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Chai v Peng: Shifting the Jurisdictional Goalposts Once the Forum Dispute Match Has Started

Michael Allum, Solicitor, The International Family Law Group LLP, considers the implications upon jurisdictional disputes of the judgment in Chai v Peng.


Michael Allum, solicitor, The International Family Law Group












Michael Allum, Solicitor, The International Family Law Group LLP 


Summary

An English High Court judge, giving directions in a heavily contested jurisdiction dispute, has allowed a petitioner's original divorce petition to be dismissed only six months before the final jurisdiction hearing and has permitted her immediately to commence fresh proceedings, even though this gives some or significant advantage on her claims to English jurisdiction.  If this approach was repeated outside the specific facts of this case, it would make a dramatic impact on contested jurisdiction cases and quite probably lead to premature issuing of proceedings. 


Background

In Chai v Peng [2014] EWHC 1519 the wife issued divorce proceedings in England in February 2013 asserting jurisdiction on three alternative grounds:

  1. that she had resided in England and Wales for at least 12 months at the commencement of proceedings and was habitually resident here; or
  2. that she had resided in England and Wales for at least six months at the commencement of proceedings and she was domiciled here on the date of the petition and was habitually resident here; or
  3. that she was domiciled in England and Wales on the date of the petition.

The husband disputed that the wife was domiciled in England and Wales or habitually resident for 6 (or 12) months prior to the date of the divorce petition.  A 10 day hearing was listed in October 2014 in order to consider whether the English court had jurisdiction to entertain the wife's divorce petition.  

The husband also issued divorce proceedings in Malaysia and applied to the English court for a discretionary stay of the English divorce proceedings on the basis that Malaysia had the closer connection to the family.  The wife applied to the Malaysian courts for a discretionary stay of the Malaysian proceedings.     

In a first instance decision in Malaysia the wife was found to be necessarily domiciled in Malaysia by application of the wife's dependent domicile rule and her application for a stay of the Malaysian proceedings was refused.  The wife appealed.  The Malaysian appeal court allowed the wife's appeal in respect of her domicile but refused her appeal in respect of her application for a discretionary stay of the Malaysian proceedings.  This decision dissatisfied both parties who intend to seek permission to appeal to the highest appeal court in Malaysia; the husband seeking to reinstate the first instance decision that the wife is domiciled in Malaysia and the wife continuing to say that the Malaysian proceedings should be stayed to allow the English proceedings to continue.  

Against this backdrop the matter came before Holman J on 30 April 2014.  The judge had already dealt with the matter and made strong remarks about forum shopping and international cases; see Chai v Peng [2014] EWHC 750. At the later hearing Holman J had to consider the wife's application for a Hemain temporary stay injunction preventing the husband from proceeding further with his suit for divorce in Malaysia.  However, in light of the developments in Malaysia, namely that the court had not yet determined that it had jurisdiction to hear the husband's divorce suit, the need to consider the wife's application for a Hemain injunction had, for the time being at least, fallen away.

Accordingly much of the hearing was used in order to consider the wife's application to issue a fresh divorce petition.  This was perceived as an opportunity to improve her position with regard to English jurisdiction on the basis that with the passage of time she would now, with a newly issued petition, have accrued a longer period of residence and/or stronger claim to habitual residence and/or domicile.  Was it right to allow this?  Inevitably it would have an impact on the jurisdiction dispute, despite the wife asserting that she was confident on the jurisdiction as originally claimed.  


The procedure

Rule 7.7 of the Family Procedure Rules 2010 provides as follows:

(1) Subject to paragraph 2, a person may not make more than one application for a matrimonial ... order in respect of the same marriage ... unless:

(a) the first application has been dismissed or finally determined; or

(b) the court gives permission.

Holman J made it clear that he would not allow the wife to have on file two concurrent petitions.  The wife therefore sought for her existing petition to be dismissed under R.7.7 (1)(a) FPR 2010, clearing the way for her immediately to issue a fresh petition, with jurisdiction at the date of that fresh, much later, petition. 

An essential reason why the wife's legal team sought to issue a fresh petition was to re-set the jurisdictional clock in relation to the periods of domicile and residence as at May 2014 rather than February 2013.  The wife's legal team made clear that the wife did not in any way resile from her assertion that she satisfied the jurisdictional requirements in February 2013.  What they said was that it would be more "economical" to eliminate arguments about the wife's habitual residence and domicile in the periods preceding February 2013 and instead concentrate on the periods preceding May 2014, which might or would eliminate any possible continuing dispute with regard to jurisdiction.


The husband's opposition

The thrust of the husband's opposition to the wife's application is captured in the following metaphor coined creatively and colourfully by the husband's legal team:

"To file prematurely is the equivalent of laying one's towel at dawn upon the sun lounger of the English court and returning at high noon to bask in the warmth of the law of England and Wales on divorce and financial remedies."

The husband and his legal team sought to resist the wife's application for the following four reasons. 

First, they argued that as a matter of principle any practice which encourages or endorses forum shopping should be strongly discouraged.  Holman J made clear that he is not a friend of the forum shopper and does not have the slightest desire or intention of opening the floodgates.  However, on the facts of the case there was no evidence that the petition presented on behalf of the wife in February 2013 was in bad faith; it was, and remains, the wife's case that the jurisdictional bases were made out in her original petition and it had not in any way been established that they had not.   (In passing, he could therefore have said that the jurisdiction dispute would still run on the February 2013 grounds and not May 2014, to avoid any suggestion of assisting the petitioner, but he did not do so.)

Second they argued that if this sort of conduct was given even the slightest judicial endorsement it would run the risk of prejudicing respondents everywhere.  For example, a respondent might lose the opportunity to obtain a judicial decree in an overseas jurisdiction within the period before which the petitioner could legitimately present an English petition.  In the event that a marriage were to break down within a day of the parties' arrival in England, i.e. before jurisdiction existed, and the respondent were forthwith to issue proceedings in an overseas jurisdiction, it is possible that the overseas petition could proceed to final decree before the petitioner would have been able to present an English petition.  If instead a holding (albeit premature) petition were filed in England, the petitioner might well succeed in obtaining a Hemain injunction to prevent the respondent from reasonably obtaining the overseas decree.

Holman J's response was that these arguments did not arise on the facts of this case – although they will certainly do so in other cases.  The husband had not yet been able to satisfy the Malaysian courts that they had jurisdiction to hear the divorce proceedings, let alone obtain a decree of divorce there.  In respect of the argument that a petitioner may be able to obtain a Hemain injunction, Holman J held that not only had the wife not obtained such an injunction in these English proceedings, but an important consideration in determining whether to grant a discretionary Hemain injunction is the strength of the petition in England; if the jurisdictional basis of the English petition was unclear or weak, that would operate strongly against a discretionary grant of a Hemain injunction.

The husband's legal team also argued that the timing of an English petition may well be given significant or decisive weight by a competing overseas jurisdiction, particularly in some civil law jurisdictions such as Switzerland and Monaco where clear priority is given to the petition issued first in time.  Again the response of Holman J was that the facts of the present case did not engage either Switzerland or Monaco or any other Member State of the European Union (where lis pendens, first to issue, is vital).

The third argument advanced by the husband's legal team was in relation to estoppel.  They quoted Lord Denning (in Amalgamated Investment and Property Company Ltd (in Liquidation) v Texas Commerce International Bank Ltd [1982] QB 84, page 122) in support of their argument that when the parties to a transaction proceed on the basis of an underlying assumption, neither of them should be allowed to go back on that assumption when it would be unfair or unjust to allow them to do so.  They also relied on a passage from Lord Scarman (in Castanho v Brown & Root (UK) Ltd and Anor [1981] AC 557, page 571) to the effect that the court has an inherent power to prevent a party from obtaining a collateral advantage by termination of the proceedings before the court.  Applying the law to the facts of the case, it was argued on behalf of the husband that the wife had obtained a number of advantages from the existing proceedings on her present petition: namely a voluntary payment by the husband of £1,850,000 and an order for maintenance pending suit and a legal services order in the sum of £170,000.  The wife had also made three applications for a Hemain injunction, albeit none had ever been ordered.   

The argument on behalf of the wife, which was accepted by Holman J, was that the payments made by the husband had been on a very clear, recited basis that they were on account of the petitioner's claims in any jurisdiction for financial provision arising from the breakdown of the marriage.  In circumstances where the parties were married for a period of 42 years, during which the majority of the husbands' wealth – estimated by the wife to be £400 million – was accumulated, the wife would have a substantial claim for capital provision in any jurisdiction in the Western world.  In the event that the wife were not to receive a significant financial award in Malaysia, the wife would have very strong grounds for making an application for financial provision under Part III of the Matrimonial and Family Proceedings Act 1984. 

The final point on behalf of the husband was described as pragmatic and economic in relation to the vast expenditure on legal costs.  The essential argument was that there had already been numerous and expensive hearings in England on the original basis of the jurisdiction which the wife now sought to disavow.  The response on behalf of the wife was that the wife and her legal advisors remained confidently of the view that her existing and original petition was well-grounded.  They argued that the very reason for seeking permission to have her original petition dismissed and re-issued was to cut through the arguments in respect of jurisdiction and therefore reduce further costs.

Accordingly Holman J acceded to the wife's application to have her petition dismissed, thereby allowing her to issue a new petition.  Holman J stressed that his decision was fact specific.  There was no evidence to suggest that when the wife presented her petition in February 2013 she did so without genuinely believing that she had jurisdiction to do so.  He emphasised that the wife's petition was dismissed in order to narrow the issue in dispute and attempt to reduce further legal costs in accordance with the overriding objective contained within Part 1 of the Family Procedure Rules 2010. 

Holman J then went on to award the wife further maintenance pending suit and legal funding provision, despite there not being a live petition, on the undertaking of the wife to re-issue forthwith and in order to avoid the need for the issue to be adjourned which would result in significant further legal expenditure.


The debate

Should the English court allow a petitioner to have their original petition, with original jurisdictional claims, dismissed in order that they may immediately re-issue for the sole or primary purpose and/or consequence of increasing their chances of then being better able to satisfy the jurisdictional requirements for English proceedings?  By law, jurisdiction in divorce matters is on the date of issue. 

On these present facts and as justification by the judge, the competing court did not yet have jurisdiction to hear the divorce suit.  But this only increases the litigation tactics of racing in this jurisdiction and deliberately delaying in the other jurisdiction and some jurisdictions are much slower than England in forum disputes.  This justification seems to encourage the wrong sort of litigation behaviour. 

Moreover and in contrast to the facts of this case, what if a respondent had satisfied a foreign court that it had jurisdiction?  Would the permission to reissue have been granted?  Would it be different if a respondent was close to achieving a final decree in the foreign court?  How would this be considered? 

How late can the reissuing be?  What about the eve of the final jurisdiction hearing – so that in effect the law becomes not jurisdiction at the date of issue of proceedings but as at the date of adjudication?

The invariable position if one party stops proceedings and starts again is that they pay the "wasted" costs of the other party, sometimes as a condition of having permission to start fresh proceedings.  In this case where the assets are very substantial, the costs become far less significant in any steps taken in the litigation.  But in most cases, stopping a year into litigation and less than six months before a final hearing will cause significant costs liabilities to be incurred.  This will be a very relevant factor.

As the judgment did not contain reference to any previous authority, the judgment of Holman J may be the only reported decision directly on this point.  It is understood the husband is going to appeal. That is welcome because it is an issue of considerable international importance.  Allowing this procedure in other cases will encourage potential petitioners to issue proceedings, notwithstanding material doubts in respect of the jurisdiction of the English court, in the hope that they may later be able to re-issue proceedings when their jurisdiction claim is stronger due to the events in the intervening period. 

A court should look at the jurisdictional position when a party first seeks to bring a claim before the family courts of England and Wales.  The period thereafter is inevitably artificial as the petitioner naturally stays in England to improve his or her connections.  There are already too many instances of spouses engaging in secretive and deceptive behaviour in order to gain English jurisdiction against the knowledge of their spouse.  Notwithstanding Holman J's finding that the original petition was issued in good faith, this High Court decision gives even more opportunity to the English forum shopper: if at first you don't succeed (or your jurisdiction is not very strong), try again once the forum litigation is well advanced and then you are more likely to succeed.

It is stated in the judgment that the decision is entirely fact specific and made in the understandable hope by the judge that it would narrow the issues between the parties and reduce further costs.  This is highly commendable.  However, although the overriding objective – on which Holman J placed great significance – includes saving expense, it is primarily aimed at dealing with cases justly.  One has to consider how just the decision is for the respondent spouse, here the husband, who has already fought the English jurisdiction for approximately 15 months at great legal cost on the basis of a petition, now abandoned, and finds that he has to start fighting all over again on different jurisdictional facts. 

My colleague, David Hodson, has written elsewhere that, intentionally or unintentionally, some of the English judiciary are allowing many international cases to go ahead in England by giving wide interpretation and allowances in forum and jurisdiction matters.  This is yet another example.  As the World Cup starts, an apposite analogy is of shifting the jurisdictional goalposts once the forum dispute match has started with the referee, unintentionally but nevertheless clearly perceived by some spectators (here and abroad), permitting such behaviour. 

Michael Allum acknowledges the assistance of his iFLG colleague, David Hodson, in this article.

4/6/14