Court of Appeal (Lord Justice Glidewell and Lord Justice Waite) 2 May 1995.
The court, when redistributing the assets of divorced spouses, can have regard to the potential availability of wealth from sources administered by others and may frame financial provision orders in a form which encourages third parties to enhance the means of the maintaining party without putting improper pressure on the third party.
The Court of Appeal dismissed the husband's appeal against a lump sum and periodical payments order made by Judge Heald sitting in the Nottingham County Court.
The husband and wife, aged 43 and 34, were married in 1980. Their two sons, aged 12 and 9, receive private education. The husband is joint managing director of a successful family business. In 1985 the husband became a name at Lloyd's. The spouses separated in 1992. The wife has no capital. The husband's resources include the family home, valued at £250,000 on which a £78,000 mortgage, a bank guarantee covering contingent liabilities to Lloyd's of up to £100,000 and a Lloyd's losses loan of £43,000 are secured. The husband's pension fund has a current value of £394,000 and his shareholding in the company is worth £600,000. The company's policy is to pay relatively modest salaries and to plough back profits. The husband is paid £2,791 net per month.
Judge Heald decided that the husband could provide an alternative security for the Lloyd's liabilities and his income could be increased at minimal cost to the company. He ordered the sale of the family home and payment by the husband to the wife of a lump sum of £158,000 which was to extinguish all capital claims, periodic payments to the wife for the children's maintenance of £1,500 per month, payment of the boys' school fees and payment of the wife's costs.
The husband appealed on the grounds that (1) without evidence of alternative security, the proper lump sum order would have been for the husband to provide £90,000 from the proceeds of sale of the home for the purchase of the wife's new home, on terms that the husband could mortgage the new property up to £80,000 and pay the mortgage instalments, and that (2) the income award was a breach of the principle of self-imposed constraint on which the court normally acted where the interests of third parties were involved.
Peter Duckworth (Bramleys, Nottingham) for the husband; Christopher Wood (Rupert Bear & Co, Nottingham) for the wife.
LORD JUSTICE WAITE said that the discretionary powers conferred on the court by the Matrimonial Causes Act 1973 to redistribute the assets of spouses were almost limitless.
Certain principles emerged. The court was not obliged to limit its orders exclusively to resources of capital or income which were shown actually to exist. Where a spouse enjoyed access to wealth but no absolute entitlement to it, the court would not act in direct invasion of the rights of or usurp the discretion of a third party. The court would not put upon a third party undue pressure to act in a way which would enhance the means of the maintaining spouse.
That did not mean that the court acted in total disregard of the potential availability of wealth from sources owned or administered by others. There would be occasion when it became permissible for a judge deliberately to frame his orders in a form which afforded judicious encouragement to third parties to provide the maintaining spouse with the means to comply with the court's view of the justice of the case.
In the present case, the court was confronted by a husband with immediate liquidity problems but possessing substantial means. With due regard to the demands of finality in a case where the costs had already reached an alarming figure of £80,000, the judge could not be faulted for making the order in respect of both capital and income.
The order involved a powerful inducement to the extended family to come to the husband's help, but that fell within the bounds of judicious encouragement and well short of placing improper pressure on third parties.
LORD JUSTICE GLIDEWELL concurred.
Ying Hui Tan, Barrister