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England and Wales Family Court Decisions (High Court Judges) |
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You are here: BAILII >> Databases >> England and Wales Family Court Decisions (High Court Judges) >> BT v CU [2021] EWFC 87 (01 November 2021) URL: http://www.bailii.org/ew/cases/EWFC/HCJ/2021/87.html Cite as: [2022] 1 WLR 1349, [2021] WLR(D) 557, [2022] 1 FCR 471, [2022] 3 All ER 309, [2021] EWFC 87, [2022] EMLR 14, [2022] 2 FLR 26 |
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Strand, London, WC2A 2LL |
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B e f o r e :
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BT | Applicant |
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- and – |
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CU | Respondent |
____________________
Amy Kisser instructed by Mills and Reeve for the Respondent
Hearing dates: 7-8 October 2021
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Crown Copyright ©
Mr Justice Mostyn:
i) Is Covid capable of being a Barder event?
ii) Has the applicant established sufficient grounds to set aside the final order, whether in part or in full?
Such a process is clearly permitted by FPR PD 9A para 13.8. This states:
"In applications under rule 9.9A, the starting point is that the order which one party is seeking to have set aside was properly made. A mere allegation that it was obtained by, e.g., non-disclosure, is not sufficient for the court to set aside the order. Only once the ground for setting aside the order has been established (or admitted) can the court set aside the order and rehear the original application for a financial remedy. The court has a full range of case management powers and considerable discretion as to how to determine an application to set aside a financial remedy order, including where appropriate the power to strike out or summarily dispose of an application to set aside. If and when a ground for setting aside has been established, the court may decide to set aside the whole or part of the order there and then, or may delay doing so, especially if there are third party claims to the parties' assets. Ordinarily, once the court has decided to set aside a financial remedy order, the court would give directions for a full rehearing to re-determine the original application. However, if the court is satisfied that it has sufficient information to do so, it may proceed to re-determine the original application at the same time as setting aside the financial remedy order."
The legal principles
i) New events have occurred since the making of the order invalidating the basis, or fundamental assumption, upon which the order was made.
ii) The new events should have occurred within a relatively short time of the order having been made. It is extremely unlikely that could be as much as a year, and in most cases it will be no more than a few months.
iii) The application to set aside should be made reasonably promptly in the circumstances of the case.
iv) The application if granted should not prejudice third parties who have, in good faith and for valuable consideration, acquired interests in property which is the subject matter of the relevant order.
To this list must be added a further condition namely that the applicant must demonstrate that no alternative mainstream relief is available to him which broadly remedies the unfairness caused by the new event: Penrose v Penrose [1994] 2 FLR 621 at 634; Myerson v Myerson (No 2) [2010] 1 WLR 114 at [35]; J v B (Family Law Arbitration: Award) [2016] 1 WLR 3319 at [34].
"When a businessman takes a speculative position in compromising his wife's claims, why should the court subsequently relieve him of the consequences of his speculation by rewriting the bargain at his behest? [The husband] continues to enjoy control of the opportunities that go with it. The marketplace may take a pessimistic view of his future prospects. He may not share the marketplace view. Unusual opportunities are created for the most astute in a bear market."
Thus, the court is bidden to consider exercising its discretion so as to say to a businessman who has settled his wife's claim that, even if he satisfies all the Barder conditions, he has made his bed and must lie in it. As I read the decision, this discretion will only arise where the final order was made by consent and where the applicant is a buccaneering market trader. It is hard to envisage other circumstances where the discretion would properly be exercised against a set-aside once all five conditions have been proved.
"(1) An asset which was taken into account and correctly valued at the date of the hearing changes value within a relatively short time owing to natural processes of price fluctuation. The court should not then manipulate the power to grant leave to appeal out of time to provide a disguised power of variation which Parliament has quite obviously and deliberately declined to enact.
(2) A wrong value was put upon that asset at the hearing, which had it been known about at the time would have led to a different order. Provided that it is not the fault of the person alleging the mistake, it is open to the court to give leave for the matter to be reopened. Although falling within the Barder principle it is more akin to the misrepresentation or non-disclosure cases than to Barder itself.
(3) Something unforeseen and unforeseeable had happened since the date of the hearing which has altered the value of the assets so dramatically as to bring about a substantial change in the balance of assets brought about by the order. Then, provided that the other three conditions are fulfilled, the Barder principle may apply. However, the circumstances in which this can happen are very few and far between. The case-law, taken as a whole, does not suggest that the natural processes of price fluctuation, whether in houses, shares or any other property, and however dramatic, fall within this principle."
"What chance do you see of a global pandemic arising in 2020 which has the result of wiping out this business's operating profit?"
to the question:
"What chance do you see of a global financial crisis arising in 2020 which has the result of reducing this business's turnover by 10%?"
"In my judgment it is not proper for the court to accede to H's application to vary the quantum on macro-economic grounds. If H wishes to assert that there has been a fundamental change in his worth so as to justify a reopening of the inquiry, then it is up to him to provide prima facie evidence. It is trite to say that the pandemic has affected different sectors in different ways. Some, such as hotels and airlines, which make up part of the wealth of H and his family, will undoubtedly have been negatively affected but so varied are his interests that it is far from obvious that there has been a collapse in his global fortune."
This case
"Contrary to [C's] assertion, the re-opening of the schools does not mean that my business resumes 'trading fully immediately.' Primary school income is down by 10 to 20% with no after school clubs or breakfasts and this seems to be the case nationwide. Eating in classrooms, as is now frequently the case seems to be less popular. Secondary school income is down between 20 to 50% with no break or breakfast services. Our labour costs are greater proportionately for less income and this will be the case until at least September. Schools still operate "bubbles" for year groups and we still have reduced school populations due to year groups being out. Contrary to what C says the company trading in December 2020 does not demonstrate a return to profit. In December 2020 we received income from schools for free school meals that we had not provided as schools depopulated. This source of income is no longer relevant as schools have returned."
|
A |
B |
C1 |
D2 |
E3 |
| ||
|
Y/e |
Y/e |
P/e |
Y/e (est) |
change |
| ||
|
31-Dec-19 |
31-Dec-20 |
30-Jun-21 |
31-Sep-22 |
|
| ||
Profit & Loss |
|
|
|
|
|
| ||
Turnover |
16,639,369 |
9,799,693 |
5,260,216 |
14,975,350 |
-10.0% |
| ||
Cost of Sales |
(14,654,527) |
(10,701,133) |
(5,108,669) |
(14,244,122)4 |
-2.8% |
| ||
Gross Profit |
1,984,842 |
(901,440) |
151,547 |
731,288 |
-63.2% |
| ||
Margin |
11.9% |
-9.2% |
2.9% |
4.9% |
|
| ||
Admin Expenses |
(1,250,468) |
(1,219,272) |
(678,919) |
(937,851) |
-25.0% |
| ||
Other Operating Income (Furlough) |
0 |
2,156,278 |
950,713 |
|
|
| ||
Operating Profit |
734,374 |
35,566 |
423,341 |
(206,623) |
-128.1% |
| ||
|
|
|
|
|
|
| ||
Balance Sheet |
|
|
|
|
|
| ||
Fixed Assets - Tangible assets |
196,913 |
129,179 |
127,453 |
|
|
| ||
Current Assets - Debtors |
1,664,745 |
1,102,667 |
1,003,098 |
|
|
| ||
Current Assets - Cash |
832,760 |
1,049,207 |
1,808,866 |
|
|
| ||
Creditors less 1 year |
(1,723,723) |
(949,753) |
(1,248,260) |
|
|
| ||
Creditors more 1 year |
0 |
(406,334) |
(452,333) |
|
|
| ||
Provision for Liabilities |
(31,531) |
(32,218) |
(32,218) |
|
|
| ||
Net Assets |
939,164 |
892,748 |
1,206,606 |
|
|
| ||
Notes: |
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1. Column C gives the figures for the six-month period ended 30 June 2021 | ||||||||
2. Column D gives the figures in the husband's document referred to above | ||||||||
3. Column E gives the percentage changes between Columns A and D 4. The cost of sales of £14,244,122 in Column D is calculated by taking 90% of the Column A figure of £14,654,527 and then multiplying it by the general 8% increase: £14,654,527 x 0.9 x1.08 = £14,244,122. |
"A value in a company is not the same as liquid capital. There is an element of risk attaching. There is no guarantee that the company will continue to perform at the same level but assuming the company continues to perform well, as it has done for 23 years, the husband will retain the value of the company to realise when he seeks to leave the industry on retirement. He proposes to retain the value within his shares. Both parties propose that he should retain all of his shareholding. I have to be careful to ensure that I am considering both the potential value to the husband but also the potential risk to him."
And at para 56:
"This is a company that has gone from strength to strength through careful management but no doubt there is a competitive market ahead and the wife is not carrying any of that risk on the proposed structure for lump sum payments. It seems to me, on that basis, it is appropriate that any distribution should involve a departure from equality in the husband's favour. It will be fair to do so to give him a greater proportion of the assets to reflect both the premarital value and also the risk that is inherent in his retention of the company and that it is not pounds in the bank or a property."
"I am satisfied that the company is able to release money at that rate. A net profit of £600,000 will be comfortably adequate to pay the £200,000 to the wife and around £175,000 or thereabouts to the husband by way of dividends net of tax. Obviously, tax will need to be paid at 38.1%. However, looking at the company's accounts for the past five years, it has achieved that level of profit in four of those five years and across those five years, there has been a comfortable excess of sums that will be required to pay sums in that order. The company is financially sound and has considerable leeway in how it operates. It seems to me that there is always the option for finance if there are any cashflow issues, but I am satisfied, on the basis of the expert's opinion, that given the retained earnings that are in the company, there should not be any difficulty in realising those sums and the issue would simply be one of liquidity rather than one of a level of profits to enable those dividends to be declared."
"...it is necessary to look at the purpose and effect of the application to extend time to see whether in truth it is intended to strike at the heart of the lump sum order or whether it is a slight extension (as was said by Sheldon J in Gregory v Wainwright) of no great importance, which does not go to the main or substantive part of the order."
Clearly an application for a modest extension of time to pay an individual lump sum would not strike at the heart of the order and would be, if granted, of no great importance, particularly if compensatory tapering periodical payments are being paid in the meantime.
An executory order?
"Where the order is still executory, as in the present case, and one of the parties applies to the court to enforce the order, the court may refuse if, in the circumstances prevailing at the time of the application, it would be inequitable to do so: Mullins v. Howell (1879) 11 Ch D 763 and Purcell v. F. C. Trigell Ltd. [1971] 1 QB 358, 366, 367. Where the consent order derives its legal effect from the contract, this is equivalent to refusing a decree of specific performance; where the legal effect derives from the order itself the court has jurisdiction over its own orders: per Sir George Jessel M.R. in Mullins v. Howell (1879) 11 Ch D 763, 766."
"But there is no ground here so far as I can see for setting aside this consent order. It was deliberately made, with full knowledge, with the full agreement of the solicitors on both sides. It cannot be set aside. But, even though the order cannot be set aside, there is still a question whether it should be enforced. The court has always a control over interlocutory orders. It may, in its discretion, vary or alter them even though made originally by consent."
Again, this case says nothing about the existence of a power to vary a substantive final order which happens to be executory. The cases merely say that the court has power to control its interlocutory orders inter alia by not enforcing them.
"A party against whom a judgment has been given or an order made may apply to the court for … a stay of execution of the judgment or order on the ground of matters which have occurred since the date of the judgment or order, and the court may by order grant such relief, and on such terms, as it thinks just."
Although this rule is not replicated in the FPR, the same power is to be found in FPR 4.1(3)(g) which provides that the court may stay the whole or part of any proceedings or judgment either generally or until a specified date or event.
"On my analysis of the caselaw, the first question in deciding whether to exercise the Thwaite jurisdiction is whether there has been a significant (and necessarily relevant) change of circumstances since the order was entered into; and the second question is whether, if there has been such a change, it would be inequitable not to vary the order. For myself, I do not find the words "cautious" and "careful" particularly helpful. There are two requirements to the use of the jurisdiction and their application will ensure that the Thwaite jurisdiction is used with care. There is no additional test or hurdle set out by the Court of Appeal in Bezeliansky which is the case that binds me."
A lump sum by instalments?
"… orders for cash provision ought normally to be reviewable. But, here again, there must be an exception to this general rule. This relates to orders for a lump sum payment. Once a payment has been made it obviously cannot be cancelled or varied. If, however, the order has not been fully complied with it could be effectively varied and it is necessary to consider whether this should be permissible; its importance is mainly, of course, in cases where a lump sum has been ordered to be paid by instalments. In our view variations should not be permitted. An order for a lump sum of £5,000 payable by ?ve yearly instalments of £1,000 is to be distinguished from ?nancial provision of £1,000 per annum for ?ve years. Apart from the different tax consequences, the former should not end on the death or remarriage of the payee whereas the latter would. If a lump sum is ordered it should be on the basis that the payee is entitled to it here and now although, to soften the blow to the payer, actual payment may be spread over a number of years. In our view once an order for a lump sum has been perfected its amount should not be variable whatever may happen later. This, of course, does not mean that a subsequent order cannot be made which may have the effect for the future of undoing the original payment. If, on a judicial separation, the husband had been ordered to pay the wife £1,000 and if the husband subsequently divorced her because of her adultery and was granted custody of the children, it might well be that the court would then order her to pay him £1,000 or some other sum. This would not be a variation of the original order, but a new order made in the light of the changed circumstances when a second occasion arose to review the ?nancial position." (emphasis added)
"Hence orders for lump sum payments (except in relation to the instalments or the security therefor) and out-and-out transfers are not variable at all and orders for other property adjustments are variable only if made on the grant of a judicial separation and then only in the circumstances stated in subsection (4). But all other orders are variable.
It will be observed that though the amount of lump sums will not be variable (the reasons for this are set out in paragraph 89 of the Report) the provisions relating to the instalments or any security therefor will be variable. A change of circumstances may make it just either to extend or to curtail the time of payment of the instalments or, indeed, to increase or reduce the number of instalments. And after a number of the instalments have been paid it may be reasonable to reduce the amount of the security." (emphasis added)
"I think that the purpose of the words "or sums" must be to enable the court to provide for more than one lump sum payment in one order; indeed, that is what has been done in the present case, for there is an order for the payment of £2,000 and for the payment of £5,500, the latter being expressed by the registrar in his judgment to be "so that she may, should she so wish, acquire a capital interest in her home." Many examples suggest themselves - an order for a lump sum to cover expenses, as in section 2(2)(a) of the Matrimonial Proceedings and Property Act 1970, or for the purchase of the house or for furnishing the house, or in lieu of maintenance, or it may be that one lump sum is to be payable immediately and another by instalments. Then there are wives like the present wife who must have money at once for at least the deposit on a new home for herself and the children, but the final amount she should receive cannot be fairly decided until the selling price of the former home (owned by the husband) is known. At the present day that may be in a bracket of many thousands of pounds. This problem can be resolved within the section by requiring the husband to give her an immediate lump sum for the deposit and adjourning the question of the further lump sum (if any) until after the sale of the former home
…
Counsel for the wife submits that section 2(2) of the Matrimonial Proceedings and Property Act 1970 supports the view that the insertion of the words "or sums" in section 2(1)(c) must be for the purpose of enabling the court to make a plurality of orders. Were it otherwise, section 2(2)(b), which enables an order to provide for the payment of a lump sum by instalments of such amount as may be specified in the order. would, he submits, be quite unnecessary. Although at first sight the meaning and purpose of section 2(2) of the Act is not entirely clear, it seems to me that it is merely a declaratory subsection, for on any construction section 2(1)(c) at least allows sums to be ordered on a first application." (Emphasis added)
"On granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation or at any time thereafter (whether, in the case of a decree of divorce or of nullity of marriage, before or after the decree is made absolute), the court may … make any one or more of the following orders, that is to say …(c) an order that either party to the marriage shall pay to the other such lump sum or sums as may be so specified."
Therefore, the power to award a lump sum or sums derived from this provision, and this provision alone. But, s. 2(2) provided:
"Without prejudice to the generality of subsection (1)(c) above, an order under this section that a party to a marriage shall pay a lump sum to the other party:
(a) may be made for the purpose of enabling that other party to meet any liabilities or expenses reasonably incurred by him or her in maintaining himself or herself or any child of the family before making an application for an order under this section;
(b) may provide for the payment of that sum by instalments of such amount as may be specified in the order and may require the payment of the instalments be secured to the satisfaction of the court."
"(1) Where the court has made an order to which this section applies, then, subject to the provisions of this section, the court shall have power to vary or discharge the order or to suspend any provision thereof temporarily and to revive the operation of any provision so suspended.
(2) This section applies to the following orders, that is to say ….
(b) any order made by virtue of section 2(2)(b) of this Act …"
The variation power therefore does not apply to the order under s. 2(1)(c) which constitutes the lump sum. Rather, it is strictly confined to the subsidiary provisions under s. 2(2)(b) allowing for payment of "that sum" by instalments in the amounts and periodicity there specified. Thus, variation cannot alter the quantum of "that sum".
1970 Act |
1973 Act |
Sec 2(1)(c) |
Sec 23(1)(c) |
Sec 2(2)(b) |
Sec 23(3)(c) |
Sec 9(1) |
Sec 31(1) |
Sec 9(2)(b) |
Sec 31(2)(d) |
Sec 9(7) |
Sec 31(7) |
Plainly, the meaning of the original provisions did not alter on transposition.
i) the two lump sums of £5,000 and £4,000 could be set aside under FPR 9.9A provided that the five conditions in Barder were all satisfied, and it was proved that the new event was unforeseeable; alternatively
ii) the date for payment of the first lump sum of £5,000 could be varied from 1 January to, say, 1 February under the inherent power of the court as explained in Masefield v Alexander; and/or
iii) Under s. 31(1), (2)(d) and (7) of the Matrimonial Causes Act 1973 the scheduled payments of the instalments of the second lump sum of £4,000 could be varied to eight monthly payments of £500 commencing on, say, 1 March and ending on 1 October.
i) Tilley v Tilley (1980) 10 Fam Law 89, CA
ii) Penrose v Penrose [1994] 2 FLR 621, CA
iii) R v R (Lump Sum Repayments) [2003] EWHC 3197 (Fam), [2004] 1 FLR 928, FD
iv) Westbury v Sampson [2001] EWCA Civ 407, [2002] 1 FLR 166, CA.
v) L v L (unreported) 13 October 2006, FD
vi) Hamilton v Hamilton [2013] EWCA Civ 13, CA
vii) Myerson v Myerson (No 2) [2009] EWCA Civ 282, CA
viii) FRB v DCA (No. 3) [2020] EWHC 3696 (Fam), FD
"57. Nevertheless, given the constant emphasis in the authorities generally on the need to uphold the finality of orders intended to be final, including orders as to capital, it seems to me that very similar considerations ought in practice to be applied under s. 31 as those laid down in Barder, at any rate as regards varying the overall quantum of a lump sum order by instalments (as distinct from re-timing or 're-calibrating' the instalments).
58. The re-opening under s. 31 of the overall quantum of lump sum orders by instalments, especially when made as part of a package intended to be final (and all the more so when ordered by consent following an agreement) should only be countenanced when the anticipated circumstances have changed very significantly, and/or for cogent reasons rendering it quite unjust or impracticable to hold the payer to the overall quantum of the order originally made.
59. This formulation gives a little more latitude as regards s. 31 than do the Barder conditions for the grant of leave to appeal out of time; but that must I think follow from the statutory requirement under s.31(7) that the Court is to consider "all the circumstances".
"The Court is given the power to vary a lump sum [payable by instalments] and it stands to reason that that power must extend to quantum as well as timing."
And at [49] she recommended that:
"Finally, in future, parties may consider that a recital at the beginning of an order which sets out the basis of the agreement in terms of a potential variation would put disputes of this type beyond doubt."
"My order will leave the husband with the full value of the company once the lump payments have been cleared in full. They must be cleared and I am quite clear that this is an order for a series of lump sums and it is not my intention that they should be susceptible to variation. It seems to me preferable for both parties that there is certainty."
Her order contained a recital that the parties agreed and declared that the lump sum orders should be considered to be a series of lump sum orders. The order itself at para 7 was headed "series of lump sum orders" and required the husband to pay the wife a series of lump sums.
'…in every case where there is to be a staged payment then this is in reality a lump sum by instalments and that it is not possible to protect the payee by drafting the order as a "series of lump sums".'
"41. … Where there is a disagreement as to whether the terms of the order are, in reality, correct then the Court retains jurisdiction and must assess what the parties agreed against the objective factual matrix of what occurred during the relevant period. Ordinarily the language of the order will settle matters but, in the event of a dispute as to the nature of the agreement, the Court is entitled to look at the surrounding facts and circumstances which bear upon the terms as drafted. This investigation is perfectly proper because it is evidence of the stages that preceded the perfection of the Court order. To be clear, the test is objective as the court is not looking to assess the subjective beliefs of the parties rather it is looking at the objective factual matrix to interpret what was agreed in the light of the words used and communications that passed. "
"…The manufacture of a five-pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade."
I agree.
Conclusion
Postscript: anonymity
"Sir James Munby's judgment was anonymised when published and the parties have requested that this court's decision should also be anonymised when published. Having considered the parties' respective submissions, we have concluded that there is no sufficient justification for the judgments above to be anonymised."
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