B v B

This is an application by the wife for permission to bring a second appeal in a matrimonial ancillary relief case. The suggested issue of principle is whether an order which aimed at broadly equal division of capital was one which could properly be made in this case. There is, however, in addition, a reasons challenge to the decisions arrived at below; and (on behalf of the wife) Mr Turner QC contends, in the alternative, that there is compelling reason why the second appeal should be heard, because the result below is, at any rate prima facie, demonstrably wrong and unfair.

The parties married in April 1992, having lived together for about 3 years before that. They separated in March 2004, so they were together for about 12 years of marriage, plus the 3 years or so of cohabitation. There was one child, a boy born in March 1992. He was 14, not quite 15 at the time of the appealed decisions.

The husband was born in 1964. He therefore is 42 or 43 at the material time. He comes from Kosovo. The wife was born in 1954. She is thus 10 years older, 52 or 53 at the material time. She came originally from the United States and has joint nationality, British and American. She has lived in this country from 1974 onwards, that is to say, from the age of about 20.

By the time of the decisions under review, the assets were these. The former matrimonial home was a house in Hampton Hill in the wife’s sole name. She and the son lived in it. The circuit judge treated it as worth approximately £306,000 net. There was a car wash business in Hampton Wick. The premises were owned in the sole name of the wife. They had been bought by her to set the husband up in business in about 1997. The husband works in it full-time, and it is the family’s main source of income. The capital value was put by the circuit judge at about £707,000 net, that is, on the basis of some development value if it were to be sold; but development is not something that the parties, either separately or together, would contemplate undertaking, and nor would they have the resources to do so. There would be capital taxes payable in the United Kingdom and/or the United States in the event of disposal.

Thirdly, the wife had investments of her own, put by the circuit judge at £262,000. That was the remainder of a larger sum inherited from her father. Again, the assets were in her sole name. The only asset that was in the husband’s name was a flat, which he had acquired after the separation. It was worth (net of mortgage) about £29,000. When the car wash business had been set up, the wife had made a loan to the husband of approximately £74,000 for that business. It is repayable without interest at the rate of £5,200 per annum, and there is about £30,000 still outstanding. Accordingly, in terms of paper ownership, the wife had an additional £30,000 plus, and the husband owed £30,000 minus.

From the beginning, the husband paid rent for the car wash premises to the wife, who was the owner of the premises, and the rent was £28,500 per annum. As for income, the husband had about £45,000 net income from the car wash, after, as far as I can judge, paying the rental of £28,000 to the wife. Thus, the car wash generated about £73,000 at any rate, plus tax, all told. There were other employees, one of whom was the husband’s brother, but no doubt if it had not been him it might have had to be somebody else. From that income, the husband paid the business loan repayments to the wife. He was making periodical payments to the household expenses and the school fees of the son.

The wife, for her part, had the rental paid by the husband for the car wash -- the business loan repayment. The income from her investments was, however, described by the circuit judge (at any rate at present) as minimal. In the past, she had drawn a modest £3,800 gross from the car wash for bookkeeping. She had child benefit. She had not worked otherwise than that, apparently, during the marriage, although in the past she had had a career as a jazz singer. More recently, she had contemplated retraining as a psychologist or counsellor, but she had not completed the course of study, it may be because of ill health, and there was some doubt whether she would ever be able to do so. It follows that, in effect, the car wash and the husband’s work in it was the sole source of the family income.

The district judge heard the case in July 2006. His order followed in September. He aimed to achieve broad equality of capital. He left the wife with the former matrimonial home. He transferred the car wash to the husband. He made periodical payments order in respect of school fees against both spouses, and he ordered, as to maintenance to the wife, a capitalised lump sum against the husband of £102,000, calculated on the basis of five years’ worth of maintenance.

On appeal to the circuit judge in February 2007, she declined to say that the district judge was plainly wrong to aim to achieve broad equality of capital. She held, however, that he had erred on the valuation of the car wash by ignoring development potential, and after that and an additional recalculation of assets to some extent, in order to achieve the same approximate equality, she ordered the husband to pay a lump sum to the wife of £54,000. As to income, she held that the district judge had been wrong to say that a clean break was achievable, whether after five years or otherwise. She made a continuing order for periodical payments for the wife in the sum of £1,200 per calendar month: that is to say, £14,400 per year. She varied the school fees order to remove the order affecting the wife, but left it against the husband.

Both those orders left untouched the business loan with the £30,000 outstanding and the husband’s obligation to repay the wife at the rate of £5,200 per annum.

Mr Turner’s principal complaint about the decision is the aim for broad equality of capital. He says that that is simply wrong in principle. The submission is based on the fact that the source of all the capital in this marriage was money inherited by the wife from her father, when she was a child, and thus in her possession long before she met the husband. From this money she had: 1) bought the flat that she was living in when she met the husband; 2) also shortly before she met him, bought as an investment property the freehold of the other flat or flats in the same building; 3) subsequently sold those properties and bought the matrimonial home; and 4) put up the capital to buy the car wash.

For his part, the husband seems to have come more or less penniless from Kosovo. He worked in a sandwich bar and a fruit or vegetable stall for a while. There was a period of some years when he was altogether out of work before the car wash was set up. To that extent, as Mr Turner says, that meant that for that period the family was supported entirely from the wife’s capital.

The nub of Mr Turner’s submission, as to the existence of an important point of principle or practice, is the proposition that on the facts of this case, the aim for broad equality was simply not open to the judge below. Says Mr Turner, the whole rationale of sharing is marital acquest, and there was none; if anything, the assets of the parties had diminished during the marriage. He has helpfully and extensively rehearsed the ground traversed by White v White and Miller v Miller; McFarlane v McFarlane.

For my part, I am perfectly content to accept that those decisions support the propositions that, first, there is no presumption or starting point of equality in all cases; rather, all the Section 25 factors and any other relevant ones have to be examined, no difference being made, when contributions are under consideration, between those which are in money and those which are in some other form. Secondly, the judge should test his provisional conclusions: “against the yardstick of equality” (those words, of course, derive from Lord Nichol) and depart from it only if there is good reason to do so. Thirdly, good reason to do so may be found in the source of the family’s money, if it was inherited or provided by one spouse from resources acquired independently of the marriage, and especially if before the marriage.

It would follow that if in this case the result had been a less than equal division of assets, there would have been no error of principle. It does not, as it seems to me, follow that the conclusion that equal division is fair does involve an error of principle; and indeed, the way in which the argument has to be put does rather betray that. Mr Turner accepts that in a particular case there may on the facts be a justification for an equal sharing, despite the fact that a significant part of the available wealth was derived from inheritance rather than from joint effort; and he is plainly right to do so.

It follows from the way the argument has to be put that what is the wife’s case here is not really the enunciation or ascertainment of principle, but its application to the facts of this case. In Uphill v BRB (Residuary) Ltd, this court made it clear that the reference in Section 55 of the Access to Justice Act and in rule 52(13)(2) of the Civil Procedure Rules to “an important point of principle or practice” is a reference to an important point of principle or practice that has not yet been established. In very broad terms, what one is looking for to justify a second appeal on the grounds of the existence of a point or principle or practice is a point of importance which goes beyond the present case, and has application for the future. I am quite satisfied that there is none in this case.

The second argument which is advanced is that there is an important point of practice because Mr Turner has significant criticisms to make of the structure of the judgments below. This was a case in which neither spouse had worked for some years. The family lived on the wife’s inherited assets. Thereafter, it was supported by a business run by the husband in property provided by the wife from her inheritance. There had been a substantial dispute about commitment to the marriage, and that is what had taken up nearly all the time in evidence at first instance. The wife’s case was that the husband had cynically married her for her money, had shown no commitment to the marriage, and that his conduct towards her had been so unacceptable that it should be reflected in the distribution upon ancillary relief. The husband had responded to that with criticism of the wife. The district judge heard evidence on that issue over the best part of three days of a four-day hearing. It plainly wholly dominated the proceedings below.

Substantially, he rejected the wife’s case. He held that each of these parties had been committed to the marriage in their different ways. For the future, on any view, the financial support was going to come from the husband’s income. It would be barely enough to support the style which the spouses had adopted. Without the car wash, upon the district judge’s findings, the husband’s earning capacity would be approximately £250 a week net, significantly less than the car wash provided to support the family.

It was on that basis that the district judge justified his conclusion that broad equality was fair in all the circumstances. The district judge adopted the structure of summarising the evidence which had been given on contentious points, and making short findings of fact upon them. He did not summarise the uncontentious evidence, and accordingly it is true to say that his judgment lacks the basic financial facts which commonly make their way into the beginning of any judgment in an ancillary relief case. That seems to have been because so much of the hearing had been taken up by what, in the end, were fruitless disputes about conduct and commitment.

The circuit judge, for her part, proceeded by way of analysis, point by point, of the grounds of appeal. There does not seem to me to be sufficient substance in the proposition that she did not grapple with the question of whether an aim for approximately equal division of capital was fair or not, to justify (on the grounds of an important point of practice) a second appeal. It may be that some criticisms can be directed to her judgment, but in substance it is plain that she did address the question at issue.

That leaves the question of whether there is, nevertheless, some other compelling reason for this court to hear this appeal. The outcome is, as it seems to me, a striking one. This is a case in which the whole of the capital had been the wife’s from before the time of marriage. Everything which now existed had come from her, and not during the marriage, but before it. It is also a case in which there was barely recognised in the order, a very significant disparity in the future earning capacity of each spouse. At 10 years older, the effect of the order on the wife was to remove from her the rent which was payable from the car wash of £28,000, and to substitute for it periodical payments of £14,400 per annum; fine so long as the husband was remaining in work, but with very little security in the event that anything should happen to that career.

The cases in which this court ought to entertain a second appeal, on the grounds of some other compelling reason, are, as it seems to me, limited. It is important that it should be recognised that the system provides for a single appeal on the merits, and only exceptionally for a second one. However, I am in the end persuaded by Mr Turner’s advocacy that the end result of this case is, on the face on it, sufficiently surprising, and sufficiently arguably unfair, to justify re-ventilation in this court. In those circumstances I, for my part, would grant permission to appeal; not on the ground that there exists any important point of principle or practice, because there does not, but on the grounds that there exists a compelling reason for this court to hear the case.

I agree.