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You are here: BAILII >> Databases >> England and Wales Family Court Decisions (other Judges) >> W v H (divorce : financial remedies) [2020] EWFC B10 (24 February 2020) URL: http://www.bailii.org/ew/cases/EWFC/OJ/2020/B10.html Cite as: [2020] EWFC B10 |
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IN THE FAMILY COURT
Case Number SO16D11878
SITTING AT SWINDON
Date: 24th February 2020
Before
B E T W
E E N:
W
Applicant
- and -
H
Respondent
This judgment |
Anonymised version
of the
written
Judgment of
His
Honour
Judge Edward
Hess
dated 24th February
2020
INTRODUCTION
BACKGROUND
(i) The wife
is aged 50. She
had
not been married before meeting the
husband
and
had
no children.
(ii) The husband
is aged 48. The
husband
had
been married and
divorced
before
his
relationship
with
the
wife.
There
were
two children from
his
first marriage, now in their mid-twenties, and the
husband
has
a good relationship
with
these children.
(iii) The parties met in 1998 and started a relationship of cohabitation in 1999. They met through their mutual employment in X financial
services company. The
wife
left
her
employment in 2001
when
she became pregnant
with
her
first child.
(iv) The parties married in 2005.
(v)
style='font:7.0pt "Times New Roman"'> From 2011 onwards the parties lived together at the family
home
in
Wiltshire,
an agreeable and spacious period country
home
with
nearly an acre of land in its ownership and surrounded by farmland, just four miles outside a city, albeit near a main road.
(vi)
style='font:7.0pt "Times New Roman"'> The marriage broke down in 2016. The parties separated in February 2016
when
the
husband
told the
wife
that
he
had
commenced a relationship
with
R, a business associate of
his
aged in
her
early thirties. The
husband
moved out of the family
home
in February 2016 and
has
subsequently lived in rented accommodation
with
R. The
wife
has
remained
with
the children in the family
home.
It
has
been
very
clear during the
hearing
that the
wife
has
been, and remains, deeply emotionally
hurt
by the
husband’s
decision in this respect, but it is of course not part of my task to apportion blame for the breakdown of the marriage.
(vii)
style='font:7.0pt "Times New Roman"'> The
wife
commenced
divorce
proceedings in August 2016.
(viii)
style='font:7.0pt "Times New Roman"'> Decree Nisi
was
ordered in November 2016.
(ix) Decree Absolute awaits the outcome of the financial
remedies
proceedings and is not, in itself, controversial. The requisite conditions
having
been met, I propose to include in my order that permission is given to apply for a Decree Absolute, notwithstanding that more than a year
has
passed since Decree Nisi
was
ordered.
(i) A is aged 18. She is in her
final year at school and
will
leave after taking
her
A levels in Summer
2020.
She
hopes
to
have
a gap year before going on to university in Autumn 2021. She plans to study in a medical field,
which
involves lengthy education and training, and
has
had
offers on suitable courses from four universities for the first part of the training.
(ii) B is aged 16. Up to his
GCSEs
he
attended a fee-paying school.
He
is now in the first year of
his
A level course at a state school and
will
leave school in Summer 2021.
He
is also likely to go to university and
his
current thoughts are to follow a similar path as A,
with
its lengthy period of education and training.
(iii) C is aged 10. He
is currently at a state primary school and is expected to proceed to a state secondary in September
2020.
Assuming expected progress,
he
will
attend that school until Summer 2027 and there is no reason to suppose that
he
will
not also go on to university.
(iv) All the children have
remained living in the family
home
with
the
wife
and it is clear that she devotes a good deal of
her
time caring for the children. A sad feature of this case is that there is currently little or no contact between the
husband
and the children. I note that this is the situation, although it is no part of my task
within
these
financial
proceedings to seek to analyse this or to apportion blame for
what
has
gone
wrong.
As in all such situations, it must be
hoped
that the passing of time
will
begin to
heal
the rifts that
have
developed. I consider it
very
unfortunate that the
wife
has
chosen to bring into the case (by annexing it to
her
narrative statement) a letter from A in
which
some deeply unpleasant things are said about
her
father. I
hope
a more mature A
will
think better of some of these things.
(i) The wife
issued Form A on 26th February 2018.
(ii) Forms E were
exchanged in June 2018.
(iii) A First Appointment took place before District Judge Bloom-Davis on 15th October 2018.
(iv) An FDR took place before District Judge Bloom-Davis on 14th October 2019.
(v)
style='font:7.0pt "Times New Roman"'> Narrative statements
were
exchanged in January
2020
for the final
hearing
in February
2020.
LEGAL STRUCTURE OF THIS APPLICATION
(1)
It shall be the duty of the court in deciding whether
to exercise its powers under section 23, 24, 24A or 24B above and, if so, in
what
manner, to
have
regard to all the circumstances of the case, first consideration being given to the
welfare
while
a minor of any child of the family
who
has
not attained the age of eighteen.
(2)
As regards the exercise of the powers of the court under section 23(1)(a), (b) or (c), 24,
24A or 24B above in relation to a party to the marriage, the court shall in particular have
regard to the following matters
:-
(a)
the income, earning capacity, property and other financial
resources
which
each of the parties to the marriage
has
or is likely to
have
in the foreseeable future, including in the case of earning capacity any increase in that capacity
which
it
would
in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;
(b)
the financial
needs, obligations and responsibilities
which
each of the parties to the marriage
has
or
is likely to
have
in the foreseeable future;
(c) the standard of living enjoyed by the family before the breakdown of the marriage;
(d) the age of each party to the marriage and the duration of the marriage;
(e) any physical or mental disability of either of the parties to the marriage;
(f)
the contributions which
each of the parties
has
made or is likely in the foreseeable future to make to the
welfare
of the family, including any contribution by looking after the
home
or caring for the family;
(g)
the conduct of each of the parties, if that conduct is such that it would
in the opinion of the court be inequitable to disregard it;
(h)
in the case of proceedings for divorce
or nullity of marriage, the
value
to each of the parties to the marriage of any benefit
which,
by reason of the dissolution or annulment of the marriage, that party
will
lose the chance of acquiring.
(1)
Where on or after the grant of a decree of divorce
or nullity of marriage the court decides to exercise its powers under section 23(1)(a), (b) or (c), 24 or 24A or 24B
above in favour of a party to the marriage, it shall be the duty of the court to consider
whether
it
would
be appropriate so to exercise those powers that the
financial
obligations of each party towards the other
will
be terminated as soon after the grant of the decree as the court considers just and reasonable.
(2)
Where the court decides in such a case to make a periodical payments or secured periodical payments order in favour of a party to the marriage, the court shall in particular consider whether
it
would
be appropriate to require those payments to be made or secured only for such term as
would
in the opinion of the court be sufficient to enable the party in
whose
favour the order is made to adjust
without
undue
hardship
to the termination of
his
or
her
financial
dependence on the other party.
THE CHILDREN’S NEEDS
PROPERTY AND OTHER FINANCIAL
RESOURCES
REALISABLE ASSETS/DEBTS
Joint
The family |
241,782 |
TOTAL |
241,782 |
Bank accounts in sole name |
1,840 |
Monies owed to |
-40,000 |
Outstanding Legal Costs [2] |
-26,041 |
TOTAL |
-64,201 |
Bank accounts in sole name |
150 |
50% x joint TSB account ( |
-1,292 |
Credit card and loan debts in sole name |
-49,813 |
Outstanding Legal Costs [3] |
-1,905 |
TOTAL |
-52,860 |
PENSION ASSETS
X Defined Benefit Pension Scheme (Z plan) CE |
138,939 |
X Adaptable Defined Contribution Pension Plan CE |
13,798 |
TOTAL |
152,737 |
X Defined Benefit Pension Scheme (Z plan) CE |
2,155,475 |
X Retirement Account Defined Contribution Plan CE |
58,653 |
TOTAL |
2,214,128 |
INCOME AND EARNING CAPACITY
(i)
On both parties’ cases there will
be payments of spousal periodical payments from the
husband
to the
wife.
(ii)
There is a CMS assessment (which
is a maximum income assessment), currently at £2,087 pcm. Ms Goodall
has
calculated (and I accept
her
figures) that this
will
reduce to £1,697 pcm in Summer
2020
(
when
A leaves school) and to £1,273 pcm in Summer 2021 (
when
B leaves school). This
will
carry on until Summer 2027
when
C leaves school.
(iii)
Following the logic of Mostyn J’s judgment in CB v
KB [2019]
EWFC
78 (paragraphs 48 and 49),
which
both parties
have
agreed, there should now be a child periodical payments top up order at the rate of £525 pcm now, reducing to £420 pcm from Summer
2020
and to £315 pcm from Summer 2021. Again,
this
will
carry on until Summer 2027
when
C leaves school.
(iv)
There will
be child benefit now at the rate of £192 pcm, reducing to £149 pcm from Summer
2020
and to £90 pcm from Summer 2021. Again,
this
will
carry on until Summer 2027
when
C leaves school.
(v)
The wife
currently receives Tax Credits of £946 pcm. The receipt of these state benefits is likely to be short-lived, because it is likely that the reassessment of the benefits prompted by A’s leaving school in July
2020
will
cause a move on to Universal Credit and the existence of a spousal periodical payments order is likely to eliminate (or at
very
least substantially diminish) the entitlement to this state benefit.
NEEDS
CMS payments to |
2,087 |
Top-up child periodical payments to ![]() |
525 |
Spousal Periodical Payments to ![]() |
1,000 |
50% of monthly rent payments |
925 |
Debt repayments pcm |
1,835 |
50% of general |
346 |
Food, including eating out |
450 |
Clothing/Hairdressing |
200 |
Transport and Petrol |
100 |
Gym |
32 |
Entertainment and |
250 |
Dental Plan |
20 |
Pets |
40 |
Personal Critical Illness insurance cover |
77 |
TOTAL |
7,887 |
43.
Although Ms Goodall did seek to try and cross-examine this figure down, I was
not persuaded that there
was
anything
very
remarkable or unreasonable about these figures. I do not agree
with
her
that the
husband’s
choice of rental property
was
excessive. I do not agree
with
her
that the
husband’s
figures for food spending, given
his
circumstances,
were
unreasonably large.
44.
I note, however,
that given my assessment of
his
income at £9,631 pcm net, it seems to me that it must follow that the
wife’s
income demand (for a global amount of £3,750) is certainly affordable to the
husband
and the quantum of maintenance sought by the
wife
is not unreasonable in all the circumstances, though I shall differ
with
her
on the structure of the order (see below).
45.
In discussing these needs figures, I have
taken into account the standard of living the parties and the children jointly enjoyed during the marriage and the duration of the marriage.
CONTRIBUTIONS AND THE PRINCIPLE OF EQUAL DIVISION OF CAPITAL
46. As a starting point in the division of capital after a long marriage it is useful to observe that fairness and equality usually ride hand
in
hand
and that (save
when
an asset can properly be regarded as non-matrimonial property) the court should be slow to go down the road of identifying and analysing and
weighing
different contributions made to the marriage.
47. In the words
of Lord Nicholls in
White
v
White
[2000] UKHL 54:-
“…a judge would
always be
well
advised to check
his
tentative
views
against the yardstick of equality of division. As a general guide, equality should be departed from only if, and to the extent that, there is good reason for doing so. The need to consider and articulate reasons for departing from equality
would
help
the parties and the court to focus on the need to ensure the absence of discrimination”.
and in Miller v
Miller; McFarlane
v
McFarlane [2006] UKHL 24:-
"This 'equal sharing' principle derives from the basic concept of equality permeating a marriage as understood today. Marriage, it is often said, is a partnership of equals…The parties commit themselves to sharing their lives. They live and work
together.
When
their partnership ends each is entitled to an equal share of the assets of the partnership, unless there is a good reason to the contrary. Fairness requires no less. But I emphasise the qualifying phrase: 'unless there is good reason to the contrary'. The yardstick of equality is to be applied as an aid, not a rule."
48. In the words
of Mostyn J in JL
v
SL [2015] EWHC 360:-
“Matrimonial property is the property which
the parties
have
built up by their joint (but inevitably different) efforts during the span of their partnership. It should be divided equally. This principle is reflected in statutory systems in other jurisdictions. It resonates
with
moral and philosophical
values.
It promotes equality and banishes discrimination.”
49. The evidence I have
heard
in this case satisfies me that both parties
have
made full contributions to this long marriage, albeit in their different
ways.
50. The wife
sought to persuade me that
her
greater cash contribution to the parties’ first family
home
provided extra justification for
her
having
100% of the net equity in the family
home,
the only realisable asset remaining; but this argument is not persuasive in my
view
since it ignores the obvious facts that the
husband
contributed a great deal more than the
wife
in
his
substantial earnings over many years of marriage (as
well
as some early cash contributions as
well)
and also that the
wife’s
initial contributions
were
very
much mingled over time into the jointly owned family
home
-
which
is undoubtedly a matrimonial asset: see, for example, S
v
S [2006] EWHC 2793.
51. The husband
sought to persuade me that
his
pre-cohabitation pension accrual should be excluded in the division of pensions. I analyse this argument in the pensions section below, but record
here
that I did not find that argument persuasive either.
52. Accordingly I have
decided that if there is any reason for departing from equality of capital in this case it is not to be based on contributions.
53. Accordingly, I have
not been persuaded that it is necessary or appropriate for me to get involved in the detailed assessment and quantification of contributions
here.
For me, the needs issues
here
far outweigh any significance arising from the different contributions respectively made.
CONDUCT
54. This is not a case in which
the issue of conduct plays any part in the determination of the
financial
remedies
applications.
DISABILITY
55. This is not a case in which
the issue of disability plays any part in the determination of the
financial
remedies
applications.
PENSIONS
56. I now turn to the issue of pensions, in section 25 terms
the value
to each of the parties to the marriage of any benefit
which,
by reason of the dissolution of the marriage, that party
will
lose the chance of acquiring, considered of course in the context of the ages of the parties and the duration of the marriage.
57. A useful starting point here
is to remind myself of the principle set out above, i.e. the proposition that fairness and equality usually ride
hand
in
hand
and that this applies to the division of pensions as much as it applies to other assets.
58. Beyond this basic principle, there seem to me to be three relevant issues arising here
for consideration:-
(i) The first issue is whether
it is right for the court, in dividing pensions
with
a
view
to promoting equality, to target capital equality (i.e. equal CE or other definitions of capital
value)
or to target the promotion of equal incomes.
(ii) The second issue is whether
it is right for the court, in dividing pensions
with
a
view
to promoting equality, to exclude a portion of the member spouse’s pension if it
was
earned prior to the marriage (or seamless pre-marital cohabitation).
(iii) The third issue is the extent to which
the court should disaggregate the pensions in the case and promote a discrete and equal division of the pensions as opposed to attempting to execute an offset against other assets.
59. I propose to deal with
these separately. In doing so I shall give consideration to the opinions on these issues set out in some detail in “A Guide to the Treatment of Pensions on
Divorce:
The Pension Advisory Group Report” (July 2019)
[4] (to be found online at www.nuffieldfoundation.org/pensions-divorce-interdisciplinary-working-group). The Pension Advisory Group (PAG) report, although produced by an independent interdisciplinary
working
group of lawyers, judges, academics and Pensions on
Divorce
Experts (PODEs),
has
the support of the Family Justice Council and the President of the Family Division and should, in my
view,
be treated as being prima facie persuasive in the areas it
has
analysed, although of course susceptible to judicial oversight and criticism.
60. In dealing with
the question: is it right for the court, in dividing pensions
with
a
view
to promoting equality, to target capital equality (i.e. equal CE or other definitions of capital
value)
or to target the promotion of equal incomes, I
have
the following observations:-
(i) There is no ‘one size fits all’ answer to this question. There are undoubtedly scenarios where
the fair solution is probably to divide pensions by CE
value.
For example,
where
the CEs are relatively small in themselves or as a portion of the assets overall. For example,
where
the parties are relatively young and any projections about the future income-producing qualities of the pensions are likely to be speculative or unreliable. For example,
where
all the pensions are simple defined contribution funds so that the CE
values
can be regarded as reasonably reliable and simple predictor of future income streams. For example,
where
the sole pension involved is a non-uniformed public sector defined benefit scheme offering internal transfers only.
(ii) There are, however,
scenarios
where
a simple division of CEs may
well
not represent a fair solution. For example,
where
the pensions are medium or large, both in themselves and as a portion of the assets overall, but needs issues still arise. This is particularly the case
where
one or more of the pensions involved is a defined benefit scheme (and income from
within
the scheme per £ of CE is likely to be
higher
than annuity income outside the scheme per £ of CE on an external transfer). This is particularly the case
where
the parties are no longer young and retirement issues are on the
horizon.
(iii) The PAG report expresses its view
on this as follows:-
“In a needs-based case, in particular where
there is a significant Defined Benefit pension involved, for the parties or court seeking to identify a fair outcome the appropriate analysis
will
often be to divide the pensions separately from the other assets, based on an equalisation of incomes approach, such approach often requiring expert evidence from a PODE.” (page 11)
“Dividing pensions according to their potential income value.
Equality: Given that the object of the pension fund is usually to provide income in retirement, it will
often be fair (
where
the pension asset is accrued during the marriage) to implement a pension share that provides equal incomes from that pension asset. This is particularly the case
where
the parties are closer to retirement.
Where
they are further from retirement, it is arguable that the number of assumptions made in an ‘equal income’ calculation
will
render a calculation less reliable
Equality of income will
often be a fair result
Needs: In many cases the parties will
be dividing modest pension funds. It follows that, in order to determine
whether
the parties’ needs are met in retirement, they
will
need to know
what
their respective incomes are likely to be following any pension sharing order. A division that pays little or no attention to income-yield may
have
the effect of reducing the standard of living of the less
well-off
party significantly.” (page 31).
(iv) The PAG report also endorses similar sentiments expressed in the Family Justice Council’s report “Guidance on Financial
Needs on
Divorce”
(2018 edition)
where
it is stated:-
“In bigger money cases, where
needs are comfortably met, the courts are now likely to be less interested in drawing a distinction between pension and non-pension assets than
hitherto.
This is partly because other assets
will
also be deployed for income production so the distinction is less obvious, but more because the “pension freedoms” introduced by Taxation of Pensions Act 2014… as a result of
which
those aged 55 or above
have
the option of cashing in some categories of pension scheme,
have
blurred the dividing line between cash and pensions and in such cases the trend is now to treat pensions as disposable cash assets, thus disregarding their income producing qualities: see SJ
v
RA [2014] EWHC 4054 (Fam) and JL
v
SL [2015] EWHC 555. In small to medium money cases,
however,
where
needs are
very
much an issue, a more careful examination of the income producing qualities of a pension may
well
be required in the context of assessing
how
a particular order can meet need. The need to avoid the possibly punitive tax consequences of cashing in a pension may be more important in these cases and the mathematical consequences of making a Pension Sharing Order (for example because of an external transfer from a defined benefit scheme to a Defined Contribution scheme or the loss of a guaranteed annuity rate) can be unexpected and often justify expert actuarial assistance: see B
v
B [2012] 2 FLR 22” (page 23).
(v)
style='font:7.0pt "Times New Roman"'> In my
view
the facts of the present case (the ages of the parties, the size and largely defined benefit nature of the pension funds, the relative paucity of non-pension assets) place it firmly in that category of case
where
the fair and equal outcome is to identify, as a starting point anyway, the pension sharing orders
which
would
bring about equal incomes at a specified time in the future. The mathematics in the PODE report indeed illustrate on the facts of this case the general proposition that income from
within
the scheme per £ of CE is likely to be
higher
than annuity income outside the scheme per £ of CE on an external transfer.
61. In dealing with
the question: is it right for the court, in dividing pensions
with
a
view
to promoting equality, to exclude a portion of the member spouse’s pension if it
was
earned prior to the marriage (or seamless pre-marital cohabitation), I
have
the following observations:-
(i) There has
undoubtedly been an established practice in some courts considering the divisions of pension, regardless of needs issues, to make a straight line deduction from the CE of a relevant pension fund by reference to a fraction
where
the numerator is the number of years of the marriage (including seamless pre-marital cohabitation) and the denominator is the number of years over
which
the pension fund in question
was
accrued, and to include in its calculations and deliberations only the reduced amount of the CE. It is this approach
which
the
husband
in the present case urges on me, arguing that in making a calculation of equality I should reduce the pensions involved in the calculations by reference to the above fraction - in the present case the numerator is 16.584 and the denominator 28.469 (see the PODE report of Mr Galbraith at D25) so that on this basis only 16.584/28.469, i.e. 58.3%, of the
husband’s
large pension fund should be included in the calculations. In my
view
this approach carries
with
it significant risks of unfairness as the mathematics of the present case undoubtedly illustrate.
(ii) In considering the merits of this approach it is worth
noting that the inspiration for this approach is sometimes said to be the judgment of Thorpe J (as
he
then
was)
in
H
v
H
[1993] 2 FLR 335, notwithstanding that a close analysis of
what
Thorpe J said in that case does not in fact provide clear support for this approach. This
was
a pre-pension sharing case, there
was
no reference to CEs in the judgment and
his
emphasis
was
on the comparison between pension rights earned during the cohabitation and future pension rights: “I think that in deciding
what
weight
to attach to pension rights it is more important in this case to look to the
value
of
what
has
been earned during cohabitation than to look to the prospective
value
of
what
may be earned over the course of the 25 or 30 years between separation and retirement age”. This seems to me a
very
different point of reference. Further, in a later case (
Harris
v
Harris
[2001] 1 FCR 68) Thorpe LJ (as
he
had
become) appeared to eschew this approach
when
he
said, albeit in a slightly different context: “I do not myself find the argument on proportionality to the pension earned during the marriage to be an attractive one”. It is perhaps also surprising that the judgment in
H
v
H
(supra) is thought now, nearly thirty years later, to be authoritative on this issue, especially if one reflects on the fact that at the time it
was
delivered pension sharing did not exist,
White
v
White
(supra)
had
not been decided and the use of CEs in these cases
was
not
widespread.
(iii) In one sense the exclusion of the pre-marital portion of the pension is no more than, in modern parlance, the identification of non-matrimonial property. In other words
the pre-marital portion of the pension is non-matrimonial property
whilst
the remainder is matrimonial property.
Where
the pension
was
wholly
accrued prior to the marriage then it is easy to identify it as non-matrimonial property: see, for example, King J (as she then
was)
in GS
v
L [2013] 1 FLR 300 and Mostyn J in
WM
v
HM
[2017]
EWFC
25. The apportionment exercise seems a logical extension of this and pension funds are rarely subject to the ‘mingling’
which
often occurs in relation to cash assets.
(iv) In a sharing case the exclusion of the pre-marital portion of a pension might well
be a legitimate exercise in principle, although, as identified in M
v
M [2015]
EWFC
B63, the court might retain an element of discretion as to the level of sharing. In a needs case, the approach needs to be treated
with
more caution.
Where
the pensions concerned represent the sole or main mechanism for meeting the post-retirement income needs of both parties, and
where
the income produced by the pension funds after division falls short of producing a surplus over needs, then it is difficult to see that excluding any portion of the pension
has
justification. In the
words
of Lord Nicholls in
White
v
White
[2000] UKHL 54: “in the ordinary course, this factor”..i.e. the factor that the property concerned is non-matrimonial…“can be expected to carry little
weight,
if any, in a case
where
the claimant's
financial
needs cannot be met
without
recourse to this property”.
(v)
style='font:7.0pt "Times New Roman"'> The PAG report
view,
which
accords
with
what
I
have
said above, is as follows:-
“an important initial question is whether
pensions should be
handled
any differently according to
whether
the case is governed by the needs principle (
where,
broadly speaking, the assets do not exceed the parties’ needs), or the sharing principle (
where,
broadly speaking, the assets do exceed needs). The
vast
majority of cases - including cases involving low £millions -
will
be needs-based. Given the Lifetime Allowance, even a ‘big’ pension case
will
usually be a needs-case - it is non-pension assets that
will
generally take a case out of the needs bracket…One central issue is
when
regard may be
had
to the timing and source of pension savings. It is important to appreciate that in needs-based cases, just as is the case
with
non-pension assets, the timing and source of the pension saving is not necessarily relevant - that is to say, a pension-
holder
cannot necessarily ring-fence pension assets if, and to the extent that, those assets
were
accrued prior to the marriage or following the parties’ separation. It is clear from authority that in a needs case, the court can
have
resort to any assets,
whenever
acquired, in order to ensure that the parties’ needs are appropriately met” (page 22).
(vi)
style='font:7.0pt "Times New Roman"'> The reference to Lifetime Allowance issues is apposite to the present case. Introduced as a matter of government policy to restrict the use of the tax advantages of pension funds, the Lifetime Allowance
was
significantly reduced in April 2016 (from £1,800,000 to £1,000,000) and currently stands at £1,055,000. The effect of this change is that there are tax disadvantages for individuals using pension funds once their
value
reaches this figure. There are a number of
historic
fixed protection regimes
which
have,
for some,
have
ameliorated the effect of these changes (indeed the
husband
in the present case opted into the 2014 fixed protection scheme), but the overall effect in most of these cases is to limit the attractiveness of pensions above the Lifetime Allowance levels such that, as PAG
has
noted, it is quite unlikely that pension funds
will
themselves
will
take the case outside the category of a needs case. It may be that other assets
will
perform that task, but
where
(as in the present case) the pension funds are the major asset, the case is more likely to fit
within
the ‘needs case’ category.
(vii)
style='font:7.0pt "Times New Roman"'> Further, in many cases, and the present case is a good example, the straight-line methodology of calculation, though simpler and easier to apply in practice, conceals an unfairness in that the
value
of a defined benefit pension scheme based on final salary does not accrue on a straight line basis, especially if the member spouse concerned starts
work
as a lowly paid junior employee and rises to a
highly
paid director level many years later. The pension
will
accrue much more
value
in its later years
when
the member spouse
has
reached the
high
salary level and this is likely to be, as it is in the present case, firmly during the marriage. Thus,
where
an apportionment is to be made, the straight line methodology of apportionment may
well
not be fair and some caution needs to be exercised before using it if other fairer methodologies are available. Other methodologies include inviting the PODE to make a notional calculation of the current CE on the basis that the member spouse’s earnings rose only
with
inflation in the post-marriage period - I note the PODE
was
not invited to make these calculations in the present case.
62. In dealing with
the question
when
should the court disaggregate the pensions in the case and promote a discrete and equal division of the pensions as opposed to attempting to execute an offset against other assets I
have
the following observations:-
(i) The orthodox view,
encouraged by Thorpe LJ in Martin-Dye
v
Martin-Dye [2006] 2 FLR 901, is that pensions should be dealt
with
separately and discretely from other capital assets and
with
a
view
to their post-retirement income producing qualities. The PAG report offers a similar
view:
“try, if possible, to deal
with
each asset class in isolation and avoid offsetting…a discrete solution
which
equalises pensions by pension sharing orders and
which
equalises non-pension assets by lump sum or property adjustment orders” (page 35).
(ii) It is undoubtedly the case, however,
that many litigants choose to blur the difference between the categories and engage, to a greater or lesser extent, in an offsetting exercise. It needs to be borne in mind,
however,
that mixing categories of assets runs the risk of unfairness in that
valuation
issues become
very
difficult and, absent agreement, it may be unfair anyway to burden one party
with
non-realisable assets
while
the other party
has
access to realisable assets.
63. Applying these principles to the fact of the present case I have
reached the following conclusions about the pensions:-
(i) I have
decided that I should divide the pensions in this case
with
a
view
to making pension sharing orders
which
have
the effect of providing for the parties equal incomes at a specified time in the future.
(ii) It has
been suggested by Mr Galbraith from Mathieson Consulting Limited, the PODE instructed in this case, in
his
report of 3rd July 2019 (D16), that (for reasons convincingly explained in detail by
him
which
have
been accepted by both parties, and
which
include a proper consideration of the Lifetime Allowance and Fixed Protection issues arising
here)
the appropriate equalisation age on the facts of this case is 60 (rather than the normal 65 or 67). I propose to adopt this recommendation.
(iii) The mathematical conclusions of Mr Galbraith are that to equalise incomes at age 60:-
(a) if all pensions are included then the appropriate pension sharing orders are 100% of the husband’s
smaller defined contribution pension scheme and 51.7% of
his
larger defined benefit pension scheme (D29); and
(b) if a pre-marital pensions deduction is made on a straight line discounting basis then the appropriate pension sharing orders are 100% of the husband’s
smaller defined contribution pension scheme and 27.3% of
his
larger defined benefit pension scheme (D33).
(iv) This would
produce the following divisions of the pension funds:-
(a) on the first scenario:-
X Defined Benefit Pension Scheme (X plan) CE |
138,939 |
X Adaptable Defined Contribution Pension Plan CE |
13,798 |
100% x |
58,653 |
51.7% x |
1,114,381 |
TOTAL |
1,325,771 |
48.3% x X Defined Benefit Pension Scheme (X plan) CE |
1,041,094 |
TOTAL |
1,041,094 |
(b) on the second scenario:-
X Defined Benefit Pension Scheme (X plan) CE |
138,939 |
X Adaptable Defined Contribution Pension Plan CE |
13,798 |
100% x |
58,653 |
27.3% x |
588,445 |
TOTAL |
799,835 |
72.7% x X Defined Benefit Pension Scheme (X plan) CE |
1,567,030 |
TOTAL |
1,567,030 |
(v)
style='font:7.0pt "Times New Roman"'> The mathematical conclusions of Mr Galbraith are that these pension sharing orders
would
(assuming no tax-free lump sum
was
taken) respectively provide the following income for the parties in retirement :-
(a) on the first scenario £36,119 per annum gross for both parties (D29); and
(b) on the second scenario incomes of £54,365 per annum gross for the husband
and £22,036 per annum gross for the
wife
(D33).
(vi)
style='font:7.0pt "Times New Roman"'> Both parties are,
however,
working
on the assumption that the
wife
will
be able to draw a tax-free lump sum at
her
age 55 in November 2024. If she does this, then the income figures
will
reduce by 25% in lieu of
which
the
wife
should receive a tax-free lump sum, (on current figures, assuming this sum
will
be 25% of CE) something in the region of:-
(a) on the first scenario 25% x £1,325,771 = £331,443 plus an income at age 60 of £27,089 pag; and
(b) on the second scenario 25% x £799,835 = £199,959 plus an income at age 60 of £16,527 pag.
(vii)
style='font:7.0pt "Times New Roman"'> It can readily be seen that, on my assessment of ongoing income need, the second scenario
will
not provide enough income to enable the
wife
to meet
her
ongoing income needs into retirement and, even the first scenario falls a little short, absent a tightening of
her
belt into retirement. In my
view
the proper conclusion is that
we
are firmly in a ‘needs case’ category
here,
in
which
case, for all the reasons discussed above, it
would
be
wrong
for me to follow the logic of the straight line discount advocated by the
husband.
I
have
reached the conclusion that the proper and fair approach is for me to seek to equalise incomes on an equal basis taking into account all the pensions.
(viii)
style='font:7.0pt "Times New Roman"'> I
have
also considered
whether
I should go on to allow an element of offsetting, as is requested by the
wife.
Ms Goodall’s contention is that I should allow the
wife
to retain 100% of the net equity in the family
home
(i.e. she
would
receive
his
existing
half
share of 50% x £241,782 = £120,891) in return for
which
she proposed that the pension sharing order against the
husband’s
defined benefit scheme should be reduced from 51.7% to 49.5%. This proposition is supported mathematically by the supplemental report from Mr Goodwin of Mathieson Consulting Limited dated 10th October 2019. Although I find it prima facie quite surprising that £120,891 of cash should be regarded as
having
an equivalent
value
of 2.2% of the
husband’s
pension, i.e. on a CE basis 2.2% x £2,155,475 = £47,420, as Ms Goodall pointed out nobody
has
challenged Mr Goodwin on this figure and I must accept its correctness for the purposes of this argument. The
husband
is,
however,
firmly opposed to the offsetting proposal on the grounds that
he
requires a cash sum to put down a deposit to purchase a property for
himself
after the sale of the family
home
after November 2024.
His
rights under
his
pension do not arise (absent substantial tax disadvantages) until
his
age 60, by
which
time it may be too late to contemplate buying a
house
and
he
urges me to follow the orthodox approach of dividing pension assets and non-pension assets separately and discretely.
He
points out that
with
her
50% share of the family
home
plus
her
pension tax-free lump sums
which
can be taken in November 2024, the
wife
should
have
enough capital to purchase a
house
meeting
her
needs as I
have
assessed them to be, possibly mortgage-free or possibly
with
a modest mortgage if all of
her
debts
have
to be met. On these points I accept the
husband’s
arguments and adopt them. I think it
would
be unfair to the
husband
for me to follow the
wife’s
offsetting approach.
(ix) It follows from all the above that my order on pensions will
to make pension sharing orders of 100% of the
husband’s
smaller defined contribution pension scheme and 51.7% of
his
larger defined benefit pension scheme. The pension sharing charges
will
be met equally between the parties.
CAPITAL ORDERS
64. It follows from all the above that I have
not been persuaded that there should be an adjustment of the respective interests in the family
home.
The parties
will
each retain their respective 50% share.
65. The husband
has
volunteered
not to enforce
his
50% interest until November 2024 and in my
view
this is a reasonably pitched offer. Plainly an order needs to be drawn up
which
reflects this and commits the
wife
in appropriate terms to looking after the property and paying the mortgage in the meantime. I suggest a starting point for the drafting should be the Mesher order drafts in the Standard Family Orders.
66. Plainly it follows from this that the husband
is entitled to force a sale of the family
home
from November 2024. If the
wife
is by then able to buy out
his
half
share at market
value
and simultaneously release
him
from the mortgage then in my
view
the order should give
her
the opportunity to do so, but it seems likely that this
will
only be possible if the
wife’s
personal circumstances change significantly in the meantime.
67. I am conscious that nothing was
said in the course of the
hearing
on the subject of chattels. This may
have
been deliberate, but if it
was
an oversight then I suggest it is dealt
with
forthwith by the
husband
producing a list of items
he
would
like to
have
and the
wife
responding.
INCOME ORDERS
68. The position in relation to income orders is complicated by a moving picture in relation to a good deal of matters, including the wife’s
earnings, the incidence of state benefits, the gradually reducing dependency of the respective children and the future arrival of pension income.
69. I need to take into account the present and likely future needs of the wife
and the children and the
husband’s
ability to pay maintenance, all as discussed above.
70. I need to deal with
a number of areas in
which
legal principle is involved:-
(i) First, Ms Goodall invites me to make a global order and places reliance on AB v
CD [2017] EWHC 3164 in this respect.
Whilst
this authority provides strong support for the proposition that a court
has
the power to make a long term global maintenance order, it falls short of stating that a court definitely should make such an order in a scenario, such as the present one,
where
there exists a CMS assessment and proper mathematical knowledge of
how
the child maintenance aspects of the case are likely to progress. The existence of a global order carries
with
it the complication of knowing
how
to proceed in the future if, for example, circumstances change such as the spousal element is to be deleted because, for example of a remarriage. It seems to me that if a disaggregated order can be made fairly then that it is often the better approach and in my
view
that applies
here.
(ii) Secondly, there are issues here
in relation to
how
the child maintenance picture should fit together as the children move from secondary to tertiary education, sometimes complicated by gap years. I quote from the Dictionary of
Financial
Remedies
(
2020
edition at p.12):-
“The standard cessation date for a child periodical payments order is the date when
the relevant child attains the age of 18 or ceases full time education. Education is ordinarily defined as tertiary education up to a first degree course… The calculation of this date can be complicated by a child’s decision to take a gap year between school and university or, perhaps more controversially, between university and starting
work
or a decision to take a Master’s degree after
his
first degree (see Re N [2009] 1 FLR 1442) and it is not uncommon to extend child periodical payments orders for such periods, but ‘a parent is entitled to be protected against the child's prolonged or indefinite deferral of attendance at university’ (see Re N (supra).
When
style='letter-spacing:-.4pt'> a child moves from secondary to tertiary education it is not uncommon to redirect all or some of the child periodical payments to the child
himself,
style='letter-spacing:-.45pt'> for example to meet accommodation or living or tuition costs (see McFarlane
v
McFarlane [2009] 2 FLR 1322). The parent
with
style='letter-spacing:-.45pt'> care may retain an amount as a ‘roofing allowance’, reflecting the fact that children attending university sometimes spend a good deal of time at
home.
Which
solution is appropriate is likely to depend on the amount of money being paid and the amount of time spent at
home
as opposed to university, but a roofing allowance of one third of the total is not uncommon”.
(iii) Thirdly, the assessment of spousal maintenance needs to be undertaken against the background of Matrimonial Causes Act 1973, section 25A which
requires
“periodical payments to be made…only for such term as
would
in the opinion of the court be sufficient to enable the party in
whose
favour the order is made to adjust
without
undue
hardship
to the termination of
his
or
her
financial
dependence on the other party”.
The meaning of this section
has
attracted attention in recent case law, including by Mostyn J in SS
v
NS (Spousal Maintenance) [2014] EWHC 4183
where
he
said:-
“Pulling the threads together it seems to me that the relevant principles in play on an application for spousal maintenance are as follows:
i) A spousal maintenance award is properly made where
the evidence shows that choices made during the marriage
have
generated
hard
future needs on the part of the claimant.
Here
the duration of the marriage and the presence of children are pivotal factors.
ii) An award should only be made by reference to needs, save in a most exceptional case where
it can be said that the sharing or compensation principle applies.
iii) Where
the needs in question are not causally connected to the marriage the award should generally be aimed at alleviating significant
hardship.
iv) In every case the court must consider a termination of spousal maintenance with
a transition to independence as soon as it is just and reasonable. A term should be considered unless the payee
would
be unable to adjust
without
undue
hardship
to the ending of payments. A degree of (not undue)
hardship
in making the transition to independence is acceptable.
v) If
the choice between an extendable term and a joint lives order is finely balanced the statutory steer should militate in favour of the former.
vi) The
marital standard of living is relevant to the quantum of spousal maintenance but is not decisive. That standard should be carefully
weighed
against the desired objective of eventual independence.
vii) The
essential task of the judge is not merely to examine the individual items in the claimant's income budget but also to stand back and to look at the global total and to ask if it represents a fair proportion of the respondent's available income that should go to the support of the claimant.
…
xi) If the choice between an extendable and a non-extendable term is finely balanced the decision should normally be in favour of the economically weaker
party.
(iv) Fourthly, the termination of the spousal maintenance order needs to take into account the pension distribution. If that has
been executed to achieve equality then allowing an ongoing spousal order beyond the retirement date runs the risk of upsetting the fairness of the scheme of capital distribution: see D
v
D [2004] 1 FLR 988.
(v)
style='font:7.0pt "Times New Roman"'> Fifthly, I note some some dicta in Murphy
v
Murphy [2014] EWHC 2263 and Aburn
v
Aburn [2016] EWCA Civ 72,
which
establishes that I
have
the power to step up or down the spousal order at
various
stages providing the prediction of future circumstances based on evidence justifies this.
71. Taking into account all these matters I propose to make the following income orders:-
(i) There will
be a spousal periodical payments order as follows:-
(a) The order will
commence on 1st March
2020
and continue to be paid in advance on the first day of each calendar month thereafter.
(b) The initial sum will
be £1,138 pcm.
(c) From 1st September 2021 this will
rise by
way
of automatic
variation
to £1,300 pcm.
(d) From 1st September 2027 this will
rise by
way
of automatic
variation
to £1,500 pcm.
(e) This will
carry on until the death of either party, the
wife’s
remarriage or further order of the court or until the
wife’s
60th birthday, i.e. until and including the payment due on 1st November 2029,
when
it
will
stand dismissed
with
a section 28(1A) bar excluding any extension.
(ii) I note that the CMS maximum assessment will
continue to be binding on the
husband
and that, on the current figures, this is
£2,087 pcm, but
will
reduce to £1,697 pcm in Summer
2020
and to £1,273 pcm in Summer 2021 and
will
carry on at this rate until Summer 2027,
when
it
will
disappear altogether.
(iii)
There will
be top-up orders as follows:-
(a)
for the benefit of the three children from 1st March 2020
at the rate of £525 pcm;
(b)
for the benefit of the two younger children from 1st September 2020
at the rate of £420 pcm; and
(c) for the benefit of C from 1st September 2021 at the rate of £315 pcm.
(iv)
There will
be child periodical payments orders in favour of each child respectively from the 1st September immediately after they respectively leave secondary education until they respectively complete their tertiary education to a first university degree, including one gap year, at the rate of £450 pcm,
with
£150 being paid to the
wife
as a roofing allowance and £300 being paid directly to the child concerned.
(v)
All the figures in paragraphs (i), (iii) and (iv) above will
be subject to CPI uprating on 1st March 2021 and each anniversary thereafter.
72.
These figures have
been selected
with
a
view
to matching all the principles discussed above. I
have
taken the
view
that these orders appropriately factor in the
wife’s
income needs in the context of the duration of the marriage and the gradually diminishing significance of the marital standard of living over time as
well
as the ‘transition to independence’,
whilst
recognising that this
will
not fully
happen
until she is able to rely upon pension income at age 60 in accordance
with
Mr Galbraith’s calculations. At that stage I
have
taken the
view
that there should be a clean break. I conclude that the
wife
can adjust to this
without
undue
hardship
at that stage. The
husband’s
assertion that the adjustment could be done in 2024 is not, in my
view,
made out. I
have
preferred this solution to the
wife’s
suggested formulation - that the maintenance should be reduced in 2028 but
with
no section 28(1A) bar - on the basis that this might
very
well
be a recipe for more litigation in 2028 and it is better for everybody to
have
certainty at this stage. I
have
concluded that this solution is affordable to the
husband,
assuming of course that
he
retains
his
current employment (or something similar) over the next ten years,
which
should be achievable.
73.
I recognise that it may be that the above child periodical payments order suggested above may not cover the entirety of the medical based course, but my solution is intended to recognise the limitations on a parent’s obligations discussed in Re N [2009] 1 FLR 1442. This does not prevent further arrangements being made on a voluntary
basis and I
would
like to express the
hope
that by that stage relationships may
have
improved between the
husband
and the children to facilitate this.
74.
Of course things may not turn out exactly as expected, but assuming things proceed more or less as projected, the following represents a tabular summary of the wife’s
income from all sources for the next few years, at current prices:-
|
From 1st March ![]() |
From 1st September ![]() |
From 1st September 2021 |
From 1st September 2027 |
Spousal Periodical Payments pcm |
1,138 |
1,138 |
1,300 |
1,500 |
CMS pcm |
2,087 |
1,697 |
1,273 |
0 |
Top-up child maintenance pcm |
525 |
420 |
315 |
0 |
Roofing Allowance of child maintenance for A pcm |
0 |
150 |
150 |
0 |
Roofing allowance of child maintenance for B pcm |
0 |
0 |
150 |
0 |
Roofing allowance of child maintenance for C |
0 |
0 |
0 |
150 |
Earned income net pcm |
535 |
817 |
1,100 |
1,371 |
Child Benefit pcm |
192 |
149 |
90 |
0 |
TOTAL pcm |
4,477 |
4,371 |
4,378 |
3,021 |
Payments direct to adult children |
0 |
300 |
600 |
300 |
3,750 |
3,705 |
3,788 |
1,950 |
75. At the outset of the case there was
an issue about life insurance to secure these payments, but I believe the solution offered in the course of the
hearing
by the
husband
was
acceptable to the
wife
- i.e. that
he
would
nominate an appropriate portion of
his
existing life insurance to cover a reasonable projection for payments remaining outstanding at any particular time. This
will
need to be carefully drafted to include in my order. For the reasons discussed in the course of the
hearing
I did not feel inclined to impose any arrangement about a critical illness insurance cover.
76. In view
of the fact that the outcome I
have
decided upon came between the two open positions - i.e. neither party
was
entirely successful or entirely unsuccessful - I consider the correct order on costs is that there should be no order. In reaching this conclusion I am of course cognisant of the provisions of FPR Part 28.
77. I shall now ask Ms Goodall to take the lead in drafting an order which
reflects all the provisions of this judgment. I
will
be
happy
to consider, and
hopefully
approve, an order in an agreed form.
78. In case the drafting process throws up unexpected arguments, or anything else arises for my consideration, I shall list the matter for a mention at 10.00 am on 25th March 2020
(t/e: 30 minutes). I express the
hope
that this
hearing
can be avoided.
Swindon Family Court
24th February 2020
[1] This is based on an agreed valuation
of £730,000 less an outstanding
Virgin
Money mortgage of £466,318 and costs of sale estimated at 3% of the sale price = £241,782
[2] This figure is based on a total of incurred fees of £70,834 less a total of fees paid of £44,793 = £26,041
[3] This figure is based on a total of incurred fees of £42,905 less a total of fees paid of £41,000 = £1,905