Brooks v Brooks

The House of Lords held that a private occupational pension scheme may, in appropriate circumstances, constitute a "post-nuptial settlement" within section 24(1)(c) of the Matrimonial Causes Act 1973 so as to be amenable to a court's variation order on divorce. The court will look at the scheme as a whole and the settlor's purpose in establishing it; where the scheme was intended to provide tax-efficient provision for the husband and his wife, the benefits (including those payable initially to the member) can form part of the marriage settlement. However, funds which legally belong to the employer (for example, a surplus refunded to the company under the scheme rules) do not form part of the settled property and are outside the section 24(1)(c) jurisdiction. The House therefore upheld the power to vary the scheme so far as the settled property was concerned but declined to treat the employer's surplus as settled property.

This appeal concerned ancillary relief following the breakdown of a long marriage. The principal assets included the matrimonial home and several occupational pension schemes of the husband. The wife sought financial provision; the district judge ordered part of the house proceeds to the wife, periodical payments and varied one of the husband's pension schemes under section 24(1)(c) of the Matrimonial Causes Act 1973 to provide immediate and deferred pensions for the wife.

The husband appealed. On appeal to the judge (Ewbank J.) the lump sum award from the house proceeds was reduced; the judge dismissed the husband's challenge to the pension variation. The Court of Appeal dismissed a further appeal ([1994] 3 WLR 1292), with Hoffmann L.J. dissenting on the point whether the scheme was a post-nuptial settlement and whether any surplus belonged to the company. The House of Lords was asked to determine whether the court has jurisdiction under section 24(1)(c) to vary the terms of an occupational pension scheme and, if so, the extent of that jurisdiction in relation to any surplus belonging to the employer under the scheme rules.

The issues framed were:

• whether the pension scheme in question was a "post-nuptial settlement" within the meaning of section 24(1)(c);
• whether any surplus money arising under the scheme (by reason of rule 7) formed part of the settled property and therefore could be varied by the court;
• the appropriate remedial order if the court had jurisdiction over the scheme.

The House analysed the statutory concept of "settlement" in its statutory and factual context, emphasising a purposive approach to section 24(1)(c). The court considered the scheme in the round, including rules permitting provision for dependants and discretionary death benefits, and concluded that the husband established the scheme to provide for himself and his wife so that the scheme amounted to a marriage settlement. The House distinguished those parts of the scheme which were properly part of the settlement from the rule 7 surplus, which legally belonged to the company and did not form part of the settled property. The appropriate remedy was to vary the scheme so that the pensions ordered for the wife were provided in priority to, and if necessary in diminution of, the pension payable to the husband, thereby placing on the husband the burden of resolving any company or creditor complications.

The Lords emphasised that this decision was not a general solution to the wider problem of pensions on divorce: many schemes will not be marriage settlements; multi-member schemes raise additional difficulties; and in many cases comprehensive legislative reform would be required to enable wide-scale splitting or transferring of pension rights.

Appeal dismissed. The House held that the particular occupational pension scheme, viewed in the round and in the context of the husband’s purpose in creating it, constituted a post-nuptial settlement within section 24(1)(c) Matrimonial Causes Act 1973, so the court could vary the scheme insofar as it comprised settled property; but the surplus monies refundable to the employer under the scheme rules did not form part of the settled property and were outside the court's variation jurisdiction. The proper order was to vary the scheme by prioritising the wife’s pensions even if that reduced the husband’s pension, leaving the husband to address company/surplus issues.

District Judge (Plumstead) ancillary relief order (October 1992); appeal to Ewbank J, reported [1993] Fam 322 (lump sum reduced; pension variation order upheld); appeal to Court of Appeal dismissed [1994] 3 WLR 1292 (Neill L.J. and Waite L.J. giving majority reasons, Hoffmann L.J. dissenting on certain points); further appeal to the House of Lords dismissed [1995] UKHL 19.