AB v CB [2014] EWHC 2998 (Fam) (25 June 2014)

Neutral Citation Number: [2014] EWHC 2998 (Fam) Case No: FD12D04963 IN THE FAMILY COURT Swansea Civil and Family Justice Centre Caravella House Quay West Quay Parade Swansea SA1 1SP 25 June 2014 B e f o r e : THE HONOURABLE MR JUSTICE MOSTYN ____________________ AB Applicant - and - CB First Respondent Trustees of the X Trust Second Respondent ____________________ The Transcription Agency, 24-28 High Street, Hythe, Kent, CT21 5AT Tel: 01303 230038 ____________________ AB, Litigant-in-person Richard Anelay QC on behalf of the First Respondent Richard Dew on behalf of the Second Respondent (Interveners) ____________________ HTML VERSION OF JUDGMENT ____________________ Crown Copyright © The Honourable Mr Justice Mostyn: This is my judgment on the wife's claim for ancillary relief following divorce. I use the old expression 'ancillary relief' rather than the neologism in the Family Procedure Rules of 'financial remedy', as ancillary relief is still the heading to that part of Part 2 of the Matrimonial Causes Act beginning at Section 22, where it sets out the powers of the Court and describes them as "ancillary relief in connection with divorce proceedings". The application is made in the wife's divorce petition, dated the 15 th October 2012, on which a decree nisi was pronounced on the 17 th April 2013 and was formally activated by the wife's Form A issued on the 19 th November 2012 in the Principal Registry of the Family Division; and those proceedings were transferred to the Swansea County Court earlier this year. The case was listed before the district judge in this Court for four days, but was allocated to me having regard to the nature of the dispute, I sitting in Swansea for this week and last week. I have to say that the case has been conducted in a model way. The parties and the interveners filed very full skeleton arguments which obviated the need for any opening, evidence in chief was not permitted in accordance with the new prescription, we heard all of the evidence and final submissions in one day and I am giving judgment at 10:15 on day two. The efficiency with which the case was done is a credit to all concerned and it should serve as a reminder to those who practise in this field that with goodwill and effort it is possible to do what are quite complex cases extremely economically, both in terms of time and money. The applicant wife, and I will refer to her as the wife because that is the convention and because in fact she still is the wife, the decree absolute not having yet been issued, is aged 44. She is a journalist by profession, the daughter of a man who was a pensions manager. When she and the husband first met in 1999 she had by then acquired her first home in Bristol, which she still has. That is pre-marital property and indeed by making further borrowings on that property she has bought another property in Pembroke Dock, which again is to be characterised as non-matrimonial property even though that latter property is in fact in negative equity. I will deal with her financial position in more detail a little later. The husband is aged 41, being born on the 28 th July 1972. On paper he has almost no assets at all and his income is extremely modest. On paper his only asset is a plot of land called Plot A, in Pembrokeshire, with a net value after subtraction of notional Capital Gains Tax, of just under £38,000. His income from all sources, including from welfare benefits, is said to be just under £3,000 a month. So on paper, and I emphasise on paper, he presents as somebody who is rather less well off than the wife. I perhaps should mention that in addition to Plot A he has a microscopic pension fund as well. However, that does not tell the true story by any means. The husband is the third child of DB and VB. He has an older sister LB who is 46 and who lives in London, and an older brother EB who is aged 44, who is married and who has four children and who is a farmer in Pembrokeshire. The husband comes from a distinguished Welsh family which own substantial lands in Pembrokeshire and have done so for generations. The family as a whole is obviously of great wealth and I heard evidence from EB, who confirmed that as a result of transfers, some of which I think have been relatively recent, from his father and possibly from his mother as well (although I did not enquire as to the precise origin of the donations) that he (EB) has assets net of borrowings of around £3,500,000 in farm land and property. That excludes the valuable home in which he lives, which happens to be owned by his father; his father living in another valuable home which happens to be owned by his wife. The husband told me that his trade or profession is as a copywriter, working in the field of media, but again that does not tell the whole story by any means. He works within the overall family enterprises as an agent for the family in advising on developments; he is a shareholder and director of the enterprise company that has been set up in order to undertake developments; and he is involved in other aspects concerning the economic life of the village, which have been explained to me and which I do not need to go into. On any view, although there is no sense of entitlement on his part, his position in terms of financial security is absolutely assured. The parties, having met in 1999, moved to Pembrokeshire in 2002 and began living together in the husband's parents' home and they were married on the 8 th February 2003, having some months before that established a media consultancy company, a service company, in which they each held a 50% shareholding and through which they conducted their media consultancy work. Shortly after the marriage in February 2003 the enterprise company, which I have just mentioned, was incorporated with four directors, the husband, his brother and his parents each holding a 25% share. In March 2004 a property on the estate, a cottage, then derelict, was gifted to the husband and wife by the husband's parents and the parties worked hard in converting that property into a house, for which purpose they borrowed money, but in addition they invested considerable brawn in making it an attractive property fit for sale, and it was duly sold on the 30 th July 2004. There is a spreadsheet, which is not disputed, which has been produced by the husband which explains with some precision what happened to the proceeds of sale. For my purposes all I need to note is that from the proceeds of sale certain sums were paid back to the parties to discharge their individual debts, but those individual debts were in truth joint debts, and nobody has disputed otherwise, leaving a surplus, and that surplus was used in three ways. First £15,000, money that was jointly owned by the husband and wife, was lent to the enterprise company; £21,000 was spent on their new home, which I shall describe in a minute, a farmhouse; and £21,625 was spent by the parties on buying things and living, and there is a list of that which descends even to things like cash at Tesco, which explains exactly how that money was spent. In 2005, after the cottage had been sold, the parties moved into the farmhouse. It is on the public highway next to the dairy unit, which I think, at that point, although I may be wrong, was in disuse. It had been, in the past, used as a herdsman's accommodation. It had also been, in the past, rented out. It was not in good shape, and following the moving in significant renovation work was undertaken which was funded, in part, as I have just mentioned, from the proceeds of the cottage, that is the £21,000. So it can be seen at this point that even though the farmhouse, the title of which was held at that point by the husband's father and then later by the husband's father and mother, the parties applied their own monies which derived from the cottage. This unquestionably was their money, notwithstanding that it had been gifted to them by the husband's father. In August 2007 SB, the parties' adopted child, was born. She was placed with the parties for adoption in December 2009 and adopted by them jointly on the 15 th March 2011. In relation to this aspect I jump forward out of the chronology to explain that in December 2009 JB was born. He was placed with the parties for adoption on the 13 th March 2012. The parties applied to adopt him on the 13 th July 2012. However, they separated on the 1 st September 2012 and that separation inevitably caused a disturbance to the adoption application and, without going into too many details, notwithstanding opposition by the natural mother, which has included an appeal to the Court of Appeal, the consequence of the separation, among other things, was that JB has been adopted by the husband alone on the 13 th May 2014. In relation to SB there is a joint residence arrangement between the husband and the wife. On the 21 st April 2009 a trust was established in relation to the farmhouse. There is a factual dispute between the parties as to whether the wife had any knowledge of the creation of this trust at all and I will deal with that in a minute. The wife says that she only discovered the trust existed after the breakdown of the marriage when she was told about it, and at that point she went to the files in the family office and saw the deed of trust and only then realised that her home was held by a trust. The husband's father, DB, has made two witness statements, to the first of which he exhibits the background paperwork leading up to the creation of the trust, and it appears that the process or the thinking that led to the creation of the trust began over two years before the actual execution of the trust, back in March 2007. That is apparent from an internal memorandum, written by DB's solicitor on that day, where it says: "I confirm that I met with DB on the 9 th March. We agreed that given that he wants to keep the farm intact his only option, if CB is to be able to remain at the farmhouse into the longer term having already, I understood, spent quite a lot of money on it, is to grant him some form of long lease. DB is looking to grant him as long a lease as possible within reason, but I told him there would be different implications depending on whether the lease was for longer than 21 years or not." There is also mention in that note of the father's wish of giving other property to the husband. Following that initial discussion the idea of a trust developed. It is not necessary for me to read out the various entries in the file beyond noting that on the 17 th December 2007 DB, the husband's father, wrote to the bank manager at HSBC in Carmarthen, in these terms (the letter is headed "Farmhouse Release from Security"): "Can I make progress on the above, if possible before the Christmas break, this concerns the transfer of the XX Farmhouse into trust to make provision for a home there for our younger son CB and his wife, something I have mentioned to you recently. This will make necessary the release of the house from the farm mortgage. Management of the housing development over the next few years will be a demanding full time occupation and CB will need to live close by and attend the office there most days and this is the only suitable house available. The point of putting the house into trust is to ensure that in the long term it remains available as a farm or estate asset. We are anticipating it may improve the planning case for the restoration of a disused building opposite for the use of a farm worker or manager. This would restore in the medium term any value to the secured land that might notionally be lost with the release of the farmhouse. The completion of this operation will enable me to carry through the long delayed transfer of the farm land to EB." Before I go on to examine the terms of the trust I should interpolate at this point that in relation to the monies that had been spent on the farmhouse prior to the establishment of the trust, when it was in the ownership of the husband's father and later the husband's mother as well, that in addition to the £21,000, which derived from the cottage, it has been agreed this morning, following perusal of further documents lately produced, that in addition the wife herself, from her own personal resources, contributed a further £5,000 to the capital expenditure on the farmhouse. The trust was executed on the 21 st April 2009. The parties to the trust instrument are the husband's parents and the trustees, who are the husband's father and Mr Y and Mr Z, both professional men living respectively in Nottinghamshire and Bedfordshire. The trust describes the principal beneficiary as the husband. It describes the discretionary beneficiaries as the children and remote descendants of the settlor, (i.e. the husband's father and mother), and such persons or objects who are added pursuant to clause 3. Clause 3 permits the settlor during his lifetime and his widow (which is quite confusing bearing in mind that the husband's father and mother are both described as the settlor so quite how his mother could have a widow I do not understand) during her subsequent lifetime (this obviously means the husband's parents) or such other person or persons as the settlor shall have nominated in writing, may at any time during the trust period add to the discretionary beneficiaries one or more objects or persons as they shall determine. Clause 5 deals with the trust in default of appointment. First, under clause 5.1, the trustees must hold the trust fund and its income on trust to pay the income to the husband during his lifetime. The trust fund is described in schedule 1 as XX Farmhouse. Second, the trustees may at any time during the lifetime of CB as to the whole or part of the trust fund (so for these purposes that means the farmhouse) transfer it to him absolutely or to raise money on it for his benefit as they may determine in their absolute discretion. Subject to those provisions there are powers to apply the trust fund for the maintenance and educational benefit of the discretionary beneficiaries in the way in which one sees in so many of these trusts; and finally, subject to the foregoing, on the expiration of the trust period the trustees hold the capital and income on the trust fund for EB, his children and remoter issue. So that is the trust fund executed on that day. On the same day an occupation agreement was executed by the husband and the trustees. The husband had not signed the trust deed but he did sign this occupation agreement. This occupation agreement, in its recitals, enables the husband to live in the property. In recital (d) it says: "In entering into this agreement the trustees have had regard to the wish of the settlor to enable the beneficiary to occupy the property for as long as he wishes provided he undertakes financial responsibility for maintaining and occupying it, but this should confer no long term proprietary right on the beneficiary but should instead enable the property to revert to the estate after the beneficiary has given up occupation of the same." And, on the basis of that, the husband, as beneficiary, agreed to pay the Council Tax and rates, and things like that; not to use the property except as a residence for him and his family; to keep it in good shape; to pay for the utility bills; to keep the garden in good shape; to insure it; and not to allow any construction or alteration without the prior written consent of the trustees. There were other provisions which I do not need to mention. So that was the next document signed on the 21 st April and a few months later, on the 29 th September 2009, a further document was signed which purported to describe the sums that had been paid in relation to the property, which I have described, prior to the creation of the trust, as a loan from the husband, but not apparently the wife, to his father. This was a tax device which nobody suggested was anything other than completely legitimate, but it hardly describes the reality of the situation. One would have thought, in circumstances where the farmhouse was the matrimonial home of the husband and the wife and SB, from when she was placed with them in December 2009, that the wife would have been completely aware of the arrangements that had been made in relation to it. However, her case is that the husband and his family were extremely guarded about the arrangements that had been made. She deposes, and indeed this is repeated in her skeleton argument, that she was specifically told by the husband: "This is ours in perpetuity . . . you will always have a home here, and our children." In her witness statement, at paragraphs 32 and 33, she puts it more fully. What she said there at those paragraphs were as follows, 32: "I was specifically told by CB that the property was to be our long term home. He used the phrase 'we cannot buy it but we can live here in perpetuity'. That phrase stuck in my mind as being unlike CB in the technicality of the language he normally uses. I had no idea why we could not have bought it, but we had not bought the cottage yet, we were able to treat it as ours. At another point CB said to me that 'you will always have a home here, and our children'. When I tried to ask what he meant by that I was made to feel greedy and selfish and I should simply accept the generosity of his family. I was reminded often by CB how lucky I was not to have to pay rent or mortgage on this property" 33: "CB and I had also discussed moving to France on a number of occasions. In that context we had discussed what should be done with the Farm. We had discussed that we would be in a position to rent it out and use the income that it would produce to support us living in France, but that it would always be our base if ever we wanted to relocate back to Wales. In fact CB and I also spoke at length about extending the Farm into an adjoining derelict barn, also owned by DB and VB, to the side of the property, which would provide a huge sitting room and two to three new bedrooms. We had detailed discussions about it but eventually CB seemed to lose interest in the idea and we did not proceed." In her oral evidence to me the wife told me a slightly different story. In her cross-examination she was asked by Mr Anelay whether she believed she had a beneficial interest in the farmhouse and she said yes, and he then asked "how did you derive that understanding" and her answer was: "I was given to understand that by my husband. He told me it would be ours. I took it to be mine not just as a home." Now it can be seen that what the wife says there is somewhat different from the language that she describes in paragraphs 32 and 33 of her witness statement, and indeed in paragraph 11 of her skeleton argument. In my judgment the wife had not seen the trust deed prior to it being executed. That is my finding. She did not see it subsequently while the marriage subsisted; she only saw it after the marriage had broken down when she went to the office and found it in the files. However, it is also my clear finding that she knew well enough that this property was not owned by them, nor would it be owned by them. She knew, in my judgment, that there was some kind of an arrangement whereby it was intended that it would stay in the family and after it had been used by them, possibly for their entire lives, it would revert to the family estate. Of that I have no doubt at all. Following the creation of the trust further monies were spent on the property, specifically a loft conversion, which seems likely to have taken place after the creation of the trust, and a new roof was put on. The parties have agreed, and again I commend them for the cooperative stance they have taken to each other, that £15,000 was spent by them following the creation of the trust. The husband also candidly agreed with me that there was no question of him, in accordance with the occupation agreement, having obtained the consent of the trustees in writing to do anything. This points up to me that this house, although it was held under the formal umbrella of a trust, was first and foremost the matrimonial home of the husband, the wife and their children, SB from 2009 and to be joined by JB, although the end of the marriage disrupted that plan. So the parties lived there until the end of the marriage when they separated. The husband has since formed a new relationship and a child has been born as a result of that new relationship, and he is living in another house on the estate. The wife occupies the the farmhouse sometimes, otherwise she lives in north Oxfordshire in her parents' spare room and it is to north Oxfordshire that she wishes to locate. For quite a lot of the time the farmhouse stands empty. In his second witness statement DB, the husband's father, describes how it is becoming scruffy and unkempt. In paragraph 32 he says: "This property has now been virtually empty for several months following the wife's decision to leave and as a result of its increasingly unkempt appearance it is my own personal opinion that its value can now be worth no more than £260,000." It must be clearly understood that had the marriage not broken down the parties could have continued to live in the farmhouse, probably would have continued to live at the farmhouse, until their very old age. This might have been for a period of up to 50 years. I say this because I have received a witness statement from EB which I simply do not understand. It speaks about how this property is a vital resource for the farm, as he says in paragraph 2: "Its location right next to the dairy buildings lends itself perfectly for housing a herd manager when the dairy is in use." Then he says, in paragraph 5: "If the trust were modified to force the sale of the farmhouse then either another house would have to be built to house a herdsman or I would be forced to accept that a dairy unit would not be a viable option." This is incomprehensible to me. The point of the creation of the trust was to allow the husband and the wife and his children to live there indefinitely, a period for which might have been up to 50 years. In any event, the plan now is not to put a herd manager in there but to allow the husband, his new partner, his child by that new partner and JB and SB to live in the farmhouse. So I simply regard this as an unhelpful forensic stratagem advanced by EB which certainly does not assist me to reach a just conclusion in this case. I now turn to the legal treatment of this trust. It is argued on behalf of the trustees, who have intervened in these proceedings and who I am satisfied are properly representing the interests of the children and thereby obviating the need to make an order for separate representation of the children under Rule 9.11 of the Family Procedure Rules, that the trust is not a nuptial settlement. Alternatively, if it is a nuptial settlement the only nuptial element which is capable of variation by the Court under Section 24(1)(c) of the Matrimonial Causes Act 1973 is the husband's right to occupy and that, in any event, the scale of variation, should I be against him on the first two points, should be proportionate and should not amount to an exercise in confiscation of the remainder interest of EB and his children, or indeed the discretionary interest of the adopted children of the husband. The question of what type of arrangements qualify as variable nuptial settlement have been considered in a number of cases, which I, in a sort of taxonomical way have attempted to summarise in my most recent decision of DR -v- GR [2013] EWHC 1196 . I, in that case, examined with some care the previous decisions of the House of Lords in Brooks -v- Brooks; the old decision of the Court of Appeal in Dormer -v- Ward; the very lengthy decision of Mr Justice Munby, as he then was, in Ben Hashem -v- Shayif & Another; and the earlier decision of Mr Justice Coleridge in N -v- N and F Trust . In my own decision, in my attempt to summarise the law, at paragraph 8, and by reference specifically to what Lord Nicholls had said in Brooks -v- Brooks , I said the test for what comprises a nuptial settlement is: "any arrangement which makes some form of continuing provision for both or either of the parties to a marriage" And pointed out that in the case of Brooks itself the arrangement in question was a pension scheme established by a struck off company which had been owned by Mr Brooks. That was a variable nuptial settlement according to the House of Lords in that case. However, it is fair to say that in that case Lord Nicholls stated that there may well be nice questions which may arise over whether property is or is not brought into the settlement, and in my paragraph 11 in DR -v- GR I explain that a settlement which affects property does not necessarily capture all of that property. Therefore in Dormer -v- Ward [1901] the settlement was a jointure rent-charge charged on certain specified hereditaments, which are the pieces of land, and a jointure rent-charge is a settlement on a woman in consideration of marriage of rents from the land, to be owned by her after her husband's death. In that case the subject matter of the variable nuptial settlement was the rent-charge only and not the land on which it was charged. Similarly, in Ben Hashem there were two properties of which only one was even arguably a nuptial settlement, it was called 17 Kensington Heights in London, and the element that was settled in relation to that was not the property itself, so Mr Justice Munby found, but only the husband's revocable right to occupy it. In N -v- N and F Trust Mr Justice Coleridge held that a house which was lived in by the parties, which was owned by a settlement which was categorically not a nuptial settlement, was a nuptial settlement although, as Mr Justice Munby pointed out in the later decision of Ben Hashem , at paragraph 248, Mr Justice Coleridge's judgment does not reveal what aspect of the house in question was the subject of the settlement. Was it the whole of the house in terms of its title and value, or was it only the right to occupy it? Unfortunately the decision of Mr Justice Coleridge is not clear on the point and so that is not helpful in determining the issue which I have to decide. It is said by Mr Dew on behalf of the trustees that the only aspect which is within the Court's dispositive powers and capable of variation is the husband's right to occupy under the terms of the trust and the occupation agreement, rather than the property itself. He says this is essentially a Ben Hashem and Dormer -v- Ward situation where it cannot be right to bring into the Court's remit of powers the actual ownership of the property itself. There can be no doubt in my view that the fundamental question, which is whether is this an arrangement which makes some form of continuing provision for both or either of the parties to a marriage, is satisfied. If I had any doubt about it I only need to go back to the letter to the bank manager of the 17 th December 2007, where it is stated that the transfer is: "to make provision for a home there for our younger son CB and his wife." The more difficult question is whether the arrangement only brings within the scope of the Court's powers the right to occupy. I am satisfied, however, that this would not be the right conclusion to draw in this case. Had clause 5.2 not been present I might have reached a different decision, it would then have been more borderline. However, the existence of clause 5.2, which gives the trustees the specific power to advance all of the property to the husband during his lifetime, in my view makes clear to me that this settlement as a whole, and all of the property which it captures, is to be regarded as a variable nuptial settlement. However, I am with Mr Dew that when deciding whether and, if so, how it should be varied, the intention of the settlor and the knowledge of the parties that ultimately the value of the settlement would revert to the estate, must be given heavy respect. I go back again to what the husband's father wrote to the bank manager: "The point of putting the house into trust is to ensure that in the long term it remains available as a farm or estate asset." On the other hand it must not be forgotten that this property was the parties' matrimonial home. It was their matrimonial home for a long time. They moved in in April 2005. They lived there together until the end of the marriage in September 2012. It was the focal point of their marriage and in this regard I remind myself of the important words of Lord Nicholls in Miller -v- Miller [2006] UK HL 24 , at paragraph 22, when discussing the conceptual division between matrimonial and non-matrimonial property, he said this: "This does not mean that, when exercising his discretion, a judge in this country must treat all property in the same way. The statute requires the court to have regard to all the circumstances of the case. One of the circumstances is that there is a real difference, a difference of source, between (1) property acquired during the marriage otherwise than by inheritance or gift, sometimes called the marital acquest but more usually the matrimonial property, and (2) other property. The former is the financial product of the parties' common endeavour, the latter is not. The parties' matrimonial home, even if this was brought into the marriage at the outset by one of the parties, usually has a central place in any marriage. So it should normally be treated as matrimonial property for this purpose. As already noted, in principle the entitlement of each party to a share of the matrimonial property is the same however long or short the marriage may have been." So, there is a clear tension here which this Court has to resolve, similar to the tension which I had to resolve in the case of DR -v- GR , although perhaps more acute in this case given that the trust property in DR -v- GR was the product of the parties' endeavours, whereas in this case it cannot be said that this is so, except to the extent that they have contributed to the improvements to the property. And so in this case I have to resolve the familiar tension between balancing the right to share matrimonial property of which the most important element is the matrimonial home, however provided, with the fact that there is a trust here and the intention of the trust was, as the husband's father clearly stated, to ensure that in the long term the property remained available as a farm or estate asset. The value of the farmhouse was agreed between the parties at £325,000. I place no reliance on the husband's father's statement that it has subsided in value to £260,000. There would be, were it to be sold, notional costs of sale of around £11,000, giving a net value, for my purposes, of £314,000. If this were a straightforward case without trust complications, then having lived in it for nine years, applying paragraph 22 of Miller that would, under the sharing principle of the most important piece of matrimonial property, subject always to the question of need, entitle the wife, as a starting point, to half of its value, i.e. £157,000. I will come back to this figure in a moment. The parties have agreed, as I have mentioned, that before the creation of the trust they contributed from the proceeds of the cottage, £21,000, and after the creation of the trust a further £15,000, so it is £36,000 in contributions of their own joint money to the property. In addition the wife, from her own personal resources, prior to the creation of the trust, contributed £5,000. In my judgment half of the £36,000, or £18,000 plus the £5,000, a total of £23,000 is a sum that the wife is entitled to recover outright from the trust fund by way of variation. It would be unconscionable and unfair, in my judgment, were she not to be able to recover that sum of £23,000 from the trust property. At this point I should also say that I have been treated to some argument as to whether the wife has an actual beneficial interest referable to her contribution. I am not satisfied that I need even to venture down that road. It is a complex area of law, and gives rise to the familiar question of whether contributions alone, outside Section 39 of the Matrimonial Causes Act 1973, can give rise to a beneficial interest in circumstances other than through evidencing a common intention or giving rise to a proprietary estoppel. I believe that were I to have to render a judgment on that the wife would be likely to fail in establishing that her financial contributions give rise to an actual beneficial interest. It is not necessary for me to do so because I can do justice by varying the trust to make outright provision for her for the value of her contributions which I assess at £23,000, for the reason I have given. In addition, as I have explained at para 16 above, from the proceeds of the cottage, the parties lent £15,000 to the enterprise company. Half of that is to be regarded as the wife's money and in that regard I am going to award a lump sum against the husband, personally, of £7,500 referable to that contribution and the quid pro quo will be that the wife will transfer to the husband the debt due to her, if any, from the enterprise company. So, pausing at this point, the outright provision at the end of this marriage that will be made to the wife, will be from the trust £23,000, I will discuss the mechanics of this in a minute, and from the husband £7,500. A total of £30,500. Now, in my judgment justice in this case, reflecting the sharing principle in relation to the core element of matrimonial property and, at the same time, the existence of the trust and its purpose, entitles the wife to a further award, but not on an outright basis from the trust. Half of the net value of the farmhouse is £157,000. She will be getting £23,000 outright, so that leaves £134,000. That sum will be extracted from the trust and appointed to the wife, but on the terms of a life tenancy. There will be independent trustees, no power of advancement, and on her death the sum will revert to the estate. The details will need to be sorted out in circumstances which I will mention. It therefore follows that the trust will be varied to create a wife's fund, of which £23,000 will be outright and £134,000 will be on the life tenancy terms which I have mentioned. So where does that leave the wife? I said I would come to her financial position in due course. The wife has the two properties which I have mentioned, Pembroke Dock in negative equity of minus £5,890, and 8 Melbourne Road in Bristol with a positive equity of £199,641. The calculation of the notional Capital Gains Tax, were those properties to be sold, is £26,266. I take all these figures from Mr Anelay's helpful schedule. In addition she has monies in bank accounts of £3,675, and she owes her father, in relation to the costs of these and the adoption proceedings, £84,000. This represents the great majority, 85%, of the father's savings, and the wife, understandably, would like to be able to repay that just as the husband would like to be able to repay the six figure sum that he has borrowed from his own father for the purpose of this litigation. I pause here just to note that the aggregate of the costs, in the usual way, has exceeded the amount of the award that I am making in favour of the wife. The position of the wife, therefore, if she has to repay all debt due to her father immediately, is a net position of £87,160. She will receive an outright capital award in the way I have described, of £30,500, £23,000 from the trust, £7,500 from the husband, so her free capital position will be £117,660, she will then have the life tenancy fund on top, of £134,000, giving her a net position of £251,660. So I now turn to consider the question of the wife's needs and ask myself whether that is a sufficient sum to meet them. The exercise of assessing the wife's needs is made more complicated by virtue of the fact that the wife is in a relationship with a former army officer, who was in the Signal Regiment, who is an IT specialist, called Mr P. Her relationship has been going on with him for nine months; she did not disclose it, it was revealed by virtue of investigations made by those instructing Mr Anelay QC. Mr P is about to buy a home for £500,000. The wife does not know how much of that is being furnished by means of free capital and how much by mortgage. She says she is not going to live with him, although it is perfectly clear that the relationship is strong, she likes him and his children very much, she hopes it continues, they have a lot in common and are happy together. Relationships like this always are a significant fly in the ointment in the assessment of need. One cannot make assumptions, if it is not full blown cohabitation akin to marriage, that it will grow into that, because if it does not the wife may be left stranded between Scylla and Charybdis if the assumption is wrongly made. On the other hand, if one makes a needs assessment on the basis that she is a single woman and she soon cohabits, then the paying party in the ancillary relief proceeding can rightfully feel significantly aggrieved. In my judgment, if the wife were assuredly single and I could foresee that continuing, I would have my doubts as to whether a net capital position, excluding pension, which will not be accessed for a long time, of just over £250,000 would be enough in circumstances where she intends to live, not unreasonably, in north Oxfordshire, near her family and her friends. On the other hand I cannot ignore the existence of the relationship with Mr P and so I reach the conclusion that the net figure that I leave the wife with of just over £250,000 is sufficient to meet her needs. She does not seek any order for periodical payments, nor would I grant it had she done, and that claim will in fact be dismissed. In the case of O'D -v- O'D [1976] Fam 83 Lord Justice Ormrod dismissed the appeal in respect of the lump sum award made in favour of the wife and concluded his judgment in these terms, at page 92C: "The court must, of course, consider very carefully the effect on the husband of any order which it has in mind to make, because its purpose is to do justice to both parties and the section specifically requires the court to have regard to what is practicable, but in considering this aspect of the case the court is entitled to look at all the surrounding circumstances with a realistic eye. In many cases the difficulty of raising a large lump sum immediately may be very real, in which case arrangements for some form of deferred payment may be appropriate, in other cases the husband might prefer to put forward alternative proposals to avoid having to raise a large cash sum, in others the court may be able to find there are ways and means of complying with the order. In the present case one of the family companies has recently sold a hotel for £500,000 and has bought the building next door to the Sea Hotel. It appears still to have large liquid assets so that the family are or may be in a position to invest some of these funds in the Sea Hotel, thus freeing some of the husband's resources at present invested in it without prejudicing in any way his position as manager. It is legitimate, as the judge did, to take such matters into account when considering the husband's submission that the lump sum should be reduced owing to his difficulties in realising part of his assets, probably, it will be found convenient in cases like this one, to adopt the practice which in the past was used in cases where secured provision was ordered. The court would indicate the amount to be secured and then adjourn the application to give the husband an opportunity of putting forward proposals for compliance with the order and for the wife and her advisors to consider them. The court itself refrained from selecting the security unless the parties were unable to reach agreement upon the matter, so in a case like this the husband should be given every opportunity of putting forward a scheme which will enable the order to be complied with within generous time limits and the court should refrain from devising ways and means itself once it is satisfied that the order it makes or intends to make is practicable. Indeed in some cases it may be found on further consideration that the most practicable way of dealing with the wife's position is to make one or other of the orders provided for in Section 24 in substitution in whole or in part for the lump sum order, the drawing up of which can be postponed until after discussions have taken place between the parties." Here I have ordered sums which are, in the scheme of the wealth of the overall family, comparatively modest, to be appointed to the wife out of the trust, a total of £157,000, partitioned as to £23,000 outright and £134,000 on a life tenancy. I expect the parties, and for this purpose I think the wife may need to get some legal advice, to engage in discussions as to how this might best be formulated technically. It may well be that, bearing in mind the fund is quite small, rather than having an actual trust with independent trustees the parties might agree that perhaps an equitable or legal charge should be executed over the wife's new home in favour of the trustees of the trust, thereby avoiding all the formality and panoply of a trust arrangement. So I am expecting discussions to take place between the parties. If they cannot agree how my judgment should be given effect then I will, of course, rule on it. That is the end of my judgment. Later - (28 July 2014 - The Royal Courts of Justice - [2014] EWHC 2990 (Fam)) : This is an application by the trustees for permission to appeal my judgment delivered in the Swansea Civil Justice Centre on 25 th June 2014. The written record of the judgment given by me has now been finally approved and was distributed last Friday, 25 th July 2014, exactly a month after I gave judgment. No application was made for permission to appeal by any of the parties (and there are three, the husband, the wife and the trustees) when I gave my judgment on 25 th June 2014. However, on 16 th July 2014 an application by the trustees seeking permission to appeal was filed directly with the Court of Appeal. If I had not noticed a cryptic reference to this in one of the emails concerning the transcription of my judgment, I would have been oblivious of this step. It is my opinion that an application for permission to appeal should always be made to the court of first instance before an approach is made to the Court of Appeal. It is for this reason that I have directed this application to be made to me. CPR 52.3(2) and CPR Practice Direction 52A 4.1 allow the application to be made to either the court at first instance or to the appellate court. The old version of the practice direction encouraged the application to be made to the court of first instance, but that prescription is now absent from the existing practice direction. However, the editors of the White Book, headed by Lord Justice Jackson, are clearly of the view that an application for permission should be made to the court of first instance. This is set out at para.52.3.4. It sets out five reasons why the application should be made to the court of first instance as follows: "(a) The judge below is fully seised of the matter and so the application will take minimal time. Indeed the judge may have already decided that the case raises questions fit for appeal. (b) An application at this stage involves neither party in additional cost. (c) No harm is done if the application fails. The litigant enjoys two bites at the cherry. (d) If the application succeeds and the litigant subsequently decides to appeal, they avoid the expensive and time-consuming permission stage in the Appeal Court. (e) No harm is done if the application succeeds but the litigant subsequently decides not to appeal". The White Book goes on to say this: "It should be noted that the guidance in this paragraph was firmly endorsed by the Court of Appeal in Re T (A Child) [2002] EWCA Civ 1736 at 12-13." The remarks of the Court of Appeal in Re T (A Child) are seared on my memory as I represented the delinquent applicant in that case who made an application for permission to appeal directly to the Court of Appeal without troubling Mr. Justice Wilson (as he then was) who was the first instance judge, and where, in the Court of Appeal, I received withering criticism for my conduct for so doing. In my judgment, there is an additional very good reason why an application should be made before the judge at first instance. The judge at first instance may very well be a specialist in this field. Without being hubristic, I can, I think, rightly claim to be specialist in the field of what used to be referred to by the profession, and is still referred to in the Matrimonial Causes Act, as "ancillary relief". I myself, when at the Bar, appeared in the House of Lords in the case of Brooks v Brooks . I appeared in the House of Lords in the cases of White v White and Miller v Miller . I appeared in the Supreme Court in the case of Granatino v Radmacher. Since my elevation to the bench I have written a number of important judgments about the scope of the powers and the exercise of discretion in nuptial settlement cases. I refer to my decisions of BJ v MJ (Financial Remedy: Overseas Trusts) [2011] EWHC 2708 (Fam) and DR v GR & Ors (Financial Remedy: Variation of Overseas Trust) [2013] EWHC 1196 (Fam) . I am aware, from remarks that have been made at judicial symposia, that the judges in the increasingly beleaguered Court of Appeal find the rulings made by judges of first instance on applications for permission to appeal to be extremely helpful in identifying the merits or otherwise of an application for permission to appeal. It is therefore my clear view that in the future, in the field of ancillary relief at the very least, an application for permission to appeal must always be made to the judge at first instance before an approach is made to the Court of Appeal. I now turn to the grounds of appeal in this case. In para.1 it is suggested that I was wrong in law in making the orders that I did. In para.2 it is suggested, additionally or alternatively, that I failed properly to exercise the discretion conferred upon me. I have to say that I find these criticisms hard to take given that, in my own small world of complex ancillary relief cases, I do regard myself as knowing what the scope of the law is and how the discretion should be exercised, they being in my blood. Be that as it may, I will go on in a moment to address the specific criticisms that are made of my judgment in the particularised grounds of appeal. However, before I do so, I would wish to refer to para.13 of the skeleton argument, which is not in fact reflected in the grounds of appeal, where this is said : "Although in his judgment the judge decided this as a model of how such a trial should be conducted, it is respectfully submitted that before making an order not canvassed by any of the parties before or during the trial, albeit raised by the judge during the course of the trial, it might have been better to have given at least a longer period for closing arguments or invited written submissions on the proposed order". As I explained in my judgment, the case had been listed for four days, although in fact everything apart from the judgment was concluded in the first day. It was during that first day, obviously, that I raised the proposal that the variation in favour of the wife could be on a life tenancy basis rather than outright. Nobody sought any kind of adjournment to deal with this suggestion. There was ample time to seek an adjournment for reflection, if indeed it was the case that reflection needed to be taken, and so I comprehensively reject the criticism in para.13 of the skeleton argument. I now turn to the six particularised grounds of appeal. I take initially numbers 1 and 5. These read as follows: "The judge failed to properly or sufficiently take into account the needs and welfare of the children of the family" And: "The judge failed to properly or sufficiently take into account the husband's needs and particularly his need for housing" In the skeleton argument, at para.20, it says this: "Prior to the separation the property was occupied by the husband and the wife and the children of the marriage, SB and JB who are 6 and 4, as the matrimonial home. SB has occupied the property from the time of her adoption and from the separation occupied it with her mother when she was not staying with her father. JB has occupied the property until April 2013 when the wife abandoned the adoption process in relation to him. The property is therefore the home of both of the children. It was common ground at the trial that the husband would return to live in the property together with the children. The wife said she had no desire for the property to be sold - 'but if that is the only way that I can seek a fair outcome then so be it.'" At para.22: "It is therefore clear and obvious that the sale of the property will be to remove the home of both the husband and the children. The effect of the order is therefore to cause direct harm, financial and otherwise, to both the children of the family. The order necessitates the sale of the property. No alternative provision is made for the husband to live and he has no money to purchase a home. The consequence is to deprive the children of their home". At para.30: "It was plainly wrong to make the order because: (i) it failed to consider its effect on the husband's needs; and (ii) it failed to consider the effect upon the welfare of the children. The reality of the order is that the home that would otherwise be available to the husband and the children will have to be sold. That does not meet the husband's needs nor provide for the welfare of the children". The case that was advanced against the wife in relation to this property by EB, as I explained in paras. 41 and 42 of my judgment, was that this property was needed as a herd manager's property. He stated in his affidavit, as I quoted in my judgment: " Its location next to the dairy buildings lends itself perfectly for housing a herd manager when the dairy is in use" And later in his affidavit he said: "If the trust were modified to force the sale of the farmhouse then either another house would have to be built to house a herdsman or I would be forced to accept that a dairy unit would not be a viable option". In his oral evidence EB said: "The farmhouse is a vital option for the farm". In his oral evidence the father of the husband and EB, DB, said: "The farmhouse is part of an active dairy farm. It has never been considered anything other than a stockman's house". Now it is said that this property first and foremost is a home for these children and that my order, if a rescue plan is not adopted by the family, will involve its sale. In my judgment I said this about the husband's financial position at para.12: "On any view, although there is no sense of entitlement on his part, his term in terms of financial security is absolutely assured". At para.39 I said: "The husband has since formed a new relationship and a child has been born as a result of that new relationship and he is living in another house on the estate" That is a fair summary of para.58 of his witness statement dated 7 th February 2014, where he said: "It is very much my wish and intention to move back into the former matrimonial home. I have a life interest under the trust and the benefit of an occupation agreement. I intend to live there with SB and JB subject to the orders made by the court in the residence and adoption proceedings. My current address at Abbey View is not a property owned by me, but I am allowed to live there rent free, in short, while I am likely to need to house a family with three children. My current home is a cost to my parents for as long as I occupy it and is too small for a family with three children" In his oral evidence the husband simply said this: "I live in rent-free property provided by my parents. In the future I hope to live in the farmhouse". That was the extent of the evidence about the husband's proposals for the future and I would suggest that it goes too far for it to be said, in para.20 of the skeleton argument, that: "It was common ground at the trial that the husband would return to live in the property together with the children" The reason that it is said that Abbey View is too small is because the husband has formed a new relationship and, with his new partner, he has had another child. So it seems to be the case of the husband, for the purposes of appeal, that the wife here should be deprived of a settlement which would enable her to be housed properly with the child SB, for the periods when SB is with her, because of the demands made on the husband by virtue of his new relationship. This is directly offensive to the principle affirmed by the Court of Appeal in Vaughan v Vaughan [2011] 1 Fam 46 at para.37 and 38 where it was said unambiguously by Lord Justice Wilson (as he then was) that an award should certainly not give priority to the claims of a second wife; a fortiori I suggest in relation to a new partner who is not married to the husband. It seems to me that every argument was deployed in this case to prevent the wife getting a fair settlement. First, there was an absurd argument put up that the property was needed as a herdsman or stockman's house. Secondly, it is put up that the husband has to live there rather than the other property on the estate where he is currently living because of the demands made by his new relationship and newly arrived child. In my judgment, the argument in relation to the children's needs and the husband's needs is completely untenable and the appeal in that respect has no realistic prospect of success. I now turn to the next three grounds, the second, third and fourth, which are as follows: Second: "The judge failed properly or sufficiently to take into account the interests of the other beneficiaries of the trust" Third: "The judge sought to rely upon an express or implicit finding of fact to the effect that the husband's family would satisfy this order, so avoiding the property being sold, that it was not open to him to make" Fourth: "The judge sought to place improper pressure upon the husband's family to satisfy the order being made" This is the nub of the appeal, as Mr. Dew has described it. It is expressed in para.16 of the skeleton argument thus: "The simple point on this appeal is that the trustees do not have the assets available to make the provision ordered. Their only asset in the home. They have no cash assets and no income to service any indebtedness. The consequence absent a rescue from the family, as to which see below, is that the home must be sold in order to make the provision ordered by the judge. But a sale means there will be no home for CB or the children of the family and prejudices the interests of the beneficiaries" As to whether the trustees have access to any other money I would remark that I have established today that the trustees' costs, which were at trial £50,000, and which no doubt will be appreciably more by virtue of the application made in relation to the proposed appeal, are being all entirely met by DB. So it is, in my view, fantasy for it to be suggested that the trustees do not have access to other resources. The suggestion that I failed to take into account the interests of the other beneficiaries is, in my judgment, completely untenable. I took them fully into account in para.60 of my judgment, in that I provided that the wife's interests in the great majority of the fund carved out for her would be only as a life tenant, thereby ensuring that on her death the funds would revert to the estate for the benefit of the other beneficiaries. That is said in the skeleton argument to be so far in the future that it is for practical purposes to extinguish the interests of the remaindermen, but that would be the case anyway if I were not to make any kind of variation in favour of the wife because of the life interest in favour of the husband, where I assume that he will live at least as long as the wife. So that particular argument demonstrates no merit to me at all. The third and fourth grounds are basically the same thing and suggest that I sought to put improper pressure on the husband's family to satisfy the order. I did nothing of the sort. I have given them choices, that is true, but I have not put any pressure on this father, DB, or his brother, EB, to satisfy this award. If they want to satisfy the award and avoid the sale of the property that is up to them. If they choose not to then the property will be sold and the property will be converted into cash. In White v White , in the Court of Appeal, Lord Justice Thorpe memorably stated that the only difference between real property and cash is the sound of the auctioneer's hammer. In this case, if the family do not rescue, the property will be sold. It will be divided in half and become two cash funds. In relation to the cash fund that is retained by the trust, the husband will have a life tenancy under the existing terms of the trust. In relation to the cash fund that is awarded to the wife, the great majority of that is on life tenancy terms. I do not regard it as any kind of disadvantage to the estate or to the children if there were to be a sale. I am not at all satisfied that the husband or the children would suffer any kind of hardship if the property were sold. If Abbey View is, for the time being, somewhat cramped because the property is sold then so be it. That is not unjust, in my judgment, particularly where the position of the wife would be that she herself would not be able to live in a property of any particular value as I explained in para.64 and 67 of my judgment. The final ground of appeal is that I failed "to properly or sufficiently consider the extent to which the wife's needs were met by her own or other assets". In the skeleton argument it is said, at para.31, that I "effectively ignored her ownership of two rental properties and the equity in those". I have to say that when I read that I was startled, to say the least, having regard to the fact that in para.61of the judgment I very explicitly compute the equities in the two properties that are there referred to and take them into account. So how it can be said that I ignored those is beyond me. It is implied that I ignored that on paper the wife's assets were considerably greater than the husband's. Again that is a meritless criticism bearing in mind that that is exactly what I said in para.9 of my judgment. Finally it is said this: "The judge referred to the fact, discovered only just before the trial, that the wife had begun a new relationship but considered that her new partner could not be expected to be relied upon. It is unclear to what extent this second aspect was sufficiently explored at trial" I cannot understand how Mr. Dew suggests that it is unclear how this second aspect was sufficiently explored. He was there. He knows perfectly well that it was explored in some depth and the wife was cross-examined at some length about it. There was no application made for an adjournment for the wife's boyfriend to be summoned before the court or for further disclosure. Both Mr. Dew and Mr. Anelay were content for the matter to proceed to judgment on the evidence that was given at trial. That aspect was taken into account by me fully in para.64 to 66 of my judgment. They amount, in effect, to findings of fact which it would, in my view, be impossible to challenge on appeal. In this respect I am not satisfied that the ground of appeal has any attraction at all. The application for permission to appeal is therefore dismissed. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII