4. The children are C, sixteen, D, fifteen, E, thirteen and F, ten. D is living with his father, the other three children are living with their mother. There are ongoing Children Act 1989 proceedings.
9. The order provides:
(i) The wife to receive £952,555 of the combined proceeds of sale of the properties (68%);
(ii) The husband to receive £450,000 from the combined proceeds of sale (32%);
(iii) Any additional capital raised from the sale of the property after that to be split 50/50;
(iv) The parties to discharge their debts from their respective shares of the proceeds of sale;
(v) Until sale, the husband to have the benefit of the rental income from [property B] but also the responsibility for the mortgage and all other outgoings related to it;
(vi) The husband to pay to the wife periodical payments initially in the sum of £3,000 per month and once a child support assessment has been concluded, spousal maintenance in the sum of £1,860 a month until September 2022 and thereafter £860 a month. The spousal maintenance is to be paid until the husband’s retirement age, the applicant’s remarriage or death of either party.
(vii) The parties are to keep their pensions.
10. The judge found that the husband had liabilities of £238,140 and the wife had liabilities of £110,000. There is nothing in the judgment about whether these were ‘soft’ or ‘hard’ loans, or what the terms of repayment were. However, the judge found that both parties should discharge their debts before purchasing a new property. That left the wife with a housing fund of £842,555, the husband’s fund was reduced to £211,860. The judge determined that the husband should use a mortgage capacity of £350,000 in order to meet his housing need, which was assessed at £550,000.
12. The wife’s earning capacity was assessed at between £12,000 and £15,000. She was diagnosed with breast cancer in 2012 for which she was treated with surgery, chemotherapy and radiotherapy. She had to undergo further extensive treatment between 2017 and 2019 when there was a recurrence of the cancer. Unsurprisingly she continues to be significantly impacted by the physical and emotional consequences of her illness and treatment and will continue to be so. In practical terms she continues to be under regular review and to receive treatment from clinicians and her energy levels are not what they were, impacting her capacity to work and all aspects of her life. She has not worked for some time and is not likely to be able to return to [her previous profession]. The judge found that she was unlikely to have the opportunity to start work in a new field until at least September 2021, when the parties’ youngest child will start secondary school.
13. The judge found that the husband’s likely net income was £6,900 a month. She found that he had capacity to borrow up to £350,000 on a mortgage over a period of 18 years or so at a cost of £1900 a month. She found that this was affordable, together with global maintenance payments initially of £3,000 but reducing from September 2022. The child maintenance payments will continue thereafter but will step down as each of the children turns twenty, although it is likely that the children would continue to need some form of financial support thereafter, particularly if they go to university.
14. The husband’s appeal is against both the capital division and the award of maintenance. There are four grounds of appeal:
(i) The assessment of the parties’ respective needs was unbalanced and unfair;
(ii) The judge erred in finding that the husband had a mortgage capacity of £350,000;
(iii) The division of capital was unfair and fell outside the reasonable bounds of the judge’s discretion;
(iv) The judge failed to have adequate regard to the clean break principle and ordered the payment of maintenance that was excessive in amount and duration.
18. In Re T  EWCA Civ 453, the Court of Appeal reminded itself of the margin of respect that should be given to a judge at first instance; an appeal is not a wholesale review of the case:
 Secondly, I have already described the approach of the judge and the experience of the judge. Where a judge correctly identifies the legal test, says he is applying it, and says he has the evidence which justifies that conclusion, and is able in the course of the judgment to refer to that evidence, this court should be slow to interfere and say he is wrong. There is no indication here that there was an error of principle in the judge's conclusion, and to my mind he should be given a substantial margin of respect by this court in having conducted the exercise that he said he had undertaken.
(per Lord Justice McFarlane at paragraph 41)
19. I have been referred to a number of cases, which I have read:
· K v L  EWCA Civ 550, in which the wife’s inherited wealth which had been ring-fenced during the marriage, was held to be non-matrimonial property not subject to the sharing principle;
· WX v HX (NX and another intervening)(treatment of matrimonial and non-matrimonial property)  EWFC 14 Roberts J;
· JL v SL (no 2)(Appeal: non-matrimonial property)  EWHC 360 (Fam) Mostyn J;
· B v B  EWHC 4545 (Fam) Roberts J, concerning assessment of a husband’s earning capacity and his ability to pay spousal maintenance;
· A v L (Departure from equality: needs)  EWHC 3150 (Fam), Moor J, in justifying a departure from equality the needs of both parties must be considered. Disparity in earning capacity could justify departure but that must be considered in the context of the needs of both parties. In particular there has to be consideration of how such a departure could be justified if there was also a substantive periodical payments order;
· CR v SR (Financial remedies: permission to appeal)  EWHC 1155 (Fam) Moylan J, where the court was making orders based on estimates of future income, there needed to be a reasonable degree of caution exercised to make sure that the order which was made was (i) affordable, and (ii) did not result in an imbalance or an undue imbalance between the parties’ respective future financial positions;
● Piglowska v Piglowski  1 WLR 1360, citing M v B (ancillary proceedings: lump sum)  1 FLR 53, per Thorpe LJ:
23. The judge had the benefit of seeing each of the parties give evidence, and so far as the husband was concerned, evidence in the form of his accounts and [name of individual redacted]. There is no appeal against the judge’s assessment of the wife’s earning capacity. So far as the husband’s earning capacity is concerned the judge noted that [name redacted’s] prediction of future gross earnings in the region of £200,000 to £250,000 was perhaps optimistic when compared with the husband’s accounts which showed that in previous years he had only twice exceeded turnover of £200,000. The judge’s assessment of the husband’s net income was cautious and conservative but justified on the evidence and plainly a finding available to the judge to make.
24. The findings in respect of the husband’s mortgage capacity were based on quotes obtained by each of the parties and evidence given by the husband. There was no expert report. The quotes reflected different propositions in terms of deposit, monthly payments, income projection, mortgage term, but were all broadly consistent. If the husband were paying maintenance of around £3,000 a month, took out a mortgage for roughly 18 years (to retirement age 67) the husband would be able to borrow around £150,000 at a cost of about £800 a month and around £350,000 at a cost of £1,940 or £594,000 at a cost of £3,274 a month. The judge took into account that the husband’s status as a self-employed [professional] injected additional uncertainty but found on balance that the husband had capacity to borrow up to £352,000. Whether it was fair to require the husband to utilise that capacity to its full in order to house himself is a different question, but the finding that he could borrow to that level is sound given all the evidence before the judge.
27. I have set out in full the judge’s approach to the parties’ respective housing needs:
‘I turn to the parties’ housing needs but these cannot be considered in isolation, in this case the husband has a significant mortgage capacity but, at the very least for the immediate future, he will not only be paying his mortgage but supporting the wife and children and his ability to raise monies by way of mortgage are limited by the availability of his income to pay such a mortgage. The wife accepts that the husband will need between £450,000 and £600,000 to rehouse himself, that figure is based on property particulars provided by the husband as being suitable for either party. Taking account of the need to repay his debts and to pay his mortgage and leave sufficient income to support himself and the wife and children I will limit the husband’s housing fund to £550,000. The husband will need £238,140 to repay his debts and therefore needs capital of £788,140. If he borrows £350,000 he will need a balance of £438,140 or roughly £450,000. His monthly mortgage payments will be £1,940 a month leaving £5,300 a month to support himself, the wife and the children. I have considered the possibility of his taking a higher mortgage and have concluded it is not feasible as there would simply not be sufficient income available to support the family.
28. The husband’s housing need was put into a bracket of £450,000 to £600,000 based on the property particulars provided by the husband and accepted by the wife as a reasonable range. The figure of £550,000 was reached on the basis that the husband could service a mortgage of £1,940 a month, pay £3,000 child and spousal maintenance and live on the remaining £2,000 per calendar month. The judge had identified that the husband’s living expenses could be met by the sum of £1,500 a month. It may or may not be affordable, but there is a risk of unfairness to the husband in this approach which appears to have considered the question of affordability first and as determinative of the sum to be awarded to the husband, rather than there being in the first instance an objective assessment of the husband’s actual housing needs.
29. The judgment goes on to consider the wife’s housing need, but from a starting point that the husband’s needs could be met by the release of only £450,000 of the joint proceeds of sales to him:
The capital available to the parties is £1,402,555, if the husband receives £450,000 from the net proceeds of sale the amount left for the wife to rehouse herself and the children and pay her debts will be £952,555. It is the wife’s case that she needs £800,000 or more to rehouse herself and the children in a suitable property. I calculate the wife’s debts come to £110,000 … If those debts are paid out of the £952,555 the wife will be left with £842,555 to rehouse. I find that sum is sufficient to enable her to purchase a property which will provide a suitable home for her and the children. The wife says that it is essential that she remains living in [place name redacted] where she has a support network and the children are also settled. [Place name redacted] is a particularly expensive area; the wife has produced particulars for properties which she says would be suitable to rehouse her and the children at prices ranging from £799,950 to £875,000. Not all the properties are in [place name redacted] but, on the wife’s case they are close enough and/or have good transport links to [place name redacted]. The husband has produced particulars of properties that he says would be suitable to rehouse the wife and children ranging from £450,000 to £600,000. The wife says those properties are not suitable and her particular complaint is that they are too far away from her support network and the children’s social networks. There are a number of properties in [alternative local town] which would appear to be suitable, there are good transport links between [alternative local town] and [place name redacted], and two of the children attend school in [alternative local town]. I think it is fair to say that [alternative local town] is a significantly less desirable area than [place name redacted] and that is reflected in house prices.
I do not dismiss the properties suggested by the husband out of hand and if the division of the liquid capital between the parties meant that the parties’ needs could only be met if the wife and children rehouse for about £600,000 that is what the wife would have to accept. In this case I calculate that the husband’s needs can be met leaving a sum in the region of £842,555 available to rehouse the wife and the children. Taking account of stamp duty and other expenses in connection with the wife should be able to find a property that will suit her needs and those of the children including her wish to be in or near [place name redacted] for about £800,000.’
31. But that was only possible on the basis that the husband borrowed at the very top of his mortgage capacity and spent around 30% of his income on the mortgage. Further, it was based on an assessment of the husband’s income needs in which the judge ‘pared to the bone’, finding that his ‘very basic and essential expenses come to approximately £1,500 a month.’ No equivalent assessment was carried out of the wife’s monthly expenditure, which was rounded down to £3,000 a month.
34. On behalf of the wife, Miss Gillman argues that the judge had in mind to ring-fence for her a proportion of the assets to reflect the wife’s capital contribution to the purchase price of the parties’ first home together (£150,000), and that the judge was entitled to do so. There is some basis for this in the judgment:
‘If there was sufficient capital available to meet the parties’ needs if the wife’s contribution was excluded I would accept the submission made on behalf of the wife and ring fence her contribution in whole or in part but I have found it difficult to divide the parties’ limited capital in such a way as to ensure that both the parties’ and the children’s needs are met. In those circumstances I cannot award the wife an additional sum to take account of her premarital contribution. I note however that when I have taken account of the parties’ needs as set out above, the division of available capital after deduction all the parties’ debts means the wife will be receiving approximately 80% of the capital and the husband approximately 20%.’
35. If the wife’s capital contribution was a substantial reason for the departure from equality, in my judgment this was an error. At paragraph 113 of WX v HX  EWFC 14, Roberts J summarises the law in relation to matrimonial and non-matrimonial property in the context of the parties’ sharing claims:
‘Each case has to be considered on its own facts and the court’s assessment of fairness in that particular case. The judge must consider whether the existence of such property should be reflected in outcome at all. This will depend on the extent to which it has been ‘mingled’ with matrimonial property and the length of time over which that ‘mingling’ has taken place: per Mostyn J in N v F (Financial Orders: Pre-acquired Wealth)  EWHC 586 (Fam).
39. I find that both these grounds of appeal are made out. The assessment of the husband’s housing need was based on what the judge found he could afford. In carrying out that assessment the judge appeared to take a different approach to the husband’s needs than to the wife’s. His schedule of income needs was ‘pared to the bone’, the wife’s were not scrutinised in the same way. The judge found that the husband should incur debt of £350,000 repayable over 18 years and end up with a house worth around £550,000, whereas the wife received nearly £250,000 in excess of her assessed housing need debt free.
42. To the extent that the departure from equality may have been justified by the parties’ different earning capacities going forward, this was to compensate the wife twice over, because she will receive child maintenance and spousal maintenance, and will not have a mortgage to service. Mr Brooks’ summary of the parties’ relative incomes after the judgment is as follows (the first box sets out the position until September 2022, the second thereafter):
The judge erred in finding that the husband had a mortgage capacity of £350,000;
43. The judge’s finding that the husband had a mortgage capacity of £350,000 was sound and based on a thorough investigation of his income and the evidence of what was available in the form of the mortgage quotes. However, for the reasons given above, I find that in all the circumstances, the Court was wrong to conclude that the existence of the husband’s mortgage capacity was a good reason to depart as substantially from the equitable sharing of the matrimonial property as occurred in this case.
The judge failed to have adequate regard to the clean break principle and ordered the payment of maintenance that was excessive in amount and duration.
45. On the judge’s order, the maintenance payable is £1,840 from sale of the FMH until September 2022, and thereafter £840 a month for a further 225 months. On Mr Brooks’ calculations (assuming 15 months from sale of the family home until September 2022) that is a total of £216,600. Allowing a discount for early receipt he says that the surplus capital the wife received from the capital division of matrimonial property more than covers it and if the division is to remain the same, then there should be a clean break on the basis that spousal maintenance should be immediately terminated.
47. At that time, the children would be 35, 33, 32 and 29. As the judge anticipated, the wife will have been able to free up some equity by downsizing ten years earlier, once the youngest child has left school. By contrast, in eight years’ time on the judge’s order, the husband will still have ten years’ to pay on the mortgage, will still be paying spousal maintenance and will have much less ability to release equity from his property because he started with only £210,000 equity in it compared to the wife’s £800,000.
53. The judge made some clear findings:
(i) the parties’ debts should be discharged before they purchased their properties;
(ii) the wife had a housing need of £600,000 and the husband a housing need between £450,000 and £600,000;
(iii) the husband had an earning capacity of £6,900 a month and from September 2021 the wife had an earning capacity of £1,000 a month;
(iv) The likely amount of matrimonial assets for distribution was £1,402,555.
55. If the proceeds of sale were split fifty-fifty (£701,277 each), after payment of debts the wife would receive £591,277 the husband £463,137. This leaves the wife short of her housing need and she has no capacity to improve her situation by raising a mortgage. She has to be housed mortgage-free. It is hoped by both parties that all children will spend time with both their parents but the judge found that the three children who were living with their mother at the moment were likely to continue to do so, and the wife’s limited earning capacity compared to the husband’s was in part assessed on the basis that she would continue, as she has throughout the marriage, to take responsibility for the day to day arrangements and care of the children. Her housing need is greater than his who has only one of the children living with him full-time.
58. If the figures are adjusted so that the wife receives £752,555 and the husband £650,000, after payment of debts the wife would have the sum of £642,555 to rehouse herself, and the husband a lump sum of £411,860. He could raise a mortgage of £150,000 to £200,000 at around £900 to £1,200 a month, which is affordable on his income. The percentage split becomes 61:39.
59. Having regard to all the factors on the section 25 checklist, the parties’ respective earning capacities, ability to improve their pensions in the future and the funds available, the husband’s diminishing liabilities towards the wife in terms of child and spousal maintenance, but his additional existing liabilities and need to incur debt to rehouse, my conclusion is that the award should be adjusted so that the wife is awarded the first £752,555, the husband the next £650,000. This more fairly in my judgment shares the joint proceeds of the marriage. If the sale of [property B] does not enable the total fund to reach £1,402,555 then the proceeds of sale should be split pro-rata 61:39. If sums reached are in excess of £1,402,555 I would not disturb the 50/50 split ordered by the judge.
67. The terms of the order I propose to make are therefore in the same terms as the District Judge’s, save that I substitute the sums awarded to the wife as £752,555 and £650,000 to the husband. I appreciate that the wife has taken steps towards buying a house at a price she could afford under the terms of the original order and could not afford under the terms of this order. I am sorry for the difficulties and expense that I can see this is bound to cause not just for her, but for other buyers and sellers in the chain, and for the children who will have been prepared for a house move. However, for the reasons I have given, I am satisfied that the original order does require to be varied to rectify the unfairness that it produced as between the parties after a twenty year relationship.
74. The general rule in financial remedy cases is that there is no order for costs, but appeals fall outside the general rule (per Moor J in WD v HD  1 FLR 160) so the Court starts with a ‘clean sheet’, applying CPR 44.2(1). The Court must have regard to all the circumstances, which, per CPR 44.2(4) include:
(a) the conduct of the parties
(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and
(c) any admissible offer to settle made by a party which is drawn to the court’s attention and which is not an offer to which costs consequences under Part 36 apply
75. The conduct of the parties includes –
(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction - Pre –Action Conduct or any relevant pre-action protocol;
(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c) the manner in which a party has pursued or defended the case or a particular allegation or issue; and
(d) whether the claimant who has succeeded in the claim, in whole or in part, exaggerated it’s claim.
76. Refusal to negotiate openly will amount to conduct in respect of which the Court will consider making an order for costs. See Mostyn J in OG v AG  EWFC 52:
77. The orders which the court may make under this rule include an order that a party must pay-
(a) a proportion of the other party’s costs
(b) a stated amount in respect of another party’s costs
(c) costs from or until a certain date only;
(d) costs incurred before proceedings have begun;
(e) costs relating to a particular step taken in the proceedings
(f) costs relating only to a distinct part of the proceedings; and
(g) interest on costs from or until a certain date, including a date before judgment
79. Negotiations in advance of the appeal were fairly half-hearted. The appellant made an offer on 3 May 2021 that the wife should receive £740,000 from the proceeds of sale (I awarded £752,500), and for a substantial reduction in both amount and the term of maintenance. The Respondent made a counter-offer only that the Appellant should have all, not 50% of the proceeds of sale over the £1,402,500 allocated in the order. One would hope the parties would have engaged in more meaningful negotiations, but neither of the opening offers were unreasonable in all the circumstances. The Appellant did not do better than his offer on appeal. I do not find that either of them has refused to negotiate openly to the extent that it should be regarded as conduct that impacts on the decision as to costs.