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IN THE COURT OF APPEAL (
CIVIL
DIVISION)
ON APPEAL FROM THE FAMILY COURT
MR JUSTICE MOSTYN
FD12D04963
|
|
Royal Courts of Justice Strand, London, WC2A 2LL |
|
|
06/05/ 2015 |
B e f o r e :
LORD JUSTICE JACKSON
LADY JUSTICE BLACK
and
SIR DAVID KEENE
____________________
Between:
|
P
|
Appellant
|
|
- and -
|
|
|
P
|
Respondent
|
____________________
Mr Richard Dew (instructed by Taylor Wessing) for the Applicant
Mr Max Lewis (instructed by Moss Fallon solicitors) for the 1st Respondent
The 2nd Respondent
provided
a skeleton argument but was neither
present
or represented at the hearing
Hearing date: 26th February
2015
____________________
HTML
VERSION
OF JUDGMENT
____________________
Crown Copyright ©
BLACK LJ :
- This is an appeal brought by the trustees of a
post-nuptial
settlement ("the trustees") against an order of Mostyn J, made on 25 June 2014,
varying
that settlement by way of ancillary relief following a divorce between the spouses (hereafter "the wife" and "the husband"). The husband and the wife are the respondents to the appeal.
The terms of the settlement
- The settlement (hereafter "the trust") was established on 21 April 2009. I shall summarise the main
provisions,
albeit in simplified terms.
- The trust
property
was (and still is) a farmhouse ("the trust fund"). The
principal
beneficiary was the husband. The settlor, as defined at the start of the trust deed, was his father and mother. It appears elsewhere in the draft as if the draftsman might have
proceeded
upon the basis that the settlor was his father alone; nothing turns on this. The husband's father is one of the trustees. The discretionary beneficiaries are the settlor's children and remoter descendants and those added
pursuant
to a
power
under clause 3 to add to the discretionary beneficiaries. The trust
period
is 80 years from the date of the settlement or such earlier date as the trustees should specify.
- By clause 4, the trustees were given
power
to appoint the whole or
part
of the capital and income of the trust fund on trust for all or any of the discretionary beneficiaries in such shares as they may appoint in accordance with the rules of appointment which were set out in the trust deed.
- Subject to clause 4, the trust
property
and any income of it was to be held on trust to
pay
the income to the husband during his life, and it was declared that "the making of any land or building comprised within the Trust Fund available for occupation by the
Principal
Beneficiary shall be a
purpose
of this trust". The trustees were given
power
to transfer the farmhouse to the husband or raise money from it and apply that for his benefit "in such manner as [they] shall in their absolute discretion think fit". Subject to that, they were given
powers
to apply the trust fund for the maintenance, education or benefit of one or more of the discretionary beneficiaries.
- At the expiration of the trust
period,
the capital and income of the trust fund was to be held on trust for the husband's brother, his children and remoter issue.
Post-nuptial settlement
- Before Mostyn J, the trustees argued that the trust was not a nuptial settlement or, if it was, that the only nuptial element which was capable of
variation
under section 24(1)(c) of the Matrimonial Causes Act 1973 was the husband's right to occupy the farmhouse. The judge found against them on both
points.
In making his finding that the trust was a nuptial settlement, he relied upon a letter written by the settlor to his bank in December 2007 with a
view
to having the farmhouse released from a mortgage affecting it. In that letter, the settlor spoke of "the transfer of [the farmhouse] into trust to make
provision
for a home there for our younger son …and his wife". In finding that the court's
powers
extended to the whole trust fund rather than just the husband's right to occupy, Mostyn J relied upon the clause giving the trustees
power
to advance all of the
property
to the husband. These findings were not appealed. The focus of the appeal was the specific order made by the judge under section 24(1)(c) which it was said was wrong in that it exceeded the
proper
ambit of his discretion or failed to balance the relevant factors
properly.
The judge's order
- Mostyn J ordered that the husband
personally
should
pay
to the wife a lump sum of £7,500. That has been
paid
and there is no debate about it.
- He
varied
the trust to
provide,
in essence, as follows:
i) a sum of £23,000 was to be
paid
to the wife absolutely;
ii) a sum of £134,000 was to be
provided
for the benefit of the wife for life, to be held by independent trustees, with the wife entitled to use the capital sum for or towards the
purchase
of a
property
for her occupation and having the benefit of the income during her lifetime.
- A
period
of six months was allowed for the sum of £134,000 to be
provided,
and the order
permitted
it to be
provided
otherwise than from the assets of the trust and, with the agreement of the wife, on terms other than those set out by the judge.
- There was no need for the judge to make any orders about other assets. The order simply recited arrangements made between the
parties
about them.
Outline facts
- The husband and wife first met in 1999. They are now in their mid forties. They lived together in the husband's
parents'
home from 2002 then married in 2003. They have one child who is now of
primary
school age.
- The husband's family were described by Mostyn J as being "of great wealth". They own
property
and there are family businesses. The year after the husband and wife were married, the husband's
parents
gave them a derelict
property,
which they made into an attractive house, using their own efforts and borrowed money. It was sold the following year and, after debts were
paid
off, the surplus was used in three ways. Some was lent to the family enterprises. Some was spent on the farmhouse which was to be a home for the husband and the wife, and which was then, in the
pre-settlement
days, owned by the husband's family; the wife contributed a further £5,000 herself to the improvements to it. Some was, as the judge
put
it, "spent by the
parties
on buying things and living".
- It was in 2005 that the
parties
moved into the farmhouse. They separated in 2012 and decree nisi of divorce was
pronounced
in the spring of 2013.
- A joint residence arrangement was reached between the husband and the wife in relation to their child. By the time of the hearing before Mostyn J, the wife was dividing her time between the farmhouse, in which she lived when the child was in her care, and her
parents'
spare room in Oxfordshire where she lived when the child was with the husband.
- The husband adopted a child after the breakdown of the marriage. He also has had a further child by a new
partner.
At the time of the hearing, he and his
partner
were living with the children in a
property
owned by his family, but he said that it was too small for a family with three children and he wished to move back to live in the farmhouse, which the trust would make available for him. Leaving
pensions
to one side, the only capital asset he owned
personally
was a
plot
of land with a net
value,
after subtraction of notional capital gains tax, of just under £38,000.
- The husband's income from all sources, including welfare benefits, was said to be just under £3,000
per
month. He is by
profession
a copywriter but the judge said that did not "tell the whole story by any means". He works in the family enterprises and is a shareholder in and director of the company set up to undertake developments of family
property.
Commenting on the benefits to the husband of his family's situation, the judge said that "although there is no sense of entitlement on his
part,
his
position
in terms of financial security is absolutely secured".
- The wife has also formed a new relationship. Mostyn J said that her new
partner
was about to buy a home for £500,000. The wife said that she was not going to live with him, but the judge said that it was "
perfectly
clear that the relationship is strong" and that it was the wife's hope that it would continue. Mostyn J accepted that, despite the relationship, it was necessary for the wife to
purchase
her own accommodation, but he factored the existence of the relationship into his thinking about the wife's capital needs.
- The wife's
plan
was to
purchase
a
property
where she could live, as could her child when with her. She wanted to be near to her family and friends in Oxfordshire which Mostyn J thought was not unreasonable (judgment §67). As can be seen from the documentation that was before Mostyn J, the wife's case was that to acquire a suitable
property
would cost approximately £300,000 (see, for example, the wife's statement of January 2014 at §81). She sought
provision
from the husband/the trust.
- The wife had certain assets of her own. By the time she met the husband, she had already bought her own home and she still owns that
property
which is rented out. Taking the figures as they were at the time of the hearing before Mostyn J, it has an equity of nearly £200,000. Borrowing against it, she had bought a second
property
which has a negative equity of £5,890. Notional capital gains tax, if both
properties
were to be sold, would be just over £26,000. She had £3,675 in a bank account. She owed her father £84,000 which he had lent to her for the costs of the ancillary relief and children
proceedings;
this represented most of her father's savings and the judge thought it understandable that she wished to repay him. Taking all of this into account, Mostyn J worked upon the basis that, net of debts, the wife's capital was £87,160 (judgment §63). She also had
pension
entitlements which would benefit her in the future, as did the husband, hers being rather larger than his but neither
party
having
particularly
ample
provision;
indeed Mostyn J described the husband's
pension
fund as "microscopic".
- The wife is a journalist by
profession.
She and the husband ran a company together, but since separation, the wife has begun her own business. Mostyn J did not make any finding as to her
past
or future earnings. She was not seeking
periodical
payments
but her case was that she had no meaningful mortgage capacity (see her statement of January 2014 at §70). It appears, from the way in which he approached the wife's needs and resources (see
particularly
§61 et seq of the judgment) that Mostyn J accepted that.
The judge's reasoning
- A
picture
emerges from Mostyn J's judgment of how the farmhouse came to be available to the
parties
and of what those involved understood and intended about it. He found that the wife did not see the trust deed until after the marriage was over, but that she knew before that that the
property
was not owned by her and her husband, and that it was intended that it would stay in the family, reverting to the family estate after they had finished living in it. He found that had the marriage not broken down, the
parties
would
probably
have continued to live in the farmhouse until
very
old age.
- He rejected the evidence of the husband's family that the
property
was needed for farming
purposes,
pointing
out that it would not have been available for that
purpose
if the marriage had worked out, nor would it be available now if the husband and his new family were to live there as intended.
- Having found that the trust was a nuptial settlement, he considered what
variation
of it would be appropriate. He said that "the intention of the settler and the knowledge of the
parties
that ultimately the
value
of the settlement would revert to the estate, must be given heavy respect", referring to what the husband's father wrote to the bank manager, at the time when the trust was being conceived, to the effect that the
point
of
putting
the house in trust was to ensure that in the long term it remained available as a farm or estate asset (§52). But on the other hand, he reminded himself that the
property
was the
parties'
matrimonial home for a long time, citing Lord Nicholls in Miller
v
Miller [2006] UKHL [2006] 2 AC 618 at §22 where he considered the difference between matrimonial
property
and other
property.
Mostyn J observed (§54) that he had 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."
- Mostyn J took the
value
of the farmhouse as agreed between the
parties
(£325,000) which would
produce
a net
value
of £314,000 after allowing for notional costs of sale. He observed that if there were no trust complications, the starting
point
under the sharing
principle,
subject to the question of need, would be that the wife would receive half of its
value,
£157,000. However, in light of the trust complication, his analysis did not stop there.
- He determined first that the wife should receive a total of £30,500 outright. This was made up of (1) £23,000 from the trust by way of
variation
to reflect the money that she had
put
into the farmhouse, namely £5,000 from her
personal
resources and £18,000 being half of the
parties'
joint contributions (see §56 of the judgment), and (2) £7,500 from the husband
personally,
being one half of the £15,000 that the
parties
had lent to the family enterprises, in return for which she was to transfer to the husband any debt due to her from that family company (see §58).
- A key
paragraph
in the judgment is §60 where the judge explained his reasoning for
varying
the trust to make
provision
for the use of further capital by the wife for life. He said:
"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."
- Mostyn J then went on to consider whether that would meet the wife's needs. She would have just over £87,000 of her own
plus
£30,500 outright from the husband and the trust. The fund made available for life from the trust would bring her capital up to just over £250,000. It can be seen from §67 that the judge did not consider that this was in any way generous
provision
for her and it was certainly less than she had said she needed. He said that he would have had his doubts as to whether it was enough for her to acquire accommodation had she been "assuredly single" but taking into account her relationship, he found it to be sufficient to meet her needs.
- Mostyn J alluded at the end of his judgment to the
possibility
of alternative means being found to
provide
the funds required for the wife. His order allowed 6 months for the sum of £134,000 to be found and
permitted
it to be
provided
other than from the assets of the trust.
The nature of the appeal
- The trustees challenged both of the orders that the judge made in respect of the trust. In short, they argued that it was not open to him to exercise his discretion in this way, submitting that the order failed to take account of the needs of the children, the interests of the other beneficiaries under the trust, the intention of the settlor that the
property
would not be sold, the husband's needs (
particularly
for housing), and the wife's ability to
provide
for herself from her own or other assets. The judge was in error, they said, in making an order which, given that the trust had no other means to raise the sums required, would necessitate the sale of the farmhouse which should be a home for the husband and his children.
- The grounds of appeal also criticised the judge for wrongly
proceeding
on the basis that the husband's family would satisfy the order so as to avoid the farmhouse being sold, or at least
placing
improper
pressure
on them to do so.
- Mr Dew's skeleton argument on behalf of the trustees made a further complaint which was not in the grounds of appeal, namely that the order that the judge made had not been canvassed
properly
with the
parties.
- As the only order that was made against the husband directly was for the
payment
of the lump sum of £7,500 and that had been
paid,
the husband did not himself appeal or appear on the appeal. However, a skeleton argument was filed on his behalf which lent support to the
position
of the trustees.
The judge's judgment in relation to
permission
to appeal
- Dealing with the application made to him, in the circumstances described by my Lord, Lord Justice Jackson, for
permission
to appeal, Mostyn J made a
particularly
full response to the complaints made by the trustees ("the second judgment"). For the most
part,
it is unnecessary to refer to that judgment here but a handful of matters do need to be extracted from it and it will be convenient to do that as I discuss the grounds of appeal.
The law
- As is material to the question of the treatment of
post-nuptial
settlements, section 24(1) of the Matrimonial Causes Act 1973
provides:
"(1) 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 –
(a) ….
(b) ….
(c) an order
varying
for the benefit of the
parties
to the marriage and of the children of the family or either or any of them any ante-nuptial or
post-nuptial
settlement (including such a settlement made by will or codicil) made on the
parties
to the marriage, other than one in the form of a
pension
arrangement (within the meaning of section 25D below);
(d) an order extinguishing or reducing the interest of either of the
parties
to the marriage under any such settlement, other than one in the form of a
pension
arrangement (within the meaning of section 25D below)"
- Counsel were agreed that the
principles
on which the section 24(1)(c)
power
should be exercised in a case such as this are set out in Ben Hashem
v
Ali Shayif [2008] EWHC 2380. They did not seek to
persuade
us to alter the formulation of them in that case by the then Munby J in any way. Their argument was rather about what was a
proper
application of the
principles
in the
present
case.
- In Ben Hashem, Munby J surveyed the relevant authorities, then summarised the
principles
as follows:
"290. Surveying all this learning, identifying what is of enduring significance whilst ruthlessly jettisoning what has become more or less irrelevant in modern conditions, I can
perhaps
summarise matters as follows:
i) The court's discretion under section 24(1)(c) is both unfettered and, in theory, unlimited. As Miss
Parker
put
it, no limit on the extent of the
power
to
vary
or on the form any
variation
can take is specified, so it is within the court's
powers
to
vary
(at one end of the scale) by wholly excluding a beneficiary from a settlement, to (at the other end) transferring some asset or other to a non-beneficiary free from all trusts. She
points
to E
v
E (Financial
Provision)
[1990] 2 FLR 233 and C
v
C (
Variation
of
Post-Nuptial
Settlement: Company Shares) [2003] EWHC 1222 (Fam), [2003] 2 FLR 493, as illustrations of
property
held on trust being transferred free from any trusts to the applicant, in E
v
E a sum of £50,000 and in C
v
C shares in a Cayman company.
ii) That said, the starting
point
is section 25 of the 1973 Act, so the court must, in the usual way, have regard to all the circumstances of the case and, in
particular,
to the matters listed in section 25(2)(a)-(h).
iii) The objective to be achieved is a result which, as far as it is
possible
to make it, is one fair to both sides, looking to the effect of the order considered as a whole.
iv) The settlement ought not to be interfered with further than is necessary to achieve that
purpose,
in other words to do justice between the
parties.
v)
Specifically, the court ought to be
very
slow to deprive innocent third
parties
of their rights under the settlement. If their interests are to be adversely affected then the court, looking at the wider
picture,
will normally seek to ensure that they receive some benefit which, even if not
pecuniary,
is approximately equivalent, so that they do not suffer substantial injury. As Sheldon J
put
it in the
passage
in Cartwright which I have already quoted: "if and in so far as [the
variation]
would affect the interests of the child, it should be
permitted
only if, after taking into account all the terms of the intended order, all monetary considerations and any other relevant factors, however intangible, it can be said, on the while, to be for their benefit or, at least, not to their disadvantage."
- Munby J continued:
"291. Miss
Parker
submitted that the central theme which
permeates
these authorities is that it is
permissible
for the court to invade third
party
interests within the confines of the trust structure, but only to the extent that fairness so requires. It is acknowledged that in the generality of cases, the court should indeed be slow to do so. Broadly speaking, I accept that submission.
292. Moreover, as she rightly
points
out, the court always retains a discretion as to the extent of any
variation.
Even in circumstances where the court could quite
properly
vary
a
post-nuptial
settlement so as to transfer (say) the matrimonial home to a wife free from any trusts, it may nonetheless direct some less intrusive form of
variation,
such as to transfer the
property
to the wife for life and thereafter to the other beneficiaries, to confirm the right to remain in occupation indefinitely without any form of transfer, or to direct that the applicant has a right to remain in occupation until (say) other orders made have been complied with. All of this depends, of course, as she says, on the court's
views
as to what is fair on the facts, as it finds them, of the
particular
case."
- In a slightly later
passage
upon which Mr Dew for the trustees relied, he said:
"300. Miss Evans-Gordon for her
part
submits that any legitimate
variation
could not require the introduction of new
property
from outside the settlement as would be necessary to
pay
the mortgage and other outgoings. I agree. …."
- The only other authority to which I need refer is Thomas
v
Thomas 1995] 2 FLR 668 to which we were taken for its summary, at
page
670, of the
principles
that apply where a spouse may have access to resources but no absolute entitlement to them. I will quote that whole
passage
but it is the latter half of it which is important:
"The law
The discretionary
powers
conferred on the court by the amended ss 23-25A of the Matrimonial Causes Act 1973 to redistribute the assets of spouses are almost limitless. That represents an acknowledgement by
Parliament
that if justice is to be achieved between spouses at divorce the court must be equipped, in a society where the forms of wealth-holding are diverse and often sophisticated, to
penetrate
outer forms and get to the heart of ownership. For their
part,
the judges who administer this jurisdiction have traditionally accepted the Shakespearean
principle
that 'it is excellent to have a giant's strength but tyrannous to use it like a giant'. The
precise
boundaries of that judicial self-restraint have never been rigidly defined – nor could they be, if the jurisdiction is to retain its flexibility. But certain
principles
emerge from the authorities. One is that the court is not obliged to limit its orders exclusively to resources of capital or income which are shown actually to exist. The availability of unidentified resources may, for example, be inferred from a spouse's expenditure or style of living, or from his inability or unwillingness to allow the complexity of his affairs to be
penetrated
with the
precision
necessary to ascertain his actual wealth or the degree of liquidity of his assets. Another is that where a spouse enjoys access to wealth but no absolute entitlement to it (as in the case, for example, of a beneficiary under a discretionary trust or someone who is dependent on the generosity of a relative), the court will not act in direct invasion of the rights of, or usurp the discretion exercisable by, a third
party.
Nor will it
put
upon a third
party
undue
pressure
to act in a way which will enhance the means of the maintaining spouse. This does not, however, mean that the court acts in total disregard of the
potential
availability of wealth from sources owned or administered by others. There will be occasions when it becomes
permissible
for a judge deliberately to frame his orders in a form which affords judicious encouragement to third
parties
to
provide
the maintaining spouse with the means to comply with the court's
view
of the justice of the case. There are bound to be instances where the boundary between improper
pressure
and judicious encouragement
proves
to be a fine one, and it will require attention to the
particular
circumstances of each case to see whether it has been crossed."
Discussion of the arguments advanced by the trustees by way of appeal
Order not canvassed with the
parties
- I can deal shortly with the complaint that Mostyn J made an order which had not been
properly
canvassed with the
parties.
Mostyn J rejected this "comprehensively" in his second judgment on the basis that he had raised the
possibility
of a
variation
of this type on the first day of the hearing and nobody asked for an adjournment to deal with it. I agree with him that there is nothing in this complaint. The hearing had been listed for four days, and all but the judgment was concluded on the first day, so there would have been time to return to the matter after reflection and
preparation
of further argument but that opportunity was not sought.
Wrong approach to the trust and to the wife's entitlement
- I turn to Mr Dew's
points
as to the substance of the order. He submitted that in his dealings with the trust, the judge had not applied the
principles
set out in the case of Ben Hashem. Mr Dew's focus was
particularly
upon the judge's treatment of the intention of the settlor that the farmhouse should be kept in the estate and benefit future generations, and upon the adverse impact of the judge's order upon the husband and children and upon other beneficiaries of the trust.
- Mr Dew's submission
proceeded
upon the basis that the husband and children, all of whom were beneficiaries under the trust, needed the farmhouse as a home and would be wrongly deprived of it because the judge's order meant that it would have to be sold, the trust having no other way in which to make the required
provision.
Not only was this contrary to the intention of the settlor, it also left the husband, in his submission, without a
proper
home. In addition, he argued that the other beneficiaries of the trust would be deprived of real financial benefit by the sale of the
property
and the
postponement
of their interests behind those of the wife for such a long
period
as to amount, for all
practical
purposes,
to them being extinguished.
- In Mr Dew's submission, Mostyn J approached matters on the wrong basis, seeking to
provide
the wife with a share of the assets when he should have
proceeded
upon the basis of her needs. If he had dealt with matters in that way, he would, in Mr Dew's submission, have concluded that the wife could meet her needs from her own resources, in the form of her own capital and income or by relying on her new
partner,
and there was no need to
vary
the trust.
- The breadth of the discretion to
vary
a nuptial settlement is considerable, including the
power
to exclude a beneficiary entirely from the settlement and to transfer an asset to a non-beneficiary free from all trusts (Ben Hashem §290(i)). In theory, therefore, it is wide enough to encompass the order that Mostyn J made. The appeal can only succeed if the exercise of the discretion in this case was flawed.
- The starting
point
for the exercise of the discretion is section 25 of the Matrimonial Causes Act 1973, as Munby J
pointed
out in Ben Hashem (§286 and §290(ii)), and the objective is a result that is fair to both sides (ibid §290(iii)) and which does not interfere with the settlement more than is necessary to do justice between the
parties
(ibid §290(iv)).
- Mostyn J started his consideration of what order, if any, to make with the sharing
principle.
I would not have started there. In this case, it was need which was likely to be more influential, specifically the need for accommodation. Mostyn J did deal with need, but later on in his judgment. I turn to it first. In considering it, it is important to remember that not only did the wife herself need accommodation, the child also needed somewhere to stay with the wife and, furthermore, did not need to be burdened with anxiety about the wife's living circumstances at other times.
- Mostyn J accepted as reasonable the wife's desire to live near her family in Oxfordshire. He appears also to have accepted her case as to the cost of a suitable
property
there; this was not the focus of any argument on appeal and nor was Mostyn J's analysis of the wife's own capital situation as it then was. Similarly, the arguments on appeal did not focus upon the wife's earning capacity or borrowing capacity in order to seek to establish that they had been significantly under-estimated. It followed that the wife could not afford to
purchase
a home relying solely on her own capital and income; this is
plain
from the judge's calculations at §§61 and 63 of his judgment.
- Although conscious of the
potential
impact of the wife's new relationship upon her needs/resources, Mostyn J did not treat it as wiping out the need for the wife to buy a home of her own. The question of the relationship was explored in some depth at the hearing and the wife was cross-examined about it at length, as we can see from the second judgment. There was no request for an adjournment so that the man concerned could come to give evidence or for any further disclosure on the subject. It was
very
much a matter for Mostyn J to determine, in the light of all the information that he had, how he thought the relationship would be likely to develop and what impact it had on the wife's resources/needs. I will return in the following
paragraph
to the way in which he did factor it into the equation. All that needs to be said at
present
is that I would not interfere with his assessment that the wife's housing needs were not satisfied by this route. It follows that the trustees' argument that the wife had the capacity to
provide
for herself from her own resources (financial or other) cannot succeed.
- Mostyn J's consideration of how much was required to
provide
for the wife was carried out in the context of a cross-check of the figures that he had
provisionally
in mind as a result of his sharing analysis but it serves
perfectly
well to demonstrate the level of
provision
that he found was needed. He totted up the sums that the wife had herself, what she would receive outright by way of his
proposed
order, and what he had in mind that she should have by way of a life interest, reaching a total of just over £250,000. It is clear that he
viewed
this as
possibly
not enough for her housing
purposes,
as we can see from §67 of the judgment where he said he was doubtful whether it would be enough "if [she] were assuredly single". However, it was this figure that he took for the
purposes
of his order, because it was at this
point
that he factored in the existence of the wife's new relationship, adopting the
pragmatic
solution of treating it as a justification for limiting the
provision
that he made for the wife, notwithstanding his doubts as to whether it was sufficient for her housing needs. It was a delicate balance that he had to strike and, in my
view,
this court should not interfere with his approach on this
point.
- As for the husband's needs, Mostyn J was well aware that the
plan
on his side was for him and his new family to live in the farmhouse (see §42 of his judgment, for example). He did not accept that it was necessary for them to do so, nor even regard it as a hardship/disadvantage to the estate, or to the husband and the children, if there were to be a sale, as he said in the second judgment. As for the estate, he rejected, and in my
view
was entitled to reject, the assertion that the farmhouse was crucial to the farm; the intended use of the
property
as a
permanent
family home fatally undermined that line of argument. As for the husband and the children, they were, in fact, housed elsewhere in family
property.
Mostyn J acknowledged that that home (from which it seems they have since moved back to the farmhouse) might be "somewhat cramped", but he had few options as to how to
provide
for everyone's needs and it appears he did not consider this unworkable. In his second judgment, he balanced this disadvantage to the husband with the disadvantage to the wife that she would not be able to live in a
property
of any
particular
value
either (§19). It was
very
much a matter for him to determine, on his assessment of the evidence, what the husband's reasonable needs for accommodation were and how they would be satisfied, and I would not interfere with his conclusions on the subject which could,
perhaps,
be summarised as being that the family would
provide,
even if the farmhouse was sold. It is worth noting in this regard that the husband's father said in oral evidence (
page
96 of the transcript) that the family expect "all family members, all those who are supporting the family" to live rent free. Furthermore, I do not know to what extent it would assist, but it should not be ignored that the life interest awarded to the wife will not use up the whole of the
proceeds
of sale of the farmhouse and the funds left over will be available to
put
towards the husband's accommodation in whatever way the trustees think fit.
- In the light of his conclusions about the
parties'
respective needs and resources, in my
view,
Mostyn J had no choice but to turn to the trust in order to
provide
for the wife and he was entitled to do so. The question becomes whether the order that he made failed to
pay
sufficient regard to what might be called compendiously "the trust considerations". The judgment leaves one in no doubt that Mostyn J gave full attention to these considerations. He said that he gave "heavy respect" to "the intention of the settlor and the knowledge of the
parties
that ultimately the
value
of the settlement would revert to the estate" and it is apparent from his judgment, both in terms of what he said and what he ordered, that this was not merely lip-service. He referred in §54 to the tension that the court had to resolve and in §55 acknowledged that the case was not a straightforward case because of the "trust complications". In the
paragraphs
that followed, his efforts to
provide
for the wife, whilst still respecting the existence and
purpose
of the trust, are clear. And his choice, at §60, of a life interest rather than an outright
payment
in respect of the bulk of the money that was to come from the trust, reflected that this was not a straightforward ancillary relief situation.
- Did the order nonetheless breach the
principles
as set out in Ben Hashem? In my
view,
it did not.
- The trustees' complaints must be evaluated in the light of the terms of the trust and the
practical
realities of how it would operate. I would make a number of observations in this regard. First, it is material to note that, had she remained married to the husband, although not a beneficiary of the trust herself, the wife would have enjoyed the benefit of the trust
property
for life by
virtue
of her occupation of it with the husband as the family home. Unlikely as it might have been in
practice,
in theory she could even have been added by the trustees as a discretionary beneficiary of the trust and an appointment made in her favour. The judge's order could be said to build upon this foundation in that it enabled her (and the child whilst with her) to continue to be housed in accommodation
purchased
with the assistance of an appropriate
proportion
of the trust funds, the balance being left available for the husband's needs. Secondly, although the beneficiaries other than the husband and the children had the chance of benefiting from the
power
of appointment in clause 4 of the trust, this gave rise to no entitlement and they would, in any event, have been likely to have to wait for a long time before they could hope to benefit. The entire trust
property
was used to house the husband and wife during the marriage and, given a free hand, the trustees would use it now to house the husband and his new family, so the beneficiaries could expect nothing until the husband's death. In real life rather than legal theory, a life interest to the wife (who is of similar age to the husband) does not therefore
prejudice
them materially. Thirdly, it cannot be ignored that there were
powers
under the trust to transfer the
property
to the husband for his absolute use and benefit, thus depriving the other beneficiaries, and the husband's brother and his issue as remaindermen, of their chance of benefit. In the event that the husband chose to sell the
property
thereafter, it would be lost to the estate as well.
- To my mind, these
points
show that the detriment to third
parties
from the
variation
of the trust should not be overstated, and nor should the weight to be given to the settlor's intentions in setting up the trust. I do not think it can be said that innocent third
parties
have been inappropriately deprived of their rights under the settlement, nor do I consider that the settlement has been
varied
with an inappropriate disregard for the intentions of the settler or further than was necessary to make
provision
for the wife and the child (also a beneficiary) when with her. The route chosen by Mostyn J was the least intrusive available. The trust had no assets other than the farmhouse and, having no income, had no way in which to raise money against the
property.
Mostyn J did not fall into the trap of requiring new
property
to be introduced into the trust in order to fund the
payment
to the wife (see below for my discussion of the trustees' argument about improper reliance on the husband's family). His order was to be met from the assets of the trust and the trustees' complaint is, in reality, about the fact that there was no alternative way to satisfy the order here than a sale of the trust
property.
- It is right to say that Mostyn J took into account that the
property
had been the
parties'
home for a long time and he appears to have thought that by
virtue
of this it had some claim to be treated as matrimonial
property,
despite the fact that it had come from the husband's family and was held in trust. However, in the course of his discussion of the
point,
he expressly acknowledged (§54) that the trust
property
was not the
product
of the
parties'
endeavours, except to the extent that they had contributed to the improvement of it. In any event, whatever the merits of an attack upon Mostyn J's use of sharing
principles
(about which I do not express a concluded
view),
his order was supported by the
parallel,
and in my
view
much more important, reasoning based upon need. If confirmation of the importance of this strand of reasoning were to be needed, it is
present
in the second judgment from which it can be seen that Mostyn J had had clearly in mind, in formulating his order, the objective of enabling "[the wife] to be housed
properly
with [her child] for the
periods
when [the child] is with her" (§14).
Reliance on the husband's family
- Mr Dew complained that there was no evidence to justify the judge
proceeding
on the basis that the husband's family would make sums available so that the farmhouse did not have to be sold and that he wrongly relied upon them to meet the order or
put
pressure
on them to do so.
- The first thing to observe is that there were a number of facts which were not in dispute and which at the
very
least justified the judge giving the family the chance to avoid the sale. They included the early gift of the derelict
property
to the husband and wife and the later
provision
of the farmhouse for life, the
provision
of alternative accommodation for the husband and his new
partner
after the breakdown of the marriage, the transfer of a farm of significant
value
to the husband's brother (whether or not unencumbered or realisable), and the existence of family enterprises in which the husband worked.
- Secondly, and more fundamentally, the judge did not require the family to
put
up the money, he merely gave them the option to do so, recognising that they may not do so and the farmhouse may have to be sold.
- In my
view,
the judge's approach was therefore faithful to the
principles
set out in Thomas
v
Thomas. He had regard to the
potential
availability of resources from elsewhere but I do not think it can even be said that his order was judicious encouragement to the family, let alone improper
pressure.
It simply
provided
a choice.
Conclusion
- In all the circumstances, I would therefore dismiss the appeal. I would also express my agreement with the judgment of Lord Justice Jackson, which I have seen in draft.
Jackson LJ:
- I agree that this appeal should be dismissed for the reasons stated by Lady Justice Black.
- In the course of the appeal counsel asked the court to consider Mr Justice Mostyn's second judgment, in which he dealt with the question of
permission
to appeal: Re
P
[2014] EWHC 2990 (Fam). The judge expressed displeasure that the appellants were (until the judge discovered what was going on)
pursuing
an application for
permission
directly to the Court of Appeal without reference to himself.
- The judge quoted the following
passage
from
paragraph
52.3.4 of the notes to the White Book (2014 edition), which sets out five reasons why an appellant should, in the first instance, apply to the court below:
"(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."
- After referring to the nature of claims for financial remedy or ancillary relief, the judge said this at [6]:
"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."
- Mr Dew says that
paragraph
[6] of Re
P
is being treated by the Family Bar as a mandatory direction that applications for
permission
to appeal must always be made in the first instance to the lower court. He submits that, although that was so under the old rules, it is no longer the case under the
present
form of CPR
Part
52. See rule 52.3 (2) and
Practice
Direction 52A,
paragraph
4.1. Mr Dew requests that we clarify the
position
in our judgments.
- I must confess at once that, when the earlier
version
of the rules was in force, I was the editor in the White Book team who was responsible for
Part
52. Indeed I am the author of the note in
paragraph
52.3.4, which has appeared in successive editions of the White Book and which the judge has quoted.
- In my
view,
even under the current rules, it is still good
practice
for any
party
contemplating an appeal in the first instance to seek
permission
from the lower court. Ideally the
party
should do so when the judge delivers or hands down judgment. This is for the five reasons set out in
paragraph
52.3.4 of the White Book commentary.
- On the other hand there is no longer a rule requiring the appellant to apply to the lower court for
permission.
Therefore the need to apply to the court below is no longer a mandatory requirement, merely a matter of good
practice.
- These observations apply both to family cases and to
civil litigation generally.
Sir David Keene:
- I agree with both judgments.
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