Source: https://www.familylawweek.co.uk/site.aspx?i=ed71063
Timestamp: 2018-12-12 01:11:18
Document Index: 433160273

Matched Legal Cases: ['EWCA ', 'EWCA ', 'EWCA ', 'EWCA ', 'EWCA ', 'EWCA ', 'UKHL ']

Family Law Week: Kingdon v Kingdon [2010] EWCA Civ 1251
Kingdon v Kingdon [2010] EWCA Civ 1251
Ancillary relief order by consent was vitiated by non-disclosure of assets by the husband. Husband ordered to pay additional lump sum. Appeal by the husband that the award should be set aside dismissed.
This case involved a material non-disclosure by the husband in ancillary relief proceedings concluded in April 2005. During those proceedings, the husband failed to disclose the purchase of £200,000 of shares. The consent order did not take into account the undisclosed shareholding.
The husband subsequently sold some of the shares in November 2006 for a sum of £1,633,000, with a net gain of £1,268,000. The wife became aware of the non-disclosure and in 2008 wrote to the husband's solicitors about the shares. The husband compounded the non-disclosure by lying in correspondence about the sale, the value and the tax paid on the shares.
In light of the non-disclosure, in addition to the order reached in 2005, HHJ Cardinal, sitting as a High Court Judge, ordered the husband to pay an additional lump sum of £481,000. This sum was the subject of appeal.
The Court of Appeal held that although in some cases of non-disclosure the Court would require a re-hearing and fresh consideration of the s.25 factors, that would not always be the case. Consideration as to how to proceed would depend on an analysis of the nature of the defect generated by the non-disclosure.
HHJ Cardinal was entitled to proceed to repair the defect caused by the material non-disclosure by enlarging the lump sum because:
a) He had discretion as how to best proceed;
b) In exercise of this discretion he was required to deal with the case justly and in a way that was proportionate to the issues;
c) The non-disclosure was of a discrete element and could be cured by one simple enlargement;
d) The order had been fully implemented and there was no need to reverse any part of the implementation;
e) The husband's lies in 2004-05 compounded by further lies in correspondence yielded a conclusion that no assertion in respect of the husband's financial circumstances would be likely to be accepted unless clearly established following protracted and costly examination. The procedure needed to reflect the degree of the husband's turpitude.
In addition, the judge had to be satisfied that the husband could reasonably make the extra payment.
The Court was also asked to consider giving general guidance as to the proper application of the sharing principle to property which is in part matrimonial and part non-matrimonial. Wilson LJ declined to do so on the basis that suggesting a specific starting point would add fertile ground for further argument and would banish none of the current uncertainty in the current justice system which is bespoke to the particular facts.
Summary by Mathew Stott, barrister, of Field Court Chambers
Neutral Citation Number: [2010] EWCA Civ 1251
Case No: B4/2010/0681
FAMILY DIVISION, BIRMINGHAM DISTRICT REGISTRY
HIS HONOUR JUDGE CARDINAL , sitting as a High Court Judge
LOWER COURT NO: WR4D00411
SIMON CHARLES KINGDON Appellant
HELEN JANE KINGDON Respondent
Mr Valentine Le Grice QC and Mr Huw Jones (instructed by Williamson and Soden, Solihull) appeared for the Appellant.
Mr Robin Rowland (instructed by Benussi & Co, Birmingham) appeared for the Respondent.
Hearing date: 11 October 2010.
1. The husband (as I will call him notwithstanding the grant of a decree absolute of divorce in 2005) appeals against an order for ancillary relief made against him in favour of the wife (as I will call her) by His Honour Judge Cardinal, sitting as a judge of the Family Division, Birmingham District Registry, on 3 March 2010.
2. On 18 April 2005 a district judge of the Worcester County Court had, by consent, made an order for ancillary relief between the parties on a clean break basis. By his reserved judgment dated 3 March 2010 HHJ Cardinal ("the judge") found that the order dated 18 April 2005 had been vitiated by material non-disclosure on the part of the husband. But the judge did not proceed to set the whole order aside. Instead he built on it. By the substitution of just one figure for another in that order, he proceeded, there and then, to make the additional provision for the wife which in his view would have been made in the event that the husband had given proper disclosure. The additional provision was a lump sum of £481,000.
3. So the husband's appeal is against the order for payment of a lump sum of £481,000. Mr Le Grice QC, who did not appear for him before the judge, makes four points on his behalf. The third is of some general interest but the most important and troublesome is the second. It raises the following question:
When the court finds that an order for ancillary relief was vitiated by non-disclosure, should it set it all aside and direct that the application for ancillary relief be reheard, almost certainly on a later date, on the basis of a conventional examination of all the up-to-date figures and other circumstances? Or can it – and, if so, when – proceed there and then to make the additional or different provision which in its view would have been made at the time of the order in the event that proper disclosure had been given?
B: BACKGROUND TO THE 2005 ORDER
4. The parties were married in 1980 and separated in 2003. They had three children, all boys, who, at the time of the order in 2005, were aged 20, 18 and 13. During the marriage the main role of the wife, who is now aged 52, was that of a wife, a mother and a home-maker. At times she also worked as a legal executive.
5. The husband, who is now aged 54, is a chartered accountant and has had a successful career in financial services. Initially he was in private practice. Between 1995 and 1997 he was finance director of the West Bromwich Building Society. Then he moved to work for Kensington Group PLC ("KG"), a quoted company which provided mortgage services. By the time of the separation he was the finance director of KG and was earning about £350,000 p.a. inclusive of bonus. In 2003-04 he also made £1.7m as a result of his exercise of share options in KG and of immediate sale of the shares.
6. On 1 October 2004 the husband ceased to be finance director of KG and became finance director of Money Partners Holdings Ltd ("MPH"), a private company. By then the wife had activated her application for ancillary relief and affidavits in Form E had been exchanged. To the wife and to the court the husband duly disclosed his move of employment to MPH. He had foreshadowed it in a brief discussion with her as early as March 2004.
7. MPH had been incorporated in December 2003 as a venture between KG, which held 20% of its shares, and a group of individual investors, who held the balance. The purpose of the venture was to make sub-prime mortgage loans. Such were mortgage loans at high rates, for example to mortgagors whose personal circumstances rendered their ability to service them somewhat speculative or loans by way of second mortgage. Having made such loans, MPH was to sell them for a fee to KG. In October 2004 the FSA authorised MPH to be a lender and, through subsidiaries, it began to trade.
8. In the proceedings for ancillary relief the husband disclosed that his annual salary at MPH would be almost half that at KG, namely only about £200,000. He also disclosed that, as a result of his departure from KG, he had foregone the right to exercise further share options. It now seems that, had he not foregone them, he could have made a modest gain – about £120,000 – on exercise in December 2004 of a small proportion of them. Whether any of the others would have proved to be of value is unclear.
C: THE 2005 ORDER
9. The date fixed for the hearing of the wife's application for ancillary relief was 14 March 2005. On that date, at the door of the court and with the aid of solicitors and counsel on both sides, the parties reached their agreement. On the basis of it, a consent order was subsequently drafted, filed and approved by a district judge; and, as I have indicated, it was dated 18 April 2005. The basis of the order was that the wife's application for ancillary relief should be resolved on a clean break basis by an equal division of their assets and by an additional payment to her by the husband of £200,000. The primary rationale behind the additional payment appears to have been that, even following his move to MPH, the husband was likely in the future to generate vastly greater earnings than was the wife as a legal executive.
10. The parties' agreement was translated into provisions of the order dated 18 April 2005 to the following effect:
(a) the husband should transfer to the wife his interest in the matrimonial home near Kidderminster;
(b) in the event of a grant of planning permission to convert to residential accommodation two barns which formed part of the curtilage of the home, the wife should pay to the husband one half of the net increase in the value of the property as a whole, to be determined by a named valuer;
(c) the wife should transfer to the husband her interest in their flat in London;
(d) the husband should pay to the wife a lump sum of £500,000, being as to £300,000 the sum necessary to achieve equality of division and as to £200,000 the additional payment;
(e) the husband's pension rights should be split equally between himself and the wife; and
(f) the husband should make periodical payments for the boys, including the school fees of the youngest, and should pay their tuition fees at university up to first degree.
11. The provisions of the order dated 18 April 2005 were implemented. Later in 2005 the parties secured planning permission for conversion of the barns with the result that, in accordance with the determination of the valuer, the wife paid £50,000 to the husband.
D: THE NON-DISCLOSURE
12. What the husband failed to disclose to the wife prior to the making of the 2005 order was that he was a member of the group of individual investors in MPH to which I have referred in [7]: on 9 July 2004 he acquired 200,000 £1 shares in MPH, being 10% of the issued shares.
13. The husband bought the shares at par, i.e. for £200,000, being a sum which, on the date of purchase, he borrowed from Barclays. For a time the borrowing was secured on the proceeds of the exercise of his share options at KG. But, just as he did not disclose the shares, so also he did not disclose the borrowing.
14. The husband's ability to sell the shares was the subject of restrictions set out in a Shareholders' Agreement. In summary:
(a) He could not sell the shares at all until 9 July 2005, being the first anniversary of the agreement, without the consent of KG and a specified individual investor.
(b) KG was given an option to purchase some of his shares during the three months following the filing of MPH's accounts for the year ended 30 November 2006, i.e. in effect in 2007, at a price to be calculated by reference to MPH's performance, and had an option to purchase the remainder two years later, i.e. in effect in 2009, at a price to be calculated similarly.
(c) From 9 July 2005 until the date of expiry of KG's first option in 2007 the husband could sell his shares but only at par, to an existing shareholder and subject to KG's options.
(a) Three weeks after he acquired the shares, namely on 3 August 2004, the husband swore his affidavit in Form E. In it he made no mention of the shares. The fact, if he is being honest in so stating, that the material to be included in the affidavit had been provided by him to his solicitors prior to 9 July 2004 is no mitigation whatever.
(b) In October 2004 the husband provided answers to questionnaire. In them he denied that he had share options in MPH. The denial was true but misleading. Nor did he disclose the shares in response to a question about incentives for moving from KG to MPH.
(c) By letter from his solicitors dated 10 February 2005 the husband reiterated that no share options in MPH were available to him.
(d) For the hearing on 14 March 2005 the husband's then counsel filed and served a position statement. Of its contents the husband was aware. Counsel wrote that "all the shares [in MPH] are held by [KG] and the venture capital investors. [The husband] will not have access to shares or share options".
16. The order made by consent dated 18 April 2005 was thus reached on the basis that the husband had no shares in MPH. The husband had been guilty of deliberate, substantial and protracted non-disclosure.
E: THE HUSBAND'S SALE OF SOME OF THE SHARES
17. Eighteen months after the date of the order, namely on 2 November 2006, the husband was required to, and did, sell almost one half of his shareholding in MPH, namely 93,749 shares, to KG pursuant to its options. The time for KG to exercise both its first option and, in part, its second option had by agreement been brought forward to 2006. The price paid by KG to the husband for the shares was £1,633,000. Out of the proceeds the husband repaid the loan of £200,000 from Barclays. He also paid capital gains tax on the disposal but only in the sum of £165,000, i.e. at only about 12% of the gain, by reason of its qualification for business asset taper relief. So the net gain made by the husband on the sale was £1,268,000.
18. But the husband made no gain in respect of the remainder of his shares. In November 2006 the sub-prime property market was a bubble about to burst. MPH's massive profit in 2006 was followed by a substantial loss in 2007. There was no question of any exercise on the part of KG of the remainder of its second option. On the contrary. In January 2008 all the shares in MPH, including the husband's remaining shares, were sold to Goldman Sachs for £2; he resigned as a director; and MPH made him redundant with effect from July 2008.
F: FURTHER NON-DISCLOSURE
19. The husband's sale of shares in MPH in November 2006 took place unbeknown to the wife. But in January 2008 a third party suggested to her that the husband had held shares in MPH and received benefit from a sale of them. She instructed her present solicitors to make enquiries.
(a) By letter directly to the wife dated 12 March 2008, the husband stated that "there was and is no value in [MPH]".
(b) By letter to the wife's solicitors dated 16 April 2008, the husband's present solicitors stated:
"He borrowed monies to buy shares in the business post Form E. At the time the matter came to court the shares had a net value of £0. Our client had paid £200,000 for £200,000 par value of shares.
… at all times the shares have been valueless. The net effect to the matrimonial position if one wanted to take it at face value is that there is a net loss of £200,000. We are sure your client does not want an interest in that."
(c) By letter dated 19 June 2008 the husband's solicitors first admitted his sale of shares in November 2006 but averred that he had paid tax on the gain at the rate of 40%.
21. Thus it is that, in the months prior to the wife's issue in July 2008 of her application to set aside the order dated 18 April 2005, the husband compounded his deliberate non-disclosure in 2004/05 with further bare-faced lies that his shares had never had value and, later, that on the sale he had suffered CGT at the rate of 40%. The compound dishonesty is in my experience an unusual feature.
G: THE VALUATION REPORT
22. In the proceedings before the judge the husband admitted the non-disclosure but disputed that it was material. He contended that, if disclosed in the proceedings in 2004/05, the existence of the shares would not have led to provision for the wife different from that contained in the order dated 18 April 2005 in that the shares had had no value at that time.
23. The husband's contention led to the joint instruction of a partner in PKF, Birmingham, to value the shares in April 2005. In retrospect there was an excessive concentration before the judge on the value of the shares in April 2005. For the husband's non-disclosure was material even if the shares were likely to be of value only in the foreseeable future (s.25(2)(a) of the Matrimonial Causes Act 1973), provided only that, as a result, the outcome of the case would be likely to have been significantly different (Bokor-Ingram v. Bokor-Ingram [2009] EWCA Civ 412, [2009] 2 FLR 922, at [17]). Even without the benefit of hindsight it was not difficult so to conclude.
24. At all events, in the light of the restrictions until 2007 on the husband's ability to sell the shares, PKF arrived, at the end of a long report, at the conclusion that in April 2005 the shares had a value of par. The writer then added, rather impertinently:
"Taking into account the loan of £200,000 to purchase the shares I consider that [the husband's] Form E was not understated."
25. In appendices to the PKF report there was, however, some relevant information about the progress of MPH in 2005. In the year ended 30 November 2004, in which it had traded only during the final month, it had made a loss of £2m. In the year ended 30 November 2005, however, its fees receivable were £43m, its operating income was £9m and its post-tax profit was £140,000; all three figures were in excess of those which had been forecast to the FSA for that year.
26. It was only shortly prior to the hearing before the judge that the husband disclosed management accounts for MPH for the first quarter of that year, i.e. the quarter ending on 28 February 2005. Although they showed that, in terms of operating income, the company achieved during the first quarter only 7% of what it achieved during that year – and thus that its trajectory of growth was steep thereafter – the achievement even during that quarter was more than double what had at one stage been forecast.
27. In its report PKF also offered a valuation of the husband's shares in April 2005 on an earnings basis at £258,000, from which it then expressed a preference to depart to par. Shortly prior to the hearing it offered a revised valuation, on the same basis albeit on different arithmetical premises, in the sum of £935,000, which it said was "illustrative" and from which it again expressed a preference to depart to par. The judge attached some significance to the revised valuation.
H: THE JUDGE'S CONCLUSIONS
28. The judge held:
(a) that the non-disclosure was material;
(b) that it was unnecessary and inappropriate to set aside the whole of the order dated 18 April 2005 and to direct a full rehearing of the wife's application for ancillary relief on updated presentations of the means and other circumstances of both parties, probably also including a detailed examination of alleged changes therein since April 2005;
(c) that, had the husband disclosed the existence of the shares in 2004-05, the court would have made deferred, contingent provision for the wife along the lines adopted by the parties in relation to the gain attendant upon the contingency of planning permission, namely that, in the event of an increase in the realisable value of the shares above £200,000 (perhaps within a finite period of years: but the judge did not expressly so state), the husband should, as an extra element of his lump sum obligation, pay to the wife a sum equal to x% of the net gain;
(d) that in part the husband's shares in MPH represented matrimonial assets, in that his relationship with the company had grown out of his relationship, during the marriage, with KH, its primary owner, and that, by joining it, he had both foregone share options in KH which would have been matrimonial assets and also suffered a substantial reduction in salary; but that in part they represented non-matrimonial assets in that he had acquired them in the year following separation and the value of the shares ultimately realised had surely to some extent been the product of his work in the company during the two years following acquisition;
(e) that the proper application of the sharing principle to the circumstances set out at (d) yielded a conclusion that the deferred, contingent provision for the wife would have been an extra element of lump sum equal to 35% of the net gain in the realisable value of the shares;
(f) that the net gain in their value, realised in November 2006, was £1,268,000, of which 35% was £444,000 or, inclusive of interest since then, £481,000; and
(g) that neither the fact that – to some extent – the husband had suffered on the stock market since 2006 nor his claim to have suffered a diminution of capital for other reasons should deflect the court from proceeding to order him forthwith to make the additional provision for the wife of £481,000.
I: POINT ONE: MATERIALITY
29. The first point made by Mr Le Grice is that the judge was wrong to hold that the non-disclosure was material. Mr Le Grice touched only so lightly upon the point that I feel emboldened to do likewise. In the light of KG's support for MPH, of its arrangements to be entitled to acquire entire ownership of it, of the husband's expensive decision to commit to it, of the projections for it presented to the FSA and of its promising results even for the quarter ending as early as February 2005, it is inconceivable that in April 2005 the court would not have treated the husband's shares in it as likely to prove of value in the foreseeable future and thus as properly subject to the sharing principle in one proportion or another.
30. Into his first point Mr Le Grice is instructed to throw an additional argument. The additional argument is founded upon an assertion, pressed at length before the judge, that, contrary to a declaration made by her in a recital to the order dated 18 April 2005, the wife then intended to marry, or cohabit with, a named man. The husband has not sought, by reference to this assertion, to secure a setting aside of the consent order in his favour. Instead the argument by reference to it has been that in April 2005 the wife was strongly motivated to accept a clean break.
31. One problem about the additional argument is that it is illogical: for the hypothetical, deferred, contingent element of the wife's lump sum would have been part of the clean break settlement, not inconsistent with it. The other problem is that, having heard delivery to her of extensive cross-examination in relation to the assertion, the judge found that the wife had had no firm plan to marry, or cohabit with, the named man (who sadly died in September 2005) at any stage. This court allowed the husband to put before it fresh evidence that, in a recent presentation to the planning authority, the architect who had been employed by the parties to secure planning permission for the barns within the curtilage of the home had described the man as the wife's deceased "partner"; but it also allowed the wife to put before it a response by the architect that he used the description without reference to the wife and, in effect, without having any valid basis for believing it to be true but simply in order to attract the authority's sympathy for her. It is a curious explanation which does the architect no credit; but the result is that the fresh evidence breathes no life into the additional argument.
J: POINT TWO: REHEARING
32. The second point made by Mr Le Grice, foreshadowed at [3] above, is that, having found that the non-disclosure was material, the judge should have set aside the whole order dated 18 April 2005 and have given directions for the wife's application for ancillary relief to be re-heard on a future date on updated presentations by both parties of their current means and of all the other matters specified in s.25(2) of the Act of 1973. "The exercise was defective so the court must start again" says Mr Le Grice. But might it not be more logical to say "the exercise was defective so the court must adopt the optimum means of curing the defect"?
33. There is a surprising dearth of authority on the course which the court should adopt in the wake of finding of material non-disclosure. Such authorities as exist relate to the course which the court should adopt in the wake of a finding, within the principles set out in Barder v. Caluori [1988] AC 20, [1987] 2 FLR 480, that a new event has supervened so as to invalidate the foundation of an order for ancillary relief. Such authorities may well illumine the course to be adopted in cases of non-disclosure although, as I will explain at [35], a valuable distinction has been drawn between them.
34. In Smith v. Smith (Smith and others Intervening) [1991] 2 FLR 432 the supervening event was the suicide of the wife five months after a needs-based award of capital to her. Butler-Sloss LJ held, at 435G, that "the correct approach is to start again from the beginning" on the basis that the wife's needs were limited to five months; but she also held, at 436B – 437D, that all the other matters specified in s.25(2) had again to be taken into account. Such was an exercise which, on the particular facts, this court considered itself able to conduct.
35. In Williams v. Lindley [2005] EWCA Civ 103, [2005] 2 FLR 710, the supervening events were the engagement of the wife to her employer one month after a needs-based award of capital to her and their marriage five months later. Applying its decision in Smith above, this court directed a rehearing of her application on an up-to-date reassessment of all the matters specified in the subsection. But the valuable distinction to which I have referred at [33] was drawn by Thorpe LJ in the preface to his conclusions, at [22], as follows:
"So I would emphasise that this case it to be clearly categorised as a supervening event case and not a case of a tainted order. Accordingly nothing that follows is to be understood to apply to taint cases where the procedure and adjudication may need to reflect the degree of turpitude of the party responsible for the taint." (italics supplied).
36. Notwithstanding the distinction drawn by Thorpe LJ, I can well imagine cases of non-disclosure – for example where an applicant has secured a needs-based award without disclosure of a substantial asset or of an engagement to marry – in which the proper course is indeed to conduct the exercise under s.25 all over again on updated material. The same might apply to non-disclosure by a respondent which was so far-reaching as to have led the court to survey the entire financial landscape on a false basis. What I cannot accept is that the exercise will always have to be conducted again. The exercise certainly has to have been conducted. But it has been conducted; and the nature of the defect generated by the non-disclosure may – or may not – require the whole order to be set aside and the whole exercise to be conducted again.
37. Take, then, the present case. In the exercise conducted, ultimately by consent, in 2005 what was the nature of the defect generated by the non-disclosure of the shares? The nature of the defect was the omission of a subparagraph in the part of the order which provided for the wife to receive a lump sum, namely of a subparagraph which provided for an extra, deferred, contingent element of lump sum referable to the shares. There is nothing wrong with the order dated 18 April 2005 save that it requires such an addition. There is no need to dismantle it: the need is to add to it. Indeed, in that in November 2006 the contingency arose, there is no further need to express the provision by way of a formula: the husband's net gain on the shares has been precisely quantified and whatever would have been the appropriate percentage expressed in the formula can be translated into a specific sum.
38. I have come to the conclusion that the judge was entitled to proceed there and then to repair the defect by enlargement of the lump sum provision in the order dated 18 April 2005. The reasons for my conclusion are as follows:
(b) in exercise of the discretion he was required to seek to deal with the case justly, and thus in a way which was proportionate to the complexity of the issues and which would save expense and ensure expedition: Rule 2.51D(1) – (3) of the Family Proceedings Rules 1991;
(e) the husband's lies in the proceedings in 2004-05, compounded by his further lies in the correspondence which preceded issue of the present proceedings, yielded a conclusion that, were there to be a second, updated, enquiry into all the matters specified in the subsection, no assertion on his part in relation to his financial circumstances, for example of any current inability to pay to the wife what would otherwise have been her appropriate share of the gain on the shares, would be likely to be accepted unless clearly established following protracted and costly examination. In the words of Thorpe LJ in Williams v. Lindley, set out at [35] above, the procedure needed to reflect the degree of the husband's turpitude.
39. To the above, however, I add an important rider: before adopting the course which he took, the judge had to be satisfied that the husband could reasonably make the extra payment of £481,000. In this respect, however, the judge was entitled to take a broad and robust approach. Less than four years earlier, when the husband was still in receipt of a substantial income from MPH, he had enjoyed a secret windfall of £1,268,000 in cash on sale of the shares. Without the need to have regard to the other assets which, following the order dated 18 April 2005, had remained to the husband, the judge was entitled to assume, in the absence of powerful prima facie evidence to the contrary, that he could still reasonably make the extra payment. No doubt he had chosen to make substantial payments into his personal pension scheme in and after 2006: we were told, for example, that, although pursuant to the order dated 18 April 2005 the value of the husband's pension rights had been divided equally, those of the wife were now worth £255,000 whereas those of the husband were now worth £758,000. No doubt, also, the husband, who was unemployed from July 2008 until recently (when he became engaged to work for six months for a total of £50,000) maintained himself during that interim – and met his obligations to the boys – to some extent out of capital. He also pressed upon the judge that losses in the fall of the stock market had not been fully recouped upon its subsequent revival and that, for reasons which he had to date failed to explain, he had paid £350,000 to a cohabitant upon the end of their relationship. None of this amounted to powerful prima facie evidence of his loss of ability reasonably to make such payment to the wife as was otherwise her entitlement.
K: POINT THREE: 35%
40. The third point made by Mr Le Grice is that the judge was wrong to award the wife as much as 35% of the net gain on the shares, namely £481,000. He submits that, irrespective of whether the requisite appraisal is of the court's likely award in percentage terms in 2005 or of the award of a specific sum following re-enquiry in 2010, an award of 35% or £481,000 is appealably high and that the award ought to have been of 25% or £344,000.
41. Mr Le Grice accepts that, were the judge's discretion in this respect to have been untrammelled, it would not be possible to maintain that the difference between 35% and 25% was so wide as to fall outside it. But, on behalf primarily of his client but also (so he adds) of the many other couples to whom our law of ancillary relief will fall to be applied and indeed also of those who will have to try to advise them, he makes to this court an energetic plea: please provide guidance as to the proper application of the sharing principle to property which is in part matrimonial but which, whether because it is in part pre-marital property or in part extra-marital property (i.e. received by donation to one spouse during the marriage) or, as here, in part post-separation property, is also in part non-matrimonial.
42. We know that even non-matrimonial property is subject to the sharing principle: Charman v. Charman (No 4) [2007] EWCA Civ 503, [2007] 1 FLR 1246, at [66], per Sir Mark Potter P. We know that, to the extent that property is non-matrimonial, there is likely to be better reason for departure from equality: ibid. But, where property is non-matrimonial or, as here, is partly so, the law as it stands (complains Mr Le Grice) gives no guidance as to the extent of the likely departure from equality. Following the hearing Mr Le Grice has lodged with the court two volumes of authorities, being decisions mainly at first instance, which demonstrate departure from equality in circumstances in which the asset was, in whole or in part, non-matrimonial; but, as his valuable epitome of them shows, the authorities offer in effect no reasoning as to why the facts found were translated into the percentage favoured.
43. The answer suggested by Mr Le Grice is that this court can and should generate consistency in the exercise of discretion by the provision of further starting points within the sharing principle. Just as the starting point for the sharing of a matrimonial asset is established to be a 50% - 50% division, the starting point for the sharing of a wholly non-matrimonial asset should (so he submits) be a 0% - 100% division. So (continues his argument) the starting point for the sharing of an asset which, as here, is partly matrimonial and partly non-matrimonial, should be 25% - 75%, being 50% of the half of it which is matrimonial and 0% of the half of it which is non-matrimonial.
44. Mr Le Grice is at pains to stress that, even within the sharing principle, there should be departure from his suggested starting points for good reason; and no doubt he would also accept that application of the other two pillar principles of need and compensation might well generate an ultimate disposition of the asset far removed from that suggested by his starting points. But if (so he contends) the judge in the present case had started at a point of 25% - 75%, he could have found no good reason for departure.
45. With reluctance – because on a superficial level it might seem that this court is failing to be helpful – I consider that it should resist taking the route charted for it by Mr Le Grice. But in this regard I would be wise to confine myself to the situation in the present case, namely of an asset which is partly matrimonial and partly non-matrimonial. The reader will have noticed the major difficulty which lurks in the final sentence of [43] above: for the argument jumps from treating an asset as "partly" matrimonial to treating it as "half" matrimonial. Unfortunately the jump in the argument is not necessarily valid. Couples will probably wish to argue about it, one arguing that the asset is more than half matrimonial and/or the other arguing that it is less than half matrimonial. If so, they will wish to argue that should be departure from Mr Le Grice's starting point (or even that it is not apt to be applied in the first place). The problem is that there is no escape from examination of the genesis of the asset (albeit to be conducted from this month, November 2010, onwards by allotment to it only of an appropriate share of the court's severely reduced resources: Rule 2.51D(e) of the Rules of 1991) and that, while I applaud the general starting point of equal division established in Miller v. Miller, McFarlane v. McFarlane [2006] UKHL 24, [2006] 2 AC 618, the insinuation into the sharing principle of other starting points in relation to particular types of assets would serve only to sweep the inevitable examination of the facts downstream into the realms of departure. Indeed, upon analysis, my conclusion is that the interposition into the sharing principle of the subsidiary starting point suggested by Mr Le Grice for property which is only in part matrimonial would add fertile ground for further argument on an extra level and would banish none of the current uncertainty which, though regrettable, is unavoidable in a system which remains committed to justice bespoke to the particular facts.
L: POINT FOUR: CREDIT FOR £200,000
46. The fourth and final point made by Mr Le Grice is that the judge was wrong not to have reduced the award of £481,000 by £200,000, which had been the agreed payment made to the wife in 2005 additional to whatever was required in order to achieve equality of division.
47. This point was not made by Mr Jones, the husband's junior counsel, before the judge. Mr Le Grice protests that Mr Jones should not be criticised for failure to make it. I agree, albeit not for the reason put forward by Mr Le Grice. For in my view the point is invalid. Its purported foundation is that the sum of £200,000 was paid to the wife in service of her needs and that, were her assets to have been augmented by a formula in the order in 2005 which in the event would have been productive for her of an extra £481,000, her need for an extra £200,000 would have been extinguished. But I do not interpret the agreement in 2005 for the husband to make the additional payment of £200,000 to the wife as being based primarily on her needs. Following study of the rival position statements prepared for the hearing on 18 April 2005, I treat that part of the agreement as primarily reflective of a different feature, namely (as set out in [9] above) that the husband was likely in the future to generate vastly greater earnings than was the wife. Such was a reasonable assumption; and, surveyed broadly, events since 2005 have served only to confirm its validity.
48. I would dismiss the appeal.