Bishop v Bishop

J U D G M E N T

Monday, 26 April 2004

1. LORD JUSTICE THORPE: Mr and Mrs Bishop arrived at a consent order to divide their financial affairs on the breakdown of their marriage. The order was dated 25 November 1998. It was a relatively complicated arrangement. The principal asset was a property in Sussex, 1 Magdalene Close, Pound Hill, Crawley. The minutes of consent order provided for the sale of that house forthwith at a price to be agreed between the parties and in default as determined by the court. The wife's solicitors were to have the conduct of sale, and on completion the net proceeds were to be divided as to the first £80,000 to the wife, and the balance, so far as the gross sale price did not exceed £159,000, to the petitioner and any surplus in the event of the gross sale price exceeding £159,000 to be divided between the parties in the proportions 78% to the wife and 22% to the husband. It was also provided that forthwith on completion of the sale the husband would transfer to the wife all his interest in the two policies that supported the endowment mortgage on the property. The husband's final obligation, somewhat unusually, given that capital positions were to be regulated by the division of proceeds of sale, was the payment to the wife a lump sum of £27,000.

2. The consent order defined what was meant by net proceeds of sale. Clause 4 of the recitals was in these terms:

"And upon the term net proceeds of sale referred to in paragraph 1 of the order meaning the gross sale price (including any consideration paid for fixtures and fittings) less the amount outstanding in respect of the mortgage the estate agents charges and solicitors conveyancing costs and disbursements."

That was what the parties agreed in the face of the court in November 1998.

3. In the event the husband died on 15 March 1999 before any sale of the property was achieved. An immediate consequence was that the policy holders paid out on the two endowment policies and the payment discharged the mortgage. That was all done relatively simply since the mortgagee was Lloyds Bank and since the policies were provided by their insurance arm, Black Horse: so, by what are more or less internal movements of funds within the Lloyds Bank organisation, the effect of the husband's death was to discharge the mortgage on the property.

4. The agreement provided that the wife was to remain in occupation of the property pending sale. It was incumbent on her to pay the mortgage instalments and any premiums on the life policies were to be shared between them. So the effect of the husband's death was to relieve liability for continuing mortgage repayments and to relieve the wife of the obligation to pay off the premiums on the endowment policies.

5. The sale of the house was deferred for years until 27 August 2002. Part of the reason for that delay seems to have been that the wife was endeavouring to buy out the interest that the husband's estate held in the property on the application of the terms of the consent order. But when sale was achieved in August 2002 it was at a much enhanced sale price - not the £159,000 which had been written into the consent order as the model for implementation but £275,000. That led to dispute between the wife and the estate as to how the net proceeds of sale should be divided and how the consent order should be implemented.

6. The dispute was taken before District Judge Dickinson, who had made the consent order. He heard the submissions of counsel on 12 June 2003 and delivered a reserved judgment on 29 July 2003. By that reserved judgment he found in favour of the submissions of the wife advanced by Miss Da Costa on her behalf, and he rejected the rival submissions on behalf of the estate. The estate appealed to the circuit judge and their appeal succeeded in front of His Honour Judge Mitchell on 13 October 2003. In due course permission to appeal his ruling was sought by the wife and a paper order was made directing that her application for permission should be listed for oral hearing on notice with appeal to follow if permission granted. That is the hearing which takes place today.

7. Of course there is an impediment to the wife's application created by section 55 of the Access to Justice Act 1999. There has been an appeal in the court of trial, and no application for permission to appeal will be granted unless the application raises some important point of principle or practice or there is some other compelling reason to hear it. It seems to me that some distinction needs to be drawn in cases such as this where what is involved is not the exercise of the judicial discretion, but a point of law, such as the construction of a contract or a court order, in which in the court of trial one party has succeeded in front of the district judge and the other party has succeeded in front of the circuit judge. In such a situation permission can more readily be granted than in the contrasting situation where in the court of trial what is in play is the exercise of a judicial discretion and where the party seeking permission in this court has already lost twice in the court of trial. So given the nature of the issue, given the conflicting views taken by the judges in the Worcester County Court, it seems to me that it would be right to grant permission despite the terms of section 55 of the Act.

8. The essential submissions presented by the estate and by the wife have not varied throughout the course of progress from district judge to circuit judge to this court. For the wife, the submission of Miss Da Costa is crystallised in a submission document in which it is shown that in the event that happened the costs of sale amounted to £5,619.51. Allowing to the wife the £80,000 (which was her due under paragraph 1 of the order) and to the husband the £79,000 being the balance up to £159,000, there falls for division the surplus above £159,000 which, on a division of 22%/78% in the wife's favour, would result in the allocation of just over £24,000 to the husband's estate and just over £86,000 to the wife. Miss Da Costa then moves from the husband's account to the wife's account the £27,000 lump sum, and to the wife the sum of £37,445.30, which is the total transferred by the insurance arm to the banking arm of Lloyds on the payment out of the endowment policies. That is the only sensible way of applying the consent order, giving due effect to the fourth recital which defines the net proceeds of sale. That is Miss Da Costa's essential submission.

9. For the estate, Mr Spollen contends that from the sale price of £275,000 gross is to be deducted not just the £5,619.51 cost of sale, but also the notional sum of £37,445.30, which Mr Spollen suggests should be deducted from the gross proceeds of sale on a fictional assumption that the mortgage at the date of the consent order remained a mortgage outstanding at the date of sale. The resulting distribution thereafter is to produce figures as between the wife and the estate which are less favourable to the wife to the extent of proximately £30,000.

10. It seems to me that the situation which confronted the district judge in June 2003 was actually relatively commonplace. In many instances consent orders are dependent for their implementation on future happenings which can only be guessed at at the date of the making of the order. They may depend on all sorts of vagaries. It may be that the housing market will distort the best estimates of the parties made at the date of the agreement. It may be that the sale will be postponed for a period much in excess of that which was contemplated by the parties. In every instance the court that made the consent order will exercise its powers of construction to ensure that the implementation of the consent order is as close as possible to the intention of the parties and of the court as at the date that the order was entered. As Judge Mitchell recorded in the course of his judgment this proposition was authoritatively defined by Oliver J in Thompson v Thompson[1955] 2 All ER 243 when he said at 249:

"The court must, as it seems to me, consider the application for the purpose of ascertaining whether what is sought is to give effect to the original order in accordance with its spirit and construction, or whether it is made with a view, in effect, to producing a different substantive result from that originally contemplated."

Judge Mitchell went on to express the view that the district judge in his conclusion had effectively varied rather than implemented the order. That, in my judgment, is not a fair criticism of the district judge. In my opinion he did the very reverse. He simply strove to give sensible effect to what had been agreed in the light of events as they had transpired. His interpretation seems to me to involve less fiction and unreality than that contended for by Mr Spollen. The definition of "net proceeds of sale" in the fourth recital to the order unnecessarily involves taking deductions not as they were at the date of the consent order, but as they would prove to be. As Bennett J pointed out during the course of argument, it might well have been that the parties would have achieved a private sale of the property in which instance there would have been no estate agent's charges. To contend that in such a situation some fictional estate agent's charges should be imported into the calculation would be manifestly absurd. So equally the mortgage must be taken to be the mortgage as it proved in the event rather than as it was fictionally at the date of the order. The district judge, in my view, sensibly regarded the mortgage as being such mortgage as subsisted, recognising the right of the wife to discharge the mortgage from other funds if other funds should come into her possession. By analogous extension, if the mortgage were discharged by the maturity of the endowment policies, then that event effectively removed that element of deduction in arriving at the net proceeds of sale.

11. It seems to me that that sufficiently explains my conclusion that the circuit judge was in error in his conclusion and that the judgment of the district judge is to be preferred.

12. For all those reasons I would allow this appeal and reinstate the order of the district judge.

13. LORD JUSTICE KEENE: I agree. The way in which the "net proceeds of sale" are to be ascertained is provided for by paragraph 4 of the consent order. It means the gross sale price, less "the amount outstanding in respect of 'the mortgage', the estate agent's charges and the solicitors' conveyancing costs and disbursements."

14. The interpretation advanced on behalf of the estate involves treating the first of those deductions, namely the amount outstanding in respect of the mortgage, as the amount outstanding at the date of the consent order and not at the time of sale. That does not seem to me to be what was intended by those words. I have two reasons for that conclusion. First, neither of the other two deductions, that is to say the estate agent's charges and the solicitors' costs and disbursements, were to be ascertained at the date of the consent order. Indeed they could not be. The paragraph clearly intended that the parties would in those respects use the figures eventually thrown up by the process of sale and the figures which emerged at that time. If so, then one inclines towards adopting the same approach as being appropriate in respect of the other item in the very same paragraph, namely the amount outstanding in respect of the mortgage.

15. Secondly, it is perhaps significant that the parties use a formula in respect of the amount outstanding in respect of the mortgage. It was a formula which would allow for a fluctuating amount of outstanding mortgage debt. They did not choose to specify the actual amount outstanding at the date of the consent order, although clearly it would have been possible, if that was what they intended, for them to do so. If they had intended that this particular phrase should relate to the amount actually outstanding at the time of this consent order, one wonders why they did not choose to do so.

16. For both those reasons, as well as those which my Lord has spelt out I too agree that this appeal should be allowed and I agree with the order which he has proposed.

17. MR JUSTICE BENNETT: I too agree that this appeal should be allowed for the reasons given by my Lords.

(Application granted; appeal allowed; Respondent to pay the Appellant's costs of the appeal).