Radmacher v Granatino

On 28 July 2008 Baron J gave judgment upon an application by a husband against a wife within divorce proceedings for ancillary relief and specifically for a lump sum payment. The husband is by ethnicity French; and the wife is by ethnicity German. They were married in London in November 1998 and lived here until the breakdown of their marriage in about 2006. The husband remains living in London and the wife now lives in Germany. There are two children of the family, namely girls now aged nine and six; under orders of the English court they spend about two thirds of their time with their mother in Germany and about one third of their time with their father in England. For most of the marriage the husband was a merchant banker working in the City. But in about 2003 he went to Oxford University to conduct research in some biotechnological area with a view to attaining an expertise which would assist him upon return to a particular niche of merchant banking. But it seems that his plans may now have changed and that, even were it now open to him to return to work in the City, such a course would no longer appeal to him.

The husband has virtually no assets; indeed now, partly as a result of this long-running litigation, he has considerable debts. The wife is a very wealthy woman and her wealth is entirely inherited.The judge found that the wife had liquid assets equivalent to ₤54 million; but that such was far from the full extent of her assets in that she had significant minority interests in two valuable family companies in Germany. Although the husband, by Mr Mostyn Q.C., his counsel, pressed the judge to ascribe to those minority interests a capital value of ₤52 million, the judge, while not rejecting that figure, said that she preferred to leave the matter on the basis that the value of the interests was so substantial as to generate for the wife an annual income of equivalent to about ₤2 million net.

The central issue in the case before the judge surrounded the fact that, about four months prior to the marriage, the parties had entered into a contract, therefore a prenuptial contract, in Germany, whereunder, in the event of the dissolution of the intended marriage, neither was to have any financial claim against the other. By reference thereto, it was the wife’s case, strenuously put before the judge, that she should dismiss the husband’s claims for himself but, of course, accede to his claims referable to the girls in respect of such periods of time as he was to be looking after them, including therefore accommodating them. Very much as a fallback position, the wife submitted in the alternative that, if there was to be any provision for the husband at all, it should be in the form of limited periodical payments to act as a bridge between his earning capacity on the one hand and his reasonable needs on the other.

In the event the judge decided to give what appears to be very limited weight to the prenuptial contract. She identified, helpfully, five reasons which led her to that decision. First, that the husband had had no independent legal advice prior to his entry into the contract. Second, that the wife had given no disclosure of the extent of her resources prior thereto. Third, that there had been no negotiations between the parties or their representatives prior to entry into it. Fourth, that, in the events which had happened, it would be manifestly unfair to hold the husband to its terms. And fifth, that the arrival of the two girls had so changed the landscape as to require it to be put to one side. The judge did, however, recognise, in the light of the expert evidence before her -- which I think was unchallenged -- that both in Germany and in France the contract would be fully enforced against the husband so as to preclude any financial recovery for himself.

Such being her view, Baron J ordered the wife to pay to the husband a lump sum of ₤5,560,000 by 31 July 2008. Unusually, but for a particular reason, she directed that such payment should be made out of one or other of the wife’s accounts with UBS. Of the liquid capital of the wife equivalent to £54 million, some ₤19 million was understood to be in accounts with UBS. The judge had said that, in alighting upon her figure of ₤5,560,000, following assessment of aspects of the husband’s perceived needs, she had given some reducing effect to the prenuptial contract notwithstanding that in no way did she consider that it precluded her from making a substantial order. Asked by the wife to grant permission to appeal to this court, the judge refused. Asked by the wife to grant a stay of execution of her order that the lump sum be paid within three days, the judge indicated that she would be minded to grant it only if the wife in return would provide security for the payment; and, faced with that indication, the wife (so we are told) withdrew her application for a stay of execution of the order. The result is that the lump sum remained payable on 31 July 2008; that it has not been paid; and that thus the wife is in contempt of court.

An order for interim periodical payments in favour of the husband against the wife had been made by another judge on 15 July 2007 in the sum of ₤215,000 per annum, i.e. of ₤17,916 per month. Baron J ordered the wife to continue to comply with that order until the lump sum had been paid in full. She directed that the lump sum should carry interest at the judgment debt rate but that payments under that interim order after 31 July 2008 should be credited against the interest thus due. The judge then addressed the need for the children to be maintained by the wife during the substantial periods for which they were to be with the husband. One order in that regard was that the wife should pay to the husband for each child the sum of ₤35,000 per annum. Another order was that, by 1 December 2008, the wife should provide a fund for the purchase of accommodation in Germany for the children, and for the father when with the children, such to remain available for them and him until the children had ceased further education. There was also provision for a small, further element of the lump sum then to be paid to the husband so that he could furnish that accommodation.

The wife comes to this court seeking permission to appeal against -- I believe -- every one of those orders. When I considered the application on paper in the usual way, I had before me a letter from the husband’s solicitors in which they requested that, before consideration be given to the wife’s application, there should be an oral hearing at which they would seek the opportunity to raise certain matters. I acceded to the request in that letter and set up the hearing which I and my Lord have conducted this afternoon.

I -- and I know that my Lord shares this view -- have come clearly to the conclusion that, subject to the issue of conditions to be attached to it, there should be a grant of permission to appeal. I believe that the wife has a reasonable prospect of success in her challenge to the orders of Baron J. I also consider that the proposed appeal raises an important point of principle.It is tempting at this stage to proceed to explain the reasons for that conclusion. But it is a temptation which I propose to resist and not simply because I speak at almost 4.15 pm. My experience is that, when he has granted permission at a hearing, a judge may later regret the way in which, perhaps without much preparation, he has sought to articulate his views as to why the appeal should proceed. I say, therefore, nothing further on that subject.

I should add that I have looked at all twelve of the grounds of appeal settled by Mr Todd on behalf of the wife and have wondered whether one could reasonably abstract some of them as being not worthy of articulation in this court. Most of them, as one would expect, relate in some way or another to the alleged failure of the judge to give proper weight to the contract; and although, for example, a complaint about the locality in London considered by the judge to be suitable for the husband’s accommodation might seem at first sight not to be fit for argument in this court, it is in fact related to the wife’s fall-back complaint that, even if it is not to have complete effect, the contract should have lowered the husband’s need for, or entitlement to, accommodation well below the level of value favoured by the judge. So, one way or another, all of Mr Todd’s grounds really relate to the important nub of this case, namely the contract; and subject to what I am about to say and subject to what my Lord may say, all of his grounds deserve this court’s full consideration.

But should the grant of permission be made subject to conditions? Following dialogue with counsel this afternoon, there seems to be common ground that the relevant rule is CPR 52.3(7), which provides that an order giving permission may be made subject to conditions. Prior to our dialogue this afternoon, counsel (I believe on both sides) have proceeded on the basis that another rule was apt, namely CPR 52.9(1)(c), which provides that the appeal court may impose or vary conditions upon which an appeal may be brought. Paragraph (2) of the rule provides that the court will exercise its powers under paragraph (1) only where there is a compelling reason for doing so. My interpretation of that rule is that it governs an application to impose or vary conditions in relation to a grant of permission to appeal already made, which of course is not the situation in this case but was that in Charman v Charman (No 3) [2006] EWCA Civ 1791, [2007] 1 FLR 1237.

As Lawrence Collins LJ has pointed out in the course of argument, it is at the very least curious that the requirement of a compelling reason is to be found in Rule 52.9 but not in Rule 52.3. Nevertheless, in Days Medical Aids Ltd v Pihsiang Machinery Manufacturing Co Ltd (Conditions of Appeal) [2004] EWCA Civ 993, Dyson LJ in this court proceeded, at [5], on the basis that there is as much of a need for a compelling reason for a condition to be attached under Rule 52.3 as there clearly is for a condition to be imposed or varied under Rule 52.9.

So I look to see whether there is in this case a compelling reason to attach a condition, in particular a condition which would provide security for the husband in the event that ultimately the wife’s appeal were to fail. The husband’s case is that a compelling reason consists in the steps which the wife has clearly been taking since 28 July 2008, and probably prior thereto, to evade enforcement of the order for a lump sum made against her in the event that her proposed appeal were to fail.

We must start from the fact that the wife was ordered to pay the lump sum on 31 July 2008 and has not paid it. Then we must recall that, when the judge indicated that a condition of her grant of permission would be a payment equivalent to the lump sum into, for example, a joint solicitors’ account, to stand as security pending determination of the proposed appeal, the wife backed off. This is a case in which, in the light of her liquid assets with a value equivalent to ₤54 million, a payment of less than ₤6 million into a joint account could not be said to have any economically painful consequences for her, still less to stifle her ability to mount the proposed appeal.

But to those points Mr Mostyn is able to add others of importance.

For example, the wife has not made the interim periodical payments due under the order dated 15 June 2007, as reaffirmed on 28 July 2008: she has paid neither the instalment due on 1 August 2008 nor that due on 1 September 2008 nor, indeed, that now due on 1 October 2008. Mr Todd does not seek to challenge Mr Mostyn’s presentation of the husband’s currently dire financial situation nor his argument that, as the wife well knows, the husband needs those payments in order to subsist. Mr Mostyn contends that basic obligations of the husband referable to payment of rent, utilities and telephone either have not been met or are on the point of not being met because of the wife’s failure to make the interim periodical payments.

When I arranged this hearing, I wrote that I could see no possible reason why the instalments under that interim order due on 1 August and 1 September had not been paid and that I expected them to have been paid by the date of this hearing, together with the further instalment which would have become due on 1 October. Mr Todd tells me, unsurprisingly, that the importance of her fulfilling my expectations was made amply clear to the wife; but that, for reasons best known only to herself, she has decided for the time being not to fulfil them, with the result that those instalments have still not been paid. I should add that there came a time when her solicitors wrote, in fact by letter dated 23 September 2008, that she was unable to pay those instalments because a freezing order, which in the interim had been obtained by the husband in the Family Division, first without notice and then ultimately -- after three further interim hearings in the interim -- on 5 September 2008 by Baron J on notice, precluded her from making any such payment. The predictable response of the husband by his solicitors was that his consent to variation of the provisions of the order dated 5 September in order to permit her to pay the instalments to him would at once have been forthcoming if requested.

To finalise this part of the saga, there was yesterday a request by the wife, by letter from her solicitors, for consent to vary the freezing order in order to enable her to pay the instalments. It is impossible to regard yesterday’s letter as other than window-dressing for today. But there was another quirk about that letter, namely the suggestion therein that the payment should be made out of an account which the wife has had with the Fortis Bank in Dublin. In fact that is an account in which, as I will explain in a moment, she still has funds and which the husband has succeeded in freezing by virtue of the order dated 5 September 2008 together with, I understand, a mirror order obtained in Dublin. So yesterday’s suggestion by the wife was that the only fund to date clearly frozen by the husband, being not nearly substantial enough to cover the lump sum in the event that the order for its payment was to remain in being at the end of this appeal, should be the fund out of which the interim periodical payments should be made. I take a cynical view of that suggestion.

Baron J provided that the periodical payments to be made by the wife to the husband for the girls should be made monthly from 1 August 2008. The wife has not paid the instalments for any of the three months which have elapsed since then.

The wife’s liquid assets taken by the judge to have a value equivalent to £54 million broadly comprised ₤33 million in Credit Suisse; ₤19 million in UBS; and only ₤2 million with the Fortis Bank in Dublin. On 2 September 2008 the husband found a letter sent to the wife by the Fortis Bank in Dublin dated 29 August 2008 and for some reason addressed to his accommodation in London. In the light of the events which I have described, the husband saw fit to open it; and it would be hard to criticise him for having done so. What he read in that letter, and what the solicitors for the husband then raised with those for the wife, was that on 23 July 2008 the wife had apparently given instructions for all sums held to her credit at the Fortis Bank in Dublin to be transferred to an account held by a company called CITCO Global Custody N.V. In fact the lack of a stock transfer form had disabled Fortis Bank from complying with those instructions; and the gist of the letter from Fortis Bank to the wife dated 29 August was that it had recently been served with the mirror order obtained in Dublin, reflective of the without notice order obtained by the husband in London, with the result that her funds with the bank were frozen there. We asked Mr Todd this afternoon whether he wished to make any submissions, or to try to cast any light other than that which already shines, in relation to the letter from Fortis Bank; but he said that he was not in a position to help us in that regard.

Another mirror order was obtained by the husband in Switzerland and was served on Credit Suisse and UBS. On 5 September 2008 Credit Suisse wrote to the husband’s legal or other representatives in Zurich, saying that the service of the mirror order upon it on the previous day had frozen nothing in that the wife’s accounts had been emptied “long before”. It remains to be seen whether the funds had been removed prior to, or after, 28 July 2008. At all events the considerable fortune which was believed by the judge to be in Credit Suisse has been moved somewhere; and to date it is not known where.What, then, about the funds in UBS, out of which the judge directed that the lump sum be paid? When served with the Swiss mirror order, UBS duly acknowledged receipt but declined to say whether the order had succeeded in freezing any monies which it still held to the account of the wife.

When making the freezing order on 5 September 2008, Baron J was naturally concerned to identify the current location of the wife’s liquid fortune at the earliest possible moment; and so she provided that, within 48 hours of service of the order upon her, the wife should disclose the current whereabouts of all sums held in bank accounts on her behalf. Such disclosure would have enabled the husband, and thus the court, to discern whether any money remained in UBS and, in any event, where the remaining cash now lay. The wife has not complied with that provision.

I asked Mr Todd during this afternoon’s hearing what his instructions were in relation to the amounts of funds held and for the amount and whereabouts of funds recently held by his client at UBS. He responded that she was travelling and that he had been unable, unfortunately, to obtain instructions. Such might -- arguably -- have been an acceptable answer if such questions had only just arisen; but it arose 28 days ago and was made the subject of a direction of the High Court. Mr Todd, although he did his best for the wife this afternoon in difficult circumstances, was unable to challenge the inference which I put to him as almost inevitable, namely that there were now no longer any monies held to the order of the wife in UBS.

Mr Todd accepted that the saga which I have described indicated a sorry state of affairs. In effect, although he could not agree in any way to the attachment of a condition to the grant of permission referable to security for the husband, he accepted that it was hard for him to marshal arguments to defeat the conclusion that this was an extreme case, and indeed a case which yielded a “compelling reason” to protect the husband in the event that the proposed appeal were ultimately to fail. Mr Todd deployed however the conventional argument that, in that he had persuaded us that the wife had a reasonable prospect of success -- indeed, he contended an excellent prospect of success -- it would be wrong to derogate from her access to this court by circumscribing the permission with conditions referable to security.

In my view, however, it is clear that the wife wants to put herself into a win-win situation and that she does not wish to participate fairly in the English forensic process. She would prefer to win by securing success in her appeal but, if she is not to win by that route, then she proposes to win by doing everything possible -- with the massive resources at her command, quite unmatched by any resources at that of the husband -- to put her assets beyond the reach of this court. Her several gross and subsisting breaches of the order made on and after 28 July 2008 by themselves represent a sufficient distinction between this case and Charman (No 3) cited in [10] above. The wife has an arguable case to put to this court and I hope that she does so; but the only playing-field which we provide here for public use is a level one. Thus my view is that we should attach a condition to the grant of permission whereby a sum of money should, within a specified period of time, be brought by the wife into a secure environment to abide the determination of the appeal. By a secure environment, I mean an account in England and Wales in the joint names of the two English firms of solicitors.

What sum should thus be brought into this account? I turn to Mr Mostyn’s suggestions in that regard.

The first suggested component is the most obvious: it is the lump sum of ₤5,560,000 ordered by the judge to have been paid by 31 July.

The second suggested component is the interest accrued thereon as at today’s date, namely ₤77,992. I will also be proposing that another condition be attached to the grant of permission, namely that the wife should make the payments under the order for interim periodical payments. If she were to make those payments, there would, pursuant to the provisions made by Baron J, be a corresponding credit in her favour against the interest accruing until the payment of the lump sum (if the order for it survives the proposed appeal); thus there would (subject, of course, to any countervailing factors which may then operate) then be a modest refund due to the wife. We are talking, however, only about security, not about outright payment to the husband. And so, yes, I approve Mr Mostyn’s second component.

The third suggested component of £499,512 relates to the German property to be purchased for the benefit of the girls and of the father qua theircarer. Mr Todd reminds us that the time for providing that relatively small sum of money has not yet arrived: it is 1 December 2008. But it will arrive prior to any practicable date for the hearing of the appeal. I take the view, however, that the conduct of the wife during the last two months gives rise to an inevitable inference that she does not intend to make that payment on 1 December 2008 and, in that it is part and parcel of the judge’s capital award, in my view it should also be brought into security in the sum identified by Mr Mostyn.

The fourth suggested component represents a purported capitalisation of orders for periodical payments for the girls and is founded on the apparently contumacious approach on the part of the wife to making such payments even for them. In my view capitalisation is entirely premature. I reject inclusion of it.

More difficult is the fifth suggested component of £103,837, which represents the provisional estimate by the husband’s solicitors of the large amount of costs which, in August and September in the course of (or referable to) the five hearings before judges of the Family Division, have been ordered to be paid to him by her. My mind has wavered in this regard. In the end however I look to the genesis of the hearings in August and September. It was growing concern on the husband’s part, reasonably founded, that the wife had no intention of complying with the orders of Baron J even if they were to withstand appeal to this court. In the light of such genesis it seems to me that it is proper to sweep this estimate into the sum to be put up by the wife by way of security; the orders for costs obtained by the husband will be subject to assessment and, insofar as the assessment falls short of the estimated figure, then the balance (subject again to countervailing factors) will be released back to the wife. It could not be said, in the light of the extent of her fortune, that such is a disposal which could cause her any economic discomfort.

When should this total sum be paid? Mr Mostyn suggests that, wherever the wife’s liquid assets are now to be located, the press of a computer button alone is needed before the money can be brought into England and Wales under the control of the solicitors; and that 14 days is more than adequate in that regard. Mr Todd, however, has in my view a good retort, namely it is simplistic to consider only the button on the computer. For the wife needs to receive, to listen to, and most carefully to weigh, advice to be given to her by her lawyers both in England and in Germany. So I would favour payment within 28 days, as Mr Todd suggests.

As I have indicated, I would also attach to the grant of permission a condition that the wife should comply with the interim order for periodical payments for the husband and the order for periodical payments for the girls until determination of the appeal. I see no reason why the arrears accrued thereunder to date should not be paid within 14 rather than 28 days of today. What then of future instalments between now and the date of the appeal, whenever that should be? Clearly we do not want a situation to arise in which some very minor hiccough in payment causes the grant of permission to lapse and the proceedings in this court to be determined; so some leeway must be given to avoid administrative and other hiccoughs. I consider that we should provide that, if any instalment under either of those orders were to be outstanding for more than 14 days, then the condition would not be satisfied. The result would then be that the grant of permission would lapse, the proceedings in this court would be at an end and the husband would be at liberty to proceed to enforce all the orders of Baron J. Conversely, while the permission to appeal subsists in that the wife shall have complied with the conditions attached to it, execution of the orders for capital provision made by Baron J will be stayed.

That leaves the question of security for the costs of the proposed appeal, for which the husband has recently applied. This afternoon Mr Todd raised an initial jurisdictional argument to the effect that the provision for making an order for security for costs in Rule 25.12 of the CPR did not apply; and so that there was, at least under that rule, no facility for this court to make provision by way of security for costs. The argument was that the Family Proceedings Rules 1991 have not provided for Part 25 of the CPR to apply to family proceedings. But the Rules of 1991 apply to “family proceedings in the High Court or county courts”: s.40(1) Matrimonial and Family Proceedings Act 1984. They do not apply to this court, even in respect of appeals against orders made in family proceedings. This court is governed by the CPR, including Part 25.

Thus we have to address on its merits an application by the husband which he needs to found on propositions that, in the words of Rule 25.13(2)(g), the wife has taken steps in relation to her assets that would make it difficult to enforce an order for costs against her; and that, in the words of Rule 25.13(1)(a), it is, having regard to all the circumstances of the case, just to make an order for security of costs. The ground which I have covered in explaining my view that conditions should be attached to the grant of permission also leads me confidently to the view that both those propositions are established. The husband’s costs of the proposed appeal are estimated by his solicitors in the sum of ₤103,837. We are of course unable to discern how good an estimate that is. But it is not an absurd estimate. In my view it is a sum which, without cavil, we should accept and direct should be paid by the wife, by way of security for costs, into the same receptacle and within the same period which I have identified in respect of the capital payment which she must make as a condition of the grant of permission.

I would also accept the estimate of the husband’s solicitors that this is likely to occupy the time of the court for two days. I would ask the associate to note that Thorpe LJ wishes to preside upon the substantive appeal; and it is obviously appropriate that he should do so. He has also indicated that he would wish that my Lord and I should sit as the other two members of the constitution if such be practicable. At all events three Lords Justices will hear this case.

I entirely agree.