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Pension sharing orders: Finch v Baker

Date:28 JUN 2021
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The Court of Appeal judgment in Finch v Baker [2021] EWCA Civ 72 was released on 28 January 2021. The judgment provides some useful guidance on not being able to get what are essentially conduct arguments contrary to s25(g) through the back door by making ‘negative contribution’ arguments, and it also highlights the importance of ensuring that you adduce and apply for the most appropriate and necessary evidence in advance of a hearing.  Simply arguing that an updated pension report is needed, following an appeal hearing, on the basis that the pension sharing order made would not reflect the judge’s intentions as the CE figures would be significantly out of date, is insufficient and misconceived. 

Background, proceedings, and outcome 

W was 57 and H 69.  The parties met in 1990 and began cohabiting from 1991, later marrying in 1993.  The parties separated in 2012/2013, by which point H was living in rented accommodation and W remained living in the former matrimonial home with their two young children, twins born in 2011.  W had a successful career working for the BBC, earning approximately £90,000 net per year, but she was due to be made redundant in September 2021. H on the other hand had not worked in quite some time, which was a point of contention in the marriage. 

In terms of assets, W had a private pension with a CE of £13,000 and a BBC pension with a CE of approximately £2.1 million (though W’s pensionable salary from the BBC scheme was capped).  This latter pension pot was mostly generated during the marriage but there had been some growth to the pension after the parties had separated.  H had a private pension with a CE of £12,000, producing income of approximately £900 per year, and a state pension producing £7,000 gross per year.  An expert pension report was obtained in March 2018, based on gross benefits as at October 2017.  H had significant debts of £66,000. There were several jointly owned properties, with a combined net total of £2.17 million, including the FMH which had an approximate net value of £222,000. 

The District Judge, adopting a needs-based analysis, decided that “all non-pension assets were matrimonial property, and that W’s BBC pension was generated during the marriage”.  It was decided in relation to the non-pension assets that a departure from equality was justified to meet the needs of the parties and their children, and that in relation to the pensions, it would be unfair to make an order that did not provide both parties with equality of income at retirement, meaning an order should be made giving H 48.6%. 

W argued on appeal that it was “unfair, illogical and wrong” to rely on the pension report on the basis that the value of her BBC pension had increased since the parties’ separation.  She also argued that the decision failed to give due weight to the welfare of the children, nor did it give sufficient weight to her role as the primary carer of the children.  However, no application was made to adduce evidence updating the initial pension report.  On this appeal, the judge reduced H’s pension share to 34%, (providing an annual gross income of £22,280 not including H’s private scheme, and state pension) based solely on the evidence available to him and on a realistic analysis of the parties’ respective needs.  W, and her counsel, later argued for clarification, submitting that an updated pension report was needed to ensure that the figures reflected what the court believed was necessary to meet H’s needs, but again, no steps were taken to admit a new report at this stage. The judge therefore dismissed this argument on the basis that it seemed that W and her counsel were trying to get evidence in via the backdoor. 

W appealed to the Court of Appeal, raising 11 grounds of appeal, including that the Circuit Judge had failed to consider W’s tax liabilities (in relation to the annual allowance and lifetime allowance) in respect of her BBC pension, and on the ground that they had used outdated figures that were not reflective of the pensions actual current CEs. An informal application was made to adduce new evidence after the appeal judgment, but in the submitted documents, W included various other pieces of evidence, including evidence from chartered financial planners, and a schedule prepared by W herself.

The Court of Appeal dismissed W’s appeal.  On the evidence that was available to the court at the time of the judgment, the outcome did what it was intended to do, even if on a review a share of 34% would provide a greater income than £22,280.  The Court of Appeal took the view that the judge was entitled to conduct a discretionary analysis of the parties’ needs.  W, and her counsel, had multiple opportunities at the first appeal hearing to apply to adduce fresh evidence, but failed to do so. Simply arguing that time has elapsed and so the figures are outdated is insufficient.  In every case that comes before the court there will be delay between the date of the order and the date of implementation, and as such, the actual figures will vary. 

Furthermore, Lord Justice Moylan made clear that by simply seeking to criticise the earlier judgment, without real grounding, W was attempting to admit further arguments by the backdoor.  It was decided that the decision taken by the Circuit Judge was a decision that was open for him to take and was not wrong on a matter of principle - nothing in counsel’s submissions convinced the Court of Appeal otherwise. 

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Lessons to take away from the judgment

There will always inevitably be some delay involved between the making of a pension sharing order and its implementation.  Lord Justice Moylan reminds us that the family court, in exercising its powers under the Matrimonial Causes Act 1973, acts in a “broad, discretionary manner, and not necessarily with the expectation of achieving mathematical precision”.  It is well known that CEs are ‘volatile’ in nature.  It is optimistic and somewhat misguided to expect the court to go beyond exercising its discretion to get involved with the detail of the ever-changing figures involved in each case.

Parties should not expect a judge to permit additional fresh evidence at a late stage in the process, particularly following an appeal hearing, and where no such application has been made in a timely manner.  Such an approach would risk opening the floodgates and creating “rolling litigation that would be contrary to the interests of justice”.  Tax advice can of course be sought from an expert in good time to ensure the order is structured in the most tax efficient manner. 

There was also a reiteration of the principle set down in W v H [2020] EWFC B10 that, in a case that is dictated by needs, it is not appropriate to exclude any portion of the pension on the basis that some of the member spouse’s pension was earned pre or post-separation.  Applying the logic of Lord Nicholls in White v White [2000] UKHL 54, the idea that some of the fund is arguably ‘non-matrimonial’ carries little weight in a case whereby each parties’ respective financial needs cannot be met without having recourse to the full extent of the asset.  In this case, the District Judge adopted the clear view that W’s BBC pension was “generated during the marriage”. 

Finally, reference was made to Wilson J making clear that the allegation that H had made a “negative contribution” was no more than an “unhelpful oxymoron”.  It was endorsed that if one party is essentially pursuing a conduct argument by saying it is inequitable to disregard the spouse’s behaviour, this needs to be dealt with properly under s.25(2)(g) MCA 1973.  You cannot pursue a conduct argument by the backdoor by trying to frame it as a ‘contribution’ argument. This reinforced the logic utilised in Charman v Charman (No 4) [2007] 1 FLR 1246 that it is “unnecessarily confusing to present a case [of conduct] as a negative or nil type of contribution”.