H v H (Financial Provision); [1993] 2 FCR 308

Matrimonial Causes Act 1973, ss 1 and 25.

Besterman, Re, Besterman v Grusin [1984] Ch 458; [1984] 3 WLR 280; [1984] 2 All ER 656.

Duxbury v Duxbury [1990] 2 All ER 77.

Michael v Michael [1986] 2 FLR 389.

O'Neill v O'Neill [1993] 2 FCR 277.

Andrew Le Grice for the husband.

Michael Sternberg for the wife.

I give judgment in open court, partly because this is an appeal and partly because it raises one or two points that are not entirely easy. Obviously any transcription of the judgment will, as far as possible, preserve the anonymity of the parties.

The case comes to me by way of appeal from a judgment delivered by a district judge in the county court. Following his judgment the appeal was, by consent, transferred to the High Court.

The parties to the appeal are the respondent husband as appellant and the

petitioning wife as respondent. The family background is that the husband is 39 years of age and a doctor by profession. The wife is 42 years of age and has a number of qualifications, although she has not worked in any material way since the marriage. There are three children of the marriage: the eldest is 12 and she is a girl; the middle a boy aged 10; and the youngest a girl aged 7. The husband comes of a comparatively affluent family. I think somewhere in the evidence it is said that his great grandfather made a substantial fortune in north Lancashire, probably in the last century. He is one of four children of his generation, having three sisters. His father is dead, his widowed mother now 68 years of age. There are two settlements of which his mother is the life tenant, one made by his father, one by his grandfather. He, together with one or other of his sisters, is trustee of each of the settlements.

The settlements provide, in the events that have happened, that the life tenant, his mother, has the right to appoint the funds absolutely, either by deed during her lifetime or alternatively at her will, and she may appoint amongst her children and their issue as she determines. In this class there are at present the four children of her marriage and the nine grandchildren born to those children. In default of any appointment the funds would go to her four children in equal shares. The evidence established that the value of the two funds is presently about £1m.

In addition to those settled funds it is likely that the husband's mother has not insubstantial free estate, although there is no evidence as to its extent and both she and her late husband have been generous in their lifetimes, making substantial gifts both to the husband and the wife and to the three children of this family.

The wife has a formidable collection of qualifications. In 1972 she obtained a degree in accounting, I think at Kent University. Subsequently, in 1973, she obtained a Diploma in Education but did not complete her probationary year as a teacher. In 1974 she qualified as a state registered nurse and thereafter worked at a well known London hospital. Probably it was there that she and the husband met, for he qualified I think from the same hospital in 1977 and the marriage was celebrated on 21 October 1978. The wife's family was not similarly affluent. On the death of her father she inherited the sum of between £2,000 and £3,000, which she contributed to the family finances but it is common ground that that has been the extent of her monetary contribution. At marriage the husband's father made a gift to the wife of £10,000. In April of the following year the first matrimonial home was purchased in joint names with funds provided by the husband or by his father. Considerable sums were spent on the improvement of that house. Again the cost of about £10,000 was met by the husband's father.

In 1983 the husband made a gift to the wife of a share in land which had obvious development potential. It was not a large acreage but the possibility of an advantageous sale was perceived and there were thought to be tax advantages in dividing the asset between the spouses in advance of realization. In 1983 the parties moved to Australia, where the husband worked for approximately two years as a doctor. It was during that absence that the development land was sold and the husband received the sum of approximately £85,000 for his share, and the wife the sum of approximately £65,000 for hers before tax, if any, was due because

of the arrangements that had been made, arrangements that were facilitated by the absence of the family in Australia.

On the family's return from Australia the husband tried to establish himself in general practice but quickly found that his aspirations lay in the specialist branch of psychiatry. He accordingly, at a considerable income sacrifice, transferred from general practice to training that will eventually result in him obtaining consultant status in psycho-geriatrics.

The first matrimonial home was sold in November of 1986 for £44,000. The proceeds of sale was divided equally in accordance with ownership. In the spring of the following year the parties moved to the final matrimonial home, a property of unusual character. It was once a keeper's cottage, or two estate workers' cottages, which at a later stage were made into a single dwelling but subsequently redivided into two, and the family purchased one of those two dwellings.

The separation came on 20 April 1987, which is 8½ years after the marriage. The husband, in the affidavit which he subsequently swore in ancillary relief said:

"I left the cottage six weeks after we moved into the house at the petitioner's request and went to live in hospital accommodation. The petitioner had wanted a trial separation. However, she informed me on June 1 1987 of her decision to seek a divorce."

As she did not comment upon that in her oral evidence I take it not to be in issue.

The petition was, in fact, presented on 15 June 1989 under s 1(2)(b) of the Matrimonial Causes Act 1973 and a decree nisi was pronounced on 14 August 1990. In that year the wife successfully completed a degree course in ecology at the local university and further registered herself as a supply teacher with the local education authority. On the pronouncement of the decree, or perhaps at some later stage, orders were made committing the custody of the children to the wife, with access to the husband and on 10 October the wife filed for notice of application in Form 13. In her affidavit in support the wife said in relation to the matrimonial home:

"It is an isolated rural dwelling, making it difficult to attract help in the home and difficult for me to find local work. However it is next door to the children's school and they are very happy and settled at the cottage which is a four bedroom semi-detached, in which the children each have their own rooms. There is a garden of approximately two acres … I feel it is essential that the children's home should be maintained and I am therefore seeking a transfer of property order in respect of the cottage to enable me to continue to live there with the children."

At the end of the affidavit she made it plain that she was seeking periodical payments for herself and the three children and a lump sum order and a transfer of property order in respect of the matrimonial home.

I have already referred to one passage in the husband's affidavit in answer. In

addition he said, in regard to the matrimonial home:

"I accept that the cottage is ideal accommodation for the petitioner and children and wish to do nothing to prejudice their occupation of it."

He did later refer to his housing intentions in these terms:

"I would wish to buy myself a home when I find a permanent post in some two or three years time. That property, which will ideally have three bedrooms so that I can have the children to stay with me at weekends, would cost at present day value something in the region of £200,000 to £250,000, depending on the area in which I am required to live."

I should perhaps say that the husband was in a position to advance his needs in those terms since at that date and for the immediate future he divides his time between the hospital where he is working and a flat in central London which belongs to his eldest sister, but which she allows him to occupy on the generous basis that he has only to pay the outgoings, amounting to about £2,600 a year. That flat has a value of something in excess of £200,000.

The wife's affidavit in reply was filed on 18 January 1991 and on 31 January the district judge, by consent, made provision for a final hearing on 29 May and gave some ancillary directions. Between that date and the final hearing I believe the wife undertook a course that was arranged for her by the local education authority called "Keep in Touch with Teaching". The hearing took place on 29 and 30 May 1991 and both the parties gave evidence.

The wife in her evidence said:

"As to my home, I would like to stay where I am. The children are happy and settled. It is ideal while the younger children are at their present school. So long as I can manage the run to [the eldest child's new school] … we all want to stay where we are."

Later, in cross-examination, she said "In the long term I would plan to move. Properties in the town area are much more expensive. In four years' time it would be much better to live nearer to the town."

The husband, in the course of his oral evidence when cross-examined, said in relation to the matrimonial home, "In my affidavit I said the cottage is ideal for my wife and children. That was a statement made by my solicitor. It was ideal geographically for the school. I don't wish to alter that statement."

The order is dated 12 June 1991 because the district judge reserved his judgment. The order provided, by para 1, that the father should pay the children's school fees at their private day school and it is common ground that the current cost of those fees amounts to £13,800 per annum. Paragraph 2 provided that he should pay periodical payments to the children at the annual rate of £2,280 each, making a total annual liability for child periodical payments of £6.840. Paragraph 3 provided

that he should pay periodical payments to the wife until further order at the rate of £5,700 per annum.

Paragraph 4 provided that the matrimonial home be sold and by a fairly complicated formula provided that at the conclusion of the sale the wife should receive a net sum of £180,000. At that time it was thought that the value of the property was about £155,000 and, therefore, the likelihood was that the husband would have to augment the proceeds of sale by a sum of roughly £25,000 in order to achieve the total of £180,000. There was a provision that any balance over £180,000 should go to the husband but that seems to me to have been an extraordinarily unlikely contingency.

The district judge then gave liberty to apply as to chattels and as to costs. Those liberties have not been exercised. Although there has been no completed agreement yet as to chattels, I am told that it is likely. In respect of costs, the need for any application was forestalled by the husband accepting that he should pay the wife's costs in the sum of £14,500. The husband's notice of appeal was filed on 24 June and that appeal was transferred to this court on 25 July 1991.

I should have mentioned that very shortly before the hearing the husband had changed his legal team and the specialist London firm who had taken on the case filed a notice of application in Form 11 for lump sum. That was a perfectly conventional procedural step since the matrimonial home was in joint names and the wife seeking a transfer of property order. Had the court determined that she should not receive the whole value of the husband's half share the notice of application would have provided a convenient vehicle for ordering some balancing payment to the husband in compensation for the transfer.

At the beginning of the judgment of the district judge he recites the facts and the history with great care and then he says:

"So long as the petition and the children live at the cottage it seems to me it would be unrealistic to expect the wife to take up gainful employment. I can see that if all the children are to go to school in the town it makes good sense for her to aspire to live in a home nearer the town, which she has vowed to do in about four years' time, by which time the youngest child should be ready to enter school there."

That seems to me to be a reasonable summary of the wife's evidence both in chief and in cross-examination.

Then he said:

"As already indicated, it is my view that the present modus operandi of the wife and children must continue as it is until such time as they can move to a new home nearer to the town. I hope this will be sooner rather than later and I would wish to see the parties use their best endeavours to sell the cottage in the fairly near future."

And later he said:

"I think that in the interests of the parties and children it is desirable to sell the cottage at a proper price as soon as possible."

He then came to deal with the order and this seems to me to be the crux of his judgment. He said:

"My order is published with this reserved judgment. As will be observed and anticipated by my earlier comments, it is not a clean break order. It envisages, however, that after sale the petitioner should receive a sum to enable her to buy a four bedroomed house in or near the town free of mortgage. If she can then earn and increase her earning power she may, if so advised, elect to realize investments or borrow money to buy a better house than my order taken in isolation might enable her to obtain. That is for her to decide. I see no reason why the wife should be required to part with any of her capital in favour of the husband. She will not qualify to share in the husband's pension rights from the N.H.S. She is unlikely to receive any inherited capital, whereas he has substantial inheritance prospects. In order to take up a career, whether nursing or teaching, she may need some retraining and certainly would require new experience in either profession before she could expect promotion into higher grades and she would be a late entrant into any pension scheme of which she might become a member. Altogether, both as to income and capital, the wife's prospects are not as good as the husband's. The husband's claim for a lump sum order is accordingly dismissed.

The portfolio and P.E.P. statements in the bundles indicate that in the valuations at April 5, 1991 the gross income of the parties was as follows: wife £3,230; husband £8,259. According to income tax returns for the year April 5, 1990 the petitioner's investment income was, including bank and building society interest, £10,700 odd, and for the husband £14,000 odd. This last figure including something for foreign dividends.

I cannot go into the mutation and yield tax investment policy. That is not my function. Suffice it to say that investment income as at April 5, 1990 stood at a ratio of almost ten to fourteen in favour of the husband. In investment terms he is better off than the wife and she should in my view be entitled to reclaim her portfolio undisturbed as a sort of Besterman cushion: see Re Besterman [1984] Ch 458. I am prevented, for want of time, from extending this reserved judgment, which is already somewhat long. I hope the reasons for the order published herewith have been made sufficiently plain."

As to capital it was common ground that before the district judge the jointly owned assets were worth £158,000, the husband's assets were worth £242,000 and the wife's assets £162,000, making a total of £562,000. The effect of the order, whereby the wife acquired not only the husband's half share of the matrimonial home but also a tot-up provision of about £25,000, had the result, as is demonstrated by the calculations in Mr Le Grice's skeleton argument, of bringing the wife's share of the family capital to 61% and reducing the husband's share

of the capital to 39%.

With great respect to the district judge, who tried this case with evident care, I cannot understand from the passage of the judgment to which I have referred at its conclusion, or in any earlier passage, any rationale for making this substantial variation in the parties' respective capital worth. It also seems to me curious that he should have, in his judgment, determined that the matrimonial home should be sold as soon as possible when the evidence of the spouses. not in any discord, was that it should remain undisturbed for the benefit of the wife and children for a period of approximately four years. Equally I have to say I cannot find within the judgment any rationale for fixing the wife's periodical payments in the sum of £5,700 and, for reasons which I will elaborate in due course, I believe that the district judge misdirected himself in assessing the respective needs of the spouses, in assessing the effect of the husband's hope of inheritance, and finally in assessing the extent of the burden to him of discharging the children's school fees.

I am, therefore, in no doubt at all that the order made in the county court in June of last year cannot stand and I must carry out the s 25 exercise afresh in order to determine what is the fair order in response to the two notices of application, the one in Form 13 and the other in Form 11.

The first point that I would emphasize is that this is not a case in which there is any material dispute as to fact. The district judge saw and heard both the parties but he makes no specific findings or comment upon their credibility or reliability as witnesses. I have had the opportunity of seeing and hearing each of them, not at any great length because the factual foundation established in the notes of evidence was not challenged, and the evidence that I heard was such evidence that each desired to give in reaction to the hearing below or in updating circumstance since. I say at once it seems to me that both spouses were excellent witnesses. I have no reason to doubt the responsibility or the good faith of either, whether as witnesses or as spouses or as parents. It is unfortunate that they have had to undergo two runs in this litigation in order to sort out their financial affairs.

The main points that are in issue in this appeal are what weight should be given to the husband's inheritance expectations? Secondly, what weight should be given to his pension rights as they are or as they may become? Thirdly, what weight should be given to the wife's earning capacity? Fourthly, what weight should be given to the fact that the capital worth of the spouses has almost entirely come from the husband's side of the family? Fifthly, what weight should be given to the burden of paying the school fees over the long years that lie ahead. Sixthly, was this a case for what the district judge called a Besterman cushion? Seventhly, what weight should be given to the means of the children independently derived from gifts that have been made during their lifetime in the main by their grandparents, although in one exceptional instance by their parents.

My decision on the issues in dispute will become clear as I undertake the exercise under s 25 of the Matrimonial Causes Act 1973. I have to have regard under s 25(1)(a) to the income earning capacity, the property and other financial resources which each of the parties of the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which

it would in the opinion of the court be reasonable to expect the party to the marriage to take steps to acquire.

The capital position of the parties as it is today has varied very slightly since the hearing in June. The jointly owned assets today consist of the former matrimonial home and a building society account with £8,000 in it. Having allowed for the notional costs of sale of the former matrimonial home, the value of these two together amounts to £158,165. The husband's assets today consist of his portfolio, his PEPs, some National Savings Certificates, and a relatively small sum in a current account with the bank. These four items total £225,275. His liabilities consist only of legal costs. In respect of these proceedings he has a liability to his solicitors which is estimated at just over £15,000 and he has yet to discharge the agreed order in respect of the wife's costs below in the sum of £14,500. Those two together make £29,500 odd, reducing his net worth to £198,500 odd. To that must be added his half share of the jointly owned assets, which bring his net worth to approximately £277,500.

The wife's assets consist of her investment portfolio, her PEPs, her National Savings Certificates and a cash deposit account which she has in Jersey. The sum total of those four assets is £157,000. She has a liability to her solicitors estimated at £8,400 odd in respect of these proceedings, reducing her net assets to roughly £148,500. To that must be added her half share of the jointly owned assets in the sum of £79,000, bringing her net worth to date to about £227,500.

As to the current incomes of the parties, it is agreed that the husband's current NHS salary as a senior registrar is £18,840 per annum net. In addition, the income derived from his portfolio, after deduction of tax at top rate, amounts to £6,780, making his annual net income £25,620. Two of his assets are not income producing, namely the PEPs and the National Savings Certificates. The wife at present has no earnings. She has an income from her portfolio of £8,300 net after deduction of standard rate tax. She also has child benefit of £1,552 per annum, making her total present income £9,852 per annum. Again in her case two of her investments are not income producing, namely the PEPs and the National Savings Certificates.

So much for the present. What about the future? First of all on the capital front, what regard should be paid to the husband's prospects of inheritance? That point was very carefully reviewed by the district judge. At the conclusion of his reasoning the district judge said:

"I think that the balance of probabilities indicates that on the death of his mother the respondent will acquire a one quarter share in (a) the trust fund, and (b) his mother's residuary estate."

Later in the judgment he quantified the quarter share in the trust fund at £162,500.

The district judge's approach may have been influenced by a passage in cross-examination when the husband was being firmly pressed by the wife's counsel. It was apparently put to the husband that it was almost outrageous for him to suggest that capital was not coming to him. His answer apparently, "I accept I

made a mistake. A large amount of money will come to me." It seems to me that the assessment of this contingency must rest with the court and I do not regard myself as precluded from making an independent assessment by that answer apparently given below. Of course, the husband may be party to family communication that has not emerged in the course of litigation but at the same time he may be unrealistic and over optimistic in his assessment and I think I have to look at the issue objectively in the light of authority.

The authority upon which Mr Le Grice relies is the case of Michael v Michael [1986] 2 FLR 389, and in particular he relies on a passage in the judgment of Nourse, LJ at pp 396 and 397. The district judge did not have the advantage of that judgment before him when he decided the issue as he did and, with great respect to his approach, I think it is flawed in two respects. Firstly, I think that he gave insufficient weight to the obvious possibility that the husband's mother might, for tax avoidance considerations, bypass his generation in whole or part in favour of her grandchildren. The district judge's reasoning almost implied that the mother's choice was confined to the four children of her marriage. He seems to have given insufficient weight to the fact that the class within which the husband's mother exercises her discretion consists of thirteen and not four.

The second respect in which I differ from the district judge is his assessment of whether this hope is properly classified as being within the foreseeable future. Although I accept the proposition that "given good health of both mother and son the son is likely nevertheless to survive his mother", the district judge in my judgment paid insufficient attention to the fact that at that date the husband's mother was only 67 years of age and in good health. Of course, he is likely to survive but that event may lie many years forward and applying the approach of Nourse, LJ as it appears from the report in Michael v Michael, it seems to me that it would be wrong in principle to bring this hope of succession into the scale in this case in anything other than the most general way. To bring it in as though it were a vested interest, likely to fall into possession within the foreseeable future, is in my judgment to exaggerate its significance unreasonably.

What then of the husband's pension rights? They are defined in a letter written recently by the Department of Health to the husband's solicitors. The first paragraph shows that as at today the husband has an entitlement to a pension of £3,200 per annum, together with a lump sum retiring allowance of £9,600 and a widow's pension of £1,600, all that derived from his years of hospital service. Evidence established that those years of service are thirteen in number split between the years 1977 to 1984, which are the years between his qualification and his departure from Australia, and between 1986 and the present, when he has been training for psychiatric consultancy. It is plain, therefore, that of these 13 years only seven of them are years of cohabitation. There is also a minimal pension addition that stems from the very short period when the husband was employed as a general practitioner on the family's return from Australia.

The wife's advisers have sought to amplify this information by obtaining from Coopers & Lybrand a projection of his anticipated pension benefits from the National Health Service, assuming that the husband remains on his present course,

attains consultancy status in about four years time and then works to the age of 60 or 65. That projection, of course, throws up big figures. That is hardly surprising since the husband will not attain the age of 65 for 26 years during which inflation will inevitably have continued to reduce the real spending value of money.

I think that in deciding what weight to attach to pension rights it is more important in this case to look to the value of what has been earned during cohabitation than to look to the prospective value of what may be earned over the course of the 25 or 30 years between separation and retirement age. Of course, I bear in mind that in the future accumulation of pension rights the husband has very great advantages. He has already an established position in the National Health Service which is likely to develop into consultancy status in approximately three years time. Although the wife is well qualified she is three years older than the husband and even when she returns to employment it is likely to be on a part time basis until the children are considerably older. But I do not think that this disparity in their ability to accumulate pension rights over decades post separation should be given undue weight in the performance of the balancing exercise.

Next I turn to the weight to be given to the source from which capital derives. The district judge, in a homely passage of his judgment emphasized that the statute directs attention to contributions including contribution by looking after the home and caring for the family. In those circumstances he said that the fund of love is much more important than the fund of money. I obviously recognize that in the assessment of contribution and in the reckoning of capital worth between the spouses, the source of contribution is a secondary rather than a primary consideration, but it is not in my judgment thereby rendered unimportant. It is, in my judgment, significant that the wife's substantial independent fortune is the direct result of the generosity of her father-in-law or arrangements made within the family to reduce the likely incidence of taxation.

In relation to the foreseeable future, the major question affecting earning capacity is obviously the wife's capacity to earn. I do not think that there can be any substantial question overhanging the husband's likelihood of increasing his present income by achieving consultant status in three or four years time. But what is the wife's capacity? The facts upon which that decision rests are not in dispute. The wife's curriculum vitae exhibited to the husband's affidavit in the ancillary relief proceedings shows the formidable extent of her qualifications and implies the strength of her intelligence. Of course, she is inhibited from marketing the qualifications and the quality partly by the location of the family home, but much more realistically by her obligations to the children.

The parental decision is for private education without boarding and accordingly a great deal of the mother's time and energies are directed to caring for these children on a daily basis throughout the 48 odd weeks of the year when they are not with their father and in ferrying them from home to school. For the two younger children at present that is but an easy journey, since home adjoins school, but the daily mileage in getting the older child to school in the town is 62 miles unless it is a day when she is able to share with another parent when it reduces to 32 miles. Before the district judge there was no such sharing arrangement and

the burden of a series of trips totalling 62 miles, day in, day out, was obviously impressive. In the interim since that judgment the mother has arrived at a sharing agreement which relieves her of the obligation to make the full school run on half of the days of the school year. But I think that the district judge was perfectly right to assess the mother's earning capacity as minimal in present circumstances. It is creditable that she has made real efforts to retrain herself in both the teaching and the nursing professions and I do not doubt her responsibility in this area. But in order to make the most of her talent and opportunity she will need to be relieved from some of her responsibilities to the children and that relief will surely come when the middle boy goes to public school in three years time by which stage the youngest will certainly have joined her sister at the school in town. At that stage, as the registrar rightly held, the mother will have the opportunity to move the family home to avoid all this school travel. She will then have all three children at day school in the same town and the family home in the vicinity. At that stage I believe that her earning capacity will become real and significant.

She has a wealth of opportunity. I do not myself believe that she is necessarily confined to a choice between teaching and nursing. She could look for work using her skill in accounting, although she has no professional qualification, or she could launch herself into some sort of self-employment. What she manifestly needs is time in which to make the necessary adjustment and to feel that she has sufficient energy and resource to devote to her return to earning and not, as she reasonably does at present, feel that all that she has must be devoted to the children. So in that area I do not differ from the approach of the district judge, although I do doubt the justification for his decision to accelerate this stage by providing for a more or less immediate sale of the home in the face of the parties' declared desire to maintain it for a spell of years.

The relevance of the cost of private education and of the children's needs attaches more to para (b) of s 25(1) of the 1973 Act:

"… the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future …"

As to capital needs, I see no reason to differ from the district judge's estimation of £180,000 for the purchase price of the home which the wife will in due course acquire nearer to the children's school. I believe, however, that he has given insufficient weight to the husband's evidence that he will need to accommodate himself as soon as his career has taken root with a consultant appointment. It may be that the husband put the cost of that accommodation a bit high and I see no reason to allow much more for his re-accommodation than for the wife, but even if it be brought in at £180,000 it is a very real need when looking beyond the immediate future.

Equally I think that insufficient regard was paid to the burden on the husband of school fees over the course of the next decade. A quotation has been obtained from an insurance company as to the single premium cost of providing for the school fees for each of the three children to age 17. The projection is conveniently

set out in Mr Le Grice's skeleton. The total sum that an insurance company would want by way of capital payment to make provision for these school fees is £115,000. That is only to age 17, does not allow for the possibility that one or other of the three may need to stay to age 18 in order to complete secondary education, and makes no allowance for the possibility of tertiary education beyond that. Furthermore, the built in allowance for annual inflation and school fees is only 8%, whereas there is evidence to show that historically school fees have been increasing at the rate of about 14% over the last decade. These three considerations show that the present cost of making provision for this future obligation is probably rather greater than the figure of £115,000 brought in.

A good deal of argument seems to have been directed below to the classification of this obligation. Was it an income obligation or was it a capital obligation? I do not think nowadays that those sorts of distinction are very meaningful in a case such as this. Money is money. The husband's capital is deployed partly in assets which produce no yield but accumulate and partly in a portfolio which is deliberately invested as much for capital growth as for yield. Obviously it would be open to the husband to invest all his free capital for yield only and perhaps in that way he could be said to discharge future school fees out of income. Alternatively, he could invest the whole of his free money in funds that produced no yield but had an even higher expectation of capital growth and he could pay the school fees from year to year by resort to capital. I believe that these distinctions are of little meaning. The obligation to meet school fees results from the parental commitment to private education. It is an agreed commitment. It is also agreed that the husband alone will discharge the financial obligation and I think it is relevantly reflected in decisions today as to how capital should be divided between the spouses.

In this area I should also like to consider the children's needs. The detail of the financial circumstances of the children is contained in a document which the wife's advisers very recently obtained from Coopers & Lybrand. It shows that the elder girl has assets worth nearly £56,000; the boy has assets worth nearly £9,500; and the younger girl has assets worth nearly £9,000. The disparity is explained by the fact that each has received different gifts at different times. The eldest has done best, since she received a substantial gift from her grandfather and it has been invested in a fund which has done very well. All three have investments in other funds which have done markedly less well and that has increased the disparity between them. Should these assets be taken into account in the circumstances of this case? I have reached the clear conclusion that they should not. These are monies which were given to the children primarily by their grandparents with the intention of benefiting them. In so deciding they were preferring their grandchildren to their son and daughter-in-law. Had they wished to relieve the burden to their son and daughter-in-law of the cost of school fees they would surely have given the money to them and not to the children. I suspect the grandparents would be far from pleased if they were subsequently to discover that the parents had raided the children's funds in order to reduce their own liability for school fees. Particularly am I of that view when the parents have very substantial free assets

of their own which have come from the same source.

In relation to financial needs, I would wish to record the income needs of the parties. The wife, because no doubt of her degree in accounting, has over the years maintained extremely detailed and accurate accounts of her expenditure and the source of funds which has met that expenditure. She has further, in each year, distinguished between general expenditure and non-recurring items. This information shows that in 1988/89 her general expenditure was £14,500 a year; in 1989/90 it rose to £16,600; and in 1990/91 it rose to £16,700.

She has also produced figures for seven months of the current year which will end in April 1992. That shows that in those seven months her general expenditure has amounted to over £11,000. If that figure is adjusted on the assumption that the expenditure in the remaining five months of the year remains at a constant rate, there would be an annual expenditure figure of £20,000. I think that that is an unsafe extrapolation, since the seven months of the year for which figures are available include the expensive months of summer holiday when sums approaching £2,000 went on children's holidays. I have come to the conclusion, speculative though it may be, that the current year expenditure is likely to be in the order of £18,500.

The husband's present income needs are considerably alleviated by the generosity of his sister in allowing him the use of the flat free of any rent or payment other than outgoings.

As to s 25(1)(c) of the 1973 Act, the standard of living enjoyed by the family before the breakdown has always been comfortable, as I see it, but equally, because money has been well managed and expenditure always kept within moderation, it has never been anything more than comfortable. Moving to para (d), the age of the parties, I have already recorded, as also the duration of the marriage. I think that the duration of the marriage and the age of the parties is a factor that deserves some reflection in this case. It is obviously not a short marriage. On the other hand it is by no means long and its ending after 8½ years of cohabitation seems to have reflected the wishes of both parties. There is no evidence to suggest physical or mental disability: para (e). As to contributions, para (f), that I have already considered, particularly in relation to capital and source of capital. All the evidence indicates the high standard of parenting and the mother's commitment to the children. Equally there is no dispute that this is a loving father who seeks to play a major role in the upbringing of his children and in due course he looks to establish a home where they can stay with him. Presently they are able to stay with him at the flat in London, although the sleeping arrangements are rather cramped. As to para (g), conduct, there is nothing in this case that needs to be brought into the reckoning. As to para (h), pension, that I have already considered in relation to the financial resources that will become available in the future.

What then is the outcome? The case seems to me to be essentially a relatively simple one. The wife, by virtue of arrangements that have been made by the husband or his family during the marriage, has got capital with a present value of approximately £227,000. The husband has present capital with a value of approximately £277,000. Why, in those circumstances, is it necessary for the court

to make any capital adjustment between the spouses? The district judge, by his judgment, made a very substantial readjustment to capital without any express rationale. I believe that the discretionary powers of the court to adjust capital shares, between the spouses should not be exercised unless there is a manifest need for intervention upon the application of the s 25 criteria. In this case I can see no manifest need for intervention.

I appreciate that it is important in this case to survey not only the present but the impending changes on both sides which coincidentally are all likely to mature within the next three to four years. Those changes are, of course, the children's school moves which will lead to their congregation in different schools within the same town. Then there is the move of their primary home when the present cottage is replaced by a house in or near the town near to the schools. Then there is the husband's graduation to consultancy appointment. Finally, there is the expiration of the current licence whereby he may live rent free in his sister's house. He has said that there is no guarantee that that licence will extend to the end of the present phase in his career. It depends upon his sister's needs and circumstances, but he would be hopeful that the arrangement would be allowed to continue that long.

It seems to me that there is a happy coincidence in all these impending changes. For, so long as the husband has the benefit of virtually free accommodation, he is the better able to make available to the wife and children on the same basis his share in the former matrimonial home. When the time comes for wife and children to make the move into or nearer the town, then there will be to him a release of capital, namely his half share of the proceeds of sale which will facilitate his purchase of an independent home. It does not seem to me that those impending changes, whether taken in isolation or taken cumulatively, in any way undermine the conclusion that this is not a case in which the court should disturb the distribution of capital between the spouses.

Of course, I must look too to the distribution of income, not just in present circumstances but also in the light of impending changes. When I look to the present circumstances again this seems to me a pretty straightforward case. There are three children at home and by virtue of the parental agreement that their private education should always be day education, very heavy expenditure falls upon mother who provides the primary home and who meets all the incidental costs of getting them to and from school. The district judge, without any indication of why he selected the figures, quantified the child periodical payments at £2,280 per child. I believe that that is too low. I am sure that the real cost to the mother of maintaining the children exceeds that, particularly if regard is had to indirect costs. I believe that that should be adjusted to a figure towards the top limit of the personal allowance and I intend to say that the periodical payments order should be at the rate of £3,200 to each child. In supplement to that, the wife has, of course, the net yield of her investment funds and the child benefits. The product of the children's order will be £9,600 a year which, together with the wife's net income from the other two sources, amounts to nearly £19,500 per annum. That, on the face of it, exceeds her required expenditure in the current year and, even allowing for some inflation in the future year, she should manage. I do not see

any justification for making a periodical payments order to her in any real sum in present circumstances.

But what about the position as it will be when the pipeline changes have taken effect? Obviously one consideration in the decision that she needs no more today is the consideration that she will have the use of the husband's capital invested in the home free of charge. When all these changes have taken place she will have lost that benefit and she will have had to find an additional sum of money from her own sources to meet the increased cost of housing in or nearer the town, as found by the district judge. But against those disadvantages she will by then have had the opportunity to bring her earning capacity into play. Obviously there can be no certainty as to how things will go for her but I think it is reasonable to ascribe to her an earning capacity in that time future which will offset the loss of income flowing from the reduction in her investment portfolio. So I see no reason to anticipate that the wife will have a substantial right to periodical payments at that future stage either. Obviously the children's periodical payments will fall for increase probably on an annual basis to offset the sure annual increase in the cost of maintaining them.

In those circumstances, should the wife's right to periodical payments survive at all in the light of the statutory requirement to look for conclusion? I have come to the decision that the circumstances of this case are not sufficiently secure to justify an outright dismissal at this stage. Although I do not myself today envisage circumstances in which the wife's claim for periodical payments might become substantive, I cannot ignore that possibility. I accordingly conclude that the wife's claim to periodical payments should result in a 5p order. I am sure that she will not interpret that as any invitation to renew application in three or four years time. Nor, I am sure, will she slacken her efforts towards a return to earning in any false reliance upon it. It is only there as a long stop.

The last word that I want to say relates to the district judge's apparent justification of his capital order by reference to the case of Re Besterman [1984] Ch 458. That is relied upon by Mr Sternberg, who particularly draws attention to the passage at p 478 in the judgment of Oliver, LJ. It must be borne in mind that the allocation of money between spouses in substantial cases is nowadays principally directed to the estimable objective of obtaining a clean break and furthermore, in pursuit of that end, the Duxbury approach has become common place. [See Duxbury v Duxbury [1990] 2 All ER 77.] So perhaps dicta in relation to cushion have less relevance today than once they did. It does not seem to me, in the age of Duxbury, that there is much principle for increasing a wife's countable award by reference to some specific cushion. In so far as the district judge seems to have resorted to that justification in this case I believe he fell into error.

Looking back to cases decided in the first half of the 1980s, I remind myself of the decision of the Court of Appeal in the case of O'Neill v O'Neill [1993] 2 FCR 277. In that case, which involved substantial capital worth on both sides, the President had increased the applicant's financial award from £200,000 to £250,000 in these words:

"But that is not the end of it. It is very nice to have, and reasonable that a person in the wife's position should have, some not vast but nevertheless adequate capital resource and I put that at £50,000 in this particular case."

The £200,000 award, augmented by this £50,000, was an allowance for the purchase of a home and for kitting it out. In addition to that the wife had substantial capital that had come to her during the marriage, which the President thought would yield sufficient income to run the home that he was evaluating at a capital cost of £200,000. So the £50,000 in addition was, indeed, a cushion. In the Court of Appeal the judgments of Cumming-Bruce, LJ and Sir David Cairns disapproved that approach and made it plain that there was no material before the President to support the sum of £50,000, or any other sum, under that head. It seems to me that that principle can be expressed thus: that any specific award of capital must have an evidential justification.

Accordingly, I allow this appeal and instead of the order of the district judge insert the simple orders periodical payments to the wife at the rate of 5p; periodical payments to each of the children at the rate of £3,200 per annum until aged 17 or further order.

Solicitors: Messrs Gordon Dodds for the husband.

Messrs Thomson, Snell & Passmore for the wife.

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