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Martin-Dye v Martin-Dye [2006] EWCA Civ 681

Husband’s second appeal concerning the treatment of pensions in payment in ancillary relief proceedings allowed.

Court of Appeal: Thorpe and Dyson LJJ and Lord Phillips CJ (25 May 2006)

Husband's second appeal concerning the treatment of pensions in payment in ancillary relief proceedings allowed.

The parties married in December 1987; at that time, they had assets of approximately £1.67 million, of which the wife had contributed four-fifths and the husband one-fifth. The parties divorced in August 2003 and, by the time of the ancillary relief hearing in September 2004, they had amassed by their joint efforts an estate worth about £6.3 million, comprising a number of properties and the husband's and wife's pensions in payment valued at £940,000 and £100,000 respectively.

In the ancillary relief proceedings before the district judge, both parties sought a clean break. The husband contended that the assets should be split equally, with all the properties being sold and each party retaining their pension. The wife's case was for a 62.5:37.5 division of assets in her favour; she particularly sought the transfer of the husband's share of the family home, which was also the site of her successful business, and accepted that each party should keep their own pension. Neither party's primary contention was for a pension-sharing order, and both presented the two pensions as assets together worth over a million pounds.

The district judge concluded that a fair split of the assets totalling £6.3 million would be 57:43 in favour of the wife, with each party's share including their pension as valued above. The husband appealed against the judgment, challenging the treatment of the pensions in payment, but the appeal was rejected by the judge. Permission for a second appeal was granted, as the appellant's notice raised a sufficient point of principle to justify it.

The court reviewed the decision of the district judge and the judge's reasoning on appeal.

Held, allowing the husband's appeal, that the judgment of the district judge was flawed and the judge had been wrong to reject the appeal.

In dividing the available assets between the parties, the district judge had ignored the essential differences between saleable property and an income stream derived from an inalienable pension in payment; when she said that she had 'weighed all the other section 25 factors in the balance', it was not at all clear that she had factored in the different nature of the pensions; indeed, the husband was entitled to receive a reasoned response to his submission that the pensions were different in kind from the other assets and should be left out of account, but he did not receive any such response. Further, the district judge's rejection of the husband's alternative application for a pension-sharing order was insufficiently reasoned.

As to the judge's decision on appeal, the court considered that (1) he had wrongly construed the district judge's assessment of the nature of the parties' assets; and (2) he failed to deal with the submission that the district judge's reasons for rejecting the claim for a pension-sharing order could not be sustained, since the husband's criticisms appeared to be well founded and constituted an independent ground of appeal.

The court offered some useful guidance on the treatment of pensions in payment in clean-break cases, by reference to the wording of section 25(2)(a) of the Matrimonial Causes Act 1973: while 'property' consists of houses and investments, and 'income' is the receipts anticipated from the parties' continuing endeavours, 'other financial resources' is the appropriate categorisation of pensions in payment.

In this case, the district judge had the option of leaving the pensions undisturbed, compensating the wife for the disparity in income ('offsetting'), or making a pension-sharing order, adjusting the apportionment of the capital property to reflect its effect. The district judge adopted the former approach, but should have favoured the pension-sharing order. Accordingly, the court ordered the 57:43 division in favour of the wife to be applied to the pensions, with an increased balancing payment to be made by the wife to the husband.

Finally, the court observed that the difficulties encountered in this case should not recur, as the Family Proceedings (Amendment) (No 5) Rules 2005, SI 2005/2922 (in force from 5 December 2005), introduce Form P, which should be used in every case where a pension is significant and where a pension-sharing order might be made.

Read the full text of the judgment here