JL v SL
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mostyn |
| Judgment Date | 09 March 2015 |
| Neutral Citation | [2015] EWHC 555 (Fam) |
| Court | Family Division |
| Date | 09 March 2015 |
| Docket Number | Case No: FD12D00611 |
[2015] EWHC 555 (Fam)
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
Civil Hearing Centre
Coverdale House, Leeds, LS1 2BH
Mr Justice Mostyn
Case No: FD12D00611
Alexis Campbell (instructed by Family Law in Partnership) for the Applicant
Richard Bates (instructed by Kidd Rapinet) for the Respondent
Approved Supplemental Judgment
On 16 February 2015 I sent out my principal judgment in draft, seeking any typographical or other corrections of a serious nature by the following day. Both counsel made nil returns, although Miss Campbell mentioned that she was out of the country. Accordingly my judgment was finalised, handed down on 18 February 2015, and placed that day on Bailii: JL v SL (No. 2) [2015] EWHC 360 (Fam)1.
On 25 February 2015, a week after the hand-down, I received from Miss Campbell a lengthy request for amplification of my calculations and reasons. This is totally unacceptable. In that period I had left to sit on circuit and had dealt with much other work. Inevitably the details of this case had faded from my mind. The system depends on requests for clarification of the draft to be submitted promptly and in any event before the judgment is finalised and handed down. If Miss Campbell had anticipated that following her return from holiday she would seek amplification then she should have said so and asked for the hand-down to be deferred. That would have been considered by me on its merits.
I have been tempted to reject Miss Campbell's request summarily as being too late. But I will not do that and will address her arguments, if only to dispel what seem to be serious misconceptions on her part.
I append as the annex to this supplemental judgment the request made by Miss Campbell. It can be seen that 13 separate questions are posed. I am not going to answer them by rote exam-style, as many of them are founded on the misconceptions which I will dispel.
I turn to Miss Campbell's first 6 points which are grouped under the heading "Application by W for amplification of calculations".
In my principal judgment I used the Duxbury algorithm to calculate the wife's needs for the three phases I identified. I started with phase 3 (see para 58). The figure calculated was £1,191,357. I found that part of this fund would be met by the wife's pension share of £650,000. That was a perfectly reasonable assumption to make given the greatly increased flexibility afforded to the holders of pension funds by the Taxation of Pensions Act 2014, which received royal assent on 17 December 2014. It probably would have been a reasonable assumption even had the reform not been enacted. I heard no argument to the contrary at the hearing. It would have been unreal to take some annuity figure calculated by a pension expert for the trial before District Judge Reid in October 2013 well before the pension reforms were announced in July 2014. This deals with Miss Campbell's point No. 4.
I explained in para 58 that in order to build the phase 3 Duxbury fund the wife would need to preserve carefully £541,357 but that she would have available investment income from that sum to meet immediate needs in phases 1 and 2. I took the Duxbury norm of 3% gross. Miss Campbell asks at her point No. 2 "does the Duxbury calculation of £1,191,357 assume gross investment income on the preserved element of £541,357 remains invested in the fund?" The answer is a categorical no. The calculation in fact assumes that the sum will more than maintain its value in real terms enjoying the Duxbury norm for capital growth of 3.75% while experiencing inflation of 3%. So in real terms, on these norms, it will grow by 0.75% annually while the whole of its income yield will be available for meeting needs in phases 1 and 2. This would have been obvious from reading the explanatory text to Table 14 in the 2014–2015 edition of At A Glance.
Prompted by Miss Campbell's propositions I have considered an alternative approach to the computation of the wife's needs starting from the position that she has immediate funds of £1,302,491 available to her, which will be augmented by earnings (in years 4–10) of around £14,800 (which at current rates of tax would be £13,007 p.a. net), together with a pension share of £650,000 (in 2015).
i) On the assumption that the pension fund continues to grow, untaxed, but at a rate of only 3.75% p.a. by the date of the wife's need to draw upon it, it would be worth around £974,500 of which 25% (or £243,625) being the tax free lump sum will be a direct accretion to her invested funds. I have adopted a return rate of only 3.75% in relation to the pension growth so as not to need to compensate in the arithmetic for inflation.
ii) The balance of around £731,000 could be drawn down by the wife under the new regulations, at a gross rate of at least £29,235 p.a. for the remainder of her life expectancy.
iii) On that basis by the time the wife is 60 (and before she has touched her pension), and if the wife spends at the rate referred to in paragraph 57 of the main judgment, the wife's capital will remain undiminished (i.e. as I said in paragraph 60 of the main judgment, she should not, in that phase, be required to amortise her capital).
iv) Even after she takes her pension, and ceases to have any earned income at the age of 60 or 61, on those assumptions, her capital will continue to grow. By the assumed date of her death in around 39 years according to the mortality tables, her capital wealth will have grown in absolute terms to over £2.3m although with the effect of inflation that would have a real value of only about £860,000.
v) Since this is considerably more than the present value of her share of the non-matrimonial assets (i.e. £465,000) it is clear that, as my original methodology demonstrated, she is easily able to adjust to independence with her share of the matrimonial and non-matrimonial property, without undue hardship and without even eroding all of her share of the matrimonial property, let alone eating into her non-matrimonial property. She will, of course, also still have her unencumbered home with a present value of over £900,000. She would thus have, in today's money, on this alternative basis, around £1.5m to pass on at her death, subject to inheritance tax.
These explanations by me dispose of all of Miss Campbell's points 1 – 6.
I turn to her next section headed "Application by W for amplification of allegedly inadequate reasons for the decision" and the seven points grouped in it.
In her point 8 Miss Campbell asserts that "the Duxbury formula is a tool but not an accurate reflection of real rates of return" which I found to be a statement both bold and, perhaps more importantly,...
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