Family Law

The article continues Christopher’s regular reviews of the more important recent financial remedy cases, this one covering the period from October 2015 to the end of February 2016.

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Amongst the arbitrary selection of finance cases which attracted the attention of the writer during the period under review, the eagerly awaited decisions of the Supreme Court in Sharland v Sharland [2015] UKSC 60 and Gohil v Gohil [2015] UKSC 61 were among the first tasty morsels. Both cases involved wives seeking to set aside consent orders on the grounds of deliberate misrepresentation. Both succeeded. Each case raised separate but related issues so that, although heard together, separate judgments were delivered. There is, nevertheless, much cross fertilisation.

The issue of the procedure for setting aside consent orders ('a procedural quagmire', per Munby J in L v L [2006] EWHC 956 (Fam)) arose indirectly. Lady Hale in Sharland approved the decision of Munby P in CS v ACS and BH [2015] EWHC 1005 (Fam) that the statement of Practice Direction 30A (which supplements the provisions for appeals in Part 30 of the FPR 2010) at para 14.1 that 'an appeal is the only way in which a consent order can be challenged' is ultra vires. While section 31F of the Matrimonial and Family Proceedings Act 1984, inserted by the Crime and Courts Act 2013 provides at (3): 'Every judgment or order of the family court is, except as provided by this or any other Act or by rules of court, final and conclusive between the parties', nevertheless s 31F(6) gives the family court power 'to vary, suspend, rescind or revive any order made by it'. Rule 4.1(6) of the FPR provides that 'A power of the court under these rules to make an order includes a power to vary or revoke the order'. This gives the family court power to entertain an application to set aside a final order in financial remedy proceedings on the well-established principles reviewed by Lady Hale. It is clear, therefore, that an application to set aside can be made either by way of an appeal or by way of an application to a first instance judge. In Gohil, Lord Wilson (obiter, para [18]) approved the approach of the Family Procedure Rule Committee predicated upon there being a power for the High Court and the family court to set aside its own orders where no error of the court is alleged, and for rules to prescribe a procedure limited to all types of financial remedy only, and that such applications to set aside should be made to the level of judge that made the original order. If such an application to set aside can be made, any application for permission to appeal should be refused. In Sharland, Lady Hale expressly endorsed this approach.

In Gohil, W sought to re-open her capital claims (which were dismissed by consent in 2004), in light (inter alia) of evidence from H's father and material (subsequently found to be inadmissable: Gohil v Gohil [2012] EWCA Civ 1550) arising from criminal proceedings against H, which confirmed the belief W had held (and which was, together with his denial, recorded at H's instance in the 2004 order) that he had not made full disclosure. One question was whether the Ladd v Marshall (1954) FLR Rep 422 principles referable to the admissibility of fresh evidence on appeal have any relevance to the determination of a spouse's application to set aside a financial order in divorce proceedings on the ground of a fraudulent non-disclosure of resources on the part of the other spouse. The short answer was 'no'. There had been no trial at which W could adduce evidence and the CA was manifestly an inappropriate forum for fact-finding and the hearing of any 'new' evidence.

The recital in 2004 that W believed H had not made full disclosure did not assist H because he owed a duty to the court (from which W could not exonerate him) to make full and frank disclosure, without which the court (from whose authority the validity of the order flows) could not fulfil its function under s 25(2).

The burden was on W to establish that the 2004 order had been obtained by, and that H had been guilty of, material non-disclosure (Livesey v Jenkins). Moylan J had taken into account inadmissible evidence but the admissible evidence established what W had to prove. If there had been such non-disclosure, but it had been accidental or negligent, the wife would also have had to establish that the effect of the non-disclosure was such that the 2004 order was substantially different from the order which would have been made (or agreed) if the husband had afforded proper disclosure (Livesey). However, as the non-disclosure alleged by W was said to be intentional, then, if there was such non-disclosure, the 2004 order should be set aside unless H (the burden now being on him) could satisfy the court that the 2004 order would have been agreed and made in any event (see per Lady Hale in Sharland v Sharland at paras 29-33 on the difference between innocent or negligent misrepresentation and fraud). In the circumstances Moylan J's order should stand and the 2004 order be set aside.

In Sharland prior to the parties reaching an agreement during the trial, H had deliberately withheld information about the preparation for an Initial Public Offering in respect of his business which would affect its value. The judge found that he had dishonestly misled the expert values and the court about material matters which it was inconceivable the judge would not have regarded as relevant and in the hope that this would lessen H's exposure to the court's discretionary powers. However, the judge had that he would not have made a significantly different order in the circumstances and so directed that the draft order reflecting the agreement be perfected. Lady Hale reviewed the well-known law derived from Livesey and from de Lasala, and noted that there was a difference between civil claims and matrimonial cases in that consent orders in the latter derive their force from the court's order,  but nevertheless cannot be made without the parties' valid consent. If there is a reason which vitiates a party's consent, then there may also be good reason to set aside the consent order. The question was whether the court had a choice. Here, the judge had indicated that, had he known the truth, he would have waited to see how matters developed. He would not therefore have made the order he did, when he did. Moreover, W, with full knowledge, may have taken a different view as to the balance to be struck between her present share in the liquid assets and her future share in the value of H;s shareholding. W was thus entitled to re-open the case, when she might seek to negotiate a new settlement or a re-hearing of her claim when all the relevant facts were known.

Lady Hale added in Sharland that any re-hearing should be tightly case managed and the issues closely defined (referring to the examples of Kingdon v Kingdon [2010] EWCA Civ 1251 and Vince v Wyatt (Nos 1 and 2) [2015] UKSC 14. The principles in Sharland and Gohil have since been applied by Roberts J in AB v CD [2016] EWHC 10 (Fam), which also illustrated the principle (see, eg, KG v LG (No 2) [2015] EWFC 64, Moor J) that a decision by parties to negotiate does not absolve them from their duty of full and frank disclosure. One party cannot allow the other to settle on information that is materially in error. W had failed to disclose a proposal for substantial investment in her company (in which H held shares) which had significant implications for the share value. The fact that negotiations which might lead to the existence of a material matter or event remain uncrystallised or subject to further negotiations is irrelevant to the question of whether the negotiations have to be disclosed. Disclosure is likely to be essential to enable the court to assess one or other, or both, of the parties' future prospects. While holding that W's failure to disclose was not deliberate and intended to mislead H;s and therefore in accordance with the guidance given by Lady Hale in Sharland, it fell to H to satisfy the court that the effect of the non-disclosure was such that the terms of the consent order were substantially different from the order which would have been made (or agreed) if she had revealed the investor's involvement at the time, the judge had no difficulty holding that H had passed that test and she set aside a consent order under which he had agreed to transfer his shares to W, but rather than substituting a new order she gave directions enabling the parties to have time to reflect.

BG v BA (deceased) [2015] EWHC 3947 (Fam) provides a good example of the need to avoid loose wording and lack of consistency of approach when drafting a consent order. The court was asked to construe a 2012 consent order in financial remedy proceedings where the husband had died and his insolvent estate was represented by trustees in bankruptcy. Bodey J had previously held W's accrued rights against H under the consent order remained enforceable, subject to the merits, as against the estate. A significant sum for W was to come from a villa in France held on a bare trust for H but which was charged to various creditors including the French tax authorities who were owed in excess of €9m. Was the liability for tax, which was not specifically dealt with in the consent order, to come from her share? The judge reviewed the law on construction of contracts and concluded that while the purpose of interpretation is to identify what the parties have agreed, not what the court thinks they should have agreed, nevertheless, while the court should usually give words their natural and ordinary meaning, the law does not require judges to attribute to the parties an intention which they plainly could not have had. If a word has been used carelessly (as here), then a court may, having reviewed all the relevant background, conclude the parties used the wrong word, and here Bodey J concluded that H's obligation to discharge 'borrowings' in fact meant liabilities (including the tax).

Section 25 factors

Aburn v Aburn [2016] EWCA Civ 72 was a refreshingly quotidian case which could genuinely be categorised as a needs case. The division of the FMH and capital having been decided, this was a second appeal against an order for periodical payments which the deputy district judge directed on a needs basis should be £1,000 pm but in 4 years' time, when the youngest child ceased private education, H was ordered to pay half the sum he had been paying in school fees to W, thus effectively doubling W’s maintenance. The CA struck down this provision on the basis that the award for the current payment was needs based and no principled justification for an increase had been articulated. Moreover the order did not reflect a consideration of all the s.25 factors, and further there was no telling what resources, needs or other factors would be relevant in 4 years time. The order might well merit review at that stage but only on the basis of the known circumstances then obtaining.

Rapp v Sarre (Formerly Rapp) [2016] EWCA Civ 93 with its background of cocaine addiction, excess alcohol consumption addiction, the use of female escorts and conduct, H’s 'reckless frittering away of family money' appeared to be a potential conduct case but Black LJ declined to explore 'the interesting and challenging question (recently considered by Moor J in MAP v MFP [2015] EWHC 627 (Fam) of whether behaviour such as the husband's should be reflected in the court's ancillary relief order,and if so, how' because the Court accepted it as a needs case. The parties began to live together in 1993 and married in September 1994. W was in her late forties and H in his mid-fifties. They separated in December 2009 and were divorced in 2014. There were no children. H moved to London in 1993 to work as an oil broker and W joined him shortly after and had not worked since. Since separation W had lived in their flat in London and H in Monte Carlo. Assets were around £13.5m. The judge awarded W 54.5% on a clean break basis partly on a needs basis and partly on the grounds of H’s conduct. H’s appeal failed. H’s case that their needs were identical was rejected on the basis that while W’s income needs would be met from the conservative returns assumed within Duxbury H’s greater financial sophistication and skills would enable him to achieve a better return. His Wells v Wells argument that W had been given secure assets and he was left with illiquid and risky ones was rejected on the basis that he chose to invest in them and it would be unreasonable to expect W to be able to manage such investments. The challenge to the approach to conduct was not addressed because W’s award was justified by need.

C v C [2015] EWCA Civ 1204 was another comparatively modest means case where W had been diagnosed with a delusional disorder which she did not accept. The court struggled because as a litigant in person she did not provide evidence of he undoubtedly modest earning capacity (despite her brilliant academic background), her housing need or her pension entitlement. The parties’ daughter lived with H and his new wife and child. The judge gave first consideration to the child’s housing needs but reduced them to the bottom of the bracket to allow W a mortgage free, if modest,home, allowing for a notional pension set off for H’s inevitably greater pension entitlement. The CA concluded that W’s earning capacity could not affect the inevitable capital division driven by the child’s needs and the limited resources. W’s income need would normally be met by maintenance but H’s income would not allow for this.

Another example of the mess into which cases can get when parties are unrepresented is provided by Azizi v Aghaty [2016] EWHC 110 (Fam) where Holman J allowed an appeal from a deputy district judge who made an imbalanced decision against an unrepresented Iranian wife, whose first language was not English but where there was no interpreter, and who the first instance judge improperly found to have entered into the marriage bigamously, although neither party seemed to appreciate the significance of an earlier marriage.

FB v PS [2015] EWHC 2797 (Fam) was W’s application for a financial remedies order after a 16 year childless marriage where the value of the assets amounted to c. £19m yet there was virtually nothing at all in the name of the wife. The judge held the business (sold for £17.6m which was held in a trust from which only H had benefited)had been founded by H and W jointly and that the sharing principle applied to the matrimonial assets. The issue of interest is how Moor J dealt with a property which had been the family home for 15 years, was in H’s sole name, but had previously been his father’s matrimonial home and was largely funded extraneously to the marriage. Moor J noted that the matrimonial home will normally be treated as matrimonial property (Miller) but that does not automatically lead to equal sharing of that asset (S v AG): an unequal division may be justified if unequal contributions to its acquisition can be demonstrated. The transfer from H’s father (and refurbishment work) was a very significant unmatched contribution, now worth some £3.5 million gross. However, as a result of being persuaded (by the father) to remain at the property and not enter the property market W argued the parties had 'lost' £1.4m. The judge accepted this argument to the tune of £500K which he included as matrimonial property, excluding the balance of the home. This reduced the assets subject to sharing to c. £16m of which W received 50%, giving her (by cross check) some 42% of the total assets - an appropriate division of the assets to reflect the unmatched contributions made to the property by H’s father.

JS v RS [2015] EWHC 2921 (Fam) is instructive as an example of the practical working out of commonly encountered arguments. Sir Peter Singer characterised as 'doomed' a 'clutter' of arguments by which W sought to avoid an equal division in a 6 year marriage where the assets of £6.9m (plus some £940,000 pension) had largely been accrued during the marriage but chiefly through her bonuses. The judge gave short shrift to arguments on pre-acquired ('fledged') earning capacity (impermissible, not least because of the absence of any principled approach to its evaluation), contributions('expensive, time-consuming and almost invariably arid disputes' which should be consigned and confined to the "attic" referred to by Coleridge J in G v G [2002] 2 FLR 1143), stellar contributions (very rarely made out, and here W fell “several leagues short”), while conduct (not made out) and add-backs (no wanton dissipation established) would not have made any difference to the award. 'Unilateral assets' (arising from the dual career concept introduced by Lady Hale in Miller) was a concept for which the Court of Appeal in Charman showed a patent lack of enthusiasm and an express intention to keep the application of the concept closely confined. Indeed it was difficult to think of a case in which it had been applied as opposed to being discussed. The judge concluded the sharing principle should apply to this 6 year marriage. It was consistent with current principle that the matrimonial acquest, the value of the assets and savings built up during the marriage, irrespective of the very different proportions in which the parties contributed them, should be subject to the equal sharing principle. Although W brought £1.37m into the marriage (and H virtually nothing) £1.02m was invested in the FMH and so mingled. Only £350K was therefore excluded. It proved unnecessary to consider Mostyn J’s approach to unequal contributions and thus an unequal division of the FMH (eg S v AG) because H, in the event, conceded that its value should not be included in the fund for division. The judge concluded the court could not force upon a party the greater share that would otherwise inform the award by the application of the sharing principle.

In NR v AB & Ors [2016] EWHC 277 (Fam). Roberts J helpfully reviewed a number of authorities in addressing issues of constructive and resulting trusts (from Pettitt and Gissing to Stack v Dowden), variation of nuptial settlements (from Brooks v Brooks [1995] 2 FLR 13 to Ben Hashem v Al Shayif [2009] 1 FLR 115) and the implications of the principles in Thomas v Thomas [1995] 2 FLR 668 where both H and W came from wealthy Saudi Arabian families who, it was argued (by the opposing sides), would be expected to assist their family member. W would inherit under Sharia law from her father. H (the judge found) had only a one third interest in assets shared with his family following the death of his father. The parties had lived in properties owned by a company which H did not own or control (Prest principles applied) but under a licence held to be a nuptial settlement which could be (and was) varied to provide W (and children) with a long term home. H’s liquid assets and limited joint funds amounted to only £1.64m and his additional resources of £12.4 -15.7m were all inherited. A capitalised maintenance award was made for W (£2m to represent £175K pa over 14 years, by which time it was likely she would have received her inheritance) with further support for the children, and a modest sum for a car. Costs had exceeded £2m.

Interim relief

In BR v VT [2015] EWHC 2727 (Fam) Mostyn J employed FPR 20.2(1)(c)(v) to order the interim sale of the matrimonial home in order to impose financial sanity on the family and seek to avoid insolvency where the family were in critical revenue deficit with pressing debt, albeit largely due to H’s reckless expenditure and W reneging on an agreement to sell. An interim sale could not be made unless the Court was satisfied that W’s home rights should be terminated pursuant to an order under s 33(3)(e)Family Law Act 1996 applying the evaluative factors in s 33(6). Applying those factors W’s rights of accommodation were terminated, her rights notice was vacated (para 1, Sch 4 to the Act), and she was ordered to give vacant possession on completion of the sale. H’s income would (just) cover rented accommodation for each party and the school fees.

Pensions

In JS v RS [2015] EWHC 2921 (Fam) Sir Peter Singer considered the merits of off-setting.A pensions expert had been asked to calculate the PSO necessary to provide an equal income outcome from the growth of each party’s pension during the marriage. She concluded there should be a 23.8% PSO from W to H. W would lose more pension income than H would gain (£5,300 pa), and any benefit to H depended on him surviving the 20 years until he would take the pension. Off setting would, by contrast,provide H with immediate capital and give W greater security. The expert calculated the appropriate capital sum, even discounted, as £210,856 which the judge could not accept as the value of £5,300 pa in 20 years time and he assessed the off-setting sum(apparently arbitrarily) at £60,000.

In WS v WS [2015] EWHC 3941 (Fam) the issue arose again. The judge noted JS v RS and recent commentary in Family Law which demonstrated the absence of any reliably consistent expert evidence as to methodology or outcome for calculating the appropriate figure for off-setting and concluded there was 'no obviously right figure or correct calculation' for offsetting but adopted W’s approach of assessing a conventional Duxbury valuation of the shortfall in H’s pension income which was certainly preferable to an annuity based calculation.

Cases with a foreign element

Estrada v Walid Bin Ahmed Abdallah Al-Juffali [2016] EWHC 213 (Fam): Hayden J had to decide whether H had diplomatic immunity from suit (under Art 39(1) Vienna Convention on Diplomatic Relations (1961) in respect of his appointment as Permanent Representative of St Lucia to the International Maritime Organisation) in relation to an application for financial relief under Part III of the Matrimonial and the Family Proceedings Act 1984. He concluded that the appointment was spurious and that, as W argued, H had secured the post to avoid her claims. Article 39 must be interpreted in light of W's Art 6 ECHR right to a fair trial, and therefore, balancing the need to protect the functionality or effectiveness of a mission on the one hand and minimising abuse of diplomatic immunity on the other, Art 39(1) required not only that a person had been appointed to a diplomatic post but that he had, in reality, taken it up. He had not. In any event the immunity would not apply if H was permanently resident and a factor in deciding this was whether he would be in the UK but for the requirements of the sending state. On all the evidence he was permanently resident. Hayden J finally,and although it was no longer relevant, considered whether W's claims fell within the'real action' exemption (Art 31 of the Convention) to diplomatic immunity and concluded they did not.

Another Part III case

Ramadani v Ramadani [2015] EWCA Civ 1138 was an appeal concerning the jurisdiction of a court in England and Wales to hear a spousal maintenance application in the context of Council Regulation (EC) 4/2009 ('The Maintenance Regulation') following previous proceedings in another EU member state.Held: no ‘decision’ by the Slovenian court, when W withdrew her application there.

In MS v PS [2016] EWHC 88 (Fam) W, a German living in Germany, applied to the Family Court in Lincoln to enforce a German maintenance order for two children against the H living in England. The matter was referred to the High Court on the issue of whether an application for enforcement of such a maintenance order can be issued directly in the Family Court or whether, in all cases, the application must first be lodged with the Lord Chancellor for onward transmission to the Family Court through the Reciprocal Enforcement of Maintenance Orders Unit ('REMO'). There was a conflict of judicial opinion in the case law, and an apparent inconsistency between Council Regulation (EC) Maintenance Regulation 4/2009 and domestic legislation (the Civil Jurisdictions and Judgments (Maintenance) Regulations (2011)). Roberts J concluded that the matter required an expedited reference to the ECJ (in summary): whether a maintenance creditor wishing to enforce in one member state an order obtained in another has a right under the Maintenance Regulation to make an application for enforcement directly to the competent authority of the requested state? If so must each member state provide a mechanism to recognise that right?The answer will be awaited with interest.

In Maughan v Wilmot [2016] EWHC 29 (Fam) H challenged a 2013 order authorising service on him by e-mail on the basis that there is no power to serve a person out of the jurisdiction by email where he is in Turkey, a party to the Hague Convention of 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. While dismissing the challenge for delay, acquiescence and/or voluntary acceptance of delivery (Art 5 of the Convention), Mostyn J also addressed the merits.The objective of the Convention was 'to create appropriate means to ensure that judicial and extrajudicial documents to be served abroad shall be brought to the notice of the addressee in sufficient time'. It requires service through the authority designated under the Convention in respect of the foreign country. At the time technology did not exist to effect service other than physically. Things have moved on. Service in another jurisdiction used to be regarded as an interference with the sovereignty of the other country. Abela and Others v Baadarani [2013] UKSC 4 decided that the purpose of service is simply to inform the defendant of the contents of the claim form and the nature of the claimant's case. Previous jurisprudence is now redundant. FPR 6.1(b) permits the court to dis-apply the terms of Chapter III of Part 6 and to authorise email service on a party out of the jurisdiction, if there is good reason to do so. H had not shown there was no such reason.

Family Arbitration

In DB v DLJ [2016] EWHC 324 (Fam) Mostyn J upheld an arbitral award on H’s application for W to show cause why it should not be made an order of the court (pursuant to the procedure set out by the President in S v S (Arbitral Award: Approval) (Practice Note) [2014] 1 FLR 1257, and the Practice Guidance: Arbitration in the Family Court). W resisted the application on the basis that the award was vitiated by a mistake about the true value of a property in Portugal allocated to her. Alternatively, she said that events had occurred since the award which invalidated the finding made by the arbitrator as to the value of that property. The judge, while commending the arbitration route to resolving such disputes underlined and described the very limited basis upon which such an award may be challenged(while identifying the slightly broader grounds open to parties in family proceedings because of the need to secure an order of the court, for instance to obtain a clean break or a pension sharing order). Mistakes in the presentation of evidence, and supervening events would not enable a party to avoid the award. Mostyn J also set ou procedural steps which will be necessary to implement such awards.

Professional Negligence

In Minkin v Landsberg [2015] EWCA Civ 1152, after being advised by T solicitors against a proposed settlement the claimant W, an experienced accountant, decided to proceed with it anyway and she and H submitted a draft order to the court which was rejected (twice). She instructed D solicitors to redraft the order which was then accepted by the judge. Subsequently she unsuccessfully sued D for failing to advise her against the settlement. W’s appeal failed. On the judge's findings of fact, the defendant was working under a limited retainer to redraft the financial remedies consent order and had no duty of care to advise on the merits of the underlying agreement or to give the broader advice or warnings for which W now contended. Also, on the basis of the evidence at trial, W could not succeed on causation. Jackson LJ summarised the duty of a solicitor as follows (para 38):


King LJ made the further point that with the loss of legal aid in financial remedy cases the courts were overwhelmed as a consequence of the increase in court time taken by each case where the parties appear as litigants in person. It is not the function of district judges to draft or redraft consent orders. As a consequence solicitors are offering a bespoke but limited service to both draft Forms E and consent orders. This service is invaluable to both courts and litigants alike, saving as it does court time but also stemming the increasing number of applications to the courts in relation to the working out of orders which do not accurately reflect the true intentions of one or other of the parties. It is essential that solicitors are able to offer such a service within the confines of their retainer without an obligation to offer wider advice, but it is also important that the restrictions on the retainer are recorded in writing.

Miscellany

In Mackay v Mackay [2015] EWHC 2860, Holman J recused himself where, although there was no express application for him to do so, he felt there were “'solid reasons' why he might feel personally embarrassed where he might have to make a judgment about the integrity or probity, and possibly the very honesty, of the husband who was a friend of a sailing friend of the judge. The case was a ‘set aside’ case which, in any event Holman J held, could not be heard before Sharland and Gohil had been decided.

In Mann v Mann [2016] EWHC 314 (Fam) Roberts J had to calculate outstanding arrears due to W after 17 years of litigation and examined the applicability of s 24 Limitation Act 1980 to claims for interest on unpaid financial orders in light of Lowsley and Another v Forbes (t/a L E Design Services) [1999] 1 AC 329. In addition, she addressed recent developments concerning the burden of proof for committal under s 5, Debtors Act 1869 (Mostyn J in Bhura v Bhura [2012] EWHC 3633 (Fam) and of McFarlane LJ in Prest v Prest [2015] EWCA Civ 714).

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This article is due to be published in the FLBA's Family Affairs and appears on the St John's Chambers website. It has been reproduced here with kind permission.

Family Affairs is the FLBA’s tri-annual magazine which aims to keep members up to date with events around the country and important developments in family law and procedure. Family Affairs is edited by John Wilson QC.