Pearce v Pearce
| Jurisdiction | England & Wales |
| Judge | THORPE LJ,THE PRESIDENT |
| Judgment Date | 28 July 2003 |
| Neutral Citation | [2003] EWCA Civ 1054 |
| Docket Number | B1/2002/2786 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 July 2003 |
[2003] EWCA Civ 1054
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICEFAMILY DIVISION
(MR JUSTICE HEDLEY)
Royal Courts of Justice
Strand,
London WC2A 2LL
The President
Lord Justice Thorpe
and
Lord Justice Mantell
B1/2002/2786
LEWIS MARKS QC and PHILIP MARSHALL (instructed by Messrs Withers of London EC4M 7EG) appeared for the appellant.
FLORENCE BARON QC and CHARLES ATKINS (instructed by Messrs Levison Meltzer Pigott of London EC4A 3AE) appeared for the respondent.
The parties to this appeal married in 1963. The marriage was dissolved on 13 November 1997. However I will for convenience refer to them throughout this judgment as respectively the husband and the wife. The wife's financial claims were settled by a compromise that was made the subject of an order dated (appropriately, as Mr Justice Hedley was later to observe) on 11 November 1997. By its terms all capital claims between the parties were resolved. However for various reasons the accumulated family assets were not commensurate with the husband's considerable income. Accordingly the order provided that the wife should receive periodical payments at the rate of £36,000 per annum on conventional terms 'during their joint lives until the petitioner shall remarry or further order'. Furthermore by his second undertaking preceding the order the husband agreed that the wife should enjoy in addition the use of the holiday home in Italy, the ownership of which had been transferred to the two daughters of the marriage. There can be no doubt that the wife's continuing entitlement to income was accepted to be for her life since the fourth and fifth undertakings covered provision for the wife out of the husband's pension funds to cover any period by which she survived him.
At the time of this compromise the wife was living in a recently acquired flat in Chelsea. However in the following year she exchanged it for a property in Ireland which no doubt had potential but which required extensive renovation. It proved an unfortunate speculation. After two years it was sold at a loss of £50,000. Accordingly when she returned to London and to a changed market she could afford no more than a flat in Fulham, and even that was partially financed by a £30,000 mortgage repayable over ten years.
These misfortunes may have contributed to her request, by solicitor's letter of 26 April 2001, for an increase in her periodical payments order. The husband countered with an application dated 21 September 2001 for an order under section 31(7B) of the Matrimonial Causes Act 1973 for the dismissal of her outstanding claims. As the husband put it in his Form E of 6 December 2001:
"Due to a change in my financial circumstances (I have more capital but my income has reduced and is reducing further) I would like to apply to capitalise my former wife's maintenance."
The wife's reply was an application of 15 March 2002 for an increase in her periodical payments order and for capitalisation of such periodical payments. In Part III of her Form E she stated her reasonable future income needs to be £48,138 per annum, a figure particularised in the accompanying schedule of expenditure. The schedule was extensive covering sixty individual heads.
The cross-applications came on for hearing before Mr Justice Hedley on 26 November 2002. In the intervening five years since the consent order the wife had sustained capital losses and had lost the advantage of the escalation of the London property market during the years of her Irish venture. Her income had remained unchanged. By contrast the husband had prospered. He had earned considerably more after the making of the consent order than had been expected. He had also managed his capital assets astutely, with the result that his net worth excluding pensions exceeded £1.25M. However being 69 years of age, his income was declining. Whilst it had been approximately £270,000 per annum at the date of the consent order it had reduced to about £130,000 per annum by the date of the trial.
In those circumstances it was common ground that the wife should receive an increase in her periodical payments but the husband's position at trial was that he should not be forced to capitalise them because he could not afford so to do in the light of a potential outstanding tax liability. The wife submitted that she was entitled to a current periodical payments order at the rate of £60,000 per annum to be capitalised as a lump sum of over £800,000 on the application of the Duxbury tables. In contending for a periodical payments order of £60,000 a year she elevated item 58 in her schedule of expenditure (holidays/weekends away) from £4,000 to £20,000 per annum. For the husband it was submitted that the judge should ignore the annual cost of servicing both her mortgage and also a debt of just over £9,000. However it was common ground that the attempt to share the holiday home had not been successful and that the judge should also compensate the wife for the discharge of the husband's second undertaking. There were a number of subsidiary issues which have now fallen away.
The judge's broad conclusion was that the wife had established her reasonable future needs at the rate of £47,000 per annum. Although that resulted in a Duxbury capitalisation of £635,000, from that starting point the judge advanced to a final figure of £740,000, inclusive of £25,000 to compensate her for the future loss of use of the holiday home. The judge explained his conclusions in an extempore judgment at the end of which he refused the husband's application for permission to appeal. A notice of application was lodged on 30 December 2002 and permission was granted on paper on 24 February 2003.
Mr Lewis Marks QC, who was brought in to prepare and conduct the appeal, submitted that Hedley J had erred in principle in saddling his client with the future costs of servicing the mortgage and the debt. He further submitted that the judge was plainly wrong to have provided the wife with the annual cost of the mortgage repayment for the remainder of her life when the mortgage had only eight years to run. However Mr Marks' principal submission was that the judge had no jurisdiction to add an additional sum of at least £70,000 which was not directly referable to the capitalisation of the wife's periodical payments.
Miss Baron QC, who equally was brought in for the purposes of the appeal, contended that the judge's uplift of the Duxbury capitalisation was legitimate following the decision of Charles J in the case of Cornick v Cornick(No 3) [2001] 2 FLR 1240. She submitted that junior counsel at the trial had agreed that the judge should direct himself on that authority. She also contended that much of the argument in relation to the wife's mortgage had not been advanced at the trial. Finally she submitted that any lesser award would have been plainly unfair given that, even if the judge's order stood, her client would have only 27% of the joint assets.
This brief summary hardly does justice to the fluent and skilful oral submissions advanced by both Mr Marks and Miss Baron. I shall touch on some of them further in considering the issue that lies at the heart of this appeal, namely what is the ambit of the judge's discretion in determining a payer's application for an order under section 31(7A) and (7B)? Is his task simply to capitalise the respondent's ascertained periodical payments order at the level at which it stands immediately prior to discharge or is he entitled to redistribute capital assets more liberally in the respondent's favour? Mr Marks contends that the judge's watchwords must be compensation and substitution. Miss Baron submits that following the evolution of the court's approach initiated by the decision of the House of Lords in White v White [2001] AC 596 the judge is not confined to substitution but may readjust the division of family assets to ensure a fair outcome. In support of her proposition she of course relies on an apparent decision in her favour, namely that of Charles J in Cornick v Cornick (No 3).
Before coming to that authority it is important to set the statutory scene. Although the Matrimonial Causes Act 1973, itself consolidating the Matrimonial Proceedings and Property Act 1970, has never been substantially reformed, it has undergone considerable piecemeal modernisations to enable it to keep pace with social change. For present purposes I need refer to only three.
The Matrimonial and Family Proceedings Act 1984 with effect from 12 October 1984, removed from section 25 what has been described as the 'minimal loss objective' and by section 25A imposed upon the court a duty to endeavour to terminate financial obligations as soon as that could be done without undue hardship. That principle was duly reflected in an amendment to section 31(7) which thereafter required the court in exercising its powers to vary periodical payments orders not only to have regard to all the circumstances of the case (including any change in any of the matters to which the court was required to have regard when making the original order) but also to search for finality without undue hardship.
The second development was effected by the Family Law Act 1996 with effect from 1 November 1998. Into section 31(7) were inserted sub-sections (7A) – (7F). These of course include the powers specifically reviewed in this judgment.
Accordingly I set them out in full:
"(7A) Subsection (7B) below applies where, after the dissolution of a marriage, the...
To continue reading
Request your trial
-
Mills v Mills
...out in para 1 above. 35 In addressing the question, the court must consider three earlier decisions of the Court of Appeal. 36 First, Pearce v Pearce [2003] EWCA Civ 1054, [2004] 1 WLR 68. At the time of the original order in 1997 the wife had owned a flat in Chelsea free of mortgage. Late......
-
Grocholewska-mullins v Mullins
...be brought to an end. But the issue is whether the way that the judge did that complies with the guidelines laid down by this court in Pearce v Pearce [2004] 1 WLR 68 and in the other authorities dealing with the exercise of the section 31(7) power. What the judge held was that the husband'......
-
McFarlane v McFarlane ; Parlour v Parlour
...and obliging the wife to lay up £294,000 per annum as a reserve against the discharge of the periodical payments order; Pearce v Pearce[2003] 3 FCR 178 distinguished; Minton v Minton [1979] 1 All ER 79 Per curiam. (1) The practice of substantial earners to decline any statement of their nee......
-
Nichola Anne Joy v Clive Douglas Christopher Joy-morancho (First Respondent) Nautilus Fiduciary (Asia) Ltd (the trustee of The New Huertotrust) (Third Respondent) LCAL Anthology Inc. (Fourth Respondent)
...1973 Act. Such an application should however, if made, not be constrained by the approach to such applications advocated in the case of Pearce v Pearce [2003] EWCA Civ 1054, [2003] 2 FLR 1144 where the Court Appeal (at [37] and [38], in the words of the FLR headnote) stated that on applica......