(Family Division, Roberts J, 24 July 2014)
Financial remedies – Misconduct – Distribution of assets – CostsIn a judgment distributing the matrimonial assets following divorce an adjustment was made to reflect the wife’s misconduct in selling a property at an undervalue and disposing of the proceeds while a costs order was made against the husband for litigation misconduct in failing to make full disclosure.
The 63-year-old husband and the 48-year-old wife were married for 12 years and had three children together who were now 19, 17 and 14. The husband had a successful career in the oil and gas industry. Following the parties’ divorce he married a 26-year-old woman and they had a 3-year-old child together.
The wife and children remained living in the family home which was worth £1.1m and remained subject to a mortgage. The husband and his new family were living in rented accommodation.
A 10-day fact-finding hearing took place during financial remedy proceedings and judgment was given on computation and the many detailed allegations which the parties made as to conduct against one another – both in respect of litigation conduct and conduct under s 25(2)(g) of the Matrimonial Causes Act 1973. A number of findings were made in relation to the wife’s dealings with a Russian property portfolio and the husband’s failure to disclose until a late stage in the proceedings an offshore bank account containing $850,000. It now fell to be determined how the matrimonial assets totalling £5m were to be distributed. £1.76m was tied up in the husband’s pension funds and it was agreed that those funds should remain with the husband who was now retired. The husband and wife had combined legal costs of £1.25m.
It was clear that this was a needs-based case. The main issues for determination were: the impact upon the distribution exercise of the wife’s conduct of her Russian property portfolio and whether the husband’s litigation conduct called for a costs order to be made against him.
The fact-finding hearing found that the wife had disposed of a Russian investment property at a significant undervalue and disposed of the proceeds of sale. A notional £1m was reattributed to her account which represented the approximate lose to the family on the sale. The judge found that the wife’s conduct could not be ignored. She proposed that the assets and liabilities should be apportioned to reflect the baseline consensus as to which assets should follow which party. An adjustment should then be made to reflect sharing taking into account the notional £500,000 which was no longer available to the husband. A cross check should then be carried out to check the adjusted figures met the needs of both parties and then cost orders should be applied. A final cross check should be made to ensure that the outcome met the needs and cash flow requirements of the husband and wife and was fair in all the circumstances.
A punitive costs order was made against the husband to reflect his litigation misconduct. He was ordered to pay 70% of the wife’s costs due to the fact that virtually the entirely of the proceedings had been contaminated by his failure to disclose.
In total the wife retained 45.78% of the total assets and the husband retained 54.22%. On the basis of the global asset base the difference in their respective shares was a proper reflection of the wife’s misappropriation of the husband’s half share of the £1m loss incurred on the sale of the property. That was a useful cross check as to the overarching fairness of the award on a needs basis. However, that award would provide the wife with a degree of financial autonomy in terms of her future decision making as her share was predominately made up of liquid assets whereas a substantial percentage of the husband’s share remained tied up in his pension.
The award represented a fair outcome bearing in mind the existence of non-matrimonial property, reattribution issues, the nature of the assets each would retain and sharing.
Please see attached file below for the full judgment.
Case No: RG11D00397
Neutral Citation Number:  EWFC 24
IN THE HIGH COURT OF JUSTICE
Royal Courts of Justice
THE HONOURABLE MRS JUSTICE ROBERTS
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(No.3 needs) (Adverse influences/costs order reflecting litigation misconduct)
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Richard Sear of counsel (instructed by Pinsent Mason LLP) for the Applicant
James Ewins of counsel (instructed by Levison Meltzer Pigott) for the Respondent
Hearing dates: 21st July 2014, 22nd July 2014, 23rd July 2014 and the 24th July 2014
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US v SR  EWFC 24