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Tracey v Tracey [2006] EWCA Civ 734

Application by father to appeal an order requiring him to pay for private school education for his two sons. Appeal allowed in part.

The father applied to vary a consent order in respect of school fees because his business was in difficulty. The trial judge granted the mother's cross application which was that the father pay in full the future costs of the school fees. At the Court of Appeal, Thorpe LJ heard new evidence that the father's health had deteriorated, thus affecting his earning capacity. The judge upheld the order of the trial judge in relation to outstanding arrears but reduced the lump sum payable.


B4 2005/1998 & B4 2005/1998(A)

Neutral Citation Number: [2006] EWCA Civ 734






Royal Courts of Justice


London, WC2

Monday, 15th May 2006

B E F O R E:






- v -



(DAR Transcript of

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MR C POCOCK (instructed by Messrs Radcliffes Le Brasseur, London SW1P 3SJ) appeared on behalf of the Appellant.

MR R TODD & MS S SYME (instructed by AWB Partnership, 3 & 5 Jenner Road, Guildford,

Surrey GU1 3AQ) appeared on behalf of the Respondent.


(As Approved by the Court)

Crown copyright©

1. LORD JUSTICE THORPE: The parties to this appeal were married on 9 August 1986. They have two children, W, born on 5 June 1993 and therefore nearly 13 and A, born on 24 May 1996 and therefore nearly 10. W has attended Cranmore Preparatory School and is due to commence his public school education at Cranleigh in September next. A is at Cranmore and he hopes to follow on to Cranleigh in September 2009.

2. The appellant father ran his own company until 1993, when he successfully sold his shares, and thereafter he embarked on a new career as a trader full time in options and futures working from home. He chose to trade not through the purchase of commodities but through spread betting. This method of trade has the advantage that any profits accruing are not subject to income tax. The respondent mother also worked prior to W's birth and she had a good salary as an accounts manager. Now her attentions are devoted to the children, but she still manages to earn about £5,000 and Bennett J at the trial thought that her income potential was probably twice her present earnings.

3. Sadly, the marriage broke down and divorce proceedings were commenced in the year 2000, culminating in a decree absolute on 13 August 2001. The financial issues were sensibly compromised and embodied in a consent order of 5 September 2001. The basic arrangement was that the father should retain the former matrimonial home with approximately 75 acres of adjoining woodland. He was to provide the mother with half a million pounds to enable her to purchase a new home for herself and the children, and in addition she was to 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 per annum by way of periodical payments for each child, and he also agreed to pay £10,000 per annum for the mother.

4. That arrangement had a short duration, since almost immediately the New York 9/11 disaster occurred and impacted heavily on the father's trading, since he has always specialised in the American market. Accordingly, he applied for the variation of the consent order and that implication was compromised by a further consent order dated 21 November 2002. His achievement was to reduce the mother's periodical payments order from £10,000 per annum to a nominal order. It is in context of this appeal important to note that a secured provision order was introduced for the payment of the children's school fees but, unfortunately, the security was only provided for a period of 12 months. In the events which have since happened, had the security for the payment of the children's school fees been of indefinite duration, this present litigation would not have been necessary.

5. Despite the challenge presented by the New York disaster the husband still managed to turn in a profit on his trade in the year ended 5 April 2003. However it was the buoyancy of the New York markets in the financial years 2003/2004 that almost destroyed the husband's financial standing. We have within the papers the brief account of his trade in those two years and we can see that, having opened the 2003/2004 year with an exposure of only £20,000 deficit, by the end of the year the cumulative deficit had risen to £408,000. That, no doubt, led him in December 2003 to give notice that he could no longer afford private education for the boys.

6. His endeavour to trade his way out of difficulties in the following financial year were unsuccessful, although less spectacularly so. He opened the year with a deficit exposure of just over £400,000, but by the end of the year that had advanced to nearly £450,000, and at one point towards the close of the calendar 2004 year his deficit exposure stood at nearly £750,000.

7. The father's application to vary the consent order in respect of school fees was issued on 3 May 2004. The mother cross-applied on 20 August 2004, seeking a lump sum of £272,771 to ensure that the private school education of the two boys was prepaid throughout. That capital sum would have enabled her to commute the basis fee liability at both Cranmore and Cranleigh for both boys. It is notable that the applications set very high targets on both sides. The father sought the complete elimination of private school education for the boys. The mother sought the immediate payment of the whole costs of future private school education immediately up front.

8. The trial was conducted by Bennett J, commencing on 22 August. 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: the father had in essence brought the situation upon himself by what she characterised as gambling and she asserted that it was all the more important that the children's education should be secured before the risk of any further deterioration in the father's position.

9. Bennett J heard evidence over two days and gave his judgment on 24 August, explaining why he dismissed the father's application and granted the mother's application as sought. A Notice of Appeal to this court was filed in September 2005. On 21 November Wilson LJ set up this hearing, on notice with appeal to follow if permission granted, and shortly before the fixed date on 5 May the father filed an application seeking to adduce fresh evidence. A notable aspect of the case is that the husband presented his case below in person; proceedings in this court have been conducted on his behalf by specialist solicitors and specialist counsel.

10. The fresh evidence goes entirely to the father's medical history and prognosis. This is an important issue, and accordingly I will briefly summarise the medical evidence that was available to the judge and the more recent medical evidence available to this court. The report has been prepared by Dr Trent, who is a consultant neurologist, and he records historically that the father was referred to him in March 2004 by his GP. The referral was for the investigation of a number of symptoms, particularly urogenital, fatigue and weakness of the legs. Dr Trent referred on to a second consultant, Dr Davies, who was a urological specialist. Investigations included MR imaging of the brain in both 2004 and 2005 and very little emerged from that.

11. The father was referred on to a third consultant, Professor Russell Jones, specialising in diabetes and endocrinology, and all that evidence culminated in an analysis of the father's spinal fluid in March 2005. That analysis suggested abnormality indicative of ongoing inflammation within the central nervous system suggestive, possibly, of multiple sclerosis.

12. Now all the evidence was available, obviously, in August 2005. It seems that it was contained in two reports from Dr Trent which had been prepared for the purposes of adjournment applications, which were either not pursued or failed. What is significant, as we will see, is that that consideration, the health consideration, did not figure in the judgment of Bennett J.

13. The evidence before this court that was not before Bennett J is that Dr Trent found that in December 2005 that the father's urogenital symptoms had worsened further, as had the weakness in his legs and the fatigue. He was admitted to the Guildford Nuffield Hospital in January 2006 for intravenous treatment, which alleviated some of his symptoms. However, the continuing medical puzzle led to father's referral to a fourth consultant, Professor Fowler, at University College Hospital, and then most recently to a fifth consultant, Professor Alan Thompson at the National Hospital, who is described as a super-specialist in multiple sclerosis. At the date of the report, 5 May, the father was currently awaiting an appointment to see Professor Thompson.

14. I turn now to consider the judgment of Bennett J. First, I emphasise that the judge in dismissing the father's application and granting the mother's was exercising a broad discretion, and it is trite to say that it is not for this court to interfere unless errors are demonstrated in the discretionary analysis. Two points have emerged during the course of argument, skilfully presented by Mr Pocock for the father, and equally skilfully responded to by Mr Todd for the mother.

15. The first point is one of accounting. Bennett J turned to consider the respective financial positions of the parties in paragraph 30, and particularly investigated the father's net worth between paragraphs 31 and 38. In the last of those paragraphs he summarised the father's position, saying that he had assets of £1.1 million, liabilities of £380,000 and therefore net assets of £762,000. Mr Pocock attacks that analysis, which is all drawn from a single sheet which appears at page 1973 in the case papers.

16. The argument is that the judge has introduced into the assets a borrowing from the Cheltenham and Gloucester Building Society in the sum of £125,000 secured on the property occupied by the father's parents, which is currently in the joint names of the father and his father. That figure of £125,000 does not appear in the assets column and Mr Pocock says, persuasively, that the judge erred in adding it in because it was immediately offset by the obligation to repay.

17. It is clear that the judge did bring that sum in at paragraph 28 of his judgment and again at paragraph 31. I can understand the judge's temptation to bring it in, since the father had undoubtedly been switching the borrowing from his own account to some safe haven at various critical points in the litigation, and that of course attracted the impression that he was trying to hide the money. No doubt he was, but the fact remains that it was an asset precisely offset by a liability. During his parents' lifetime, the property was no more than security for commercial borrowing, and to that extent I would accept Mr Pocock's submission that the judge effectively overstated the father's assets in paragraph 38 in that sum of £125,000. I was not impressed by Mr Todd's effort to suggest that the judge was right on his figures.

18. That would in itself expose the discretionary conclusion to review but it does seem to me that even more significant is the fresh evidence that we have admitted. The judge dealt specifically with the father's ability to earn in paragraph 40 of his judgment, when he only noticed that the father was handicapped in the labour market because, first, he was 50 years of age and, second, he had all his life been an entrepreneur and not a team player.

19. But more threatening than either of those factors was obviously the deterioration, and seemingly the continuing deterioration, in the father's health. I have considerable sympathy with the omission, since it seems as if this medical emphasis was not emphasised to the judge and it was not the father's case below that his ability to earn was threatened by developing ill health.

20. So the omission is entirely understandable and in making much of it I in no way criticise Bennett J. The most serious aspect is drawn from the fresh evidence which I have already summarised. Looking at the case as it now stands, it would be quite impossible to evaluate the father's future earning capacity without placing great weight on the medical evidence now available, and not available to Bennett J. That is a second and perhaps more substantial reason for holding that the judgment below cannot stand and that we must exercise our discretion afresh.

21. So what should we do? My first conclusion is that there must be security for the future private education of these boys: enough to say that the history of the case demands it. The real choice is between making a secured periodical payments order or a lump sum order. The father says that either would destroy his trading capital; so in that sense neither is preferable to him.

22. The secured periodical payments have the advantage of flexibility, since they allow annual variation to reflect circumstances. Change of future circumstances can be divided between change in the payer's circumstances and change in the recipients needs. By contrast the lump sum has the great attraction of finality, eliminating the risk of future litigation between the parents.

23. Returning to the secured periodical payments route, as to the payer's circumstances there is a plain risk of a health collapse and an income collapse within the scale of W's education at Cranleigh. On the other hand, in many families private education is frequently funded in whole or in part from capital. As to the recipient's needs, there cannot be much doubt as to A's need to complete his education at Cranmore and of W's needs to complete his education, so soon to begin, at Cranleigh, but A, in a future that would not commence until September 2009 and which would not terminate until July 2014, is much less easy to predict.

24. So, balancing all these considerations, in the end I favour the advantages of finality, but a finality that does not endeavour to reach beyond the reasonably predictable. I would accordingly uphold the order of the judge in relation to the arrears outstanding for both W and A at Cranmore. I would uphold the judge in his requirement for lump sum payment of W's future fees at Cranleigh and A's future fees at Cranmore, but as to Alexander beyond Cranmore, that liability, although remaining principally on the father under the terms of the consent order of November 2001, must remain flexible and subject to review in the light of circumstances as they will emerge.

25. I would accordingly allow the appeal to the extent of deleting that part of the lump sum designed to cover A's fees at Cranleigh. It will also be necessary to extend the time for payment, since it may well be that preparations for payment have been put on hold pending the outcome of the appeal. That then is the disposal which I would propose.

26. LADY JUSTICE SMITH: I am in complete agreement with the judgment of my Lord, Lord Justice Thorpe, and his proposed order, subject only to further argument as to the time for payment.

27. MR JUSTICE HEDLEY: I also agree and have nothing to add.

Order: Permission to appeal granted. Appeal allowed.