Richardson v Richardson and Another

JurisdictionEngland & Wales
JudgeLord Justice Munby,Lord Justice Rimer,Lord Justice Thorpe
Judgment Date08 February 2011
Neutral Citation[2011] EWCA Civ 79
Docket NumberCase No: B4/2010/0859
CourtCourt of Appeal (Civil Division)
Date08 February 2011

[2011] EWCA Civ 79

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

FAMILY DIVISION

MANCHESTER DISTRICT REGISTRY

His Honour Judge Raynor QC

(Sitting as a Judge of the High Court)

Before: Lord Justice Thorpe

Lord Justice Rimer

and

Lord Justice Munby

Case No: B4/2010/0859

MA08D00066

Between
Eric Keith Richardson
Appellant
Fraser Richardson (Executor of Harriet Ann Richardson Deceased)
Respondent

Mr Nigel Dyer QC and Ms Nikki Saxton (instructed by DWF LLP) for the Appellant

Ms Sally Harrison QC and Ms Lorraine Cavanagh (instructed by Pannone LLP) for the Respondent

Hearing date : 10 November 2010

Lord Justice Munby

Lord Justice Munby :

1

This is an appeal against a final order in ancillary relief proceedings made by His Honour Judge Raynor QC (sitting as a judge of the High Court) on 25 September 2009.

2

The appellant's leading counsel expressly disavows any attack on any aspect of Judge Raynor's judgment. The basis of his appeal is that two events which occurred after Judge Raynor had handed down his judgment and made his order constituted so called ' Barder events' – Barder v Calouori [1988] AC 20– and that one of them also demonstrated the order to have been vitiated by a common mistake of fact: see Judge v Judge [2008] EWCA Civ 1458, [2009] 1 FLR 1287, paras [3], [59].

The background

3

At the date of the hearing before Judge Raynor in June 2009, the husband and the wife, as it convenient to refer to them, were both 70 years old. They had been married for 46 years, though separated since 2004. They had one child, a son, born in 1968. The wife issued her divorce petition and her claim for ancillary relief in January 2008.

4

The husband and the wife had for many years been partners in every sense in a property and hotel business. The matrimonial assets were worth something of the order of £40 million gross, but were subject to many mortgage and other liabilities. The net value of the assets was found by the Judge to be £10,906,734. Many of the assets were held by a company, Richardson Hotels Limited, and others by a partnership, the Richardson Group, in which the husband and the wife were, both in law and in fact, equal partners. Sensibly and appropriately, for the purposes of the ancillary relief proceedings no distinction was made between the spouses and these entities. All the assets, however held, were treated as matrimonial assets available for division in the ancillary relief proceedings.

5

As will be appreciated from the great discrepancy between the gross and the net values of the assets, the various businesses were very highly geared and most of the assets were subject to mortgages. The parties' non-business borrowings exceeded £2 million; the business borrowings exceeded £27 million. Perhaps unsurprisingly, given the state of the economy when the matter came on for hearing before the Judge, the value of much of the property portfolio was depressed. Thus, for example, part of the assets held by the Richardson Group comprised a number of flats in Manchester which were in negative equity and being operated at a loss.

6

Before the Judge there was no dispute but that this was clearly a case calling in principle for an equal division of the assets between husband and wife. The real issue was as to how this should be achieved. The wife sought an equal division of the assets in specie, on the basis that the parties would share the ongoing liabilities. The husband, taking the view that the wife would not realistically be able to service the highly geared borrowings if there was such a division, sought an order which gave the wife some of the properties, the balance being made up by a lump sum.

7

Judge Raynor circulated his judgment in draft on 11 August 2009. It was formally handed down on 25 September 2009 when he made his order, sealed the same day. Essentially he adopted the husband's approach to the division of the assets. He ordered two properties, subject to their mortgages, to be transferred to the wife. He awarded her a lump sum of £3,352,500 payable by instalments. All in all, the wife received £5,180,698. The husband was left with the rest, including the bulk of the property portfolio. All in all, he received £5,726,035. The order provided for the wife to resign from the partnership and for the husband to indemnify her against all liabilities of the partnership. On 9 October 2009 the husband and the wife executed a Deed to give effect to her resignation from the partnership; clause 5.2 of the Deed contained the indemnity.

8

The effect of the order was to give the wife approximately 47.5% of the matrimonial assets. Judge Raynor explained the basis of the order as follows:

"However, I do not consider that it would be fair to the husband to make an award (£3,763,565) which would allow the wife a full 50% of the net assets. The effect of my order will be to leave him with 9 blocks of loss making flats with negative equity (and secured indebtedness of approximately £10m exclusive of the early redemption penalty), which no-one contends could or should sensibly be disposed of forthwith … There are no grounds for optimism as regards to the recovery of the Manchester residential flat market any time soon, nor any guarantee that the flats would realise their agreed value if sold in the immediate future. The hotel business that he will retain has considerable potential for growth as well as inherent risk and whilst it is encumbered by substantial secured indebtedness, it is possessed of assets of a gross value very substantially in excess of this …

I have concluded that a settlement, fair to both parties, will be achieved by the award of a lump sum of £3,500,000 together with the assets mentioned above, which will result in the wife obtaining approximately 47.5% of the net assets …

Notwithstanding her objections, I am of the view that such an award in the circumstances will result in a fair outcome for the wife, as well as the husband. She will retain the hotel she is devoted to … ; she will be able if she chooses to discharge the mortgages on that hotel and her home, together with her debts, and will be secure both as regards her capital and income positions … Alternatively, she may choose to invest in a new business, although I accept that probably not at rock bottom prices given the period of time for payment of the lump sum … True it is that the husband will have retained assets providing far greater potential for growth, but he will also have paid her a very substantial lump sum and accepted all of the risk-laden assets and assumed responsibility for the losses associated with the flats and SWAPS contract, in a situation where the wife was not in any event able to demonstrate that she was able to fund her proposals."

9

There is one other matter that needs to be referred to at this stage. On 1 July 2004 a little girl, then aged only 2, had fallen out of a first-floor window of one of the partnership's properties in Manchester, landing on her head. On 10 December 2008 proceedings had been issued on her behalf in the Stockport County Court. Although the claim form asserted that the claim was for £5,000 this was, as I understand it, merely a device to enable the claim to be issued in the County Court at a lower court fee than would have been payable had it been issued in the High Court. But the husband and wife knew that the girl had been seriously injured. The husband's evidence filed in support of this appeal shows that both he and the wife were aware as early as August 2004 that the child had suffered brain damage. Indeed, documents which were sent by her solicitors to the solicitors instructed by the insurer, and sent on by them to the partnership's insurance broker, Ms Downie, under cover of a letter dated 22 July 2009, include the child's hospital notes for the first few days after the accident. They recorded her as being "critical", on ventilation, with "dead areas in the brain", and marked as 'Do Not Resuscitate'. It was even contemplated that she might die overnight. Although, happily, she has made a significant recovery she remains seriously damaged by her accident.

10

The husband and the wife can have been in little doubt, both in 2004 and still in 2009, that if liability was established the damages might be substantial, possibly very substantial. However, no reference to this potential liability was made either in the schedule of assets and liabilities put before Judge Raynor or in his judgment. The husband (and the wife also, he says) assumed that it was covered by their insurance. By the time the order was made it was no longer of any concern to the wife (at least as between her and him) because the husband, as we have seen, was assuming responsibility for the liabilities of the partnership. The husband's evidence is that he told the wife that the insurer had been notified and "reassured her on a number of occasions that we were protected against any claims brought by [the child] by our insurance policy."

Subsequent events

11

On 25 September 2009, as we have seen, Judge Raynor finalised his judgment and made his order. On 4 November 2009 the wife died of a heart attack. The son is the sole executor and sole beneficiary of her estate. On 18 December 2009 the husband became aware for the first time that the insurer had avoided the policy, receiving that news in letters from the claimant's solicitors dated 16 December 2009 and from Ms Downie dated 17 December 2009, the latter being supplemented by an email sent to him by Ms Downie on 18 December 2009.

12

On 10 February 2010 the husband...

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