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Young v Young - An Analysis of the Judgment

Thomas Dudley, barrister, of 1 Garden Court Chambers provides a detailed guide to 'as complicated a financial remedies case as has been dealt with by the courts'

Thomas Dudley, 1 Garden Court

 

 

 

 


Thomas Dudley, barrister, 1 Garden Court Chambers

A final award has at last been granted in the long-running case of Young v Young [2013] EWHC 3637 (Fam) - a case described by Moor J as "as complicated a Financial Remedies case as has been dealt with before these courts".

Background
The husband was aged 51 and the wife 49. The parties met in 1988 and began to cohabit in 1989. They married on 31st March 1995. The marriage broke down in November 2006 and was therefore treated as a 17 year marriage, of "significant length". Both parties suffered health problems, arising in large part from the toll taken by the long running litigation. There were two children of the family: Scarlett, aged 21 and Sasha, who turned 19 during the final hearing. Both were students in London and continued to reside with the wife.

The husband was, in his words, an "entrepreneur" whose business activities had been principally in the fields of property, technology companies and investing 'seed corn' capital into start-up businesses. The wife had, by the time of the breakdown of the marriage, been a housewife for many years and it was accepted that she had no earning capacity.

There was a huge disparity between the parties' positions on the level of the level of the husband's wealth. The husband claimed to be insolvent, owing £28 million, but the wife claimed that he was worth "many hundreds of millions" or, at one stage "a few billion at least" [17].

Conduct of the litigation
Preceding the 20 day long final hearing before Moor J, there had been 6 years of litigation in which 65 preliminary hearings had taken place, the wife had incurred around £6.4 million in legal costs and costs of forensic accountants (an amount described by Moor J as "completely unacceptable") [9], and the husband had been sentenced to 6 months' imprisonment for contempt of court in not having complied with orders for disclosure. Moor J commented that the case had been as complex a financial case as had ever been dealt with by the Family Division, but that the way it had been conducted had also fallen foul of "just about every part" of the overriding objective in Rule 1.1 of the 2010 Family Procedure Rules and was a prime example of "how not to litigate" [3] and [10].

The wife had, for the earlier part of the proceedings, had the assistance of litigation funding to the tune of £4 million, but that had ceased and she was now represented on the basis of her legal team accepting that they would only be paid in the event of her receiving a substantive award. The husband acted in person.

Noting that the wife's litigation funding had been spent long before the final hearing, Moor J stated that "I am quite sure that in cases such as this there should be rigorous control on the amount spent, in particular, on expert evidence... Maximum figures need to be placed on the disbursements incurred. If the solicitors and clients are not willing or able to do so, the court will have to impose limits." [11]

The wife had made a number of interim applications for inspection orders, for search and seizure orders, as well as for orders against various computers used by the husband. The husband had been in contempt of court in not providing complete or even adequate disclosure and for that Moor J found that he was to be criticised substantially. On the other hand the number of applications for orders by the wife had been higher than any other case known to Moor J and had there been any more it would have amounted to an abuse of process. [80] In some respects, for example signing letters of authority for the wife to make enquiries of various professionals and waiving privilege to all files held by some of his previous solicitors, the husband had not obstructed the process of evidence gathering. Further, some allegations made by the wife, such as the allegation that the husband had an interest in American Idol, were without evidence and should not have been made. [82]

Moor J also expressed reservations about the use in this case of the procedure set out in the case of OS v DS (Oral disclosure: Preliminary hearing) [2004] EWHC 2376 (Fam). A four day hearing before Mostyn J had taken place in which oral evidence had been heard from a number of witnesses, but Moor J found that all of the important evidence had to be repeated before him. He considered that he had not been assisted by the OS v DS hearing, which had taken up considerable time and expense. He suggested that the only circumstances in which such a hearing would be useful were:

a. as in care proceedings where fact-finding on certain specific issues would lead to those issues not having to be revisited at the final hearing and
b. by analogy with the case of Khanna v Lovell White Durrant [1995] 1 WLR 121, as an exercise in obtaining pre-trial discovery of documents where the witness is asked to give specific evidence by way of explanation of the document or how it came into his or her possession.

The wife had also made an application in June 2013 for the husband to be prevented from participating in the final hearing pursuant to the case of Hadkinson v Hadkinson [1952] P 285 given that he had been found to be in contempt of court. Moor J rejected that application. He held that although the Hadkinson jurisdiction does apply in family law cases and that there will be certain cases in which it is proportionate and not in breach of a litigant's Article 6 rights, he was concerned about the use of it in contested final hearings for financial remedies. [90] Given that the court has to "get to the bottom of the financial affairs of the parties" it is important that it makes a proper investigation and produces a fair judgment.

Husband's financial position
Moor J sets out the background to the husband's business career at paragraphs [32] to [48]. One important element of the case was that the husband had held a close relationship with a solicitor, Stanley Beller of Beller & Co, who had written to a bank in Monaco in July 2005 that the husband was worth in excess of £120 million. Moor J considered it "tolerably clear" that in February 2006 Mr Beller and the husband were telling the world that Mr Beller held at least £24 million in assets that belonged beneficially to the husband. Mr Beller would later be struck off owing to his inability to comply with undertakings he had given to hold money for the Husband following the Husband's removal of share certificates from his office without his knowledge.

Moor J summarises the husband's alleged financial meltdown in 2006 owing to an unsuccessful property venture entitled "Project Moscow" at paragraphs [49] to [59], which, on the Husband's case, led to the implosion of his business empire with nothing but debts to the Bank of Scotland, HMRC and his business friends and colleagues. [44]

Paragraphs [63] to [65] of the judgment contain background as to commercial litigation brought against the husband by creditors in 2006.

On 9th April 2009 the husband was made bankrupt on a petition brought by HRMC. There were a total of 20 creditors, claiming to be owed £27 million. On 1st June 2012 the wife applied to annul the bankruptcy. Moor J adjourned that application generally on 2nd October 2013 on the basis that the wife could renew it in the event that she obtained a significant sum at the final hearing.

An important element of the wife's case centred around files recovered from a computer given by the husband to the children after separation. Despite the husband's attempts to wipe the hard drive, the wife's computer experts were able to recover a number of deleted documents, in particular:

a. a schedule prepared in December 2002 by Coutts Bank showing his assets totalling £319 million, albeit £279 million of the assets were classified as "high risk".
b. A document headed March 2006 prepared for the Bank of Scotland providing a "Current Value" figure for the assets of £382 million. The Husband denied ever owning or having an interest in certain of the assets listed in this document.

The wife further relied at the final hearing on a number of sources of evidence:

a. A "Preliminary" report from Mr Mark Bezant, a Chartered Accountant from FTI Consulting dated 14th April 2012;
b. An Affidavit of Malcolm Hebron of Guidepost Solutions dated 7th November 2012;
c. A Statement of Luke Steadman, Partner in Alvarez and Marsal also dated November 2010;
d. The Report of L Burke Files dated 22nd October 2013;
e. Various letters from Mr Carl Biggs, a New Zealand Chartered Accountant, who is also an Associate of the Institute of Chartered Accountants in the UK;
f. The evidence of various witnesses she summonsed to court and, in particular, the husband's former solicitor, Stanley Beller; and
g. Documents obtained by her during the discovery process that she argues are inconsistent with the husband's case.

The wife also asserted that the husband had made two offers of settlement to her which revealed his true wealth. In October 2009 he was said to have offered £27 million. There was evidence heard from a professional photographer to whom the husband was alleged to have said that he offered the wife £27 million. Moor J found that he could not rely on the evidence of the photographer, who had at one point in his oral evidence said he could have been wrong as to what he had heard, and then at another stage said he was "1000% sure" of it. Moor J concluded on the balance of probabilities that no such offer had been made. [114]-[117]

The wife also stated that the husband had made an offer in a meeting on 25th August 2009 of £300 million. From an inspection of the attendance note created at this meeting, Moor J considered that this offer had not been a serious one capable of acceptance. [120]

Law
Moor J recounted the factors for the court to take into consideration under s25(2) of the Matrimonial Causes Act 1973. He noted that conduct was rightly not alleged by either party (save for the husband's alleged non-disclosure). He recalled that it was made clear in the seminal House of Lords decision of White v White [2000] UKHL 54, [2001] 1 AC 596 that there is to be no discrimination in financial remedy cases between the breadwinner and the homemaker, as each, in their respective roles, contribute equally to the family.

As to the allegations of the wife that the husband had vastly greater wealth than he had disclosed, Moor J confirmed that the standard of proof is the balance of probabilities. He provided a summary of the relevant caselaw relating to inferences to be drawn from non-disclosure, quoting Sachs J from J v J [1955] P 215 (a decision approved in Baker v Baker [1995] 2 FLR 829) in which Sachs J stated at p227:

"In cases of this kind, where the duty of disclosure comes to lie upon the husband; where a husband has – and his wife has not – detailed knowledge of his complex affairs; where a husband is fully capable of explaining, and has the opportunity to explain, those affairs, and where he seeks to minimise the wife's claim, that husband can hardly complain if when he leaves gaps in the court's knowledge, the court does not draw inferences in his favour. On the contrary, when he leaves a gap in such a state that two alternative inferences may be drawn, the court will normally draw the less favourable inference – especially where it seems likely that his able legal advisers would have hastened to put forward affirmatively any facts, had they existed, establishing the more favourable alternative."

And at p229:

"...it is as well to state expressly something which underlies the procedure by which husbands are required in such proceedings to disclose their means to the court. Whether that disclosure is by affidavit of facts, by affidavit of documents or by evidence on oath (not least when that evidence is led by those representing the husband), the obligation of the husband is to be full, frank and clear in that disclosure. Any shortcomings of the husband from the requisite standard can and normally should be visited at least by the court drawing inferences against the husband on matters the subject of the shortcomings – insofar as such inferences can be properly drawn."

The result of the husband remaining, at the time of the final hearing, and undischarged bankrupt, was that any assets that were owned either beneficially or legally by the Husband on 9th April 2010 (when he was made bankrupt) were vested in his joint trustees in bankruptcy (section 306, Insolvency Act 1986). Pursuant to Re Holliday (A Bankrupt) [1981] Ch 405, the Court was therefore precluded from making property adjustment orders. The Court was not, however, precluded from making a lump sum order, provided consideration is given to the level of his debts, statutory interest and the costs of the insolvency when weighing in the balance the quantum of any lump sum order (Hellyer v Hellyer [1996] 2 FLR 579). [22]

Court's findings as to the husband's wealth
Moor J's assessment of the wife as a witness was that although she was honest, he did not consider her to be reliable; she saw "conspiracy everywhere". It had also been erroneous for the wife to require friends of the husband who had provided him with financial support (Sir Phillip Green and Richard Caring) to give evidence. He accepted their evidence that they had not held money on behalf of the husband and were providing the Husband with assistance / loans from their own resources. They should not, in Moor J's view have been required to give evidence.

The husband, in Moor J's view, faced "serious evidential difficulties" arising from having been found to the criminal standard of proof to be in contempt of court twice for failing to provide full and frank disclosure. On the other hand that led to a need for caution when assessing the husband's claims made in the documents produced by Coutts in 2002 and for the Bank of Scotland in 2006. Indeed the husband's own case was that he was "bigging himself up" in those documents. Moor J considered he was unable to rely on those documents without more. 

Moor J analyses the expert evidence provided by the wife, some of he did not accept, at paragraphs [121] to [131]. The Coutts and the Bank of Scotland schedules are analysed at paragraphs [136]-[139] and [140]-[148], Moor J concluding that he could not rely on them. He also held that the letter written by Mr Beller in July 2005 in which he "confirmed" that the assets of the husband were over £120 million had been mistaken and indeed "foolish", even though there was no reason to doubt that Mr Beller believed it at the time. [149]

However, Moor J found that the husband did have substantial assets in March 2006. On the balance of probabilities he found that he "overstretched" himself in Project Moscow and, having difficulty servicing the borrowing, cut his losses and rescued as much as he could, whilst allowing the rest of his business empire to implode.

He found that the husband had indeed removed share certificates from Mr Beller in March 2006 worth around £20 million. [158] He further held that he had other undisclosed assets at that date worth around £25 million. This finding arose out of the husband's failure to deal satisfactorily with a number of points raised by the Wife, of which Moor J provides examples at [162].
The husband's total assets at March 2006 were found to have been around £45 million. Moor J considered that it would be wrong to find a higher sum than this, since had it been worth significantly more, he considered that the Husband would have dealt with the fall-out from Project Moscow and the action taken against him by the Bank of Scotland rather than "running away". [177]

He also declined to make any findings that various individuals and corporate entities were holding assets on behalf of the husband (which would have assisted the wife in enforcement proceedings) because (a) none of the individuals or entities had been joined to proceedings and (b) he was quite unable to say where the husband had secreted his money.

Moor J stated that he had "no idea what has happened since then" [178], but doing the best he could, found that the husband still had £45 million hidden from the court. As against that, he deducted £5 million for the husband's debts, making a net total of £40 million.

The wife's needs
The wife had stated in her Form E that she required £5 million to purchase a home, £500,000 for refurbishment, and a further £2 million for a holiday home. She sought maintenance of £29,635 per month, equating to £355,620 per annum. Using the Duxbury formula for capitalisation, this would require a lump sum of £9.4 million. She subsequently claimed a much higher budget in her section 25 statement, which Moor J rejected as being "entirely litigation driven". He also held that she had exaggerated the parties' standard of living (specifically rejecting her assertion that the family spent £1 million per year in restaurants) albeit the standard of living had been "extremely high" [31]. He held that her original budget was reasonable, but the amount required to purchase a home needed to be adjusted for house price inflation in central London. Overall he assessed her needs as being £20 million. [108]

The wife's award
The wife was consequently entitled to half of £40 million as a lump sum. Moor J commented that £20 million "happen[ed] to equate with my view of her reasonable needs, generously assessed" [179], so there was no question of awarding her more than half of the assets.

There was no reason why the husband should not pay the lump sum quickly, given that half of the money he had in 2006 was held in shares which would have been readily realisable, and therefore Moor J ordered the husband to pay within 28 days. Moor J commented that the rate of interest on High Court judgment debts, 8%, would give the Husband a huge incentive to pay quickly.

Moor J further held that in light of his findings, the maintenance pending suit order had been "fully justified" [180] and therefore he dismissed the application to remit the arrears and ordered that they be paid within 28 days. He did not, however, extend the period of arrears further.

Prospects of enforcement
Moor J commented that as his findings as to the husband's wealth had been made on the balance of probabilities a Judgment Summons would not be possible without further evidence to satisfy the court beyond reasonable doubt that the husband had the means to pay the judgment debt. However, he commented that the debt will exist for all time and the husband would never be free of it and it was in his interests to discharge it so he could move on with his life. The court had not ordered the much higher lump sum sought by the wife so he hoped that the husband would take the view that he would be better off paying the lower sum and concentrating on rebuilding his life. [181]-[182]

Husband's passport
The husband's passport had been seized pursuant to an order of Hogg J on 12th March 2009 and the court had held it ever since.  Moor J decided that the husband's passport had been kept from him for an excessive period of time already and that there was no longer a reason for not returning it.

Costs
Further argument on costs would follow from the judgment, but Moor J indicated that he was inclined to order the husband to pay the wife's costs on an indemnity basis and that he was not inclined to order a detailed assessment. The basis for this was that the husband had misled the court, had made no reasonable offer to settle and had disobeyed Court orders. Although the wife had made some unfounded allegations, many of her lines of enquiry about his finances had been brought on by the husband's own failure to provide disclosure.

Moor J concluded by expressing sympathy for the parties' children, particularly in light of how the case had been played out in the full glare of the media, and commented that he hoped no other children had to go through the same process.

2/11/13