Ancillary relief – Error of fact – Lump sum payments – Periodical payments – Transfer of assets – Acquisition of capital after marriage

Paul Fallon v Ruth Fallon: CA (Civ Div) (Lords Justice Thorpe, Lawrence Collins, Goldring): 20 November 2008.

The appellant husband (H) appealed against a decision of the judge in ancillary relief proceedings brought by the respondent wife (W).

Following their marriage, H and W had occupied H’s local authority flat. H acquired the right to buy it shortly afterwards. The parties lived together and had two children, but separated four years later. H remained in the property and exercised his right to buy. He then sold it at an advantageous figure which, with a family loan, he used to buy another property. W was re-housed in local authority accommodation. In due course, W issued an application for ancillary relief.

The district judge ordered H to: (i) transfer an endowment policy to W; (ii) pay her a lump sum of £75,000; (iii) make nominal periodical payments. H appealed, and it was accepted that the case had proceeded before the district judge on a general mistake of fact, namely that W had the right to buy 25% of the equity in her secured tenancy for a payment of £63,500. On appeal, the judge stated that he was spared from the exercise required by section 25 of the Matrimonial Causes Act 1973, as the district judge was experienced and careful and had reached her decision after a long trial. He confirmed the district judge’s provisions, save for introducing a mechanism for H to reduce the lump sum to £60,000 if he chose to sell his home rather than to mortgage it.

Held: (1) In reaching his decision, the judge had made a fundamental error. It had not been appropriate for him to bolster his hesitation in applying section 25 of the act by reliance on the fact that there had been a long trial by an experienced judge. That approach was simply erroneous in circumstances where the district judge’s quantification of the lump sum had been as a result of a general mistake of fact. The foundation for the quantification was thereby destroyed and the judge ought to have looked at the case in the round and asked himself what was fair as between H and W. His failure to consider that question resulted in an elemental failure of the appeal process and his decision had, accordingly, to be set aside.

(2) It was appropriate for the court to approach quantification of the lump sum afresh. The court, under section 25, had regard to the available assets, the parties’ respective needs, their ages, the brevity of the marriage and the contributions that had been made. The case was unusual in its facts in that H’s acquisition of capital had not been realised until after the marriage had ended. It was clear that a clean break was appropriate and the order for provision of periodical payments was struck out. Further, the endowment policy should not have been transferred from H to W as that had resulted in the inflation of H’s contribution to 30% of his assets. That was plainly excessive, given the short duration of the marriage and the fact that H needed the policy to secure the borrowing necessary to discharge the lump sum that would be payable. In all the circumstances, the appropriate lump sum to be awarded to W was £40,000. Appeal allowed.

Michael Horton (instructed by Bar Pro Bono Unit) for the appellant; More O’Ferrall (instructed by Gillian Radford & Co) for the respondent.