V v V

This is an appeal from a decision of District Judge Cushing. She gave her judgment on 23 February 2011 at the end of a hearing which began on the 21 February 2011. Her judgment was therefore given at, or very shortly after, the end of submissions. A transcript of that judgment, and of the hearing, is included within the appeal bundle. I would like to pay tribute to the quality of the judgment.

The application before the judge was an application by the respondent to this appeal (who, for convenience, I shall refer to as the wife) for financial relief under the MCA 1983 against the appellant (who, for convenience, I shall refer to as the husband). Both parties were represented by the same counsel and solicitors before me and the judge.

The judge heard evidence from both parties and she gives a helpful summary of the relevant history. As she sets out:

There was little difference between the asset schedules provided by counsel to the judge. Excluding chattels and pension, the capital totalled £1,289,347 of which £1,155,413 (made up of assets, investments and cash less liabilities) was in the husband’s name and £133,934 (made up of cash and a small investment, less liabilities) was in the wife’s name. The liabilities included outstanding legal fees. The husband also had a pension fund of £94,214.

The income position was that the husband was earning £55,000 per annum net and the wife was in receipt of benefits (tax credits and child benefit) of £6,849 per annum.

The mix of the assets in the husband’s name was:

The house in Italy was bought in June 2003, and so shortly after the engagement. At the date of the marriage it had an estimated value of around £340,000. It is not a practical home for the husband having regard to where he works. It is not, and has not been, let out. The possibility that it might be let was recognised by the judge but apart for that the possible rent was not quantified or brought into account.

The land in Italy was bought by the husband’s father in 1983 and was transferred to him and his sister equally in 1985. In 2005, it had an estimated value of £140,000. Both of these properties are included in the inventory of the husband’s assets attached to the Marriage Settlement together with “assets as funds and bonds on deposit in bank accounts in Sweden and Switzerland”. The total value of those properties and assets listed in that schedule was about £1,080,000.

About £350,000 of the husband’s guaranteed bonus from his earlier employment was outstanding and was due in 2011 and 2012, the next tranche in March 2011.

The award made by the judge was as follows:

The case was argued on the basis that the wife intended to remain in England with the children and so was not planning to return to Sweden, and that the husband would be living in Italy and travelling regularly to England to see the children. The thinking behind the lump sum was to enable the wife to buy a home in a small area close to the former matrimonial home, the judge having found that:

“ 34. The wife came across in evidence as a particularly nervous person which was acknowledged by the husband, very fairly, in my view. He said she had always been anxious and nervous. She is particularly anxious about health matters, both for herself and the children and about safety. She only feels safe in that very small area of London. This is not to say that the wife has any physical or mental disability - I was not provided with any evidence that she does - but it is certainly the case that she is acknowledged to be very anxious. I've thought long and hard about how this should be managed and I asked her, if she had a certain amount of money to buy a house, what would her priority be: The safety issue or the size of the accommodation? She did not hesitate to say that for her it was safety that came first.”

This award left the husband with: (a) £489,000 of non-pension capital of which £156,000 (rounded) was liquid, or would be paid as part of his guaranteed bonus from his previous employer, and (b) his income and prospects.

In percentage terms (including pension) the wife received 58% and the husband 42% and, if pension is excluded, the wife received 62% and the husband 38% and present income (excluding any rent that might become payable for the Italian house) was effectively shared equally.

The task facing the judge was complicated by the fact that the husband had been a much higher earner during his previous employment and so the lifestyle enjoyed during the marriage could not be replicated from his present earnings. As to the income award, and the husband’s prospects, the judge said:

“30.

I find that the parties each have a need for approximately £40,000 of income to live at a standard not unrelated to the way they lived during the marriage, but by no means at the standard that they enjoyed during the marriage. The husband said that he did not expect to be able to obtain better paid employment than the employment he has with [the bank in Milan]. I do not know if he is right, but he is certainly an ambitious man and at 41 he is not too old to think in terms of a better paid job once again though I recognise the difficulties that face him in the current climate and with his particular experience ------------- ”

The judge continues:

“ 32. As the resources are not there to meet the budget which I find is appropriate for each of the parties to the marriage, I decided that the fairest thing to do was to share the available income equally and they will both have to manage as best they can ------------”

To my mind that is not a finding on the husband's evidence concerning his prospects of obtaining better paid employment, and the judge did not make such a finding elsewhere. Rather, she dealt with this factor on the basis that there is an obvious possibility that the husband might, at some unspecified time in the future, get a better paid job. This approach necessarily carries with it, when considering the husband’s prospects, a need to recognise the possibility and thus the risk that, as he asserted in evidence, the husband would not do so, or at least that he would not do so in the short term. But, in my judgment, this is overlooked by the judge later in her judgment when she is taking the husband’s earning capacity and prospects into account.

The overall approach of the judge in making her award is reflected in the last two paragraphs of her judgment, where she says:

“40.

I need to deal with the question of contribution. The husband's contribution to the welfare of this family has been very significant. He supports the family financially. He has brought in the assets including those that he acquired before the marriage because needs dictated that they be brought in. He will contribute by paying maintenance in future to the best of his ability. The wife will also make a full contribution as the mother and main carer of the two children, who will not have recourse to practical help from the husband who will be living overseas. The wife's homemaking and childcare contribution will last, at least, a further 13 years. It is difficult to quantify a wife's contribution in terms of money and I shall not try. But the care of young children and of teenagers has a value and she contributes all of the value of that care that she will provide for the children.

41.

Having regard to all of these circumstances, the fact that the wife’s future earning capacity will be depressed due to her responsibilities for the children and her entitlement to share in the family assets because of her future contribution, I conclude that the provision made by my order is as fair as it can be. It is hard for both the husband and a wife because they will have to scale down their households and their spending. There is no alternative to it. In a sense, what I have done is to equalise the pain as best I can. That will be my order. ”

The focus of this appeal is on the exclusion from the award of a charge back in favour of the husband on the property to be purchased by the wife with the lump sum award. It was, and is, common ground that, as the judge found, housing is a very important issue and that the husband’s level of income meant that renting a home for the children in the area of the Old Brompton Road was no longer an affordable option. However, as mentioned above, the judge concluded that it was fair and appropriate to assess the lump sum by reference to the purchase price of homes in that small and expensive area of West London. Having quantified the lump sum in that way she went on to say this:

“36.

It does, of course, encroach into the husband's personal property as described in the marriage settlement document. I place limited weight on that document for the reasons I have already explained, but, most importantly, because the wife needs to have access to some of the husband's personal property in order to satisfy the basic housing requirement of herself and the children.

37.

I considered whether there should be a charge back in favour of the husband when the children leave home or at one of the other trigger events. There are problems with a Mesher Order. The likelihood is that the trigger would not fire until about 15 years or so from now at which time the financial position of the husband and wife are likely to be completely different from what they are now. It may be a problem for the wife at that time whilst being meaningless to the husband who may have recouped the capital provision that he has had to pay to the wife by rebuilding. The wife is not in a position to rebuild capital because her earning capacity is limited due to her responsibilities to the children. Her capital will all be tied up in a property whereas the husband has the opportunity to invest and grow capital. Alternatively, there can be real unfairness to the person who is kept out of what would otherwise be his, i.e. the husband’s, fair share of capital.

38.

I concluded that the Mesher Order, if made, would be less than 10% of the value of the house because on my calculations £750,000 is 58% of the matrimonial ready capital. The additional sums which have to be paid to put the wife into the house are not reflected in the capital value of the asset that she will have. Due to the greater earning capacity of the husband when he is able to exploit it by getting a better paid job, the disparity in capital is not so great that it would be unfair to the husband to make the capital provision and outright order with no charge back in favour of the husband. ”

This conclusion is reached against the background that for the time being the husband would be living in rented property in Italy in or near Milan, and would be travelling regularly to England for contact with the children. By so seeking to maintain and promote his relationship with the children he is making a regular contribution to their welfare and care. The expenditure on contact was recognised by the judge.

Further, as mentioned earlier, the reasoning of the judge is not based on a finding by her that the husband would be able to, or would be likely to be able to, obtain better paid employment and to rebuild a capital base in the short, medium or long term. Rather, it was based on the judge’s recognition of the possibility that he would be able to do so without any reference to, or analysis of, the possibility and risk that he would not be able to do so, and thus the husband’s evidence on this point. So her reasoning includes a risk analysis that leaves a relevant factor out account and, as a result, it is heavily weighted in favour of the payee, albeit that, as the judge found, her earning capacity was limited and significantly hampered now and in the future because of her role as a single residential parent.

The marriage settlement is a short document it provided as follows:

“ We, [the wife and the husband], agreed to marry, and we hereby agree upon the following Marriage Settlement.

All property that is now owned by [the husband], including any future return yield hereof property (sic), shall be his private property, and [the wife] has consequently no right to marital property in this property.

All property that any one of us may inherit or receive from a will, or as a gift, as well as the yield hereof (sic) shall be the inheritor’s / the receiver's private property.

All other property that any one of us acquires during the marriage shall be marital property.

Swedish law shall be applicable to this Marriage Settlement.

A list of the property that [the husband] now owns is enclosed to this Marriage Settlement ”

I have already set out what is included in that list.

The judge made the following findings in respect of the Marriage Settlement and the evidence of the parties relating to it:

As with the husband’s evidence on his prospects of getting a better paid job, the judge recorded the following aspects of the evidence, but made no findings on them:

The judge dealt with the Marriage Settlement in this way:

“ 15. The difficulty with this agreement is that it does not spell out at all what was to happen if the marriage broke down. It is perfectly clear that it was intended to identify the husband's personal property and that the wife would have no right to marital property in his private property. It is clear that all other property acquired during the marriage - other than by inheritance, will or gift, which would be private property - would be marital property. In a sense all that the marriage settlement does, so far as the husband's private property is concerned, is to identify that he owned it prior to the marriage being celebrated and that it was not to be treated as joint property. It does not define the party's entitlements in the event of marital breakdown. It is silent as to the arrangements for S (the child already born to the parties) and it is silent as to any future children that the parties may have. It is correct that the wife was not legally advised about the agreement, as Mr Swift in his document sets out. It is correct that the husband's bargaining position was strong in that it was a condition of the marriage, that the parties were already engaged to be married, and the husband knew that the wife really wanted to be married.

16.

As the settlement does not specify what would happen in the event of marriage breakdown or divorce, the weight that I can attach to the prenuptial agreement is limited. I accept it does what it says it does no more. ”

Part 30 FPR 2010 applies. This provides that an appeal is limited to a review and that the appeal court may allow an appeal if the decision of the lower court was wrong or unjust (see Part 30.12). To my mind correctly, and as indicated by the notes to CPR Part 52 at 52.11.4, it was common ground that in determining whether a decision of a lower court is wrong the approach taken in cases under the earlier Family Proceedings Rules and, more generally, in respect of an appeal against a decision based on the exercise of a judicial discretion, still apply. To my mind, the approach taken in those cases to an appeal against a decision based on the exercise of a discretion (see the cases referred to in CPR 52.11.4 and the family cases of Cordle v Cordle [2002] 1 FLR 207 at para 32, V v V [2005] 2 FLR 697 at 699, Piglowska v Piglowski [1999] 2 FLR 763 at 783H to 785E (which contains citations from earlier cases) and Re J (Child returned abroad: Convention Rights) [2005] 2 FLR 802 at paragraph 12) clearly show that it is not open to the appeal court to find that such a decision is wrong on the basis that it would have reached a different conclusion. Rather, the available grounds of appeal are that:

Errors of law include:

Counsel for the wife invited me to pay particular regard to what Lord Hoffman said in Piglowska on the basis that his comments relating to (a) the advantages of the court below that flow from the judge seeing and hearing the witnesses in respect of the evaluation of the facts found, and the weighing and quantification of relevant factors, (b) proportionality, (c) the taking of a narrow textual analysis in determining whether the judge has misdirected herself in law, and (d) the assumption that, unless she has demonstrated the contrary, the judge knew how she should perform her functions and which matters she should take into account, are all engaged on this appeal. I agree that they are.

Further, on this theme counsel for the wife referred me to the approach taken by Lord Nicholls in Miller & McFarlane [2006] 1 FLR at paragraphs 27 and 28 under the heading “flexibility” to emphasise (a) the width of the statutory discretion, and (b) the importance of recognising the role and advantages of the judge below in evaluating the range of different factors, that are not given a hierarchy by the MCA.

I acknowledge the force of those submissions and have recognised that they apply directly to:

At times it seemed to me that counsel for the wife was asserting that I should approach this appeal by simply and only considering whether the decision was within the range of reasonable disagreement between judges properly exercising the statutory discretion. If, and to the extent that he was submitting this, to found a conclusion that this appeal should be dismissed, on the basis that the decision was within that range and so could not be said to be wrong or plainly wrong, I do not accept that that would be a correct approach. This is because it fails to have regard to the free standing nature of the available ground of appeal against a decision in exercise of a statutory discretion that the court below erred in law, and so misdirected itself in law in its exercise of that discretion.

As all first instance judges are only too aware, if an appeal court concludes that they have erred in law, and so misdirected themselves in the application of the statute, it can exercise its own discretion or remit the case.

In those circumstances, in deciding whether to exercise the discretion itself the appeal court needs to consider (a) what the relevant factors to be taken into account are, and thus what the factual and other building blocks for its exercise of the statutory discretion are, and (b) what updating material it should take into account and how this should be done. If it exercises the discretion itself, the appeal court is very unlikely to rehear the case, or to determine disputes of fact. It follows that the appeal court has to adopt and apply (a) the findings of fact of the court below, together with (b) its evaluations of the competing factors, in so far as those findings and evaluations are not flawed by reason of the error or errors of law identified by the appeal court.

In so taking into account the findings and approach of the lower court the comments and guidance of Lord Hoffman in Piglowska are again relevant. This is because those comments and guidance show that the appeal court should not step outside them if they are not tainted by the identified error or errors of law. But, having said that it also needs to be recognised that, at this stage, the appeal court is exercising its own discretion and is not considering whether the decision of the court below is within the range of permissible disagreement if the court below had not misdirected itself in law. However, if an appeal court concluded that it was within that range proportionality might lead it to dismiss the appeal or to refuse permission to appeal.

Both parties invited me to exercise my own discretion. The wife put in some updating evidence by a statement with exhibits and the husband put in some property particulars to show house prices in the area used by the judge to assess the award she made. This invitation, the sensible approach adopted by the parties in respect of updating evidence and the approach to the exercise of discretion by the appeal court set out above, mean that although I am exercising my discretion afresh, in doing so I am reliant on many of the findings and conclusions of the judge and this leads to an approach that effectively adjusts her award, rather than one that starts completely afresh. This is not uncommon when an appeal court allows an appeal and, in the exercise of its discretion, makes a different award.

This was that the judge erred in law in not ordering that there should be a charge back in favour of the husband over the home to be bought applying the lump sum (and thus effectively over the lump sum). This focus therefore relates to the division of the available capital assets and so the approach taken by the judge to sharing and contributions when exercising the statutory discretion (the s. 25 exercise).

Unsurprisingly, a focus of the argument before the judge and on this appeal (a) in favour of a charge back, and (b) on the approach to be taken to sharing and contributions, was based on the impact of the marriage settlement having regard to the recent decision of the Supreme Court in Granatino v Radmacher [2011] 1 AC 534.

To my mind, this decision of the Supreme Court necessitates a significant change to the approach to be adopted, on a proper application of the discretion conferred by the MCA, to the impact of agreements between the parties in respect of their finances. At the heart of that significant change, is the need to recognise the weight that should now be given to autonomy, and thus to the choices made by the parties to a marriage (see paragraph 78). The new respect to be given to individual autonomy means that the fact of an agreement can alter what is a fair result and so found a different award to the one that would otherwise have been made (see paragraphs 75 and 79).

The award that would otherwise have been made would be based on the application of the statutory test in which the competing factors listed in the statute, and so the weight to be given to them in informing the award, would be assessed with all other relevant circumstances of the case by reference to the needs, sharing and compensation rationales or principles, and the overriding criterion of fairness.

So, Granatino effectively adds another rationale or principled approach to the reasoning to be applied in the judgmental or balancing exercise demanded by the statutory test, namely that weight should be given to autonomy. This effects a change because previously the general approach to agreements of the type under consideration in this case (i.e. a pre-nuptial agreement) made between the parties on, or relevant to, the financial award to be made on their divorce was more paternalistic and protective of the payee. The result was that generally they were given little or no weight, and so generally that they did not found a different award to the one that would have been made by the court if no such agreement had been entered into.

So, in my view, just as the House of Lords did in White v White, the Supreme Court in Granatino has identified a significant error of law in the approach that was generally being adopted by family courts and practitioners to the exercise of the judicial discretion conferred by the MCA. The thinking that underlies the non-discriminatory approach established in White, and developed in later cases, is in line with the respect that Granatino decides and directs is to be given to autonomy. The upshot of both cases is that, the House of Lords and the Supreme Court have decided that earlier reasoning processes and rationales that had been developed and applied to the judgmental or balancing act that is central to the exercise of the judicial discretion conferred by the MCA 1973, with the objective of achieving a fair result, were wrong in law and so may well not have produced a fair result judged by reference to the correct approach to the exercise of the statutory discretion.

So, it is wrong to apply the factors set out and referred to in the judgments in Granatino against a pre-existing approach of practitioners and courts to the weight to be given to the autonomy of the parties, and thus to the agreements they have made (and I add to the choices they have made and the way in which, or the principles by which, they have run their lives together).

Having said that, it is also very important to recognise and remember that it is the court and not any prior agreement between, or choices made by, the parties that will determine the award to be made under the MCA 1973 (see for example paragraph 7 of the majority judgment in Granatino). It follows that:

From the starting point of the new respect and weight to be given to autonomy, the majority judgment in Granatino makes it clear that:

The points made in paragraphs 41 and 42 show that (a) a nuptial agreement and its effect on an award cannot be looked at in isolation, and (b) its impact on the result suggested by one of the rationales (e.g. sharing) can have an impact on the overall result and thus, for example, the extent to which that suggested result should be changed to meet the requirements of the children or the needs of a spouse, and thus that (c) the common ground before me, and the approach of the judge, that the court should consider:

The judge, in my view correctly, considered what weight should be attached to the marriage settlement by firstly considering it in isolation, and before moving to the second stage and a consideration of its impact as one of the relevant, or potentially relevant, factors. At that first stage, she concluded that it was a factor that should be given little weight. She did not conclude that it should be given no weight.

I agree with the judge that the marriage settlement does what it says it does and no more.

However, to my mind on that approach it is clear, as the judge recognised, that the marriage settlement provides that the wife was to have no right to “marital property” in the property of the husband listed in the schedule to the agreement.

As recorded by the judge, it was common ground that the wife entirely agreed with the suggestion that the husband was making, namely that the marriage was conditional upon there being a prenuptial agreement to protect his pre-existing property (for the reasons identified by the judge). There is no evidence, finding or sensible possibility that the parties did not intend it to be effective to achieve that purpose.

It follows, on the findings made by the judge, and the common ground, that both parties intended the marriage settlement to be effective and, as intelligent people, were aware of its obvious purpose, notwithstanding that the wife (and, on the evidence and findings, the husband) did not have advice concerning it, or its effect. It follows that they intended to achieve that purpose by agreeing that the husband's pre-acquired property, as identified in the schedule, and any further gifted or inherited property of either party, should not be “marital property”.

Advice / lack of information / the natural meaning of the word and concept “marital property”. The findings of the judge are to the effect that neither of the parties had advice as to the impact in Swedish law (the law applicable to the agreement), or in English law, of property being marital property or not being marital property. It follows that they entered into the agreement on what they understood its effect to be absent advice, or on the basis that they were indifferent as to its effect. The judge accepted that the wife did not seek advice because she did not know that she should do so, but the whole tenor of her evidence, and of the findings made, was that if she had been given advice on the impact of the agreement in Swedish and/or English law she would have entered into it willingly.

Absent such advice and knowledge of Swedish or English law the natural meaning of the words used, and the obvious purpose of the agreement, is that the listed property of the husband was not to be treated and divided between them in the same way as “marital property”. And, in my view, as a matter of language the intelligent (but legally unadvised reader) would understand “marital property” to be property in which there is an equality of interest or a community of property that will be shared when the marital relationship ends. It follows, that such a reader would understand that the husband’s property was to be treated differently to protect it from any such sharing at the end of the marital relationship.

There is nothing inherently unfair in, or difficult to understand about, that concept and, in my view, the findings of the judge (and indeed the evidence of the wife) was that this is what she agreed to.

Disclosure. The wife’s evidence, and the findings of the judge, were to the effect that she was indifferent to the detailed value of the husband’s property and it follows that there was no material non-disclosure.

The nature of the agreement. So the agreement is of the type, and was motivated for the reason, referred to in paragraph 79 of the majority judgment in Granatino, although it lacks the element that by its terms it refers to the disposal of non-marital property on the termination of the marriage. But, to my mind the cited passage from the judgment of Rix LJ is applicable to the agreement, he said

“ if the parties to a prospective marriage have something important to agree with one another, then it is often much better, and more honest, for that agreement to be made at the outset, before the marriage, rather than left to become a source of disappointment or acrimony within the marriage. ”

Pausing here. Before turning to consider other factors referred to in Granatino, in my view, on a proper application of that case, the terms of the marriage settlement taken together with the findings of the judge do not warrant a conclusion that the agreement should be given only little weight.

Are there vitiating factors? There was no evidence, suggestion or finding that any of the standard vitiating factors, namely: duress, fraud or misrepresentation were present (see paragraph 71).

Also, the second safeguard proposed by the consultation document referred to in paragraph 5 of that judgment is not present. As to those safeguards, the decision in Granatino makes it clear that the absence of a suggested safeguard does not mean that the agreement has no weight unless it founds the conclusion that there is duress, fraud or misrepresentation or other unconscionable conduct of a degree that eliminates the weight to be given to it (see in particular paragraphs 68 and 71).

The question therefore becomes whether there are factors that reduce or enhance the effect of the agreement in the s. 25 exercise and, if so, what is the nature and extent of that reduction or enhancement.

Any unconscionable conduct such as undue pressure (falling short of duress) or a lack of information as to the implications of the agreement can result in an agreement not being given any weight or not being given full weight (see paragraphs 68 and 71 of the majority judgment in Granatino).

Advice / lack of information. I have already dealt with these factors, and that discussion and the conclusions reached in it on the approaches, intentions and understandings of the parties found the conclusion that these factors do not detract from the weight to be given to the marriage settlement.

Pressure / unconscionable conduct / respective bargaining positions. These are referred to in paragraph 72 of the majority judgment in Granatino and, as set out therein can have a number of aspects that cannot be looked in isolation and some of them may “cut both ways”

The wife was 10 years younger, the parties had been engaged for some time, and they had one child, when the agreement was entered into. The wife wanted to get married and was faced with the condition that the husband wanted to enter into an agreement to protect his pre-acquired property.

It is inherent in the findings made by the judge (and as I understand it was common ground) that the husband had not indicated that he would want or require such an agreement to be entered into when the parties became engaged, or earlier during their engagement. But, there is no finding that he would not have married the wife if she had not entered into the agreement, and it seems that this potential “stand off” was not tested in evidence, or at the time. Further, there is no finding (and so far as I am aware there was no evidence) that the wife felt under any undue pressure to sign, or that she was acting against her better judgment.

These factors provide a starting point for a conclusion that the respective bargaining positions of the parties found a reduction in the weight to be given to the agreement. But, in my view, the findings of the judge on the respective positions of the parties taken alone do not warrant a conclusion that the marriage settlement should be given only little weight.

It is not clear what weight the judge put on this factor, which it seems she approached and took into account without evidence concerning relevant facets of it. However, in my view on the basis of her findings such inequality of bargaining position, or the pressures on the wife, when taken together with the other findings made by the judge about the marriage settlement and the allegations concerning it that she left undecided, do not found a conclusion that the agreement was not one that was not willingly and honestly entered into by both parties to achieve the purpose identified by the judge (namely to protect the husband’s separate and existing assets).

So, in my view on a proper application of Granatino the weight to be given to the marriage settlement is not reduced by these factors, and that any such reduction is subsumed in the issue as to whether the agreement operates unfairly having regard to the circumstances at the breakdown of the marriage and now.

Foreign element. This is referred to as a factor that can enhance the weight to be given to an agreement (paragraph 74 of the majority judgment in Granatino).

The wife is Swedish and the husband Italian and the marriage settlement is governed by Swedish law. The Law Commission’s Consultation Paper on Marital Property Agreements indicates that in Sweden there is a default regime of total community (see paragraph 4.13). Against that background it is plain that the effect and purpose of the agreement was to extract the husband’s listed property (and the other property referred to in the agreement) from that default regime on the termination of the marriage.

This fits with the natural meaning of the words used in the agreement, the reason why the husband demanded it and thus its purpose identified by the judge (i.e. the protection of his property acquired by his efforts and inheritance before the marriage). But, as no findings were made by the judge as to the general knowledge of the wife (or the husband) of Swedish law, I have not taken the impact of Swedish law into account.

In my view, on the findings made, the extent to which it is permissible to have regard to the fact that both parties are foreign is limited to it being a factor that supports the view that they both intended the marriage settlement to have effect.

Conclusion on the application of Granatino. In my judgment, the judge erred in law in her approach to the assessment of the weight to be given to the marriage settlement and so in reaching her conclusion that it should only be given little weight in the s. 25 exercise. The essential reason for this is that, in effect, the judge adopted a pre - Granatino approach to agreements reached between parties to a marriage relating to their assets and, by so doing, failed to properly recognise the weight that the Supreme Court has decided should on the proper approach in law to the s. 25 exercise be given to the autonomy of both parties.

Under this heading (in paragraphs 44 to 69 above), I have assessed the circumstances of this case against the guidance given in Granatino by reference to the factual findings of the judge. On the basis of that assessment, I have concluded that on a proper approach in law to the s. 25 exercise the marriage settlement, and so what it provides, is a factor that should be given weight to give proper respect to the autonomy of both parties who, on the findings of fact made by the judge, entered into it honestly, freely and knowingly.

It follows that by their agreement the parties made a choice concerning the husband’s existing assets, and that this agreement or choice formed one of the bases upon which the parties agreed to conduct their married lives. By reference to its language and its purpose (which was known to both parties), what that agreement provides, and so the choice they made as a basis for their marriage, was that, if and when relevant, the husband’s pre-acquired property was to be ring fenced and not treated as marital property.

So, in my judgment:

The findings of the judge mean that, in addition to the marriage settlement the following factors, also provide "good reason" to depart from equality in the application of the sharing principle and are relevant to the assessment of contributions, namely:

In my judgment, the effective approach of the judge was:

So, that sentence shows that the judge’s approach was based on a conclusion or assumption that, in the application of the sharing principle and the competing factors relating to contributions on a non-discriminatory basis, there should be an equal division of all of the readily available capital, and thus that there was no good reason to depart from equality in assessing what would be fair on that part of the s. 25 exercise (see again Charman (No 4) in particular at paragraphs 65 to 67 and 72).

In my judgment, in reaching that conclusion, or in proceeding on that assumption, the judge erred in law by:

It follows that in my judgment the approach and reasoning of the judge to the issue whether there should be a Mesher order or charge back, and thus to the division of the available assets, was flawed in law.

As explained above, the errors of law I have identified mean that the appeal succeeds and that I can remit or exercise the statutory discretion myself.

As I have mentioned, (a) neither party asked me to remit, (b) I am exercising the statutory discretion in the circumstances that exist now, rather than as they existed before the judge, but (c) the building blocks for the exercise of my discretion have to be founded on the facts found by the judge and her assessments (e.g. where the wife’s housing need should be met), save to the extent that they are flawed in law (see paragraphs 31 to 33 above).

In my judgment, it is established by the authorities, that:

In my view correctly, the judge and the parties approached this case as one in which the award to be made was effectively dictated by an application of the needs principle. This is reflected in the common ground that there would have to be periodical payments and the housing needs of the wife and the children had to be met.

The judge’s approach to the level of periodical payments is not challenged. The common ground that the housing needs of the wife and children should be met by a lump sum payment remains and so, the central question is (and was before the judge) how the available capital assets should be divided to meet the housing needs of the wife and the children if, and to the extent that, such division does not reflect the result suggested by the sharing principle.

So, the points made in paragraph 81 (ii) and (iii) above are of central importance and could found a conclusion that the overall criterion of fairness, in the application of the statutory test, founds the conclusion that the wife should receive more than one half of the available assets (and so necessarily more than a lower percentage of those assets if, an application of the sharing principle, and so an assessment of contributions, suggests a result that she should receive less than 50%).

Key building blocks in this case are:

New and updating evidence provided at the hearing of the appeal is:

Pausing there, and leaving interest on the lump sum out of account, as a result of the award made by the judge the wife’s total funds were (£667,100 + £127,000) £794,100 and her total costs and estimates relating to the property and its extension are £783,909 (£724,909 + £59,000), leaving a balance of £10,191. This falls to be compared with the approach of the judge in reaching the figure for the lump sum of £667,100. This sum equalled the difference between the judge’s figures for purchase cost, stamp duty, moving costs and fitting out costs (namely £750,000, £30,000, £10,000 and £10,000 = £800,000) and the sum she was told was in the wife’s savings account (£132,900). On that approach the judge allocated all the lump sum and the assets in the wife’s name to the purchase of the new home, and left no remaining balance (save that there was probably an ability to make savings in respect of her allowance £20,000 for moving and fitting out costs). So, this comparison shows that the wife could have adopted this approach of the judge on the purchase of her new home and, if she had done so, she would have been left with a balance in her hands. However it appears that she did not adopt this approach.

If the costs already paid in respect of the appeal £13,809 are added back to the balance of the wife’s savings account as at 4 October 2011 (£32,008) her savings would have stood at £45,817. Again leaving interest on the lump sum out of account, this indicates that in addition to the expenditure on the new home (£724,909), which would leave a balance of £69,191 (£794,100 - £724,909) from the total of her lump sum and savings the wife has spent an additional £23,374 (£69,191 - £45,817) on expenditure other than costs. This expenditure is not described in her updating evidence.

Her estimated costs of the appeal are £31,228 of which £17,419 remains outstanding, and if those costs are deducted from her savings as at 4 October 2011 that leaves a balance of £14,589. So her estimated expenditure on repairs (£9,000) and an extension (£50,000) would leave a shortfall of £44,411 or, if the unexplained expenditure of £23,374 is added back, £21,037.

The husband did not provide such updating figures. But taking an equivalent costs liability and the figures used by the judge, his position is that he has the land and house in Italy (£273,772 + £59,019) £332,791, his pension (£94,214) and liquid capital of £1,288,781 (£13,247 + £692,752 + £582,782) less liabilities £466,339 = £822,442, less the lump sum (£667,100, ignoring the interest he paid on it) = £155,342 less costs (estimated as being equal to the wife’s costs (£31,228) = £124,114. On the assets schedules (accepted by the judge) it appears that this would represent the tranche of unpaid bonus due in March 2012 and so at present he has little no liquid capital.

The husband provided property particulars to show that, as one would expect, there is a significant difference in purchase price between a home, in the West London area selected by the judge, that is suitable for the wife and the two children now and as they grow up, and one that would be suitable for her alone, on the basis that she was visited by adult children. It is difficult to compare properties by reference to particulars and the exercise is complicated by the point that when the children cease education they may well remain at, or return regularly, to their mother’s home. But, doing the best I can, the housing particulars show that, if the wife was to be downsizing now, the percentage difference in purchase price would be in the range of 20% to 40%.

Isolating an approach on the sharing principle:

The marriage settlement taken alone and with the other good reasons for departing from equality in the application of the sharing principle, support an approach that that non marital property should be allocated 100% to the husband. If that is done, it produces a 28/72 division of the assets totalling £1,289,347 between the parties (wife £358,358 and husband £930,989 – which equates to the value put on his pre-acquired assets listed in the marriage settlement). I acknowledge that this, or an equivalent, analysis (a) was not advanced in argument before me, or as I understand it before the judge, and (b) it only provides a guideline as to the application of the sharing principle on the proper application of Granatino, and the other good reasons for departing from equality, when assessing the contributions of the parties and the sharing principle.

However, in my view, no more than a guideline is necessary because it is clear, and agreed, that an application of the sharing principle will not meet the housing needs of the wife and the children. This has the result that in reaching a result, by reference to the overall criterion of fairness, any application of the sharing principle is only a background factor, or a stepping stone, in the reasoning as to how those needs should be funded.

The impact of the marriage settlement applying Granatino has a more direct impact on the allocation of capital resources by reference to the contributions of the parties and the sharing principle but, as mentioned earlier, the marriage settlement can also have an impact on the overall result and thus how needs are to be funded and covered.

In my judgment, absent a finding on the likelihood of the husband being able to make up capital by obtaining better paid employment, or otherwise, it is wrong in law and manifestly unfair to justify either (a) a higher capital award to the wife than that justified by reference to the marriage settlement, contributions and the sharing principle, or (b) a conclusion that there should not be a Mesher order, by reference to the possibility that the husband will earn more. This is because, such a rationale, (a) flies in the face of a non-discriminatory approach, (b) leaves out the relevant factor that there is also a possibility that the husband’s income will not increase and (c) effectively places all the relevant risk on the husband as the main income provider. It also ignores the ability of the court to vary periodical payments, and to capitalise them, if the husband obtains better paid employment in the future and so is able to build up his capital base and afford higher periodical payments.

In my judgment, the impact of:

Indeed, in my judgment it would be manifestly unfair not to make such a provision, because, absent such a charge back, the marriage settlement and the wide divergence of contributions which, on the sharing rationale, result in a split of capital assets under which the husband would receive significantly more than the wife, would not be recognised at all, in circumstances where:

Although the husband has property in Italy, it seems to me that as the purpose of the lump sum was to enable the wife to buy a home that the charge back should be a percentage of the lump sum, and thus of the value of the home bought with it, rather than a fixed sum with interest to be accumulated or which is to grow by reference to an index. This is because, in my view, both parties should be in the same position in respect of the increase (or decrease) of the capital used to buy a home for the wife and the children.

I agree with the husband that the percentage should be one third (33.3%). This is significantly less than he was seeking before the judge and, before me, he based it on the comparison based on housing particulars I have referred to above starting with the house price of £750,000 chosen by the judge and comparing what is on the market for that sum and for £500,000, and would now be suitable for the wife if the children were visiting rather than living at home. That starting figure of £750,000 equates to what the wife actually would have spent on the house she bought, if she had retained her savings and the lump sum to meet the extension costs and the repair costs. That comparison is within the range I have referred to earlier (see paragraph 90).

To my mind it is this comparison that provides the rationale for, and thus the fairness of, the quantum of the charge back. This is because it is directed to the reason why in this case an application of the marriage settlement, and the sharing principle, is not determinative of the allocation of available capital between the parties. That reason is that, the housing needs of firstly the wife and the children, and then the wife, cannot be fairly met if the available assets were to be so divided. But, it is not necessary to meet those needs by an outright transfer to the wife of all the capital needed to meet the housing needs because in the longer term, and after the needs and requirements of the children have been met, the wife’s housing needs can be met by her downsizing to release capital. So, her housing needs can be fairly met by delaying the payment or transfer to the husband of the capital that will be so released, and which would have been allocated to him now, if the result suggested by the matrimonial settlement and the sharing principle had founded the award.

That rationale as to the quantum of the charge back means that any further analysis by reference to the overall percentage split (whether or not it takes into account the postponement of the husband’s interest under the charge) is not informative as a cross check or otherwise.

I am very aware that, absent express provision to the contrary, this award would have the consequence that if the wife’s home is extended to provide more space for her and the boys (that would be desirable as they get older) it is likely that this will increase the value of the husband’s percentage charge. The problem is that any such provision to address the funding of the extension, and its impact on the husband’s percentage charge, is likely to be complicated, not least because of the real possibility that the husband would (directly or indirectly) be paying for, or contributing to, the costs of the extension. So, subject to the provision (not included in either of the draft charges I have been sent) that the wife can by reference to a valuation (I suggest by an estate agent agreed or appointed acting as expert) buy out all or part of the charge (see paragraph 98 above), I have concluded that these problems should be left to agreement and/or adjustment of the periodical payments in the future. In my view, this approach favours the conclusion that the covenant sought by the husband in his draft charge that structural alterations are not to be carried out without his consent should be included, as reasonable conditions for that consent could include conditions on funding. In any event, in my view such a covenant by a mortgagor is reasonable and appropriate.

After the hearing I was provided with draft charges by both sides. In my judgment:

Adjustments to have regard to the new evidence. When I circulated this judgment in draft, I gave permission to the parties to treat my conclusions on my exercise of the discretion (as opposed to my conclusion that the appeal is allowed) as preliminary conclusions, and so subject to any further submissions they may wish to make. I did this because I did not have the benefit of submissions on the figures and a number of the points set out above (because the submissions were focused on whether or not there should be charge back). I have now heard those submissions, including submissions on costs.

I was told that my estimate that the husband’s costs of the appeal would equate to those of the wife is wrong in part because his counsel acted pro bono on the hearing of the appeal. They are £19,723.64. So when he is paid the outstanding tranche of his bonus the balance available to him will be higher than the figure set out in paragraph 90 above (£135,618 rather than £124,114)

I was told that:

So, the home chosen by the wife together with her estimates for an extension and the costs of repair (£680,000 + £50,000 + £9,000 = £739,000) accords with the lump sum for housing selected by the judge (£750,000). Her costs of moving (including stamp duty, fees and fitting out) (£724,909 - £680,000 = £44,909) was less than that estimated by the judge (£50,000), in part because the stamp duty was payable on the lower purchase price of £680,000. The wife’s present financial position is that she does not have the funds to meet the extension costs but can meet her estimate of the cost of the repairs (leaving a balance of between £5,000 and £6,000). The main reasons for this are (a) her liability for costs, (b) explained and unexplained expenditure from the lump sum and her savings (total £23,374) of a type that was not factored in by the judge (because she proceeded on the basis that her award would effectively all be spent on acquiring a new home, and so would not be used for other purposes and the wife would have to cut her cloth to live on the periodical payments), and (c) the fact that her savings were £5,900 less than the figure given to the judge.

The planned extension is desirable so that the boys can each have a bedroom, or for a bedroom for someone who helps in their care (e.g. an au pair), but it is not vital in the short term, and could be achieved in the longer term by a move to a less expensive area. Absent the wife’s costs liability (and her potential liability for the husband’s costs of the appeal) she would have been able to fund the entire costs of the house purchase, the repairs and the extension from her award and the sum actually in her savings account. The essential reasons for her present predicament, in which she does not have the funds to meet the costs of the proposed extension are (a) her liability and potential liability for costs, and (b) her decision not to confine her expenditure from the lump sum and her savings to the acquisition of her new home, in line with the approach of the judge. I acknowledge that much of that expenditure could be allocated to the wife spending less than the estimates included in the judge’s reasoning.

The costs problem is similar to the problem that existed under the old rules. It arises from the different discretions involved in making the financial award and the costs award, which were reflected in the Leadbeater add back. The costs of an appeal are not governed by the new starting point in the FPR, and the rule that costs follow the event does not apply, although “the event” can be a decisive factor (see Baker v Rowe [2010] 1 FLR 761). There are two stages of this appeal, namely the appeal itself, and then, the re-exercise of s. 25 exercise having regard to the present position (albeit that the new exercise is necessarily based on findings made by the judge at first instance). If the wife was ordered to pay all, or a significant part, of the husband’s costs of the appeal she would not have the funds readily available to pay them and that liability would undermine, if not destroy, the rationale of the award made by the judge, which I must adopt, that the housing needs of the wife and children should be met in a small and expensive area of West London. The wife’s only realistic prospect of paying the husband’s costs of the appeal without a sale of the home would be to borrow money on it and look to the husband (or her earnings) to meet the loan costs.

I have now had the benefit of submissions on costs, during which I was not referred to any relevant correspondence. So, the position is that I have found that the husband should have a charge back in the percentage he was arguing for before me, and I have rejected the wife’s argument that, as found by the judge, there should be no charge back. So, the husband has been a clear winner on the appeal and in my view this should be reflected in an order for costs in his favour, unless that would seriously undermine the rationale of the award made by the judge, or on an overall assessment render the award unfair (which is a two way street).

In my judgment, the fair way to deal with the competing factors is set out in the following paragraphs.

First, the wife should not receive any additional payment to meet the costs of the proposed extension, because if she had followed the approach of the judge, and so allocated the award and her savings to expenditure on, and in respect of, her new home, then if she had settled the appeal, and thereby reduced her costs in respect of it, she would probably have had enough to fund the extension, because the balance in her savings account - after payment of her appeal costs - plus the additional explained and unexplained other expenditure would have been about £38,000, and it would now be unfair on the husband to make him fund all or part of the wife’s costs of the appeal, and so effectively (a) to require him to pay both his own and all or part of the wife’s costs of his successful appeal, and (b) to take away from him his ability to deal, as he sees fit, with the capital he now has.

Secondly, the husband should pay the wife an additional sum of £5,600 (the shortfall of £5,900 in her savings account reduced by £300 to take account of the incorrect figure the judge was given on the wife’s outstanding costs liability) within 7 days of the receipt by the husband of the tranche of his bonus due in March 2012. As to that:

Thirdly, the charge back should be increased to 35.83% so that it includes the costs of the appeal that in my judgment the wife should pay to the husband. His costs are reasonable, when compared with the wife’s costs, and when looked at in isolation and, fortunately for him and the wife, they are reduced by the fact that counsel appeared pro bono on the appeal (although the costs schedule indicates that he had charged for some earlier advice). In my view, a fair summary assessment of the husband’s costs is £18,750 (including VAT), which is 2.5% of the £750,000 house price taken by the judge. That increase in the percentage will not realistically undermine the rationale of the award and will not render it unfair, whereas an order that could be enforced now would do so. Further, it is a proper and fair reflection of the point that the husband achieved what he sought on the appeal and the wife failed in her argument that there should not be a charge back. Also, the husband will receive funds (the March 2012 tranche of his bonus) which will enable him to meet his costs of the appeal (or a sum borrowed to meet them) and the cash flow burden this imposes on him.

I think that the best way to deal with this award of costs is to set out in a recital that I have determined that the wife should pay £18,750 (including VAT) towards the husband’s costs of the appeal and that such order is to be satisfied by and through an increase in the charge back in favour of the husband from 33.33% to 35.83%.