Morgan v Morgan

LORD JUSTICE WILSON: A "husband", as for convenience I will describe him notwithstanding divorce, applies on notice to the "wife" for permission to appeal against a direction given by His Honour Judge Horowitz QC, sitting as a deputy judge of the High Court, Family Division, on 3 November 2006.

The judge's direction was given in the wake of a substantial order for ancillary relief made by Mr Peter Hughes QC, sitting as a deputy judge of the Division, on 31 March 2006 in accordance with a judgment handed down by him and now reported as M v M (Financial misconduct; subpoena against third party) [2006] 2 FCR 555. In the course of the judgment the deputy judge criticised the husband's honesty and the frankness of his disclosure. He found that by far the most valuable asset of the parties was the matrimonial home in Tilehurst, Reading, still to date occupied by the wife and the two adult children of the marriage, and that, together with adjacent land owned by the parties which had attracted planning permission for seven dwellings, it had a value of about £2,500,000 gross and, after allowance for very substantial debts to NatWest, a net value of about £1,182,000. The deputy judge directed that the property be "sold immediately on the open market" and that, out of the net proceeds, the wife should first be paid £110,000, later varied to £120,000, and that, subject to a proviso, the remainder of the net proceeds should be divided as to 62.5% to the wife and as to 37.5% to the husband. The proviso was to cater for the eventuality that the gross sale price exceeded £2,500,000: any such excess was to be divided equally between the parties. The deputy judge gave the parties permission to apply to the court in the event of a dispute as to the price to be accepted for the property or as to any other aspect of the sale.

Relevant only by way of background is the fact that the deputy judge also directed the sale of a property owned by the parties in Lagos, Portugal. At a hearing before Bodey J on 18 August 2006 the husband persuaded the court to direct that he be the purchaser of that property. It is clear that the wife is deeply suspicious of the husband and in particular as to whether, in the wake of the substantive decision, he is manoeuvring in order to prejudice her rights under the order; and that she is also concerned, in the light of the resources which he disclosed to the court at the substantive hearing, whether he has the financial resources which he now seeks to deploy. In the light of the comments made by the deputy judge about the husband in judgment, it is entirely understandable that the wife should harbour such suspicions and concerns.

The proposed appeal arises out of a decision by Judge Horowitz which was required to be made as a result, again, of the husband putting forward proposals that he himself should be the purchaser of matrimonial property, namely on this occasion the former matrimonial home and its adjacent land. In April 2006 the parties combined to accept an offer for its purchase in the sum of £2,900,000 from Millgate Developments Limited ("Millgate"). At least the husband cannot be charged with having prevaricated in that respect. Thereupon, however, Millgate discovered a rare geological fault in the development land, as a result of which, in September 2006, it withdrew its offer and substituted an offer to enter into a contract for purchase immediately but only on a conditional basis. The condition was that, within four months of the exchange of contracts, a satisfactory geological report by consulting engineers would have become available and would have estimated the cost of the necessary remedial work upon the land at no more than £400,000. In other words, in the absence of such a report within such a period, Millgate would not be obliged to proceed to completion at all. The price proposed to be paid by Millgate in the event that it was obliged to proceed to completion was £2,900,000 less both the cost of the necessary remedial works and one half of the fees of the consulting engineers who are already at work in assessing the extent of the problem, provided that neither of such deductions could so operate as to reduce the price below £2,500,000.

Early in October 2006 the husband indicated that he was dissatisfied with this revised offer by Millgate and was minded to purchase the property himself upon terms, so he averred, no less advantageous to the wife. Thereupon she issued the summons, returnable before Judge Horowitz first on 26 October 2006 and then, part heard, on 3 November 2006, for a direction that both she and the husband should be obliged to accept the revised offer made by Millgate.

By the time, at any rate, of the second part of the hearing before Judge Horowitz, the husband had put before the court an alternative proposal for the purchase by himself of the home and land and was contending that the court should direct acceptance of his offer by himself and the wife. His proposal was that, within seven days, they should exchange contracts with him on an unconditional basis for a sale at £2,450,000, with a non-refundable deposit of £90,000 and with completion 28 days thereafter. He placed before the court evidence that he was able in the short term to borrow the purchase price from Cheval Bridging Finance Limited upon various terms and conditions not directly relevant today. To date the husband has declined to reveal the identity of the person or persons who, either alone following his possible resale to him or them or in conjunction with him, would conduct the development and fund the venture in the longer term.

I should add that, for the consideration of the judge on 3 November, there were two further proposals, the first being an alternative proposal by Millgate to purchase on an unconditional basis and the second being an alternative proposal by the husband to purchase on a conditional basis. The former was a proposal by Millgate to enter into a contract for purchase on an unconditional basis at a price of £2,300,000. The latter was a proposal by the husband to purchase upon terms identical to the conditional sale proposed by Millgate save only that both the maximum price (namely £2,910,000 rather than £2,900,000) and, should completion duly take place, the minimum price (namely £2,525,000 rather than £2,500,000) were fractionally higher than the figures proposed by Millgate. In the event, seemingly even prior to judgment, the judge had no difficulty in dismissing as clearly unattractive both Millgate's offer to purchase unconditionally at a price of £2,300,000 and the husband's offer to proceed on the conditional basis to which I have just referred.

The judge was therefore left with the task of weighing Millgate's offer to purchase on a conditional basis with the husband's offer to purchase on an unconditional basis. It seems that the judge asked himself the right question, namely which offer was more favourable to the parties, surveyed jointly and as sellers. In the event he directed that the parties should accept Millgate's offer. It is against this direction that the husband aspires to appeal. Although I cannot at this stage accept the written submission of Mr Shaw on behalf of the wife that the exercise of a judicial discretion was involved in the judge's determination, I consider it to have been a finding of fact on his part that Millgate's offer was on balance more favourable to the parties and thus to have been a decision which this court would set aside only if satisfied by the husband that it was wrong.

In his judgment, of which I at least now have an official transcript albeit unapproved, the judge indicated that his decision was "by a narrow margin". He weighed the uncertainty as to whether the Millgate offer would result in completion but, by reference to indications that the cost of the remedial work and half of the fees of the consulting engineers might prove to amount to about £320,000, calculated first that it was likely that the Millgate offer would indeed result in a completed sale at a price of £2,580,000, namely £130,000 more than the sum offered by the husband; and second that the proportion of it payable to the wife, namely 62.5%, would in principle be about £81,000 but that, as a result of increase in the sums owing to NatWest as a result of the delay in completion, the advantage to the wife might be reduced to about £60,000 or conceivably more. "My view on balance," said the judge, "is that I think I ought to let the wife have the call, the chance of the additional sum". The judge was also influenced, rightly or wrongly, by a perception that the husband's proposals would require the wife inconveniently to move first into temporary accommodation and only later into more permanent accommodation. In the dying moments of the argument today, Miss Allardice has contended that the wife faces that unfortunate situation whichever offer be accepted.

Following the judge's decision there have been three further developments, of which at this preliminary stage I consider it right to take note.

First, by letter dated 6 November, the husband, by his solicitors, has increased his offer so as to provide that out of the proceeds the wife should receive an additional capital sum of £60,000 in order to equate with the likely advantage to her arising out of the Millgate offer, as discerned by the judge.

Second, by letter also dated 6 November, an officer of NatWest wrote to the husband. One must be exceedingly suspicious that the husband may have, in some way, invited this letter. On the face of it, however, it demands that, unless a sale to Millgate is completed by 23 November 2006, the bank will not allow further interest to be rolled up with the debt but will demand its actual payment, failing which steps will be taken to foreclose upon the property. Of course, by reference to Millgate's conditional offer, there is no question of completion by 23 November; and in his submissions today Mr Shaw on behalf of the wife informed me that his client is so suspicious of the husband's offer and so keen to proceed to exchange of contracts with Millgate offer that, if necessary, she would in the first instance fund the payments of interest between November 2006 and March 2007 even if necessary by liquidating her pension rights.

Third (so Miss Allardice on behalf of the husband has told me this morning) Millgate has following the hearing refined its offer to its own advantage, by demanding that not one half but all of the fees payable to the consulting engineers should be ultimately borne by the husband and wife by way of deduction from the purchase price. Miss Allardice has calculated however that, by reason also of a difference in the estimate of the fees of the consulting engineers between that given to the judge and that now thought likely to be accurate, Millgate's refinement would reduce the net price payable to the parties by Millgate only by £11,300.

Having heard both counsel today, I am satisfied that the husband has a real prospect of success in arguing that, particularly perhaps as adjudged in the light of the combination of the later three developments to which I have referred, the judge's direction that the parties should accept Millgate's conditional offer should be declared to be wrong. In my view the husband should have permission to appeal. I must therefore consider a further stay of execution, beyond that which I granted until today by paper direction dated 8 November, to endure until the appeal is heard. Mr Shaw expresses understandable concern that, were there to be any significant delay in acceptance of its offer to purchase on a conditional basis, Millgate might walk away from the negotiating table, whereupon, were the appeal subsequently to be dismissed, the judge's direction would no longer be susceptible of implementation. However, with his usual honesty, he has conceded that he has no specific ammunition with which to seek to persuade this court that, unless there was to be an exchange of contracts on the conditional basis with Millgate in the course of the next few days or weeks, it would indeed be minded to walk away from the proposed deal. Indeed it has already made a considerable investment in the proposed purchase, in terms both of time and almost certainly of money, during the past several months. In my view the proper course is to direct the early hearing of this appeal, namely, so I propose, a hearing before two Lords Justices on a date to be fixed by Ms Whitfield, the Chief Listing Officer of Civil Appeals, within the course of the remainder of the Michaelmas term. There must be a stay of execution of the judge's order until then or further order in the interim.