SRJ v DWJ [1998] EWCA Civ 1634 (28 October 1998)

(His Honour Judge McNaught )
Royal Courts of Justice
London WC2
Wednesday, 28th October 1998
B e f o r e :
– – – – – – – –
– v –
– – – – – – – –
(Computer Aided Transcript of the Stenograph Notes of Smith Bernal Reporting Limited
180 Fleet Street, London EC4A 2HD
Telephone No: 0171-421 4040
Fax No: 0171-831 8838
Official Shorthand Writers to the Court)
– – – – – – – –
MR. A. BARTON (instructed by Messrs Farrells, Bristol) appeared on behalf of the Appellant/Respondent.
MR. N. MILLER (instructed by Messrs Robert Clarke & Co., Bristol) appeared on behalf of the Respondent/Petitioner.
– – – – – – – –
As approved by the Court )
– – – – – – – –
Crown Copyright
MRS JUSTICE HALE: The parties were husband and wife until their divorce in 1996, and I will refer to them as that throughout to avoid confusion. This is the wife’s appeal from the order of His Honour Judge McNaught, sitting in the Swindon County Court on 5th March 1997. He dismissed her appeal from the order of Deputy District Judge Bedford on 23rd October 1996. The relevant part of that order was that the wife’s claims for a lump sum, transfer of property and periodical payments orders were dismissed. There was no order for costs in either court apart from legal aid taxation of the wife’s costs.
There are two points in this appeal. The first is whether a deferred lump sum order should have been made so that the wife could have the benefit of some proportion of the husband’s future pension entitlement. The second was whether there should have been an order for nominal periodical payments rather than the complete dismissal of her claims. Swinton Thomas L.J. gave leave to appeal so that the second point could be argued. It is fair to say that both the judges in the courts below had great sympathy for the position in which the wife found herself but felt that there was nothing they could do.
The background is that the parties were married on 23rd September 1967. The wife was then 20 and the husband 23. In March 1997, therefore, they were respectively aged 49 and 52. They have four children, R who was born in 1971, E who was born in 1975, W who was born in 1979 and so is now 19, and H who was born in June 1988 and is now 10. The wife qualified as a teacher in the 1960s but has not been employed as such for many years. She has done voluntary work at schools attended by the children or in the village and other voluntary work in the village where she lives. The husband is a professional chartered engineer. He has worked abroad during the marriage and latterly in this country. Their matrimonial home, High Hall Cottage, Compton Martin, near Bristol, was bought in joint names in 1974. It was subject to an ordinary mortgage to the building society and also a charge to the Bank of Scotland to secure the husband’s guarantee of his company’s liabilities. In about 1985 or 1986 the husband and his partner, Mr. K, established their own consulting engineering business, the JK Partnership Limited. This must have done well for a while. We are told that from 1987 two of the children were sent to Millfield School. It is common knowledge that Millfield School is one of the most, if not the most, expensive schools in the country. W remained at that school until 1996 when he moved to a local school. On the wife’s own account in her first affidavit:
“Throughout our married life, the Petitioner and I have not managed our finances well. Every three years or so there seemed to be a financial crisis which was met either by tax rebates or remortgaging the matrimonial home.”
It appears from the company accounts that the company was not doing well from at least 1993 onwards. The parties separated in July 1994 when the husband moved out of the former matrimonial home. There is a dispute on the papers as to the circumstances in which that took place but nobody has regarded that as relevant for the purposes of these proceedings. The wife stayed in the home with W who was then 16, and H who was then 6. In April 1995 the husband stopped paying the mortgage instalments on the home. Arrears built up. The building society brought a possession action. In June 1995 the wife also ceased to be an employee of the company and thus to receive the small salary which she had been drawing. Problems also arose in relation to her income tax on the benefit of the company car which she had enjoyed.
The first substantive ancillary relief hearing took place on 13th March 1996 before District Judge Bentley. It was then ordered that the matrimonial home be sold and the proceeds be applied to discharge the mortgages in favour of the building society and the Bank of Scotland. Any balance remaining would go to the wife. The rest of the wife’s application for other forms of ancillary relief was adjourned. In April 1996 there was an order that the property be sold to named purchasers for £200,000. The building society mortgage, which was over £150,000, was discharged. There was further dispute about whether the balance should be released to discharge the liability to the Bank of Scotland. Eventually it was. A small balance of some £687 remained for the wife.
The second substantive ancillary relief hearing came before Deputy District Judge Bedford on 23rd October 1996. Once the home had been sold there were no other assets of any significance. There was a parcel of land, variously valued from £1,000 to £5,000, which the husband had always been willing for the wife to have. There were some insurance policies which were subject to a loan. There was the value of the husband’s shares in his company, but at that stage it was not thought that they had any value. Thus the only two points in argument were the question of the pension and periodical payments.
The husband was a member of the company pension scheme. The value of his entitlement at that time was of the order of £60,000. The husband’s evidence was that he intended to keep up the contributions if he could. This meant that the projected value would rise by an unknown amount and certainly considerably by his projected retirement date of 17th June 2004. The Deputy District Judge in his judgment said:
“It may produce a minimum income of £6,000 pa provided the contributions are maintained. A small tax free lump sum might be available reducing the ongoing pension. Beyond asking me to take it into account there is no specific submission. It is not a significant [factor] and not an asset on which funds can be raised.”
Much more was made of this before the circuit judge. It was argued on behalf of the wife that a deferred lump sum order along the lines of that made in the case of Milne v Milne [1981] 2 FLR 286 should be made. That is an order that the husband should pay a sum equal to one half of the sum that he or his estate would be entitled to under the pension scheme if the appropriate option were exercised on the projected retirement date. The judge could see the force of that submission but in his view it was only one side of the equation. The husband also had debts which he would have to bear. The district judge had found that these amounted to £50,000. An attack has been made on that figure before us but, of course, it is not for us to resolve such disputed issues of fact. But it appears from the list that the total claimed of £54,000 related to unpaid tax on the wife’s company car, a loan from Standard Life to cater for school fees, a further school fees loan from the Royal Bank of Scotland, the outstanding school bill, and a very substantial amount of unpaid tax of the husband dating back well into the marriage. The judge also stated that the husband might elect not to take the lump sum anyway. He said:
“So it seems to me that it is unrealistic to make an order now that she should have part of a totally speculative lump sum which may be at least seven years ahead and it may be 17 years ahead.”
Mr. Barton has argued before us that the judge had not fully grasped the type of order which he was being asked to make. If a Milne v Milne order is made, then of course it is not a totally speculative lump sum. It is up to the husband how he raises the sum which is based upon his undoubted entitlement. Mr. Miller accepts that this might well be the sort of case in which a Milne v Milne order was appropriate. It stands to reason that this is not only a reasonably foreseeable benefit; some benefit from this pension entitlement is undoubtedly going to accrue within a period of time which the courts have regarded as foreseeable for the purpose of these applications.
However, there are two factors against the making of such an order. The first is the level of the debts which arise out of the marriage, principally from taxation on the husband’s income, of which the family must have had the benefit during the relevant years, and from the sum raised to pay the very expensive school fees for the children. Although those debts will be reduced by the value of the policies relating to the school fees, they nevertheless still total a substantial sum. It seems clear that those are quite separate from the business debts for which the husband and Mr. K are liable. Furthermore, even if one ignored the effect of those debts, any sum produced by a Milne v Milne order could not be sufficient to produce a home for the wife. Even if she is right that a very small cottage could be bought for the order of £30,000, the sort of figure we are talking about is around £7,000 or, at the most, £10,000. It is quite unrealistic to imagine that without further help, of either a capital or an income nature, she could afford to buy a home of her own. If that be so, any benefit accruing to her from such an order would immediately be eaten up by the Legal Aid Board’s charge in respect of the costs of these proceedings. We do not have the usual accounts of the parties’ costs before us but they are likely to be substantial. For my part, therefore, although in principle this was indeed the sort of case in which such an order would have been appropriate, the practicalities are such that it would be of no real benefit to the wife, and I cannot, for my part, say that the district judge or, more importantly, the circuit judge, to whom this point was more forcefully made, was plainly wrong to refuse to make such an order.
The question of the dismissal of the wife’s periodical payments claim is much more difficult. The wife is living in rented accommodation and is supported by state benefits. The circuit judge stated that it was “not an issue” in the case that she was being supported by her new partner who also happens to be called K. The husband is also living in rented accommodation, although his business is still trading. The district judge did not believe that his credit card statements indicated that he was living a luxurious lifestyle. The district judge took the view that the wife had clear needs but that he was limited by what the husband could afford. The circuit judge cited the following passage from his judgment:
“There is no evidence on which I can take the view that Mr J is in the reasonably near future going to have so much more income that he can remove Mrs J from benefit. That must be conjecture. I do not even have that hunch. Leaving the claim for periodical payments open does not achieve desired finality. All it leaves is the possibility of future strife with the parties looking over their shoulders.”
He therefore made the usual clean break order dismissing all the wife’s claims, apart from an order denying her the possibility of making a future application under the Inheritance (Provision for Family and Dependants) Act 1975. We are told today that that was not raised before the district judge. The husband agreed, however, to an order for £100 per month for the two children. The circuit judge, having cited that passage from the district judge, agreed with it entirely and saw no reason to form a different view. He concluded:
“… I am afraid some people prosper in marriage financially and some people sadly do not, and this is one of the sad cases where Mr and Mrs J have come out with nothing.”
It was on this point that Swinton Thomas L.J. was moved to grant leave.
The background to this is well known. In 1984 the Matrimonial Causes Act 1973 was amended so that the courts no longer had to try, so far as practicable, to place the parties in the position in which they would have been had the marriage not broken down. It was also amended to insert a new section 25A which has three relevant provisions. Subsection (3) gives the court power to dismiss claims for periodical payments without consent. Subsection (1) gives the court the duty to consider “whether it would be appropriate so to exercise [its] powers that the financial obligations of each party towards the other will be terminated as soon after the grant of the decree as the court considers just and reasonable.” Subsection (2), in particular, gives the court the duty, if it makes a periodical payments order, to consider whether that should last “only for such term as would in the opinion of the court be sufficient to enable the party in whose favour the order is made to adjust without undue hardship to the termination of his or her financial dependence on the other party.” Thus there is a duty to consider a clean break and the power to bring it about. Mr. Miller, however, accepts that there is no presumption in favour of a clean break. Mr. Barton cites the decision of Waite J. (as he then was) in the case of Ashley v Blackman [1988] 2 FLR 278, and in particular his words at page 284, that the courts have to bear two policies in mind. One is the clean break and the other is the policy in the case of Barnes v Barnes [1972] 1 WLR 1381, that the parties should not be able to throw their own obligations on to the state unless there is no practical alternative. The court must then:
“Strike whatever balance – or if need be make whatever choice – between them that the requirements of justice in the particular circumstances appear to dictate. The devious or the feckless husband will still be prevented from throwing his proper maintenance obligations upon the state. The genuine struggler, on the other hand, will be spared the burden of having to pay to his former spouse indefinitely the last few pounds that separate him from total penury. Between those two extremes there will be ample opportunity for flexible orders which give proper weight to both heads of policy….”
One such possibility is, of course, to accept that there is no present alternative to relying on state benefits but to preserve the possibility of the state being relieved of those burdens should the family circumstances improve.
In this case there are several factors which the courts have recognized militate against a clean break. First, the wife continues to be responsible for looking after H, who is still only 10 years old. The welfare of minor children is the first but not the paramount consideration in cases of ancillary relief. The presence of such children does not rule out a clean break, but the courts recognize that it is difficult to achieve this when children and their carer are still dependent because there are so many uncertainties involved (see, for example, the case of Suter v Suter and Jones [1987] FD 111 in the Court of Appeal). There is a rather different, perhaps even a psychological point, which was made by Ormrod L.J. in the earlier case of Pearce v Pearce (1979) 1 FLR 261 at 266 (see also Moore v Moore (1980) 11 FL 109:
“… people who have children cannot succeed in making a clean break. . . . Whether they like it or whether they do not, they continue to be fathers and mothers respectively to the children, and the relationship such as it is continues, and so clean breaks are not possible in all cases, or indeed in many cases.”
It must be difficult for many couples to understand how they can be expected to make a financial clean break when they cannot make a personal clean break because the courts and others keep telling them how important it is to continue to co-operate over their children’s future. Of course, it is not ruled out if proper provision can be made (see, for example, Preston v Preston [1982] FD 17) but here it cannot.
Secondly, the wife is extremely unlikely to be able to support herself without resort to state benefits for the foreseeable future. It will be in her interests to do so. She must accept that she should try to do so if she can. But one has to be realistic. This is a case in which the words of Heilbron J in M v M [1987] 2 FLR 1, at page 10, may well apply:
“The wife (and she will not mind my saying so) is no longer a young woman and she is beginning to enter the world of work from a base of 46 or 47 years of age. She is embarking on a difficult and unpredictable life in an increasingly difficult world of work – things do not get easier – and the older she gets, in all probability, the more difficult will it be for her, in my opinion, to work and make her way in that world of employment.”
The wife in this case did train as a teacher but it was many years ago, and she would have to undertake retraining in order to be able to re-enter that world.
Thirdly, however, that would not be enough to justify an order in all marriages, particularly a short or childless one. This was a long marriage. The couple had 27 years together. There were four children. It was a classic example of the sort of case where the wife could have continued to work as a teacher; indeed, she did for some of the time. But she gave up her place in the world of work to concentrate upon her husband, her home and her family. That must have been a mutual decision from which they both benefited. It means that the marriage has deprived her of what otherwise she might have had. Over the many years of that marriage she must have built up an entitlement to some compensation for that. It is not only in her interests but in the community’s interests that parents, whether mothers or fathers, and spouses, whether wives or husbands, should have a real choice between concentrating on breadwinning and concentrating on home making and child rearing, and do not feel forced, for fear of what might happen should their marriage break down much later in life, to abandon looking after the home and the family to other people for the sake of maintaining a career.
All those factors in combination point to its being inappropriate to make a clean break order in this particular case. The only factor against this is the husband’s present financial position. But this is not a case where both parties are on benefits and likely to remain so. The husband is a professional man. At the date of the hearing he was still practising his profession. He tells us that he does so today. For the year ending April 1996 he declared an income of over £28,000. Before then his income had been very much higher than that. Even if the district judge did not have any hunch that it was going to get better, it is foreseeable that his position may improve somewhat. He will in due course have his pension. We have been told that he has been paying more for the children than in fact the order required.
The other point made on his behalf is that the existence of an order for the benefit of the children means that the wife can still come back to court and apply for that to be increased. That is all very well but it only applies while the children are young. All the points that I made earlier relate to the position in which the home-maker finds herself at the end of a long marriage such as this. It is entirely foreseeable that in due course the husband will have his pension.
The only argument to set against all of these is the one which persuaded the district judge, which was the desirability of finality. If the possibility of the future periodical payments is kept open for the wife, then there may be further proceedings and more and more financial cost. The history of the case, so far as we know it, is not such as to suggest that there have been arguments unreasonably pursued at great length and cost. If there is to be a nominal periodical payments order, any variation application would have to be based on very solid grounds to suggest that it had merit, and any legal adviser would be most ill-advised to pursue it without such a solid basis. Were such a solid basis to arise in future years, it seems to me right and proper that the wife should have the possibility of coming back to court and asking for a variation. For my part, therefore, I would allow this appeal to the extent of making an order for nominal periodical payments of £10 a year.
LORD JUSTICE PETER GIBSON: This court is properly reluctant to interfere with the exercise of a discretion vested in the court below. On well recognised principles, it can only do so if it is satisfied that there has been something approaching an error of principle or the court going plainly wrong. I recognize that in the present case the district judge grappled with the difficult question whether there should be a dismissal of the claim for periodical payments or whether he should keep the door open to a possible variation. The judge accepted the approach of the district judge. It therefore requires careful examination of the circumstances if we are to interfere with the exercise of discretion.
I have reached the same conclusion as my Lady that this is a case where the court below did err in principle. The circumstances here are striking. The wife, after a very long marriage, is left living off benefits. She still has an infant daughter living with her. That daughter will not be 18 until the year 2006. Her chances of obtaining work for herself are extremely poor. The husband in contrast is a professional man. The company, of which he is the equal owner with another engineer, has had more prosperous times in the recent past, and the two partners have taken for themselves each over £40,000 per annum from at least 1992 onwards until 1996, when we are told that the company’s circumstances did not permit Mr. J to draw his full entitlement. The fortunes of the company appear to have suffered a downturn with the building trade being in recession in the years after 1992. There is at least the possibility that the former prosperity of the company will return.
In these particular circumstances, it would seem to me wrong in principle that the wife should be denied any possibility of being able to claim against the husband should matters improve. I too would stress what my Lady has said, that the opportunity afforded by our order to return to court must not be taken to seek further payments unless and until there is material evidence of a solid improvement in the husband’s fortunes. For these reasons, as well as those given by my Lady, I, too, would allow the appeal to the limited extent that she has indicated.
Order: Appeal allowed to limited extent as per judgment; legal aid taxation.