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Tracey v Tracey [2006] EWCA Civ 734

Lump sum order varied on appeal where fresh medical evidence admitted.

Court of Appeal: Thorpe and Smith LJJ and Hedley J (15 May 2006)

Summary
Lump sum order varied on appeal where fresh medical evidence admitted.

Background
The parties to these proceedings married in August 1986; they had two sons, born in June 1993 and May 1996, and they divorced in August 2001. Their financial arrangements were settled in a consent order of September 2001, by which the father kept the former matrimonial home and adjoining woodland; he paid to the mother half a million pounds to buy a new home for herself and the children, and she would receive a lump sum payable over five years. Importantly, the father undertook the obligation for children's school fees and extras: he agreed to pay £5,000 a year by way of periodical payments for each child, and £10,000 a year for the mother.

The father worked as an options and futures trader, through spread betting, and was financially affected by the New York 9/11 disaster. By a further consent order of November 2002, the mother's periodical payments order was reduced to a nominal order; also, a secured provision order was introduced for the payment of the children's school fees, although the security was only provided for a period of 12 months. Following continued trading difficulties, the father gave notice in December 2003 that he could no longer afford private education for the boys. In May 2004, the father applied to vary the consent order in respect of the school fees, and the mother cross-applied, seeking a lump sum of more than £270,000 for pre-payment of the boys' education.

At the trial in August 2005, the father's case was that there had been such a disastrous worsening in his financial circumstances that he should be relieved of all liability. The mother's case was that the needs of the children should be prioritised over any other needs. Having heard the evidence over two days, the judge dismissed the father's application and granted the mother's application as sought.

The father, who had represented himself before the judge, appealed, and instructed specialist solicitors and counsel for the appeal. He contended that the judge, in considering the respective financial positions of the parties, had wrongly including a loan of £125,000 as an asset, when it was in fact immediately offset by the obligation to repay. Shortly before the date fixed for the hearing, the father filed an application seeking to adduce fresh evidence concerning his medical history and prognosis, principally that he had suffered various symptoms, possibly indicative of multiple sclerosis, since March 2004.

The court heard that the medical evidence had been available in August 2005, in two reports prepared by a consultant neurologist for the purposes of adjournment applications, which were either not pursued or failed; however, the evidence was not presented at trial and did not figure in the judgment. The court also heard that the father had suffered further weakness in his legs and fatigue in December 2005, and had been admitted to hospital for intravenous treatment in January 2006, but no conclusive diagnosis of his condition had yet been made.

Judgment
Held, allowing the appeal in part, that the fresh medical evidence had to be taken into account in evaluating the father's future earning capacity.
On the accounting matter, the court found that the judge had overstated the father's assets by the sum of £125,000, with the effect that the discretionary conclusion of the judge was exposed to review. However, much more significant was the medical evidence that had not been before the judge and which meant that the judgment below could not stand.

In exercising its discretion afresh, the court treated securing the future private education of the boys as the first priority, and had to decide between the flexibility of a secured periodical payments order and the finality of a lump sum order. Given the potential impact that a collapse of health, and consequently income, would have on the secured periodical payments route, the court favoured the advantages of finality, but only to the extent of the reasonably predictable.

Accordingly, the court upheld most of the judge's decision, but deleted from the lump sum awarded the part designed to cover the younger son's public school fees, payment of which would not commence until September 2009, on the basis that the father's liability in that respect needed to remain flexible and subject to review in the light of circumstances that might emerge.