Parra v Parra

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
Judgment Date20 December 2002
Neutral Citation[2002] EWCA Civ 1886
Docket NumberB1/2002/1159

[2002] EWCA Civ 1886

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE – FAMILY DIVISION

(MR JUSTICE CHARLES)

Royal Courts of Justice

Strand

London WC2A 2LL

Before

Lord Justice Thorpe

Lord Justice Sedley and

Lord Justice Latham

B1/2002/1159

Between
Pepe Luis Parra
Appellant
and
Yvonne Katrina Parra
Respondent

JEREMY POSNANSKY QC (instructed by Messrs Boodle Hatfield of Oxford OX1 2BX) appeared for the appellant.

JONATHAN COHEN QC (instructed by Messrs Lucas McMullan Jacobs of London E10 7AA) appeared for the respondent.

THORPE LJ:

1

The parties were married on 15 November 1980. At the date of this appeal they are both 44. They have two children, a boy of 17 and a girl of 16, both at fee-paying day schools. In about 1987 the couple launched the family business, 2 Heads Global Design Limited, a company that subsequently prospered greatly. Each held 50 shares and both worked hard to make the company a success. In 1993 they bought in their joint names a four acre brownfield plot known as Star Works at Checkendon to provide a site for the company's future activities. They held their ownership of the site separate from their ownership of the company.

2

The marriage failed in early 2000 and in July the final matrimonial home was sold. The wife received the proceeds which enabled her to purchase her present home for £520,000 subject to a mortgage of £90,000. The husband borrowed almost all the cost of a flat which he has recently sold at a loss. He intends to move into one of the two cottages on the business site which has in the past been occupied by the company.

3

Each petitioned for divorce and on 8 January 2002 a decree nisi was pronounced on the wife's petition. The wife's participation in the management of the company ended in January 2001. Thereafter the husband made voluntary arrangements to support the wife and the children. The financial proceedings commenced in the Reading County Court and were listed for an FDR hearing on 5 July 2001. That hearing was aborted by a belated claim from the wife that the Star Works site could and should be sold for residential development. That resulted in an order transferring the case to the High Court with a direction for the trial of the preliminary issue:

"Whether the ancillary relief application should be adjourned to enable an application to be made for planning permission for residential development of the Star Works Kit Lane site."

4

In the Principal Registry a direction was made that if the outcome of the preliminary issue trial was the refusal of adjournment then the ancillary relief application should be determined within the same fixture. Three days were allowed. The case came before Charles J on 14 January. He gave three days to the preliminary issue at the end of which he rejected the wife's contention that the Star Works site was ripe for residential development for reasons which he reserved for incorporation in his judgment on the application that was to follow. Three further days were devoted to the trial of the application. After reserving his judgment Charles J worked assiduously on its preparation. He sought answers and comment from leading counsel for the parties in written exchanges. Later he acceded to an application by the husband to reopen the evidence at a hearing on 22 March. On 22 April he sent out his draft judgment. On 8 May he held a further hearing to deal with a number of issues arising out of the draft judgment, which he then handed down. At a hearing on 22 May he handed down a separate judgment on costs. To the main judgment there was annexed a schedule setting out the judge's preliminary view as to the form of provisions and covenants binding on the parties and their estates to ensure that in the event that the husband ever realised the potential inherent in residential development of Star Works after the judgment the gain should be shared equally with the wife. This mechanism has generally been referred to as the claw-back provision. We were told that the mechanism is known to conveyancers as overage.

5

Charles J refused the husband's application for permission to appeal and his application to this court for permission was lodged on 31 May. On 7 June I ordered the application to be listed for oral hearing on notice with appeal to follow, with a one-day time estimate. On 18 June the wife filed a respondent's notice seeking permission to appeal the judge's costs judgment. Pending the hearing in this court each party instructed an expert conveyancer to settle the terms and provisions of the claw-back provision ordered by the judge. Their respective submissions were submitted to Charles J in writing and on 26 November he delivered his preliminary determination on those written submissions. Although his determination runs to some 47 paragraphs it is tolerably clear that it is not by any means conclusive and the indication is that an oral hearing would be required to determine the detail and extent of the claw-back provision if it survives the attack which the appellant has mounted on it before us.

6

The judge's order, perfected on 28 May, is (relatively) complex. Its essential structure provides for the wife a lump sum of £925,000 in return for her half-share in the company and in the premises at Star Works. In addition she receives the benefit of the charge over the premises to guarantee her half the net gain resulting from future residential development. Finally the order provides periodical payments to each child at the rate of £5,000 per annum and for the husband to pay the costs of their education.

7

The judgment that explains the order is long and conspicuously thorough. It consists of 39 pages, omitting the schedule and the 10 pages of the costs judgment. However approximately 14 pages explain the judge's determination of the preliminary issue. In summary the evidence established that there was a negligible prospect of residential development in the short or medium term and that any prospect beyond that was exceptionally low because it was entirely dependent on a wholesale shift in national and local planning policies. We are not in any way concerned with those issues which are not the subject of appeal. The judge's judgment has subsequently been reported at [2002] 2 FLR 1075. The structure of that part of the judgment with which we are concerned emerges from its sub-headings. The judge turned first to introduce the section 25 exercise and proceeded to what he identified as the main issue, namely whether there should be a clean break or a clean break with a claw-back. Having dealt with other issues, he established the assets, liabilities and valuations that were in play. He next explained why he imposed the claw-back provision and reasoned the figure of £925,000 as the wife's lump sum. That figure resulted in an overall division of assets that gave the wife 54.3% and established the divergence of 8.6% between the wife and husband. In the final sections of the judgment the judge offered an overview and dealt with some miscellaneous matters.

8

At the outset of the hearing of the appeal we granted permission on both applications and stood over the wife's cross-appeal on costs to await the outcome of the husband's attack on the judge's conclusions. The attack falls into the following broad sections:

i) Mr Posnansky QC submits that the wife should not have received a greater share of the family assets. Whilst he conceded that she was entitled to an equal share if the court had ordered the sale of the company and the Star Works site, he submitted that the wife should otherwise only have received 45% to reflect the illiquidity of the family assets and the huge burden of debt that the husband would have to assume in order to pay her out.

ii) Second Mr Posnansky submitted that the claw-back provision was unprincipled. The agreed value of the Star Works site at trial contemplated its development potential. The valuers had allowed little or nothing for hope value simply because the development prospects were too slim to merit any uplift. To impose a claw-back provision was to impose an unreasonable fetter on the husband's future ownership, inhibiting his ability to borrow against the security or to let the site in whole or in part. Finally he submitted that the imposition of a covenant of indefinite duration was plainly inconsistent with the court's duty to strive to liberate the parties by a clean break.

iii) Third Mr Posnansky submitted that the consequence of the judge's elevation of the lump sum to a figure of £925,000 imposed on the husband an obligation to borrow £1.05M in order to implement the order. That was a massive and daunting burden which his client might well be unable or unwilling to bear. It was wrong of the judge seemingly to have ruled that, if he declined to bear it and elected to sell the company and the Star Works site, the wife should still receive 54.3% rather than 50% of the largely liquid family assets.

iv) Fourth Mr Posnansky submits that the judge was wrong in principle to saddle his client with the full costs of the children's education after not only giving the wife more than half the family assets but also giving her the majority of that share in cash.

9

Mr Jonathan Cohen QC in his response essentially sought to uphold the judge's reasoning on the four points against which Mr Posnansky's attack is directed. As to the quantum of the lump sum he emphasised, of course, that the judge exercised a broad discretion and that we should not tinker. He submitted that the judge's conclusion that the husband was capable of discharging the lump sum by a borrowing of £1.05M was well...

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