LORD JUSTICE THORPE: Mrs Warner, who I will call “the wife”, appeals an order made by HHJ Cardinal on 20 December 2005 in the Birmingham County Court. HHJ Cardinal’s order concluded an appeal brought by Mr Warner, who I will call “the husband”, from the order of District Judge Richmond made on 25 June 2004. It is a great misfortune to any family to have to undergo and finance a contested hearing at first instance and then an appeal within the same court. Even greater the misfortune for the family that then finds itself in the Court of Appeal, despite the provisions of section 55 of the Access to Justice Act 1999, which is designed to terminate the appellate proceedings at the conclusion of the first appeal. The case comes into this court because the wife’s application for permission to appeal, robustly refused by Wilson LJ on paper, was then more profoundly considered by Waller and Wilson LJJ at an oral hearing on 28 April 2006. At the conclusion of that hearing, Wilson LJ delivered an oral judgment explaining why the court was granting permission to appeal. He identified three points which justified that unusual course, and to them I will return.

Before the district judge, the wife was represented by counsel, Miss Brown, and the husband by Mr Peter Duckworth, who has been in the case throughout. Unfortunately, the wife felt unable to continue to fund her team, so she appeared in person before the circuit judge. She also appeared in person before this court on 28 April, and she is only represented by counsel today because Miss Caroline Wright has accepted the considerable task of presenting the appeal on a pro bono basis directly instructed by the Pro Bono Unit.

The case on its face was a simple one, and certainly not a case that could have been predicted to end up before us as a second appeal. The parties had been married for over 20 years. The husband had had secure employment and had begun to build up significant pension rights. The parties were still in their 40s. They had two grown-up children who were university students. They had a relatively modest home, which had already been sold to produce just about £250,000. They had an endowment policy which was worth about £12,000. The CET value of the husband’s pensions was about £54,000. Those were all the fruits of the marriage and the common endeavour.

If there was an unusual feature of the case, it was that the wife was one of four children of a father who had succeeded richly in business life and had towards the end of his life disposed of his business for several million pounds, a considerable proportion of the purchase price being paid in loan notes. He had gifted to the wife, one of his four children, loan notes which at that date had a value exceeding £200,000. They were redeemable in 2010, but prior to redemption the wife had an entitlement to income at a rate considerably over current base rate and in addition had the right to draw down a capital tranche in each succeeding year. So the combination of income entitlement and capital draw down gave her an annual income of something in the order of £17,000.

The husband’s salary as a manager was in the order of £30,000 a year before tax. The wife had not worked for over 20 years and had no qualifications. In addition, medical evidence suggested that she had a degenerative back problem. So she was dependent on the income that derived from the loan notes, and seemed to have scant earning potential, although the district judge was to find that on the expiration of the loan note source of income she could expect to earn relatively modestly, up to £10,000 a year.

So the district judge decreed that the net proceeds of sale and the endowment policy should be divided equally between the parties. The husband should keep his pension fund and the contents of the former matrimonial home. Additionally, the district judge ordered a clean break and the reciprocal dismissal of claims.

The wife’s advantage as a member of an affluent family extended beyond the loan notes, because she had a reversionary interest in her mother’s principal home. By the time of trial her father had died and her mother as a widow continued to live in a valuable property, which she had provided should be divided equally between her four children on her demise. The then value of the property was agreed to be about £800,000, so there was in prospect an interest in reversion which was likely to be of some considerable value to the wife, but on the dropping of a hale 79-year-old female life.

The final trace of affluence lay in transactions between mother and daughter: holidays, presents, and particularly a loan of £20,000, all of which were tested during the course of the evidence, since inevitably one of the avenues investigated by Mr Duckworth for the husband was the extent to which the wife had benefited from her parents’ past generosity, and the extent to which she was predictably likely to benefit from that source in the future.

The district judge’s judgment came after a day and a half of oral evidence and it was an ex tempore judgment. At several passages in his judgment, he accepted the evidence of the wife, by way of instance in paragraph 19, when he considered whether a payment of £20,000 to the wife from her mother was indeed a loan. He said:

Of equal significance is his finding not only on the evidence that was given, but also on the evidence that Mr Duckworth asserted had been omitted. He asked himself the question:

Mr Duckworth’s attack on the wife’s credit and on her disclosure had been foreshadowed in his position statement, when he identified four specific areas of intended attack. It is perfectly plain from the judgment of the district judge that Mr Duckworth had failed in that assault.

The outcome before the district judge was not accepted by the husband, and a notice of appeal of 9 July 2004 settled by Mr Duckworth took issue particularly with the fact that the district judge had made an equal division only of the liquid assets. He continued that the exclusion of the illiquid assets resulted in an ultimate division of 67% to the wife and 33% to the husband, which Mr Duckworth suggested was manifestly unjust. He subsequently filed a skeleton argument in which he gave a brief update of incidents since the district judge’s hearing and elaborated his grounds of appeal. What is absent from either document is any suggestion that the district judge had reached impermissible conclusions on any factual issue or had erroneously assessed the wife’s credit or the quality of the wife’s disclosure.

However, it is plain from the judgment of the circuit judge that at the hearing Mr Duckworth mounted an even more extensive and critical attack on the wife’s credit and disclosure than before the district judge. He used as ammunition a large number of disclosed documents, bank statements and the like, questionnaires and answers to questionnaires, focusing on individual sums which had undoubtedly passed through the wife’s hands and which were seemingly unexplained. He of course also sustained his principal submission that the district judge had fallen into obvious error in dividing equally only the liquid assets, and excluding from the division the illiquid assets.

Now Mr Duckworth had some additional evidence, because as a result of a direction given earlier by HHJ Deeley, professional valuation had been obtained of the wife’s reversionary interest. The expert valuer had looked to the current market value of £200,000 and had discounted that to a figure of £94,000 to reflect the prior interest of the life tenant. The circuit judge also assessed the current value of the loan notes at £68,000, a figure which Mr Duckworth has demonstrated was soundly based, and indeed Miss Wright has not quibbled at that.

So, having found that the illiquid assets could be given a modern market valuation of something like £160,000, the district judge ordered the wife to pay half that sum to the husband, discounted marginally to reflect the fact that the husband had retained the chattels, and secured by a deposit of the loan notes with the husband’s solicitors pending payment.

In this court Wilson LJ identified the wife’s essential submissions. First, that she could not possibly discharge the lump sum of £65,000 fixed by the circuit judge without the realisation of the loan notes, which would destroy her source of income. Second, that the circuit judge had impermissibly concluded that she would be able to rely on her mother’s generosity to replace the lost income; that was completely contrary to the findings of the district judge. Thirdly, in ordering the equal division of the illiquid assets the circuit judge had not sufficiently recognised that they were derived entirely from the wife’s family and were not to be treated as were the liquid assets, which had been built up during years of marriage by joint endeavour.

From that foundation, Miss Wright has developed the essential submission that the circuit judge had nothing other than a brief statement as to relevant developments in the interim and the professional valuation ordered by HHJ Deeley. He did not receive any oral evidence and accordingly it was not for him to depart from the considered findings of the tribunal which had received and evaluated the oral evidence. Her second fundamental submission is that the district judge did not exclude the illiquid assets. He had full regard to them and brought them into his discretionary balancing exercise. Accordingly, says Miss Wright, the circuit judge, bound by the decision of this court in Cordle v Cordle and the family proceedings rules as subsequently amended, could not substitute his own view of a better outcome unless it was demonstrated that the district judge had fallen into error in the conduct of the balancing exercise or had arrived at a conclusion that was plainly wrong.

Mr Duckworth in his submissions has maintained forcefully the argument that succeeded before the circuit judge. He asserts that paragraph 50 of the judgment of the district judge plainly reveals the fundamental error which he asserts, and accordingly he submits that the circuit judge was not only entitled but bound to intervene to correct the error.

This appeal has been very skilfully argued on both sides, but I prefer the submissions of Miss Wright. It cannot be overemphasised that the circuit judge before whom an appeal is listed must uphold the findings of the district judge, unless either fresh evidence is admitted or alternatively it is demonstrated that the findings were contrary to the evidence. Particularly difficult to shift on an appeal is the finding of the first tribunal as to the credit of witnesses who have given oral evidence.

The circuit judge was undoubtedly drawn into making these converse findings by the manner in which the appeal was presented, divergent from the grounds of appeal and the skeleton argument, and the fact that the respondent to the appeal was in person. I cannot be satisfied in my mind that the judge would have arrived at his ultimate conclusion had he not been drawn into what I believe was an impermissible re-examination of the facts and the relative credibility of the parties.

But that, in a sense, is by-the-by, because the crux of this appeal lies in a consideration of paragraph 79 of the judgment of the circuit judge and paragraphs 49 to 54 of the judgment of the district judge. The essential ratio of the circuit judge’s conclusion, expressed in paragraph 79, is as follows:

Is that a fair criticism of the judgment of the district judge? It is seemingly supported by a limited and selective citation from his concluding paragraphs. Mr Duckworth has focused on paragraph 50, which only records the liquid assets as being house and policy, and says that they are clearly there and clearly to be dealt with. However, that paragraph cannot fairly be read in isolation. It is part and parcel of a long reasoning process which extends from paragraph 49 to paragraph 57.

Now it is easy to analyse critically specific passages and it is easy to say that there is a degree of repetition in all this and that it is not set out with the clarity and the economy that would have been possible had the district judge reserved. But reading those paragraphs in their entirety, it is quite plain to me that the judge is carrying out a relatively sophisticated balancing exercise. He brings into account the fact that he will be terminating the wife’s claim to periodical payments. He brings into account the fact that the husband has substantial employment. He has in addition the prospect of continuing employment over the next decade and a half, during which he will gradually build up his pension rights. He brings into account the fact that the husband is retaining the chattels and that he will not be accounting to the wife for her share. Against that, he brings in to the account on the other sheet the fact that the wife has the value of her reversionary interest in her mother’s home and in addition has a generous mother who would continue making gifts, and beyond that that she has in the short term the loan stock to provide her with benefits.

The concluding paragraphs then approach the submission made on the wife’s behalf that she should not be cut adrift financially by any reordering of the family finances. He goes on to look at the effect of his award on the parties. Particularly, he notices that she will receive her half share of the liquid assets. She has the loan notes, which will produce an income and which might also be used as collateral to secure a mortgage. He notices that she will receive a substantial lump sum on the repayment of the loan notes in 2010; and from those circumstances he reassures himself that she will not be cut adrift. He does the same exercise in relation to the husband, noticing that he has a very secure employment position which he will be able to build up over the future years of work.

So, I am satisfied that the judge has not fallen into the error for which he was indicted. He has not excluded the benefits in reversion or in suspension. He has brought them into a general balancing in a way that is defensible, and for those simple reasons I would accept Miss Wright’s primary submission that there was no sufficient foundation for the circuit judge’s intervention.

I would accordingly allow the appeal and restore the order of the district judge.

LORD JUSTICE DYSON: I agree.