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Ancillary Relief Update (August 2008)

Joanna Grandfield, barrister with Mills & Reeve, analyses the key ancillary relief cases from the past three months

Picture of Joanna Grandfield

Joanna Grandfield, Barrister, Mills & Reeve

The summer update includes cases dealing with Barder events, the application of Stack v Dowden, business assets and departure from equality and the effect of non-disclosure before turning briefly to cases dealing with the old costs regime and the correct approach to be taken to arrears of maintenance.

Judge v Judge [2008] EWHC 101 (Fam)
This decision of Coleridge J involves consideration of what constitutes a Barder event.  Somewhat unusually, the alleged Barder event involved a reduced liability rather than any increase in either the value of an asset or a party’s income.

The original proceedings involved assets in excess of £33M and concluded in 2001.  One of the issues in the substantive proceedings was the amount a foundation set up by the husband owed to HMRC. The wife argued less than £9M was due, whilst the husband submitted that it was in the region of £24M.  In addition the husband argued that, even if he had no legal obligation attaching to him personally, he felt morally bound to reimburse any sums due.  Coleridge J held that the liability was in the region of £14M and made an order providing the wife with 38% of the assets that would be left once that liability had been paid. 

Five years later, the actual liability crystallised at only £589,000, some 4% of the figure used in the original proceedings.  The wife applied to have the order set aside, arguing that either the court had been mistaken in its analysis of the extent of the monies due and/or the husband’s failure to act on his “moral obligation” to the foundation amounted to a Barder event.

The judge characterised the reduced actual liability as being an unexpected windfall.  Whilst the wife would have received more had the liability been assessed at a lower level at the time of the original order, the Judge had proceeded on the basis that the outcome was uncertain, albeit that the likely outcome was that a higher figure would be payable.  The fact that the liability crystallised at a much lower figure was therefore foreseeable and did not amount to a Barder event.  The court had made its decision based on the husband’s legal liability at the time.  The fact that the husband had changed his mind in relation to any moral obligation to reimburse the foundation was irrelevant.  In short, the husband had borne the risk as to the extent of the liability under the order. As Coleridge J said at 63:

“In this case the ball bounced the wrong way for this wife.  On the basis of the gloomy prognostications of the wife’s own counsel at the time, it might just as easily have bounced the wrong way for the husband in which event it would have had a catastrophic effect on his finances.  She was completely secure, he was most secure.  That is precisely how I intended it to be”.

Finally, practitioners should note that the court approved the procedure adopted by the wife in bringing the application under the Robinson procedure [1983] 4 FLR 102 and in the matter being returned to the judge who heard the original proceedings.

Fowler v Barron [2008] EWCA Civ 377
This case, an application of Stack v Dowden [2007] UKHL 17, emphasises the heavy burden of proof a party in proceedings involving a property held in joint names who seeks to establish it is owned in anything other than equal shares is under.

The parties, who were in a relationship for over 23  years, bought a home in joint names in 1988 funded by a deposit provided by Mr Barron and a joint mortgage.  No declaration of trust was completed.

Some 30 years older than Miss Fowler and retired by the time of purchase, Mr Barron paid the mortgage, utility bills and council tax and cared for the parties’ children whilst his partner went out to work.  Miss Fowler’s income was spent on herself and the children.

Mr Barron argued that the property had only been put in joint names as he wanted it to pass to Miss Fowler on his death.  Both executed mutual wills leaving their interest in the home to the other. 

At first instance the court applied the doctrine of resulting trusts and found that, since she had made no contribution to the purchase price, Miss Fowler had no interest in the home.  The appeal was heard after the House of Lords had given judgement in Stack v Dowden.  The court applied the decision of the higher court, and held that in the absence of an express agreement, the whole course of dealing must be looked at against a presumption of joint equitable ownership.  As a result, it was for Mr Barron to rebut the presumption of joint ownership.  He had not succeeded for the following reasons:

H v H [2008] EWHC 935 (Fam)
This case is included as illustrative of the approach the courts are adopting to the division of capital when much of it is tied up in the husband’s business.  After a 15 year marriage resulting in two children aged 10 and 13 by the time of the hearing, the wife (a 49 year old artist) was awarded £1.45M of the available assets on a needs and sharing basis, together with periodical payments of £60,000 p.a., maintenance for each child of £20,000 p.a. and school fees.  The capital award equated to 67% of the “non-business wealth”.  The husband, a 64 year old chef who had worked in his restaurant business in Chelsea for 33 years, was left with 68% of the total assets. 

The court arrived at this decision by concluding that there was insufficient capital for there to be a clean break.  At the same time, Moylan J held that it would not be fair on the husband to be forced to sell the business he had spent over 30 years building up  The Judge was not assisted by an approach involving separating assets into “matrimonial” and “non-matrimonial”, since this was too formulaic on the facts of this case, where the value of the business as at the date of trial was a direct result of 33 years of work by the husband, much of which was pre-marriage.  The fact that his interest in the restaurant did not have any significant realisable value until the husband ceased to operate merely as a licensee (which in fact occurred post-separation) did not make the business a marital asset.  In so finding, the Judge relied on the speech of Lord Nichols in Miller/McFarlane at [27]:

“This difference in treatment of matrimonial and non-matrimonial property might suggest that in every case a clear and precise boundary should be drawn between these two categories of property.  This is not so.  Fairness is a broad horizon. Sometimes, in the case of a business, it can be artificial to attempt to draw a sharp dividing line as at the parties’ wedding day…. Accordingly, where it becomes necessary to distinguish matrimonial property from non-matrimonial property the court may do so with a degree of particularity or generality appropriate in the case”.

The fact that the husband had worked for so many years prior to the marriage justified his being able to retain it.  Further, if the available assets had been greater than needs, Moylan J would have departed from equality because of the husband’s efforts over such a long period.

The case is another in a line of judgements advocating the use of single joint experts.  Moylan J bemoaned the fact that this had not happened here, notwithstanding the number of areas of dispute between the parties.  At the same time, the judgement analyses the competing reports before the court in some detail, and provides helpful insights into the workings of the restaurant business, particularly in relation to payments made in cash and in kind.

Finally, practitioners will note that the fact of the husband’s cohabitation with a new partner did not reduce his capital award, Moylan J finding that it would not be fair on the husband to have to rely on his new partner to rehouse, at para 54:

“However, whilst this [cohabitation] might mean that he is able to obtain accommodation with Mrs A, I do not consider it follows that he has no need for available capital.  It would not be fair to the Husband to make him dependent on Mrs A for his own home”.

I v I [2008] EWHC 1167 (Fam)
This application by the wife to set aside an order for ancillary relief made at FDR considers the ongoing duty to provide full and frank disclosure.

By the time of the FDR on 20 July 2006, the husband, who was in negotiations for new employment in the City, had not by that stage reached agreed terms or an actual draft contract.  He therefore did not disclose these negotiations to the wife, no doubt because the remuneration package he was to receive both in terms of salary and bonus was far better in the proposed new role. Charles J held that the husband had taken a commercial decision not to inform the wife of these negotiations, and that he had been under a duty to disclose them.  On the day of the FDR, but after the order had been approved by the court, a draft contract was sent out to the husband’s employment solicitors. The husband then resigned from his present employment 11 days later, on 31 July 2006 and started a new job on 4 September the same year. 

The wife’s victory in persuading the judge that the husband had breached his duty of full and frank disclosure was a pyrrhic one.  Charles J referred to the test out set out in Jenkins v Livesey and found that, since the absence of full and frank disclosure did not lead to the court making an order substantially different from that which it would have made had the disclosure taken place, the wife’s application to set aside the original order was dismissed.

R-H v R-H [2008] EWHC 347 (Fam)
This case heard by Singer J is illustrative of the application of FPR 1991 rr 2.69, 2.69B and 2.69D under the old costs regime in circumstances where the conduct of a party in pursuing litigation which bordered on the obsessional.  As a result, £225,000 of the £486,000 spent by the husband in costs were written back in so as to reduce the lump sum payable to him from his wife, whose costs were only £265,000 in comparison.  However, since the wife should have accepted the husband’s offer to settle, she was ordered to pay £150,000 towards his costs (although this was not the total amount spent by the husband since his costs to final hearing were considered to be excessive).

King v Bunyon [2007] EWHC 3281 (Admin)
Heard by Mr Justice McCombe on appeal by way of case stated, this case involved an application for maintenance made by the father of three children who lived with him in the USA .  The mother, who lived in the UK, had been on benefits and had significant debts.  Over time arrears in the maintenance built up.  At first instance, the magistrates remitted some of the mother’s arrears but held that she should pay the remaining £3,000.  On appeal, the court held that the correct way to approach arrears of maintenance is not to ask whether arrears should be remitted but to consider whether to exercise a discretion to enforce the arrears.  In circumstances such as in the present case, where the mother was on benefits, had significant debts and where all the children were living with her by the time of the hearing, it could not be right for the discretion to be exercised.

Finally, the husband’s petition for leave to appeal to the House of Lords in Dixon v Marchant [2008] EWCA Civ 11 (covered in the Spring update; see also the article Can Remarriage be a Barder Event?) has been refused.  Practitioners should therefore ensure that careful advice is given in cases where consideration is given to capitalisation of periodical payments.