Family

Family proceedings - Orders in family proceedings - Financial provision

V v V: Fam Div (Mr Justice Charles): 21 December 2011

In October 2002, the husband and the wife started living together. In April 2003, they became engaged and shortly thereafter their first child was born. The wife wanted to marry and the husband agreed, but he requested that they enter into a pre-nuptial agreement.

In May 2008, the parties separated. The wife remained in the matrimonial home (a rented flat) and continued to look after the children. In September 2009, the husband, who had been made redundant from his previous job, secured new employment in Milan at a salary significantly below his rate of remuneration in his previous job. The total capital of the assets of both parties came to £1,289,347. Nearly 90% of that was in the husband’s name. In February 2011, the wife was awarded: (i) a lump sum of £667,100 which, with the assets in her name, gave her a capital of £800,000 (rounded); and (ii) periodical payments of £30,000, payable until remarriage or further order of the court. In reaching her decision, the judge found that she could give only limited weight to the marriage settlement.

The judge excluded from the award a charge back in favour of the husband on the property to be purchased by the wife with the lump sum award, on the basis that there was a possibility that the husband would be able to obtain better paid employment. The husband appealed.

The husband submitted that the judge had erred by not ordering that there should have been a charge back in favour of the husband over the home to be bought applying the lump sum. Consideration was given to the approach taken by the judge to sharing and contributions when exercising the statutory discretion under section 25 of the Matrimonial Causes Act 1973 (the section 25 exercise). Further considerati­on was given to the principles set out in Granatino v Radmacher [2011] 1 All ER 373.

In exercising its statutory discretion to determine the matter instead of remitting it to the original court, consideration was given to the rationales (needs, sharing and compensation) identified in White v White [2001] 1 All ER 1 and the rationale of autonomy set out in Granatino. The appeal would be allowed.

Giving effect to the majority judgment in Granatino, a nuptial agreement and its effect on an award could not be looked at in isolation. Its impact on the result suggested by one of the rationales (namely sharing) could have an impact on the overall result. Therefore, the court should consider: (i) the meaning of, and the existence of any vitiating factors in respect of, the marriage settlement; (ii) its impact on the result suggested by the sharing principle; (iii) its impact on the overall award; and that (iv) at that last stage its primary relevance was on the issue of whether there should be a charge back had been correct (see [43] of the judgment).

Applying the guidance given in Granatino to the facts of the case, on a proper approach in law to the section 25 exercise, the marriage settlement was a factor that should have been given weight to give proper respect to the autonomy of both parties who, on the facts, entered into it honestly, freely and knowingly. Further, in the instant case, the judge had erred in law in her approach to the assessment of the weight to have been given to the marriage settlement and so in reaching her conclusion that it should only have been given little weight in the section 25 exercise.

The judge had adopted a pre-Granatino approach to agreements reached between parties to a marriage relating to their assets and, by so doing, had failed to properly recognise the weight that the Supreme Court had decided should, on the proper approach in law to the section 25 exercise, be given to the autonomy of both parties. Consequently, the approach and reasoning of the judge to the issue of whether there should have been a charge back, and thus to the division of the available assets, had been flawed in law (see [70], [71], [78] of the judgment).

As neither party had requested that the matter be remitted, the court would exercise its statutory discretion in the circumstances as they existed at the time of the instant hearing, rather than as they had existed at the time of the original hearing, using the facts found by the judge, save to the extent that they were flawed in law (see [80] of the judgment).

It was an established principle that, first, the three rationales identified in White were not, and should not be treated as, a statutory test. They provided a rationale for, and so informed the application of, the statutory task to achieve a reasoned and principled award that met the overall criterion of fairness.

Post-Granatino the same approach applied to ‘autonomy’. Second, a nuptial agreement could alter what was a fair award on the proper application of the section 25 exercise. Third, even when a nuptial agreement carried full weight, it was nonetheless only one of the factors to be taken into account, and in line with the application of the sharing and needs rationales when the latter suggested a larger award, if the result suggested by giving effect to a nuptial agreement falls short of the result suggested by the application of the needs rationale, then the criterion of fairness meant that, unless the result suggested by the nuptial agreement altered what would overall have been a fair award if the nuptial agreement had not been made, the nuptial agreement and its impact would not dictate the award, but would be a factor to which appropriate weight should be given in determining how the needs of the payee spouse and any children were to be funded by a combination of an award of capital, periodical payments, pension sharing and so on (see [81] of the judgment).

In the instant case, the judge and the parties had been correct to approach the case as one in which the award to be made had been effectively dictated by an application of the needs rationale. An application of the sharing rationale would not have met the housing needs of the wife and children. That had the result that any application of the sharing principle was only a background factor in the reasoning as to how those needs should have been funded.

Applying Granatino, the marriage settlement had a more direct impact on the allocation of capital resources by reference to the contributions of the parties and the sharing rationale, but the marriage settlement could also have an impact on the overall result and thus how needs were to be funded and covered. In the instant case, absent a finding on the likelihood of the husband being able to make up capital by obtaining better-paid employment, or otherwise, it was wrong in law and manifestly unfair to justify either (a) a higher capital award to the wife than that justified by reference to the marriage settlement, contributions and the sharing rationale; or (b) that there should not be a charge back, by reference to the possibility that the husband would earn more.

On the facts, the central question relating to the funding of the housing need of the wife and children there should be a charge back, coupled with periodical payments. As the purpose of the lump sum had been to enable the wife to buy a home, the charge back should be a percentage of the lump sum, and thus the value of the home bought with it, rather than a fixed sum. (see [82], [94], [95], [96], [97], [99] of the judgment).

Taking into consideration the cost of a property in which the wife could live on her own, compared to the cost of a property in which the wife could live with the children, the charge back should be 33.3% of the lump sum (see [100] of the judgment).

Brent Molyneux for the husband; Jonathan Swift for the wife.