Heyer v Newby

J U D G M E N T

Wednesday, 19th October 2005

1. LORD JUSTICE THORPE: The parties to this application married in 1976 and divorced in January 2002. A few days before the decree absolute, District Judge Gamba, in the Horsham County Court, entered an ancillary relief consent order under the terms of which the applicant wife received net assets of about £230,000 and a joint lives periodical payment order at the rate of £20,000 a year with automatic RPI uplift.

2. In December of the same year, a number of national papers briefly reported the sale of a company named "Yes Car Credit" to Provident Financial. The report was to the effect that nine managers who had formed the company were to share up to £62 million after agreeing the sale to Provident Financial. The identification of the husband and a colleague as the joint managing directors was followed by an announcement that they would share an initial sum of nearly £12 million in cash with seven other executives, and that there would be future benefits flowing down the line, conditional on business performance.

3. It seems that some friend of the wife mentioned to her in February 2003 that she had read something in some newspaper about the sale and the consequential benefit to the husband. At some stage, either at the end of March but certainly before 8th April, the wife saw the report that The Sun had carried to this general effect. She had a meeting with the husband on his birthday, 20th March. There was some discussion at the meeting of the windfall. The parties' recollection of the meeting was conflicted and was subsequently addressed by the judge at the trial which we now review.

4. There was a hearing in Children Act proceedings on 8th April. The wife and her counsel were present. The husband was not present but was represented by his solicitor. The wife had informed her counsel of the news and seems, probably, to have furnished him with a newspaper cutting. There was, accordingly, an exchange between the two lawyers, the substance of which the judge was to investigate.

5. In June 2003 the wife changed solicitors. Her new, and indeed present, solicitor, Mr Hodkin, had first to focus on the Children Act proceedings since there was a deadline date of 8th July by which the wife had to issue an application if minded to do so. When Mr Hodkin had got himself well into the saddle and dealt with that business he focused on the wife's concern that the financial settlement might not fairly meet her deserts and that she had possibly been the victim of some injustice.

6. There was, perhaps strangely, a first move by the husband's solicitors who wrote seeking a downward variation of the periodical payments order. What could be the foundation for that and what could be the prospects of success simply elude me.

7. The ancillary relief files came to Mr Hodkin in that month of September and he instructed an assistant to research the husband's business interests and the history of the sale of the company. That research only revealed that the contemporaneous press release had led to very similar reports in a number of national newspapers.

8. The focus on ancillary relief proceedings was elevated by the issue of the husband's application for downward variation of periodical payments. A mutual exchange of Form E's had been proposed by Mr Hodkin but rejected by the husband's solicitor. Accordingly an exchange of Form E's was only achieved pursuant to the Rules in early December.

9. A few days after receiving the husband's Form E, Mr Hodkin sent instructions to counsel to advise on the prospects of setting aside the consent order on the grounds that it was vitiated by material non-disclosure. Positive advice was received on 6th January, leading to the issue on 8th January of an application by the wife to vary periodical payments and to set aside the consent order.

10. The enlarged proceedings were transferred to the High Court and came for trial before Miss Judith Parker QC, sitting as a Deputy Judge of the division, in February. She heard evidence, reserved her decision, and ultimately handed down on 18th April 2005. The judgment that she wrote is extremely full, running to 43-pages, in which she carefully and conscientiously addresses all the issues of fact that it fell for her to decide. With equal care she directed herself as to the relevant authorities in this area of the law and ultimately stated her conclusion that the wife was entitled to succeed on her application.

11. That conclusion was founded on two sub-conclusions. The first was that the husband was responsible for material breach of the duty of full and frank disclosure in the period leading up to the making of the consent order. The second sub-conclusion was that, although the wife had delayed substantially in issuing her application, the delay was not such as to disentitle her to relief.

12. The notice of appeal was lodged swiftly on 29th April and supported by a very full skeleton argument signed by Mr Martin Pointer QC and Mr Timothy Bishop and received on 17th May. The arguments advanced by Mr Pointer led my Lord, Wall LJ, on 22nd June to order that the permission application be listed on notice with appeal to follow if permission granted. That is the hearing which we conduct today.

13. Mr Pointer, in his clear skeleton argument, accepts that the judge's first sub-conclusion is not open to challenge in this court. He puts his case on a single foundation. He says that the judge duly directed himself by reference to the correct authorities, but then manifestly failed to apply those authorities to the facts that she had found. In a powerful submission Mr Pointer asserts that the wife had the requisite knowledge in February 2003 and accordingly was responsible for eleven months of delay before the issue of the relevant application. Alternatively, he says that she plainly had the necessary information by March 2003 when The Sun newspaper report was in her hands, and, if not then, then at the latest the clock started to tick on 8th April 2003 when the wife, through her counsel, brandished the article and issued the verbal challenge.

14. Mr Pointer's simple submission is that from that date at the latest there was a responsibility on the wife to ensure that a letter was written to the other side stating her knowledge of the scale of the sale, and requiring confirmation of those facts and an acknowledgment that the consent settlement could not stand.

15. Mr Pointer says that if the wife had received a dismissive response then she would not have been on risk as to costs. Any application issued, if demonstrated by the emerging evidence to be unfounded, could always be withdrawn without cost penalty, given that the initial letter of enquiry had been dismissed.

16. Mr Pointer emphasises that the court's enquiries should not begin with the instruction of Mr Hodkin. There is the substantial period between March and June when her former solicitors had the obligation to issue the challenge and then the proceedings if rebuffed. He says that there was really nothing of any substance to explain this delay. The step that the wife took in January 2004 could have been taken with equal ease, and upon equal evidential foundation, at any time from, at the latest, April 2003 onwards.

17. Mr Pointer emphasises that the authorities are very clear on the need for promptitude. He obviously refers us to the well-known passage in the speech of Lord Brandon in Barder v Caluori[1988] AC 20. Although the House was there considering a supervening event case, rather than a breach of duty of full and frank disclosure, the subsequent authorities in the Court of Appeal: Harris v Manahan [1997] 1 FLR 205; Shaw v Shaw[2002] 2 FLR 1216; and Burns v Burns[2004] 3 FCR 263, all make it plain that promptitude is also demanded in cases where the application to set aside rests on evidence of a breach of the duty of candour.

18. Mr Pointer finally says that it is very important for the practitioners that this court should make a clear rule so that advisers know where they stand in handling these difficult cases.

19. He says that Bennett J, in an unreported case of Hartley v Hartley, had, in similar circumstances, refused relief to an applicant who was only 4 months in default. He says that inferentially this court, in its judgment in Burns v Burns, set the same sort of time limit on an applicant wife.

20. Those submissions are to be tested essentially against the judge's findings. As to the events on 20th March 2003, the birthday meeting, the judge said at paragraph 31:

"I have come to a clear conclusion that I prefer the wife's account and that the discussion consisted of the wife's commenting to the husband that she had heard that he had made some money, or that he had done well, but that he did not confirm this."

That preliminary indication of the judge's view was expanded in paragraph 160 of her judgment when she said:

"I accept the wife's account that the husband did not volunteer any information. I accept also that the wife did not ask him any questions. It is relevant in that context that the wife told me, and I accept, that in spite of all the acrimony and the litigation that she had hoped that the invitation to coffee meant that they could now be friends and that she felt that the husband was 'reaching out to her'."

In the following paragraph she considered the husband's rival account of the meeting. She said of that:

"The husband in my view has embellished his evidence in order to bolster up his case that the wife knew well what he had received and yet took no steps to set aside the order for many months. His account that he told the wife what he had received and what he hoped to receive is untrue."

21. As to the court appearance on 8th April, the judge dealt with that at some length in paragraph 164 of her judgment. The extracts that I take from this paragraph all focus on the part played by the husband's solicitor, Mr Delo. The three passages are as follows:

"I am in no doubt that Mr Delo said that the information was of no relevance to the proceedings before the court and declined to discuss the issue."

Second extract:

"Furthermore Mr Delo's response did not provide her with any such evidence."

Third extract:

"Mr Delo's lack of response to [counsel] supports the wife's case as to her lack of information from the husband and her consistent difficulty in obtaining any relevant information from him."

22. In relation to the period after Mr Hodkin assumed responsibility, the judge made these findings in paragraph 33:

"[The wife] says, and I accept, that there was a vast amount of paperwork for them to master. Mr Hodkin, who gave evidence to me, told me that he was told by the wife that there was an issue with regard to the sale of the company at an early stage. He also said that there was vast amount of material to master and work to be done on the children's proceedings and that he did not at that stage focus on the financial aspects."

In her following paragraphs she dealt with the developments in the early autumn.

23. The judge's resolution of the factual disputes brought her, in paragraph 165, to this:

"Thus my finding is that until the husband's Form E was produced in December 2003 the wife only knew that [Yes Car] had been sold. She did not know for how much. She did not know what the husband had received. She was entitled to this information."

24. The judge, in the following paragraph, recorded that the delay in the case was substantial. She traced it from the date of the wife's knowledge to be about 8 or 9 months until issue of application. She continued:

"But the reality is that had the wife proceeded on the basis of the information known to her before the husband filed his Form E on 8th December 2003 she simply would not have had the grounds. She had limited means and was no longer entitled to public funding."

25. The judge then went on to consider the cases relied upon by Mr Pointer and distinguished Hartley on its facts and also the case of Burns. In her final paragraph she simply said that the wife succeeded on her application.

26. I do want to draw attention to paragraph 167 when the judge said this:

"What Lord Justice Thorpe meant in Burns about the continuing duty of disclosure I think means that where a party has not taken up the opportunity to disclose then he or she cannot complain about delay. The wife raised the question of the sale with the husband. Her counsel, as I have found, raised it with Mr Delo. The husband did not take that or any other opportunity to reveal what had transpired."

27. I would support the validity of that consideration. I think the judge was right to focus upon the fact that the wife's, as it were, amateur effort to raise concerns were brushed off by the husband at the March meeting. Equally, although Mr Delo did not have his client with him, he obviously had the opportunity, after the 8th April appointment, to take his client's instructions and to respond more informatively to the challenge.

28. It does seem to me that the duty of promptitude on the applicant has to be measured in the context of the obligation that clearly rests on the respondent to furnish, if not detailed information, then at least the core information to enable the enquiry to be professionally evaluated. That consideration is all the more marked in a case where the consent order includes a substantial joint lives periodical payments order. This case is distinct from the majority in that the consent agreement included an ongoing and variable element that would be immediately reactive to the change in the payer's circumstances. From that it seems to me that the obligation on the payer to communicate a substantial change in financial circumstances is magnified.

29. Mr Pointer has attacked the judge's factual conclusions in the passages that I have cited in various respects, and it may be that some of his criticism is well-founded. But the criticism is not sufficient to shift the judge's clear overall appraisal. It is, above all, the judge's function to weigh up an assertion that the application has been unduly delayed in the light of all the circumstances and then to exercise, if not a discretion, at least a proportionate judgment as to which side of the line the case falls.

30. Miss Parker reached a clear conclusion here on the facts and I do not begin to think that the conclusion which she reached in her final paragraph was not open to her in law. Indeed, I am clear in my opinion that the judge applied the authorities cited entirely properly to the facts as she had found them.

31. For all those reasons I would dismiss the application.

32. LORD JUSTICE WALL: I agree.

33. LORD JUSTICE MOORE-BICK: I also agree.

(Submissions on Costs)

(Costs Judgment)

34. LORD JUSTICE THORPE: The costs of the trial before Miss Parker were dealt with subsequently at a hearing on 12th July and were the subject of a judgment given on 4th August. Orders have yet to be drawn to reflect her decision, but essentially her conclusion was that the husband should pay, on the standard basis, the wife's costs of and relating to her application to set aside the consent order. Further, that he should pay a substantial proportion on account.

35. There seems to have been some misapprehension that the notice of appeal, dated 29th April 2005, would enable the husband to tack on arguments that the judge had reached an impermissible conclusion on costs. When that misapprehension was dispelled the husband's solicitors filed with the court, on 12th October, an appellant's notice which contains not only the husband's grounds of appeal in relation to the costs order but also a skeleton argument in support.

36. For sensible reasons Mr Pointer has asked us to rule on that freestanding permission application today. He says that the judge reached an impermissible conclusion for two reasons. The first is that she should, in any event, have reserved costs given that there was to be a substantial and determinative future hearing when all remaining issues would be concluded by the quantification of the wife's further capital payment to achieve clean break.

37. It seems to me that that is a very difficult argument to advance. The judge has a particularly wide discretion in the field of costs following the completion of a trial that has involved a great deal of oral evidence and investigation of past fact and credibility. It would no doubt have been open to the judge to accede to Mr Pointer's application that the costs should be reserved, but there can be no doubt that in rejecting that submission she took a line that was not only permissible, but one that was predictable.

38. Alternatively, Mr Pointer says that she should not have dealt with costs because, in the end, what is in dispute is the size of the capital payment to compensate the wife for clean break. Mr Pointer says there has been a Calderbank exchange as to the size of that payment and if, at the end of the day, the payment fixed by the court is less than the sum rejected by the wife, then his client would be entitled to her costs, not only of the second, but also of the first round of the contest.

39. I do not, myself, regard that to be a principled submission. This was a distinct preliminary issue. The judge, in her costs judgment, very clearly defines that, when she says that the wife had been compelled to bring the application because the husband did not concede that the order of 9th February 2002 should be reopened: she won on the point and accordingly was entitled to the costs of achieving that victory. I simply cannot conceive that if we were to grant permission on the application of 12th October we would be creating an appeal that had any measurable prospects of success. I would dismiss the application.

40. LORD JUSTICE WALL: I agree.

41. LORD JUSTICE MOORE-BICK: I agree.

ORDER: applications refused.