Guiding Light

So many published cases involve assets of considerable value. There is always difficulty in applying the principles established in such cases to the more everyday type of case. Younger practitioners may feel that White v White [2001] 1 AC 596 was the first where the starting point of equality was mentioned. However, in relation to more modest cases it was not unusual, even before the case of White, for a wife to receive substantially more than 50% of the family assets, on the basis that the assets pool was limited and the children’s needs came first.  This would often be on the basis that there was a clean break on income (in appropriate cases).

A helpful reminder
A v L [2011] EWHC 3150 (Fam) features an extremely usual set of circumstances – unusual in the sense that it ever came before a High Court judge. It is a helpful reminder to divorcing couples and solicitors of how the court is likely to approach financial remedies where the assets and incomes are modest.

Moor J made it clear that the case was “a very difficult one, because no outcome is in the least bit satisfactory”. That is often  the case when a matter is appealed as the costs incurred warp any sense of fairness and make nonsense of earlier attempts at settlement.

This case involved an appeal from a district judge. The wife was a 49-year-old and a housewife and mother. She was found to have a very modest earning capacity. Her husband was 57 years old and worked part time as a letting agent on a self-employed basis with a net income of around £17,000 per annum.

the two children were semi-independent. The 21-year-old son was studying law at university. The 18-year-old daughter was living at home on a gap year. The marriage had lasted for 13 years. Of significance was the fact that 11 years had elapsed between separation and the application for financial remedies. The wife had contributed £14,000 from her parents to purchase the family home. The assets and liabilities were  as follows – property in Egypt £45,833; family home £216,908; wife’s savings £752; husband’s savings £5,811; husband’s debts £35,789 – amounting to a total of £233,515.

At first instance, the district judge had ordered that the wife would remain in the family home for two years, whereupon the property would be sold with the proceeds divided 70% to the wife and 30% to the husband. The husband would pay maintenance to the wife at £500 per month for four years without a bar on extension under 28(1)(a) of the Matrimonial Causes Act 1973. The district judge found that there was no major disparity between the contributions made by the parties throughout the marriage.

Lack of reasoning
On appeal, Moor J criticised the lack of reasoning in the judgment below. In particular, he felt the significant departure from equality required reasons and justification on the basis of needs.

He also criticised the lack of connection between the unequal division of capital and the maintenance order.

The wife had asserted that an informal agreement was reached at the time of separation, involving a delayed sale of the family home until the children had reached majority. The husband asserted an agreement that the proceeds would then be divided equally but the wife denied this. The district judge found in favour of the wife.

Ever pragmatic, Moor J refused to order a rehearing but provided his own solution. He found the district judge’s maintenance award to be unaffordable for the husband, particularly as he intended to support the two adult children during their tertiary education.

He agreed with the unequal split of capital resulting from the disparity in incomes and earning capacities but would only do this on a clean-break basis. He refused to delay the sale of the family home and ordered an immediate sale, while commending the 70:30 split on a clean-break basis. He accepted that both parties would find it difficult to manage. The wife would be obliged to purchases a small flat and the husband, after discharging his debts, would be left with a small deposit if he decided to purchase. However, at 57, his mortgage capacity would be modest. This difficult situation was the best that could be achieved in the circumstances and the court was not obliged to find housing solutions in these circumstances.

The case is useful for practitioners and clients. Clients frequently fail to appreciate the inevitability of an unequal division of capital and this is a useful case to copy to clients to encourage realistic offers.

High value financial remedy cases
Charles J gave guidance in the recent case of X v X [2012] CWHC 538 (fam).

A final hearing was adjourned at the end of the seventh day as both parties acknowledged that further information was required. This allowed the parties to conduct negotiations which resulted in a negotiated settlement. The settlement was presented to Charles J for approval, but he took the opportunity of commenting on the preparation and presentation of the case and he was critical of both. He reminded practitioners of the importance of identifying the following:

• the findings that the court is being invited to make and the reasons why they are relevant;
• the facts and matters the court is being asked to find as the basis for those findings; and
• the evidence that is needed to achieve those goals.

Charles J was of the view that the Form A, Form E and short Statement of Issues would not lead to a clear and succinct “identification of the building blocks of the rival contentions”. He felt it would be appropriate for direction to be given after a failed family dispute resolution (FDR) which would enable the parties to exchange a summary of disputed facts in open form.

In this particular case, the asset in dispute was a hotel which had been given to the husband by his father. It was common ground that the company in which the parties were both shareholders had been a tenant of the hotel and had run the hotel and sub-let it to another operator in the hotel business. While the subject matter was the freehold of the hotel rather than its business, the valuation was based on the income and profit of the hotel business even though this was inappropriate. This is one of the primary reasons for the adjournment of the hearing, although the absence of an appropriate valuation was remedied quickly and did not cause any real difficulty. Limited information had been obtained about the transfer of the hotel but it indicated that the hotel had, in fact, been transferred by a company controlled by the husband’s father and mother with gaps in the evidence about the background to, and completion of, the gift and the legal relationships between the relevant people. Despite ,this, the legal fees at the adjournment stage totalled around £1m and no doubt this  triggered Charles J’s intervention, although he was not particularly critical of the professional advisers.

Identification of issues
In his view, the solution was an early stage identification of issues involving the following:

1. The identification of the documents that needed to be produced, inspected and considered.
2. The identification of the expert evidence that needed to be gathered and the drafting of appropriate instructions to experts.
3. The identification of the other evidence that would need to be gathered and service of it much earlier on in the proceedings.

He went on to say that preparing for cases of this nature would require the above and an analysis of the range of practical and commercial options available to achieve a fairer result.  He advised that this would involve a brief exchange following the filing of Forms E and so presumably before the FDR.

That task might be an impossibility in the average complex case when assets are unable to be quantified at that stage prior to the questionnaire process. In that case, Charles J felt that the reasons ought to be stated in the post-Form E document. He direct that the judgment be made public in the hope that ways of improving the preparation of cases would follow. However, surely the answer is with judicial continuity and active case management at FDR stage?

Kim Beatson is a Partner and Mediator and head of Anthony Gold’s Family & Divorce Law team. For further information email Kim or call 020 7940 4060 for advice on any aspect of family law.

This article was first published in New Law Journal, “Guiding Light”, NLJ 18 May 2012, p 668.

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