H v H

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Ryder,Lord Justice Kitchin,Lord Justice Moore-Bick
Judgment Date02 December 2014
Neutral Citation[2014] EWCA Civ 1523
Docket NumberCase No: B6/2014/1143
Date02 December 2014

[2014] EWCA Civ 1523



Coleridge J


Royal Courts of Justice

Strand, London, WC2A 2LL


Lord Justice Moore-Bick

Lord Justice Kitchin


Lord Justice Ryder

Case No: B6/2014/1143


Patrick Chamberlayne QC (instructed by Stewarts Law LLP) for the Appellant

Phillip Marshall QC and Harry Oliver (instructed by Payne Hicks Beach Solicitors) for the Respondent

Hearing date: 8 October 2014

Lord Justice Ryder



On 8 October 2014 the court heard an application for permission to appeal a financial remedy decision made by Coleridge J on 18 March 2014, with the appeal to follow on if permission was granted. For convenience, I shall call the appellant, the wife, and the respondent to this application, the husband. The judge ordered a lump sum payment to the wife of £400,000 to be paid by the husband upon the termination of a joint lives periodical payments order which would occur on his retirement next year.


There is some sensitivity surrounding the identity of the adults because of personal information that the husband should be entitled to impart to his children when that is appropriate and there is accordingly an order in place prohibiting their identification, that of the children or the information concerned and this judgment is appropriately anonymised.


The key issue in the appeal is whether the judge erred in his calculation of the lump sum award by applying a rate of return on investments of 3.75% net when the applicant says that it should have been 3.75% gross. There is also a dispute between the parties as to the application of the principle of 'compensation,' which arguably would have had a significant effect on the computation of the award. The husband opposes the grant of permission or in the alternative submits that the appeal should be dismissed. At the conclusion of the hearing we reserved judgment. For the reasons which I now explain, I would grant permission and allow this appeal.

The background circumstances:


The parties married on 30 July 1983. The husband was 54 years of age and the wife 55 at the date of the hearing. The parties separated in August 2004 after 21 years together and the wife's petition for divorce was presented on 22 December 2004. Decree nisi was pronounced on 17 June 2005 and decree absolute on 12 August 2005. There are two adult children of the marriage. In May 2006 the husband remarried. He has two young children from his new relationship. It is a relevant fact that because of a serious personal issue he wishes to retire in the Summer of next year to allow him to be the full time parent of those children.


The parties are both qualified accountants. They met when they were trainees in the same firm. The husband has been with a major international financial services firm since 1984 and was Chief Operating Officer of a tax practice of the firm until June 2010. The wife worked until 1990 eventually as a finance director in a retail organisation. Although she then took redundancy, the cessation of her career coincided with the birth of their first son who is now 24 years of age and a daughter who is now 21. None of the children of either party were concerned with the application before the court below.


On 3 August 2005 Deputy District Judge Solomons made an order consequent upon the divorce that the husband pay to the wife periodical payments of £90,000 each year during the parties' joint lives. That order was agreed. The papers reveal that at that time there was a division of the assets such that the wife received £1.37m and the husband received approximately £1.2m. I note that Coleridge J made an error in relation to that asset division but it does not appear that the error was material to his subsequent deliberations.


Following the decision of the House of Lords in Miller v Miller; McFarlane v McFarlane [2006] UKHL 24, [2006] 2 AC 618, the wife applied for a variation. It is apparent that in making that application she relied upon the principle of compensation, which is to be derived from the opinions of their Lordships in that decision. There was no agreement between the parties then or now about the applicability or effect of the application of that principle to their circumstances with the consequence that without privilege being waived this court cannot make any assumption about the basis for the agreement subsequently reached between the parties. That has not occurred and there are no recitals setting out the understandings or bases for the order. The agreement that was reached was approved by the late Mrs Justice Baron on 20 June 2007 and the order records that the periodical payments sum was increased to £150,000 each year.


On 5 November 2012 the husband made an application to terminate the periodical payments that he was making to the wife with effect from his retirement. The wife's response until questioned about it by the judge during the hearing was that the application was premature. She changed her position during the hearing before Coleridge J and acquiesced in the court making new orders to take effect on the husband's retirement with the consequence that the quantification of any terminating payment to her from the husband was the subject of oral submissions rather than detailed written submissions.


It is common ground that when considering an application under section 31(7)(a) of the Matrimonial Causes Act 1973, as amended, the court has the power to vary the underlying periodical payments provision, if it is not to be terminated, and also to capitalise the same under section 31(7B). The judge was required to have regard "to all the circumstances of the case" in his consideration of an application to which section 31(7) of the 1973 Act applied. That involved consideration of any change in any of the matters to which the court was required to have regard when making the original order(s) under sections 25(1) and (2) of the Act. The relevant provisions are as follows:

s 31(7)(a): "in the case of a periodical payments order made on or after the grant of a decree of divorce … the court shall consider whether in all the circumstances and after having regard to any such change it would be appropriate to vary the order so that payments under the order are required to be made or secured only for such further period as will in the opinion of the court be sufficient (in the light of any proposed exercise by the court where the marriage has been dissolved of its powers under section (7B) below) to enable the party in whose favour the order was made to adjust without undue hardship to the termination of those payments."

s 31(7B): "the court has power, in addition to any power it has apart from this subsection, to make supplemental provision consisting of any of-

(a) an order for the payment of a lump sum in favour of a party to a marriage; […]"



The wife submits that although she regarded the husband's application as premature she was prepared to capitalise her existing periodical payments order. She submitted to Coleridge J that her existing capital fund of £1m savings would produce an annual income of £28,000 assuming a rate of return on that fund of 3.75% gross which she submitted was the rate of return that was to be regarded as 'standard'. Her income shortfall given her needs as quantified in the existing annual sum of £150,000 would be £122,000 which would require a Duxbury fund of £2.6m, which was her claim.


In the alternative, the wife submits to this court that if the judge had applied a rate of return of 3.75% gross to the capital fund that he identified, that rate of return would have produced a lump sum of £746,000 not £400,000. She does not contend for that sum save in the event that she does not succeed on the other significant limb of her case which is that the judge failed to have proper regard to the compensation principle in quantifying her needs and in particular whether she should have to downsize to release funds to generate income. She submits that to be required to do so damages the compensation element of her existing award, which should not be prejudiced by the changes that are to be made for the parties' futures.


The wife also submits that in coming to a conclusion about whether the judge erred in applying a rate of return to her capital fund of 3.75% net, this court should have regard to the draft judgment that was handed down to the parties for typographical correction. It is said that the draft judgment, together with the email exchange that followed, demonstrates a change in the substance of the judge's reasoning before he handed down the final judgment.


The husband submits that Coleridge J was entitled to apply the rate of return that he did (i.e. 3.75% net). He says that there is no 'industry standard' rate of return to be applied to non-amortised (as opposed to Duxbury) capital funds and even less so a rate of return that is acknowledged by the judges of the Family Division of the High Court to be of general application. There is no reported case dealing with the question and this court should decline to be drawn into identifying such a rate, at least in the absence of additional evidence and submissions on the point.


The husband also submits that there was no evidence before Coleridge J about the rate of return that he should apply. That being so, he was entitled to take notice of a rate that he (the judge) thought was appropriate and apply it to the underlying capital fund that he had identified. In the alternative it is submitted that in the exercise of his broad discretion the judge was entitled to conclude that £400,000 was fair.


The husband submits that the exercise of discretion is incapable of challenge and...

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