Wodehouse v Wodehouse
| Jurisdiction | England & Wales |
| Judge | SIR ANDREW McFARLANE P,KING,COULSON LJJ |
| Judgment Date | 29 November 2018 |
| Court | Court of Appeal (Civil Division) |
Financial remedy – Trust – Order against third party to pay sum in default of husband’s payment – Jurisdiction to make such an order – Value of Financial Remedies Court.
The couple met in 1988 and married in 1992. They had no children. The husband was a beneficiary under two family trusts; his interest was essentially a one quarter interest in the trust assets on the death of the main beneficiary, his mother.
During the marriage the couple originally lived in the wife’s property, purchased before the couple met for £75,000, with a £30,000 mortgage. In 1990 the husband was made bankrupt; he was discharged from bankruptcy in 1994. In 1998, the wife sold the property and advanced £30,000 of the proceeds to the husband to assist with his new business. Using the balance of the proceeds of sale, the wife purchased a rental property in her sole name. In early 2000, the wife raised funds by way of mortgage on the rental property, giving £11,000 of the funds raised to the husband to assist with his business. In 2003, the rental property was sold for £133,000 and, after repayment of the mortgage, the husband received a further £19,000 and the wife £44,000.
In the meantime, a new matrimonial home, VR, had been purchased for £130,000, with a mortgage of £110,000; the equity in this property came from the husband, who invested £26,000 in it, including purchase costs. Then, in 2007, the couple moved into a different home, SH, purchased in joint names for £392,000 using funds (£405,489.71) provided from the husband’s main family trust, secured by a first legal charge. This was intended by the trustees to be merely a short-term bridging loan; the expectation was that the equity released by the sale of VR would be used to pay, in whole or in part, the sum advanced. However, instead, the husband increased the mortgage on VR to £350,000, and used this money to repay his debts rather than to reduce his borrowing from the trust. VR was then rented out until, in 2010, it was repossessed by the mortgagee, with a negative equity of £97,000. That sum had not been repaid to the mortgagee. In August 2010, the husband was once again declared bankrupt. He was discharged from bankruptcy in February 2011 and the marriage finally came to an end in October 2011. The couple’s decree nisi was pronounced in July 2015.
By the time of the financial hearing, the couple’s financial situation was very bad. The wife had had two hip replacement operations and was unable to carry on her previous employment as a shop assistant. She was homeless, rotating between the homes of three friends. She was not entitled to go onto the waiting list for social housing because she was still the joint legal owner of SH. Her income was £463 pm, made up from a small private pension and her state pension. Unlike the husband, who as a bankrupt was no longer liable for his share of the shortfall owed to the mortgagee following the sale of VR, the wife was still liable for the entire £97,000 still owed on that property. The husband and his new partner were living in SH; it was common ground that this should be sold. Although there was no professional valuation of the property, the husband’s estimate was that it was worth £525,000. The husband was not yet entitled to his state pension but was entitled to a police pension accrued prior to the marriage, which produced an income of about £8,000 pa.
The evidence was that the husband was also unable to work but that he could expect to inherit some capital from the main trust in about 20 years. Although one of the trustees of the main trust intervened in the proceedings, filed a statement and gave oral evidence, he was not asked or cross-examined as to whether the trust would be in a position to or willing to advance further money to the husband if requested to do so. The other, entirely separate trust, was not considered at all.
The judge proceeded on the basis that no funds would be made available to the husband by the trust. He held that the husband’s pension should be shared equally between the parties by way of a pension sharing order, describing it as ‘right that the wife shares in his pension’. He ordered that SH be sold for the best price and the net proceeds of sale divided equally between the parties, but deducting from the husband’s share a sum equivalent to the loans made to him by the wife and the shortfall to the mortgagee. The order drafted by the wife’s counsel provided for the husband to pay the wife £138,500 by the completion date of the sale of SH, with, in default, interest payable from the completion date at the rate applicable to a county court judgment debt, with the balance of the lump sum, including all interest, to be paid by the trust from the husband’s interest in the trust when that became payable to him. Despite protests by the husband and his team, the judge considered both that this order was an effective expression of his judgment and that it did not interfere unacceptably with the trust.
The husband appealed, arguing that it was wrong in principle to order a third party to pay a lump sum and also that the pension order should not have been shared equally because the pension had not been a matrimonial asset. Having expressed concern about the fact that the order required the trust to pay the wife directly, the appeal judge nonetheless upheld this aspect of the decision below, allowing the appeal only to the limited extent that he considered that the husband should not be expected to take responsibility for the entire £97,000 shortfall still owed to the mortgagee, and therefore reduced the lump sum payable to £90,000 (rather than the original £138,500).
The husband appealed again. The husband’s estimate of SH’s value had proved to be very optimistic; shortly before the second appeal hearing, an offer was accepted for £400,000. This meant that there was no net equity but rather a small shortfall owing to the trust; the trustees had indicated that they intended to deduct this from the husband’s interest in the trust on his mother’s death. In the meantime, the husband had remarried and he and his new partner had moved out of SH and were living in rented accommodation. In the course of the hearing the wife conceded that the appeal against the lump sum would have to be allowed.
Held – (1) The way in which the order against the trust had come into being had been procedurally unfair, even without taking into account the fact that there was simply no jurisdiction for the court to make the order directing the trust, as a third party, to pay the lump sum ordered by the judge in the event that the husband failed to do so (see [44], below).
(2) The original judge did not have the advantage of being a specialist matrimonial finance judge; while he might have used the language of sharing (perhaps unsurprisingly, given that the order he was making was called a pension sharing order), it was clear that he had been substantially influenced by the needs of the wife and in his conclusion, when making the pension sharing order, he had specifically referred to the fact that both parties were impecunious. Further, the appeal judge had clearly approached his review of the order on a needs basis. The court agreed with the appeal judge that 50 per cent of the pension was ‘clearly within the discretion that a court is likely to consider’ by reference to the wife’s needs (see [47], [48], below).
(3) The pension sharing order was to remain in place, together with the order for sale of the property, whilst the lump sum order was to be set aside. The court had been concerned that unless the matter was remitted for a rehearing, for consideration as to whether or not this was one of those (rare) cases in which the lump sum application should be adjourned or deferred, the wife would find herself continuing to bear the sole responsibility for the debt to the mortgagee. Although the mortgagee seemed to be taking no action at present, the court had no doubt that for the wife the existence of that debt continued to be a burden and a shadow on her life and must, inevitability, underscore her feelings of unfairness in relation...
To continue reading
Request your trial