, does not make clear precisely what was agreed. He does not refer to an agreement as such in his Form E; he simply says that he understood that his financial obligation to the wife "was at an end". In his statement he refers to those events more in terms of the wife having agreed to have the terms removed from the Order ending his financial obligations in recognition of that having, in his opinion, been in full settlement, with his subsequent payments to her being ex gratia.

43. The remarks made were cryptic and may have meant different things to each of them. Certainly the evidence left me in no doubt that conversations took place which would have had the effect of leading the wife to believe that if she had the clause removed the husband would ensure she received satisfactory consideration for doing so. I find that a subsequent conversation did take place and that what was said by Mrs North led Mr North to the conclusion that the clause had been removed. Having considered all of the evidence both in the statements and oral I have concluded that there was no real consensus.

45. The various payments and provisions made by Mr North subsequently are part of the circumstances which I should take into account. They have been very substantial. He apparently did not take legal advice before making any of the extra payments. However he did not take advice or apply to vary and the provision remained."

13. The District Judge also expressed the opinion that had the husband in fact applied for the dismissal of the nominal order on the basis of the payments subsequently made the application would have succeeded.

14. Having thus cleared the way District Judge Greene explained the outcome of the case in the following paragraphs: -

"54. I take into account the fact that Mrs North's situation is entirely of her own making through both her actions and inaction. I also take into account the fact that Mr North has acted generously and honourably throughout despite believing he had no legal obligation. Had Mrs North remained in England she would have been comfortably off for the rest of her life – particularly so had she taken the reasonable steps I find she could and should have taken to make herself financially independent.

55. What are Mrs North's reasonable needs now? In the letter from her Solicitors at C1b of the bundle it was stated that her expenditure was £16,350 a year including rent in 2003. By the time Form E was filed about a year later that had gone up to £23,496. A similar figure was given in her later statement together with a second aspirational budget of £42,606. I reject the latter as unreasonable in many respects. The expenditure budget set out in her Form E is perhaps more realistic.

56. I take as general principles that Mr North should not be ordered to make up the deficit resulting from Mrs North's capital losses and that Mrs North chose, or assumed responsibility for, a lower standard of living as a consequence of her life-style choices; they include choosing not to work; choosing to sell up everything in England and put the money into investments; choosing to live in Australia where she has no entitlement to State benefits such as health services or pension; and choosing to live in one of the most desirable and expensive parts of Sydney. They too are matters for which Mr North should not, in my view, be expected to bear burden.

57. Although Mrs North's budget was examined in some detail in her evidence I do not propose to set out any detailed analysis of it here. I have taken a broad brush approach to the figures variously claimed and challenged and have factored in the matters mentioned earlier. I have also taken into account the capital which Mrs North still has and added back in for this purpose the costs she has incurred. I have reached the conclusion that if I were to order periodical payments then a fair and appropriate amount would be £16,500 per annum."

15. The subsequent order resulted from the application of the Duxbury table in order to capitalise the current order of £16,500 per annum.

16. In my view, the husband's appeal to Charles J was a strong one. It seems to me that it failed because the argument successfully presented to us by Mr Phillip Moor QC was not clearly put to Charles J. In his judgment he recorded the husband's fundamental submission as follows: -

"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."

17. Charles J rejected that submission, rightly in my view. He then rightly rejected the husband's submission that the District Judge had erred in the exercise of his discretion by failing to take sufficient account of the wife's delay in applying for variation.

18. Finally he assessed the argument that the District Judge had been plainly wrong. He was sympathetic to that argument to the extent of concluding that, had he been trying the case at first instance, he would probably have concluded that no variation should be ordered notwithstanding the consequences for the wife.

19. However he went on to record factors which brought the outcome within the broad ambit of the judicial discretion. The factors which he identified were: -

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."

20. The grounds of appeal in the Appellant's Notice are as follows: -

"1. Having found that there was "at least a very strong possibility" that, if the order for ancillary relief dated 24th February 1981 had been made after the 1984 amendments to the Matrimonial Causes Act 1973 came into force, the February 1981 order would have provided for a clean break, the learned judge erred in law in not dismissing the present application.

2. In the alternative, the learned judge erred in law in determining that he had to consider whether or not the learned district judge was plainly wrong in the way that he had exercised his discretion when it was clear from his other findings that the matter was one of principle and should have been determined as such.

3. Given the findings of the learned district judge that: -
(a) the respondent had no control over the applicant's lifestyle choices and he should not bear any responsibility for them;
(b) it is likely that there would have been a dismissal of any further claims had the court considered the provision made by the respondent for the applicant after February 1981;
(c) the applicant would have been comfortably off for the rest of her life had she remained in England and taken reasonable steps to make herself financially independent; and
(d) the respondent should not be ordered to make up the resulting deficit

the learned judge erred in law and was plainly wrong not to allow the respondent's appeal, particularly given his finding that, if he had been trying the case, it is likely that he would have found that no variation should be made to the original order in favour of the applicant."

21. Lord Justice Wilson concluded that these grounds satisfied each alternative requirement of CPR 52.13(2). He made it plain that he was impressed by the third ground of appeal and not by the first. Mr Moor sensibly accepted that evaluation and limited himself to advancing grounds two and three. In a succinct and powerful submission he emphasised the findings that the wife would have been comfortably off, despite her failure to utilise her earning capacity from the date of the order (when she was only 36 years of age), had she not sold up in England. Above all he emphasised the District Judge's repeated conclusion that the husband should not be responsible for the wife's financial self-destruction. He therefore submitted that, having found the facts as he did, the District Judge's ultimate conclusion was both illogical and inconsistent. Indeed the concluding paragraphs of the judgment were internally contradictory. Mr Moor also relied on the decision of this court in Pearce v Pearce [2003] EWCA Civ 1054, particularly at paragraph 36.

22. Mr Moor adopted the argument that paragraph 57 of the District Judge's judgment is opaque in the sense that it is impossible to discern how he arrived at the annual award. What budget for the wife did he think reasonable? What discount did he allow for the consequences of her choices? What did he take to be the income from her own capital?

23. Finally, Mr Moor emphasised that his primary submission was one of principle rather than a challenge to the exercise of a judicial discretion. The principle for which he contended must result in the dismissal of the application.

24. Miss Bangay, in response, sought to label Mr Moor's primary submission as an impermissible textual analysis against which Lord Hoffman had warned in the case of Piglowska v Piglowski [1999] 2 FLR 763. Alternatively she emphasised that a husband whose financial circumstances had deteriorated as a result of imprudent investment was not barred from applying for a downward variation of a pre-existing periodical payments order. She relied on the judgment of Charles J and particularly the five factors which he had identified to support the District Judge's discretionary conclusion. She relied on the case of Primavera v Primavera [1992] 1 FLR 16. Finally she suggested that the District Judge had allowed her client a budget of £23,000 a year and assessed her income from her own capital at £5000. She suggested that he had therefore allowed the husband a discount of £1,500 per annum in respect of all the matters which the District Judge had held not to be his responsibility.

25. Before expressing my conclusions I set out the relevant statutory material all within Section 31 of the Matrimonial Causes Act 1973: -

"s 31 Variation, discharge, etc., of certain orders for financial relief.
(1) Where the court has made an order to which this section applies, then, subject to the provisions of this section and of section 28(1A) above, the court shall have power to vary or discharge the order or to suspend any provision thereof temporarily and to revive the operation of any provision so suspended.
(2) This section applies to the following orders, that is to say--
(b) any periodical payments order;

(7) In exercising the powers conferred by this section the court shall have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen, and the circumstances of the case shall include any change in any of the matters to which the court was required to have regard when making the order to which the application relates, and--
(a) in the case of a periodical payments or secured periodical payments order made on or after the grant of a decree of divorce or nullity of marriage, the court shall consider whether in all the circumstances and after having regard to any such change it would be appropriate to vary the order so that payments under the order are required to be made or secured only for such further period as will in the opinion of the court be sufficient (in the light of any proposed exercise by the court, where the marriage has been dissolved, of its powers under subsection (7B) below) to enable the party in whose favour the order was made to adjust without undue hardship to the termination of those payments;

(7B) The court has power, in addition to any power it has apart from this subsection, to make supplemental provision consisting of any of--
(a) an order for the payment of a lump sum in favour of a party to the marriage;

(c) a direction that the party in whose favour the original order discharged or varied was made is not entitled to make any further application for--
(i) a periodical payments or secured periodical payments order,"

26. It is to be noted that at the date that the periodical payments order was made in the present case the court's power to dismiss a periodical payments claim was limited to dismissal by consent. The Matrimonial & Family Proceedings Act 1984 made substantial amendments to the Matrimonial Causes Act 1973, not the least of which was empowering the court to dismiss claims for periodical payments without consent and furthermore requiring the court to seek a clean break wherever achievable without undue hardship. In respect of the original order the court's obligation is expressed in Section 25A and, in respect of the variation of an original order, in Section 31(7)(a). Thus in relation to the present case the husband's option to buy off the nominal order was much strengthened on and after October 1984 since that outcome was no longer dependent upon the wife's consent.

27. As to previous authority, I do not find either of the cases cited particularly influential. All decisions in this field are highly fact dependent.

28. Of the rival submissions I find those of Mr Moor generally persuasive. In my opinion the otherwise careful judgment of the District Judge is fatally flawed in its concluding paragraphs. I accept Mr Moor's primary submission that the result of the judgment cannot flow from the prior findings. The husband's absolution from responsibility is so clearly stated in paragraphs 37, 54 and, particularly, 56. Thereafter comes inconsistency amounting to contradiction.

29. I also accept the criticism of the delphic paragraph 57. Had the judgment built up the result by consecutive steps (needs, income from free capital, evaluation of the factors for which the husband was not to bear responsibility) there would have been a safeguard against a conclusion at war with the findings.

30. Although Miss Bangay did her best with a difficult case I did not find her arguments persuasive. A fundamental flaw cannot be finessed as a textual criticism. Of the five factors identified by Charles J the first two go to jurisdiction, and the third deals with a consideration no longer live. The changes to which he refers in paragraph 4 go as much for the husband as for the wife. The fifth point is well made but does not in itself rescue the District Judge's conclusion. Miss Bangay's analysis of the steps by which she suggests the District Judge reached his ultimate conclusion are no more than speculation.

31. I am fully satisfied that Mr Moor is entitled to succeed on the appeal. He has demonstrated that the judgment that emerged from the trial is fundamentally flawed. However, I am not persuaded that as a matter of principle the wife's application for variation must be dismissed. Whilst it can be said that paragraph 56 of the District Judge's judgment suggests that all the factors upon which the wife relied were vain, that conclusion needs to be tested. Clearly they are not excluded as a matter of statute or authority. Their weight and relevance have to be tested in the exercise of the broad discretion conferred by Section 31.

32. Once within the territory of discretion, the court's over arching objective is a fair result. There are of course two faces to fairness. The order must be fair both to the applicant in need and to the respondent who must pay. In any application under Section 31 the applicant's needs are likely to be the dominant or magnetic factor. But it does not follow that the respondent is inevitably responsible financially for any established needs. He is not an insurer against all hazards nor, when fairness is the measure, is he necessarily liable for needs created by the applicant's financial mismanagement, extravagance or irresponsibility. The prodigal former wife cannot hope to turn to a former husband in pursuit of a legal remedy, whatever may be her hope that he might out of charity come to her rescue.

33. Thus in the present case the wife's failure to utilise her earning potential, her subsequent abandonment of the secure financial future provided for her by the husband, her choice of a more hazardous future in Australia, together with her lifestyle choices in Australia, were all productive of needs which she had generated and for which the husband should not as a matter of fairness be held responsible in law. Even the applicant's subjective sense of fairness should surely not encourage her to expect that someone from whom she was divorced so many years ago should be required in law to compensate her for the financial consequences of ill-advised choices.

34. However I would not necessarily, as the District Judge appeared to do, put the wife's investment losses into the same category. Whilst it can of course be said that stock exchange investments are less secure than ground rents, they are a more conventional form of capital investment and carry the prospect of capital appreciation to offset the erosion of inflation. Thus even had the wife been content to remain in Sheffield she might reasonably have decided to exchange the ground rents for a stock exchange portfolio. The consequential loss seems to me more the outcome of hazard and therefore to be characterised as misfortune rather than mismanagement.

35. The time estimated for the hearing was spent on rival submissions that went to either the dismissal of the application or the confirmation of the District Judge's award. Thus the territory between those extremes has not been canvassed in argument. Plainly given the escalation of costs resulting from both an investigation of superfluous byways at the trial and the need for a second appeal, the option of remitting the case for further investigation by Charles J is impractical. I am in no doubt that we should exercise our own discretion on the basis of the findings of District Judge Greene. It may be said that the wife has an entitlement to some modest award despite the adverse findings of the District Judge. Accordingly we invite brief written submissions from counsel on that residual area. We would hope that there will be no need for further oral submissions. We intend to hand down our final conclusion before the end of this Trinity term.

Lord Justice May:
36. For twenty years or more between her divorce in December 1978 and her emigrating to Australia in October 2000, Mrs North lived a reasonably comfortable life financially in England. She had a house without a mortgage and investment income equivalent to a good living wage. These derived from the product of an agreed financial order of 24th February 1981 and subsequent voluntary transfers from Mr North. In the main, Mrs North chose not to work during these years.

37. From December 1998, Mrs North chose to give up this financial security in England for insecurity in Australia. The cash into which she commuted her house and English investments has been significantly diminished by investment losses. She has not, so it seems, used the cash to buy an Australian house nor invested the balance so as to produce an income equivalent to that which she enjoyed in England. She has incurred expenditure which, on one view at least, she could not really afford. Accordingly she sought in these proceedings a substantial upward variation of the dormant nominal periodical payments order made in 1981 against her rich former husband, whose financial conduct towards her in the intervening twenty-five or so years has been irreproachable. The bald case is that she has a need and he can afford it.

38. The district judge acceded to this application by ordering increased periodical payments capitalised at £202,000. But there was a large logical hole in his reasons. For he held that Mr North should not be responsible for those elements of Mrs North's needs which resulted from her own choices; and those choices to which he referred on the face of it accounted for all her relevant present needs, this, in short, because she chose to give up a financially comfortable life in England for a financially insecure life in Australia. That, submits Mr Moor QC, should embrace the investment losses also, because they were a consequence of the choice and because a variation of a periodical payments order should not extend to replacing lost capital.

39. Ms Bangay QC submits that this is impermissible textual criticism of the district judge's judgment. I do not think so. There is a plain logical disconnection most obviously to be seen in the absence of reasoning between the end of paragraph 56 and the beginning of paragraph 57 of the judgment. Granted that the district judge's conclusion that the fair and appropriate amount to order as periodical payments of £16,500 a year was the product of a broad brush approach, there is no reasoned basis for reaching that (or any) amount, when all the preceding discussion pointed to no significant payment or a much lower one.

40. For these reasons, I do not think that the district judge's order, upheld on appeal by Charles J, can stand. Mr Moor did not argue for an intermediate result between £16,500 and zero and Ms Bangay did not therefore respond to that possibility. Since I consider that an intermediate result might (but might not) be an appropriate answer under section 31(7)(a) of the Matrimonial Causes Act 1973, I would invite further succinct written submissions limited to that point before the court finally determines the outcome of this appeal. Neither remitting the matter for a further hearing nor reconvening this court for further oral submissions would be proportionate, when so much has already been spent in legal fees.

Mr Justice Bennett:
41. I agree with the judgment of my Lord, Thorpe LJ, that the appeal must be allowed for the reasons he gives. I add a few words of my own only because we are differing from the judges below. The fundamental argument of Mr Moor QC, for the husband/appellant, is centred on what he has termed an illogical inconsistency in the judgment of District Judge Greene. It is that, having found that the husband played no part in, and/or should not be held responsible for, the depletion of the wife's finances, the District Judge nevertheless then jumped to the impermissible conclusion that the wife was entitled to an order of (capitalised) periodical payments; whereas, so it is submitted, he should have reflected those findings by awarding her no periodical payments at all and by dismissing her claim outright.

42. Ms Bangay QC, for the wife, counters that attack by submitting that Mr Moor's argument does less than justice to the reasoning of the District Judge. The District Judge rehearsed the salient facts and factors in his judgment, applied the law, and came to a decision that not only was the wife entitled to be awarded periodical payments but also that the annual figure of £16,500 was well within his discretion. Accordingly the figure of £202,000 accurately reflects the capitalisation of the periodical payments on a Duxbury basis.

43. I have considerable sympathy for the District Judge. He was faced with a most unusual case – and one which is a far cry from the type of case normally heard by a district judge. The case has a number of highly unusual, if not unique, features. At the time of the original order in 1981 the court had no power to dismiss an applicant's claim for periodical payments against her will – see Dipper v Dipper [1980] 1 FLR 286. The wife's annual income stream was generated not by a substantive award of periodical payments, as might have been expected, but by the making over to the wife of the husband's entitlement to ground rents .Thereafter the husband made over further ground rents to his wife, allowed her to receive commissions from collecting some of the husband's ground rents, and in 1991 paid her a not insubstantial sum of £23,000. I can well understand therefore the District Judge taking the view that, objectively viewed, the husband was supporting the wife despite the nominal order for periodical payments. He said at paragraph 49:

"The ground rents in the original Order were providing a high income then but were fixed and unable to keep up with inflation. I have to assume that the provision for nominal maintenance was purposeful and was to ensure that the wife had the means of having her income reviewed if, despite her best efforts, it ceased to meet her reasonable requirements"

44. In 1998/2000 a sea change occurred. The wife emigrated to Australia. She disposed of her right to the ground rents (in part bought back by the husband), sold the house and left England. She exchanged a secure and inexpensive lifestyle for an expensive way of life in Australia, and put her cash into investments which proved, to a significant extent, to be unwise. She was entitled to no state benefits in Australia. Yet she made no effort to obtain work. It is to the wife's actions (or lack of them) during this period of time that her husband particularly latched on to in the deployment of his case before the District Judge. The District Judge found that the wife's situation was entirely of her own making (see paragraph 54 of his judgment), for which the husband should not be asked to bear the burden (see paragraph 56).

45. By the time of the wife's application in 2004 the husband had become a very rich man. He had disposed of his business and was worth £ 4.7 m (plus pension and an annual income of £60,000) as per his Form E, or £10m, as per Ms. Bangay's schedule before the District Judge, depending upon how his wealth was to be assessed. The District Judge, rightly in my view, concluded that it was not necessary to resolve that issue. The husband accepted before the District Judge that he could pay any award the District Judge might order.

46. Mr Moor's submission is in a nutshell that the District Judge, having expressed himself as he did in paragraph 56 of his judgment, abruptly and illogically passed immediately in paragraph 57 to quantify the wife's periodical payments at £16,500. The District Judge should have dismissed the wife's application had he applied the findings he had made not only in paragraph 56 but also paragraphs 37 and 54.

47. Ms Bangay rightly reminded us of the words of Lord Hoffman in his speech in Piglowska v Piglowski [1999] 2 FLR 763 at page 784 between letters E and H, in particular about the undesirability of appellate courts subjecting a judgment to narrow, textual analysis thereby enabling them to claim that the judge below misdirected himself. Ms Bangay sought to persuade us that the District Judge had taken into account the full thrust of the husband's case. However, the force of Mr Moor's submission has driven me to conclude that the chain of reasoning in the District Judge's judgment clearly lacks the necessary links for him to have made his award in the light of his trenchant and powerful findings adverse to the wife. The reader of his judgment, if asked, having read as far as the end of paragraph 56 and no further, what he might expect the District Judge to find bearing in mind all that the District Judge had said hitherto in his judgment, would have answered, in my judgment, that he would expect the wife's application to fail or at the least a substantial discount would be made. He would have been considerably surprised to have then read at paragraph 57 that, far from the wife's application being dismissed or the wife being awarded very much less than her full claim, she had succeeded. He might reasonably have asked – "well, what is it that has suddenly changed the District Judge's mind?" – but he would have searched in vain for an answer.

48. Moreover, the District Judge, in my judgment, does not explain adequately how he reached the figure of £16,500. Ms Bangay submitted that the District Judge rejected the wife's needs at £42,606, accepted that her needs were of the order of £23,496, deducted her investment income of £5000 p.a., made a further deduction of £1,500 to reflect a discount for the wife's financial imprudence, and thereby arrived at the figure of £16,500.

49. To my mind the difficulty with her submission is that the District Judge gave no reason at all why he alighted on the figure of £16,500. He said he had taken a broad brush and had factored in "the matters mentioned earlier". Even assuming he took all the necessary facts and matters into account, as he said he had, the District Judge still does not explain how he arrived at £16,500. He seems to have started and indeed ended his reasoning at the figure for the wife's needs less her annual income of £5000 from her investments, without explaining whether he gave any "discount", and if so to what extent, for the wife's imprudence for which the husband was not to be held responsible. Had he said in his judgment that the starting point was the wife's needs but that in his discretionary exercise the award had to reflect the important factor of the wife's imprudence for which the husband was not to be held responsible, and had then arrived at a figure for periodical payments of £X, or £Y, or even no award at all, such a conclusion, in my judgment, might well have been unappealable. The reality would seem to be that he gave no, or no significant, discount at all despite what Charles J described in paragraph 46 as the husband's "powerful case that the wife is undeserving of an exercise of the statutory discretion to vary the nominal periodic payments".

50. Mr Moor told us that his central submission was also made to Charles J. He points to the grounds expressed in the husband's Notice of Appeal from the District Judge. But, in my judgment, what is pleaded in a Notice of Appeal is not determinative as to that. Grounds expressed in notices of appeal are often refined in the process of oral argument or subsumed into other points. If the submission now made to us by Mr Moor had been squarely put to Charles J, I have no doubt he would have addressed it in his judgment. But paragraphs 42 onwards of his judgment under the sub- heading "plainly wrong" make it clear to me that the husband's case as put to us was not delineated, or not sufficiently delineated, from the submission made to Charles J (rightly not pursued before us) that the wife had to surmount a condition precedent or trigger to the exercise of the court's discretion (see paragraph 33 of the judgment of Charles J) before an order of periodical payments could be made. Thus the judge was led into error, as my Lord has pointed out, when he did not deal with the argument addressed to us.

51. However, in my judgment it does not automatically follow that as a result of that serious flaw in the District Judge's reasoning the wife is thereby entitled to no order for periodical payments. That may be the result; or it may not. Neither Counsel's submissions focused on this point. The thrust of Mr. Moor's submissions were that the wife's application completely failed. Ms. Bangay's submissions did not address, understandably, what was the consequence if we accepted that the District Judge's judgment was flawed.

52. For these reasons, and the reasons given by my Lord, I agree that the appeal has to be allowed. I also agree that Counsel be invited to make succinct written submissions so that we can decide what order, if any, the wife should receive by way of capitalised periodical payments. The enormous costs incurred by both parties in this case prohibit a remission to a judge; for that would inflate the costs even further.