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Wilson L.J. in Jones v Jones [2011] EWCA Civ 41:

‘The judge released his judgment for publication but on an anonymised basis, i.e. as J v. J. Its citation number is [2010] EWHC 2654. It has 484 paragraphs. An article on the judgment, by Mr Ashley Murray of counsel, has recently been published in [2010] Family Law, Vol 40, at 1111. Mr Murray introduced his article as follows:

“There are certain challenges each of us should attempt in our lifetime and for most these involve a particular jump, a mountain climb, etc. Akin to these in the legal world would be reading from first to last a judgment of Charles J. One of his most recent is J v. J …”

Mr Murray’s introductory sentences were witty and brave. In respect at any rate of the judgment in the present case, they were also, I am sorry to say, apposite…’

The appeal was concerned with two questions (1) how the sharing principle in ancillary relief is to be applied when the husband’s assets are the proceeds of sale of a company he bought into the marriage and built up during the currency of the marriage and (2) did the need principle, where it suggested an award lower than generated by the sharing principle, inform or dictate the extent of the departure from equality within the sharing principle.

Along the way, the Court of Appeal found a way to cite, consider and disagree with the recent decision of the Court of Final Appeal in WLK v TMC, Unreported, 12 Nov. 2010, FACV 21/2009.

On the first question, the trial judge held that 60% of the net proceeds of the sale of the company represented what the husband had brought into the marriage because the marriage the company had been in existence for ten years at the date of the marriage and based on the special skills of the husband displayed prior to forming the company. This was based on a calculation that capitalised his earning capacity following GW v. RW (Financial Provision: Departure from Equality) [2003] EWHC 611. The Court of Appeal decided that this approach was wrong in law after Miller v. Miller, McFarlane v, McFarlane [2006] UKHL 24, [2006] 2 AC 618 and that henceforth the capitalisation approach should not be adopted.

There was a further finding by the judge that at the date of the marriage, the company had already acquired the latent capacity that would see its value increase by 14X from its price at the date of the valuation, and that this should be partially included into the value of the company as at the date of the start of the marriage so as to be treated as a non-marital asset. The Court of Appeal decided that this should be treated with caution, as the price of the company at the start of the marriage (which was agreed by the parties) would naturally already reflect this ‘spring-board’ advantage and the ‘passive growth’ that could be expected from a company in the sector. The court decided to apply (self-admittedly arbitrary) uplifts to this agreed values to effect what it saw as a fair division.

One refreshing aspect of how it handled this uplift is the acceptance by the Court of Appeal that the figures it worked with, and the resulting mathematics of uplift and balancing were entirely arbitrary and designed to do broad brush justice between the parties. Whilst the necessity of such an approach is essential under the sharing principle as it is currently understood, there has often been a great reluctance by judges to accept how capricious the results of this process may appear. Wilson L.J.’s blunt articulation of the inevitable – and necessary – capriciousness of the ancillary relief jurisdiction is something to be welcomed (even if rather cautiously since English law still affects a revulsion of ‘palm tree justice’).

More interesting for us Hong Kong lawyers was how the Court of Appeal answered the second question. They stated:

[31…In a decision of the Court of Final Appeal, Hong Kong, given as recently as 12 November 2010, namely WLK v. TMC, FACV 21 of 2009, I have discovered some support for the judge’s proposition: see the judgment of Mr Justice Ribiero PJ at [84], although his remarks at [86] are arguably inconsistent with those at [84]. Notwithstanding its apparent endorsement from so distinguished a source, I feel emboldened to suggest obiter that the proposition of Charles J is confusing and unhelpful; that, in applying the principles of need and of sharing, the court is engaged in two separate exercises, which require it to refer to different considerations (Charman, cited above, at [70] and [72]); and that the suggestion that the result of the assessment under the need principle can be introduced into the assessment under the sharing principle in order to identify the extent of departure from equality is inconsistent with the guidance given in Miller/McFarlane, as recognised in Charman at [73] and as noted by the judge himself at [410], that in principle the higher assessment should found the award.

Implied in that (alongside the backhanded compliment of calling the Court of Final Appeal a distinguished source but then refusing to follow its decision and calling the proposition it apparently endorsed as confusing and unhelpful) is that the Court of Final Appeal wrongly applied the principles in Charman v Charman in reaching its conclusion that the sharing principle could be departed from in some cases to favour a needs approach only.

The contradiction identified by the Court of Appeal stands out only on a rather literal reading of the judgment in WLK v TMC:

[82]…The “needs” discussed in Step 2 are to be included as one of the factors to be considered as part of Step 4 when addressing the question whether good reasons to depart from an equal division exist, and also as part of Step 5 when the final outcome is determined after examining the entire picture in the light of the “yardstick of equal division”.

[84]…The better approach is to regard the sharing principle as always applicable when there are assets surplus to needs but accepting that, as part and parcel of that principle, an equal division should indeed be departed from if good reason exists for so doing.  The shortness of a marriage, the absence of marital acquest and similar matters can all be considered as possible reasons for such a departure.  The circumstances of a particular case may lead the court to decide, for example, that equal division should be departed from to the extent of restricting the award to a sum sufficient to meet one of the parties’ needs.  But that is not to say that the sharing principle has been “displaced”.

In my view, to construe the Court of Final Appeal as permitting a departure from the sharing principle back to the needs principle is a rather strained interpretation of these paragraphs. There is an equally plausible interpretation that sees the ‘need’s principle lay down a lower boundary, so that no party is left with a sum lower than needs. The starting point still remains the principle of equal sharing as identified in the authorities. 

The principle of equal sharing can progressively be departed from based on the factors of the case. In WLK v TMC the Court of Final Appeal had regard to uncontroversial factors that are ordinarily considered in the ancillary relief jurisdiction, such as the length of the marriage, the compensation principle and the existence of any contribution to arrive at the conclusion that a figure based on needs, generously interpreted, was the proper result.

That does not mean, and I don’t see why it ought to be construed to mean, that this was a departure from the sharing principle –and indeed Ribeiro PJ expressly acknowledges that this not a departure but the conclusion based on the application of the principle that equality was not appropriate, and indeed would have been unfair, to one of the parties in the proceedings. It is not entirely clear why the Court of Appeal thought otherwise.