Vaughan v Vaughan

JurisdictionEngland & Wales
Judgment Date31 March 2010
Neutral Citation[2010] EWCA Civ 349
Date31 March 2010
Docket NumberCase No: B4/2009/2533
CourtCourt of Appeal (Civil Division)

[2010] EWCA Civ 349

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE, FAMILY DIVISION, PRINCIPAL REGISTRY

Mr Richard Anelay QC, sitting as a Deputy Judge of The High Court

Before: Lord Justice Wilson

Lord Justice Hughes

and

Lord Justice Patten

Case No: B4/2009/2533

Lower Court No: FD84D09776

Between
Philippa Mary Vaughan
Appellant
and
David Arthur John Vaughan
Respondent

Mr Christopher Wagstaffe (instructed by Hodge Jones & Allen LLP, London NW1) appeared for the Appellant.

Mr Nicholas Mostyn QC and Mr Timothy Bishop (instructed by Withers LLP, London EC4) appeared for the Respondent.

Hearing date: 4 March 2010

Lord Justice Wilson

Lord Justice Wilson:

A: INTRODUCTION

1

For convenience I will describe the Appellant as the wife and the Respondent as the husband notwithstanding that they were divorced as long ago as 1985.

2

The wife appeals against orders made by Mr Richard Anelay QC sitting as a deputy judge of the High Court, Family Division, on 3 November 2009. Ever since their separation in 1981 the husband had been making periodical payments to the wife; and, for the twenty years between 1989 and the date of the judge's order, he had been making them at the rate of £27,175 p.a. As it happens, they had then been payable as to £12,000 p.a. under a Deed of Separation (“the deed”), as varied, and as to £15,175 p.a. under an order for periodical payments. Before the deputy judge (hereafter “the judge”) was an application by the husband to terminate both parts of his obligation to make periodical payments to the wife. Also before him, however, was a cross-application by the wife for an order that its termination should be in consideration of his payment to her of a substantial lump sum by way of capitalisation, under s.31(7B) of the Matrimonial Causes Act 1973 (“the Act”), of what she contended would otherwise be his obligation to continue to make periodical payments to her. She contended that the lump sum should be in the sum of £560,000. By way of reply the husband conceded that, were he to be held to be under any obligation to continue to make periodical payments to her, his obligation should indeed be capitalised; but he contended, as before, that in the circumstances he was under no such obligation.

3

The judge acceded to the husband's application. Thus, in relation to the deed, the judge revoked the financial arrangements contained in it pursuant to s.35(2)(i) of the Act; and, in relation to the order for periodical payments, he expressed himself satisfied, pursuant to s.31(7)(a) of the Act, that the wife could adjust without undue hardship to the immediate termination of the payments and so he discharged the order under s.31(1) of the Act. In that he held that the husband was under no obligation to continue to make periodical payments to the wife, it followed that the judge dismissed the wife's cross-application for an order for the payment of a lump sum by the husband to her by way of capitalisation thereof.

4

Against these orders the wife appeals. By Mr Wagstaffe, who did not appear for her in the court below, she contends that the judge's determination was vitiated by legal error; that we should therefore determine the applications in his stead; and that we should order the husband to make to the wife a lump sum payment not of £560,000, but of £342,000, by way of capitalisation of his obligation, whether under the deed and/or under an order of the court, to continue to make periodical payments to her.

5

In particular the appeal raises a question about the proper treatment of the hypothetical claims of a second wife against the husband in the assessment of any obligation on his part to continue to make periodical payments to a first wife. It also touches, tangentially, upon whether, in the assessment under s.31 of the Act of the amount of the contribution which a wife can herself make to her own future support, it is appropriate to amortise capital held by her otherwise than as a result of transfer by a husband, namely in this case to amortise capital inherited by her.

B: THE BACKGROUND

6

The wife is aged 66. She has not remarried. She lives alone in a four bedroom house in Hammersmith which is in her sole name, free of mortgage and worth £1,091,000 net of costs of sale. She is a renowned expert on Islamic and Indian art but she now has no earned income. Her health appears good and she claims genetic longevity.

7

The husband is aged 71. He has remarried. He married the second wife (as I will describe her) in 1985. She is aged 56. They live together in a large house in North Kensington which is in their joint names and is worth £4,365,000 net of costs of sale. But it is subject to a mortgage of £737,000. They have two children, namely a son aged 22 and a daughter aged 19, both now at university. The husband still heavily subsidises the children; but the subsidy will not endure in the long term and, in the case of the son, should end after about two years.

8

The husband has been in practice as a barrister since the age of 24 and he took silk in 1981. He is a distinguished member of the bar and one of the leading exponents of E.U. law in England and Wales. It was with difficulty that this court was able to identify three of its members who were acquainted with him only so slightly that they could properly hear this appeal.

9

Unfortunately, however, the husband's health has been in serious decline during the last three years. For the time being he continues to do limited work at the bar; but the wife accepts that it is inappropriate to ascribe to him any future earning capacity for the purpose of these applications.

10

The husband and the wife were married in 1967 and they separated in 1981: so the marriage lasted for more than 13 years. There was no child of the marriage. At the time of the separation the husband was aged 42 and the wife was aged 37. In 1975 she had begun to work full-time at Christie's in her specialist field but from 1979 to 1981 she was working there only as a part-time consultant.

11

The deed was executed in September 1981, at the time of the separation. It provided that, out of the proceeds of sale of the parties’ home, the wife should receive £105,000 together with chattels, including an already valuable Indian desk which the parties had bought together; and that the husband should make periodical payments to her at the rate of £12,000 p.a. for two years and, thereafter, at a rate which would bring her income up to one third of their joint incomes.

12

In 1984 the wife petitioned for divorce; and in August 1985 the decree absolute was pronounced which enabled the husband to marry the second wife. At that time the wife did not activate her claims for ancillary relief. Instead there was a consensual variation of the deed, whereby the wife's periodical payments reverted to the fixed rate of £12,000 per annum and, perhaps as a quid pro quo for her relinquishment of the right to have her income brought up to one third of their joint incomes, the husband paid her a further capital sum of £40,000.

13

In 1989 the wife for the first time applied to the court for financial provision. In form it was an application under s.35 of the Act for an order for upwards variation of the provision in the deed, as already varied, for periodical payments at the rate of £12,000 per annum; but the wife seems to have been treated as having also activated the claims for ancillary relief made in her petition.

14

We have the benefit of a written judgment on the wife's applications delivered by Booth J on 20 December 1991. The wife accepted that, in the light of the payments of capital made to her in 1981 and 1985, there was no case for the husband to make further capital provision for her; and her capital claims were duly dismissed. In response to her application for increased periodical payments, the husband seems to have proposed a package of provision amounting nearly, albeit not entirely, to a clean break following two further years of substantially increased support for her. But Booth J rejected his proposal. The evidence was that since 1981 the wife had continued to work part-time for Christie's; that her expectation at the time of the variation in 1985 that she would obtain a senior full-time position there had not been fulfilled; and that in 1989 Christie's had even terminated her part-time employment. By the time of the hearing in 1991 she was aged 48 and Booth J found that she had an annual earning capacity of only £5000. By contrast the husband's gross annual income for tax purposes was by then already at least £243,000. Booth J held that the husband should be required to make periodical payments to the wife on a “long-term” basis: she thereby meant only an “indefinite” basis and the wife does not suggest that the terms of the judgment of Booth J by themselves precluded the judge from making the orders under appeal. Booth J also observed, however, that the history of the case did not warrant an award in excess of the wife's needs, albeit reasonably to be estimated. Booth J's order was that, because it was then tax-efficient for him to keep the provisions of the deed in place, the husband should continue to make periodical payments to the wife of £12,000 p.a. thereunder but that additionally he should make periodical payments to her under an order therefor at the rate of £15,175 p.a., backdated to 1989.

15

Thus it is that, from 1989 until the date of the judge's order, the husband made periodical payments to the wife in the total sum of £27,175 p.a. In April 2000 the husband lost tax relief on the payments...

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