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North v North: Revisiting periodical payments

Lucy Reed, of St Johns Chambers, examines the recent Court of Appeal decision in North v North, assessing its impact on variation of periodical payments. This article was updated 16 August 2007 following the decision on the quantum of the periodical payments.

Lucy Reed, St Johns Chambers

The Court of Appeal has handed down judgment (North v North [2007] EWCA Civ 760) in this unusual case arising from Mrs North's 2004 application to vary a consent order dating from as far back as 1981, under which she had been awarded (amongst other things) nominal periodical payments. The first instance order for an upwards variation of Mrs North's periodical payments to £16,500 p.a. (capitalised to £202,000) has been overturned by the Court of Appeal, but that court has yet to determine the question of what order should be substituted, having reserved that matter to itself.

The background to the application was as follows. In the days before amendments to the Matrimonial Causes Act empowered the court to order a clean break in the absence of consent, Mrs North was provided with a mortgage free home for herself in respect of her capital claims, along with the transfer of grounds rents that would provide her with c£6,000 p.a. In addition an order for nominal periodical payments was made.

In the following years Mr North voluntarily made a raft of further contributions to Mrs North's income and capital which were above and beyond those provided for in the order. Mrs North chose not to work, but to live off the income from the ground rents.

In 1998 Mrs North emigrated to Australia, having sold all her assets in the UK, which comprised the assets awarded to her under the 1981 order and the further items provided to her over the years by Mr North. Once in Australia, Mrs North did not work and selected expensive rental accommodation. She did not purchase a home, but instead invested most of her assets. In spite of having invested on advice, she made substantial losses on those investments. It was in those circumstances that Mrs North came before District Judge Greene at the Principal Registry.

It was accepted that, although now retired, Mr North was sufficiently wealthy to meet any order that the court might make.

District Judge Greene made a series of findings. He concluded that Mrs North's situation was entirely of her own making through her actions and inaction. Had she remained in the UK, she would have been comfortably off for the rest of her life, even if she had not worked. Mrs North had remained unemployed out of choice. Mrs North's reasonable needs were about £23,500 which could be partially offset by the reduced income from her remaining assets. Mr North had acted generously and honourably throughout and he should not be ordered to make up the deficit resulting from Mrs North's losses, which were matters for which he should not be expected to bear the burden.

District Judge Greene went on, however, to make an order for periodical payments at the rate of £16,500 p.a. which was capitalised using Duxbury tables to a sum of £202,000. The husband appealed.

On first appeal the thrust of the argument before Charles J appears to have been that there was a condition precedent or trigger to the exercise of the court's discretion that the wife was required to demonstrate had been activated in order for her to succeed. Essentially it was said that the wife must demonstrate that her best efforts at self-help had failed. It was unfair, it was said, for the husband to find himself responsible for the wife's predicament, when that predicament was entirely of her own making. The condition precedent argument was roundly rejected as an impermissible gloss on the broad provisions of the Matrimonial Causes Act and the enjoinder to consider 'all the circumstances'.

Charles J also rejected an argument (apparently not pursued in the Court of Appeal) that the capitalised order was in reality an adjustment of the original capital award, being as it was an order intended to ameliorate the capital losses made by the wife.

Charles J agreed that the husband had a powerful case for arguing that Mrs North was undeserving of an award, and considered it likely that he would, if trying the matter himself, have refused to vary the wife's nominal order upwards. However, he concluded that the decision made by the district judge had been within the band of responses open to him in the exercise of the broad discretion, and was not plainly wrong.

The husband appealed further. The case appears to have been put rather differently on second appeal. In summary it was argued by Philip Moor QC that it was inherently contradictory for the judge to have concluded that the husband should not be responsible for the wife's 'self destruction' and yet to have gone on to make an order that made him responsible for the vast majority of the needs arising from that 'self-destruction'. It was impossible to ascertain from the judgment how the figure had been arrived at or what discount had been allowed for the consequences of the wife's choices. The argument for the husband was put on the basis that as a matter of principle the findings led to the conclusion that the application should have been dismissed, and that the question of the correct exercise of the judicial discretion did not arise.

Deborah Bangay QC for the wife exhorted the Court of Appeal not to deconstruct the text of the judgment too finely, relying on Piglowska v Piglowski [1999] 2 FLR 763, attempting to extrapolate the judge's reasoning from the judgment and to reconstruct it in support of the argument that the exercise of the discretion was appropriate.

Thorpe LJ gave the lead judgment in which he paid close attention to the judgment at first instance. It was right of Charles J to have rejected the 'condition precedent' argument. However, the district judge's conclusions were 'fatally flawed': 'The result of the judgment cannot flow from the prior findings. The husband's absolution from responsibility is so clearly stated…Thereafter comes inconsistency amounting to contradiction.' [pa 28]

The concluding paragraph containing the sum of the award was 'delphic'. In response to the arguments of counsel for Mrs North, 'a fundamental flaw cannot be finessed as a textual criticism…Miss Bangay's analysis of the steps by which she suggested the district judge reached his ultimate conclusion are no more than speculation'.

Lord Justice May concurred, that there was a 'large logical hole in [the district judge's] reasons' [pa38]. Mr Justice Bennett noted the highly unusual if not unique features of the case and the fact 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'. [pa 47]

Whilst the husband's appeal was allowed, all three appellate judges concurred in the view that the disposal of the appeal was not as straightforward as the two diametrically opposed arguments which had been advanced by counsel. Whilst clearly very much alive to the difficulties faced by Mrs North in light of the findings made by District Judge Greene (which of course still stand), the Court of Appeal has held that it is necessary for the discretionary exercise to be conducted afresh. It did not necessarily follow from the conclusion that the judgment was flawed, that the wife was entitled to no order. The court has therefore invited further submissions on the question of whether or not an intermediate result might be appropriate i.e. a smaller award rather than outright dismissal.

Whilst an interesting case, this is a judgment which is highly fact-specific. Other cases are unlikely to be so clear cut as to permit a finding that all of an applicant's financial need is of her own making. Indeed, even in this case the court of appeal held that the Wife's need was not entirely self-created (which, although not explicit, must be a reference to the losses she had made as a result of investments on advice). (amended 16 August 2007).

The case is authority for the proposition that, on an upwards variation application, it is not necessarily a prerequisite for an applicant to show s/he has used her best endeavours to help him/herself without success, although the fact of a failure in that regard is highly likely to bear heavily in the exercise of the broad discretion, which must be exercised with regard to all the circumstances.

The factual circumstances in this case enabled the court neatly to demarcate the wife's needs as largely self-generated. Although the source of need is clearly relevant to the discretionary exercise in the case of both s21 orders and s31 orders, it is likely to be a rare case where the need is so easily compartmentalised as that of Mrs North. One of the primary reasons that the court was able to identify clearly the need in this case as being largely of the wife's making was because of the time that had elapsed since the parties separated. The wife's post-marital needs had been extinguished by the original order, and had remained so for many years. In the majority of s21 cases it will still be difficult, if not impossible, to disentangle the true source of the need. And in cases where there are children the distinction is unlikely to carry any weight at all.

In the exercise of the discretion the court is required pursuant to s31(7) to have regard to all the circumstances of the case including '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', i.e. any change to the s25 factors.

In spite of the fact that Mrs North had 'largely made her own bed' she nonetheless had a self-evident need which Mr North could meet without undue hardship. The nominal periodical payments order was after all intended to be a safety net and the court of appeal therefore held that it was right to exercise the discretion taking all factors into account and that a fair award was one of £3,000 p.a. during the parties joint lives, a figure significantly lower than Mrs North's actual needs as found by the district judge. No doubt one factor which acted heavily on the court's mind as a depressing influence on the quantum of the award was the foolhardiness of Mrs North's financial conduct for which Mr North was not to be held responsible. (amended 16 August 2007)

Lucy Reed
Tanfield Chambers
28 July 2007