IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LINCOLN COUNTY COURT
(HIS HONOUR JUDGE JENKINS)
Royal Courts of Justice
Strand, London WC2A 2LL
Tuesday, 5th December 2000
LORD JUSTICE SCHIEMANN
and
LORD JUSTICE THORPE
____________
MINAZ DHARAMSHI
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
____________
PETER DUCKWORTH and KAREN SHUMAN (instructed by Messrs Bindman & Partners of London WC1X 8QF) appeared on behalf of the respondent.
As Approved by the Court
Crown Copyright ©
1. Minaz Dharamshi is 42 years of age. He moved from Uganda to England in 1972 and ten years later launched Le Gem Products Limited in Leicester. He comes from an affluent family but there is no evidence as to the extent to which his family supported him in setting up business as a comparatively young man of 25. However it seems that the shareholding in the company was divided in some proportions between himself and his mother. In October 1984 he became engaged to Anisha who at that stage worked for Sainsburys. His progress was temporarily checked by a fire at the factory soon after their engagement but business was swiftly resumed on an alternative site. The young couple married on 31st October 1985 and their two children, Nurin and Iman were born respectively on 4th December 1990 and 19th May 1992. The wife had earlier given up her employment to devote her energies to the husband’s business and to the family. When Iman was still a baby the husband’s mother settled her shareholding in Le Gem on her grandchildren, appointing the husband and the wife as trustees of the settlement. The family prospered and the final matrimonial home was purchased in 1995 at a total cost to the husband of £165,000. It was newly built and the family were its first occupants. However by the following summer the marriage had broken down. The husband left in August and on 14th January 1997 he petitioned for dissolution on the grounds of conduct. In the same month he spent approximately £70,000 on a flat in Leicester which enabled him to offer staying contact to the children. Ancillary relief proceedings were initiated in October 1997 and the marriage was finally dissolved on 30th April 1998. At the end of that year the husband sold the company for approximately £6.6M gross. His share amounted to £4.5M gross subject to expenses of sale and a potential CGT liability of £1.8M. The ancillary relief hearing took place in July 1999 with a reserved written judgment despatched on 30th August. The implementation of that judgment resulted in further hearings in October 1999 and January 2000. The order as finally perfected in early February provided that:
1. The husband transfer to the wife the final matrimonial home and a motor car.
2. The husband pay the wife a lump sum of £1,050,000 together with a contingent lump sum representing 25% of the fruits of a CGT avoidance scheme.
3. The husband pay periodical payments at the rate of £5,000 per annum per child plus school fees.
4. The husband pay the wife’s costs.
Stays were granted partly by the trial judge and partly by this court when leave was given on paper on 7th February.
2. Before the judge the wife was represented by Mr Duckworth who sought, in addition to the house and car, a lump sum of £1.75M together with a share of the fruits of the CGT avoidance scheme capped at £900,000. For the husband Mr Hayward-Smith QC submitted that the lump sum of £400,000 on top of the transfer of house and car would meet the wife’s reasonable requirements on the application of the Duxbury tables to the wife’s income needs as he defined them. Even circuit judges ticketed for ancillary relief work very seldom try contested ancillary relief cases and such a wide spectrum can hardly have been helpful to the judge. Of course such a spectrum could not result from differences of calculation but only from a fundamental difference of approach. Mr Duckworth for the wife advanced a bold and original case emphasising an entitlement to a share in the proceeds of sale of a family business. He rejected the quantification of his client’s claim by reference to reasonable requirements or by capitalising her current income needs by use of the Duxbury tables. He relied upon a written report from an actuary who contended that, if capitalisation were appropriate, it should be done by reference to the Ogden tables rather than by reference to Duxbury. Mr Duckworth was inspired to run that argument as a result of the decision in the appeal of Wells v Wells [1999] 1 AC 345. Mr Hayward-Smith was able to advance his proposed lump sum by commencing with a stringent pruning of the wife’s proposed expenditure to a figure of just under £20,000 per annum exclusive of child periodical payments. The trial was further encumbered with a number of issues that with hindsight scarcely merited the prominence that they received. For some reason the husband thought it worth contesting the wife’s application for £6,000 per annum per child. However he was perhaps vindicated in that stance by the judge’s finding. Equally surprising to me was the wife’s application brought under section 24 of the Matrimonial Causes Act 1973 for the variation of the children’s settlement to restrict the beneficial class to the two children of the marriage. I cannot see how it could be said that the settlement in question constituted a post-nuptial settlement made upon the parties to the marriage. However since the judge ultimately refused the application in the exercise of his discretion I need say no more. Finally the judge investigated as `a major factual issue’ whether between date of separation and date of trial the wife had borrowed approximately £30,000 from within her own family to sustain her standard of living. In the scale of this case the liability, even if proved, would hardly have affected outcome. However it seems that the issue was fought partly for its impact on credibility and partly for its impact on the wife’s budget. The judge’s findings on the issue are somewhat inconclusive, although he was critical of the evidence of the wife and her supporting witness. This sense of incomplete or self-cancelling conclusion is a feature of a judgment which plainly strives to be fair to both the spouses and to match every nuance of the case. But where the same issue is addressed at different points within the judgment findings emerge that either counteract each other or are difficult to reconcile the one with the other.
3. However that is not Mr Pointer’s principal criticism. His principal criticism is that this was a conventional case requiring a conventional quantification of a lump sum payment sufficient to enable the judge to order a clean break. The primary tool for quantification was Duxbury. Once the judge determined on the tables a single payment necessary to capitalise the wife’s income requirements on an amortised basis he held the opportunity to vary that figure up or down to reflect all the circumstances of the case and in particular the statutory criteria. He submits that such an approach was not only correct but if anything generous to the wife because at the age of 39 she was at the highest on the threshold of entitlement to a Duxbury settlement.
4. Approaching the detail Mr Pointer criticises the judge for having found a reasonable need for the wife to better her accommodation when she had never mentioned such an aspiration. He further says that once the judge specifically fixed her income bracket by saying that it was in the region of £30,000 to £35,000 the addition of the words `or more’ were either meaningless or hard to construe. Finally he submitted that since the judge had found both that the wife would work and that she would earn approximately £8,000 per annum the subsequent finding that it would not be reasonable to expect her to work was otiose.
5. Mr Pointer’s further submissions were in a sense anticipatory. First he said that Wells v Wells is of no application in ancillary relief proceedings. The victims of tort are in a special category requiring a greater degree of financial security. In support he referred us to an article published in Family Law Journal in December 1998 the authors of which are the acknowledged experts in the field. Finally he approached the issue of the wife’s contributions. These he submitted could not possibly account for the judge arriving at a lump sum award of £1.05M, a figure that certainly does not explain itself and which is not specifically explained in the judgment.
6. In response Mr Duckworth asserted that this was a highly unusual case on its facts where the wife as joint contributor to the successful sale of the family business was plainly entitled to such share as the judge felt fair without any reference to her future income requirements and without any reliance on a preliminary capitalisation of those requirements by the Duxbury method. Alternatively he submits that the judge was entitled to have regard to the wife’s contribution not only by her work within the business but also as a wife and mother. He particularly relied upon a passage cited from the judgment of Purchase LJ in the case of Vicary v Vicary [1992] 2 FLR 271. Only if he failed in those submissions did he submit that any capitalisation of the wife’s budget must ignore her ability to earn and must be upon the application of the Ogden tables. The additional contingent lump sum, which Mr Pointer had submitted was unprincipled, Mr Duckworth supported by reference to a judgment in the case of Antoniou v Antoniou given on 2nd November 1989 by Douglas Brown J. This was not a reported judgment but he had heard of it from another member of his chambers and had obtained the judge’s leave to cite it.
7. In reply Mr Pointer submitted that Mr Duckworth’s bolder submissions simply ignored this court’s construction of section 25 of the Matrimonial Causes Act 1973 developed prior to the 1984 amendment and affirmed more recently in Dart v Dart [1996] 2 FLR 286 and White v White [1999] 2 WLR 1213. In relation to the assessment of contributions Mr Pointer drew a clear line of authority from Page v Page [1981] 2 FLR 198, through Preston v Preston [1982] Fam 17 and Gojkovic v Gojkovic [1992] Fam 40. The case of Antoniou turned on its very special facts where the court was obliged to preserve the only asset within the jurisdiction against the perils of a respondent who was a reckless gambler and who had absented himself from the jurisdiction and the trial. He submitted that Purchase LJ was not distinguishing or departing from the line of authority established by Page, Preston and Gojkovic all of which were cited uncritically in Vicary.
8. Whilst these submissions were advanced on the foundation of authority in this court, the last case in the line, White v White, had already been argued in the House of Lords and it was anticipated that the appeal to their lordships would be determined early in the Michaelmas term. Accordingly at the conclusion of submissions on the 6th July 2000 it was agreed that our judgment should be reserved to await the outcome in White v White. White v White was effectively the first case admitted to appellate review by the lords of appeal in 30 years since the enactment of the Matrimonial Proceedings Act 1970. The prospect that their lordships might disapprove the methodology developed by this court was obvious. The wait to end speculation was brief. The judgment of the House delivered on 26th October 2000 fully justifies the course which we had taken. On the arguments advanced by Mr Pointer and on the authorities in this court I would have held the judge’s quantification of his award both insufficiently explained and incapable of justification by reference to the wife’s reasonable requirements. The wife’s housing needs were fully satisfied by her retention of the final matrimonial home. Both in her affidavit and in her oral evidence she emphasised that she wanted the final matrimonial home, that she and the children were very happy there, and that she had no desire to move. Although the judge subsequently said:
“I think it is appropriate to take into account therefore that the wife may have a reasonable need for better accommodation ….”
9. Mr Pointer submits tellingly that that conclusion is quite unsupported by evidence and has its origin in a speculative sentence in Mr Duckworth’s written closing submission where he said:
“It may be that in the fullness of time she will seek something more comfortable.”
10. Therefore on the authorities as they stood in the summer of 1999 the judge’s task was to establish the wife’s annual income need and then to capitalise it by the use of the Duxbury tables in At A Glance. Neither side relied on expert evidence from a forensic accountant to offer any bespoke or other method of capitalisation. His final task was to stand back and decide whether to uplift or depress the mathematical calculation to give proper reflection to the other statutory criteria and finally all the circumstances of the case. This was not a case where the welfare of the children had any impact on the exercise since they were, of course, catered for by their grandmother’s settlement having a current value of £1.7M.
11. Although the wife’s own calculation of her annual income need fell squarely within the judge’s bracket of £30-35K, Mr Duckworth rightly pointed out that her budget had omitted some of the realities, such as replacement depreciation for the motor car. Nor do I think that the judge’s inclination expressed in the words `or more’ should be ignored. I would therefore take the sum of £37,500 as the current year figure to meet her needs. The tables in At A Glance would capitalise that income figure at £795,000 which I would round down to £750,000 to reflect the evidence that in the fullness of time the wife will resume work and will earn about £8,000 a year at today’s figures. Capitalisation at £750,000 per annum reflects a five year deferment of her return to work.
12. For the purposes of this exercise I see no warrant for introducing the Ogden tables into ancillary relief. The use of the Duxbury tables has had this court’s approval for many years. Their limited utility was recognised by Lord Nicholls of Birkenhead in his speech in White v White. When the case of Wells v Wells [1999] 1 AC 345 was in the Court of Appeal I suggested that the Duxbury method might offer advantages over the Ogden method in high damages personal injuries awards. The suggestion did not find favour and that in my opinion should be the end of the exchange. It simply does not follow that there is any consequential need to consider Ogden in preference to Duxbury for ancillary relief capitalisations. The victims of tort are in a special category. The field of ancillary relief is already sufficiently esoteric without disputing or discarding what was aptly described as `the industry standard’ by Holman J in F v F [1996] 1 FLR 833.
13. But the calculation of the wife’s reasonable income requirements as a means of determining her award has been expressly and emphatically rejected by their lordships. It is necessary to stand back and return to the language of the statute. As Lord Nicholls said:
“Financial needs should be seen, and treated by the court, for what it is: only one of the several factors to which the court is to have particular regard. This is so, whether the end product is labelled financial needs or reasonable requirements. In deciding what would be a fair outcome the court must also have regard to other factors such as the available resources and the parties contributions. In following this approach the court will be doing no more than giving effect to the statutory scheme.”
14. In cases `where the assets available exceed the parties financial needs for housing and income’ two principles are established by the speech of Lord Nicholls of Birkenhead. The first is that there must be no gender discrimination in the application of the statutory criteria. The second is that:
“As a general guide, equality should be departed from only if, and to the extent that, there is good reason for doing so. The need to consider and articulate reasons for departing from equality would help the parties and the court to focus on the need to ensure the absence of discrimination.”
15. The ceiling of `reasonable requirements’ originated by Lord Justice Ormrod and applied by this court for nearly a generation must now be rejected.
16. One virtue of this development is well illustrated by the present case. The Court of Appeal authorities clearly distinguished the active and productive work of a wife in the family business from a wife’s homely management of house and children. Accordingly a good deal of time and forensic effort was devoted to that distinction at the trial. For the wife Mr Duckworth sought to establish that she was an active participant in the family business. For the husband Mr Hayward-Smith sought to establish that she was just wife and mother. The judge’s findings in this area are somewhat mixed. In the section headed `General Observations’ the judge did describe the wife’s contributions as highly significant. But in his earlier findings of fact he has said of her contention that her contribution was pivotal:
“I am prepared to accept that that is her perception of what occurred but I think it highly likely that it is exaggerated and that at best she has deluded herself in her picture of what took place.”
17. On the same page he said:
“In my judgment the wife played a part in the building up of her husband’s business as well as making a perfectly good contribution to the family as wife and mother…. On the other hand I regard as far fetched the assertion that her part in the business was vital to its success or unique to quote the adjective used in the case of Conran ….”
18. Towards the end of his judgment when he specifically considered their respective contributions in the context of section 25(2)(f) he said:
“I summarise my detailed findings on this issue by indicating that the wife has made, in my judgment, a perfectly acceptable contribution as wife and mother and that her contribution to the building up of the business involved her working for the business for a period of some years rather than the roughly two set out by the husband and that on occasions she would work in the evenings or at weekends but her contribution was by no means pivotal nor was it vital to the success of the business. Nonetheless her contribution was not insignificant and is to be taken into account.”
19. From those quotations it is abundantly clear that the wife’s contribution was commendable over eleven years of married life. What she contributed to the home and the children is just as valid as the work that she did in the business. There is no distinction to be drawn between those fields of contribution in the application of section 25(2)(f).
20. Although the reserved judgment does not explain how the judge arrived at the sums ordered in paragraph 2, elucidation came six months later at a hearing to settle the form of the order to reflect the reserved judgment. In the course of exchanges with counsel the judge said that he had decided that the wife’s share should be £1.5M. A quarter share of the fruits of the tax avoidance scheme would be £450,000 therefore he had fixed the immediate lump sum payment by deducting from the sum of £1.5M the value of the contingent share.
21. Can it be said to be an erroneous conclusion or one that exceeds the broad discretionary ambit? I do have considerable reservations about the form of the order. I understand the attraction of ordering an immediate and certain lump sum supplemented by a share of any tax saving. That approach obviates the need to assess the outcome of the scheme and the risk that to quantify the lump sum on the basis of such an assessment will prove unfair to one side or the other. But as a matter of law the husband alone is liable to the tax and he must pay it unless his avoidance scheme succeeds. Such schemes inevitably involve considerable professional costs. Furthermore they generally involve restrictions upon the use of money, either transiently or long-term. The success of the scheme may involve the husband returning the capital to business risk. It can be said that the judge’s approach permits the wife to share the reward without having shared the burden. In those cases where it is possible to achieve a clean break the reciprocal dismissal of claims should be achieved at the earliest practicable date. Future financial obligations or exchanges carry the risk of prolonging dispute and ill will.
22. However to delete the husband’s obligation to pay the contingent lump sum would leave the wife a long way short of equality. If the CGT avoidance scheme fails the husband will still have £2.7M before deduction of the expenses of sale. If the scheme succeeds he will have £4.5M before expenses of sale. Some departure from equality is in my opinion clearly justified. First the wife has retained the final matrimonial home fully equipped for herself and the children. The husband has re-housed himself in a flat that is worth less than half of the family home. Furthermore either the initial launch or the subsequent success of the business may have resulted in part from the support of the husband’s family. But in my opinion those factors, one clear the other shadowy, would not justify a lump sum award which in one eventuality would leave the wife with only about 25% of the available assets. The judge’s approach was to give the wife a substantial fraction of the proceeds of sale not directly related to her reasonable requirements. That approach is fully vindicated by the decision of the House in White v White. In the light of the law as it now stands I would therefore dismiss this appeal.
23. I record that counsel for both the husband and the wife lodged written submissions on the impact of Lord Nicholls’ speech on the outcome of this appeal. I accept Mr Duckworth’s basic submission that on that authority he is entitled to succeed. I reject Mr Pointer’s attempt to distinguish this appeal on factual aspects not much explored at trial
LORD JUSTICE SCHIEMANN:
24. I agree that this appeal ought to be dismissed in the light of the decision in White v White [2000] 3 WLR 1571 and for the reasons given by Thorpe LJ. While I have some unease about different branches of the High Court adopting different approaches to the task of capitalising a sum which represents annual needs, it is not necessary for the resolution of this appeal either to express an opinion as to the relative merits of the Duxbury and Ogden methods of capitalisation or as to whether they can co-exist as judicial tools. In those circumstances I refrain from doing so.
LORD JUSTICE ALDOUS:
25. I also agree.
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