Tuesday, May 24, 2011

Whaley v Whaley: The proper question

Whaley v Whaley [2011] EWCA Civ 617 involved a husband's appeal against an ancillary relief order made by Mrs Justice Baron.

Facts: The parties were married in 1987 and separated in 2008. Since the separation, the husband has continued to be based in Spain and the wife in England. There are four children, whose ages range from 12 to 20.

Mrs Justice Baron found that the resources available to the parties amounted to £10.4 million. Nearly £7 million of this was made up of assets in two trusts in which the husband had an interest, the 'Farah Trust' and the 'Yearling Trust', the judge having accepted the wife's case that they should be seen as resources likely to be available to the husband. The non-trust assets had a value of nearly £4 million net (of which just over £1 million worth was in the wife's name), from which the judge deducted £500,000 for future school fees.

The judge ordered the husband to pay to the wife a lump sum of nearly £3 million, leaving her with some 36% of the net assets. The lump sum was payable by the 27th May 2011. Until payment the husband was to make periodical payments to the wife at the rate of £40,000 per annum, and thereafter there would be a clean break. The husband was also ordered to pay maintenance for the children, and to pay their school, college and university fees.

The husband appealed on the basis that:

1. The judge had been wrong in her treatment of the trust assets. The order could not be satisfied without the husband having recourse to trust assets, thereby putting "improper pressure" on the trustees of the Farah Trust which would require them to realise assets in order to make a payment to someone (the wife) who was not a beneficiary of the trust, in a way that would represent a departure from the previous history of dealings between the trust and the husband. Further, the Yearling Trust (of which the husband was not a beneficiary) should have been left out of account altogether.

2. The judge had made errors in her calculation of the value of certain assets.

3. Her approach to division of the assets was over-generous to the wife, as she failed to give sufficient weight to certain matters, including the "inherited and/or quasi inherited nature of the trust assets", the fact that the husband had acquired certain property before the marriage and the husband's needs generally.

4. The judge was wrong in ordering him to pay the school fees (which had always been paid by either the trust or the husband's brother) and in respect of the quantum of the periodical payments orders in favour of both the wife and the children.

Held: In her leading judgment Lady Justice Black dealt with those four arguments as follows:

1. The appropriate question had been set out by Wilson LJ in Charman (para 13):
"In principle, however, in the light of s. 25(2)(a) of the 1973 Act, the question is surely whether the trustee would be likely to advance the capital immediately or in the foreseeable future."

She concluded (at paragraph 55): "The judge having asked herself the proper question and arrived at the unassailable answer that the trustees were likely to make available such resources as the husband requests, it seems to me that [counsel for the husband] has no grounds to complain of improper pressure".

Similarly, in respect of the Yearling Trust the judge had found that the assets in the trust were likely to be made available to the husband by the trustees (paragraph 57).

2. Without going into detail, Lady Justice Black found (at paragraph 72): "that none of the grounds of appeal relating to the inclusion/valuation of assets succeed. No adjustment is required to the figures that the judge took as the basis for her determination and which can be found set out at the start of this judgment."

3. The judge had clearly recognised that there were factors in the case which justified a departure from equality. Lady Justice Black examined the arguments put forward by the husband's counsel and concluded that Mrs Justice Baron's decision was within the boundaries of her discretion:
"The precise weight to be given to that factor in an individual case is very much a matter for the discretion of the trial judge, however, and, to my mind, it has not been shown that the judge's division of the assets in this marriage of significant length failed to give due regard to the source of the assets or that she arrived at a decision which was outside the band of decisions that were open to her on these facts." (Paragraph 88)

4. Counsel for the husband contended that it was wrong of the judge to order the husband himself to pay the school fees, as opposed to accepting his undertaking to "use his best endeavours to procure the continuation of their payment", but Lady Justice Black could see no reason why the judge should not have made the order she did. She also did not accept any of the husband's arguments as to the quantum of the periodical payments orders, including an argument that the judge had failed to make proper allowance for the contribution that the wife's new partner should be making to her household.

Accordingly, the appeal was dismissed.

Lewison J and Mummery LJ gave concurring judgments.

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