Brooks v Brooks

A pension scheme may constitute a post-nuptial settlement within section 24(1)(c) of the Matrimonial Causes Act 1973. The scheme must be considered as a whole and in the circumstances existing when it was established. Benefits payable exclusively to the member will ordinarily be insufficient. Provisions benefiting a spouse or dependants may justify the inference that all member and family benefits form part of a marriage settlement.

The court may vary only property comprised in that settlement. A surplus belonging to the sponsoring company falls outside the jurisdiction where the company did not settle it and the spouses had no beneficial entitlement to it. Any variation must avoid prejudice to other scheme members and ordinarily preserve the scheme’s tax approval.

Following divorce, the district judge ordered the husband’s pension scheme to provide the wife with immediate and deferred index-linked pensions. She held that the scheme was a post-nuptial settlement which could be varied under section 24(1)(c) of the Matrimonial Causes Act 1973.

Ewbank J dismissed the husband’s appeal on that issue: [1993] Fam 322. The Court of Appeal also dismissed his appeal by a majority: [1994] 3 WLR 1292. Hoffmann LJ dissented, concluding that the scheme was not a post-nuptial settlement and that its surplus belonged to the sponsoring company.

The issue before the House was whether the court had jurisdiction to vary the pension scheme and, in particular, whether that jurisdiction extended to the surplus held for the company under rule 7 of the scheme.

1. The appeal was dismissed unanimously, but the order was varied. Lord Nicholls of Birkenhead delivered the leading speech. Lord Keith of Kinkel, Lord Ackner, Lord Lloyd of Berwick and Lord Steyn agreed with his reasons and proposed order.

2. Per Lord Nicholls, “settlement” has no single meaning in English law. In section 24(1)(c) of the Matrimonial Causes Act 1973, it bears a wide and purposive meaning. The disposition must make continuing provision for one or both spouses, with or without provision for their children. An immediate and absolute gift is not a settlement because an ordinary property adjustment order is available for such property.

3. A pension scheme must be examined as a whole and in the circumstances existing when the member entered it. The husband was taken to have intended to provide for the retirement of himself and his wife through a tax-efficient arrangement. The scheme permitted him to surrender part of his pension for a dependant’s pension and made discretionary death benefits available to his spouse and family. Those provisions supplied the necessary element beyond benefits payable exclusively to the member. All benefits provided for the member and his family therefore formed part of a post-nuptial settlement.

4. The variation jurisdiction nevertheless extended only to property comprised in the settlement. The rule 7 surplus belonged to the sponsoring company. The husband, rather than the company, was the settlor because the company provided the scheme benefits as deferred remuneration for his employment. Neither spouse had an entitlement to the surplus. Lord Nicholls accordingly agreed with Hoffmann LJ on that point.

5. The settlement did include the fund needed to provide the husband’s pension, so far as it was not funded by his other schemes. That amount exceeded the cost of the wife’s pensions. The order was therefore varied to direct that her pensions be provided in priority to, and if necessary in diminution of, the husband’s pension. This avoided reliance upon the company’s surplus.

6. The decision did not provide a general solution to pension division on divorce. Not every pension scheme is a marriage settlement. A variation should not prejudice other scheme members, and loss of Inland Revenue approval would normally cause such prejudice. Legislation remained necessary for pension splitting in the usual multi-member scheme.

1. House of Lords: The husband’s appeal was dismissed unanimously, but the pension variation order was altered so that the wife’s pensions had priority over, and could diminish, the husband’s settled pension benefits.

2. Court of Appeal: By a majority, Neill LJ and Waite LJ dismissed the husband’s appeal: [1994] 3 WLR 1292. Hoffmann LJ dissented.

3. High Court: Ewbank J reduced the wife’s payment from the proceeds of the matrimonial home but dismissed the husband’s appeal against variation of the pension scheme: [1993] Fam 322.

4. District judge: District Judge Plumstead held that the pension scheme was a post-nuptial settlement under section 24(1)(c) of the Matrimonial Causes Act 1973 and varied it to provide immediate and deferred pensions for the wife.