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T v T [2021] EWFC B67

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The parties cohabited married in 1995, separated in 2013 and divorced in 2017.

W applied for a financial remedies order on 1 April 2014 and judgment was given following a final hearing, on 30 September 2015. District Judge Thomas made a 40% pension sharing order in relation to H's Company X pension with a CE of £826,125 in favour of W ("the PSO"). On the instructions of the pension fund administrators, the box marked 'external transfer' at paragraph F of the pension sharing annex was marked.

On 11th October 2016 a revaluation of H's Company X pension produced a CE of £1,795,362, and on 8 June 2017, £1,652,012. By 2 August 2021, the pension had a CE of £2,471,833.

In June 2017, the CE for an 'external transfer' of H's pension was reduced from £1,652,012 to £722,138. On 15 July 2017, W applied for a declaration that the PSO applies to the uplift in value of the Company X pension. The court could not have made such a declaration and W ought to have sought for the pension funds to be distributed via 'internal transfer'. Unfortunately, neither W or H's legal teams appreciated that pension providers cannot insist on an external transfer if the pension credit offered is based on a reduced CE. In any case, on 13 April 2018, Company X pension trustees reversed their decision to substantially reduce CEs for the purpose of external transfers.

There is no requirement to tick either box at paragraph F of the pension sharing annex and Family Lawyers would be well advised not to tick either box. 

On 21 November 2017 H applied for a variation of the PSO. H's variation application came before HHJ Hess for a final hearing on 8 November 2021. H argued that the PSO was made on the basis of the capital value of the pension to be awarded to W was £330,450, and that the PSO should be varied to reflect that W receive this amount (with an uplift for inflation), i.e. the PSO should be varied from 40% to 17%.

The law:

- A PSO must be specified only in percentage terms and not by reference to a capital sum (H v H [2010] 2 FLR 173);

- A PSO applies to the value of the pension, not as contemplated by the judge at final hearing, but at the date the PSO takes effect (usually on pronouncement of decree absolute);

- The power to vary a PSO exists under MCA 1973 s31(2)(g) where the application to vary is made before the PSO takes effect and before decree absolute is pronounced (s 31(4A)(a)). There are no reported cases on such applications;

- The applicable law on variation of other capital orders is relevant: the power to vary, suspend or discharge an order should be used sparingly given the importance of finality in matters of financial provision (Westbury v Sampson [2002] 1 FLR 166; Birch v Birch [2017] UKSC 53);

The legal test: HHJ Hess considered that H's application to vary the PSO downwards should only succeed if "the anticipated circumstances have changed very significantly, and/or for cogent reasons rendering it quite unjust or impracticable to hold the payer to the overall quantum of the order originally made" (Westbury).

Nothing remarkable had changed as to the parties' financial resources, needs or obligations, and the only relevant change was that to the value of the CE of H's pension. HHJ Hess dismissed H's variation application for the following reasons:

(1) The CE of a defined benefit pension fund is the figure for the sum that would need to be invested to meet the income benefits which the fund is obliged to meet for the remainder of the recipient's life. By suggesting that W should have her entitlements fixed now at the cash sum contemplated in 2015, even if the cash sum is given some inflationary growth, H is ignoring the fact that that cash sum will, as a result of the very changes in market conditions and gilt yields which have driven the increased CE, purchase commensurately lower income benefits than they would have done had the pension credit been transferred in 2016, which would be unfair to W.

(2) Whilst W's overall asset figure is undoubtedly higher as a result of the growth in the CE, H's overall asset figure is even more increased, so no injustice is done to H by not varying the PSO.

(3) It is predominantly H's actions that prevented the PSO becoming effective for over 6 years because he prevented W from applying for decree absolute until December 2017 and in November 2017 applied to vary the PSO, which prevented it from becoming effective (MCA 1973 s31(4A)(b)). H left open the possibility of 'moving target syndrome' more than in most cases.

As H had taken an unreasonable view of the case from the outset and pursued it to the bitter end, failing to negotiate in a reasonable way, a costs order was made for him to pay £100,000 of W's costs totalling £130,487, reduced because if was W's application which initiated re-litigation over the PSO.

Case summary by Beth Hibbert, Barrister, 1GC Family Law

For full case, please see BAILII