H v T (judicial change of mind)
| Jurisdiction | England & Wales |
| Judge | MacDONALD J |
| Judgment Date | 20 December 2018 |
| Court | Family Division |
Financial remedies – Departure from equality – Needs – Whether departure from equality justified by housing need and disparity in income – Whether purchase costs taken into account – Failure to perform cross-check against equal division – Whether pensions to be included in total assets with or without discount.
The couple, both solicitors, were together for about 16 years; they had three children, all at private school. Following the separation the children divided their time more or less equally between the parents.
The husband was an equity partner with a large US firm earning £605,000 pa net, while the wife was an in-house lawyer at managing director level with a large investment bank, earning £171,000 pa net. The couple’s total assets were in the region of £1.76 million, including the family home, with an equity of about £721,686, and two foreign properties: foreign property A had an equity of about £134,777 and foreign property B had an equity of about £65,000. The wife wanted to retain foreign property A, because of her own and the children’s strong links with the relevant country. Foreign property B belonged to the husband and had been acquired by him before the relationship began. The husband’s pension had a capital value of just under £500,000 and the wife’s pension had a capital value of just over £600,000. The evidence was that if the wife retained foreign property A (which had a mortgage), she had an English mortgage capacity of about £770,000 and that if foreign property A were sold, she had an English mortgage capacity of about £1 million. However, the wife claimed that she would in fact be able to raise a mortgage of £850,000 and, in addition, to raise £100,000 against foreign property A. The husband was able to raise a mortgage of £1 million.
The judge required the husband to pay the school fees of £66,000 pa as well as the full cost of the nanny, £42,300 pa. In addition, he made a top-up child maintenance order (the CSA having confirmed a maximum assessment) of £24,000 pa. The judge decided that the couple had similar housing needs, each requiring a property costing about £1.25 million. He made no specific reference to costs of purchase. The judge stated that he favoured ‘a capital distribution slightly in favour of [the wife]’, going on to award the wife half the net sale proceeds of the family home (£360,000), the contents of her bank accounts (£59,000) and foreign property A. Even after taking into account the wife’s need to pay off her debts of £144,773, the judge considered that this distribution would leave the wife close to having a deposit of £375,000, sufficient for a property worth about £1.25 million. In addition, he ordered the husband to pay the wife a lump sum of £65,000, referring to the wife’s need for ‘liquidity’. The husband was to retain half the proceeds of the family home (£360,000), his bank accounts (about £29,000) and money owed to him (about £63,000) as well as, by implication, foreign property B. Even after taking into account the husband’s need to pay off his debts of about £210,000, the judge considered that the husband could, by using his partnership loan of £88,000, put down a deposit of £331,000 and purchase a property worth £1.25 million. The judge acknowledged that this sum would be immediately depleted by the £65,000 lump sum award to the wife, but considered that this outcome was justified by the wife’s need and that the husband would be able to make up the deficit from his superior earnings. There was, in addition, a pension sharing order in the husband’s favour to achieve equality of capital value in the pensions.
The husband then applied for permission to buy the wife out of her share of the family home; he said he was not questioning the assessment of needs, but trying to achieve an efficient property provision for both parties. The wife’s argument that she should receive an increased lump sum payment to reflect the savings that the husband would achieve by avoiding both sales costs on the old property and purchase costs on a new property was rejected. The judge granted the husband’s application and ordered the wife to transfer her half interest in the property on the husband’s payment of £425,843 (representing half the agreed net equity in the family home plus the lump sum of £65,000).
The husband then obtained permission to appeal the capital award. There was a dispute between the parties at the appeal hearing as to whether the pension assets should be included when considering the overall division of the assets between the couple.
At the conclusion of the appeal hearing, the High Court judge circulated his draft judgment to counsel and solicitors, with the usual rubric; the draft judgment allowed the husband’s appeal and varied the lump sum order made by the judge, on the basis that it provided the wife with more than the judge had found she needed to house herself. However, before the judgment was handed down, the wife’s counsel invited the court to reconsider, arguing that there was a significant material omission in the figures underpinning the court’s conclusions, in particular that the purchase costs of £76,000 had not been factored in. The judge invited further written submissions and provided for a further short hearing to explore the issue further. In submissions, the wife relied in particular on the transcript of two hearings, during which her counsel had referred to the relevant purchase costs and also on the arithmetic set out in the original judgment.
The couple’s legal costs were in the region of £550,000 (excluding the costs of the Children Act proceedings and the last application about the family home).
Held – (1) Although the judgment below had been opaque with respect to the question of purchase costs, it was clear from examining the wider material that such costs had formed part of the judge’s calculations. The court was satisfied that it had omitted to factor in the purchase costs of a new property in reaching its original conclusion that the judge’s capital award to the wife exceeded the wife’s need. The consequence of that omission being pointed up was that the court had changed its conclusion on the outcome of the appeal. Although there was nothing to prevent this change of mind, following careful reconsideration, because, applying Re L and B (children)[2013] UKSC 8, the court had not formally handed down judgment, the court was conscious that judicial tergiversation was, rightly, not encouraged. However, a judge must have the courage and intellectual honesty to admit and correct an error or omission. Whilst this was an uncomfortable exercise for the judge, particularly where the error or omission resulted in a change to the decision handed down in draft, a judge was duty bound to correct his or her omission or error. To do otherwise would not be just (see [34], [80], below).
(2) The judge’s reasoning was less than clear from the judgment. His departure from equality appeared to be based on (a) the extent of the wife’s housing need and (b) the disparity in income between the husband and the wife. However, it was difficult to identify with further specificity the factors and the reasoning underpinning his conclusion. In any event, at no point had the judge stepped back and evaluated the overall effect of his analysis in terms of the percentage distribution of the matrimonial assets, in order to satisfy himself and to demonstrate that his decision did in fact represent his stated intention of making a ‘capital distribution slightly in favour of [the wife]’. Further, the judge did not appear to have considered the extent to which the wife’s income would, by reason of the obligations being placed on the husband, remain largely unimpeded, or the fact that the husband was providing the wife with a significant indemnity in relation to the costs of generating her own income. He also did not seem to have factored into his evaluation the fact that allowing the wife to retain foreign property A to borrow against (or sell if she preferred), meant, that on the expert evidence before the court, the wife’s mortgage capacity was significantly reduced, with a concomitant increase in her need for capital, resulting in an additional call on the husband’s share of capital (see [41], [42], [87], [88], [96], below).
(3) As this was plainly a case of need, it was not necessary to reach a definitive conclusion on the precise method used for calculating the division of family’s assets at first instance. On the figures before the court, including the pension, the judge’s award had resulted in an overall division of 59/41 per cent in favour of the wife. Whilst it was debatable whether this constituted the ‘slight’ departure which had been aimed for, the division arrived at had been open to the judge, in circumstances where both parties had the same housing need and where one party earned at a considerably higher level than the other. Equally, whilst another judge might have decided, having regard to the burden placed on the husband with respect to the outgoings for the children, to order the sale of foreign property A, thereby allowing the wife to utilise her greater mortgage capacity in England, in light of the judge’s conclusions regarding the importance of foreign property A for the wife and the children, the wife’s ability to raise a mortgage of £850,000 in England plus an additional sum of £100,000 against foreign property A, and within the context of the husband’s significantly greater earning capacity, the court was not satisfied that the judge’s award could be said to have been wrong, given that it met the wife’s identified need precisely (see [74], [95]–[97], below).
Comment – Where both parties were adults, there was an argument that it was a matter for them if they wished to inflict on themselves grievous financial self-harm; however, the ratio of capital to legal costs in this case was alarming and strongly to be deprecated. The court hoped...
To continue reading
Request your trial