Potter v Potter
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE ORMROD,LORD JUSTICE DUNN,SIR SEBAG SHAW |
| Judgment Date | 21 June 1982 |
| Judgment citation (vLex) | [1982] EWCA Civ J0621-2 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 82/0270 |
| Date | 21 June 1982 |
[1982] EWCA Civ J0621-2
Lord Justice Ormrod
Lord Justice Dunn
and
Sir Sebag Shaw
82/0270
1978 D 512
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
ON APPEAL FROM BOURNEMOUTH COUNTY COURT
(His Honour Judge Ewart James)
Royal Courts of Justice
MR. F. A. ABBOTT (instructed by Messrs Watts Vallance & Vallance, solicitors, London; agents for Messrs Coles, solicitors, Poole) appeared on behalf of the Appellant (Respondent).
MR. STEVEN D. WHITAKER (instructed by Messrs Phillip Evans & Co., solicitors, Bournemouth) appeared on behalf of the Respondent (Petitioner).
I will ask Lord Justice Dunn to give the first judgment in this case.
This is an appeal from an order of His Honour Judge Ewart James sitting in the Bournemouth County Court on 7th April this year whereby he ordered the husband (I shall call the parties husband and wife although there has been a decree absolute) to transfer his interest in the former matrimonial home to the wife. He also ordered the husband to pay to the wife a lump sum of £22,500, together with a sum of £1400 in respect of loss of pension, making a total of £22,900. The husband now appeals against that order.
The history of the matter is that the parties were married in 1968 when the husband was 26 and the wife was 22 years old. According to the learned judge they began to drift apart after about four years and in 1974 the husband left and set up home elsewhere. They were divorced in 1979 on the basis of the husband's adultery with a woman with whom he is still friendly and who spends time at a house which he has bought since the separation. The wife has also formed an association with another man, though both husband and wife say that they have no intention of remarrying. There are no children.
They are both plainly very able people. The wife worked throughout the marriage and still works. She is obviously a very competent secretary: she was employed by a well-known firm of estate agents at the time of the marriage, and she then moved to a local authority where she is now personal secretary to the chairman and chief executive.
The husband has also done very well in business. He has his own photography business. He was in quite a small way of business at the time of the marriage but he has now built up the business. He operates it through two separate business names, although he, in fact, is the person who is responsible for the success of it.
The learned judge found that, during the marriage, the wife had contributed to the home from her wages and also helped at week-ends and at other times in the business as and when she could. One of her complaints about the husband was that he neglected her, because all his time and energies were devoted to the business, and also that he kept her short of money because he ploughed back any money that he made into the business.
It was against that background that the learned judge had to consider the matter.
The matrimonial home was in their joint names. It was bought for £4,400 with the assistance of a loan from the husband's grandfather, on which he paid interest. It is a three bed-roomed house and the wife now lives there. She told the learned judge that she did not want to move.
The judge having made certain findings of fact as to the means of the parties, approached the case on the basis of adding together the capital assets of both parties, dividing those assets by one-third, deducting the wife's assets and, having done that exercise, he arrived at a figure of some £30,000 as being the appropriate figure for the order. Since the marriage had only lasted six years, the judge felt that that was too high, so he said that the wife had to be compensated for the deficiency in income which she had proved. The wife's evidence was that her outgoings exceeded her income by some £22 a month, and it was accepted that the husband has been making payments in respect of rates and gas to a total of some £58 a month. The learned judge accepted that the wife needed some £80 a month in order to keep up her present standard of living. Accordingly, on the basis of some figures which had been put before him, the judge arrived at the figure of £22,500 which he said was the necessary capital to enable this lady to make good the deficiency in income.
The learned judge justified his original approach of applying the one-third rule by reference to the case of Slater v. Slater reported in The Times newspaper on 26th March 1982, a case in which the President, sitting in this court, is reported as having said:
"The one-third guideline might not be particularly helpful in cases involving very large or very small sums of money, but in cases in between it was still useful".
Lord Justice May said:
"Although one could not approach the case in a strictly arithmetical way, it would clearly be of assistance to the parties' advisers to have as precise a line of approach as was possible."
Slater v. Slater was concerned with periodical payments, and it was in that context that this court made the observations which it did in relation to the one-third guideline. In straight-forward cases of applications for periodical payments where the incomes of the parties are readily ascertainable, the one-third guideline is indeed a useful rule of thumb, and one that has been adopted by the profession for many years as a readily ascertainable approach to the kind of income liability under which a husband might be expected to find himself. But this court has said over and over again that in cases involving the redistribution of capital, the one-third approach is not appropriate.
This case is a good example of the practical disadvantage of this approach, because in order to arrive at a figure of a proportion of one-third, a global figure has to be arrived at and where, as in this case, the husband is engaged in a one-man business, that involves a valuation of the business. This is a necessarily hypothetical exercise because the only way that it can be done is for those valuing it to assume that the business would be sold, and that, of course, is the one thing which in fact is not going to happen, and very rarely does happen. This case is a particularly acute example of the result of approaching these cases in this way. No fewer than four accountants were instructed to value this comparatively small business. Three of them were called to give evidence; none of them agreed as to their conclusions, which were hotly contested: there was disagreement as to the proper way of arriving at a figure of goodwill for a business of this kind; there was disagreement as to the proper figure to be attributed to a notional managerial expense which, on one theory, was necessary to deduct before arriving at the goodwill: and there was disagreement as to whether or not the incidence of capital gains tax and other taxes was a proper deduction from the valuation of the business. We were told that the total cost of this inquiry amounted to some £12,000, the bulk of • which no doubt will be payable to the accountants.
At the end of the day, this exercise, namely the detailed valuation of the business, is an almost wholly irrelevant consideration.
In a case of this kind, the proper approach of the court should be to take the wife's reasonable requirements and balance those against the husband's ability to pay. That involves a general consideration of his sources of income and capital and, in particular, of his liquidity. As this court has said many times, the best way to arrive at...
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