![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |
England and Wales Family Court Decisions (other Judges) |
||
|
You are here: BAILII >> Databases >> England and Wales Family Court Decisions (other Judges) >> T v T (variation of a pension sharing order and underfunded schemes) [2021] EWFC B67 (10 November 2021) URL: https://www.bailii.org/ew/cases/EWFC/OJ/2021/B67.html Cite as: [2021] EWFC B67 |
||
[New search]
[Context
]
[View without highlighting]
[Printable PDF version]
[Help]
Case No: OX13D00825
IN
THE
CENTRAL FAMILY COURT
Central Family Court
HIS HONOUR JUDGE EDWARD HESS
- - - - - - - - - - - - - - - - - - - - -
B E
T
W E E N
Mr
T
Applicant
and
Mrs
T
Respondent
- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -
Ms Ann Hussey QC appeared for
the
Applicant Husband (instructed by Goodwins Family Law Solicitors)
Mr Michael George appeared for
the
Respondent Wife (instructed by Russells, Solicitors)
(Handed down by email on 10
th
November
2021)
JUDGMENT
This
judgment was delivered in private, but
the
judge has given leave for any part of
this
version
of
the
judgment
to
be published,
His Honour Judge Edward Hess
1.
This
case concerns
the
financial dispute arising out of
the
divorce between Mr
T
and Mrs
T.
I shall refer
to
them
in
this
judgment as ‘
the
husband’ and ‘
the
wife’ for ease of reference,
though
I am well aware
that
they
have been separated since 2013 and divorced since 2017, and I apologise if
the
nomenclature seems odd
to
them.
BACKGROUND FACTS AND RELEVANT CHRONOLOGY
2. I shall begin
this
judgment by setting out (at a little length) some background facts and a relevant chronology
to
give
the
reader of
this
judgment an understanding a context for
the
issues I have
to
resolve.
The
marriage and its breakdown
3.
The
husband is aged 53. He was initially working in a junior position with Company X and impressively raised himself over a long career
to
be
the
commercial director. He left Company X in 2018 and now works as group commercial director for Company Y, who are in
the
same field as Company X. He has had some health issues, including
testicular
cancer scares and eye problems, but
they
do not currently significantly interfere with his ability
to
work. He now cohabits with Ms A, who currently does not work for her own health reasons.
4.
The
wife is also aged 53. In younger days she was a champion Irish dancer of some note and she still does some dance
teaching,
but her main employment is as a hospital administrator. She has also had some health issues, including suffering from fibromyalgia and osteoarthritis, but again
they
do not currently significantly interfere with her ability
to
work.
5.
The
parties commenced
their
relationship in 1990, began cohabiting in 1992 and married in1995.
6.
The
marriage produced
two
children:-
(i) B was born in 1996 and is now aged 25. She is an independent adult.
(ii) C was born in 2001 and is now aged 20. She currently attends university and is in her second year.
7. A family home in Croydon was purchased in 2001 and
the
whole family lived
there
during
the
marriage.
8.
The
parties’ relationship sadly broke down and
they
separated in June 2013.
The
wife remained living in
the
family home with
the
children and
the
husband has lived separately ever since. In 2014 he purchased a home for himself in Sussex.
9.
The
husband commenced divorce proceedings on 28
th
June 2013. Decree Nisi was
ordered
on
the
31st October 2013. In
the
conventional way, Decree Absolute awaited
the
outcome of
the
financial remedies proceedings.
The
financial remedies proceedings: from Form A
to
judgment
10.
The
wife issued Form A on 1st April 2014. Both parties were legally represented
throughout
the
proceedings.
The
application went
through
its conventional stages, including an FDR on 31st March 2015, but remained contested and found its way
to
a final hearing before DJ
Thomas
at
the
Family Court in Bromley on 13
th
August 2015 and 30
th
September 2015 (
the
gap between
the
two
hearing days was apparently attributable
to
the
happily unusual experience of
the
wife’s counsel going into labour on
the
first day of
the
hearing).
11. Judgment was delivered orally at
the
end of
the
court day on 30
th
September 2015. In
very
broad
terms
the
parties’ capital position, including
the
redistribution effected by
the
court decision, was assessed by DJ
Thomas
as follows:-
(i)
The
judge assessed
the
family home in Croydon as having a gross
value
of £575,000 and a net equity (after deducting
the
Halifax mortgage of £197,000 and notional sale costs) of £363,000.
This
asset
to
be was
transferred
to
the
wife, subject
to
the
mortgage,
to
enable her
to
house herself and
the
children.
(ii)
There
was another property in Sussex, purchased after
the
separation by
the
husband, and
the
judge assessed
this
as having a gross
value
of £650,000 and a net equity (after deducting
the
mortgage of £585,000, an early redemption penalty and notional sale costs) of £30,900.
This
asset was
to
remain in
the
husband’s ownership.
(iii)
The
husband had a Company X
pension
fund with a CE of £826,125 and an Aegon
pension
with a CE of £76,990.
The
wife had a Legal & General fund with a CE of £77,232.
There
would be a 40%
pension
sharing
order
in relation
to
the
husband’s Company X
pension
in favour of
the
wife.
(iv)
There
was a Legal & General Endowment policy,
thought
by
the
judge
to
be worth c £31,000 (
though
it subsequently realised a higher amount).
(
v)
style='font:7.0pt "
Times
New Roman"'>
The
husband had just purchased a new motor car for £50,000, which was included in
the
judge’s analysis.
(
vi)
style='font:7.0pt "
Times
New Roman"'> Overall, after redistribution,
the
position (as it would have appeared on 30
th
September 2015, although
the
judgment does not actually include an assets schedule, so
this
analysis contains some speculative infilling) would have been broadly as follows:-
|
100% of |
363,000 |
|
Savings in own name |
30,000 |
|
Chattels in sole name |
31,500 |
|
Legal & General endowment policy |
31,000 |
|
|
77,232 |
|
40% x
|
330,450 |
|
863,182 |
Husband
|
100% of own home in Sussex |
30,900 |
|
Savings in own name |
30,000 |
|
Chattels in sole name |
54,000 |
|
|
903,115 |
|
40% x Company X
|
-330,450 |
|
687,565 |
(
vii)
style='font:7.0pt "
Times
New Roman"'>
The
judge’s justification for
the
40%
pension
sharing
order
was fairly broad brush, was not fixed by any reference
to
any precise mathematical calculation nor
to
any of
the
income production data which had appeared in
the
PODE report from Mr Clive Weir dated 22nd June 2015, which
the
judge had in his possession, but
to
which he makes no specific reference in his judgment. He explained his
thinking
in paragraph 36 of
the
transcript
of judgment as follows:-
“I have
taken
the
view
that
the
amount of
the
share
should be, and I am going
to
do
this
in regards
to
the
Company X
pension,
that
60 percent of
that
should be retained by Mr.
T
and 40 percent of his Company X
pension
goes
to
Mrs.
T.
This
has
the
effect, and
the
exact figures I do not
think
I need
to
go into, of Mr.
T
getting slightly less
than
50 percent of all
the
assets and Mrs.
T
getting slightly more. In
that
regard, as I say, I have
taken
into account all
the
circumstances and I have
taken
into account
the
position of both parties,
the
contribution of both parties and
the
ongoing contribution
that
Mrs.
T
will make
to
the
children.
That
is going
to
inhibit her housing ability and really inhibit her earning capacity in
the
future.
That
is
the
reason
that
I
think
it is appropriate
to
depart from equality. But it is not a dramatic departure from equality. It is merely looking at
the
fact
that
effectively all
the
value
in
the
house goes
to
Mrs.
T”.
In essence
this
seems
to
have been a broadly based decision involving an element of offsetting (
the
pension
value
against
the
family home
value),
departing from equality
to
some extent in
the
wife’s favour for
the
reasons described, i.e. mainly
the
wife’s housing needs on behalf of herself and
the
children and
the
parties
very
diverse incomes (he assessed
the
wife’s income at c £19,000 per annum net and
the
husband’s income at c £120,000 per annum net).
The
capital/
pensions
element of
the
order
was not appealed and nobody has subsequently suggested, before me or otherwise,
that
it was wrong.
12.
There
was also
to
be a substantive global periodical payments
order
which (subject
to
the
death of either party,
the
remarriage by
the
wife or further
order
of
the
court) was
to
commit
the
husband
to
making maintenance payments
to
the
wife until 2030.
This
has been
the
subject of subsequent appeal and
variation,
in particular
the
fact
that
a good deal of
the
husband’s income came in performance related bonuses has caused a difficulty, but I do not consider it necessary in
the
context of
the
present dispute
to
go into
the
details of
this
aspect of
the
case.
The
financial remedies proceedings: from judgment
to
order
13. Because of a series of ongoing arguments (including about chattels and about detailed drafting points) it
took
an unusually long
time
for
the
judgment
to
be converted into a perfected
order.
It was not until 3rd May 2016, more
than
seven months later,
that
the
order
was perfected and sealed by DJ
Thomas
(after a contested hearing). For all
this
time
(rightly or wrongly) both parties
took
the
view
that
it was not appropriate
to
obtain Decree Absolute - certainly neither party applied for Decree Absolute.
14. Even after
that
point,
there
were problems over drafting
the
pension
sharing annex. In a letter dated 2nd August 2016,
the
original
version
was commented upon by
the
pension
administrators (at
that
stage Company D), including
the
following remark:-
“Paragraph F of
the
Annex should have
the
"external
transfer”
box marked as
the
Trustee
of
the
scheme
does not permit internal
transfers.
Failure
to
do so will not invalidate
the
Annex”.
It appears
that
in October 2016 a further unsealed
version
of
the
annex was presented
to
Company D,
this
version
obediently
ticking
the
external
transfer
box in paragraph F. At some stage, possibly in early 2017 (
the
date is not clear in
the
papers),
the
court sealed
this
version
of
the
annex and at some stage after
that,
in
the
course of 2017,
the
sealed
version
came into
the
possession of Company D.
15. At some point after
that
Company D were replaced as
pension
administrators by Company E. For reasons I explain below
the
pension
sharing annex has never been implemented.
The
appeal
16. Alongside
this
activity in 2016,
the
husband sought permission
to
appeal against
the
final
order
(although not against
the
pension
sharing
order).
17.
The
appeal proceedings rumbled on until 11
th
November 2016, when
the
appeal was compromised by an
order
of HHJ Redgrave which
varied
certain aspects of
the
original
order,
but not
the
pension
sharing
order.
18. For all
this
time,
again, both parties (rightly or wrongly)
took
the
view
that
it was not appropriate
to
obtain Decree Absolute - certainly neither party applied for Decree Absolute.
This
was notwithstanding
the
order
of HHJ Redgrave dated 21st July 2016, expressly permitting
the
husband
to
apply for Decree Absolute.
Developments in
the
Company X
pension
scheme
and reactions
to
it
19. Matters might by now (early 2017) have drawn
to
a conclusion had
there
not been some developments within
the
Company X
pension
scheme
which affected
the
parties and how
they
saw
the
fairness of
the
operation of
the
pension
sharing
order.
20. On 11
th
October 2016 a revaluation of
the
husband’s Company X
pension
produced a CE of £1,795,362 (substantially up from
the
figure used at court in September 2015, i.e. £826,125).
The
husband began
to
perceive
that
the
wife would be receiving more
than
she should have done. By 8
th
June 2017
this
was revalued at £1,652,012, a slight fall but still substantially higher
than
the
figure used in September 2015.
21. A further complication occurred on 5
th
December 2016 when Company X announced a policy of substantially reducing CEs for
the
purposes of external
transfers
on
the
basis
that
the
scheme
was
underfunded.
On
the
June 2017
valuation
the
CE for an external
transfer
was reduced from £1,652,012
to
£722,138 so
that
a
pension
sharing
order
implemented at
this
moment by external
transfer
would have produced a
pension
credit of 40% x £722,138 = £288,855.
The
wife began
to
perceive
that
she would be receiving less
than
she should have done.
22. By early
to
mid 2017 both
the
husband and
the
wife were aware of
these
developments and both actively considered what
they
should do about
them.
23.
The
wife was plainly worried about
their
implications, believing
that
she would be losing substantial amounts by receiving an external
transfer,
which she believed was her only choice.
The
fact
that
she believed
this
was her only choice stemmed from
the
information presented
to
her by Company D in August 2016, but
this
was presented at a
time
when
the
Company X
pension
fund was not paying reduced CEs and was
thus
correct at
the
time
it was given and only became incorrect on 5
th
December 2016. She
took
legal advice from Solicitors and Counsel. It appears from
the
documents
that
I have seen
that
neither her Solicitors nor her Counsel (nor indeed Company D) advised
the
wife of
the
existence of a remedy which would for all practical purposes have solved her problem,
the
selection of an internal
transfer
for
the
pension
sharing
order
(I set out
the
statutory basis of
this
remedy in my section on
the
law below).
There
is no reason why
the
wife herself should have known about
this
solution
to
her problems, but it is disappointing
that
her lawyers did not know of its existence and arguably also
troubling
that
the
pension
administrators did not alert her
to
this
issue (a
theme
I shall discuss in more general
terms
below in
the
context of some recommendations made in
the
Pensions
Advisory Group (PAG) report).
24.
The
wife’s legal
team,
in
the
erroneous belief
that
she was obliged
to
take
an external
transfer
under
the
pension
sharing
order,
decided
to
issue an application on 15
th
July 2017 seeking
the
following remedy:-
“
The
Applicant seeks a Declaration of
the
Court
that
the
40%
share
of
the
Company X
Pension
Fund in
the
Applicant's favour (and 60% in
the
Respondent's favour). also applies
to
the
uplift in
the
value
of
the
Company X
Pension
Fund policy. which Mr
T
Mrs
T
of on 20 January 2017. and specifically
that
the
CEV had increased from £826,125
to
£1,795,462”.
25. It is now accepted on behalf of
the
wife (expressly by Mr George)
that
this
application was wholly misconceived and
that
the
court would not and could not make such a declaration, but, at
the
time
it was made, it was made (albeit with an erroneous understanding of
the
law) with serious intent and, as interpreted by
the
husband,
then
acting in person, it appeared
that
he would be substantially disadvantaged by
the
sought after declaration. Just as
the
wife and her legal advisers were not aware of
the
existence of
the
possibility of an internal
transfer,
so
the
husband was apparently unaware. He
told
me in his oral evidence
that
he did not become aware of
this
possibility until
the
hearing before me on 8
th
September
2021.
Apparently neither his direct access Counsel (instructed on 18
th
April 2018) nor his full legal
team
of Solicitor and Counsel (whom he instructed from November 2018 onwards) knew about it or, if
they
did,
they
did not
tell
the
husband about it.
26.
The
wife’s application was followed up (on 21st September 2017) with an application by
the
wife for Decree Absolute
to
be pronounced.
27. On 5
th
September 2017
the
husband (acting in person) applied for a stay on
the
pronouncement of Decree Absolute. On 29
th
September 2017 DJ
Thomas
temporarily
stayed any application for
the
pronouncement of Decree Absolute.
28. On 21st November 2017
the
husband (acting in person) applied for a
variation
of
the
pension
sharing
order.
This
application had
the
legal effect of preventing
the
pension
sharing
order
taking
effect until
the
variation
application had been determined: see Matrimonial Causes Act 1973, section 31(4A)(b).
The
absence of a Decree Absolute had prevented
the
pension
sharing
order
taking
effect until
this
point and from
this
point on
the
undetermined
variation
application had
the
same consequence -
the
net result is
that
the
pension
sharing
order
has never
taken
effect.
29. On 22nd December 2017 DJ
Thomas
gave permission for
the
pronouncement of Decree Absolute and
this
happened
the
same day. (I pause
to
note
that
if
the
husband had died at any
time
between 22nd December 2017 and
today
there
would have been no widow’s benefits under
the
husband’s
pension
scheme
and no effective
pension
sharing
order
and
the
wife could have lost out substantially, but happily
the
husband is still alive and
this
problem has not arisen, but, as far as I can see, nobody raised
this
point on 22nd December 2017 nor
thought
about until recently).
Onwards pursuit of
the
application
to
vary
the
pension
sharing
order
30. It has been a curious feature of
this
case
that
the
wife’s misconceived application of 15
th
July 2017 for a “declaration” has never formally been dismissed or withdrawn, but as
time
has gone on
the
clear focus of
the
litigating lawyers has certainly been on
the
husband’s
variation
application.
31. I also note in passing
that
DJ
Thomas
dispensed with an FDR in
this
case as early as April 2018. It may be
that
his knowledge of
these
combatants informed
this
decision, but it is difficult
to
see why
there
should not have been an FDR in
this
case, which might have suggested a compromise before
the
costs massively and horrendously escalated.
32. Another startling feature of
this
litigation, looking backwards, is
the
fact
that
on 13
th
April 2018
the
Company X
pension
trustees
announced a reversal of
their
policy of substantially reducing CEs for
the
purposes of external
transfers.
It appears
that
the
husband was aware of
this
important fact from an early stage, but did not inform
the
wife about it. She was unaware about
this
development until 24
th
March
2021,
some
three
years later. In
the
meantime
there
had been court hearings on 18
th
April 2018, 23rd November 2018, (possibly) 5
th
September 2019 and 8
th
October 2020 and
the
husband was legally represented by
the
same Solicitor and Counsel between November 2018 and March
2021
and yet
this
very
important fact had not been disclosed.
33.
The
discovery of
this
development in March
2021
lead
the
wife’s Counsel
to
put in her note for
the
hearing on 18
th
May
2021
before HHJ Gibbons, an invitation
to
the
court:-
“
to:
(a) Forthwith implement
the
pension
sharing
orders
in
the
Wife’s favour as
to
40% of
the
Husband’s Company X
pension
fund on current
values;
(b) Record
the
dismissal of H’s application for
variation
of periodical payments; and (c)
Order
for costs in W’s favour.”
34. At
the
hearing on 18
th
May
2021,
the
reaction of HHJ Gibbons
to
these
latest developments, noting a lack of clarity in
the
husband’s case, included an
order
that
the
husband should “serve and file a statement of case within 21 days”.
This
was done on 2nd July
2021
and
the
husband’s case was stated
to
be as follows:-
“DJ
Thomas
clearly offset
the
pension.
He analysed outcome in
terms
of capital
value
of
the
pension.
His intention was
to
achieve a result which gave W £330,450 in capital
terms.
That
outcome can be achieved by
varying
the
PSO
to
provide for such percentage as equates
to
£330,450 plus, it is accepted, an uplift for inflation. It is a matter for
the
court's discretion as
to
which of
the
various
indices is used
to
calibrate
the
uplift.”
On
the
first day of
the
final hearing before me (i.e. on 8
th
November
2021)
this
was further clarified by Ms Hussey QC (
the
husband’s Counsel before me) as meaning
that
the
pension
sharing
order
should be
varied
downwards from 40%
to
17%. She has held
to
this
position in her closing submissions.
35. Another
troubling
feature of
this
litigation has been
the
pursuit, largely by
the
husband’s legal
team,
but for a long
time
by
the
wife’s legal
team
as well, of a PODE report which sought (amongst other
things):
“a report of
the
effect of
the
Company X
pension
deficit (if any) on both parties’
pension
share
and how in light of any deficit
the
60:40 split
ordered
can be preserved”.
This
question, which was approved by
the
court on 22nd November 2018, seems
to
me
to
have been misconceived ab initio as a question
to
ask of a PODE. In
the
light of
the
fact
that
by
the
time
it was drafted Company X were already paying out full CEs and
the
underfunding
was largely irrelevant, it is an even more extraordinary question -
though
of course
this
fact was known only
to
the
husband’s legal
team
until March
2021.
To
add
to
the
tragic
chronology of
this
case, it
took
from November 2018
to
June
2021
to
get
the
questions
to
a PODE - Ms Caroline Bayliss of Excalibur Actuaries - who quickly (and in my
view
entirely correctly) pointed out some of
the
flaws in
the
letter of instruction and concluded
that
there
is “little
to
justify a
pension
sharing report…I will
therefore
decline
the
instruction”. Even after
this,
the
husband’s legal
team
continued
to
push
the
point until I discharged
the
direction for
the
involvement of a PODE on 8
th
September
2021.
36. On 8
th
September
2021
I made a direction setting out
the
matters upon which I sought clarification from
the
pension
administrators.
To
their
credit Company E moved quickly
to
provide
this
information and, in a letter dated 15
th
September
2021,
they
clarified
the
following matters:-
(i) Whilst
the
Company X
pension
had paid out reduced CEs between 5
th
December 2016 and 13
th
April 2018,
this
had not been
the
case since
then
and
there
is no reason
to
suppose
that
this
position will change prior
to
December
2021.
In any period of reduced CEs internal
transfers
would have been offered as “
the
law states
that
an ex-spouse cannot be forced
to
transfer
their
pension
credit out of
the
fund on a reduced basis”.
(ii)
The
most recent CE for
the
husband’s
pension
fund was (as at 2nd August
2021)
£2,471,833.
(iii) Because of some rule changes made in March 2016,
the
“
variation
in
the
CE quoted… since 31st March 2016 is… almost entirely
the
result of changes in actuarial assumptions over
time,
with
the
primary driver of
these
changes being changes in underlying financial conditions. In particular,
the
discount rate used
to
calculate
the
present
value
of
the
…benefits is linked
to
market gilt yields”.
37. On 16
th
September
2021,
bolstered by
this
clarification,
the
wife again made an open offer
to
the
effect
that
the
husband’s
variation
application be dismissed with costs. In his case summary Mr George (
the
wife’s Counsel before me) has largely advanced
that
position, but he has also put forward an alternative position
to
the
effect
that
the
pension
sharing
order
be
varied
to
50%, but without a costs
order
- I
think
it would be fair
to
say
that
the
alternative position has been advanced with some diffidence and most of his submissions concentrated on
the
main proposition, i.e.
that
the
husband’s
variation
application should simply be dismissed with costs. None of
these
developments appear
to
have brought on any change of
thinking
within
the
husband’s legal
team,
or at least in
their
open position.
38. I have accordingly dealt with
the
application over
three
days on 8
th,
9
th
and 10
th
November
2021.
Evidence was completed on
the
first day and submissions by lunchtime on
the
second day. I am handing down
this
written judgment on
the
afternoon of
the
third
day.
39. I have been
told
that
the
respective legal costs incurred on
this
application are £130,487 for
the
wife and £175,024 for
the
husband.
That
costs should have been incurred at
this
level on
this
application is a
tragedy
for
this
family and also a shaming indictment for
the
legal system, even more so as much of
these
costs were incurred by legal
teams
who appear
to
have had limited understanding of
the
issues with which
they
were dealing. In making
this
latter comment I should like
to
clarify
that
it does not apply
to
the
wife’s legal
team
in
the
months since at least May
2021
and Mr George is specifically exempted from
this
criticism.
APPLICABLE LAW
40. It is necessary for me
to
set out some law relevant
to
this
variation
application. I shall divide
this
part of my judgment into
two
parts.
The
first relates
to
the
procedures involved in making and implementing
pension
sharing
orders.
The
second relates
to
the
proper legal
tests
to
be applied in dealing with an application for a
variation
of a
pension
sharing
order
under Matrimonial Causes Act 1973, section 31.
Procedures involved in making and implementing
pension
sharing
orders
41.
This
case involves an extreme example of what is often called ‘moving
target
syndrome’.
To
understand what
that
is, it is necessary
to
know
that
in H
v
H [2010] 2 FLR 173 Baron J said:-
“although
the
court may calculate
the
percentage by
taking
the
precise capital sum
that
seems appropriate and undertaking a calculation
to
determine
the
relevant percentage,
the
result contained in
the
order
must be specified only in percentage
terms
and not 'such sum as will give such percentage'.
The
latter seems
to
me
to
be a method of calculation as opposed
to
an
order”.
This
dicta is binding and any
pension
sharing annex should go no further
than
stating
the
percentage of
the
member spouse’s
pension
rights which are
to
be
transferred
to
the
non-member spouse as a
pension
credit. It should not include any formula for
the
production of a certain level of income or for a particular monetary sum
to
be
transferred.
42. A related aspect is
the
implementation sequence of a
pension
sharing
order
- in particular
the
sequence of dates from
valuation
date (
the
date
the
pension
was
valued
for
the
original court final hearing)
to
transfer
day (
the
day
the
order
takes
effect)
to
the
start of
the
implementation period of four months
to
the
valuation
day (within
the
implementation period).
This
is helpfully illustrated in
the
figure below
[1]:-

43. It is a consequence of
the
above
that
the
value
of
the
pension
credit actually
transferred
as a result of a
pension
sharing
order
will usually not be
the
precise amount contemplated by
the
judge deciding
the
level of
the
percentage
to
be included in
the
pension
sharing
order
and annex. Hence
the
expression ‘moving
target
syndrome’, which is described in Hay, Hess, Lockett and
Taylor
on
Pensions
on Divorce: A Practitioner’s Handbook (3rd edition at p.124)
[2] as follows:-
“Once a
pension
sharing
order
is made, its implementation will in due course
take
place by reference
to
the
percentage identified in
the
order.
The
percentage will not, however, be applied against
the
CE
valuation
figure which
the
court will have had before it on
the
day
the
order
was made. Instead it will be applied
to
a fresh CE
valuation
figure of
the
shareable
rights.
This
fresh
valuation
will be made by
the
pension
provider as at ‘
the
valuation
day’
[3].
The
valuation
day will ordinarily be some months after
the
court hearing and will be a date selected by
the
pension
provider within a four month implementation period
[4].
This
leads
to
the
difficulty which has been identified as “Moving
Target
Syndrome”.
The
valuation
of
the
pension
against which
the
pension
sharing
order
is
to
be enforced may be quite different at
the
time
of implementation from
the
valuation
identified by
the
parties and
the
judge at
trial.
Commensurately,
the
level of
the
pension
credit may also be quite different. Often
this
will not matter
very
much as
the
use of a percentage figure in
the
order
will ensure
that
both parties will
share
proportionately in any increase or decrease in
the
value.
Especially if
the
percentage of
the
pension
sharing
order
to
be executed is not
very
far away from 50% and
the
movements in
value
are relatively modest market fluctuations
then
little injustice will be done by
the
moving
target,
a fact observed by Baron J in H
v
H (Financial Relief:
Pensions)
[2010] 2 FLR 173 on
the
facts of
that
case.
There
may, however, be cases where significant injustice might be done by a moving
target.
It may be
that
some event, such as a significant drawdown from
the
fund
[5], or a pay rise or fall for a member spouse holding a defined benefit
scheme,
between
the
date of
the
valuation
and
the
date of
the
court hearing, which undermines
the
reliability of
the
CE used at court.
The
problem is
the
same for events which occur between
the
date of a hearing and
the
date an
order
is approved if, for example,
the
judge reserves judgment for a lengthy period
[6].
The
same applies in
the
period between
the
order
being made and its
taking
effect. In some cases changes occurring between
the
date of
the
order
taking
effect and its implementation can also cause a similar difficulty; but it should be remembered
that
the
rights which are
valued
are
those
which
the
member spouse has at
the
date
the
order
‘
takes
effect’
[7], also known as “
transfer
day”
[8], so changes occurring at
this
point are less likely
to
make a significant difference.
There
are cases, however, where
there
might be significant differences. For example,
there
might be a significant change in market conditions or
valuation
methodology
[9] in
the
course of
the
process of making and implementing a
pension
sharing
order”.
44. I now
turn
to
the
procedures involved when a
pension
fund against which a
pension
sharing
order
is
to
be made, or has been made, declares itself
to
be
underfunded.
A
pension
is
underfunded
if it has insufficient funds
to
meet in full its obligation
to
all members of
the
scheme
href="#_ftn10" name="_ftnref10"
title="">
[10]. If
the
scheme
is
underfunded
the
pension
trustees
must decide if
they
wish
to
pay out only reduced CEs on external
transfers
from
the
fund -
they
may accordingly announce a reduction proportionate
to
the
level of
underfunding
in
the
scheme
href="#_ftn11" name="_ftnref11"
title="">
[11].
The
trustees
of
the
scheme
are not obliged
to
reduce CEs where
the
scheme
is
underfunded
-
they
will wish
to
consider issues such as
the
level of
underfunding,
the
strength of employer’s covenants and any recovery plans
that
may be in place
to
decide if such a step is necessary. If
they
are offering only reduced CEs on external
transfers,
however,
this
will have implications for what
they
must offer a non-member spouse in relation
to
the
implementation of a
pension
sharing
order.
In contrast
to
most other situations,
the
pension
provider cannot insist on an external
transfer
if
the
pension
credit offered is based on a reduced CE.
The
pension
provider must first offer
the
non-member spouse an internal
transfer
using
the
full
value
of
the
member spouse’s CE (i.e. without applying any reduction of
the
member spouse’s CE attributable
to
the
underfunding)
href="#_ftn12" name="_ftnref12"
title="">
[12]. In many cases
this
will be
the
solution preferred by
the
non-member spouse; but if, having received
this
offer,
the
non-member spouse would prefer an external
transfer
then,
provided a full explanation is given by
the
pension
provider as
to
the
reasons for
the
underfunding
and of
the
likely
timescale
for
the
elimination of
the
underfunding,
the
pension
provider may offer an external
transfer
on
the
basis
that
the
member spouse’s CE used in
the
calculation will be reduced proportionately with
the
extent of
the
underfunding
href="#_ftn13" name="_ftnref13"
title="">
[13]. In such circumstances
the
percentage
pension
share
will be implemented against a reduced CE.
Legal
tests
to
be applied in dealing with an application for a
variation
of a
pension
sharing
order
under Matrimonial Causes Act 1973, section 31.
45. It is undoubtedly
the
case
that
a
pension
sharing
order
can (in limited circumstances) be
varied
by
the
court under Matrimonial Causes Act 1973, section 31(2)(g).
The
limited circumstances are, in particular,
that
the
application
to
vary
must have been made before
the
pension
sharing
order
took
effect and before Decree Absolute has been pronounced: see Matrimonial Causes Act 1973, section 31(4A)(a).
46. Duckworth on Matrimonial Property and Finance has suggested
that
this
provision is not really
targeted
at cases involving other
than
those
involving
trivial
tinkering
with
the
wording of a
pension
sharing annex:-
“For reasons which are obscure, Parliament
thought
it necessary
to
confer
the
right
to
apply for
variation
of a
pension
sharing
order
before decree absolute. Since a
pension
sharing
order
made on decree nisi cannot, in any case,
take
effect until
the
decree has
been made absolute,
the
intention appears
to
be
to
allow
the
parties
to
come back
to
court
to
tinker
with
the
wording of
the
order
(perhaps, as a result of representations
made by
the
pension
managers). But
this
can equally well be achieved under
the
slip
rule. It is difficult
to
see
these
provisions being much used in practice.
47. In similar
vein,
Hay, Hess, Lockett and
Taylor
on
Pensions
on Divorce: A Practitioner’s Handbook (3rd edition at p.62) has suggested
that
“Appropriate applications under
this
section will be
very
rare beasts indeed”. Indeed, as far as I and Counsel in
the
present case are aware,
there
are no reported cases on such an application and I cannot personally recall coming across one before.
The
reason for
this
is perhaps obvious -
the
likelihood of circumstances arising between a final
order
being made and
the
pension
sharing
order
taking
effect (normally a period of no more
than
28 days)
to
justify a substantive
variation
in
the
order
must be
very
small.
48. Nonetheless,
the
power exists and
the
husband in
this
case invites
the
court
to
use it, so it is necessary
to
consider what sort of legal
test
should apply
to
such an application where it is made in relation
to
something not just in
the
nature of a
tinkering
with
the
wording of an
order.
49. Mr George has addressed me
very
fully and
very
helpfully on
this
topic
and I
think
there
is a great deal of force in his submissions.
50.
The
starting point is and should be Matrimonial Causes Act 1973, section 31(7), which reads:-
“In exercising
the
powers conferred by
this
section
the
court shall 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, and
the
circumstances of
the
case shall include any change in any of
the
matters
to
which
the
court was required
to
have regard when making
the
order
to
which
the
application relates”.
51. But
that
is only
the
starting point and I
think
Mr George is correct
to
suggest
that
the
court will be assisted by placing a
pension
sharing
order
variation
alongside other instances where
variation
of capital
orders
is involved.
52.
This
thought
leads me rapidly
to
the
decision of Bodey J, sitting in
the
Court of Appeal, in Westbury
v
Sampson [2002] 1 FLR 166.
This
case involved a consideration of
the
circumstances when a lump sum by instalments can be
varied
by
the
court under Matrimonial Causes Act 1973, section 31. He said (my emphasis included):-
“Nevertheless, given
the
constant emphasis in
the
authorities generally on
the
need
to
uphold
the
finality of
orders
intended
to
be final, including
orders
as
to
capital, it seems
to
me
that
very
similar considerations ought in practice
to
be applied under s 31 as
those
laid down in Barder
v
Caluori [1988] AC 20, sub nom Barder
v
Barder (Caluori Intervening) [1987] 2 FLR 480, at any rate as regards
varying
the
overall quantum of a lump sum
order
by instalments (as distinct from re-
timing
or 're-calibrating'
the
instalments).
The
re-opening under s 31 of
the
overall quantum of lump sum
orders
by instalments, especially when made as part of a package intended
to
be final…should only be countenanced when
the
anticipated circumstances have changed
very
significantly, and/or for cogent reasons rendering it quite unjust or impracticable
to
hold
the
payer
to
the
overall quantum of
the
order
originally made.
This
formulation gives a little more latitude as regards s 31 of
the
Matrimonial Causes Act 1973
than
do
the
Barder conditions for
the
grant of leave
to
appeal out of
time;
but
that
must I
think
follow from
the
statutory requirement under s 31(7)
that
the
court is
to
consider 'all
the
circumstances'.”
53.
This
decision received obiter approval from
the
Supreme Court per Lord Wilson in Birch
v
Birch [2017] UKSC 53:-
“It is worthwhile
to
note
that
an
order
for payment of a lump sum is occasionally
variable
even if, as is likely,
the
variation
will directly prejudice
the
interests of
the
payee.
Thus
section 31(2)(d) of
the
Act expressly empowers
the
court
to
vary
an
order
for payment of a lump sum by instalments. In
the
words of Bodey J (with whom Schiemann and Sedley LJJ agreed) in Westbury
v
Sampson [2001] EWCA Civ 407, [2002] 1 FLR 166, at para 18,
the
subsection "not only empowers
the
court
to
re-
timetable
/ adjust
the
amounts of individual instalments, but also
to
vary,
suspend or discharge
the
principal sum itself, provided always
that
this
latter power is used particularly sparingly, given
the
importance of finality in matters of capital provision"”
54.
The
Westbury
v
Sampson; Birch
v
Birch approach leaves
variation
of
the
overall quantum as a
viable
option in only a
very
few cases; but in his
very
recent decision of BT
v
CU [
2021]
EWFC
87 Mostyn J has doubted
the
correctness of even
the
modest liberality in Bodey J’s judgment, suggesting
that
the
furthest a court should go under Matrimonial Causes Act 1973, section 31, is a “recalibration of
the
payment schedule” and
that
the
original
order
“is not
variable
as
to
overall quantum” and
that
the
only way of changing
the
overall quantum is
to
satisfy all
the
Barder conditions. If
this
analogy is applied
to
pension
sharing
order
variation
provisions, it is difficult
to
see how a
variation
to
the
pension
sharing
order
percentage could be contemplated under Matrimonial Causes Act 1973, section 31. Nobody has argued, nobody could credibly argue,
that
the
Barder conditions are met in
the
present case.
55. For
the
purposes of
this
judgment I propose
to
adopt
the
really quite strict Bodey J approach
to
capital
variations
(as opposed
to
the
even stricter
test
suggested by Mostyn J) and record
that
in my
view
the
husband can only succeed in his application
to
vary
downwards
the
pension
sharing
order
percentage if he can establish
that
“
the
anticipated circumstances have changed
very
significantly, and/or for cogent reasons rendering it quite unjust or impracticable
to
hold
the
payer
to
the
overall quantum of
the
order
originally made”.
ANALYSIS OF
THE
FACTS OF
THIS
CASE
AGAINST
THESE
LEGAL PRINCIPLES
56. Having noted all
these
matters, I now
turn
to
my observations on how I should analyse
the
facts of
the
case against
these
criteria and what
orders
I should now make on
the
variation
application.
57. I start by saying something about
the
“
property and other financial resources which each of
the
parties
to
the
marriage has or is likely
to
have in
the
foreseeable future
” and
the
income and earning capacity of
the
parties and
the
changes
to
both
these
things
this
since 2015/2016.
58.
In fact I need say little about
this
because
things
have progressed since 2015/2016 in a way which was broadly predicted by DJ
Thomas
in his 2015 judgment.
The
wife has carried on similar work, earning perhaps a little more
than
she did
then,
but she is broadly in
the
same place. She lives in
the
same home,
the
value
of which has no doubt moved in line with normal house price changes over
the
time.
Likewise,
the
husband has carried on similar work, earning perhaps a little more
than
he did
then,
and although he has moved his employment from Company X
to
Company Y, he is broadly in
the
same position. He also lives in
the
same home as he did,
the
value
of which has moved in line with normal house price changes over
the
time.
He has acquired a new domestic partner and a second property, but his overall position is not
very
different.
The
simple fact is
that
nothing
very
remarkable has happened since 2015/2016.
59. In relation
to
the
“financial needs, obligations and responsibilities which each of
the
parties
to
the
marriage has or
is likely
to
have in
the
foreseeable future
” and
the
changes
to
these
since 2015/2016, again, nothing is
very
different from what it was when assessed by DJ
Thomas
in 2015.
60.
The
case must,
therefore,
stand or fall on
the
issue of
the
change in
the
CE of
the
husband’s
pension
from
the
figure used by DJ
Thomas
at
the
hearing in 2015 (£826,125) and
the
most up
to
date figure (£2,471,833 -
though
this
will no doubt change again when a revaluation is carried out during
the
implementation period which will, I hope, start soon).
61.
To
my mind
there
are
three
powerful reasons why
this
change in CE does not justify any
variation
in
the
percentage figure
to
be included in
the
pension
sharing annex, gets nowhere near passing
the
Bodey J
test
to
which I have referred above and would even fail a much lower
test.
They
are
the
following:-
(i)
The
approach
taken
by Ms Hussey QC on behalf of
the
husband seems
to
me
to
involve a fundamental misunderstanding of what
the
CE of a defined benefit
pension
fund represents.
The
CE of a defined benefit
pension
fund is an actuarially calculated figure which seeks
to
establish what sum of money would be needed
to
invest
to
produce
the
income benefits which
the
fund is obliged
to
meet for a set period, i.e.
the
remainder of
the
recipient’s actuarially predicted life span. As market conditions change and gilt yields change (as
they
appear
to
have done between 2015 and
2021
on
the
evidence I have from LCP) more money will need
to
be invested
to
produce
the
same income benefits.
The
income benefits rise with inflation, but
the
money needed
to
produce
that
income stream for a prolonged period may rise by substantially more
than
inflation, as it has done in
this
instance. By suggesting
that
the
wife should have her entitlements fixed now at
the
cash sum contemplated in 2015, even if
the
cash sum is given some inflationary growth,
the
husband is
to
my mind ignoring
the
fact
that
that
cash sum will, as a result of
the
very
changes in market conditions and gilt yields which have driven
the
increased CE, purchase commensurately lower income benefits
than
they
would have done had
the
pension
credit been
transferred
in 2016.
To
my mind a
variation
of
the
nature sought by
the
husband on
the
argued basis from 40%
to
17% would be
very
unfair
to
the
wife for similar reasons as
those
firmly, and in my
view
correctly, set out by Baron J in H
v
H [2010] 2 FLR 173
.
(ii)
The
approach
taken
by Ms Hussey QC on behalf of
the
husband seems
to
me
to
ignore
the
fact
that,
in so far as having a higher CE is a windfall benefit (and, for
the
reasons explained above,
this
can be illusory if one
views
a
pension
as an income producing asset)
the
husband has had an even greater windfall in
that
his residual 60% of
the
fund has gone up in
value
by even more (1.5
times)
than
the
wife’s 40% portion of
the
fund. If we remind ourselves of
the
broad approach of DJ
Thomas
to
the
division of assets, which was
to
include
the
CEs in
the
asset schedule and step back
to
see what justifications exist for a departure from overall equality, whilst
the
wife’s overall asset figure is undoubtedly higher as a result in
the
growth of
the
CE,
the
husband’s overall asset figure is even more increased. Following
the
logic of DJ
Thomas
takes
us down a road
to
the
conclusion
that
no injustice is done
to
the
husband
to
hold him
to
the
40% figure.
(iii)
The
reasons
that
the
pension
sharing
order
has not
taken
effect since it was first made in
the
judgment of DJ
Thomas
on 30
th
September 2015 are simply
these.
First,
there
was no Decree Absolute until 22nd December 2017.
The
husband could have applied for a Decree Absolute at any
time
after 30
th
September 2015, yet he did not, even
though
he was
the
petitioner on
the
divorce. Indeed, when
the
wife applied in September 2017 for a Decree Absolute
to
be made, he actively blocked it until December 2017. Secondly, on 21st November 2017 (just prior
to
Decree Absolute)
the
husband made a
variation
application and
triggered
the
effect of Matrimonial Causes Act 1973, section 31(4A)(b). Overall, it seems
to
me
that
it is predominantly
the
husband’s actions which have prevented
the
pension
sharing
order
taking
effect for more
than
six years. By doing
this
he has left open
the
possibility of moving
target
syndrome more
than
in most cases and if he feels he has lost out by it
then
he is
very
substantially
the
author of his own misfortune.
62.
In my
view
the
husband’s application was hopeless from
the
outset. I accept
that
part of
the
original reasoning for making
the
variation
application was
to
block or counter
the
wife’s misconceived application of 15
th
July 2017, but
the
proper response
to
that
at
the
beginning would have been
to
resist it and point out
the
availability of
the
internal
transfer
rights which she had at
that
time
and really dealt with her problem.
The
proper response after 13
th
April 2018 (when
the
Company X
pension
fund ceased paying out reduced CEs, a fact of which
the
husband was aware) would have been
to
inform
the
wife
that
there
was no longer a problem and invite her
to
withdraw her application.
63.
Accordingly, I propose
to
dismiss
the
husband’s application dated 21st November 2017 for a
variation
of
the
pension
sharing
order.
In so far as it still exists (and I
think
it
technically
does) I propose also
to
dismiss
the
wife’s declaration application dated 15
th
July 2017.
COSTS
64.
It is common ground between
the
parties
that
this
application is one where FPR 2010 Rule 28.3 (5)
to
(8) apply.
They
reads as follows:-
“(5) Subject
to
paragraph (6),
the
general rule in financial remedy proceedings is
that
the
court will not make an
order
requiring one party
to
pay
the
costs of another party.
(6)
The court may make an
order
requiring one party
to
pay
the
costs of another party at any stage of
the
proceedings where it considers it appropriate
to
do so because of
the
conduct of a party in relation
to
the
proceedings (whether before or during
them).
(7)
In deciding what
order
(if any)
to
make under paragraph (6),
the
court must have regard
to
–
(a)
any failure by a party
to
comply with
these
rules, any
order
of
the
court or any practice direction which
the
court considers relevant;
(b)
any open offer
to
settle made by a party;
(c)
whether it was reasonable for a party
to
raise, pursue or contest a particular allegation or issue;
(d)
the manner in which a party has pursued or responded
to
the
application or a particular allegation or issue;
(e)
any other aspect of a party's conduct in relation
to
proceedings which
the
court considers relevant; and
(f)
the financial effect on
the
parties of any costs
order.
(8)
No offer
to
settle which is not an open offer
to
settle is admissible at any stage of
the
proceedings, except as provided by rule 9.17”.
65. Mr George on behalf of
the
wife has invited me
to
conclude
that
this
is a case where I should make an inter partes costs
order
under FPR 2010 Rule 28.3(6).
66. In
this
context I remind myself of FPR 2010 PD 28A, paragraph 4.4:-
“In considering
the
conduct of
the
parties for
the
purposes of rule 28.3(6) and (7) (including any open offers
to
settle),
the
court will have regard
to
the
obligation of
the
parties
to
help
the
court
to
further
the
overriding objective (see rules 1.1 and 1.3) and will
take
into account
the
nature, importance and complexity of
the
issues in
the
case.
This
may be of particular significance in applications for
variation
orders
and interim
variation
orders
or other cases where
there
is a risk of
the
costs becoming disproportionate
to
the
amounts in dispute.
The
court will
take
a broad
view
of conduct for
the
purposes of
this
rule and will generally conclude
that
to
refuse openly
to
negotiate reasonably and responsibly will amount
to
conduct in respect of which
the
court will consider making an
order
for costs.”
67. I also remind myself of
the
words of Mostyn J in OG
v
AG [2020]
EWFC
52:-
“
The
revised para 4.4 of FPR PD28A is extremely important. It requires
the
parties
to
negotiate openly in a reasonable way… and so,
the
wife will herself suffer a penalty in costs for adopting such an unreasonable approach…It is important
that
I enunciate
this
principle loud and clear: if, once
the
financial landscape is clear, you do not openly negotiate reasonably,
then
you will likely suffer a penalty in costs.
This
applies whether
the
case is big or small, or whether it is being decided by reference
to
needs or sharing.”
68. In my
view
this
is a clear case where
the
husband has
taken
an unreasonable
view
of
the
case from
the
outset and has pursued it
to
the
bitter end. I have rejected his case and he has entirely lost. In my
view
he has failed
to
negotiate openly in a reasonable way and, by pursuing
the
variation
application he has placed himself firmly in at least one of
the
categories identified in FPR 2010 Rule 28.3(7) (
whether it was reasonable for a party
to
raise, pursue or contest a particular allegation or issue).
69. I
therefore
propose
to
make a costs
order
against
the
husband. I propose
to
make a summary assessment of
this
costs
order.
Mr George has invited me
to
assess
this
figure at
the
full amount of costs incurred by
the
wife, i.e. £130,487. It is, I
think,
fair
to
make a deduction
to
reflect
the
fact
that
the
original context of
the
husband’s application was against
the
wife’s misconceived application of 15
th
July 2017; but
this
provides an excuse only up
to
a point. In
the
circumstances, and
taking
a fairly broad
view,
but having firmly in my mind
the
open offers made by
the
wife in May
2021
and September
2021
and
the
husband’s open position as articulated in
the
July
2021
statement of case (which was really his position
throughout)
I have decided
to
make a costs
order
requiring
the
husband
to
pay £100,000
towards
the
wife’s costs of
this
application.
70. It is common ground
that
the
sum of £5,000 has been paid on account and so £95,000 remains
to
be paid.
The
husband has sought
time
to
pay - he suggests a first
tranche
of £30,000 on 9
th
December
2021
with
the
remaining £65,000 payable by 9
th
June 2022 with interest running at 4% from 9
th
December
2021.
The
wife does not agree and seeks
the
whole amount within 14 days with interest in default at
the
court judgment debt rate. I have considered both sides of
this
argument, but in
the
end have decided
to
make an
order
that
the
whole amount is paid by 9
th
December
2021
with interest in default at
the
court judgment debt rate. In reaching
this
conclusion I have
taken
into account
that
the
husband has c£140,000 in a current account at
the
moment following a bonus of c £100,000 in July
2021
and an inheritance of c£150,000 earlier in
the
year (albeit
that
it is a joint account with his current partner),
that
he owns
two
motor cars (one worth £75,000 and
the
other worth £38,000, albeit under credit agreements),
that
he earns a
very
high salary (at least £400,000 per annum gross) and owns
two
properties (
the
second, in Cornwall, purchased earlier
this
year). I also agree with Mr George
that
it is high
time
that
a line is drawn under
this
seemingly endless litigation.
ORDER
71. I would be grateful if Counsel now draft an
order
to
this
effect and which makes it clear
that
the
objections
to
the
original
pension
sharing
order
finally
taking
effect have gone. It is high
time
that
this
pension
sharing
order
takes
effect and is implemented.
72.
There
has been a subsidiary rumbling dispute about whether or not
the
other mechanical prerequisites
to
the
implementation of a
pension
sharing
order
have been completed and I would like
to
nail
this
down when we meet formally
to
hand down
this
judgment (although
the
parties will have seen it electronically beforehand).
73. I propose
to
publish a redacted and anonymised
version
of
this
judgment on BAILII.
POST-SCRIPT
74.
The
facts of
this
case directly give rise
to
an issue which is highlighted in
the
PAG Report of July 2019
[14], but which has not I
think
had much public profile in
the
period since
then
-
the
ticking
of
the
external
transfer
box in paragraph F of
the
pension
sharing annex. Readers of
the
PAG Report have
to
be assiduous enough
to
reach Appendix
V,
paragraphs 41
to
44,
to
find
this
narrative, but it reads as follows:-
“
V41.
Consideration should be given
to
the
removal of discretionary section F. It requires either
the
lawyer or
the
non-member spouse
to
tick
the
box
to
inform
the
pension
scheme
whether, upon
the
making of
the
Pension
Sharing
Order,
the
non-member spouse (
transferee)
receives an internal or an external
transfer,
where both options are available. Given
the
complexity of
this
issue,
the
availability of internal
transfer
options generally and
the
pension
scheme’s
legal obligation
to
offer an internal
transfer
if a
scheme
reduction factor is imposed, which could be after
the
annex has been sent
to
the
court for approval,
then
the
non-member spouse couldn’
t
possibly be in an informed position
to
make
this
decision, nor could
their
lawyers without breaking
the
law.
V.42
There
is an FCA dispensation for regulated Financial Advisers dealing with
Pension
Sharing
Orders
where
schemes
insist on an ‘external
transfer
only’ option in
that
the
Pension
Sharing
Order
transfer
is not deemed a regulated
transfer.
However, where an internal
transfer
option is available
then
the
full, regulated
transfer
advice rules apply with
the
adviser first having
to
undertake an analysis of
the
client’s options and compare
these
with
the
benefits being given up.
V.43
If a family lawyer
ticks
the
external or internal
transfer
box on behalf of
their
client
then
they
may inadvertently give regulated
transfer
advice, which
they
are not authorised
to
do. Family Lawyers would be well advised in
the
meantime not
to
tick
either boxes in section F
to
avoid
that
trap.
V.44
The
situation could in any event have changed by
the
time
the
Pension
Sharing
Order
takes
effect and
the
implementation commences. At
this
point a regulated Financial Adviser is likely
to
be involved who would need
to
check
the
options available at
the
point of advice. It is suggested
this
section is removed from
the
annex as
this
is not
the
time
to
be making
that
decision.”
75. In
the
present case
the
letter from
the
pension
administrators dated 2nd August 2016 (albeit written before
the
PAG report, but I understand
these
letters are still being written) appeared
to
require
the
wife
to
tick
the
external
transfer
box, even
though
at
that
stage
there
was no choice
to
make because (legitimately) only external
transfers
were on offer. Her lawyers obediently
ticked
the
box, probably not understanding why
they
did not need
to.
76. In
the
present case
the
pension
administrators were only offering reduced CEs from 5
th
December 2016 onwards, yet
they
did nothing
to
draw
the
wife’s attention
to
this
change and in particular
to
the
crucial fact
that
this
change meant
that
she did now after all have
the
option of an internal
transfer.
This
seems
to
be exactly
the
sort of case envisaged by paragraph
V44
above.
77. Although in
the
present case
the
pension
sharing
order
did not
take
effect during
the
period
that
reduced CEs were being paid out, and so
the
potentially direct harm of an external
transfer
in
this
period did not actually occur, it is not clear what would have happened if
the
pension
sharing
order
had
taken
effect in
the
course of 2017. Might
the
pension
administrators have simply implemented
the
pension
sharing
order
on
the
strength of
the
external
transfer
box
ticked
in different circumstances in 2016? Would
the
wife have actually been offered an internal
transfer,
as was her legal right? It is not at all clear what would have happened and
there
does seem
to
be something of a lacuna in
the
regulatory obligations
to
a
transferee
in
the
position of
the
wife in
this
situation.
78. Of course some of
these
dangers could have been avoided if
the
wife’s lawyers had properly understood
these
matters, but
this
case involves an instance where
the
lawyers did not properly understand
the
issue and, as a direct result of
this
lack of understanding, embarked on
the
course which has
triggered
the
husband’s counter-application and which has done so much damage
to
this
family.
79.
The
PAG Report suggested
that
paragraph F should be removed from
the
standard
pension
sharing annex Form P1.
This
has not yet happened.
80. In
the
meantime
the
PAG Report gave
the
warning: “Family Lawyers would be well advised in
the
meantime not
to
tick
either boxes in section F”.
81. In my
view
these
recommendations are given extra force by
the
facts of
the
present case.
His Honour Judge Edward Hess
Central Family Court
[1] I want
to
give a full attribution
to
Mr Paul Cobley of Oak Barn Financial Planning who produced
this
helpful illustration and has given permission
to
me
to
use it in
this
judgment.
[6] See, for example, Staley
v
Marlborough Investment Management Limited Retirement
Scheme
(2012) 31 July, ref 81482/2, where
the
judgment was reserved between 28 July and 24 October and
the
order
approved on 20 November
[7] See Slattery
v
Cabinet Office (Civil Service
Pensions)
and Another [2009] 1 FLR 1365
[9] See, for example, Crabtree
v
BAE Systems Executive
Pension
Scheme
(2008) 19 May, ref S00522, and Culverwell
v
Teachers’
Pension
Scheme
(2012) 13 November, ref 82981/3
[10] Occupational
Pension
Schemes
(
Transfer
Value)
Regulations 1996 regulation 8 and schedules 1 and 1A as substituted by Occupational
Pension
Schemes
(
Transfer
Value)
(Amendment) Regulations 2008, regulation 4 and schedule1.
[11] Welfare Reform and
Pensions
Act 1999, schedule 5, paragraph 8 and
The
Pension
Sharing (Implementation and Discharge of Liability) Regulations 2000, SI 2000/1053, regulation 16
[12] Welfare Reform and
Pensions
Act 1999, schedule 5, paragraph 1(2) and
The
Pension
Sharing (Implementation and Discharge of Liability) Regulations 2000, SI 2000/1053, regulation 16