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FINANCIAL REMEDY PROCEEDINGS:

AN UPDATE

MALCOLM SHARPE

ATLANTIC CHAMBERS

21ST MARCH 2013

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CASE INDEX

1. Equality or Not?

A v L (Departure from Equality: Needs) [2011] EWHC 3150 (Fam)

R v R (Financial Remedies: Needs and Practicalities) [2011] EWHC 3093 (Fam)

R v R (Financial Orders: Contributions) [2012] EWHC 2390 (Fam)

2. The Assessment of Assets

(1) Pre-Marital Property

B v B (Assessment of Assets: Pre-Marital Property) [2012] EWHC 314 (Fam)

GS v L (Financial Remedies: Pre-Acquired Assets: Needs) [2011] EWHC 1759 (Fam)

F v F (Financial Remedies: Pre-Marital Wealth) [2012] EWHC 438 (Fam)

(2) Personal Injury awards

Mansfield v Mansfield [2011] EWCA Civ 1056

(3) Lottery Wins

S v AG (Financial Orders: Lottery Prize) [2011] EWHC 2637 (Fam)

(4) Trusts

BJ v MJ (Financial Orders: Overseas Trust) [2011] EWHC 2708 (Fam)

G v G (Financial Remedies: Short Marriage: Trust Assets) [2012] EWHC 167 (Fam)

RK v RK (Financial Resources: Trust Assets) [2011] EWHC 3910 (Fam)

(5) Inherited Wealth

AR V AR (Treatment of Inherited Wealth) [2011] EWHC 2717 (Fam)

(6) Third Party Assets

Gowers v Gowers [2011] EWHC 3485 (Fam)

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Hope v Krejci and Others [2012] EWHC 1780 (Fam)

Petrodel Resources Limited and Others v Prest and Others [2012] EWCA Civ 1395*

3. Maintenance & Capitalisation of Periodical Payments

Yates v Yates [2012] EWCA Civ 532

S v M (Maintenance Pending Suit) [2012] EWHC ???? (Fam)

4. Practice Points

ND v KP [2011] EWHC 457 (Fam)

Young v Young [2012] EWHC 138 (Fam)

G v G (Financial Remedies: Strike Out) [2012] EWHC ???? (Fam)

X v X (Financial Remedies: Preparation and Presentation) [2012] EWHC 538 (Fam)

HMRC v Charman and Charman [2012] EWHC 1448 (Fam)

5. Nuptial Agreements

Z v Z (No. 2) (Financial Remedies: Marriage Contract) [2011] EWHC 2878 (Fam)

Kremen v Agrest (Financial Remedy: Non-Disclosure: Post-Nuptial Agreement) [2012] EWHC ???? (Fam)

B v S (Financial Remedy: Marital Property Regime) [2012] EWHC 265 (Fam)

6. Appeals & Beyond

NG v SG (Appeal: Non-Disclosure) [2011] EWHC 3270

L v L (Financial Orders: Remission After Appeal) [2011] EWHC 3040 (Fam)

NLW v ARC [2012] EWHC 55 (Fam)

7. Civil Partnerships

Lawrence v Gallagher [2012] EWCA Civ 394

8. Schedule 1, Children Act 1989

O v P (Jurisdiction under Children Act 1989 Schedule 1) [2011] EWHC 2425 (Fam)

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DE v AB (Financial Provision for Child) [2011] EWHC 3792 (Fam)

PK v BC (Financial Remedies: Schedule 1) [2012] EWHC 1382

PG v TW (No1) (Child: Financial Provision: Legal Funding) [2012] EWHC 1892 (Fam)

KS v ND (Schedule 1: Appeal: Costs) [2013] EWHC 464 (Fam)

9. Costs

Fisher Meredith v JH and PH (Financial Remedy: Appeal: Wasted Costs) [2012] EWHC 408 (Fam)

GS v L (No. 2) (Financial Remedies: Costs) [2011] EWHC 2116 (Fam)

Ezair v Ezair [2012] EWCA Civ 893

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1. EQUALITY OR NOT?

A v L (Departure from Equality: Needs) [2011] EWHC 3150 (Fam)

The Husband and Wife were married for 14 years and had two children, now aged 21

and 18. When the parties met, the Wife owned her own home and the net proceeds of

sale were used as a deposit for the matrimonial home. The Husband worked part time as

a self-employed letting agent and the Wife had worked, but had mostly been a housewife

and mother, throughout the marriage. Both parties suffered from health issues. When

the parties separated neither applied for a financial order for approximately 10 years and

by agreement the Husband continued to pay the mortgage and made contributions to the

care of the children. The Wife remained in the matrimonial home with the 18 year old

and the 21 year old returned home during university vacations. The Husband lived in

rental accommodation and had incurred debts of £35,000.

In the financial proceedings the judge found there was insufficient capital and income to

meet the needs of both parties but that the Husband had significantly higher earning

capacity than the Wife, who, aside from the Husband’s contributions, was largely

dependant on State benefits. In addition to a gross income of £26,000 pa the Husband

also had the benefit of properties he owned jointly with his family in his home country of

Egypt, of which some were let and others were available for use by family members. He

had also cashed in an endowment policy worth £9,000 with the Wife’s permission but

had not used it to reduce the mortgage, as he had claimed. As a result the district judge

ordered the sale of the matrimonial home to be postponed for 2 years to allow the Wife

time to adjust, and the proceeds to be divided 70% to the Wife and 30% to the Husband

with periodical payments of £500 pm to the Wife for 4 years. The Husband appealed.

On appeal, Moor J upheld only the division of capital 70:30 in the Wife’s favour. He set

aside the periodical payments order and ordered an immediate sale of the matrimonial

home:-

1) The Family Procedure Rules 2010 (FPR) 30.12(3) provided that an appeal court

would allow an appeal where the decision of the lower court was wrong or unjust

because of a serious procedural or other irregularity in the proceedings in the lower

court. In this case the judge had been wrong in his failure sufficiently to reason the

very significant departure from equality, his failure to explain how the capital order

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would fairly meet the needs of both parties and his failure adequately to explain the

interplay between the periodical payments and capital orders;

2) In financial remedy cases the law under the Matrimonial Causes Act 1973 (MCA) was

the same for everyone, whether rich or poor. There was an obligation to be fair but

where it was necessary for a departure from equality there had to be good reason for

so doing;

3) In justifying a departure from equality the needs of both parties must be considered.

Disparity in earning capacity could justify departure but that must be considered in

the context of the needs of both parties. In particular there has to be consideration

of how such a departure could be justified if there was also a substantive periodical

payments order;

4) The disparity in earning capacity, notwithstanding the Husband’s ill health combined

with consideration of the parties’ respective needs were good reasons to depart from

equality but only on a clean break basis. There should, therefore, be no periodical

payments to the Wife.

5) The 2-year delay on the sale of the home was arbitrary and unjustified; the younger

child could still be at university in 2 years’ time and the elder child might still be

dependent for a home on the mother.

R v R (Financial Remedies: Needs and Practicalities) [2011] EWHC 3093 (Fam)

Wife aged 44, Husband 57. 7 year marriage with one 6 year old child of the marriage.

Both had been married twice previously and the Wife had a 10 year old child from a

previous marriage. Prior to the marriage the Husband was already a successful and

established chartered surveyor; he owned several properties including one worth

£800,000, as well as a holiday home in Spain and he also had his own savings. By the

time the marriage ended the couple had assets of £4m including a number of properties

and the Husband was earning £186,000 per annum, but in previous years had been

awarded much higher pool payments.

Approximately half of the assets were unavailable for immediate distribution due to

investments in a property development enterprise which in all probability would be

highly profitable and would be realisable at an uncertain time in the future. During the

marriage the Wife stayed at home to care for the children and, therefore, had no up-to-

date qualifications. The matrimonial home had previously belonged to the Wife’s parents

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and she wished to remain living there following the divorce. The Husband agreed to that

insofar as it did not justify a greater proportion of capital or income.

Due to protracted pre-hearing processes the total costs were in the region of £600,000.

The Wife claimed her costs were unnecessarily inflated due to the Husband’s failure to

provide adequate disclosure and he submitted that the imbalance in costs should be

reflected by way of an add-back.

Held – awarding the Wife the equity in three of the matrimonial properties, a lump sum

of £450,000; ordering the Husband to pay periodical payments in respect of the Wife at

£55,000, plus 20% of any pool payment received by the Husband, capped at £20,000,

and in respect of the children: £15,000 per annum until the end of tertiary education;

awarding the Wife £650,000 of the deferred assets, subject to a 5% uplift per annum,

periodical payment of £55,000 to cease upon complete payment and the Wife’s claim for

periodical payments will then stand dismissed –

1) The instant case had been driven mostly by needs and practicalities. Where that

seemed likely from an early stage time and energy should not be spent on the

preliminary theoretical discussions but proceedings should rather be swiftly moved

on to look at the practicalities of the suggested outcomes while keeping the primary

considerations of s  25 of the MCA in mind.

2) Applying principles extracted from recent case-law to achieve fairness, the approach

ideally seemed to be to define the pre-existing assets and remove them from account

and then split the remaining value 50:50 as being the sum generated during the

marriage. Having done that, the assets were then split in species somehow to reflect

the notional division. There were other more ‘by and large’ approaches to this

essentially discretionary exercise, but this one did at least have the benefit of some

logic to it.

3) Bearing in mind that this was a fairly short marriage, the Wife’s entitlement to

continue to receive a very high income order long after separation was limited. Also

the Husband’s income would be likely to fall considerably and eventually disappear

after he was 60. Upon payment in full of the deferred funds the Wife would have

sufficient capital to provide for herself either on Duxbury principles or otherwise.

4) It was desirable to fix the sum to be paid to the Wife in respect of the deferred fund

now, in order to avoid any complex arguments about the percentage to be shared in

the future and in order to achieve a clean break as soon as possible.

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5) As a matter of principle the pursuit of an add-back principle or approach should be

discouraged, which inevitably led to a quasi-taxation or assessment of costs during

the hearing, but without the court having all the material that would be available to a

costs judge. It also flew in the face of the no order starting point and led to debates

about costs by the back door, which the new rules were designed to reduce or

prevent.

R v R (Financial Orders: Contributions) [2012] EWHC 2390 (Fam)

The wife, now aged 58, and the husband, now aged 61, had married in 1983 and

separated in 2008. There were two children of the marriage, now adults. The assets

after deduction of liabilities were approximately £7.675m. The husband owned a

successful company which he had formed subsequent to the marriage with financial

and other support from the wife. The wife had been an equal driving force of the

company at its inception, had become an equal shareholder with the husband upon

its incorporation and had remained involved with the business throughout the

marriage. On separation she gave up her shareholding for reasons that were in

dispute. The financial position of the wife by the date of trial was dire. She was a

solicitor but had been suspended from practice due to events which had led to the

collapse of her large solicitors’ firm (which had been the registered address of the

husband’s company and through which the wife had provided legal assistance to the

company). The wife had taken out an IVA, had significant debts and suffered from

very poor health both mentally and physically. The husband was secure financially

and had a 91.75% shareholding in the company.

The husband sought a departure from equal division of assets on the grounds that

the wife’s contributions to the marriage had not been equal, her debts should be

attributed solely to her and that the company had grown post-separation and was

illiquid.

Held – ordering inter alia the husband to transfer his interest in the former

matrimonial home and accompanying land to the wife, to pay her a lump sum of

£4m (£1.25m within 28 days to meet the wife’s debts and the remainder deferred)

and periodical payments of £7500 per month after the initial lump sum payment –

(1) The wife’s debts were not to be regarded as exclusively her burden; her initial

financial success had benefited the husband, the company and the family, and her

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ultimate downfall was to be treated as a family misfortune. The husband’s

conduct had increased the costs of the wife’s IVA. The wife’s indebtedness was

to be top-sliced before appropriate division of assets.

(2) The company was undoubtedly a matrimonial asset. Its development had taken

place over many years and the wife had played a role throughout. Contributions

to the welfare of the family were not confined to the pursuit of commercial

interests. The wife’s early contributions to the family had in fact outmatched

those of the husband. Post-separation the company did nothing other than

achieve its latent potential accrued during the course of the marriage. Whatever

post-separation credit was to be given to the husband was more than matched by

the wife’s past contributions. The husband’s shareholding was not an illiquid

asset; the company was marketable albeit that such a course was not presently

advised, and it was not dynastic. Furthermore, liquid sums could be raised by or

extracted from the company upon the husband’s discretion.

(3) This was a case for equality of division. It was not in the circumstances

appropriate to achieve this by transfer of shares to the wife; a minority

shareholding might lead to satellite litigation. A deferred lump sum order could

be secured by loan notes.

2. THE ASSESSMENT OF ASSETS

(1) Pre-Marital Property

B v B (Assessment of Assets: Pre-Marital Property) [2012] EWHC 314 (Fam)

Wife 40, Husband 61. 15 year marriage. Total assets £4,301,575. The Husband claimed

the vast majority of the assets were owned prior to the marriage and sought to exclude

the same from the pot, offering the Wife 20% of the total assets (£873,750).

The court re-emphasised the importance of the observation of Mostyn J in N v F

(Financial Orders: Pre-acquired Wealth) [2011] EWHC 586 (Fam) that, "if a party is going to

assert the existence of pre-marital assets then it is incumbent on him to prove the same

by clear documentary evidence"

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The Husband’s failure to produce evidence of the value of his assets at the start of the

relationship resulted in the Court finding only £820,000 should be excluded as non-

matrimonial. The Court refused to apply any ‘springboard’ effect to those pre-marital

assets, preferring the argument that any growth on those investments was matrimonial in

nature.

The Court awarded the Wife just under £1.75m, or 40% of the assets, on the basis that

her capital needs could be met with such an amount. This effectively excluded the

Husband’s pre-marital wealth and divided the remainder equally.

GS v L (Financial Remedies: Pre-Acquired Assets: Needs) [2011] EWHC 1759 (Fam)

The marriage had lasted 10 years. The wife was aged 41 and the husband 43; the

children were aged 10 and 9.The liquid assets were approximately £4m. Both spouses

had had successful careers in the banking industry; the wife had given up work to act

as homemaker and parent. The parties had in 2002 signed a post-marriage agreement

in Spain to the effect that all future assets would be held equally under a Spanish

matrimonial property regime. The wife petitioned for divorce and ancillary relief. The

matter was transferred from the Principal Registry to the Family Division of the High

Court only because of issues of Spanish law raised by the husband. At the date of the

final hearing in financial remedy proceedings, both parties and the children lived in

Spain. Shortly prior to the final hearing, the husband had issued an application to stay

the English proceedings, which was withdrawn before trial. The husband, albeit now

accepting the jurisdiction of the English court, accused the wife of forum-shopping,

although he had himself consulted lawyers in both England and Spain 3 years prior

to the wife’s petition. The husband initially invited the English court to approach the

case as if it were being heard in Spain and to make an order applying Spanish law; his

open position was formulated by his Spanish lawyers and wholly failed to provide for

the needs of the wife and children. The husband sought to ‘ring-fence’ £1.49m of

pre-acquired assets, relying on their derivation and on the terms of the Spanish

agreement. Spanish expert evidence was adduced at trial, but the Spanish experts did

not agree on how a Spanish court would deal with the 2002 agreement, given the

unusual circumstances of the case and the novel issues of law potentially arising. In

giving his evidence on the third day of the final hearing, the husband admitted that

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his open position was unfair, for the first time approached resolution of the case

from an English perspective, and significantly increased his offer in respect of

maintenance. The costs were more than £300,000. The wife sought an add-back,

asserting that the husband overspent since separation, both generally and in relation

to legal costs.

Held – dividing the assets equally, subject to an adjustment of capital division to

reflect capitalisation of the wife’s maintenance for 5 years at £31,000 pa –

(1) The case was to be determined wholly in accordance with the principles of

English law.

(2) This was first and foremost a case about the needs of the wife and children.

(3) Neither party had had a full appreciation of the implications of the Spanish

nuptial agreement. There had been no common understanding between

themselves of what they had believed and intended the contract to achieve in the

event of marriage breakdown; further, given the disagreement between the

Spanish experts, neither husband nor wife could have had a full appreciation of

what the agreement meant under Spanish law. The parties’ primary intention had

been to give the wife financial security in the event of the husband’s death. In the

circumstances of the case, the agreement provided little or no assistance to the

court in carrying out the s 25 exercise.

(4) There was no doubt that the husband had come into the marriage with

substantial assets. However, those assets (with the exception of the husband’s

pension, which could not be drawn down for many years) were required to satisfy

both the immediate and long-term needs of the wife and children.

(5) In all the circumstances, the right term for spousal maintenance was 5 years. This

would allow the wife time to rebuild her career and if necessary to retrain. An

adjustment of capital to reflect the wife’s entitlement was in this case more

appropriate than the making of a maintenance order.

(6) This was not an appropriate case for an add-back; the alleged overspend did not

satisfy the criteria set out in Vaughan v Vaughan [2007] EWCA Civ 1085, [2008]

1 FLR 1108. Issue-based costs could be considered subsequently.

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F v F (Financial Remedies: Pre-Marital Wealth) [2012] EWHC 438 (Fam)

Wife aged 50, Husband aged 81. 16 year marriage. This was the Husband’s third

marriage and he had four children, now adults, from his first marriage. The Husband and

Wife had three children together, aged 17, 16 and 12. The Wife relinquished her career

during the marriage and was the main homemaker.

At the time of the marriage the Husband was a wealthy man and the chairman of a

company he founded which was the family’s main source of income and enabled them to

enjoy a high standard of living. The Husband settled a family trust for the benefit of the

children, remoter issue and spouses.

The matrimonial home was purchased following the sale of two of the Husband’s

properties and was conveyed into the parties’ joint names. The property was later settled

by the Husband for the benefit of the Husband and Wife and their children.

A share agreement was also drawn up between the Husband and Wife and the family

trustees. By agreement the shares were reclassified and assigned between the Husband,

the Wife and the family trust.

Shortly before the parties separated, a London property was purchased in the Wife’s

name for £2m and a further £470,000 was spent on refurbishments. A share portfolio

worth approximately £2.477m was transferred into the Wife’s sole name. The Husband

had also gifted substantial sums to his four older children.

The FMH was worth £4.5m, the Husband’s company worth £17.5m. The Husband had

net assets of £5.981m and the Wife £4.842m.

The Court determined that the value of the Husband’s business at the time of the

marriage in 1993 was £5m and applied an uplift of 100% to represent growth. The

resulting £10m was excluded from the pot and the Wife retained 45% of the remaining

matrimonial assets on a clean break basis

(2) Personal Injury awards

Mansfield v Mansfield [2011] EWCA Civ 1056

The Husband and Wife were married, including a period of cohabitation, for 6 years and

had 4-year-old twins. The Husband received £0.5m compensation from a personal injury

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claim prior to meeting the Wife. He invested the money in a bungalow which

subsequently became the matrimonial home and an investment flat which he let out for

rent. The bungalow was adapted to meet his special needs, partially funded by £30,000

from the sale of the Wife’s pre-marital flat. Upon separation the Wife was awarded

£285,000 to provide a home for herself and the children. If the award could not

otherwise be met, the Husband was ordered to place the bungalow on the market for

sale. The Husband appealed, seeking a lower award for the Wife and the possibility of a

Mesher order.

The Court of Appeal found that the fact that family capital came by way of

compensation did not exclude it from the court’s consideration but each case had to be

looked at on its own facts and in many instances the application of the general sharing

rule had to be tempered to reflect the particular needs of the recipient and the very

nature of the acquisition of capital, ie compensation for personal injury.

Special consideration of the origin of family capital and the special purposes for which it

had been provided could be properly reflected by converting the order into a Mesher

order. There had been a fixed amount of family capital; the Wife’s substantial need rested

on her function as primary carer which would terminate on the children’s maturity or

completion of tertiary education; at that stage it was likely that the Husband’s need for

the return of capital would be augmented by the ordinary processes of ageing which

would be likely to accentuate his disabilities

The Husband’s appeal was allowed and the order for £285,000 converted into a Mesher

order with a 1/3 reversionary interest to the Husband to be redeemed upon the

children’s maturity or completion of tertiary education.

(3) Lottery Wins

S v AG (Financial Orders: Lottery Prize) [2011] EWHC 2637 (Fam)

Wife aged 51, Husband aged 55. Both parties from Columbia. A 27 year marriage. Two

children, now aged 25 and 23.

Parties moved to the UK in 1991 to better the family’s fortunes. The marriage had been

in difficulty for a number of years; the Husband was an alcoholic and was abusive

towards the Wife.

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The Wife and a friend entered into a written syndicate agreement for the National

Lottery and won £1m. The money was paid into accounts opened in both their names.

In 1999 the Wife used her share, £500,000, to purchase and renovate a home in her sole

name which the family moved into. Despite the unhappiness of the marriage the parties

did not separate until 2003. The Husband issued divorce proceedings in the UK and the

Wife countered by issuing divorce proceedings in Colombia, seemingly to avoid any

claim by the Husband. Three years later the Husband applied for financial relief in the

UK following the Colombian divorce, and was granted leave to apply under the

Matrimonial and Family Proceedings Act 1984; in response the Wife paid £250,000 to

her friend. A freezing order was subsequently made against the friend. During

proceedings in which neither party was professionally represented, the Husband and

Wife had both failed to provide wholly truthful evidence; the Wife played up the

difficulties in the marriage while the Husband played them down. The Husband and

Wife were both employed, had sufficient income to meet their expenditure needs and the

Wife had remarried. However, while the Wife had capital resources from the lottery win,

the Husband was 10 years away from retirement and in need of a pension fund. The

court’s defined task was consideration of the treatment to be accorded to a lottery prize

in financial remedy proceedings.

Mostyn J found that where one party unilaterally bought a lottery ticket from his own

income, without the knowledge of the other party, then any winnings were to be treated

as his alone, akin to an external donation and, therefore, as non-matrimonial property.

The case had been fortified because the ticket was bought as part of a syndicate and

more so because the marriage had become troubled and unhappy with the parties drifting

into separate lives, socially and economically.

However, in purchasing the family home with part of the lottery prize, the Wife had

converted that part of the non-matrimonial assets into matrimonial property and thus it

was capable of being subject to the sharing principle. Given the source of the property

and the relatively short period that the Husband lived there, he was not entitled to an

equal share. A share of 15–20% was fair in the circumstances and coupled with his need

for a pension provision, a lump sum of £85,000 was appropriate, on a clean break basis.

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(4) Trusts

RK v RK (Financial Resources: Trust Assets) [2011] EWHC 3910 (Fam)

The parties had been married for 8 years and shared the care of their three young

children. The matrimonial home worth £580,000 was owned by a family company of

which the principal activity was farming. There were eight discretionary family trusts

which owned some of the shares in the company; the trusts had liquid and illiquid

assets of £600,000–£700,000. The trusts had provided some income and advanced

modest capital sums to the family. The family had lived beyond its means and had

been afforded loans by the trusts to meet debts. The husband was employed by the

company on a net income £49,000 pa and benefits in kind of around £33,000 pa to

meet living expenses. The wife had £10,000 pa in child benefits and only a modest

future earning capacity. The wife currently had debts of £245,000, including unpaid

legal costs of £200,000 in respect of which she had entered into a Sears Tooth

agreement. The husband had large debts and had been lent £86,000 by the trust

towards legal fees.

The wife sought £400,000 for housing from the trusts under a life interest and

£25,000 lump sum for costs of purchase and for a car. She sought a further £245,000

to meet her debts, a half share of the husband’s company pension and maintenance

for herself and the children. The trustees offered £375,000 for the wife to purchase a

house and a sum for a car.

Held – awarding the wife a capital fund of £425,000 for housing and a car, £50,000

towards her debts, and £28,000 pa maintenance, and ordering a transcript of the

judgment to the trustees and the order to be deferred until receipt of their response –

(1) Resources held within a bona fide discretionary trust are a party’s resources under

s 25(a) of the Matrimonial Causes Act 1973 to the extent that, on the balance of

probabilities, they are likely to be made available to that party either now or

within the foreseeable future. This would encompass provision for that party’s

own needs as well as provision to enable that party to meet an award made

against him in favour of the other party. The form in which provision can be

made available will vary. It may be by way of income or capital distributions, by

way of loans or by way of occupation of a trust property. The question of

whether resources are available is one of fact.

(2) The wife’s reasonable housing needs were £400,000. Given that the house would

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remain in the trust, the trustees could reasonably be expected to provide

marginally more than they had offered without damaging the interests of the

trusts or of other beneficiaries. It was reasonable for the trustees to decline to

provide £245,000 to cover the wife’s debts, but it was likely that they would agree

to provide £50,000 as to contribution, either directly or through the husband.

The wife had an income need of £40,000. The husband could afford the

maintenance ordered, in the light of his salary and benefits in kind.

(5) Inherited Wealth

AR V AR (Treatment of Inherited Wealth) [2011] EWHC 2717 (Fam)

The Husband and Wife separated after a relationship that had lasted about 25 years,

including almost 20 years of marriage; they had one child, now 18. The family’s total

assets were in the region of £21–24 million, all but about £1.1 million of which was in

the Husband’s name. Almost all these assets had been gifted to or inherited by the

Husband; the source of the assets was a manufacturing business created by the

Husband’s father. During the marriage the income from these inherited resources had

been used by the family to supplement the Husband’s earned income.

In the financial order proceedings the Wife was seeking an award of £6 million, which

would enable her to leave the marriage with £7 million – approximately 30% of the total

assets.

The Husband was proposing that the Wife receive a lump sum of £1.3 million, which

would give her total resources of about £2.4 million.

The Husband, now 66, earned about £100,000 pa as a farmer; he had remained in the

matrimonial home, which was valued at about £1.1 million and in order to maintain his

current level of expenditure he needed £140,000 pa.

The Wife, now 54, had worked during the cohabitation period, but not since the

marriage; she estimated her future income needs at about £136,000 pa, plus £1.5 million

for housing.

The Husband’s key submission was that, given the source of the assets, there should be

no sharing; the Wife argued that she was entitled to an award additional to her needs

based on the sharing principle.

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The Wife was awarded £3.2 million, in addition to her own assets of £1.1 million, the

court concluding that:

a) When addressing future income needs the court’s task was not to arrive at a

mathematically exact calculation, but to determine the notional annual income which,

in the circumstances of the case, would be fair.

b) Given the level of expenditure incurred by the family during the latter years of the

marriage, the Husband’s own Form E budget, and the level of the Husband’s

expenditure since the separation, a reasonable annual income need for the Wife was

£115,000 pa;

c) The Duxbury lump sum to produce this income was £2.5 million, however, this did

not include discretionary expenditure. In a case such as the present, the Wife was

entitled to have sufficient resources to enable her to spend money on additional,

discretionary, items, which would vary from year to year and which were not

reflected in her annual budget.

d) The Wife also required about £1.1 million to obtain housing of an equivalent

standard to the matrimonial home;

e) Absent reliance on exceptional contribution and/or on conduct, evidence was not

required about the nature of each party’s contributions during the marriage beyond a

broad history of the marriage. If more detailed evidence was given, it too easily fell

into an attempt to persuade the court to evaluate the quality of a spouse’s

contributions and encouraged allegation and counter-allegation, which did not assist

the court in achieving justice, but did add unnecessarily to the cost, both financial

and emotional, of the proceedings;

f) The sharing principle could apply to non-matrimonial property if such an approach

was justified by the circumstances of the case. Such circumstances were not restricted

to the exceptions identified in K v L (Non-matrimonial Property) [2011] EWCA Civ

550; fairness required a broader approach.

g) However, in this case, nothing had happened to the bulk of the non-matrimonial

wealth to change it into matrimonial property, or to diminish the weight to be

attached to it as a factor, and the sharing principle did not justify any additional or

enhanced award above the Wife’s needs;

h) when determining a spouse’s substantive financial claims on the basis of need, the

court had a wider discretion to depart from the mathematics of the Duxbury tables

than it did when seeking to capitalise an existing periodical payments order under the

18

Matrimonial Causes Act 1973, s  31(7B); this was because at the substantive stage the

framework for the assessment had not already been set by an earlier order;

applying Pearce v Pearce [2003] 2 FLR 1144. When justified by the circumstances of

the case a flexible application of Duxbury would better achieve justice than a narrow

approach, with sufficient predictability to be acceptable. Duxbury was a tool, not a

rule, applying F v F (Duxbury Calculation: Rate of Return) [1996] 1 FLR 833, and the

court’s objective was fairness not certainty. The Wife should have a measure of

financial security above that which would be offered by a simple Duxbury calculation

in respect of her income.

(6) Third Party Assets

Gowers v Gowers [2011] EWHC 3485 (Fam)

This was a marriage of 12 years; there were five children. All the wealth had been

generated during the marriage. The husband had founded and was the main driving

force behind a company. He had formerly been the company chairman and was

currently an employee, although personally bankrupt. The majority (67%) of the

shares in the company were owned by another company which in turn was wholly

owned by a discretionary trust settled by the husband of which he and the children

were beneficiaries. There was no evidence of the trust having distributed monies.

The husband had borrowed £370,000 from the company. Shares in another company

owned by the company were sold for £10m, of which proceeds the company was

entitled to 67%. It was likely that the husband would receive a share, but the

quantum was unclear.

A High Court judge on a without notice application by the wife made a freezing

order, with provision that if £500,000 were paid into court by the company, the

freezing order would cease to be effective. The company paid the money into court

on the understanding that it would be tied up for only a few weeks.

The district judge hearing the financial proceedings found that the husband was in

effect the company in the sense that he appeared able to deal with company finances

in a haphazard way, including obtaining loans. The district judge ordered the

£500,000 to be paid directly to the wife by way of part payment of a lump sum

award. The husband and the company appealed.

Held – allowing the appeal and setting aside the order –

19

(1) The court had no jurisdiction to make an order that the sum of £500,000 held in

court be paid to the wife. The company was not a party to the marriage in terms

of s 23(1)(c) of the Matrimonial Causes Act 1973, and s 24A(1) applied only to

the proceeds of sale of property in which either or both parties to the marriage

had a beneficial interest. When the company had made the payment into court,

there was nothing to suggest that it was agreeing or intending to put itself under a

different or greater obligation than that created by the freezing order. The

payment was simply made in order to put the money in a secure place, free from

any argument about the scope of undertakings. The district judge had made no

finding that the husband owned the company. The case came nowhere near any

situation in which the court could pierce the corporate veil. The veil could not be

pierced unless there was both control and impropriety, ie misuse of the company

as a device or façade to conceal wrongdoing. The district judge had found that

the husband had treated the company as a cash cow, but she had treated the

monies obtained by the husband as loans. No finding of impropriety had been

made.

(2) The order made by the district judge could not be justified or upheld on the

authority of Thomas v Thomas [1995] 2 FLR 668. That and subsequent authorities

provided no support for making an order directly against a company with which

a spouse might be closely connected.

Edgerton v Edgerton & Another [2012] EWCA Civ 181

Husband and wife had an on-off relationship over 25 years. The three adult children

were all in further education. The husband had been involved in entrepreneurial

activities worldwide, including dealing in property and cars. In 2009 the wife filed for

divorce and ancillary relief and obtained an injunction under s 37 of the Matrimonial

Causes Act 1973 to protect her claim. The husband successfully applied to discharge

the injunction on the basis of his undertaking not to dispose or otherwise deal with

various properties and company interests. In his incomplete form E, the husband

referred to debt of £1.2m to an individual subsequently identified as Mr Shaik, a

Dubai businessmen. Mr Shaik failed to comply with a direction to file a statement

and attend the FDR. The matter was listed for final hearing. Mr Shaik brought a civil

loan action against the husband, claiming repayment of more than £1.5m plus

interest, and later applied to intervene in the ancillary relief proceedings. However,

20

instead of pursuing his intervention application, Mr Shaik discontinued the loan

action and stated a fresh action against the husband in the Chancery Division for

partnership dissolution and an account. He pleaded a partnership at will and claimed

that the partnership assets included the former matrimonial home. A circuit judge

transferred the ancillary relief proceedings to the Family Division High Court and the

partnership action from the Chancery Division to the Family Division, listed a case

management conference in both proceedings before a judge of the Family Division,

and ordered that the wife be a third party in the partnership action and file a defence.

The wife contended that the alleged partnership was a sham and that the assets in

question belonged to the spouses. At the case management hearing the judge

transferred the partnership action back to the Chancery Division but gave directions

for final pleadings. The wife was in receipt of public funding for representation only

for the ancillary relief proceedings and not for the separate partnership proceedings

in the Chancery Division. She failed to comply with directions, her defence was

struck out and her application for relief against sanctions was refused, effectively

debarring her from defending the partnership action. In November 2010, the

husband and Mr Shaik disposed of the partnership action by consent order which

entitled Mr Shaik to repayment of his capital from the partnership assets. When the

ancillary relief proceedings came before the judge, he held that the consent order in

the partnership proceedings did not bind the court in the ancillary relief proceedings

and did not stop the wife from pursuing in those proceedings any issues relating to

the ownership of the disputed assets. The judge declined to release the husband from

his earlier undertaking. The wife subsequently obtained an injunction freezing a sum

equivalent to the proceeds of sale of the former matrimonial home which had been

transferred to an offshore account in Mr Shaik’s name. The husband and Mr Shaik

appealed these interlocutory orders.

Held – allowing the husband’s appeal on the estoppel issue but dismissing his appeal

in respect of his undertaking, and dismissing Mr Shaik’s appeal, subject to

conditions –

(1) The judge’s decision that the wife could in effect ignore the Chancery order in the

ancillary relief proceedings could not stand, at least in the absence of a pleaded case

that it had been obtained by fraud or collusion, and – ideally – an application to set it

aside. The Chancery Division order was on its face a regular final decision of the

High Court which was binding on the parties to it and which conclusively

21

determined the ownership of the assets to which it referred. The parties to the order

were not just the husband and Mr Shaik, but also the wife because she had been a

party to the partnership action who had been debated from defending it. So long as

the Chancery order remained in force, it operated as an estoppel, notwithstanding

that it was a consent order and a default order as far as the wife was concerned. The

judge had been wrong to consider that the normal rules of issue estoppel did not

apply in ancillary relief proceedings where the court had an inquisitorial or quasi

inquisitorial role. The first task of the court in ancillary relief proceedings was

computation of assets: at that stage, determination of asset ownership when

embodied in a court order created estoppel between the parties.

(2) In the unusual circumstances of the case, including the wife’s loss of public funding

as a result of the judge’s case management decision, the wife should be given the

right to seek to have the Chancery order set aside. The husband’s undertaking should

be continued for the time being on the condition that the wife issue a claim as soon

as possible in the Chancery Division to set aside the order on the ground of collusion

and/or fraud, and that that action be transferred to the Family Division.

(3) It was appropriate in the circumstances to dismiss Mr Shaik’s appeal on the same

terms.

Hope v Krejci and Others [2012] EWHC 1780 (Fam)

In financial remedy proceedings the husband was ordered to pay the wife a lump

sum of £268,000 and a contribution to her costs of £100,000. The husband paid

nothing and unsuccessfully sought to appeal the orders. The wife made a

portmanteau application for enforcement under Family Procedure Rules 2010, r 33.3

and restored her adjourned application for variation of a nuptial settlement. She

sought to vary the Krejci Family Trust (an offshore trust) by pulling out of it a fund

of £373,082 for her absolutely, to include real properties and motor vehicles which

were located in England. The family trust owned a Jersey company which owned a

UK company. The only assets within this jurisdiction were the real and personal

properties which the wife sought to have vested in her. The wife also sought a non-

statutory civil restraint order under the court’s inherent powers to prevent the

husband embarking on satellite litigation without the permission of the court.

Held – varying the trust to satisfy the wife’s claim to a fund of £373,082, appointing

to her absolutely the real and personal property to be deducted from the total fund,

22

ordering the wife to sell those properties and to give credit, adjourning her

enforcement application with liberty to restore, and declining to make the civil

restraint order –

(1) The power to vary nuptial settlements under s  24(1)(c) of the Matrimonial Causes

Act 1973 was almost limitless. In most overseas trust situations there was likely

to be an offshore company interposed between the trust and the underlying asset.

The interposition of a company had never been argued, let alone found, to be an

impediment to effective variation of the settlement. In this multiple structure

context, a short-circuited or ‘telescoping’ approach was legitimate: Mubarak v

Mubarak [2001] 1 FLR 673. In a variation of trust settlement case, the court

could (metaphorically) travel right down the lift-shaft from the top floor to the

basement, without having to stop at any floor in between.

(2) The wife’ application for a civil restraint order was highly innovative, being made

not pursuant to Family Procedure Rules 2010, r 4.8 and Practice Direction 4B

but under the inherent powers. It would be quite wrong in the particular

circumstances of this case for the court to deploy its inherent powers to outflank

the statutory scheme.

Per curiam: In respect of the court’s power to pierce the corporate veil, when what is

sought was a telescoping order in the specific factual context almost invariably

encountered in financial remedy proceedings, Nicholas v Nicholas [1997] 1 FLR 649 is

binding authority, and nothing said in VTB Capital plc v Nutritek International Corp and

Others [2012] EWCA Civ 808 (in which Nicholas was not refereed to) should be taken

as altering that.

Petrodel Resources Limited and Others v Prest and Others [2012] EWCA Civ 1395*

Husband and wife married in 1993. They had four children, now teenagers. During

the marriage the family had lived an affluent lifestyle with properties in London,

Nigeria and the Caribbean. The husband was prominent and successful in

international oil development and trade. In financial proceedings following the

breakdown of the marriage, the wife claimed that the husband was worth tens if not

hundreds of millions of pounds and sought an overall award of £30.4m. The

23

husband claimed that his liabilities exceeded his assets by £48m and proposed a £2m

package for the wife. The husband repeatedly breached his duty to give full and frank

disclosure, was obstructive in the proceedings, breached multiple orders, and failed

to pay costs awarded against him. Moylan J awarded the wife £17.5m as being fair in

all the circumstances. He ordered the husband to ‘transfer or cause to be transferred’

to the wife four London properties and an interest in a fifth all held in the name of

Petrodel Resources Ltd and two London properties held in the name of V Petroleum

Ltd. The companies were incorporated in the Isle of Man. The judge found that the

husband was the only effective shareholder of these and other companies, that he

exercised sole control over the companies, that all the assets held within the

companies were effectively the husband’s property and that he was (conservatively)

worth some £37.5m. Moylan J rejected the assertion that there had been impropriety

on the husband’s part in setting up the company structure, which had been

established for conventional reasons including wealth management and tax

avoidance. The judge purported to make his order under s 24(1)(a) of the

Matrimonial Causes Act 1973, which provides that a party to the marriage may be

ordered to transfer to the other party ‘such property as may be so specified, being

such property as the first mentioned party is entitled, either in possession or

reversion’.

The husband’s appeal was struck out because of his failure to comply with conditions

of court orders. The companies appealed, arguing that the husband was not entitled

to the properties in question within the meaning of s 24(1)(a).

Held – (Thorpe LJ dissenting) – allowing the appeal –

(1) Salomon v A Salomon and Co Ltd [1897] AC 22 provided the highest authority

for the principle that a duly incorporated was a legal entity wholly separate from

its corporators, with rights and liabilities of its own. A company’s assets belong

beneficially to the company and its corporators have no interest in them. Such

assets cannot be looked to in order to satisfy the personal obligations of the

corporators. It made no difference to the fact of a company’s separate entity that

a single individual controlled all its shares. The judge’s reasoning that ‘power

equals property’ had been wrong. It was heretical to suggest that the total control

which a single individual was and always would be entitled to exercise over the

affairs of his one-man company resulted in the company’s assets becoming assets

24

to which that individual was entitled.

(2) In the present context, save in cases where it was legitimate to pierce the

corporate veil, the separate corporate identity of a company is a fact of legal life

that all courts are required to recognise and respect, whatever jurisdiction they

are exercising. It is not open to a court, simply because it regards it as just and

convenient, to disregard such separate identity and appropriate the assets of a

company in satisfaction either of the monetary claims of a corporators’ creditors

or of the claims of a corporator’s spouse. Salomon precludes any such approach

and the Salomon principle must apply equally in all jurisdictions. The obiter dicta

in Nicholas v Nicholas [1984] FLR 285 to different effect were inconsistent with

Salomon.

(3) Authorities including Woolfson v Strathclyde Regional Council (1978) SC (HL)

90, Ben Hashem v Al Shayif [2009] 2 FLR 115 and VTB Capital plc v Nutriek

International Corp [2012] 2 BCLC 437 showed that there may be factual

circumstances in which it will be legitimate for the court to pierce the corporate

veil and, to an appropriate extent, to disregard the fact of its separate identity

from that of its corporators. However, that could be done only in limited

circumstances, central to which is the demonstration of relevant impropriety in

the corporators’ use of the company. That jurisdiction is an exceptional one.

There was no rational ground to regard family courts as exempt from the need to

be satisfied as to the conditions affirmed in VTB Capital v Nutriek International

Corporation before piercing the corporate veil. Inconsistent dicta in Nicholas v

Nicholas should no longer be regarded as of any authority.

(4) In this case, once the judge had rejected the impropriety assertion, he had no

choice but to reject the claim that the companies’ London properties were or

could be regarded as properties to which the husband had any entitlement. He

had no jurisdiction under s  24(1)(a) to make the orders he did in relation to those

properties. Insofar as he was suggesting that s  24(1)(a) enabled the court to treat a

company’s property as belonging to its 100% owner, he was wrong. Section

24(1)(a) do no more than confer a jurisdiction to make a transfer order in respect

of property to which the respondent spouse is beneficially entitled. Whether such

spouse is or is not so entitled will be a question of fact, to be answered in the

same way as it would regardless of the making of an application under s  24(1)(a).

25

Per Thorpe LJ dissenting: The simple question was whether an individual is entitled to

property within the meaning of s 24(1)(a). Family Division judges with particular

expertise in this field have on many occasions stressed the need to get to the realty in

determining the assets to which a spouse is entitled. The judge had found a complete

absence of boundaries between the husband and his companies; the companies were

wholly owned and controlled by him and there were no third party interests. On the

exceptional facts of this case, the judge had been entitled to order the husband to

transfer or cause to be transferred to the wife the assets which he did.

3. MAINTENANCE & CAPITALISATION OF PERIODICAL PAYMENTS

Yates v Yates [2012] EWCA Civ 532

In financial proceedings a consent order had made provision for the Wife to receive a

lump sum of £978,000, partially in order for her to discharge the mortgage of £451,000

over the matrimonial home, and continuing periodical payments for a term of 3 years.

On the advice of a financial advisor the Wife, instead of paying the mortgage, purchased

a non-income bearing bond. The Wife subsequently applied to extend the 3-year term of

periodical payments and for capitalisation of £1.3m. The district judge granted the Wife’s

application and fixed upon a sum of £456,000. This was achieved by setting the Wife’s

monthly budget at £4,000, including mortgage payments of £500 per month and

deducting £10,000 to reflect her earning capacity. This was quantified on a straight line

12-year calculation.

The Husband challenged the extension of the term by 12 years and asserted that the

judge had included mortgage payments and substantial expenditure on the children in the

annual budget which was impermissible because the Wife had received a lump sum to

discharge the mortgage and there were continuing periodical payments orders in respect

of the children.

In his appeal before the circuit judge the straight line calculation was substituted with

a Duxbury calculation but otherwise the order remained intact. The Husband then

appealed to the Court of Appeal.

26

The Court of Appeal allowed the appeal, reducing the capital sum payable by the

Husband to the Wife by £58,000, holding that:-

1) Fleming v Fleming [2003] EWCA Civ 1841 cautioned against extensions of the term

of a periodical payments order unless exceptional circumstances were established. In

this case the decision rested on the facts as found by the district judge as to the

understanding of the parties at the date of negotiations and it was not for the

appellate court to interfere.

2) It was self-evident that if the recipient of a lump sum twice the size of the mortgage

on the final matrimonial home elected to hold back capital made available for the

mortgage discharge in order to invest in a bond that bore no income, she could not

look to the payer thereafter for indemnity or contribution to the continuing mortgage

interest payments. The courts below had erred in principle in the calculation of

capitalisation and the inescapable conclusion was that the Wife’s true needs were

£3,500 per month, excluding any mortgage obligation.

It was made clear in the judgment that the assessment of the needs of the Wife were for

the Wife and did not include these which were child-centred. The point had not, as it

were, passed under the judge’s radar: there were extensive arguments about it and the

appeal had to fail on that point.

S v M (Maintenance Pending Suit) [2012] EWHC ? (Fam)

The husband was Iranian and the wife Lebanese. They married in 2007 and lived

with the husband’s family in London. A year later, the wife moved out and occupied

a flat owned by the husband’s father, where she remained. The couple divorced in

2011. The husband was dependent upon his father for financial support, including

for the payment of £1.5m compensation to HMRC for VAT-fraud. The wife was

supported by her own family. In 2012, the father gave the wife notice to quit the flat

and she responded by applying for maintenance pending suit. Her legal team applied

ex parte for an urgent interim hearing which was heard 14 days later and given a 30

minute slot. At that hearing, an order worth around £50,000 pa was made. A couple

of months later, at a hearing in connection with enforcing the maintenance order the

wife obtained a freezing injunction against six bank accounts involving about £5,000.

The husband appealed against both orders.

Held – allowing the appeal, discharging both orders ab initio and awarding the

27

husband his costs in the freezing application and appeal –

(1) A step by step approach must be taken in cases of this kind where the ultimate

payer or source of funds is unlikely to be the respondent himself. It is of the

essence in these types of family money cases to establish as clearly as one can

what the true historical position is, in particular, the extent of the provision by

the family to the payer and the extent to which there has been an established

payment stream or other regular financial provision to the claimant in the

application. These are not straightforward matters that can be dealt with in a 30

minute hearing but require much more than usual attention by the court to try to

discern the underlying reality of the past arrangements: TL v ML (Ancillary Relief:

Claim Against Assets of Extended Family) [2005] EWHC 2860 (Fam), [2006] 1 FLR

1263 followed.

(2) The approach recommended in Thomas v Thomas [1995] 2 FLR 668 must be

preceded by good evidence to enable the court to conclude that if they make an

order which requires third parties to act there is some reason and confidence to

believe that the order will be obeyed.

(3) The evidence showed that the spouses had always been very heavily dependent

on their respective families. The husband had provided almost no support to the

wife other than paying back money he already owed her and making a few small

and infrequent cash payments. So far as the husband’s own support was

concerned, this was largely confined to paying his debts to avoid prison or

bankruptcy. There was no pattern of regular support although the father was not

going to see his son on the street. These facts did not lead to the assumption that

the husband would be expected to provide significant financial support to the

wife by way of capital or income. The wife had also had, and continued to enjoy,

the benefit of rent-free accommodation, which constituted sufficient interim

provision.

(4) The order for maintenance was plainly wrong. The judge had failed properly to

consider the husband’s resources and carry out any balancing exercise of his

resources and the parties’ individual needs.

(5) There was never any evidence properly before the court of an intention to

dissipate relevant to the making of a freezing order, and freezing so insignificant

an amount was of no practical purpose. The court needed to be satisfied that

enforcement was both appropriate and possible.

28

4. PRACTICE POINTS

ND v KP [2011] EWHC 457 (Fam)

Ancillary relief proceedings had proceeded to an FDR without resolution. One week

later on 21 December 2011 the wife applied ex parte to the urgent applications judge,

Roderick Wood J, for a freezing order under the inherent jurisdiction. The

application was supported by a professionally drawn affidavit. The judge granted the

application made in respect of the husband’s Swiss bank accounts and furthermore

froze certain properties. The orders were to run until 9 February 2011. On 29

December 2010 the wife obtained a mirror order from the Swiss court in respect of

bank accounts. The husband applied to discharge the orders and also sought an in

personam order that the wife obtain discharge of the Swiss order.

Held – discharging ab initio the orders made by Roderick Wood J and directing the

wife to obtain discharge of the Swiss order –

(1) Whether an application for a freezing order is made under the court’s inherent

jurisdiction or under s  37 of the Matrimonial Causes Act 1973, there must be

before the court a demonstration of objective facts that evidence the likelihood

of movement or dissipation of assets with the intention of defeating the

applicant’s claim.

(2) No order should be made in civil proceedings without notice to the other side

unless there is very good reason for departing from the general rule that notice

must be given, eg when notice might defeat the ends of justice. An injunction

granted without notice is an exceptional remedy: Moat Housing Group-South

Ltd v Harris [2005] EWCA Civ 287, [2005] 2 FLR 551. An application for ex

parte relief should only be made where there is positive evidence that to give

notice would lead to irretrievable prejudice to the applicant.

(3) If an applicant chooses to move the court ex parte, a high duty of candour

applies.

(4) On the material that had been put before the court, there was nothing that

brought this case anywhere near the threshold needed to obtain freezing relief on

an application ex parte, whether under the inherent or the statutory jurisdiction.

The wife’s real motive was to freeze the husband’s assets for no reason other

than that it would be desirable to freeze them until trial. She therefore had had

29

no reason to have moved the court ex parte. Furthermore, the wife had not

complied with her duty of candour.

(5) It followed that the Swiss mirror orders should not have been obtained. The

court could make an in personam order requiring the wife to obtain discharge of

the Swiss order if its obtainment and continued existence was both oppressive

and vexatious. The court was satisfied that this was the case.

Young v Young [2012] EWHC 138 (Fam)

In ongoing financial proceedings the Husband’s passport was seized by the court and

had been held by the tipstaff for almost 3 years. In the action for enforcement of orders

for disclosure and interim maintenance he was also sentenced to a period of

imprisonment for contempt. The Husband claimed he was bankrupt and in debt of tens

of millions of pounds which the Wife disputed, claiming his bankruptcy was fraudulent

and that he had secreted away hundreds of millions of pounds.

The Husband sought a return of his passport so that he could travel to help set up a

charity in Africa but the Wife asserted that the Husband needed to remain in the

jurisdiction in order to answer questions regarding his financial means before the final

hearing in 9 months’ time. He currently owed the Wife £715,000 in maintenance arrears.

Held – dismissing the Husband’s application –

1) The power to impound a passport pending the disposal of a financial remedy claim

existed in principle in aid of all the court’s procedures leading to the disposal of

proceedings. But it involved a restriction of the subject’s liberty and so should be

exercised with caution and the authorities emphasised that the restraint should be of

a short-term nature. The law favoured liberty.

2) It was necessary to establish a good cause of action, and a probable cause for

believing that the respondent was about to quit the jurisdiction unless restrained and

that the absence of the respondent from the jurisdiction would materially prejudice

the prosecution of the action. Provided the principles were carefully observed, a

passport impounding would represent a proportionate public policy-based restraint

on the freedom of movement founded on the personal conduct of the respondent.

3) The Husband remained in contempt of court in respect of his failure to disclose and

grossly in contempt of his maintenance obligations. It was for the Husband to

demonstrate he had complied with the disclosure requests. The Wife established a

30

good cause of action for a substantive award and it was plain that the Husband was

about to quit the jurisdiction. His asserted intention was highly implausible and it

seemed there was an ulterior reason for his wish to leave the country. His departure

would materially prejudice the Wife’s claim for financial remedies.

4) To withhold the passport for a further period of 9 months until the final hearing was

at the extremities of the court’s powers given the emphasis in the authorities of any

restraint being of a short-term nature. However, on the exceptional facts of the case

it was justified provided the Husband had liberty to apply again for a discharge.

G v G (Financial Remedies: Strike Out) [2012] EWHC ???? (Fam)

By consent order in financial remedy proceedings the husband was to pay the wife a

deferred lump sum of £4.7m, subsequently reduced to £3.7m when an asset was sold

and the proceeds paid to the wife. The husband applied to discharge, vary or

postpone the lump sum payment, on the ground that he was without means because

of a dramatic reduction in the value of his share of the assets caused by the global

economic downturn and bad investment decisions. This was vigorously disputed by

the wife. The husband failed to provide full financial disclosure and the wife served a

lengthy questionnaire to which the husband did not serve his replies. The wife

applied to stroke out the husband’s application to re-visit the lump sum. The court

made an ‘unless’ order under Family Procedure Rules r 4.4(1)(c) of the Family

Procedure Rules 2010, requiring the husband to file and serve his replies with all

supporting documentation by 16 November 2011, and in the event of his non-

compliance and failure to satisfy the court that: (a) he had taken all necessary and

reasonable steps to procure the document; and (b) his application could properly be

determined in the absence of the documents, his application would be struck out. On

15 November 2011 the husband served his replies; it was common ground that not

all the questions had been properly answered and that not all the required documents

had been supplied. The wife served a lengthy schedule of deficiencies. The husband

served further documents on the last working day before the hearing on the wife’s

strike-out application. The documents revealed substantial expenditure on credit

cards.

Held – declaring that the husband’s application to re-visit the deferred lump sum

payment was struck out –

31

(1) Rule 4.4(1)(c) of the FPR 2010 gives the court specific power to stroke out a

statement of case if there has been inter alia a failure to comply with a court

order. Such is a draconian step, since it extinguishes as a result of procedural

failings a claim which may or may not have substantive merit (subject to the right

to apply under r 4.5(1) for relief from the sanction).

(2) In respect of outstanding documents, the husband had not shown that he had

taken all necessary and reasonable steps to obtain them. The question whether

his application could properly be determined in the absence of the information

ordered was one of fact and degree. On balance, the application could not be

properly determined without the outstanding documents, nor in the absence of

proper answers to the outstanding questions.

X v X (Financial Remedies: Preparation and Presentation) [2012] EWHC 538 (Fam)

The final hearing of a financial remedies case had to be adjourned at the end of the

seventh day because crucially important information was outstanding. The case

settled after the adjournment. Settlement notwithstanding, Charles J delivered a

judgment in order to comment on the preparation and presentation of the case,

having received written submissions thereon.

Although no criticism was made of any individual concerned, this case represented

another example of endemic failure in this field of litigation to prepare and present a case

in such a way that prior to the commencement of the trial the issues have been properly

identified and the evidence necessary for their determination has been gathered and

prepared. Such concerns had already been raised in Jones v Jones [2009] EWHC 2654

(Fam), at paras [475]–[485]. It had been necessary to adjourn the instant case because the

presentation of a central issue had not been properly prepared, namely the ‘bricks and

mortar’ value of a hotel (in addition to its value as a business) and its alleged gift to the

husband. Furthermore, the substantive law, particularly on the sharing rationale, was the

subject of inconsistent judicial approaches even at appellate level. The application of that

rationale in non-paradigm cases has introduced into this field property and commercial

issues which the present system was not designed to deal with and with which

practitioners had historically been unfamiliar. Those property and commercial issues

have for example introduced a need to identify assets by applying company, trust and tax

law and to consider commercially and pragmatically viable options.

32

HMRC v Charman and Charman [2012] EWHC 1448 (Fam)

In 2006 the wife was awarded £48m by Coleridge J in ancillary relief proceedings:

Charman v Charman (No 2) [2006] EWHC 1879 (Fam), [2007] 1 FLR 593. The

husband’s appeal was dismissed: Charman v Charman (No 4) [2007] EWCA Civ 503,

[2007] 1 FLR 1246. One issue impacting upon Coleridge J’s determination of the

wife’s claim was the extent of the husband’s potential tax liability which depended on

the date of his change of residence. HMRC subsequently issued an assessment of

£11.5m unpaid tax for the years 2001–2008, which the husband disputed and

appealed. For the purposes of the tax appeal, HMRC sought sight and use of

transcripts of documents filed and other evidence in the ancillary relief proceedings

and requested the husband and wife to produce them. The wife did not object but

the husband did. HMRC issued an application for disclosure.

It was common ground that absent the consent of both husband and wife, the

documents and other evidence were not disclosable without court order and that the

court had a discretion to order their production. Both parties relied on public

interest. Coleridge J treated the application as being brought under Family Procedure

(Amendment) Rules 2012 r 29.12, which provides:

‘ Access to and inspection of documents retained in court

29.12(1) Except as provided by this rule or by any other rule or Practice

Direction, no document filed or lodged in the court office shall be open to

inspection by any person without the permission of the court, and no copy of

any such document shall be taken by, or issued to, any person without such

permission.’

Held – dismissing the application –

(1) As a general rule, documents and other evidence produced in ancillary relief

proceedings (now called financial remedy proceedings) are not disclosable to

third parties, save that exceptionally and rarely for very good reason they can be

disclosed with leave of the court. The fact that the evidence may be relevant is

not by itself a good reason to undermine the rule.

(2) It is in the public interest for the right amount of tax to be paid by taxpayers.

Further, there was no doubt that the documents sought in this case would be

relevant to proceedings before the First Tier Tax Chamber. However, that was

33

not the test.

(3) Considering and balancing the competing public interests, there was nothing rare

or exceptional about this case which took it outside the general rule. The

husband was entitled to say that he had complied fully with the rules of

disclosure and that the confidentiality/privilege attached to the documents and

other evidence produced thereby should not be breached. HMRC had advanced

no discernible compelling reason why the general rule should be relaxed in this

case. This was a routine tax assessment: there was no suggestion that the husband

was guilty of tax evasion or criminal conduct. The husband had to prove his case

in the tax appeal. The judgments at first instance and on appeal were already

available to HMRC.

5. NUPTIAL AGREEMENTS

Z v Z (No. 2) (Financial Remedies: Marriage Contract) [2011] EWHC 2878 (Fam)

The spouses were French nationals who, having lived together for 4 years, entered

into a marriage contract under the ‘separation de biens’ regime before two notaries

and in accordance with French law in 1994. They had three children. The husband’s

work took him to London, where the family moved in 2007. By that time the

marriage was in difficulties and the spouses separated in 2008, for a trial period of 3

months. At that time, the husband wrote to the wife undertaking that, if he took the

initiative to divorce, he would pay her half his after-tax net earnings and maintenance

of up to €200,000 per annum while his employment continued. The wife

subsequently issued a divorce petition and jurisdiction was established in a ruling by

Ryder J in Z v Z (Divorce: Jurisdiction) [2009] EWHC 2626 (Fam), [2010] 1 FLR

694. The parties agreed that there were total capital assets of around £15m, of which

£1,285,000 was in the wife’s name and the rest in the husband’s. Over half of the

wife’s assets consisted of her half share interest in the former matrimonial home in

Paris, and a 15% share in an investment property with the husband, worth around

£40,000. Most of the rest consisted of savings and inherited properties in France

which were subject to a usufruct (life tenancy). The husband had inheritances which

effectively balanced out those of the wife. Apart from his share in the marital home

and investment property, the rest of his capital derived from his remuneration from

34

his employer. His gross annual income over the past 5 years was between over €5m

and €2m but was projected to reduce to around €700,000 in the future as he became

less productive.

Held – ordering a lump sum payment to the wife of £6m –

(1) This would undoubtedly have been a case for equal division of the assets absent

the ‘separation de biens’ marital property agreement.

(2) It was relevant to the issue of fairness to know what the position would have

been in France but not to reduce the award simply because the wife would have

got less there.

(3) The burden on someone raising the argument that a marital agreement has

subsequently been varied, whether orally or in writing, is a heavy one. There has

to be the clearest possible evidence before a court could even contemplate using

this as a reason for not enforcing the agreement. Any other approach would

encourage false testimony and potentially drive a coach and horses through the

need for such agreements to be varied formally. No such evidence was present in

this case.

(4) As the husband did not bring divorce proceedings, the proviso in his letter of

undertaking to the wife had not been fulfilled and the terms of the letter did not

come into play as a matter of strict contract law. But the letter also failed to

satisfy the test set out in Edgar v Edgar (1981) 2 FLR 19 by Ormrod LJ. Neither

party had had any legal advice and both were under significant emotional

pressure. The letter was simply a reassurance by the husband that he would not

take advantage of the 3 month trial separation to commence divorce proceedings.

It was not a good reason for departing from the terms of the marital agreement,

which would be upheld.

(5) The agreement had not purported to exclude maintenance claims and it was

therefore appropriate to consider the wife’s reasonable needs.

(6) A housing budget of around £3.25m, plus costs of stamp duty, purchase and

furnishing, was appropriate. The parties had lived relatively frugally apart from

expenditure on holidays. An appropriate budget for the wife was £100,000 pa

with £25,000 per annum for each child until they had completed tertiary

education to first degree.

(7) The wife’s inherited properties should be excluded from calculating the capital

sum needed to support the income she required. Nor should the possibility that

35

she might trade down her properties in the coming years be taken into account,

which would be a matter for her. Taking all these issue together, a total capital

sum of £6m would be appropriate.

(8) While sharing was not appropriate, the cross-check should be performed if only

to make sure the award was not in excess of half the assets. On the basis of a

total of £15m, it represented 40%, which was a suitable departure from equality

to reflect the marital agreement. If the husband’s tax liabilities proved higher than

expected, he had the choice either to require an indemnity from the wife, in

return for a nominal maintenance order to meet any shortfall in the maintenance

she required, or he could assume all liability for tax and make a clean break.

Kremen v Agrest (Financial Remedy: Non-Disclosure: Post-Nuptial Agreement)

[2012] EWHC 45 (Fam)

This was a further stage in protracted and complex proceedings. The marriage had

lasted 16 years and there were three children, the two younger in private education.

The wife applied for financial orders under Part III of the Matrimonial and Family

Proceedings Act 1984. The parties had been divorced in Israel in 2003 but had not

separated until 2007. In 2010 the husband obtained a nullity decree from the Russian

court on the basis that he was already married to another woman. The wife claimed

that the husband was worth £100m, although there was only £1m within this

jurisdiction. The husband claimed that he had no assets whatsoever and was earning

only £150 per month in Russia. There had already been a number of judicial findings

that the husband was a serious and serial non-discloser, determined to thwart the

wife’s financial claims. He had failed to comply with orders for interim provision and

had fled the jurisdiction. A warrant for his committal had been stayed. The former

matrimonial home had been repossessed and the wife and children were living in

modest rented accommodation. The parties had entered into a post-nuptial

agreement in 2001 in Israel.

Held – awarding the wife a lump sum of £12.5m, of which £8.3m was certified as

constituting maintenance –

(1) The court’s task was to make a fair financial award, having regard to all the

circumstances of the case, including those set out in s 25 of the Matrimonial

Causes Act 1973 which was applied by s 18 of the 1984 Act. The distributive

36

principles of needs and sharing were to be applied, giving first consideration to

the welfare of minor children. Key considerations were: (a) whether the husband

had been guilty of material non-disclosure and if so what was the scale of his

resources; and (b) how to treat the post-nuptial agreement.

(2) The approach to non-disclosure was as summarised in NG v SG (Apeal: Non-

Disclosure) [2011] EWHC 3270, at para [16]. The court had to make its assessment

anew, but the litigation history and previous judicial findings were clearly

relevant. The husband had not made true disclosure; rather, he had set out from

the start to mislead both the wife and the court. Inevitably, when the court was

conducting the inferential exercise as to the scale of resources of a non-discloser,

the evidence was far from perfect. Having regard to hard evidence, the scope of

the husband’s business activities and lifestyle, his fortune lay in the bracket of

£20m–£30m.

(3)(i) The post-nuptial agreement had to be considered in the light of the definitive

guidance provided in Radmacher (Formerly Granatino) v Granatino [2010]

UKSC 42, [2010] 2 FLR 1900 but viewed through the lens of s 16(2)(d) of the

1984 Act, which required the court to have regard to any financial benefit

received by an agreement or operation of law of an overseas country. It would

only be in an unusual case that, absent independent legal advice and full

disclosure, a party could be taken to have freely entered into a marital agreement

with full appreciation of its implications. There would have to be clear evidence

of economic capacity before needs would be suppressed to a minimal level.

(ii) For reasons to do with asset protection, the husband had in 2001 prevailed on

the wife to enter into a post-nuptial agreement which was highly disadvantageous

to her, giving her only £1.5m out of a large fortune accumulated during the

marriage. There had been no disclosure by the husband and the wife had not

received independent legal advice. The wife’s consent had not been informed,

since she did not know what rights she was foregoing under English law. The

exercise had in fact been a charade. The husband had not complied with the

agreement and moreover had repudiated it.

(iii) The wife had not entered freely into the agreement with full appreciation of its

implications. It was the result of pressure from the husband. There was a material

absence of disclosure and legal advice. It was doubtful whether the parties had

ever intended the agreement to govern the financial consequences of marital

37

breakdown. It would be grossly unfair to hold the wife to an agreement which

deprived her of her fair share in a fortune to which she had in her own way

equally contributed. Accordingly, the agreement should be accorded no weight

whatsoever and should be discarded from the court’s assessment of what was a

fair award.

(4) Applying first the needs principle, the wife needed £8.3m, comprising capitalised

spousal and child maintenance plus school fees. Applying second the sharing

principle, the wife was entitled to an equal share of the fortune to which she had

equally contributed. This made the total award £12.5m.

B v S (Financial Remedy: Marital Property Regime) [2012] EWHC 265 (Fam)

The spouses married in Catalonia, Spain in 1995. The wife was Spanish and the

husband had dual nationality of two other countries. The marital property regime in

Catalonia is of separate property, but with a wide discretion for the court to provide

compensation for ‘unjust enrichment’ as between divorcing spouses. The spouses

bolstered this arrangement when they moved, for a time, to live in another country

with a community of property regime, and made a notarised separation of property

agreement in respect of an apartment they bought there, which the husband gifted to

the wife. The husband ran an international business incorporated in the British

Virgin Islands involving export of goods to a number of countries which were

politically unstable. Threats against the husband led the family to relocate to England

in 2004 where they rented a house in London and bought a property in the country

for £2.5m. The husband later acquired land adjoining the property for around

£475,000. The parties divorced in 2010. Excluding the husband’s interest in the

company and his wife’s non-matrimonial property, their capital assets were roughly

equal at around £1m each. The wife sought a lump sum of £3m (half the balance

sheet net asset value of the company), a joint lives periodical payments order of

£175,000 pa and periodical payments of £7,500 for the two children, who divided

their time equally between the parents, with the husband to pay the school fees. The

husband offered no lump sum payment based on the value of the company, claiming

the company assets were uncertain and illiquid; £100,000 pa periodical payments to

the wife and no child maintenance payments given his equal residence and payment

of over half of the child care costs.

Held –

38

(1) A civil law matrimonial property agreement is different in character and objective

to a ‘common law’ pre-nuptial agreement which seeks to abrogate or influence

the right to invoke a statutory discretion to redistribute fairly (or equitably) all the

resources of the spouses following their divorce.

(2) It is important to note that the UK is not participating in the development of a

EU Council Regulation on jurisdiction, applicable law and the recognition and

enforcement of decisions in matters of matrimonial property regimes. There is

therefore no prospect in a future case of the application of a foreign law in

determining rights under a civil law marital property agreement. The court must

guard against the introduction of applicable law rules by the back door. The only

possible relevance of foreign law is to evidence the intentions of the parties at the

time of the formation of the agreement ( Radmacher (Formerly Granatino) v

Granatino [2010] UKSC 42, [2010] 2 FLR 1900 followed).

(3) The requirement in Radmacher of a ‘full appreciation of’ the implications of the

agreement does not carry with it a requirement to have received specific advice as

to the operation of English law on the agreement in question. But in order for it

to have influence here, it must mean more than having a mere understanding that

the agreement would just govern in the country in which it was made. It must

surely mean that the parties intended the agreement to have effect wherever they

might have divorced and most particularly were they to be divorced in a

jurisdiction that operated a system of discretionary equitable distribution. Usually

the parties will need to have received legal advice to this effect and will usually

need to have made mutual disclosure: Kremen v Agrest (Financial Remedy: Non-

Disclosure: Post-Nuptial Agreement) [2012] EWHC 45 (Fam), [2012] 2 FLR

(forthcoming) applied.

(4) The evidence showed that the spouses did not intend, by their entry into the

separate property agreement, to alter their mutual understanding of the effect of

the law of Catalonia under which they were married, which was of separate

property subject to flexible discretionary judicial variation. The entire object of

the exercise in making the separate property agreement was to prevent the

property they acquired from falling into community property. There was no

discussion, still less no advice, as to whether the agreement was intended to affect

the position if the parties divorced in an equitable distribution jurisdiction.

Neither party had therefore entered into the agreement with ‘a full appreciation

39

of its implications’ and accordingly no weight would be placed on either the

default matrimonial regime under which they married or on the separate property

agreement in determining a fair award to the wife.

(5) Save in the exceptional kind of case exemplified by Miller v Miller; McFarlane v

McFarlane [2006] UKHL 24, [2006] 1 FLR 1186 a periodical payments claim

(whether determined originally or on variation) should be adjudged or settled,

generally speaking, by reference to the principle of need alone. To allow

consideration of the concept of sharing to intrude in the assessment of a

periodical payments award is based on a doubtful principle and is replete with

problems of quantification by any sure standard.

(6) A fair figure to take for the value of the company was £6m but the husband

would need time to raise the lump sum awarded by way of application of the

sharing principle to this asset and so he should pay £3m in instalments over 3

years. The instalments would not carry interest; the wife would be compensated

for being kept out of her money by the generous award of £10,000 pm reducing

to £7,500 pm once the husband had made the first capital instalment which

would enable the wife to buy a home for around £1.8m. The payments would

reduce to £4,300 pm on payment of the second instalment of capital, and would

be capitalised on payment of the final instalment, on a Duxbury basis to produce

a clean break lump sum of £344,000.

(7) In circumstances where the children exactly divided their time between the

parents, the father was paying more of the child care costs and would pay all of

the school fees, it would not be fair or reasonable for him to be required to pay a

separate allowance for the children. The mother was no more the primary carer

or residential parent than the father. She could reasonably pay the expenses of

the children from her own income.

6. APPEALS & BEYOND

NG v SG (Appeal: Non-Disclosure) [2011] EWHC 3270

In ancillary relief proceedings the Wife was awarded £70,000 per annum spousal

maintenance and £10,500 per annum child maintenance for each of the couple’s three

40

children. The Husband duly paid the maintenance for 10 years but then ceased making

payments, citing his inability to pay.

The Husband had sold his business shortly after the order had been made for £6.7m and

had not worked since. He initially emigrated to Monaco but when he returned he

became liable to pay Capital Gains Tax (CGT). Other expenditures had been a property

purchase, a substantial loan to a property development company of which he was now

the owner (although some of the loan had been repaid) a swimming pool and the

children’s school fees.

Overall, £1.7m had been unaccounted for but the Husband and his second Wife had

lived a lavish lifestyle during the 9-year period, as was evidenced by credit card

statements. The property company had been affected by the economic downturn and

had not been as prosperous as the Husband had envisaged.

The Husband applied for a downward variation of the order. The Wife applied for a

variation and leave to enforce the maintenance arrears which were more than 12 months

old. The time estimate of 3 days for the hearing had been inadequate and in an attempt

to minimise costs the judge ordered further disclosure, with closing submissions and the

Husband’s response to the Wife’s closing submissions to be sent via email or post. The

Husband disclosed a 101 page document which contained important material clarifying

his financial position. In the Wife’s final submissions the suggestion of capitalisation was

made. The district judge found that the Husband had failed to provide full and frank

disclosure and that he had the means to pay the Wife’s deficit in annual income of

£42,420.

He capitalised the order at £675,000, ordered that all arrears be paid and £30,000 of the

Wife’s costs. In total the Husband was ordered to pay £996,419.40. The Husband

appealed and claimed that if the order were to stand he would be forced into bankruptcy.

Mostyn J granted permission to appeal, set aside the district judge’s order and directed a

retrial on the basis that:-

1) Where the court was satisfied that the disclosure given by one party was

materially deficient, the court was duty bound to consider by the process of

drawing adverse inferences whether funds had been hidden. Such inferences had

to be properly drawn and reasonable. If the court concluded that funds had been

41

hidden then it should attempt a realistic and reasonable quantification of those

funds, even in the broadest terms. The district judge had at no point attempted

even a broad estimation of what he believed the Husband had hidden away in

residue. His findings had been stale, inconsequential and incapable of leading to a

finding that the Husband had salted away a vast sum;

2) The decision to capitalise the award, in circumstances where the Husband had

not received any notice of the intention and the proposal to capitalise the award

was only made during final submissions by the Wife’s counsel without any formal

application, had been demonstrably wrong in principle. It was elementary that

the proposed payer of a capitalisation award should actually receive, with ample

notice, an application for that relief.

3) Procedurally it could not be right or proper for further important disclosure to be

submitted after oral evidence had been closed and for such material to be

addressed merely by written submissions.

L v L (Financial Orders: Remission After Appeal) [2011] EWHC 3040 (Fam)

Upon divorce the Wife was awarded a lump sum of £600,000 and mechanisms were put

in place for her to obtain it via property sales if the Husband could not provide the cash.

Since the order had been made the Husband had not paid the money and had not

effected the sale of a property in Portugal in order to pay the Wife. He had doubled his

overdraft to £1.22m which, it now transpired, at the time of the original hearing was fully

secured and registered against the matrimonial home. The Husband applied without

notice for permission to appeal to the Court of Appeal on four grounds including his

assertion that HMRC were becoming more active in pursuing him for unpaid tax.

The Husband’s tax liabilities had been dealt with during the hearing and the judge

concluded that there had been a long running dispute with HMRC with no end in sight

and, therefore, they could not properly be considered immediate liabilities. The Husband

placed before the Court of Appeal lengthy letters and assessments from HMRC which

considered alone, without their context, appeared to indicate that the Husband’s

liabilities were now more pressing. The Court of Appeal focused entirely on the tax issue

and considered the arrival of the HMRC material to be a dramatic turn of events.

The court found that the judge’s estimation of overall fairness would have been markedly

different had he had available to him the up-to-date evidence. The order was not set

42

aside and the Court of Appeal did not identify particular shortcomings in the judgment

but the case was remitted to the judge for a reconsideration of fairness.

On remission to Coleridge J, he refused the Husband’s application to vary the original

order, placed a charge in favour of the Wife over the matrimonial home and ordered that

the Wife should take charge of the sale of the Portugal property if a sale was not effected

by 1 Jan 2012 on the basis that:-

1) The hearing could not be treated as an application to vary the lump sum on a

change of circumstances arising since the previous hearing. Absent a Barder v

Caluori [1988] AC 20, [1987] 2 FLR 480 type event or, very exceptionally, fresh

and compelling evidence in relation to a fact or matter before the court at the

original hearing, the parties did not have the ability to invite the first instance

judge to alter the original order. Even where the new evidence or event was

compelling, or sometimes overwhelming, the Court of Appeal would rarely

interfere.

2) Events since the hearing had not undermined the order but reinforced it. The

Husband had not been required to settle the debt to HMRC and was not keen to

do so of his own accord. The dispute was forecast to continue for at least

another 2 years and could take up to 10. As at the original hearing, this could not

be classified as an immediate liability. The documents placed before the Court of

Appeal had been incomplete and not properly placed in context. There was no

basis to warrant an adjustment of the order.

NLW v ARC [2012] EWHC 55 (Fam)

In December 2011 the Wife applied for permission to appeal a consent order made in

December 2009 in financial proceedings on the basis of undue influence and non-

disclosure. Pursuant to the Family Procedure Rules 2010, the Husband was directed not

to attend the permission application. His solicitors wrote to the court stating that the

Husband would not attend but that it was "assumed" that no irrevocable orders would

be made and permission to appeal would not be given in the Husband's absence.

Mostyn J considered the new procedure in Part 30 FPR 2010, which he considered was

intended to align the procedure for appeals from district judge to judge with the

procedure under which an appeal from judge to the Court of Appeal takes place. His

43

Lordship identified the only material difference as being that permission applications are

considered at an oral hearing, rather than on paper.

Mostyn J further considered the options open to a judge at the permission hearing,

which included granting permission, directing a further inter partes hearing and/or

dismissing certain grounds, attaching conditions and dealing with fresh evidence. On the

question of permission, the court must assess whether the appeal has a real prospect of

success, which Mostyn J considered to mean the appeal is more likely to succeed than

not.

In the instant case, Mostyn J granted permission and directed an inter partes hearing on

the question of fresh evidence and a three day hearing of the appeal.

7. CIVIL PARTNERSHIPS

Lawrence v Gallagher [2012] EWCA Civ 394

The parties cohabited from 1997 and entered into a civil partnership in December

2007. They separated in September 2008 and their partnership was dissolved in

January 2009. Mr Lawrence now aged 47 was an equity analyst, earning at least

£200,000 a year plus deferred share options; he had a pension worth £580,000. Mr

Gallagher now aged 54 was an actor who had been in and out of employment. At the

hearing date he had a leading theatrical role and was earning some £100,000 pa. Mr

Lawrence had purchased a London flat in 1995 for £285,000; at the date of the

hearing it was worth £2.4m, due to the rise in London property values. During the

cohabitation the parties kept their finances largely separate; from time to time Mr

Lawrence lent Mr Gallagher money. In 1998 the couple bought a country cottage

together, which was subsequently sold and the proceeds used to buy another cottage,

worth £900,000 at the date of trial. Under a declaration of trust, Mr Gallagher’s share

of the cottage was worth £230,000. In addition he had assets of some £40,000. The

total assets were approximately £4.1m.

It was common ground from the beginning of proceedings that exactly the same

principles should be applied to the financial consequences of dissolution of civil

partnership as to those of divorce. Mr Gallagher invoked the sharing approach to

asset division, with a 5% discount from equality because the London flat had been

44

pre-owned. Mr Lawrence rejected the sharing approach, arguing that the London flat

being pre-acquired was not a partnership asset and further that this was a case of a

dual career relationship. He proposed a needs-based award of £420,000 for re-

housing plus a pension share of £183,000.

Parker J held that the London flat was to be treated as a partnership asset because it

had been used as the parties’ home and that there was in law no category of dual

career couples to which the sharing principle did not apply. The judge awarded Mr

Gallagher 42% of the liquid assets and pensions, made up of the cottage, a £200,000

pension share and a lump sum of £577,000. In addition, Mr Gallagher was to receive

45% of the deferred share schemes when he came into payment, which could achieve

£90,000. Mr Lawrence appealed.

Held – allowing the appeal and varying the judge’s order by reducing the lump sum

to £350,000 and deleting the share options element –

(1) The judge had found that the flat had been used as the parties’ home and as such

it was partnership property, even though it had been pre-acquired: per Lord

Nicholls in Miller v Miller; McFarlane v McFarlane [2006] UKHL 24, [2006] 1

FLR 1186, at para [22].

(2) This was not a dual career arrangement. Rather, the couple had clearly

intermingled and combined their available capital and income to enjoy a high

standard of living of their own design.

(3) Pending examination by the Law Commission of the treatment of non-

matrimonial property, judges had consistently to apply the s 25 criteria to the

facts of the individual case, wherever possible avoiding the over-complication of

the resulting judgment.

(4) This was a comparatively simple case which had been made unnecessarily

complex as the advocates had sought to achieve their goals by praying in aid one

judicial creation or another. Mr Lawrence’s case below had been so far from

achievable as to be almost fanciful. Each party needed a home; it was self-evident

that Mr Lawrence should have the flat (which pre-dated the partnership and was

necessary for his work) and Mr Gallagher the cottage (which was his pride and

joy and could be used in the bed-and-breakfast market). The court had to

consider whether fair sharing required a balancing payment to reflect the

difference in values of the properties and also what funds were necessary for

45

each party to live comfortably in his own home. The judge’s pension share order

could not be criticised. However, there had been no rationality in the lump sum

figure, which had simply been the sum mathematically necessary to bring the

award up to £1.6m after the pension-share. The route that the judge chose to

achieve a fair outcome had followed too theoretical a map. It would have been

safer and more orthodox for the judge to have assessed the fair lump sum from

the foundation that Mr Gallagher would have the cottage and the pension share.

On such an approach, the lump sum would have been significantly lower.

Whether approached on the basis of needs or fair sharing, the appropriate lump

sum was £350,000. The share options were largely acquired post-separation; in

any event they were not capital assets but part of Mr Lawrence’s income stream

on which he was taxed at the top rate. They could not be treated as a present

capital asset.

8. SCHEDULE 1, CHILDREN ACT 1989

O v P (Jurisdiction under Children Act 1989 Schedule 1) [2011] EWHC 2425 (Fam)

The parents lived together in a substantial property in Kent and had a child born in

1997. The relationship broke down and the mother took the child to her parents in

Scotland. She then went to Australia, the father applying on the same day for parental

responsibility, residence and contact in the English court. The father obtained an

order in Australia requiring the child’s return to the UK and the mother was

permitted to take the child back to Scotland on surrender of her passport. In 1999,

the father obtained false passports and took the child to Australia while having

staying contact. The father and child were discovered and the mother was reunited

with the child. On 29 February 2000, she began Sch 1 proceedings in the Children

Act proceedings that the father had commenced. The Family Court of Australia ruled

that the child’s habitual residence was in Scotland at the time of the wrongful

removal and ordered her return once more to the UK. The father appealed and in

the meantime, was charged with incitement to murder the mother. He was convicted

in 2001 of this and then further offences and remains in custody in Australia. In

2004, his house was sold for over £1m and the proceeds held by the mother’s

solicitors pursuant to a freezing order. In 2008, the mother, who, together with the

46

child, was not living in England and Wales, sought to revive the Sch 1 application.

Held – holding that the court had jurisdiction to hear the application, and that the

question of whether it would be appropriate to do so was a matter to be determined

after hearing further evidence –

(1) Under the Civil Jurisdiction and Judgments Act 1982 which incorporated the

Brussels Convention on Jurisdiction and Enforcement in Civil and Commercial

Matters 1968 (later superseded by Brussels I (EC No 44/2001) which was in

identical terms), the courts of England and Wales had jurisdiction in 2000 if the

respondent was either domiciled in England and Wales (Art 2); or in another

contracting state or in Scotland, England or Northern Ireland and the child, as

the ‘maintenance creditor’ was domiciled or habitually resident in England and

Wales (Art 5.2); or the respondent had entered an appearance in the proceedings

(save for the purpose of challenging jurisdiction) (Art 18); or the respondent was

not domiciled in a contracting state and the courts in England and Wales

otherwise had jurisdiction under domestic law.

(2) Under domestic law, the court has power to make an order under Sch 1

whenever it has the jurisdiction to make welfare orders under the Children Act.

The primary basis of the welfare jurisdiction under the Children Act, both under

Brussels IIR and under domestic law, is the child’s habitual residence at the date

the application for a residence order under s 8 is made. There is also jurisdiction

under domestic law if the child was habitually resident in England and Wales at

the date of the Sch 1 application. However, mere service of the process is not

sufficient to establish jurisdiction: Re Dulles Settlement (No 2) [1951] Ch 842

explained.

(3) On the facts it was manifestly clear that the father was domiciled in England and

Wales when the Sch 1 application was filed.

(4) Although the father had, from prison in Australia, served notice of acting in

person in the Children Act proceedings and indicated his awareness of the Sch 1

application, no formal appearance had ever been entered and it was important,

for the purposes of prorogation of jurisdiction, that procedural steps were

followed clearly and properly. Accordingly, jurisdiction did not arise by virtue of

Art 18 of the 1968 Convention.

(5) If the father was not domiciled in England and Wales on the date of the Sch 1

application, the court had jurisdiction because the child was habitually resident

47

there on both the date of the s 8 application and that of the Sch 1 application.

Although the Australian court had concluded that the child was habitually

resident in Scotland, the court must make up its own mind on the evidence

before it, and had had the benefit of oral evidence from the mother.

DE v AB (Financial Provision for Child) [2011] EWHC 3792 (Fam)

The mother had become pregnant following a brief relationship and the father had no

ongoing relationship with either the mother or the child. The father withdrew support

and the mother made an application to the CSA and to the court for a lump sum order

under Schedule 1 Children Act 1989.

The mother owned a property worth £725,000 but it had a substantial mortgage upon it

of £600,000 and she had accrued additional debt of over £100,000. Although she had

previously been in a position to earn £60,000, the mother was currently on job seeker’s

allowance and, unable to pay the substantial mortgage payments of almost £30,000pa,

was slipping further and further into debt.

The father was held to have an earning capacity of £100,000pa and owned a property in

London with equity of £364,000.

The judge at first instance made it clear that the mother would have to sell her home, but

ordered the father to pay a lump sum of £335,000, which included a trust fund of

£250,000 for the benefit of the child together with a lump sum of £85,000 towards the

mother’s debts.

The father appealed the additional payment of £85,000 as it would leave him with only

minimal capital to rehouse himself.

On appeal, Baron J held that, given the amount of net equity in the property available to

the father the trust fund of £250,000 was absolutely justified and was unappealable.

However, the effect on the father of the additional sum of £85,000 had not been

assessed and was unfair given his very significant contribution towards housing for the

child.

Reducing the sum to £40,000 would leave the father with capital of £68,000 from the

sale of his property which would provide him with a modest deposit for a home for

himself.

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PK v BC (Financial Remedies: Schedule 1) [2012] EWHC 1382

The parties had previously been married to each other and had an 8 year old child. Upon

divorce the Wife received a lump sum of £950,000 on a clean break basis and the

Husband agreed to pay child maintenance of £15,000pa plus school fees. The Husband

subsequently lost his job and applied to the CSA and maintenance was assessed at

£8,468pa. The Husband continued to pay the school fees and extras. The Husband’s

income was below the CSA maximum level of £104,000 pa. The Wife made an

application under of the Children Act 1989 Sch 1 for a lump sum to recoup the

difference in maintenance (about £6,500pa) to better her standard of living in relation to

housing and also to purchase a new car.

She received short shrift from the High Court, Moor J holding that even though MB v

KB [2007] [2007] 2 FLR 586 provided authority for the court to consider the question of

whether or not to award a further lump sum pursuant to Schedule 1, even where there

had been a clean break in divorce proceedings, the circumstances of such cases had to be

exceptional.

The Wife’s application was found to be misconceived: in so far as her claim for a car

was concerned, the court had no jurisdiction to make an order to provide a car or, if it

had jurisdiction, it should decline it. Provision for a car regularly featured in Schedule 1

orders, but this was a case in which there was a consent order for financial provision in

divorce. Any provision for cars would either have been encompassed in the lump sum of

£950,000 that the mother accepted on a clean-break basis, or it would be incorporated in

the maintenance provision that was ordered in favour of the child.

In relation to the costs of the appeal, this was not a case where there was a principle of

no order as to costs. The court was entitled to consider a wide range of factors, including

the Wife’s financial position, which in terms of liquid resources was not strong. The

father was entitled to a proportion of his costs, although it would be wrong in the

mother’s circumstances to make her pay a large sum.

49

PG v TW (No.2) (Child: Financial Provision) [2012] EWHC (Fam)

In an earlier decision of Theis J in these proceedings, heard in May 2012 but only

directed to be reported in February 2013, made an A v A order directing the Respondent

father provide funds specifically for the purpose of enabling the Applicant mother to be

legally represented in the proceedings.

In the judgment following the substantive proceedings a point of interest arose.

Notwithstanding the limited claims which can be made under Schedule 1 a Respondent

cannot rely upon the Millionaire’s Defence in resisting claims for disclosure of his financial

position. Instead the inquisition into a Respondent’s financial position should be

approached upon a proportionate approach which avoids excessive detail but provides to

the court an accurate outline of relevant financial affairs. The justification for this is the

court’s requirement to avoid excessive disparity between the lifestyles a child will be

exposed to when their time is shared between the respective parents.

KS v ND (Schedule 1: Appeal: Costs) [2013] EWHC 464 (Fam)

The Facts:

(a) The proceedings concerned a single child and the parents had significantly

different incomes but not excessively disparate. F was a QC, now semi-retired

and working as a consultant to a solicitors’ firm with a salary of £170,000 (gross)

with a potential bonus dependent upon his fee income. M was a Parliamentary

Assistant earning £42,000 p.a.

(b) The original order had been made in 2005. M sought to increase it in 2012 and F

sought a decrease. After a 3 day trial the District Judge made orders closer to F’s

overall position than M’s but made no orders for costs.

(c) M appealed and permission was given on two points: school fees (F was now

required to pay only 75% of the school fees) and costs. M argued that the DJ

was wrong not to make an order for costs in her favour as (a) she was the

effective winner, (b) F was guilty of litigation conduct and (c) M needed her costs

to be met in whole or part as the economic impact was otherwise significantly

more adverse to her.

50

The Court (Mostyn J) held:

1. Schedule 1 Children Act 1989 proceedings have, since 6 April 2011, been

excepted - along with certain other proceedings (of which the most

prominent is maintenance pending suit) - from the "general rule of no

order as to costs principle" introduced for almost all family financial

proceedings with effect from 3 April 2006 by the insertion of rule 2.71

into the then Family Proceedings Rules 1991 (and which now is found in

FPR 2010 rule 28.3).

2. These, and the other specified proceedings, have thus been restored to

the position in which all family financial proceedings were before 3 April

2006. Then, the position was that the general rule in RSC Ord 62 rule

3(5) of costs following the event was formally disapplied, but by virtue of

the decision of the Court of Appeal in Gojkovic v Gojkovic (No. 2) [1991] 2

FLR 233, [1992] 1 All ER 267 an equivalent, but perhaps less unbending,

principle should prima facie apply, at least to ancillary relief proceedings

between husband and wife.

3. An open question since the promulgation of Part 28 of the FPR 2010 on

6 April 2011 has been whether this principle of costs prima facie

following the event has now been resurrected following the exception of

these, and the other specified proceedings, from the general rule of no

order as to costs now found in rule 28.3. It is certainly arguable that this

principle should now apply in such proceedings when they are between

husband and wife or between civil partners. However it is doubtful

whether it should apply in Schedule 1 proceedings where the mother in

effect makes her application in a representative capacity for the child. In

Schedule 1 proceedings the court should start with a "clean sheet", as

Wilson LJ (as he than was) put it in Baker v Rowe [2010] 1 FLR 761.

4. Even if the rule in Gojkovic once again does apply it is by no means clear

that this mother can be said to have "won" this case. In fact, objective

analysis would suggest that overall the father was rather more successful

than the mother. A consequence of FPR 2010 rule 28.2(1) and its

51

incorporation of CPR 44.3(4)(c) is that in relation to those proceedings

excepted from rule 28.3, protection in respect of costs can be achieved by

making a Calderbank offer. Yet no such offer was made in this case by

either party. Only open offers were made and the result was much closer

to the father's position than the mother's.

5. It is certainly correct that by virtue of CPR 44.3(4) (which is applied to

these proceedings by FPR 2010 rule 28.2(1)) the court has to consider the

conduct of the parties; whether a party has been successful in whole or in

part; and any admissible offers made by the parties (which include

Calderbank offers). These would be the first things to write on the clean

sheet.

9. COSTS

Fisher Meredith v JH and PH (Financial Remedy: Appeal: Wasted Costs) [2012]

EWHC 408 (Fam)

The husband had been allocated shares in a property company set up by his family, 3

years before his marriage in 2001. In 2008 or 2009, he transferred his shareholding to

his uncle’s wife. Shortly after, the spouses separated and the wife began divorce

proceedings. She contended that the husband was the beneficial owner of the shares

despite his claim and that of the aunt to be mere nominees, and sought a reversal of

the share transfer under s 37 of the Matrimonial Causes Act 1973. The aunt was

joined in the proceedings. Various hearings took place concerning the possible

joinder of the company in the divorce proceedings and for orders restraining the

aunt from dealing with the shares. The wife’s solicitors invited the uncle to seek to

intervene in the proceedings but he declined. Two days before the scheduled final

hearing, the aunt’s solicitors disclosed heavily redacted documents to her solicitors,

and her skeleton argument was not effectively served until the first day of the

hearing. It argued that it was negligent of the wife’s solicitors not to have joined the

beneficiaries to the proceedings and sought a wasted costs order. The trial judge

ordered an adjournment and made the order for wasted costs. The solicitors

52

appealed.

Held – allowing the appeal and awarding costs against the husband and aunt on the

standard basis –

(1) The husband and aunt had the burden of showing that the solicitors failed to act

with the competence reasonably expected of ordinary members of the solicitors’

profession and had to prove as much as they would in an action for negligence.

(2) The demonstration by the husband and aunt of a causal link between the

solicitors’ conduct and the wasted costs was essential.

(3) Having satisfied these conditions, they would still have to persuade the court to

exercise its discretion to make a wasted costs order.

(4) Where respondent lawyers are precluded by legal professional privilege from

advancing a full answer to a complaint made against them, the court should only

make an order for wasted costs exceptionally where: (a) it is satisfied that there is

nothing the lawyers could say, if unconstrained, to resist the order; and (b) it is in

all the circumstances fair to make the order.

(5) There is a clear distinction to be drawn between the state of affairs where a

claimant is saying that a property held in the name of a third party is the property

of the respondent, and the situation, as here, where the respondent says that

property to which he has legal title is beneficially owned by a third party. In the

former case, the discipline set out in TL v ML (Ancillary Relief: Claim Against Assets

of Extended Family) [2005] EWHC 2860 (Fam), [2006] 1 FLR 1263 should be

followed. In such a case, there is a clear obligation on the claimant to apply to

join the third party at an early stage so that the pool of assets over which the

dispositive powers of the court range be established and an effective FDR take

place. In the latter situation, as here, the duties are not so clear cut. If an asset is

(say) in the sole name of the respondent husband then the starting point is that it

belongs to him both legally and beneficially. The duty to bring the claim of the

non-legal owner third party before the court lies primarily and equally on the

respondent to the application and on the non-legal owner and not on the

claimant.

(6) The trial judge’s findings against the solicitors were wholly untenable. All the

parties had either expressly or tacitly assented to the preliminary issue being

decided without joinder of other members of the husband’s family. If this was

the wrong decision, the blame fell equally on the husband and aunt for not

53

inviting other family members to intervene and on those family members for not

seeking to protect their (alleged) property.

(7) The wife’s counsel’s decision to seek an adjournment rather than push on with

the claim was understandable given the extraordinary nature of the bundle of

heavily redacted papers received only 2 working days before the hearing which

would probably have required an adjournment anyway.

(8) Since it could not be known what instruction the wife had given her lawyers

regarding the decision to seek an adjournment as this was covered by legal

professional privilege, it was impossible to rely on that decision for the purposes

of deciding if the solicitors were negligent.

(9) There was nothing in his judgment to suggest that the trial judge had performed

the discretionary second stage of the decision-making process as he was required

to do, which amounted to another fatal defect.

GS v L (No. 2) (Financial Remedies: Costs) [2011] EWHC 2116 (Fam)

Following a contested hearing the wife made an application for costs. The wife’s

unassessed costs were £162,362. She sought to recover the sum of £97,797.

Held – ordering the husband to pay £55,000 towards the wife’s costs –

(1) The applicable costs regime was contained in Family Procedure Rules 2010

Part 28.2 and 28.3. The general rule in financial remedy proceedings is that costs

lie where they fall, but the court has a discretion to make an order for costs in

certain circumstances. Regards also had to be given to the overriding objective in

FPR Part 1.1, which required the court to deal with a case in a way proportionate

to the resources involved.

(2) This was an appropriate case for an issue-based costs order. The husband’s

approach throughout the entire proceedings had been erroneously founded on

his dogmatic belief that the case should be heard in Spain or, if not, that the

English court should apply Spanish law. As a consequence:

(a) The matter had been transferred to the Hugh Court only because of the issues of

Spanish law raised by the husband.

(b) The husband’s application to stay the English proceedings had been doomed and

had been rightly withdrawn before trial.

(c) The evidence of the Spanish experts did not assist the court on any single

54

relevant topic.

(d) Following the judgment in Radmacher (Formerly Granatino) v Granatino [2010]

UKSC 42, [2010] 2 FLR 1900 it was hard to see what justification there could

have been in pursuing an argument in relation to the Spanish agreement or in

calling Spanish evidence.

(e) The husband’s open offer had been based on Spanish law and had wholly failed

to provide for the needs of the wife and children from an English law

perspective.

(f) On the third day of the trial the husband had accepted that his open proposals

were not only inadequate but unfair and had for the first time approached the

case from an English law perspective.

(g) Had the case proceeded as it should, essentially as a ‘needs’ case to be determined

under English law, it could have been heard over 2 days in the Principal Registry.

(3) Pursuant to Civil Procedure Rules 1998 Part 44.3(7), it was fair to order the

husband to pay a proportion of the wife’s costs, namely one-third. It was

appropriate to translate that percentage into a stated sum.

Ezair v Ezair [2012] EWCA Civ 893

In ancillary relief proceedings, the parties agreed that their assets were worth £2.63m

as to business assets and £2.04m as to privately owned assets. They both agreed that

this was a 50/50 case and the area of dispute was as to how the assets were to be

redistributed. The husband contended that each should receive shares in both types

of assets, while the wife argued that she should receive all the privately owned

properties and a balancing lump sum. The judge found that the husband was

untrustworthy and that it would be risky to give him absolute control over the

business assets assigned to the wife. He concluded that a sum of £322,000 was

required but that, in addition, to reflect the husband’s misconduct in the proceedings,

this should be increased to £500,000. The husband appealed.

Held – allowing the appeal in part –

(1) The judge was fully entitled to have regard to the submissions by the wife’s

counsel that the husband’s conduct of the case, as a litigant in person, had

inflated her legal costs above what they would otherwise have been. It was

perfectly open to the judge to conclude, in the application of FPR 2010, r 28.3,

55

that this was not a case that fell comfortably within the general rule that there

should be no order for costs and that he could penalise the husband and

compensate the wife for that element of wasted costs. However, it was

unorthodox simply to inflate the lump sum as he had done. It produced the

result that the wasted costs order came out at £178,000 but that was simply a

mathematical consequence rather than a reasoned and considered quantification.

(2) The safe and orthodox approach was to make an assessment of the lump sum

having regard to all the s 25 criteria, and then to make a distinct costs order that

marked the litigation misconduct of one party and quantified it in a reasoned

manner.

(3) The lump sum order should be re-written in the sum of £322,000. An order

would be added that the husband pay to the wife the costs she had unnecessarily

incurred in consequence of his misconduct, to be quantified by the trial judge,

having regard to the fact that the husband was a litigant in person in complex

proceedings and that he had already been condemned in costs at earlier stages of

the litigation, and that the wife’s costs had yet to be assessed by a costs judge.

MALCOLM SHARPE

ATLANTIC CHAMBERS

20TH MARCH 2013