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Home > Articles > 2014 archive

Finance and Divorce March 2014 Update

Jessica Craigs, senior solicitor and David Salter, Joint Head of Family Law at Mills & Reeve LLP analyse the financial remedies and divorce news and cases published in February


Jessica Craigs
, senior solicitor, and David Salter of Mills and Reeve LLP

This month's update is divided into two parts:

1 News in brief

2 Case law update


News in brief
This section of the update highlights news items that will be of particular interest to practitioners who advise on divorce and financial remedy cases.

Supreme Court will hear ex-wife's appeal brought against husband, 18 years after divorce
The Supreme Court will hear an appeal by the wife in the case of Vince v Wyatt [2013] EWCA Civ 495.  The Court of Appeal allowed the husband's appeal against the dismissal of his application to strike out his former wife's claim for a financial remedy, issued 18 years after the parties were divorced. 

The court also concluded that an A v A order should not have been made requiring the husband to pay £125,000 to fund his ex-wife's legal costs.

The points on appeal are:

1. Whether or not it is permissible to strike out a party's Form A financial remedy application without the merits of such party's claims being considered by a court of trial; and

2. What is the legal and beneficial status of monies paid under the A v A jurisdiction?

The appeal is likely to be heard by the Supreme Court in December 2014.


Lord Wilson, of the Supreme Court provides his view on the institution of marriage
Speaking to the Medico-Legal Society in Belfast, Lord Wilson of Culworth provided a historical and international perspective to the institution of marriage.  

He said that as a 'committed member of the Church of England' he believed 'far from destroying marriage, I think that to allow same sex couples into it strengthens it'.  He also discussed the evolution of the traditional family make-up with widespread divorce creating what he described as 'blended families'.  He concluded: 'I am not convinced that it is a bad thing: might it not be healthier for children to learn at a very early age to cope with relationships in a mixed and wider family group?'

For a copy of the full speech click here


Greece – sixteenth state to sign up to the EU international divorce cooperation procedure
Fifteen countries already participate in the EU rules which allow couples to select which country's laws apply to their divorce.  The Council Decision authorising enhanced cooperation on the law applicable to divorce and legal separation was adopted in July 2010 (IP/10/917).

If couples are unable to agree in advance which law would apply in the event of their divorce, judges will have a common formula for deciding which country's law applies.  The aim of the legislation is to provide the weaker partner with assistance during the process.

The UK does not participate in the scheme.


Grant Thornton's 10th annual matrimonial survey published
A survey of 85 of the UK's leading family lawyers captured the key statistics for the 2013 matrimonial survey.

The conclusions reached were that 86% of lawyers said the most common age of their clients was 40 to 49 (despite the reported increase in so called 'silver splitters').  29% reported that the main reason for the marriage breakdown was growing apart/falling out of love; 24% cited an extra-marital affair.

63% of the surveyed practitioners reported that the length of marriage was between 11 and 20 years.  The biggest increase appeared to be an increase from 4% (in 2012) to 14% of marriages breaking down that had lasted over 20 years.

Click here for a copy of the report.


Habitual residence the centre stage of £11m divorce battle
The Telegraph reports that house husband, Weng Choy filed for divorce from his investment banker wife. 

Ms Tan and Mr Choy enjoyed a lavish lifestyle during their 15 year marriage.  With homes in Malaysia and Hong Kong; a £1m wine collection and a mortgage free apartment in Kensington worth £4.5m.

Mr Choy filed for divorce in the English courts whist his wife argues he has no right to divorce her in the UK.  Ms Tan has begun her own proceedings in Malaysia.

The appeal judges will provide their ruling at a later date.


Tavistock Institute says couple counselling can improve relationships
Research led by the Tavistock Institution has highlighted the benefits of utilising relationship support interventions.

Three types of intervention were the focus of the study:  marriage preparation; relationship education sessions (delivered mainly to mothers); and couple counselling.  The evaluation of over 800 interviews showed a noticeable improvement in the couples' well-being, communication with each other or the quality of their relationship after using one of these services.  Couples counselling showed the greatest improvement.

A copy of the full report can be accessed here


ONS statistics show number of divorces in England & Wales increased in 2012
In 2012 there were 118,140 divorces in England & Wale, an increase of 0.5% since 2011 when the number of divorces was 117,558.  Consistent with the Grant Thornton report (see above) the number of divorces was highest amongst men and women aged 40 to 44.

The statistics show that almost half of all divorces in 2012 occurred in the first ten years of marriage and divorce was most likely to occur between the fourth and eighth wedding anniversary.

For a copy of the ONS report please click here


Case law update

BN v MA [2013] EWHC 4250 (Fam)

Consideration of a prenuptial agreement on a wife's application for maintenance pending suit, interim periodical payment for a child and legal services provision.

Background
The wife made an application under s22 of the Matrimonial Causes Act 1973 for maintenance pending suit.  In addition, she sought interim periodical payments for the child of the family who was born in August 2005.  The application in respect of the child was only permissible if the child or either of his parents were not habitually resident in this jurisdiction.  In addition, the wife applied for an order for a costs allowance under s22ZA of the Matrimonial Causes Act 1973.

The husband was aged 55 and born in country 'P'.  The wife was aged 40 and born in the Republic of 'Z'.  The parties met in 2001 and began a relationship in 2002.  The relationship was fairly turbulent and 'punctuated by separations' [para 2].  In August 2005 their son was born.  He lives with the wife in country 'S 'where he attends an international school.

Between 2006 and 2007 the parties were not fully cohabiting.  However, they got engaged in 2009.  They continued to live international lives in various countries.

A draft prenuptial agreement was prepared by the husband's solicitors on 22 February 2010 and between then and May 2012 the agreement went back and forth between solicitors.  According to the husband, in the period before 30 May 2012, the agreement was 'intensely negotiated' leading to the parties signing a document described as a 'premarital agreement' on 30 May 2012.

Mr Justice Mostyn notes at paragraph 5 of his judgment that on the face of the document in large font was the heading 'Importance Notice'.  The notice continued: "This agreement is intended to create legal contractual relations between MA and BN.  It is intended to confirm their separate property interest and to be determinative of the division of their assets in the event of the breakdown of their marriage…".

The financial provision agreed in the premarital agreement provided for a cap of 30% of the total value of assets to which the husband was legally or beneficially entitled to (including Trust interests) to the wife.  Mostyn J calculated the husband's net property assets to be approximately £13.08million. 

The provision for the wife was different depending on the length of the relationship prior to termination.  In this case, the relationship was less than two years.  In this category, the husband had agreed that he would redeem the mortgages against the wife's two flats (approximately £528,000) and extend their leases to the maximum extent available in law (a further £250,000).

In addition, the agreement allowed for housing provision of £2 million in Trust; annual spousal maintenance of £96,000 (index linked) and £24,000 for each child born to the couple.

The marriage ended in August 2013.  By this time the wife was pregnant with their second child who was due to be born in February 2014.

The wife issued a divorce petition in London on 12 September 2013.  She pleaded that both she and her husband were habitually resident in England & Wales.  If correct, this would deprive Mostyn J of jurisdiction to make a direct order for periodical payments for the child.

Despite the premarital agreement, the wife issued a Form A seeking the full range of financial remedies.  Mostyn J comments at paragraph 22:

"At all events, one has to ask on what possible basis the wife considered it appropriate to issue an application for the full range of financial remedies, she having signed the prenuptial agreement in the terms which I have mentioned but 15 months earlier.  Certainly neither then, nor at any later stage, has the wife, in correspondence or indeed in an affidavit, articulated on what basis she can justify repudiation of the agreement."

At paragraph 23, Mostyn J was critical of the wife's application for a costs allowance (a claim of £400,000).  The wife provided no detailed particulars of the figure.

A canter through the effect of agreements (prenuptial, Edgar and Xydhias) is concluded at paragraph 26 with the Supreme Court's conclusion of the test for the treatment of all nuptial agreements, which is: "The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement".

Mostyn J concluded that the wife had not articulated her case as to why the agreement should not be upheld.  Consequently, the appropriate level of maintenance should be as stipulated in the premarital agreement, with the additional £24,000 p.a. once the second child had been born.

In relation to the costs allowance, Mostyn J considered the statutory provisions of s22ZA and found that the wife had no entitlement to a costs allowance because (a) she had failed to satisfy the court that she was unable to secure a litigation loan; (b) the court considered the subject matter of the proceedings and the wife's financial claims to be "extremely speculative" even "borderline irresponsible" in view of the premarital agreement; and (c) there was not a sufficiently detailed schedule of legal costs.

A costs order was made against the wife for 75% of the husband's costs to be assessed on a standard basis. 


EM v AK [2013] EWHC 4393 (Fam)

Wife's application for maintenance pending suit and for a Legal Services Order under s22ZA of the Matrimonial Causes Act 1973.

Background

The parties were married in 2008.  They were both Russian nationals and began living together in 2005 (according to the wife) or 2007 (according to the husband).  They left Russia in 2009 and separated in 2012.  There were no children.  King J described the marriage as short and childless.  The husband was aged 52 and the wife 28.

The assets totalled approximately £3.1m and comprised, properties in Montenegro in joint names, property and assets in the wife's name of approximately £128,000 and properties and liquid resources in the husband's name of approximately £2.5m. 

The court had listed a three day hearing for determination of whether the assets in the husband's name were beneficially owned by him or by his son.  It was the husband's case that the assets were held by him on behalf of his son as the sole beneficiary.  During the course of the judgment, notwithstanding the husband's asserted case, King J decided that the husband had the resources to satisfy a Legal Services Order.  An order was made that the wife should receive £40,200, a sum calculated with reference to the anticipated costs of the three day hearing.

The husband conceded in correspondence that the assets in his name should be deemed to be owned by him for the purposes of the financial remedy proceedings.  The three day hearing was vacated.

Reviewing the wife's claim for maintenance pending suit, Mr Justice Moylan awarded the wife the sum of £3,000.  This was on the basis that she had limited income of her own (approximately £1,333 per month) and the husband had recognised in his open offer that she should receive assets of at least €300,000.  The judge stated that, if appropriate, the sums paid to the wife could be treated as on account or otherwise to be taken into account at the final hearing.

Moylan J was not persuaded to make any further Legal Services Order in addition to that made by King J.   The original order of £40,200 should have been sufficient to meet costs up to the FDR and King J had already indicated that the order was not for historic costs incurred.


Divall v Divall [2014] EWHC 95 (Fam)
Case concerning the question of jurisdiction to hear a divorce petition on the grounds of domicile of the wife.

Background

On 17 May 2013 the Petitioner husband, issued a divorce petition in the Hertford County Court.  The petition pleaded that the court had jurisdiction to hear the case under Article 3(1) of the Council Regulation (EC) No 2201/2003.  On 26 July 2012 he amended the petition to allege that both parties are domiciled in England & Wales.

The wife filed an Answer on 28 August 2012.  She pleaded that the court did not have jurisdiction as she was not domiciled here.  The issue was transferred to the Principal Registry for determination on 7 March 2013.  On 10 July 2013 it was set down for a hearing before a High Court Judge.

The wife had filed a petition in the Netherlands on 24 September 2012.  As the husband's was first in time, the Dutch court stayed the wife's petition pending determination by the English court.

There was no doubt that the Netherlands had jurisdiction pursuant to the Council Regulation as it was accepted that both spouses were habitually resident there.  For the English court to have jurisdiction as well, the husband had to establish that both spouses were domiciled here on the date he issued his petition.

The husband remained domiciled here by virtue of his domicile of origin.  He was born in this country and is a British citizen.

The issue concerned the wife's domicile.  She was born in China and undoubtedly had a Chinese domicile of origin.  The husband alleged that her domicile of choice was England following her marriage and that she retains her domicile of choice regardless of her move to the Netherlands.  The wife argues that she is not domiciled in this jurisdiction.

Mr Justice Moor reviewed the history of the couple.  They married in England and the wife obtained a spousal visa entitling her to move to England in May 1999.  In April 2000, she obtained UK residency.  On 12 August 2002, she became a British citizen and got a British passport.  To do so, she was forced by the Chinese government to relinquish her Chinese nationality.  Since then she has always had to travel to China on her British passport and obtain a visa each time to do so.

In March 2008 the family emigrated to the Netherlands.  The children were enrolled in Dutch schools and the couple bought a property there. 

In 2011 the marriage got into difficulty.  The wife began a relationship with a Dutchman.  Although the wife does not speak Dutch, her new relationship is 'serious' and she intends, in due course, to obtain Dutch nationality.

Moor J considered the law on domicile.  He concluded (at paragraph 28) that: "Domiciles of origin are notoriously adhesive.  The acquisition of a domicile of choice (whether changing from a domicile of origin or of choice) requires physical presence, although it need not be long, plus an intention to remain permanently or indefinitely."

Moor J concludes that the court did not have jurisdiction to entertain the husband's divorce petition.  He was satisfied that, even if the wife obtained a domicile of choice in England & Wales following her marriage, she had not retained it at the date of the husband's divorce petition.  The judge declined to make a finding as to whether the wife had ever been domiciled in England & Wales as there was no need to do so.


Nightingale v Nightingale [2014] EWHC 77 (Fam)
Return hearing in respect of a freezing order made in favour of the wife where the husband was based in Singapore.
 

Background

Divorce proceedings commenced in 2008.  The hearing before Mr Justice Holman was in relation to a consent order made in November 2009 by Mr Justice Moylan.  Pursuant to the order a further, potentially substantial sum, remained due to the wife upon sale by the husband of certain shares.

In April 2013, the husband sent an email to the wife's bank manager (copying the wife in) which said that an agreement for sale had been signed for gross consideration of €8million.  The wife was entitled to one-quarter of that sum.

Consistent with that, the husband sent an email in July 2013 to the wife confirming that he would pay the wife €2million once the money was released.  Despite this email no payment was made.

The husband's statement made two days before trial said that the entire amount received by him was in fact €400 but provided no documentary evidence to support this massive drop in value.

On 19 December 2013 the wife obtained a freezing order whereby the husband was prohibited from dealing or disposing with the shares in question.  He was also obliged to disclose all details surrounding the proposed or actual sale of the shares and to produce a quantity of obvious documentation in relation to the transaction. The husband did not supply anything.

Given the abject failure of the husband to comply with the December order, Mr Justice Holman added provisions to the injunctive part of the original order.  He also ordered that disclosure from another firm of solicitors was provided to confirm the amount held on behalf of the husband on their client account. 


SA v PA (Pre-marital agreement: Compensation) [2014] EWHC 392 (Fam) 
The wife disputed a pre-marital agreement that had been made in Holland.
 

Background
The marriage lasted 18 years.  At the time of trial, the husband (who was Dutch) was aged 50 and the English wife was aged 48.  They had four children aged 19, 17, 15 and 13.  The current divisible non-pension assets were about £3.8m of which the FMH was £2.2m.   The husband was a successful solicitor in a magic circle firm earning net £600,000 p.a.

The matter had not settled for two reasons:

1. the husband placed considerable emphasis on the Dutch premarital agreement signed the day before the marriage; and

2. the wife claimed that her periodical payments award should be significantly enhanced by reference to the principle of compensation as explained in McFarlane v McFarlane [2006] UKHL 24

On the first issue, Mostyn J was satisfied that that the agreement had been freely entered into and the wife (despite her protestations in evidence) fully appreciated the implications of the agreement.  The capital division envisaged by the agreement was implemented as far as possible.  This included capital acquired from an external source after the marriage provided that it had been kept separate and in the sole name of the donee.  The agreement was silent on the issue of maintenance and consequently the judge ordered maintenance on a term basis.

Mr Justice Mostyn rejected the wife's claim for compensation based on the economic disadvantage generated by the relationship and appeared fairly disparaging about compensation claims in general.  He commented at paragraph 68:

"The wife had no appreciable track record by the time she gave up work.  It is not even known what she was earning when she quit, let along whether they were high earnings.  It is impossible to speculate where she would be now had she made different decisions at that time….The way this case is put shows just how impossible it is both in terms of logic and concept to apply the principle of compensation."

The award given to the wife was cross checked against needs to ensure the outcome was fair.


Grocholewska-Mullins v Mullins [2014] EWCA 148
Appeal by wife where the court had ordered a capitalised payment by the husband in three instalments in lieu of periodical payments; appeal as to the staging of the instalments.
 

Background

The original order was made in 2006.  The relevant part was an order for periodical payments in favour of the wife for £24,000 per annum.  The order was varied down in June 2011 to £12,000 per annum on the basis of the wife's then cohabitation.

Within the variation proceedings, the judge varied the sum back up to £24,000 per annum as cohabitation was no longer relevant and added an inflation top up of £1,000. 

The judge analyzed the resources and needs of both parties and with the aim of a clean break ordered a capitalised sum of £300,000 in lieu of periodical payments to be paid in three instalments.  The payments were to be made between December 2012 and December 2014.

On the permission hearing, the judge allowed one ground of appeal which was the staging of the instalments.

The question before the appeal court was whether the judge had factored in the hardship to the wife in having to meet her outgoings between the instalments ordered.

Before the hearing, the husband had offered the wife £1,000 per month as continuing periodical payments until the final instalment of the capitalised lump sum was paid (with the monthly contributions to be deducted from the final balance). 

Lord Justice Ryder concluded that this was a fair offer.  The husband, due to his indebtedness, could not afford to pay any more.  Consequently, the order was varied to reflect the offer from the husband.