O’Dwyer v O’Dwyer
| Jurisdiction | England & Wales |
| Judge | FRANCIS J |
| Judgment Date | 12 July 2019 |
| Neutral Citation | [2019] EWHC 1838 (Fam) |
| Court | Family Division |
Practice and procedure – Time estimates – Duty to inform court if known to be incorrect – Costs implications.
The couple were married in 1988 and separated in March 2016; they had four adult children. The husband was 62; the wife was 60. Since the separation the wife, an American citizen, had returned to live in the USA. For many years the husband had run a McDonald’s franchise. With the assistance of expert valuations, the couple agreed a net value of the business at £2.409 million. Although the business was 90 per cent owned by the husband, the couple both considered this to be a ‘sharing case’. In her Form E, the wife assessed her needs at ‘not less than £10,000 per month’ but later produced a budget of £15,000 pm.
In his draft judgment, circulated in December 2017, the judge required the husband to pay the wife £2,932,739, half the total in the wife’s schedule of assets, having allocated a total housing fund to the wife of £1.128 million ($1.5 million including cost of acquisition). In the judge’s view, after making allowance, in addition, for the costs of a car, currency fluctuations and other expenses, the wife would have an investment fund of £1.776 million (the parties later agreed that this was an error and that the correct figure was £1,732,739). The judge stated, ‘that sum, given the maintenance level for the next five years, would be entirely preserved and should grow’. The judge went on to suggest that the husband should pay the wife periodical payments for a five-year term, after which the wife’s claims were to be dismissed, with a s 28(1A) bar. In making his award, the judge said that: ‘it is clear that the business itself produces these incomes and of course although Mr O’Dwyer should have credit for the management of the business to a significant figure [sic] however the ownership of these franchises is much valued asset [sic] for the income stream. I identify that they are matrimonial property. I identify that their value is not only the capital value at this point but also the income that they will produce over the coming years.’ He went on to say that ‘this approach also leads to a true determination of the reasonable needs of the wife’, continuing: ‘as to the level of periodical payments I have considered the wife’s outgoings. In the main they are reflective of the standard of living of these parties however in the light of a net income available to Mr O’Dwyer in the region of £400,000, I am satisfied that the level of periodical payments of £150,000 per annum is appropriate’.
Although amendments to the draft judgment were provided (albeit late), the judge never circulated a perfected judgment. The wife’s counsel sent the husband’s counsel a draft order on 12 January 2018; the husband’s counsel eventually sent the wife’s counsel an amended draft order on 6 February 2018. Counsel agreed that a further hearing was necessary to resolve certain issues. Following that hearing, no perfected judgment was handed down in respect of the queries about the order.
The lack of a final judgment or an agreed order, led to difficulties in the husband’s attempts to appeal the periodical payments element of the order (the husband had paid the relevant lump sums and there was no appeal against the capital element). The court office would not issue, and therefore would not date or seal, the husband’s notice of appeal without an order in place. Eventually, the husband’s permission hearing (with appeal to follow if permission was granted) was listed for one day, plus half a day’s pre-reading. However, the bundle contained almost 400 pages as well as a bundle of 19 authorities from the wife and five authorities from the husband (further authorities were handed up during the hearing) and there was insufficient time. The judge decided to hear the case and reserve judgment, rather than to delay further. He did not grant a stay of the periodical payments order but instead ordered the husband to make the payments due under the order to a solicitors’ account, with the sums paid to be held until the outcome of the appeal was known.
The wife’s counsel initially argued that the 21-day time limit set out in r 30.4(2) of the FPR 2010 should have been adhered to and that, as no application had been made for permission to vary the time limits, permission to appeal should not be granted.
Held – (1) It would be unfair and prejudicial to the husband to hold the relevant time limits against him in circumstances where those acting for him had done all they reasonably could to progress the application for permission to appeal. These were extremely unusual circumstances. In the unlikely event that a judge again failed to perfect either the judgment or the order and repeated attempts to persuade the judge to finalise his order failed, the matter should be taken up with the office of the President of the Family Division (see [6], below).
(2) Whilst accepting that in this case the time estimate had initially been made by a High Court judge (who had disagreed with the longer time estimate suggested by the husband’s counsel), there was a general duty on counsel and solicitors to inform the court if it was obvious that the time estimate was incorrect. Failure to do so was likely to result in the case not being heard and this plainly could have substantial costs implications (see [7], below).
(3) The judge had been plainly wrong to identify the income stream as matrimonial property. Any remaining doubts as to whether an income stream was an asset which could be shared, save for the purposes of paying for needs or compensation, had clearly been dispelled by the Court of Appeal in Waggott v Waggott [2018] 2 FLR 406 (judgment handed down after the main hearing in this case). It was now settled law that income could not be shared. An award of periodical payments (absent rare compensation cases) must be based on properly analysed arithmetic reflecting need, albeit that the judge was still left with a significant margin of discretion as to how generously the concept of need should be interpreted. If a bonus was earned during the marriage but not paid out until after the marriage had ended then there was every reason to treat it as matrimonial property in the true sense. Sharing bonuses that were generated or earned after the marriage ended would usually be possible only by reference to the principles of needs and compensation. This had not been a compensation case and there were almost no examples of successful compensation claims in the reported cases. It was not possible to discern from Waggott any suggestion that an earning capacity in a long marriage was to be treated differently from one in a short or medium-length marriage, nor any suggestion that the age of the person running the business was a material factor. Following a valuation, the wife had received half of the agreed value of the business as at the date of the lump sum payment, so the income was not payable to the wife as profit from the 30-year family partnership, even subject to the judge’s finding that the husband should have credit for the management of the business to reflect post-marital endeavour. It would have been possible for the judge to have awarded the wife a capital sum in respect of her half of the business together with some form of balancing payment in the event that the business sold for a substantially different amount than the agreed value. However, it would be a rare case when it was appropriate to do this, having regard to the clean break principle. In rare cases the judge had the power to adjourn lump sum claims, if it was thought appropriate to do so, for example when ascertaining value was extremely difficult but the judge had been correct in this case to decide that he needed to resolve it. Although the judge had not failed to give proper weight to the clean break principle, in that he had imposed a five-year term with a s 28(1A) bar, there was no suggestion in Waggott that even a short period of sharing of income could be justified, other than by reference to the doctrines of need and compensation (see [18], [22]–[25], [28]–[30], [34], below).
(4) Having plainly alighted upon this figure for periodical payments by reference to the sharing principle, the judge had nevertheless also sought to justify it by reference to needs. There was a disconnect between the judge saying that the income stream was matrimonial property and that this approach led to a true determination of the wife’s reasonable needs. The judge’s task was to assess the reasonable needs of the wife and then to assess whether the capital provided to her was sufficient. The potential unfairness in the fact that the wife had to start living on her capital straightaway (whether or not amortised), whereas the husband did not, was the inevitable and direct consequence of the fact that an earning capacity was not subject to the sharing principle. Only if the judge found that the capital remaining in the wife’s hands, after providing for her reasonable housing and other assessed capital needs, was insufficient to provide for her income needs, could he then go on to consider an award of periodical payments. If he reached this stage, the judge would have a broad discretion both as to the assessment of need and as to the issue of amortisation. While entitled to be generous to the wife in terms of assessment of her maintenance requirement by reason of the fact that the husband would be enjoying a substantial income, a judge was not entitled simply to take a round number without reference to any arithmetic, and in particular (a) the recipient’s needs; (b) the income that the recipient’s capital would generate and (c) whether or not the recipient’s capital should be amortised; and, if so (d) from what date the recipient’s capital should be amortised. Parties in financial remedies cases, often acting without the benefit of legal advice, needed to know how judges alighted upon a particular figure for...
To continue reading
Request your trial