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F v F (DUXBURY CALCULATION: RATE OF RETURN) Family Division [1996] 1 FLR 833, [1996] Fam Law 467 HEARING-DATES: 12 January 1996 12 January 1996 CATCHWORDS: Costs -- Calderbank offer -- Husband taking unreasonable attitude to divorce at early stage -- Husband's Calderbank offer lower than wife's ultimate award -- Wife's award exceeding her own offer to settle -- Whether husband should pay wife's costs on standard or indemnity basis Financial relief -- Lloyd's losses -- Clean break order -- Husband to pay to wife lump sum to meet annual income needs -- Duxbury calculation -- Proper assumed real rate of return to be adopted for purpose of calculation HEADNOTE: The parties married in 1972 and had one child, a daughter, born in 1974. The marriage ended in November 1994. The husband had a business which he sold in 1982 for a substantial sum. He continued to work as a consultant until 1993. The wife never worked during the marriage and had neither capital nor income to contribute to it. At the time of the marriage breakdown the parties had recently moved into a large matrimonial home renovated at a cost of £500,000. The daughter, who was in full-time employment and in addition the beneficiary under a trust set up by the husband, was no longer a financial responsibility upon either party. The divorce proceedings were acrimonious from the first, attempts by the wife to compromise the suit being rebuffed by the husband. Counsel for the wife asked for a total of about £1.2m to £1.3m in ancillary relief, while it was submitted on the husband's behalf that the wife's reasonable needs totalled about £615,000 to £650,000, which figure should be discounted to reflect her conduct and lack of contribution during the marriage. In addition, the issue of costs was hotly contested, in particular as to whether the wife's costs which, it had been conceded in the light of the Calderbank correspondence before the court, were payable by the husband, were to be calculated on a standard or indemnity basis. Held -- (1) It was clear from the evidence that the applicant was a 'fully entitled wife' who did not merit a discount in her award on the basis either of conduct or of lack of contribution to the marriage. (2) The husband had potential future losses to bear as a former member of Lloyd's. It was notoriously difficult to quantify or predict the amount of future claims in such cases. Different bases of valuation had been put forward by expert witnesses but it would in the circumstances be idle and foolish to choose between them. A figure of £325,000 would strike a just balance between the rival contentions and, in the context of the total assets, produce a fair result. (3) Taking into account the husband's substantial capital assets, the financial position and obligations of the parties, their standard of living, and all the matters set out in s 25(2) of the Matrimonial Causes Act 1973, the wife's needs were for a reasonable house at a cost of £460,000, with an adequate income to live on amounting to £36,000 pa. The lump sum required to produce that income, using a Duxbury calculation as a starting-point, with a real rate of return assumed at 4.25%, amounted to £575,000. In the absence of any special considerations the court would reject the rates of 3% or 5% contended for by the opposing parties, taking into account that the methodology of the Duxbury calculation in matrimonial cases differed markedly from personal injury cases in which a yield equivalent to that provided by Index-Linked Government Stock was now sometimes adopted. Personal injury cases might involve very long periods of dependence and demanded a risk-free investment. Moreover, 'an industry standard' fixed at 4.25% was desirable for the purposes of the Duxbury approach so as to avoid time being taken up in case after case by expert evidence as to the appropriate assumed rate of return. (4) Accordingly, the sum made up of £460,000 for the house, £35,000 for contents, £575,000 for an income fund and £13,500 for a car, totalled £1,088,500. On that basis the final award ordered would be £1.1m. (5) Working on the principle that costs should be taxed and paid on the standard basis unless there was some unusual feature to justify the more generous indemnity basis, and that even on the indemnity basis the amount of costs should not be unreasonable, the court would take an overall view of the case and the stages of litigation as follows: for the early stage until the pre-trial review on 5 April 1995, when the husband's unreasonable attitude must have set the tone of the proceedings, costs would be taxed on an indemnity basis. For the period from 5 April to 5 November 1995 where, in a hard-fought case, there had been nothing in the husband's behaviour to justify costs on an indemnity basis, standard costs would be paid. From 6 November 1995 to date, during which time the Calderbank correspondence had taken place, the fact that the wife had ultimately been awarded more than the husband's best offer would not normally provide a reason why the husband should pay costs on an indemnity rather than a standard basis. However, the fact that the award to the wife significantly exceeded her own offer was capable of justifying the award of indemnity costs from the date of that offer. Accordingly, the husband would be ordered to pay all the wife's costs after 6 November 1995 on an indemnity basis. NOTES: Statutory provisions considered Rules of the Supreme Court 1965 (SI 1965/1776), Ord 62, rr 3(4), 7(4), 12 CASES-REF-TO: B v B (Financial Provision) [1990] 1 FLR 20, FD Besterman, deceased, Re; Besterman v Grusin [1984] Ch 458, [1984] 3 WLR 280, [1984] 2 All ER 656, sub nom Besterman (Deceased), Re [1984] FLR 503, CA Calderbank v Calderbank [1976] Fam 93, [1975] 3 WLR 586, [1975] 3 All ER 333, CA Duxbury v Duxbury (Note) [1992] Fam 62, [1991] 3 WLR 639, [1990] 2 All ER 77, sub nom Duxbury v Duxbury [1987] 1 FLR 7, CA F v F (Ancillary Relief Substantial Assets) [1995] 2 FLR 45, FD Gojkovic v Gojkovic (No 2) [1992] Fam 40, [1991] 2 FLR 233, [1991] 3 WLR 621, [1992] 1 All ER 267, CA H v H (Clean Break: Non-disclosure: Costs) [1994] 2 FLR 309, FD Leadbeater v Leadbeater [1985] FLR 789, FD Leary v Leary [1987] 1 FLR 384, [1987] 1 WLR 72, CA Preston v Preston [1982] Fam 17, (1981) 2 FLR 331, [1981] 3 WLR 619, [1982] 1 All ER 41, CA Thomas v Brighton Health Authority (unreported) 7 November 1995 COUNSEL: Adrian Taylor for the husband; Barry Singleton QC and Lucy Stone for the wife JUDGMENT-READ: Cur adv vult PANEL: Holman J JUDGMENTBY-1: HOLMAN J JUDGMENT-1: HOLMAN J: At the outset of this judgment I would like to thank the advocates on both sides, not forgetting Miss Stone, for the very great assistance they have given me during the course of a complex and difficult case. Introduction and background The husband is now nearly 57. The wife is now nearly 56. She is foreign but was already living in England when she and the husband met. They married on 18 February 1972 when each was in their early thirties. I regard the marriage as having effectively ended in November 1994 when the wife's solicitors wrote to the husband saying that she wished to divorce and his solicitors replied that he was shocked by the decision. Thus the effective duration of the marriage was just under 23 years, which I regard as a substantial length amongst those marriages which ultimately end in divorce. Their one child, P, is now aged virtually 22. She is in full-time employment. Before the parties met, the husband had started his business in the supply of medical instruments and products which led to his present means. In 1982 the business was sold and the husband's share of the proceeds was about US$4.6m gross which has since been invested in various ways. The husband has continued to work in consultancy and other capacities in the general field of medical and scientific equipment and supplies. But in September 1993 his employer purported to dismiss him from an executive post and since then he has had little remunerative employment. The wife has not been in remunerative employment during the marriage, and says that the husband did not wish her to work. She contributed neither capital nor income at any stage to the marriage. During the marriage the parties have lived in three homes. From 1972 until 1980 they lived in a four-bedroomed house in Berkshire. In 1980 the husband sold this house and bought, in their joint names, another house also in Berkshire. Although it only actually has three bedrooms it is clearly a substantial house from the description in the sale particulars. Fairly soon after they moved in they built a swimming pool and sauna in the grounds. In October 1993 they bought, in their joint names, a good quality house which was in very poor condition. A huge amount of effort and about £500,000 in money has been spent on doing it up into the large and fine house which it is today. Meanwhile, in 1994, the Berkshire house was sold for £525,000. Whilst the new house was being done up the parties lived in a cottage in the grounds, and in fact it was only after the commencement of the divorce proceedings that they were able to move into the main house itself. Inevitably it must now be sold. Clearly, therefore, the wife needs sufficient capital with which to buy and equip an appropriate home. She has certain other capital needs, such as a new car. Any suggestion that at her age and with this background history she should now work is fanciful. So she needs an income-producing fund, both parties agreeing that this is obviously a clean break case. On her behalf, Mr Singleton QC has asked for a total of about £1.2m to £1.3m made up of £450,000 for a house, £30,000 for general removal and refurbishment costs, £13,500 for a new car (plus the trade-in value of her present one) and £700,000 as a Duxbury-type fund if a real rate of return of 4.25% is taken and £790,000 if a real rate of return of 3% is taken. On behalf of the husband, Mr Taylor has submitted that her reasonable needs total about £615,000 to £650,000 made up of £280,000 to £310,000 for a house, £10,000 for removal expenses, £310,000 to £320,000 as a Duxbury fund, and £13,500 for a new car. But the husband further contends that those figures should be discounted to reflect her alleged lack of contribution during the marriage and various alleged issues of conduct to which I will later refer. So the gap between the parties' open positions, at least, is very large. I regret that the proceedings got off to a very bad start. The wife's solicitors wrote a model letter on 14 November 1994 which I quote in full: 'I have been instructed by your wife, who has sadly reached the conclusion that your marriage is at an end and asked me to issue divorce proceedings. I would be grateful if you could write to me with the name and address of your solicitors as soon as possible in order that I might contact them to discuss divorce and future arrangements between you and your wife. I look forward to hearing from you shortly.' Unfortunately, the first action of the husband, through his solicitors, was to issue a behaviour petition and then to reply on 24 November 1995 as follows: 'I refer to your letter . . . I am instructed by [the husband. He] instructs me that, notwithstanding your client's withdrawal from the marriage for in excess of 10 years, he was shocked by your client's decision. He would certainly not, he instructs me, move to a vastly more expensive home a few months ago and spend vast sums on improving it largely to meet your client's demands had he known this was what she had in mind. In the circumstances, and to put the record straight, my client has issued a petition which will be on its way from the court to your client.' Since at that stage there was no 'record' to 'put straight' this was a very regrettable step which seems to have set the tone for all that has followed. The wife's solicitors endeavoured to propose a simple compromise of the suit on the basis of the husband's recent adultery. But his solicitors said that this was 'the purest speculation' and that the husband 'has no romantic association and is not prepared to facilitate an alternative cross-petition'. In fact he was by then in a romantic (if not by then sexual) relationship with a woman named A as well as having had a number of sexual relationships with other women. Further attempts by the wife to compromise the suit were all rebuffed until the very day of the pre-trial review at Reading County Court on 5 April 1995 by which time some thousands of pounds in costs had clearly been wasted in these skirmishes. By the time of the hearing before me the inter-solicitor correspondence ran to over 450 pages together with eight lever arch files of pleadings, documents and reports. By 19 December 1995 the wife's costs had reached £172,000 plus unquantified, but clearly substantial, fees from Savills and Coopers and Lybrand, so that her total bill will not be far short of £200,000. By 11 December 1995, which was the first day of the hearing, the husband's costs had reached £96,000. But with refreshers and solicitor's attendance throughout the ensuing 6 days, and with unquantified but also clearly substantial fees from Cluttons, Coopers and Lybrand and an expert, Mr Walker, his final costs look likely to exceed £110,000. So in all at least £300,000 has been spent on these proceedings. Of course, until I know the nature and content of any Calderbank correspondence I cannot properly judge where responsibility for all these costs lies. But it saddens me greatly that these two, decent people have been locked into a combat which has been so very financially as well as emotionally costly. During the hearing itself I observed each of them visibly wilt before me, and I am sure that for each of them it has been a terrible ordeal and strain. Contributions and conduct It is convenient to deal first with paras (f) and (g) of s 25(2) of the Matrimonial Causes Act 1973. There is no issue or doubt about the contribution of the husband in this case. Starting from very modest beginnings, he has worked very hard over many years and the assets which are now available to this family are entirely due to his business acumen and efforts. By way of defence to some of the allegations made against her, the wife says that the husband showed little interest in P, at least in the first few years of her life. But I do not think that is fair and I am satisfied that the husband took as much interest in P, and gave her as much of his time, as his busy work commitments and the demands which they made on his energies allowed. As for the wife, she does not suggest that she made any financial contribution or that she helped in any significant way with the business. But she says that she contributed fully to the welfare of the family by looking after the home and caring for P and the husband. The husband agrees that as a mother to P the wife played her part to the full. But he says that 'apart from that the wife has not been willing significantly to contribute to a marriage which has, for about 13 years, been a marriage in name only'. I quote from his affidavit of 10 April 1995, and in the ensuing page he elaborates his case. In essence he says that despite the provision of help in the house and garden she herself was unwilling to do anything for the husband. She would not give him breakfast or other meals; she discouraged his family and friends from visiting; and she gave him little or no support in business or other entertaining. Closely linked with this complaint is the allegation of conduct that to the husband's great distress she refused to have another child after P, and that she refused him all affection or sexual intercourse from about 1981. Having listened to extensive oral evidence from each of the parties I do not find the thrust of these allegations proved. I am quite satisfied that there was no lack of contribution by the wife, or conduct by the wife such as now to reduce or minimise her entitlement. I could discern no reason for disbelieving the evidence of the wife whereas I regret to say that on certain issues the husband has clearly been evasive or less than frank if not actually lying. His Lordship considered the evidence on various issues and continued: There was a specific issue about how much each contributed to overseeing the work at their new house. But this was resolved by the husband agreeing in evidence as follows: 'I put a great deal of work into the renovation . . . including immersing myself in technical detail, but I agree that she also took an interest and gave such help as she could.' Faced with the statements of a large number of witnesses on behalf of the wife to the effect that the marriage was a happy one, with the wife playing a full part, the husband said that this was merely because they kept up a good front for the sake of convention and appearances. He said, 'Externally we lived a life as a couple but internally we had separate lives'. He said he simply kept the marriage going for the sake of P. But I did not find this convincing; nor does it explain why he bought the house at great expense and then spent so much on it at the very time when P was leaving home. He initially maintained that he only did so under great pressure from the wife, but he later agreed as follows: 'We both liked [the house] very much. We were both keen to move there and do it up. My wife asked me whether we could really afford to do so. I told her we could.' I accordingly proceed to consider the case on the basis that this wife is, to use the rather unattractive but nevertheless expressive jargon of family lawyers, a 'fully entitled wife' and I shall make no discount in her award on the basis either of 'conduct' or other lack of contribution by her to this marriage. Equally, however, it is not suggested on behalf of the wife (and nor do I find) that she made any special or unusually great contribution (as for example in Gojkovic v Gojkovic (No 2) [1992] Fam 40, [1991] 2 FLR 233) so as to enlarge or increase her award. In his written closing submissions Mr Singleton suggests that I should 'take into account the general behaviour and attitude of the husband when considering where in the "bracket" within which the award properly lies, to fix the figure'. However, I decline to do this. The allegations made by the husband may be relevant when I come to decide costs. But I am not prepared consciously to increase the wife's award either to compensate her for having had to defend the allegations or to penalise the husband for having made them. Assets The nature and structure of the husband's assets is such that an attempt precisely to evaluate them is artificial. Overall, the assets in this case are in a bracket of £3m to £4m. A substantial part of the husband's assets is a portfolio administered by Goldman Sachs which is worth around £1.5m, but the value of which fluctuated quite substantially even during the course of the hearing due to currency and market changes. There are a number of pictures whose acquisition costs, in some cases many years ago, total £58,000 but whose present value is likely to differ quite markedly from this. In these circumstances disputes such as whether the value of the parties' leasehold interest in the London house is £167,500 (as the husband contends) or £175,000 (as the wife contends); and even whether the husband's freehold interest in a house formerly occupied by his father should be taken at £95,000 (as the wife contends) or at £70,000 to discount for the elderly father's tenancy (as the husband contends) are of no consequence. Similarly, it is idle and unnecessary to speculate whether the husband may ultimately succeed in his claim for damages for his purported dismissal from his employment. The litigation has a long way to go. At the very highest the claim is for £90,000 but meantime it is simply proving a heavy burden on the husband in legal costs. The only two issues of any significance as to capital worth are (a) estimating the husband's potential future losses as a former member of Lloyd's and (b) determining whether a deduction should be made for inherent capital gains tax within [a non-resident trust established by the husband]. (a) Lloyd's losses Potential future claims against Lloyd's underwriters are notoriously difficult to quantify or predict, the particular problem being to know what figure to ascribe to claims which have been incurred but not yet reported ('IBNR'). As Mr Singleton put it in his written closing submissions, 'It is not going to be possible (nor perhaps is it necessary) for the court to arrive at a firm figure for the liability'. On the evidence in this case the dispute has centred on two different approaches to the task of valuation of prospective losses. Mr JR Walker, an independent Lloyd's insurance consultant, gave evidence on behalf of the husband and put forward projected figures for the husband's potential losses on his particular lines in particular syndicates using the published projections of Chatset. Chatset has until recently been the only generally recognised organisation for establishing with any reliability possible future Lloyd's losses. Using Chatset figures the husband's overall exposure may be £454,288 on a best case, £514,288 on a worse case, and £484,288 on mid-range figures. On behalf of the wife, naturally desirous to minimise the prospect of future loss, evidence was given by Mr Hallums, a senior manager with Coopers and Lybrand who spends a considerable amount of his professional time dealing with valuing, for the purpose of taxation, Lloyd's losses. He acknowledged the historical and traditional authority of the Chatset figures, but suggested that a better basis now for evaluating the husband's potential future loss is the present plan for the reconstruction and renewal of Lloyd's by the establishment of a public limited company to be known as Equitas. At the moment this is no more than a plan strongly advocated by the Council of Lloyd's but subject to the acceptance of the affected underwriters. The object of the plan is in effect to reinsure past losses so as to quantify the loss for any particular name. But it does depend on names putting up more money and agreeing to drop all the current outstanding litigation against Lloyd's. As Mr Hallums said, some members will view Equitas as 'throwing good money after bad'. The Lloyd's Names Association's working party does not support the plan. Mr Walker said that within the Lloyd's market everyone would like to see Equitas come into being as a solution to the problems of Lloyd's but not if it is under-resourced. Thus, he said, the danger is that the Equitas figures are too low in the effort by Lloyd's to 'sell' the scheme to Names and that in effect the present Equitas proposals under-estimate IBNR. On the basis of the Equitas figures and figures produced by the husband's syndicates, his potential liability may be limited to around £142,000. Only time will tell how the problems of Lloyd's Names will resolve themselves. When so much is uncertain, and when the possibility of Equitas being established depends upon the voting of Names and on so many other 'political' factors, it would be idle and foolish of me to prefer one basis of valuation or the other. Further, the implications for tax repayment claims are complicated and speculative. If Equitas is established his ultimate exposure may be minimised but so also will the scope for tax repayments. In my judgment an allowance for the purpose of this case of £325,000 for future Lloyd's losses will strike a just balance between the contentions on behalf of each party and in the context of the totality of the assets will lead to an overall fair result. Even if that overstates the possible losses by £100,000 or even £200,000 it would not result in the award to the wife being less than it otherwise would be. Conversely, if it understates the future loss by £100,000 to £150,000 it will not lead to the wife receiving more than she otherwise would do. (b) CGT in the trust In their report dated 2 November 1995 Newby Crouch have estimated the husband's overall inherent liability to capital gains tax as being £147,188. To this must be added a further £40,740 from a revised calculation to take account of a revised agreed valuation for the London house. Thus the overall inherent capital gains tax is around £188,000. However, this calculation includes within it tax on capital gains within the trust, and since his personal capital gains are largely offset by capital losses the bulk of the £188,000 is in effect attributable to gains within the trust. The trust was set up by the husband as a tax-efficient method of holding part of his wealth within a non-UK resident trust. Since the relevant tax rules were changed in 1991 it would no longer be possible to do so again so it is highly tax-advantageous to him to keep the assets within the trust. There is a dispute as to whether the element of capital gains tax attributable to gains within the trust should now be deducted from an overall appraisal of the husband's wealth. The nature of the dispute is fully set out in Coopers and Lybrand's report dated 9 November 1995, and in paras 5(a) and 6 of an agreed joint statement by Coopers and Lybrand and Newby Crouch dated 1 December 1995. Put very shortly, the point is that the capital gains tax would not be payable if an asset is disposed of by the trust but only if a capital payment is made out of the trust to a UK resident beneficiary such as the husband. Thus, say Coopers and Lybrand: 'It is possible therefore that if the trust were left entirely intact in order to prolong the tax-efficient nature of the structure a liability to capital gains tax would never arise during [the husband's] lifetime, such liability falling due only when the reversioner became absolutely entitled to the trust assets on his death.' Newby Crouch say, on the same page: 'We agree with Coopers and Lybrand that the tax on realised gains of [the trust] can be deferred until a capital sum representing those gains is paid to a UK resident beneficiary. However, Newby Crouch consider that if the assets of [the trust] are included in the assets statement as part of [the husband's] personal wealth then the tax that would be payable in order to allow him to enjoy those assets personally should be taken into account. Otherwise the extent of [the husband's] wealth is overstated.' On this issue I agree with the approach of Newby Crouch. In my judgment it would be wrong to include the assets of a trust such as this as a liquid asset in the hands of the husband without making a deduction for the capital gains tax which would be payable if the asset was actually placed in his hands. If, alternatively, the asset is to be regarded as available for the use of the husband but not actually capable of being in his hands to use entirely as he wishes without tax penalty, then the value of the asset would have to be subject to an appropriate discount. I accordingly propose to treat the assets in the trust as if they are in all respects the assets of the husband but to deduct the capital gains tax inherent upon them. Summary of assets The remainder of the assets are either agreed or, as I have said, raise issues too small to require detailed consideration. His Lordship referred to the evidence about various assets and continued: In the circumstances of this case in which the husband is aged nearly 57 and his pension funds are available at age 60 to produce a mixture of capital (if he elects to commute within the permissible limits) and income, and in which those funds are only a small part of a total income-producing portfolio, I intend to regard the whole present value of the funds as a capital asset albeit that only part could ever be available to him as spendable capital. With those explanations, and taking a dollar-pound exchange rate where relevant of US$1.53 to £1.00 (as agreed) I take the overall capital as follows:
I propose to round-down that figure to £3,400,000 which I take as a reasonable approximation, fair to both parties, of the overall wealth of this husband apart from contents to which I refer separately below. Costs The above figures ignore both the costs so far paid by each party and the costs still outstanding. I do not intend to carry out an exercise in accordance with Leadbeater of adding back costs paid on account and then deducting only those costs which would be irrecoverable from the other party unless an order is made for indemnity costs. In part that is because I do not have complete and fully up-to-date information and in part because I have deliberately not broken down the capital into those parts which are the husband's and those parts (namely the country house and the leasehold interest in the London house) which are strictly joint. I simply record the facts as up to date as they are known to me. As of 19 December 1995 the wife had been billed and had paid £99,856 all of which she has financed by borrowing £100,000 from a bank. Her unbilled costs are a further £72,086 plus, as I have already said, unquantified fees due to Savills and Coopers and Lybrand. In his written closing submissions, Mr Singleton submitted that the so-called 'irrecoverable costs (Leadbeater) of the wife are such that the wife has debts of £46,000 which should be taken into account when fixing the award'. This is a reference to the element of her total costs which would not be recoverable on a taxation on the standard basis. But I specifically decline to take these into account as a debt since that would be in effect to provide for that part of her costs at this stage when I should only do so after judgment when I come to deal with costs. The husband had incurred costs up to 11 December 1995 of £95,827 plus unquantified fees to Coopers and Lybrand, WA Ellis, J Walker, Cluttons and Berwin Leighton. To date he has paid, either in settlement of bills or on account, £89,000. Incomes The wife has none and, as I have already said, in my judgment it is unreasonable now to attribute an earning capacity to her, still less to expect her to take steps to acquire one. The husband's main income is and will continue to be of course from his invested capital. But he continues to maintain an office and to employ an assistant in his endeavour to produce some income from consultancy and other entrepreneurial activities. He currently claims to have annual 'business expenditure' of £14,500. His tax returns show profit net of expenses from consultancy of about £26,000 in the year ending 5 April 1991, £27,700 in 1992, £6300 in 1993, and £9000 in 1994. On this basis I attribute a net earned income (before tax) of £10,000 pa for a period of a further 6 years by which time I see no reason why he should not fully retire if he wishes to do so. Financial obligations and responsibilities Although the husband has continued to meet considerable expenditure on P, particularly in relation to her horses, she is now 22, working full time and the beneficiary under a trust set up for her by the husband and now worth about £400,000. For the purpose of assessing the wife's claims it would in my judgment be wrong to regard P as a continuing financial obligation or responsibility upon the husband. It is also in my judgment wrong to regard the wife as having any continuing financial obligation or responsibility towards P, and in particular wrong to regard the wife as needing a home with sufficient land and stabling to keep P's horses. I thus regard the husband and wife as having no financial obligations and responsibilities save to each other. Neither party has any relevant physical or mental disability and there is no loss of pension or other benefits to either party of the kind contemplated by s 25(2)(h) of the Matrimonial Causes Act 1973. I have thus now referred to and taken account of all the factors listed in s 25(2) of the Matrimonial Causes Act 1973 other than the very important factors of the standard of living enjoyed by the family before the breakdown and of the needs of each party. These have been the subject of much evidence and much dispute. Standard of living I intend to deal with this fairly shortly. In my judgment the standard of living was that of a comfortable, middle-class family who made good use of the husband's means when they wished to do so but who were neither luxurious nor extravagant. For most of the marriage they lived in a comfortable, commodious, but not excessively large, quality house with privacy and a nice garden in a good area in Berkshire. Recently, of course, they moved to the house in which they have invested altogether about £1.4m. But I do not regard that house as a true measure of the standard of living taking the marriage as a whole. From 1982 they had the use of a London house, albeit that the wife herself only rarely stayed there. They were able to indulge P's interest in riding and to buy and maintain ponies for her. They were able to and did engage in their respective sporting interests of tennis in the case of the wife and golf at a good club and, rather expensively, shooting in the case of the husband. They went on occasions, but not immoderately, to the theatre or similar entertainments. They dined out when they wished but not usually particularly expensively. They each had cars, latterly of the Range Rover or Mercedes type. The husband's guns are by Purdy. He built up a pleasing but not extravagant collection of marine and other water colours and paintings. The wife had the benefit of daily staff in the house and in the garden. (I do not mean every day, but on a day rather than living-in basis.) They were able to enjoy good but not normally luxurious holidays abroad. In addition, the husband skied in the winter, sometimes with the wife, and the wife also visited her family abroad. They enjoyed the security of knowing that there was quite substantial capital available to them if they needed it. Needs The reasonable needs of the husband are neither more nor less than those of the wife. But as I intend to leave him with a substantially greater share of the capital than I award to the wife, and as for a period, as I have indicated, he continues to have some capacity to earn income which she does not, I can concentrate on the needs of the wife confident that what I leave to the husband will meet his own reasonable needs. (i) A home The first clear need of the wife is for a reasonable home. There has been much evidence about a range of alternative homes and of the cost of them. The experts instructed on each side agreed a summary of her housing criteria. His Lordship considered the evidence, and went on: Taking an overall view of the evidence in relation to alternative properties, I am satisfied that a reasonable home which broadly satisfies the criteria mentioned above, including a swimming pool, can be purchased without significant delay for £440,000 to which I add a further £25,000 for the costs of moving, some refurbishment and some alterations or redecorations to the wife's taste. I thus consider that the wife can be appropriately re-housed for £465,000. That figure stands in a reasonable relationship both to the Berkshire house which was sold in 1994 for £525,000 and to the freehold value of £625,000 of the London house which I understand that the husband intends to continue to use as his London home together with purchasing a cottage in the country. (ii) Contents It has been sadly characteristic of this case that a feud has continued to the very end in relation to contents, often in relation to some very small items. Even after the close of all the evidence and argument, and during the period in which judgment was reserved, a further 50 pages of schedules and correspondence have been created in relation to the issue of contents. This morning, before I was able to give judgment, we have had to spend a further period of between an hour and an hour and a half trying to sort out contents. The upshot is that as a schedule to the order the wife will receive the specific items of contents in a list attached to a letter from Manches & Co dated 10 January 1995 headed 'List of items offered by [the husband]', subject to various amendments which were made to that list this morning. In addition the wife will receive the specific paintings and water colours offered by the husband in a list headed 'Paintings list' which is schedule no 3 to a letter from Messrs Adrian JG Pellman, his solicitors, to the court dated 9 January 1996. So when the schedule is exhibited to the order it must have those particular paintings added to it. Even if the wife has all the items referred to in those two lists it does leave obvious gaps in her needs. I accept the submission this morning on the part of the husband that to some extent the wife has rejected items offered by him and asked instead to have further money with which to buy similar or substitute items. For example, she rejects the offer of the washing machine . . . and wishes to buy a new one. Even so, in my judgment there are gaps which she will need to fill by purchasing. Viewing the position in relation to contents as a whole, I propose to allow for the wife a further £3000 with which to buy a dinner service, £6500 with which to buy suitable dining room chairs, £1500 with which to buy kitchen equipment and utilities, and £9000 for other furniture, lamps and rugs generally. Those figures total £20,000. In addition she is likely to have to provide some, at least, curtains and carpets for her new home for which I propose to provide £10,000. Finally, in my judgment the total number of pictures offered by the husband to the wife does not yield to her a fair proportion of the whole. On the husband's own figures the pictures which he is keeping for himself are worth somewhere over £20,000 whereas those which he offers to the wife are worth just over £5000 plus the value of some water colours. In my judgment it would be reasonable for the wife to have in her hands a further £5000 with which to buy some more pictures. Thus, in addition to the items of contents and pictures on the lists to which I have referred, I ascribe to the wife £35,000 in order fully to furnish and equip her new home. (iii) An income fund (a) Annual need The starting-point has to be a consideration of the wife's reasonable annual income needs. The attitude of judges to budgets notoriously varies. There are those who regard them as little more than advocacy or 'flourishes of the lawyer's brush', to quote a vivid phrase of Wilson J, and there are those who find them a useful tool. Personally, I regard them as an important starting-point. Of course they do tend to be produced by lawyers and accountants, and often that is inevitable since the wife may have no personal experience of budgeting, at any rate in her changed circumstances as a single person. Of course many given figures in a budget can be dismissed as figures taken out of the air. But at least they provide some calculated and reasoned basis for the overall figure which otherwise is even more taken out of the air. What should be avoided by lawyers on both sides is an unrealistic attempt to over- or understate the figures as the case may be. The wife's advisers have produced a schedule of estimated annual expenditure and amplified by a detailed breakdown of the figures. The claimed total is £43,289. The husband says that this is far too high and claims (a) that the parties never lived at the level proposed on behalf of the wife, and (b) that his own proposed reasonable expenditure is far less. He proposes a budget for the wife of £25,000 to £26,000 and for himself of just under £36,000 (see the total of £38,505 from which I have deducted the £2700 referable to his father). But the husband's own 'Analysis of expenditure 1994' clearly shows personal expenditure by the husband of at least £80,000 in that year after deducting legal costs, pension payments and support for his father, but adding back part of the outgoings on the London house and some other of the expenditure under his heading 'Joint'. He describes his 'normal shooting costs' as £13,236 and in addition incurred exceptional shooting costs on a safari of £18,000. I have already referred to the fact that he has clearly spent more on his several holidays this year with A than he suggests in his schedule. In any event that schedule totals £4330 against a figure of £2000 in his budget for himself. Using the wife's budget (which is very comprehensive) as a basis I make the following comments. The suggested amounts of £800 for each of the telephone and electricity and gas seem high, and I would reduce the combined total for these three items by £500. £10,400, or £200 a week, for food and housekeeping for a single person seems unnecessarily high, and I would reduce this item by £2600 (ie to £150 a week). I would reduce the clothes allowance from £4000 to £3000; entertainment/subscriptions from £2000 to £1500; travel/holidays from £5000 to £4000 and presents/miscellaneous from £2000 to £1000. These deductions total £6600 which would reduce the claimed total to £36,689. But there are other items which may be regarded as on the generous side. For example, provision of £10,000 for entirely redecorating the interior of the house every 7 years, provision for a gardener for a whole day every week, or (although a trifling sum) provision for a window cleaner as often as once a month. Viewing the budget and the facts of the case in the round, and emphasising that how she apportions her available spending money is of course a matter for the wife, I consider that a reasonable net income requirement for the wife is £36,000 pa. (b) Income-producing fund I cannot stress too strongly that I regard a Duxbury calculation as a starting-point or guide and in no way as determinative of an appropriate capital award in lieu of maintenance. In particular it is well known that the Duxbury approach can have a very distorting effect both in the case of a relatively young wife after a relatively short marriage and in the case of a relatively old wife after a long marriage. In the former case it produces too high a figure in proportion to the length of the marriage. In the latter case it may well produce a rather low figure which fails adequately to reflect a long marriage. It happens that in this case the age of the wife (and hence her assumed life expectancy) and the length of the marriage are each such that the Duxbury approach does produce a reasonably proportionate figure. The method of the Duxbury approach is now far too deeply engrained in matrimonial practice for me to need to describe it, and figures have been produced in this case which it is agreed reflect, mathematically, the conventional approach (including making provision for receipt by the wife of the State old-age pension to which she will be entitled when she is aged 60). There is only one area of dispute, namely as to the real rate of return which should be assumed. The real rate of return is found by adding the assumed income yield and capital growth and deducting the assumed rate of inflation. In the present case the husband contends for an assumed real rate of return of 5%. When he prepared and opened the case Mr Singleton contended for 4.25%. However, once it was clear that the real rate of return would be a live issue he was emboldened to submit that I should take a real rate of return of as low as 3%. The effect of these different proposed rates on a Duxbury calculation based on £35,000 net need (for which I have precise figures available) is as follows. If the assumed real rate of return is 3% then a capital sum of £621,452 is needed, if 4.25% then the capital sum is £556,810, and if 5% then the capital sum is £508,160. So the difference between 3% and 5% is to reduce the required capital by over £100,000. In support of 5% the husband called Mr Mainz of Coopers and Lybrand, it being agreed that this involved no conflict of interest with the involvement of other members of that firm on behalf of the wife. The distinction of Mr Mainz in this field is well known to me and to any lawyer experienced in the field of larger financial cases. He is a partner of Mr Lawrence who, I believe, originally devised the Duxbury calculation and who has given evidence about it in many cases. Mr Mainz stressed, of course, that his views and the evidence which he gave are his own and that there is no 'official' Coopers and Lybrand view. I entirely accept this. But in other cases Mr Lawrence has contended for 4.5% and it cannot be conducive to a consistent approach that the evidence in a case depends not merely upon which firm of accountants is instructed but upon to which partner in the litigation support team of that firm a particular case happens to be allocated. Nevertheless, in the present case the expert who gave the evidence was Mr Mainz and I must consider his evidence. It is relevant to stress that Mr Mainz does not base his evidence or his view on any recent market or economy changes. In other words, the data which underpin his view, and accordingly his conclusion that 5% should be taken as the assumed real rate of return is just the same now as it would have been, say, a year ago. Although many Duxbury calculations assume that capital growth and inflation will be the same, so that any dispute revolves around yield, it is actually in the area of growth that Mr Mainz contended for the higher real rate of return in the present case. By his report dated 15 November 1995 he selected and proposed income yield of 4%, inflation of 3% and capital growth of 4%. The Financial Times All Share Index is currently and historically showing a dividend yield of around 4%. But he says that a well-managed fund should achieve annual growth which is 1% higher than inflation. Mr Mainz produced tables showing the level of the Financial Times All Share Index over a 30-year period since 1965 and also in the shorter period from 1983 to date. The latter table shows an overall increase in the value of the shares which, after adjusting for inflation, is the equivalent to a real increase of about 7% to 8% each year. However, some provision then needs to be made for commission and dealing costs, and he concludes that a well-managed fund should comfortably be able to produce an average growth of 4% and hence on his figures an overall real rate of return of 5%. He says that to go below a real rate of return of 5% is 'an unusually low target for a competent portfolio manager'. By reference to the 30-year table he suggests that one needs to go back to the mid-1970s for really serious falls in the value of shares such as markedly to reduce his proposed rate of growth. But in fact even the table from 1983 shows some bad as well as some extremely good years. Thus, although the year to 31 December 1989 saw a real gain of 22.31%, the following year saw a real fall of 23.61%. In my view Mr Mainz's proposed real rate of return assumes an unacceptably high degree of risk for a woman in the position of the wife for whom (at least notionally) her invested capital sum is her sole source of income for the rest of her life. Mr Singleton's alternative contention of an assumed real rate of return of 3% is based not on expert evidence but on submissions based on recent developments in the field of damages for personal injuries. Since 1981 it has been possible to make a risk-free investment in Index-Linked Government Stock (ILGS) whose capital growth and yield at any time are adjusted to match the rate of inflation as established by the Retail Price Index. The return on ILGS is approximately 3%. The 'Ogden Tables' (whose admissibility in actions for personal injury is now put on a statutory footing by s 10(1) of the Civil Evidence Act 1995) are based on the return provided by ILGS, namely 3%. It is, however, important to record the reasoning of the Ogden Working Party in their introduction to the Tables where they state: 'The working party concluded that the following arguments could not be faulted. The courts seek to put the wage-earner or, if he has been killed, his dependant into the same financial position as if the accident had not happened. Investment policy, however prudent, involves risks and it is not difficult to draw up a list of blue chip equities or reliable unit trusts which have performed poorly and in some cases disastrously. Index-Linked Government Stocks eliminate the risk. Whereas, in the past, a plaintiff has had to speculate in the form of prudent investment by buying equities or "a basket" of equities and gilts or a selection of unit trusts, he need speculate no longer if he buys Index-Linked Government Stock. If the loss is, say, £5000 pa he can be awarded damages which, if invested in such stocks, will provide him with almost exactly that sum in real terms . . . For these reasons the working party concluded that the fairest approach to the problem is to work on the basis of multipliers calculated upon the basis of presumed investment in Index-Linked Government Stock.' In the recent personal injury case of Thomas v Brighton Health Authority (unreported) 7 November 1995 in which he gave judgment (of which I have a transcript), Collins J adopted the same approach. It is important to note that the case concerned damages for a seriously injured child, now aged 6, whose capacity to fend for himself will be gravely impaired for the rest of his life (whose expectancy was treated as being a further 54 years to age 60). At p 11 of the transcript Collins J said: 'The purpose of an award of damages in a case such as this is to provide for the plaintiff a sum which will cover his anticipated needs and compensate him for his loss of earnings until death or retirement. The exercise is carried out by applying a multiplier based on the number of years the sum, if invested at X%, will last. It represents the capital value of an annuity certain for the period in this case of 54 years until the plaintiff reaches the age of 60.' At p 14 he said: '. . . the evidence before me persuades me that consistently with the requirement that damages should compensate and provide so far as possible that the plaintiff is put into the position he would have been in but for the defendant's negligence, it is right to take account of the ILGS.' At p 15 he said: 'I am not impressed with the argument espoused by Mr Dickerson that the prudent plaintiff will invest in equities and obtain 4%-5%. So long as the courts assume such an investment in fixing the multiplier plaintiffs will be forced to invest in that way to prevent the money running out. The argument is thus circular. The court will not consider what an individual plaintiff may choose to do with his money. He may decide to seek a larger return, but at least the sum available should be sufficient to cover the risk involved in doing so.' In my view, even if that be the correct approach in personal injury cases, there are a number of reasons why it does not follow that an assumed real rate of return of 3% should also be adopted for the purpose of Duxbury calculations in matrimonial ancillary relief cases. First, as Mr Mainz said, the methodology of the Duxbury calculation differs markedly from that in personal injury cases which still depend on the application of a multiplier. Secondly, personal injury cases may often involve very long periods of 'dependency' (eg in Thomas itself there was an expectancy of a further 54 years). Mr Mainz commented that it is an overly prudent policy to contemplate investment entirely in ILGS for the lesser time-scale of up to, say, 30 years that is usually involved in matrimonial cases and is involved in this case in which the life expectancy of the wife is about 26 years. Thirdly, the premise in personal injury cases as reflected in the passages from the Ogden Working Party and in the judgment of Collins J which I have quoted above, is that a person who has been injured by tort should be put in the same position so far as possible as if the tort had not happened. He should not be expected to have to assume any risk at all. I do not consider that the same premise applies in the typical matrimonial case where, during the marriage, the finances of the parties may usually be at some risk from the vicissitudes of life. Certainly in the present case the main source of the family's income for some time has been the investment portfolio in Goldman Sachs which certainly has not had the freedom from risk of ILGS. The husband will no doubt continue to invest in a similar sort of way. I do not consider that I should assume for the wife a totally risk-free investment. I thus reject each extreme of 5% and 3% for the reasons given above. But in addition there are positive reasons based on consistency of approach why I should select an assumed real rate of return of 4.25%. I stress that there may from time to time be cases whose particular facts justify a higher or lower assumed real rate of return and expert evidence in support thereof. An obvious example would be if a wife was going to live abroad and might accordingly reasonably be expected to invest there. Another example might be if a wife was so old or incapacitated that she could not reasonably be expected to give any management at all to her income-producing fund. Another example might be if the wealth and security of the husband was so great that the wife could indeed be expected to be free from all risk (although in the case of F v F (Ancillary Relief: Substantial Assets) [1995] 2 FLR 45 I understand that calculations were used reflecting a real rate of return of 4.25%). But none of these particular considerations apply to this case. Evidence would also of course be justifiable if there is a relevant change in market or economic conditions. But, as I have said, the evidence of Mr Mainz in this case was not based on any such change but based indeed on an appraisal of the last 30 years. Leaving aside special considerations, in my judgment it is not desirable that in case after case time should be taken up and expense incurred in having one (as in this case) or even two (as in many other cases) experts give evidence about an appropriate assumed real rate of return. This is all the more so when, as cannot be stressed too strongly, a Duxbury calculation is merely a starting-point or guide to one component of an overall lump sum award upon which all the s 25 considerations impact. Although I am a member of the editorial committee of At a Glance (FLBA) I was not the author of 'Reflections on Duxbury' to be found at the beginning of the 1995 edition. But I agree with its reasoning and its conclusions. In my view it is important that there should indeed be 'an industry standard' for the purpose of the Duxbury approach and in my experience that standard has already settled at around 4.25% although as long ago as B v B (Financial Provision) [1990] 1 FLR 20 Ward J in fact adopted the slightly lower real rate of return of 4%. A Duxbury calculation in this case, using a real rate of return of 4.25%, produces a capital sum of about £575,000 for an assumed net income need of £36,000. (iv) A car On the evidence the wife requires £18,000 with which to purchase a suitable new car. The car which she presently uses has a trade-in value of £4500. So on the basis that that car is transferred to her she needs a further £13,500 for a new car. An overview of the case Thus far I have identified the following capital needs: (i) £465,000 for buying, refurbishing and moving into a new house; (ii) £35,000 for additional contents; (iii) £575,000 for an income fund on a strict application of the Duxbury approach as already discussed; and (iv) £13,500 for a car. Those figures total £1,088,500. But it is important that I now take an overall view of all the s 25 factors and of the case generally. 'Needs' is only one of the factors. The length of the marriage, the overall resources and all other factors need to be brought into just proportion. In my judgment a final award which is fair and just to both parties is £1.1m. The additional £11,500 above what I have identified above may be viewed as a margin in case I have erred in my assessment of any of the individual components of the award or as extra provision of the Besterman type. But in addition, in my judgment, that final figure of £1.1 m represents a just overall proportion of the assets in the context of this case and one consistent with many decided cases. It is just under one-third of the total assets which I have assessed as being around £3.4m. There is of course no magic in one-third or any other proportion, but I see no reason why in this case, after this marriage, this wife should receive less than that. The husband will be left with £2.3m less any costs that he is ordered to pay. The justification for the fact that he will remain substantially better off than the wife is that the wealth results from a business which he had started even before the parties met, to which she has contributed nothing, and which prospered due to his acumen and effort. I will hear submissions as to detailed arrangements for payment of the lump sum and for interim provision. If the husband is willing to pay £1.1m straightaway and the wife to vacate then I shall make an order in that precise sum in full and final settlement. If, however, he wishes to pay it out of the proceeds of sale of the house then I agree with the approach in Mr Singleton's written closing submissions that an element of the lump sum in addition to the £1.1m should be one half of the amount if any ('the excess') by which the gross proceeds of sale of the house exceed £1.2m (its present agreed value) less one half of the costs of sale referable to that excess. This will properly reflect the wife's existing half-interest in the property, protect her against any rise in house prices and give the parties an equal incentive in getting the best price reasonably obtainable. The husband will need to continue to pay all the outgoings until completion of the sale and to make interim periodical payments at the rate of £1250 per month to cover the wife's personal expenditure. In addition, the lump sum must bear interest at the rate of 8% pa if not paid in full within 6 months. As a further alternative, I will consider any submissions that the wife's claims for ancillary relief be disposed of by the transfer of the house to the wife now upon payment by her to the husband of £64,000, being the difference between £1.1m and the agreed equity. Such an order would give her the benefit of total control of the sale but would of course mean that she had to finance the running of the property until completion of sale. The wife has an existing interest under the non-resident trust under the terms of which the funds pass to her absolutely after the death of the husband. Plainly she cannot continue to benefit from that interest after the lump sum has been paid to her. However, as Coopers and Lybrand point out in their report of 9 November 1995, numerous tax consequences will flow depending on how her interest is disposed of. She must accordingly agree to assign or relinquish her interest under the trust in whatever way is requested by the husband and is most tax-effective; upon the cross-agreement of the husband to indemnify her against any liability to capital gains tax to which she may be exposed as a result of such assignment or relinquishment. After an adjournment his Lordship heard submissions on costs. He went on: (1) Costs I gave judgment in this case on 12 January 1996 but argument as to costs had to be adjourned for lack of time. Since then I have been supplied with a bundle of the Calderbank correspondence which, although confined within the period 30 October to 23 November 1995, ran to 36 pages and I have been supplied with 20 pages of detailed written submissions which were amplified by oral argument on 26 January 1996. In the light of the Calderbank correspondence it has sensibly and appropriately been conceded on behalf of the husband that the wife should have her costs throughout these proceedings. As I will relate, his best offer fell substantially short of the final award. The hotly contested issue is whether the basis of taxation should be the standard or the indemnity basis. Mr Singleton did submit that I should cut through all further argument, and avoid what will probably be a prolonged and expensive dispute on taxation, by assessing the amount of the wife's costs under the provisions of RSC Ord 62, r 7(4) and in accordance with the authority of Leary v Leary [1987] 1 FLR 384. But her final bill is now around £228,500 inclusive of all professional fees and disbursements and, of course, it was implicit in Mr Singleton's submission that I should assess her costs in an amount reasonably close to that figure. As I made clear during argument, I decline to do that. No itemised bill has yet been produced and in any event to assess costs even remotely of that magnitude would presuppose on my part experience in the field of taxation of costs that I simply do not have. A bill of this size deserves scrutiny on behalf of the husband by his advisers and, if agreement cannot be reached, by the process of taxation. I would risk serious injustice to him if I assessed the costs. The discretion as to the basis of taxation is a wide one. However, it is quite clear, and I proceed on the principle that, costs should be taxed and paid on the standard basis unless there is some special or unusual feature in the case to justify the more generous indemnity basis. This follows from the terms of RSC Ord 62, r 3(4) which provides: 'The amount of his costs which any party shall be entitled to recover is the amount allowed after taxation on the standard basis . . . unless it appears to the Court to be appropriate to order costs to be taxed on the indemnity basis.' There therefore has to be something special or unusual about the case such that 'it appears to the Court to be appropriate to order costs to be taxed' on the non-normal and more generous basis. Although the comments of Brandon LJ in Preston v Preston [1982] Fam 17, 39A, (1981) 2 FLR 331, 349A were based on different wording in the then Rules of the Supreme Court, they appear to me to be still in point when he said: '. . . I do not consider that the power to order costs to be taxed on a common-fund basis is intended to be exercised arbitrarily or whimsically. On the contrary, it appears to me that it is necessary, before the court departs from the general basis of taxation . . . and directs taxation on the more generous basis . . . that there should be some special or unusual feature in the case to justify the court in exercising its discretion in that way.' In the same case at 29E and 340B respectively Ormrod LJ said there had to be 'a particular reason for departing from normal practice'. In the case of H v H (Clean Break: Non-disclosure: Costs) [1994] 2 FLR 309, 322H and 323A Mr Rodger Hayward-Smith QC, sitting as a deputy judge of the High Court, described an indemnity costs order as 'Draconian', at any rate in the circumstances of that case. But in my judgment it is important not to overstate how severe is the effect of an indemnity order or how exceptional the case needs to be before one is made. It is worth quoting in full the provisions of RSC Ord 62, r 12 which define the difference between the two bases of taxation: '(1) On a taxation of costs on the standard basis there shall be allowed a reasonable amount in respect of all costs reasonably incurred and any doubts which the taxing officer may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the paying party; and in these rules the term "the standard basis" in relation to the taxation of costs shall be construed accordingly. (2) On a taxation on the indemnity basis all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred and any doubts which the taxing officer may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the receiving party; and in these rules the term "the indemnity basis" in relation to the taxation of costs shall be construed accordingly. (3) Where the Court makes an order for costs without indicating the basis of taxation or an order that costs be taxed on any basis other than the standard basis or the indemnity basis, the costs shall be taxed on the standard basis.' On taxation on the indemnity basis the receiving party is given the benefit of any doubts. But even on the indemnity basis the amount of the costs and the incurring of them must not be unreasonable. So an order for taxation on the indemnity basis does not give the receiving party carte blanche to claim any item or fee, and there can and will still be careful scrutiny of the bill. Nor is the indemnity basis the same as that on a taxation between a solicitor and his own client. So a receiving party may still be left out of pocket even after an order for indemnity costs. In support of his application, Mr Singleton submits that the case has generally been conducted by the husband in an aggressive, pressurising and stubborn way throughout. He also points to certain particular issues on which he says the husband's approach to the case has been particularly misguided, in part untruthful and generally conducive to much higher costs being incurred. In particular he relies upon the husband's attitude and allegations as to contributions and conduct, and as to the assessment of the wife's reasonable income and housing needs. There are also certain specific complaints of evasiveness (the husband was slow to acknowledge that the non-resident trust should be treated as an asset of his) and delays. Mr Taylor for the husband counters this by pointing to certain allegations made by the wife herself which either were not pursued (for instance, an allegation that the husband had deliberately injured a bird in order to upset the wife) or on which I found against the wife (for instance, that the husband had shown little interest in P when she was young). He also points out that the wife's own initial proposal for her budget of £55,000 pa was on any view unreasonably high, and he submits that there were some delays on the part of the wife. As to the inter-solicitor correspondence he submits that 'at worst, honours are even for length and frequency and combativeness of letters'. That submission is elaborated by the husband's own solicitor, Mr Pellman, in an analysis of the correspondence. As an alternative to his submission that the wife should have her costs on the indemnity basis throughout, Mr Singleton submits that at any rate she should have them on that basis in relation to specific areas or issues in the case such as that of conduct and contribution. But because it would be complex and conducive of much argument on taxation to try to apportion many items to specific issues, he suggests that a practical way of doing this would be to order that all the costs be taxed on an indemnity basis but that I should direct that the husband only pay a stated percentage of the costs so taxed. In my judgment it would be wrong and unwise of me, at least in this case, to try to single out specific areas or issues as attracting costs on the indemnity basis. The fact that one party has succeeded on a particular issue is not of itself a reason for ordering indemnity costs on that issue. Indeed if I were to do that I would have, in fairness to the husband, to consider giving him his costs, or at the least to disallow the wife's costs, on certain issues on which he succeeded -- for example the issue as to whether the inherent liability for CGT should be deducted when assessing the value to the husband of the trust. In my judgment I should take a more overall view of the case and of the stages of the litigation. Doing that, I have reached the following conclusions. (i) The suit and the early stages until 5 April 1995 In the introduction to my judgment on the substantive application I have already referred in some detail to the husband's initial approach to this divorce and to the conduct of the suit itself. That was finally resolved at the pre-trial review at Reading County Court on 5 April 1995. On that occasion Deputy District Judge Edwards gave directions enabling the suit to proceed undefended and in relation to ancillary relief. He ordered that the costs of the pre-trial review and of the directions as to ancillary relief be adjourned to the trial judge of the wife's financial claims. As part of the compromise the prayers for costs in the petition and answer were each deleted and plainly it was agreed that there should be no order as to the costs of the suit itself. But the unreasonable attitude of the husband to the divorce must have coloured and affected the approach of the wife's advisers to these proceedings generally at that stage. In my judgment the appropriate order for me now to make in relation to the costs specifically adjourned on 5 April 1995 is that they be the wife's costs, to be taxed on the indemnity basis if not agreed. Further, all costs of the wife save insofar as they are specifically referable to the suit (as to which there is no order as to costs) should also be paid by the husband and taxed on the indemnity basis up to and including 5 April 1995. (ii) The period between 6 April 1995 and 5 November 1995 Taking an overall view of the course of this case during this period I have concluded that it can best be characterised as a 'hard-fought case' and in my judgment there is nothing sufficiently special or unusual about the case to justify that the husband should have to pay the wife's costs on the indemnity rather than the standard basis. So in relation to all costs incurred by the wife between 6 April and 5 November 1995 inclusive, the husband is to pay them on the standard basis. This applies also to any counsel's fees incurred between those dates, including of course brief fees for the hearing before me on 25 October 1995. I do, however, certify that that hearing and this case generally was fit for two counsel throughout. I stress for the avoidance of any doubt that assessment of the reasonableness of the work done and of the fees charged both by the solicitors and counsel in this period is entirely a matter for the taxing officer. It may be that all the fees and expenses charged are reasonable in which case, of course, the wife is to have them in full. But the approach of the taxing officer is to be that of the standard rather than the indemnity basis. (iii) The period from 6 November 1995 to date It is now necessary to refer, although not in detail, to the course of the Calderbank correspondence. The husband's first Calderbank offer in this case was made on 30 October 1995. In essence, he offered a lump sum of £755,000 plus standard costs. That offer was increased by stages to the husband's final offer on 10 November of £851,000 plus standard costs. But meantime, on Friday, 3 November 1995, the wife had stated that she would accept £950,000 plus standard costs in full and final settlement of her claims (plus some contents). On 10 November 1995 she reduced the figure to £925,000. The fact that a wife is ultimately awarded more than the husband's best Calderbank offer frequently results in him having to pay her costs, that being the 'starting-point' in this type of case: see Gojkovic v Gojkovic (No 2) [1992] Fam 40, 57B, [1991] 2 FLR 233, 236E. But it is not normally a reason why the husband should have to pay her costs on the indemnity rather than the standard basis. In this case I make it crystal clear that I do not regard the fact that the wife has gained substantially more (some £250,000) than the husband's best offer as a sufficient reason for ordering any part of the costs on the indemnity basis. However, different considerations apply when the ultimate award also significantly exceeds the figure at which the wife bona fide offered to settle. Mr Singleton has frankly said that the wife's advisers: '. . . realised that it was unlikely that the husband would make a reasonable offer and that, therefore, the case was unlikely to settle. The wife's offers were in part tactical, pitched low in the expectation of using them on costs. Nevertheless, such was the concern about costs that it was felt that if the assumption that the husband would not settle was wrong, and the husband did offer £950,000 (or £925,000), at least the wife would avoid all costs and the argument about their recovery, as well as avoiding the normal risks of litigation.' In my judgment these were clearly bona fide offers by the wife which would have led to settlement if the husband had accepted them. In the event, the wife has achieved £150,000 more than she was prepared to accept on 3 November 1995 and £175,000 more than on 10 November 1995. Those offers were deliberately made (as was made clear to the husband in correspondence) before formal delivery of briefs and the incurring of brief fees for the main hearing, which were incurred at 4 pm on 10 November 1995. That date was eminently reasonable in relation to a 7-day hearing, involving considerable preparation and due to begin on 11 December 1995. In my judgment the fact that the award to the wife significantly exceeded her own offer does afford a special reason which is capable of justifying that, since the date of that offer, she should receive indemnity costs. Further, taking the facts and history of this case as a whole, it is in my judgment just that she should do so. Mr Taylor submitted that '. . . the award to the wife so substantially exceeds her Calderbank position as to support the contention that the wife will be able to meet all her reasonable needs with an award of costs on the standard basis'. I firmly reject that argument. In Gojkovic v Gojkovic (No 2) (above) at 59A and 238E respectively, Butler-Sloss LJ said that '. . . Calderbank offers require to have teeth in order for them to be effective'. Few things could be more damaging to the incentive to wives to make reasonable offers than an approach of the kind advocated by Mr Taylor. On the contrary, it seems to me particularly important that where a wife has made a moderate offer in a genuine attempt to settle the case, her offer has been rejected and she then gains more, the value of that 'gain' should not be eroded by costs unless they are unreasonable as to either amount or kind. I am fortified in this view by, although I reach it independently of, the Woolf Report on Access to Justice, chapter 24, para 9. Accordingly the husband is to pay all the wife's costs on and after Monday, 6 November 1995 on the indemnity basis. That includes, of course, the brief fees and refreshers in relation to the main hearing and to the hearing as to costs, and will include all other preparatory costs, such as the preparation of bundles, incurred after that date. This choice of date may pose some difficulty in relation to the fees of Savills and Coopers and Lybrand whose main reports were respectively dated 10 and 9 November 1995. They will have to prepare bills breaking down the work done up to and after 5 November 1995 respectively. In principle their fees should be taxed on the standard basis. But all work could have been stopped or put 'on hold' if the wife's offer had been accepted and, consistent with the view I have taken about this period generally, the wife should not be out of pocket in relation to any professional fees incurred on or after 6 November 1995. The exercise of Mr Adams-Cairns of Savills in preparing a report as to the cost of a new home for the wife was clearly embarked upon before 5 November 1995. So the reasonableness of the scale of it needs to be judged from a standard basis perspective and it is on that basis that fees incurred on or before 5 November 1995 must be taxed. But if he continued to do chargeable work on or after 6 November 1995 which could have been avoided, then that work is to be taxed on the indemnity basis and, accordingly, paid for by the husband save insofar as the work done or the amount charged was unreasonable. (2) Conduct of sale There are two other issues upon which I must rule before the detailed drafting of the order can be finalised. Each relates to the conduct of the sale of the house and will, of course, only arise if the wife remains in occupation pending completion rather than receiving her lump sum in full and vacating and transferring her interest to the husband now. There is a dispute as to the choice of estate agents and a dispute as to the choice of solicitor. Since each professional would be jointly instructed and could only act on the joint instructions of both owners of this jointly owned property I consider the dispute somewhat petty. However, since neither party seems willing or able to trust the professionalism of any firm which has been connected in any way with the other party, I rule that in the absence of other agreement between the parties, the estate agents on the sale shall be Messrs Knight Frank who will, initially, be sole agents. The solicitors on the sale shall be a firm of solicitors, having an office not more than 20 miles from the house, with an established practice in conveyancing and with no prior connection with either party. In default of agreement within those parameters, a firm is to be nominated by the President of the Law Society. I appreciate the force of the arguments why, if the wife does remain in residence, her matrimonial solicitors, Messrs Manches & Co, should have the conduct of the sale. But, unless the husband agrees to it, that will simply be a recipe for further strife. DISPOSITION: Orders accordingly. SOLICITORS: Adrian JG Pellman for the husband; Manches & Co for the wife |