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Harris v Harris [2018] EWHC 1836 (Fam)

Appeal against an order which capitalised spousal maintenance and increased child maintenance.

The parties were married for three years and separated a few months before the birth of their son, who was 10 years old at the date of the appeal. The final order, which was made in 2009, provided for the payment of various lump sums, spousal maintenance in the sum of £1,250 per month for a term, and child maintenance at the rate of £850 per month.

In 2015, the husband applied to vary the spousal maintenance order. This application was settled by a consent order which Mr Justice Cohen described as "unusual". It provided for spousal maintenance, which was referred to as "representing only childcare costs", in the sum of £500 per month until the end of June 2017, and then £250 per month until the end of June 2018, when it would cease altogether, with a section 28(1)(a) bar. It also required the wife to provide the husband annually with copies of her employment contact, a breakdown of past childcare costs, and an estimate for future childcare costs.

Because the wife failed to comply with these obligations, the husband unilaterally decided to stop making these payments from June 2016. He applied for an order discharging him from the obligation to pay the wife spousal maintenance and requiring the wife to repay him £3,500 in "overpaid childcare costs". The wife cross-applied for capitalisation of spousal maintenance in the sum of £9,500 (which is £500 per month until June 2017, and then £250 per month until June 2018). In view of the husband's income, which was in excess of £200,000 per annum (gross), the court permitted the wife to amend her application to include a variation of the order for child maintenance.

The trial judge concluded that the spousal maintenance should be capitalised in the sum of £9,500. He directed the husband to pay the capitalised maintenance by December 2017, ordered him to pay £250 per month until he met the capitalised maintenance order, and directed that there would be interest on the sum of £9,500. The effect of this was that a total of £11,693 would become payable by 30 June 2018, assuming that the husband did not make the capitalised maintenance payment until June 2018 [10]. The trial judge also varied the child maintenance order to £1,600 per month, which would mean that the wife would receive c.£900 per month, owing to the 40.09% tax on maintenance payments in accordance with Belgian maintenance regulations. He backdated this to June 2017.

The husband brought an appeal against this order on multiple grounds. Mr Justice Cohen gave him permission to appeal on the following grounds:

In respect of spousal maintenance:

1) whether the spousal maintenance should cease when the child maintenance increased;
2) whether payment of the capitalised sum should fall due in advance of the termination date; and
3) whether it is proper to award both interest and continued maintenance in default of payment.

In respect of child maintenance:

4) whether it should be backdated to the period when spousal maintenance was still being paid;
5 the relevance of the CMS figure; and
6) the quantum of the order.

Cohen J allowed the husband's appeal in respect of spousal maintenance to the extent that awarding the wife capitalised maintenance, plus continuing maintenance, plus interest was double-counting [13-15]. He considered that it was open to the trial judge either to make an order for capitalised maintenance with spousal maintenance continuing at the rate of £250 per month until payment or to make an order for capitalised maintenance with interest running on that sum and child maintenance at the increased rate, backdated to June 2017.

Cohen J dismissed the husband's appeal in respect of child maintenance. He was satisfied that the trial judge had found that the wife needed in excess of £900 per month (net), although this was not maintaining her at subsistence level [18]. He considered that the trial judge had properly taken into account the fact that the husband's income was £11,000 per month and the wife's income was less than £2,000 per month, in determining that the husband should bear the burden of the tax [19]. Cohen J considered that those conclusions dealt with the husband's argument in respect of quantum and the relevance of the CMS figure [20]. In the absence of reasoning by the trial judge in respect of how the spousal maintenance and child maintenance interrelate, Cohen J decided that it was fair for the increased child maintenance figure to commence in June 2017 (as the trial judge had ordered), but that spousal maintenance of £250 per month should cease at that point [20-21].

Cohen J thus substituted the trial judge's order with an order which provides for the capitalisation of spousal maintenance in the sum of £6,500 plus interest; this figure is £3,000 less than the trial judge's figure on account of removing the spousal maintenance obligation (£250 per month) from June 2017, when the increased child maintenance commenced.

The judge at first instance had not dealt with the costs of the parties' applications and so the parties had agreed that this should also be dealt with by the appeal judge. Cohen J decided that the husband should pay 60% of the wife's costs. This decision was based upon on the one hand the husband's litigation conduct, and on the other hand the no order principle which applies in a variation application [23-25].

Finally, Cohen J held that there should be no order for the costs of the appeal [27]. The husband's appeal in respect of spousal maintenance had succeeded but his appeal in respect of child maintenance had failed. Cohen J noted that he had encouraged the parties to go to mediation, given the small sums involved; and that they could have protected their position by making offers but neither had done so.

Summary by Georgina Howitt,  barrister, 1 Hare Court

Neutral Citation Number:  [2018] EWHC 1836 (Fam)


Case No:  2018/0069 – FD08D01397

The Royal Courts of Justice

Date: Tuesday, 3rd July 2018



B E T W E E N:
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MR P HOLLOW appeared on behalf of the Applicant (Direct Access)
MR N ANDERSON (instructed by Paradigm Family Law) appeared on behalf of the Respondent
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JUDGMENT (Approved)
1. This is an appeal bought by the appellant husband, Paul Harris, against an order made by His Honour Judge O'Dwyer in in the Central Family Court, the order being dated 15 January 2018, following an application made by the wife, Agnieszka Harris, for a capitalisation of the spousal maintenance that she was receiving and an increase in the child support that was payable by Mr Harris to the one child of the family, aged 10.  The parties had married in 2004 and separated in November 2007, just a couple of months before M was born, and he has, throughout his childhood, lived with his mother.

2. There was a financial remedies order made on 23 July 2009, which provided for payment of lump sums, to which I need make no further reference, spousal periodical payments in the sum of £1,250 per month and child maintenance at the rate of £850 per month, the spousal maintenance being a term order.

3. The matter came back to court in November 2015 upon the husband's application to vary downwards the order for spousal maintenance.  He made no application in respect of child maintenance which had remained, until Judge O'Dwyer's order, in the sum of £850 per month, although it needs to be said that the original order and the order in 2015, which I shall come on to, both provided for index linking, which was never in fact implemented. 

4. The 2015 proceedings culminated in a consent order made by Deputy District Judge Hodson on 13 November 2015.  It is an unusual order.  It provides for spousal maintenance 'representing only childcare costs' in the sum of £500 per month, from the date of the order until 31 June 2017 – sharp-eyed readers will have noticed that there is not a 31 June – when it would reduce to £250 per month until 31 June 2018, and thereafter shall cease altogether, with a bar on extension or further application.  There was also provision contained in the order for the wife providing to the husband, annually, copies of her current contract of employment, breakdown of childcare costs, and an estimate of future childcare costs.

5. The husband says that the wife failed to provide sufficient updating details as to her finances.  Therefore, he took it upon himself to stop making payments to the wife altogether, with effect from 1 June 2016, when she was first due to provide him with documentation.  On 2 September 2016, the husband issued an application seeking an order that the wife repay to him £3,500 in 'overpaid childcare costs', and discharging his obligation to pay maintenance to the wife, which had been agreed less than a year before.

6. The wife filed a cross-application in October 2016, seeking capitalisation of her spousal maintenance in the sum of £9,500, that being the arithmetically correct sum for the total of the £500 per month due until June 2017 and the £250 per month due until June 2018.  She did so to stop the husband simply ceasing payments.

7. The matter came before Judge O'Dwyer, for the first time, on 28 November 2017, when he joined together the husband's application and the wife's application and relisted the matter before himself on 23 February 2018 when, in the light of what the husband then indicated his income to be, namely a gross of in excess of £200,000 per annum, the court gave the wife permission to amend her application to include a variation upwards of the current child maintenance.

8. The learned judge listed the matter for a final hearing before himself on 30 May 2017 when he heard the evidence of the parties, but an issue which was certainly known to the parties by then, perhaps not to the judge, remained outstanding, namely that of the impact of Belgian tax on maintenance payments received by the wife.  The effect of the Belgian maintenance regulations is that the wife, as the recipient of a maintenance order, has to pay tax at 40.09% on her receipt, so that the order of £850 per month produced for her only £509 per month.  Correspondingly, the husband of course gets no tax relief on the payments that he makes from his English income, so that each party, in effect, is paying tax on the same income.  Such, the court was told, are the wonders of modern taxation systems.  The Belgian tax advice was submitted to the learned judge on 8 June 2017.  His judgment was not delivered until 1 November 2017, some five months later, and an order eventually emerged on 15 January 2018.

9. For reasons that have not been explained to me, despite submissions having been lodged, the issue of costs still has not been dealt with.  The wife is seeking her costs of the hearing before the judge.  At my instigation, the parties have asked that I deal with the costs below, and have agreed that I should have that jurisdiction, which otherwise would not be open to me, and that they would accept my finding on that, whatever it may be.

10. The judge ordered that the husband should, indeed, capitalise the payments due to the wife in the sum of £9,500, and directed that the money should be paid by 7 December 2017, by way of full capitalisation of the maintenance order for the wife.  He ordered that until payment from 8 December 2017 the husband should pay periodical payments at the rate of £250 per month in advance, and that in addition there was to be interest payable at the judgment rate, from 8 December until payment.  The effect of the judge's order was thus: (1) instead of paying a total of £9,500 maintenance over the period from 1 June 2016 until a period two years later, he had to pay the full sum of £9,500 by 7 December 2017, some seven months earlier than the last payment would be due; (2) if he had not paid the sum in advance of that date, seven payments of £250, that is another £1,750 would be payable by the end of June 2018 unless payment was made; (3) interest would run from 7 December until 30 June 2018, amounted to another £443.  Thus, a total of £11,693 became payable by 30 June 2018 instead of £9,500. 

11. The judge varied child maintenance backdated to 1 June 2017 in the sum of £1,600 per month, which will produce in the wife's hands something in excess of £900 per month.

12. I turn now to the husband's appeal.  The husband appealed on a number of different grounds, some of which I refused permission to appeal on and which I need not refer to again.  I did, however, grant him limited permission to appeal on issues relating to the spousal maintenance and child maintenance.  As to the spousal payments, I granted him permission to appeal on (1) whether they should cease with effect from June 2017, when the increase of child payments came into effect; (2) whether payment of the capitalised sum should be required in advance of the termination date; (3) whether it is proper to award both interest and continued maintenance in default of payment.

13. Dealing with the last of those points first, it seems plain to me that the learned judge double counted by ordering payment both of continued maintenance payments in addition to the whole of the capitalised sum and interest on top as well.  It seems to me that if he had been invited to step back and realised that he was making an order for £11,693 – rather than £9,500 – he must have come to a different conclusion.  In my view, the approach amounted to an error in law and therefore I have to consider what the right approach on his findings should have been. 

14. There seems to me no doubt that the husband was obliged to pay, and the judge was right to order him to pay, the sum of £6,500, being the 13 payments of £500 which became outstanding within a month of the hearing.  However, the judge had then, in my view, two alternatives: either to make an order that, until payment, the husband continue to pay £250 a month as per the original order or – and this is bound up with the child maintenance order – that he pay the sum of £6,500 with interest on arrears, but no further sum, if the child maintenance was to be backdated to June 2017.   

15. Therefore, in respect of the appeal against the order for spousal payments, I allow it, to the extent which I have said and which I will explain further.

16. I granted permission to appeal the child maintenance on three grounds.  Namely, whether it should be backdated to a period when spousal payments were still being paid, secondly the relevance of the CMS figure, and thirdly the quantum of the order.  Mr Hollow, on behalf of the husband, raises three arguments.  First, he says if the £850 per month was grossed up to allow for tax, it being common ground that when the £850 was agreed – there was no question then of it being subject to any taxation – the total grossed up figure now would be £1,416 per month, with a little bit of index linking on top.  That, he says, should be the maximum payable.  Secondly, he says why should the burden of paying the tax fall doubly on the husband?  That is, on his income as he earns it, and then secondly by the grossing up of the maintenance order.  He points out that his former wife is Polish, with property in Poland, and there was no reason for her to move to Belgium from Poland, where she had been living, shortly after the 2015 order, incurring with it a double tax burden, which had not previously existed.  Thirdly, he says her own evidence shows that she did not need an increase. 

17. Having listened to both parties and seen the transcript of evidence, I am satisfied that all of those objections fail.  The judge found, as a fact, that the wife needed £1,600 a month, gross – £900 a month plus, net.  He covered it in paragraph 92 of his judgment, where he said this: 'Such a sum (£1,600) should produce in excess of £900 net in Mrs Harris' hands, which although is less than may have been awarded, provides a balance between the competing issues above and meets within the terms of that compromise of the child's basic needs'. 

18. True it is that the wife, in her evidence, appears to have suggested in several passages that she could get by, but no more, with what she was then receiving, but the judge, in my judgment, was perfectly within his rights to look at the matter in a broad sense.  He rightly said that it falls to the court to assess the relevant needs of both parties and to identify what the appropriate sums were to make in respect of the child.  He did not regard it as appropriate to simply keep the child's award down to a minimum subsistence level and he said this, at paragraphs 54 and 55

'Mr Hollow, on behalf of the husband, sought to argue that the order of 13 November 2015 should be interpreted as being tied to the actual childcare costs.  I do not accept this; the figure was put on the basis of assessment of the reasonable requirements of the mother and child'. 

That was said in the context of looking at the position globally, as between mother and child, but in my judgment the judge was right to say that the approach that he should adopt was not one that kept her to bare minimum.

19. He was also right to take into account that there was an enormous difference in the income available to the husband and to the wife.  The husband's net income was almost £11,000 per month; the wife's total income was less than £2,000 per month.  I do not think that there can be any criticism of the figure of £1,600.  I do not think that the criticism that Mr Hollow makes on behalf of his client that the tax burden should be shared carries any weight.  The parties met in Belgium, they married in Belgium, the wife had worked in Belgium before, and her move to Belgium produced, for her, a greater income, which was to the benefit of all three members of the family and, no doubt, therefore, reduced the need for support from the husband.  I therefore dismiss the appeal as to the quantum of the order.

20. That also takes care of the issue of the relevance of the CMS figure, but the question then arises: should it be backdated to a period when spousal payments were still being paid?  It is evident from the judge's judgment that, as from July 2017, the mother would have coming into her home for child support the gross figure of £1,600 per month, and the net figure was what the judge decided as being the figure that she needed to meet the child's ongoing needs.  Bearing in mind the way that the 2015 order was phrased, it seems to me self-evident that, if £250 per month is payable on top of the increased figure for child support, then it significantly exceeds the needs for which the original order was intended to provide.

21. The judge does not, anywhere in his judgment, deal with the issue of how spousal maintenance and child maintenance, at an increased figure, are meant to interrelate, and so I have to do the best that I can in the circumstances.  I consider that the fairest and best way of dealing with this matter is to leave the judge's order that the £1,600 a month should start on 1 June 2017 in place, but the figure for spousal maintenance should be removed from the date of the increased child maintenance. 

22. It therefore follows, from everything that I have said, that for the judge's order I substitute the capitalisation of the spousal maintenance, at the figure of £6,500 plus interest, which it is agreed will run at 8% from the 1 January 2017 (the midpoint date) until payment.  I dismiss the appeal against child maintenance.

23. I now turn to the costs at first instance.  The wife seeks her costs and has produced a schedule in the sum of £20,294.  The husband's schedule of costs is rather higher.  It has been attacked on two bases by Mr Hollow as being too high, but I reject both of them.  Therefore, I have to then look at the matter of principle.  Should there be no order for costs, as the husband asserts, relying on the general principle that the starting point for costs is that there should be no order as to costs?  The wife asked me to summarily assess her costs, in such sum as I think is appropriate.

24. In my judgment, there are some points of force made on both sides.  The husband makes the point that this was essentially a routine application for the variation of maintenance with no grounds for the 'no order principle' being displaced.  On behalf of the wife, a number of points are made.  In particular, that the wife succeeded in getting a substantial increase in child maintenance.  Secondly, she was forced to court, because the husband had completely ceased paying maintenance for her and had only continued paying child maintenance in the sum which brought her £508 per month.  Thirdly, he had pursued some arguments which were rejected by the judge and which I refused to allow to be opened on appeal and, fourthly, the ex post facto point that, notwithstanding the judge's judgment, the husband had continued to fail to pay any sum in respect of the wife's maintenance.  Finally, she was by far the financially weaker party. 

25. I am clear that an order for costs should be made.  Normally, at this sort of level, on a summary basis, I would allow for a reduction of 20% of the total bill, to allow for what one might find typically reduced on a typical reduction on an assessment, but I think that is too large a percentage for me to order the husband to pay against the background of the general principle that costs should lie where they fall.  I think there has been some serious litigation conduct by the husband in the way that I have described, and I am going to order him to pay 60% of the wife's costs below.  That, therefore, is 60% of the figure of £20,294, which comes to £12,176.40.

26. I turn now to the cost of appeal, which I have not dealt with, because it may be that there are submissions that need to be made about offers.

Discussion as to costs of the appeal.

27. The appeal has succeeded in some respects and it has failed in other respects.  I cannot blind myself to what I know about the parties' financial positions.  When granting limited permission to appeal I urged the parties to go to mediation, as the sums involved were so small.  I have no idea whether any mediation took place; it seems to me obvious that it should have.  The parties could have protected their positions, if they wished to, by making appropriate offers but neither has done so.  Bearing in mind that the wife succeeded on child maintenance and the husband has succeeded on spousal maintenance, I am going to make no order as to the costs of the appeal.

End of Judgment

Transcript from a recording by Ubiqus
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