B e f o r e :
LORD JUSTICE BUTLER-SLOSS
and
LORD JUSTICE OTTON
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(Computer Aided Transcript of the Stenograph Notes of
John Larking, Chancery House, Chancery Lane, London WC2
Telephone No: 071 404 7464
Official Shorthand Writers to the Court)
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MR S BUCKHAVEN (instructed by Messrs Sears Tooth, DX 44643, Mayfair) appeared on behalf of the Appellant.
MR T BISHOP (instructed by Messrs Lomasney & Co, 30 Nottingham Place, London W1M 3F1) appeared on behalf of the Respondent.
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HTML VERSION OF JUDGMENT
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LORD JUSTICE BUTLER-SLOSS: This is an appeal by an appellant
(the husband) from the order of Ward J of 21st December 1994 in which he ordered the husband to pay to the respondent, (the wife) a lump sum of £160,000 and periodical payments of £17,500 until the lump sum was paid and thereafter at £15,000 for 5 years.
The husband is aged 48, an Australian and a builder by occupation. According to him, in 1982 he sold his Australian assets and invested the balance, some £400,00 with the Trust Company of a bank in Jersey, Banque Nationale de Paris (BNP). He took the oral advice of Cooper & Lybrand in Jersey. He came to England in 1982 leaving behind his first wife and child. He married in 1982 his second wife by whom he had already had a child. In the same year he met the (respondent) wife who is an interior designer, now aged 49. He became a property developer and engaged the wife to do up a house he bought in the name of his first Jersey company, Whitestone Ltd, with a loan of £32,000 from himself and a loan of £100,000 from BNP. He sold the first house in Connaught Square and remitted the net proceeds of approximately £400,000 to BNP. He set up Portland Holdings Ltd in 1984, incorporated in Liberia which he used to buy and hold paintings, furniture and wine. In 1984, his second Jersey company, Villedean Ltd, was incorporated in Jersey and it bought for £110,000 a property on short lease at 3 Red Lion Yard, Mayfair which was financed by mortgage from BNP. Also in 1984 he set up in England a company, Nationwide Self-Storage Ltd of which he is managing director and which pays his salary. He also set up a Panamanian company, Kiri Holdings SA.
Having begun a relationship with the wife in 1983, the husband married her on the 12th July 1985. The husband in 1985 established a discretionary trust, Samco Settlement, in Jersey with his children and his mother as beneficiaries, not his wife. Shares in Villedean, Kiri Holdings SA and Portland were given to Samco. A further loan of £150,000 was obtained from BNP by Villedean to buy a long lease of 3 Red Lion Yard. The house in Red Lion Yard was placed on the market in 1990 at £950,000. BNP foreclosed and sold it for about £415,000. Villedean ceased to exist and BNP was out of pocket to the extent of about £330,000. The husband appears to have incurred no personal liability in respect of the money owed to BNP. The husband and wife moved to rented accommodation in Swiss Cottage in 1991 and the husband left the wife in February 1992 and set up home with a Miss Lowe who has had two children by him. He continues to work for Nationwide Self-Storage as managing Director.
The husband`s case is that he became unsuccessful in the property market when the property prices fell and that his main company, Villedean, collapsed with considerable debts, that he lost his home and everything else and that he now has no assets other than a picture worth about £10,000, wine and furniture worth a few thousand. He is living on his own, contributing to his two children by Miss Lowe through the Child Support Agency and hoping to go and live with her and the children. He has a legal aid certificate with a nil contribution.
The wife is working as an interior designer. The husband failed to pay the rent on the Swiss Cottage flat and the wife had to leave and is now living in rented accommodation through the kindness of friends. The husband originally paid her maintenance at the rate of £17,500 under a court order of the 16th November 1992. He appealed that order unsuccessfully to Thorpe J but has made few payments since February 1994 and there are substantial arrears. In the Notice of Appeal he accepted that he should make periodical payments at a varying rate of £7,500 a year to be reduced to £5,000 a year.
The main issue before the judge was whether the husband had undisclosed assets from which the judge would be justified in making a lump sum order. The judge did not believe the husband`s account of his asset position and found serious material non-disclosure. The judge found that his evidence was so unreliable that he could not accept it without corroboration in the loosest sense of what he said and drew the conclusion that the husband did not want him to know the truth. He concluded that there were assets available from which he might properly make the lump sum and maintenance orders.
The husband appeals against the making of the lump sum order and asks this court to adjourn the lump sum application generally. He appeals against both the quantum and length of the order for periodical payments and if that order is not reduced he seeks a direction that the wife may not extend the period beyond 5 years.
Lump Sum.
The case for the husband has been put with persuasive force by Mr Holman QC and is based upon the submission that the judge erred in his approach to the failure of the husband to disclose documents and that the judge, in effect, conjured assets out the air by making inferences adverse to the husband unsupported by any evidence. He has asserted that the judge misdirected himself both as to the burden of proof and the standard of proof in a material non-disclosure case, that the burden remained throughout upon the wife and that the standard was a higher one than the standard balance of probabilities, one commensurate with the seriousness of the allegations.
Burden of Proof.
The powers to make orders for financial provision and property adjustment following a divorce are conferred on the judge or district judge solely by statute. The statutory framework is contained within the Matrimonial Causes Act 1973 (see section 25(2)) and the Family Proceedings Rules 1991 (see rule 2:58(3) and rule 2:63). Special considerations apply to the exercise of this discretionary jurisdiction. Although the burden of proof is upon the applicant to prove his or her case, it is for the respondent to the application to provide to the applicant and to the court all the relevant information. As Lord Brandon of Oakbrook said in his speech in Jenkins v Livesey [1985] 1 AC 424, unless a court is provided with correct, complete and up-to-date information on the matters to which, under section 25, it is required to have regard, it cannot lawfully or properly exercise its discretion in the manner ordained by that subsection and each party to an application under the Act owes a duty to the court to make full and frank disclosure of all material facts to the other party and to the court. He said at page 437:-
"This principle of full and frank disclosure in proceedings of this kind has long been recognised and enforced as a matter of practice. The legal basis of that principle, and the justification for it, are to be found in the statutory provisions to which I have referred."
Particular problems arise in cases where one party has deliberately failed or refused to provide the material facts and has concealed from the other party and the court his true financial position. In such a case, J v J [1955] P. 205 Sachs J said at page 227:-
"In cases of this kind, where the duty of disclosure comes to lie upon the husband; where a husband has and his wife has not-detailed knowledge of his complex affairs; where a husband is fully capable of explaining, and has the opportunity to explain, those affairs, and where he seeks to minimise the wife`s claim, that husband can hardly complain if, when he leaves gaps in the court`s knowledge, the court does not draw inferences in his favour. On the contrary, when he leaves a gap in such a state that two alternative inferences may be drawn, the court will normally draw the less favourable inference - especially where it seems likely that his able legal advisers would have hastened to put forward affirmatively any facts, had they existed, establishing the more favourable alternative."
and at page 229:-
"..... it is as well to state expressly something which underlies the procedure by which husbands are required in such proceedings to disclose their means to the court. Whether that disclosure is by affidavit of facts, by affidavit of documents or by evidence on oath (not least when that evidence is led by those representing the husband) the obligation of the husband is to be full, frank and clear in that disclosure. Any shortcomings of the husband from the requisite standard can and normally should be visited at least by the court drawing inferences against the husband on matters the subject of the shortcomings - in so far as such inferences can properly be drawn."
Those passages set out the principles upon which the courts have for over forty years approached the cases in which a spouse (not nowadays necessarily a husband) has been found to have lied and to have been guilty of material non-disclosure of relevant financial information in an ancillary relief application by the other spouse. In many decisions, reported and unreported, judges and district judges have applied those principles and drawn, where appropriate, adverse inferences from the deliberate failure of a party to give the court an accurate and complete picture of his true financial position.
Ward J had those principles well in mind as he considered the right approach to the present facts. He made strong findings of fact adverse to the husband which Mr Holman QC for the husband does not seek to go behind. He said at page 22 of his judgment:-
"In directing myself as to the proper approach I am of the view that a petitioner who brings a claim for ancillary relief assumes the burden of proving that there are the resources available to meet her claim. In my judgment the extravagant lifestyle that was adopted during the marriage up to and after repossession of Red Lion Yard and, not unimportantly, after the breakdown of the marriage leads me to infer that this respondent who had gone to elaborate lengths to preserve his wealth, had the means to support that lifestyle. The evidential burden now falls on him. This is not ordinary civil litigation."
The judge then considered whether the husband had fulfilled his duty of full and frank disclosure and made a crucial finding that he had not done so. In my judgment, Mr Holman`s criticism of the judge is unjustified. Ward J was not displacing the general duty of the applicant to prove her case. She had, in his view, prima facie, discharged that duty and the husband had failed to comply with his obligation of disclosure in the particular circumstances of this type of litigation.
Standard of Proof
Mr Holman asserted the proposition that in cases of material non-disclosure, there is a higher duty of proving the case placed upon the applicant than the standard balance of probabilities. In his submission a court was not justified in drawing inferences adverse to the husband in the absence of evidence of assets and the proof of the existence of those assets was to be sufficient to meet the seriousness of the allegations made against the husband. He argued that the judge drew inferences adverse to the husband upon inadequate facts insufficiently proved and erred in the assumptions that he made based upon an inadequate standard of proof. Although argued most attractively, and with great persuasiveness, Mr Holman was, in my view, arguing against long established practice of trying this, unfortunately not unusual, type of ancillary relief application.
Mr Posnansky QC, for the wife, reminded us of the correct approach to this type of application, where the husband has deliberately failed to disclose his assets. These cases are far removed from the line of cases such as Bater v Bater [1951] P35; Hornal v Neuberger Products Ltd [1957] 1 QB 247; Re W (Minors)(Sexual Abuse: Standard of Proof) [1994] 1 FLR 419 per Balcombe LJ at page 424. In Bater v Bater, an allegation of cruelty by a wife, Denning LJ said at page 37:-
"As Best CJ and many other great judges have said 'in proportion as the crime is enormous, so ought the proof to be clear.` So also in civil cases, the case may be proved by a preponderance of probability, but there may be degrees of probability within that standard. The degree depends on the subject matter. A civil court, when considering a charge of fraud, will naturally require for itself a higher degree of probability than that which it would require when asking if negligence is established. It does not adopt so high a degree as a criminal court, even when it is considering a charge of a criminal nature; but still it does require a degree of probability which is commensurate with the occasion. Likewise a divorce court should require a degree of probability which is proportionate to the subject matter."
This principle applies across the field of civil litigation. It has been applied in family cases in particular to allegations of physical and sexual abuse and abuse of the process of the court. In F v F [1994] 1 FLR 359, Thorpe J found that a husband had obtained a bankruptcy order on his own petition which presented a false picture of his financial circumstances. The judge set aside the bankruptcy order and said at page 366:-
"The finding that I make that the order must be rescinded involves inferentially a finding of deceitful presentation on the part of the husband. ....... The standard is one that augments with the gravity of the finding, so that even on the application of the civil balance of probabilities it is to a high standard that must be satisfied in order to reflect the gravity of the stain on the husband`s integrity. I am certainly satisfied to that standard ...."
Thorpe J then reviewed the financial resources of the husband. In doing so he directed himself:-
"Now, as I approach this operation I make it plain that I am by no means satisfied to that same high standard as to the existence of this or that asset."
I respectfully agree with the distinction drawn by Thorpe J as to the standard of proof required to prove an abuse of the process by improperly obtaining a bankruptcy order and that required to infer the existence and amount of assets which a spouse declines to reveal to the court. The latter, an all too familiar situation in family disputes, is reprehensible but not in the same class of case as the former. The husband in this appeal was not accused of fraud and Ward J evaluated his assets on a balance of probabilities and cannot be faulted for so doing.
The Assets.
Mr Holman criticised the judge for making an order without any evidence that there were assets to meet an order for a lump sum of £160,000. The facts upon which the judge was forced to draw his inferences were almost all supplied by the husband and were incapable of being checked. Therefore, for instance, there is no credible evidence that his only assets were those brought from Australia in 1982, the £400,000 the husband said he deposited in Jersey. The judge said:-
" ....the two important issues in his case were to establish how much money he remitted from Australia and how much money he left there. The second task was to show how those monies had been expended."
After buying and selling the first London house, the husband said that he was left with a balance of £400,000 and part of that sum, about £281,000, was utilised to buy the second London house through Villedean. There is no credible evidence as to what happened to the balance. The husband incurred no personal liability in the downfall of his property dealing and on the figures presented to the judge and to us, at least £300,000 and possibly nearer £400,000 has not been accounted for. The judge rejected the husband`s account that they had been living off the capital which had been dissipated. A further pointer was the continued existence of the Samco Trust and Panamanian and Liberian companies which were being serviced by a member of the BNP group and the cost rolled up in the accounts. It may be Portland Holdings are in the process of dissolution. But the others remain and if there are no assets, other than the Nationwide Self-Storage shares, the question arises - why would BNP continue to look after these companies? The judge found that the husband had lied to him about a visit to Jersey a few days after a letter from his solicitors to BNP seeking information. He discussed with BNP the information to be provided in their reply. The judge pointed to the high quality of the advice the husband received from solicitors and accountants. The husband said that he did not receive statements of account from Jersey and kept the changing balances in his head. The judge said:-
"I simply do not believe that he never had or even that he does not have records which would prove the two essential elements of his case. I am compelled to draw the adverse inference that he does not wish me to know the truth. That compels me to draw the further inference that there must be more monies available."
The judge found that he had in excess of £300,000 available and said:-
"He lived to some extent off his capital but I cannot find that the whole of that money could have disappeared. I therefore conclude that this (husband) has resources sufficient to meet the reasonable needs of the (wife). Her needs must be tempered by the shortness of the marriage and of the ambiguity about precise knowledge of the (husband`s) affairs. She does not satisfy me that he is worth millions though I am satisfied he is worth enough to meet her claim."
Mr Posnansky pointed to an utterly false case and asked us to consider why the husband was lying and what did he have to hide. If the cupboard was bare, it was in his interests to open it and display its meagre contents. But on the contrary, the husband, despite his protestations to the contrary, continued to live the life of an affluent man. I agree with the submissions from Mr Posnansky that if a court finds that the husband has lied about his means; lied about other material issues; withheld documents; failed to give full and frank disclosure; it is open to the court to find that beneath the false presentation, and the reasons for it, are undisclosed assets. Willmer LJ said in Payne v Payne [1968] 1 WLR 390 at page 396:-
"In such circumstances it is well established that the court is entitled to draw inferences adverse to a husband who has not made a proper disclosure of his available resources."
The judge carefully considered the relevant criteria set out in section 25(2) of the Matrimonial Causes Act 1973, including the shortness of the marriage. In my judgment, there was ample evidence upon which the judge was entitled to draw inferences adverse to the husband and to make findings that there were assets available to meet the order he made. To accept Mr Holman`s alternative proposition that, unless the assets can be shown positively to be available an order cannot be made, flies in the face of the principles enunciated in the judgment of Sachs J and would send a clear message to spouses unwilling to make full and frank disclosure. It would indeed, as Mr Posnansky said, be a cheats' charter. The amount of the order was appropriate to rehouse the wife modestly and, on the basis of assets available, in no way out of proportion.
I would dismiss the appeal against the lump sum order.
Income
The wife`s earnings from her business have been variable but the judge treated her as having an earning capacity of approximately £20,000 a year, £15,000 net. The judge found that she was determined and resourceful and determined to become self-sufficient as soon as she could. He ordered the husband to continue paying at the rate of £17,500 a year from decree absolute until payment of the lump sum and thereafter at the rate of £15,000. The order was to cease after five years.
Mr Holman has sought to convince us that the judge did not properly consider the issue of maintenance and had no basis upon which he could properly find at the rate of either £17,500 or 15,000. The judge held that:-
"He does not live like a man who only has £33,000 a year to spend. He lives like a man who has at least double that amount of money available to him. .... Bearing in mind his case that he had lost everything with the forced sale of Red Lion Yard and that spending in NWSS has to be carefully controlled in order to maintain the bank`s confidence in the operation, this [husband] Has lived a life inconsistent with that disastrous history and that uncertain prognosis for the future."
It is, of course, true that there are cases where a husband in genuine financial difficulties lives a life of luxury until the crash, but that was not the inference drawn by the judge in respect of this husband who was able to pay at the rate of £17,500 until February 1994. The husband`s admitted income from Nationwide Self-Storage was £50,000 a year but allowable expenses and benefits in kind brought it to over £92,000. The judge was entitled to take into account the lifestyle after the separation from the wife, which the husband sought to deny. Nationwide Self-Storage, which was controlled by the husband, had paid much of his American Express account for expensive weekends in Paris and Rome with Miss Lowe, staying in the best hotels, eating at the best restaurants and bills from Paris couturiers. Part of the American Express account had previously been paid by Villedean but that company ceased to exist. A balance of over £14,000 owed to American Express has been met from elsewhere and there is no evidence as to how or by whom it was paid. The husband also entered into an elaborate scheme whereby he lived separate from Miss Lowe and his two children and paid under a direction from the Child Support Agency. This was clearly a device to appear to reduce his disposable income.
On the facts of this case the judge was entitled to draw the inferences that he did that the husband had at least £66,000 a year to live on. On the basis of £66,000 net, and after he paid the lump sum, the husband would have over £50,00 to spend on the rest of his family and the wife would have a standard of living which was adequate but less than that enjoyed during the marriage. The additional £2500 was payable during the period when she was without capital and was living in rented accommodation. The periodical payments order of £15,000 is on the generous side but in the circumstances of this case it is not one where I should wish to interfere with the exercise of the discretion of the judge. Further, particularily with the real possibility that the wife may not get an adequate or even any lump sum, she ought to have the flexibility to seek a continuation of periodical payments after the five year period is over. I would not therefore think it appropriate in this case to impose a direction under section 25A(3) of the Matrimonial Causes Act 1973.
I would dismiss the appeal against the periodical payments orders.
LORD JUSTICE OTTON: I agree with the conclusions of Butler-Sloss LJ and for the reasons given. I wish to add a passage only by way of emphasis. Under Statute and from authority (to which reference has been made) there is a duty upon a party in proceedings such as these to make a full and frank disclosure of all matters relevant to the assessment of the financial position of the parties and the relief to which a spouse is entitled. The integrity of the legal process would be severely undermined if a party were permitted (and seen to be permitted) to evade that duty by a deliberate and stubborn refusal to make such disclosure to the other party and, more important, to the Court.
Ward J came to the conclusion that the Appellant had deliberately concealed his true financial position. In so concluding he correctly applied the law and he exercised his discretion in accordance with principle. There was sufficient evidence before him, according to how he evaluated it, which clearly entitled him to come to that conclusion and to make the assessments that he did. I heard nothing in the course of the conduct of his Appeal to persuade me to take a different view of the Appellant's conduct. In my judgment, he has deliberately concealed his true financial position from the respondent, and more important, from the Court. He has done so in order to defeat or minimise his former wife's just entitlement. His cynical, arrogant and callous attitude towards her was encapsulated in the title of the Standing Order in her favour which was entitled "WOFTAM". The Judge found as a fact that this was the acronym of an Australian expression: "Waste Of Fucking Time And Money". This says it all.
Accordingly, the husband cannot complain if the Judge following authority explored what was before him and drew inferences which may turn out to be less fortunate than they might have been had he been more frank and disclosed his affairs more fully. Such inferences must be properly drawn and reasonable. On Appeal it may be possible for either party to show that the inferences or the award were unreasonable in the sense that no Judge faced with the information before him could have drawn the inferences or awarded the figures that he did. I am satisfied that the Appellant has not succeeded in demonstrating that the figures Ward J awarded were in any regard unreasonable or unjustified.
I too would dismiss the Appeal.
ORDER: Appeals dismissed. Appellant to pay the costs of the Respondent on a standard basis, not to be enforced without leave of the High Court. Application for leave to appeal to the House of Lords refused. Legal aid taxation.
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