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Home > Articles > 2015 archive

Finance & Divorce Update August 2015

Edward Heaton, Principal Associate and Jane Booth, Associate, both of Mills & Reeve LLP analyse the news and case law relating to financial remedies and divorce during July 2015













Edward Heaton, Principal Associate and Jane Booth, Associate, both of Mills & Reeve LLP

This update is provided in two parts:

A. News in brief
B. Case law update


A. News in brief
1. Fee for issuing divorce proceedings to increase to £550
The fees for issuing divorce proceedings are set to rise to £550 from £410 as announced by The Ministry of Justice on 23 July. The same fee applies to applications for a decree of nullity or, in the context of civil partnership, for a dissolution order or nullity order.

In December 2013, the Coalition Government proposed an increase by 80% to £750, but the MoJ has said that it "carefully considered the concerns raised during the consultation and decided not to increase fees by 80% as originally proposed".  Instead, they "will press ahead with a more affordable increase of about a third". This measure will help to deliver an estimated £60million in additional income for the government each year. The MoJ also added that they will continue to protect "the most vulnerable by ensuring that fee remission is available for those who need it, such as women in low wage households".

Along with other changes, there will also be a general increase of 10% to a wide range of fees in civil proceedings.

The full MoJ response to the consultation can be found here.


2. New figures reveal divorce and cohabitation trends over the last 12 years
On 8 July, the Office for National Statistics ("ONS") released statistics analysing the marital status and living arrangements of people aged 16 and over in England and Wales between 2002 and 2014.

They reveal the following:

• In 2014, 51.5% of people aged 16 and over in England and Wales were married or in a civil partnership while 33.9% were single, never married;

• Between 2002 and 2014, the proportions of people aged 16 and over who were single or divorced increased, but the proportions who were married or widowed decreased;

• The increase, between 2002 and 2014, in the percentage of the population who were divorced was driven by those aged 45 and over, with the largest percentages divorced at ages 50 to 64 in 2014;

• In 2014, around one in eight adults in England and Wales were living as a couple but were not married or civil partnered; cohabiting is most common in the 30 to 34 age group;

• In 2014, more women (18.9%) than men (9.8%) were not living as a couple, having been previously married or in a civil partnership; this is due to larger numbers of older widowed women than men in England and Wales.

These developments reflect the economic climate and suggest an interesting change in attitudes.  With many still feeling the financial squeeze of the past 6 years, people in their 30s are more likely to cohabit than other age groups.  This is probably due to the practical benefits of running a double income household but also the often large expense of a wedding. Since there is currently no such thing as a 'common law marriage' and there is no clear legal framework for the division of assets (outside of marriage), the breakdown of a cohabiting relationship can sometimes be very messy.

More people aged 50 to 64 are getting divorced, a trend which has increased in recent years and is likely to continue.  This may partly be as a result of divorce no longer being seen as the stigma it once was, but also partly to do with the evolution and increasing success of dating websites to facilitate meeting someone new.  With people living longer, many realise that they do not want to spend their later years and retirement in a relationship that does not make them happy. 

The full statistics can be found here.


3. National Family Mediation urges judges to encourage mediation
New Ministry of Justice figures show that the devastating legal aid changes of April 2013 have resulted in fewer separating couples attending family mediation. This is in spite of Government measures over the past 12 months aimed at encouraging people to seek settlements away from courtrooms.

Jane Robey, CEO of National Family Mediation (NFM), has said that "in their bid to boost the take-up of mediation, Ministers have already played a number of cards yet the national mediation data remains doggedly low". 

In April 2014, the Government made it compulsory (subject to certain exemptions) for individuals to attend a mediation information and assessment meeting (a "MIAM") before applying for a court order.  According to Ms Robey, however, "many separating couples simply see [this meeting] as a hoop to jump through on the way to court".  She added that "Family court judges must be more willing to embrace mediation, using the powers they already have to direct people who come before courts towards alternative means of settling disputes". 

The NFM pointed to their successful pilot project "At-Court Mediation", which helps parents who have been separated for more than two years and are currently in the court system.  It allows couples to meet with specialist mediators to negotiate long-term arrangements for children, property and finances.  Ms Robey said that the project "shows that couples who have become entrenched in conflict can, with the right help, find an exit from the courtroom drama and move on in a positive way".  She added that "Judges across the county need to learn from this project and follow suit".  Last month, Lord Neuberger, the UK's senior judge, supported this saying that mediation is particularly suitable for "ordinary people" and "average citizens" in the current economic climate.

More information can be found on the NFM website.


4. Briefing Paper on financial provision when a relationship ends
The House of Commons has published a briefing note on financial provision when a relationship ends.  The note includes the following sections:

(i) Dividing up any assets;

(ii) The court's discretion;

(iii) No time limit for financial provision application;

(iv) Case law;

(v) Law Commission project on aspects of financial provision;

(vi) Mediation requirement;

(vii) Financial Remedies Working Group;

(viii) Enforcement of Family Financial Orders;

(ix) Pre-nuptial agreements;

(x) Cohabitation; and

(xi) Further reading.

The full note can be found here.


5. Award of all couple's assets to wife upheld on appeal
The Court of Appeal has upheld an order that all of a couple's £550,000 assets should be awarded to the wife.  After the couple separated in 2011, the husband moved to Bahrain and failed to pay any child maintenance to his wife for their two children.  Lord Justice MacFarlane said that the husband had effectively "abdicated responsibility" for her and his children.  He added:

"Looking to the future, there was no expectation that she could look to him for any future payment of maintenance and it was therefore necessary for her to achieve an award representing effectively most of the capital assets."

Fuller details of the case can be found at the following:
http://www.telegraph.co.uk/news/uknews/law-and-order/11736671/Husband-ordered-to-hand-over-all-assets-to-wife-in-divorce-case.html


6. New family court set up in London
A new family court designed to bring alternative dispute resolution into the court system has opened at the Central Family Court in Holborn, London.

The 'Family Solutions Court' includes a Citizens Advice Bureau, a contact centre that enables a judge to direct a defined period of contact, a 'pro bono' scheme, mediation and Mediation Information and Assessment Meetings facilities, a personal support unit and a programme focusing on the needs of children whose parents have separated.

The court has case management and timetabling powers to bring matters to a conclusion with less delay than other informal means of dispute resolution.  His Honour Judge Altman said that, "In the end, a trial may be the only solution in a case, but we consider that the responsibility of the family court in the present day is to draw into its processes all the agencies that can lead to the best solution."


7. Solicitor-advocates threatening family bar
The bar has called for an independent review of advocacy in family law, over a 'growing concern' that an increase in the number of solicitors who conduct hearings has led to a decline in standards and 'unjust' outcomes. The Family Law Bar Association and Bar Council wrote to the Ministry of Justice stating that the risk of injustice is now so great that a review is 'absolutely necessary' and in the public interest.

The letter notes that cuts in legal aid fees and the reduction in legally aided work have led to more solicitors representing their clients in court even if those solicitors 'do not have the skills to do so.' The letter goes on to say that in 'far too many' family cases those in need of family advocacy services are not getting the best available advocates and are not getting an informed choice.

Evidence from members of the family bar show that questions necessary to the proper conduct of a client's case are not being adequately put and points of law, which ought to be raised are not being raised. 'This failure is of particular significance since…it creates a serious risk of the need for an appeal.' The bar also criticises solicitors for retaining cases for all earlier hearings before instructing counsel at the '11th hour.' The letter is signed by Alistair MacDonald QC, chair of the Bar Council, and Susan Jacklin QC, chair of the FLBA and proposes that the Ministry of Justice commission a review of advocacy in publicly funded family cases.

Resolution said it was 'disappointing' that the FLBA and Bar Council felt the need to ask for an independent review, which it said would be 'neither warranted or helpful.' They stated: 'We have not seen any evidence to support the need for this; and indeed, anecdotal reports from our respective members, including barristers and leading judges, do not demonstrate that the concerns expressed in this letter are widespread.'


B Case law update

KG v LG (No 2) [2015] EWFC 64
This was an appeal by the wife (including an application for permission to appeal out of time) against an order in financial remedy proceedings on the grounds of material non-disclosure.

The facts of the case were complex and a detailed account of them is beyond the scope of this summary.   In short, however, the application related to a consent order made on 1 June 2010 and to the disclosure made in the period leading up to that order.

By way of initial background, the parties had begun cohabiting in 1987, married in August 1996 and had separated in August 2009.  They had three children, aged 17, 19 and 20.  

The alleged material non-disclosure related to the value of assets held within two Trusts, the Trustees of both of which were the husband's brother and the husband's parents.  The beneficiaries were the husband and his descendants.   The Trustees had signed a letter of wishes indicating that they would carry out their duties "in accordance with [the husband's] legal and reasonable requests, which should be notified … in writing for … consideration and action".  

At the outset of the divorce proceedings, the wife's solicitors had written to the husband's solicitors indicating, very clearly, that the husband could not benefit from the Trusts.   The subsequent enquiries of the wife's solicitors were, however, put on hold when the parties agreed to discuss matters direct, with their accountant assisting with the gathering together of their financial information.

During the period of direct discussion, the husband wrote to the wife, providing an "approximate wealth statement" which had been prepared by the accountant.  It showed the husband to be worth around £15.7m, but made no reference to either of the Trusts.

Ultimately, an agreement was reached between the parties during a meeting that took place in Switzerland in May 2010.  A consent order was signed and, at the last minute, Forms M1 produced.

The consent order provided, in broad terms, for there to be an equal division of the husband's identified worth.  However, the husband's Form M1 included an asset schedule which referred to the Trusts, indicating that the husband was a "potential beneficiary".  

By the time of the meeting in Switzerland and the consent order being made, the Trusts contained £4.2m in cash, such sum having been received by the Trusts on 5 February 2010.  The husband maintained that he did not know about this receipt and only later found out about it.  During the period subsequent to the consent order, however, the husband received very significant payments from the Trusts. 

Relations between the parties did not improve and, in November 2011 and September 2012, the wife made enquiries about "the boys' Trusts" and was, to use the Judge's terminology, "fobbed off". 

In spring 2014, the wife approached solicitors with one of the children and a letter was written to the Trustees seeking reimbursement of expenses incurred by the wife on behalf of the children.  The letter twice referred to the children as being the beneficiaries and the response received to the letter was crucial:

"The assets our client settled on the Trusts on 11 March 2008 comprised shares… represented (the Husband's) interest in the company arising from loans (the Husband) made to [his brother] at the time he established the T Business.  In view of the source of the Trusts' assets, our clients (who are the named settlors-trustees) have always considered (the Husband) to be their principal beneficiary during his lifetime and continue to do so."

The wife's case was that this was the first time that she had discovered the true position in relation to the husband's interest in the Trusts, and her Notice and Grounds of Appeal were filed shortly thereafter.

In his judgment, Moor J considered the relevant law, including the leading authority Livesey v Jenkins [1985] AC 424, and he identified three issues for him to determine.  These were as follows:

"(a) Whether or not the information provided was full and frank?

(b) If it was not, was the deficiency material?

(c) If so, has there been unreasonable delay in making this application such that it would not now be right for it to proceed?"

The Judge described the wife as "a palpably honest witness doing her best to assist".  The husband, however, he found to be "evasive and at times misleading".

In relation to the first issue, the Judge found that the disclosure provided by the husband in relation to the Trusts had not been full and frank.   The initial letter had been "materially inaccurate" and had never been corrected.  There had subsequently been "absolutely no reference" to the Trusts in the wealth statement provided to the wife.   The Form M1 had then been "equally misleading".  Not only had it identified the husband as merely a "potential beneficiary" (as opposed to the primary beneficiary), but it had also provided figures from 2008.

In relation to the second issue, the Judge was clear that the non-disclosure had been material.  The husband had known that the Trusts contained £4.2m in May 2010 and that, indeed, this was, on the balance of probabilities, the reason that full and frank disclosure had not been given.  Furthermore, the Judge made the point that the husband had been under an obligation to find out the true position from the Trustees and to disclose it, even if he had not actually known it.  Given that the disclosed assets had been divided equally in 2010, the Judge had no doubt that the amount not disclosed (which not only amounted to the £4.2m cash but also included shares which had had a value of around £3m in 2008) was material.

In relation to the third issue, the Judge determined that there had been no unreasonable delay by the wife in making her application such that the application should be dismissed.  It was clear that the wife had not known about the position until the response was received in respect of the letter that had been written to the trustees in the spring of 2014.  She had then taken prompt action.

Accordingly, the wife was granted permission to appeal out of time, the appeal was allowed and the consent order was set aside.


R v R [2015] EWCA Civ 796
Both parties were Russian citizens. Following their divorce, the husband had lived in Russia while the wife had lived in the UK.  The wife began proceedings for a financial settlement and the husband was ordered to pay interim maintenance into the wife's Russian bank account.  The husband appealed against the order on the basis that he was subject to sanctions imposed by Regulation 269/2014 Article 2, which had the effect of freezing his assets so that nobody could deal with them, or participate in his dealing with them, within the EU. That Regulation was effective in the UK as a result of the Ukraine (European Union Financial Sanctions) (No.2) Regulations 2014.

The husband maintained that the UK Regulations prevented him from making payments.  He submitted that, by departing from the 'normal' route for the ordering of interim maintenance (which involved payments being made in England) in favour of payments being made in Russia (which did not require HM Treasury authority), the court had circumvented the sanctions in Article 2, contrary to the Article 9 prohibition on circumvention.

Lady Justice Arden, delivered judgment dismissing the appeal on the basis that the making of a court order requiring a Russian husband to pay interim maintenance to his former wife in Russia did not breach, nor circumvent, either the EU or UK Regulations. The law was complex and involved detailed consideration of Articles 2, 3 and 5 of the EU Regulation and Regulations 2 and 9 of the UK Regulations.  The Treasury, as the competent authority under the EU Regulation, indicated that the sanctions prevented neither the husband from transferring money in Russia to the wife's Russian bank account nor the wife from transferring money from that account to the UK.

The conclusion of the court was that the making of a court order would only circumvent the sanctions within the meaning of Article 9 if the order contained provisions which dealt with assets, and were intended to achieve a dealing with assets, within the scope of the EU Regulation without the licence of the Treasury.  This order contained no such provisions since it did not specify that the husband should use any particular funds to discharge his obligation.

The two-stage process envisaged by Article 5(1) (court order followed by an application to the competent authority) supported the conclusion that the making of a court order for the payment of money was a self-standing, valid and effective act.  The fact that the order required payment to be made in Russia did not circumvent the sanctions because it could have required payment to be made in the UK without infringing Regulation 3.  The court could not be said to be circumventing the sanctions by adopting a means permitted by the EU Regulation (see paragraphs 12 -14, 25 - 38 and 42 - 46 of the judgment).

Lord Justice Briggs added that it was not the purpose of the EU Regulation to regulate the making of court orders.  The objective of the order was not something that the sanctions sought to control.  Even if the court took an "abnormal" route to achieving its objective, it would simply be taking a lawful route to a lawful objective and would be circumventing nothing.  Since the EU Regulation did not exist either to regulate the payment of maintenance by Russian husbands to their Russian wives, or to regulate the exercise by EU judges of their discretion to order such payments, the maintenance order circumvented nothing (paragraphs 56 - 60).


WW v HW [2015] EWHC 1844 (Fam)
This case concerns the appropriate weight to attribute to a pre-nuptial agreement ("PNA") entered into between the parties the month before their marriage in July 2002.  To quote Mr Nicholas Cusworth QC, sitting as a Deputy High Court Judge, "If ever there were a paradigm example of a case which demonstrates the need for more certainty in the law of financial remedies and nuptial agreements, this is surely it".

The parties met in 2000 and entered into the PNA in June 2002.  The PNA was a condition of the marriage and was proposed by the wife in order to protect her very significant financial resources.  Her father had died in 1972, when she had been only 3 years old, and she, and her mother and her brother had each come into a significant inheritance.  At the time of the hearing, her assets were valued at around £27m. 

The PNA, among other things, indicated that the parties intended it to be legally binding upon them, they had each received independent legal advice and disclosed their financial resources to the other, neither would make any claim against the other upon marital breakdown (without prejudice to any claim in respect of a child) and all pre-marital, gifted or inherited property should remain in the parties' respective ownerships.

The Judge identified the key issue as being "how the parties' agreement and the other surrounding factors should now affect the assessment of H's needs (for neither side suggest that this is a case which involves any element of sharing)". 

The factual background was made somewhat more complicated by the husband's conduct.  Whilst the Judge found that the "bulk" of W's evidence had been "honest and open", he referred to the husband's "self-serving approach" which had rendered him "evasive, unhelpful and even untruthful".

At the time of providing financial disclosure, prior to entering into the PNA the husband had overstated his financial resources, particularly in relation to the level of his income in recent years.  This had, the Judge found, been with a view to making himself appear "more self-sufficient" and to "procure the agreement and so the marriage".

There had then been an issue in relation to the payment of tax, responsibility for which the husband had sought to place firmly at the wife's door.  The Judge referred to the husband having been "the prime instigator" with a series of actions and decisions and indicated that any potential penalties accrued since 2010 were the husband's "sole responsibility".  

The Judge found that, depending upon the size of the potential penalty levied by HMRC, the husband's net position was somewhere between £100,000 and £500,000, and he proceeded, therefore, on the basis of it being £300,000 (the mid-point).

In relation to the pre-nuptial agreement, the Judge considered at length the judgment in the leading case of Radmacher (formerly Granatino) v Granatino [2010] UKSC 42, and he considered that "significant weight ought to be afforded to the agreement".  Both parties had understood it, had had an opportunity to take advice, had entered into the agreement freely and had intended it to be binding.   Neither had sought to exploit a dominant position.   The husband was to be held, therefore, to the terms of the agreement unless his needs dictated otherwise.

The Judge then turned to the issue of the husband's needs and how they might be assessed in light of the agreement.  He referred, in particular, to the judgment in Kremen v Agrest (No.11) (Financial Remedy: Non-Disclosure: Post-Nuptial Agreement) [2012] EWHC 45 (Fam), in which Mostyn J indicated that, whilst it was likely to be unfair to hold the parties to an agreement that left either of them "in a predicament of real need, … needs may be interpreted as being that minimal amount required to keep a spouse from destitution".  The Judge also referred to Lord Philips in Radmacher, when he stated that "the fact of the agreement is capable of altering what is fair".

The Judge went on to consider the impact of the husband's conduct, which he described as both "irresponsible and dishonest", upon how his needs should be assessed, with reference to the "overarching criterion [remaining] the search for fairness".  In short, the Judge found that, such had been the husband's conduct, he did not feel the need to be "overly protective" towards him.

The Judge found that the husband should be provided with a £1.7m fund for his accommodation, reducing by 45% upon the younger child reaching the age of 23 in August 2027, with the remaining fund reverting to the wife's estate upon the husband's death.  On the income front, the Judge found that a lump sum of £215,000 should be paid by the wife to the husband to bring the husband's capital position to £515,000 which would, on the basis of the husband working until retirement and then receiving a state pension, provided him with an income of £50,000 per annum until his retirement in 2024 and thereafter £35,000 per annum for the rest of his life.  This lump sum would be sufficient to meet his needs, even in the scenario of the penalties owing to HMRC being greater than anticipated and wiping out the husband's existing capital resources in their entirety.


JB v MB [2015] EWHC 1846 (Fam)
This case related to the extent to which the wife should benefit from a substantial post-separation increase in the value in the shareholding of the husband.

The parties had commenced cohabitation in 1990 and had married in 1997, before separating in late 2006 / early 2007.  They had two children, aged 13 and 16.  

The wife petitioned for divorce on 1 June 2011, but it was left to the husband to commence financial proceedings on 5 December 2013.  The final hearing was heard by Mr Nicholas Cusworth QC, sitting as a Deputy High Court Judge.

The main issue before the court was the extent to which the wife should benefit from the substantial increase in value of the husband's 70% shareholding in a company that he had set up, with the two other shareholders, a year before the commencement of cohabitation.  The company was set up to develop insurance administration systems and had subsequently developed the first website enabling the purchase of motor insurance "in real time". 

At the time that the parties separated, the net value of the husband's shareholding was, according to the single joint expert, £1.73m.   By the time of the hearing, however, the net value had increased to between £7.4m and £8.5m.

The wife sought 25% of the value of the husband's shareholding and the husband offered 10%. 

It was the husband's case that the significant increase in the value of his shareholding had resulted from his development of a "unique and highly sophisticated piece of software" that processed insurance quotes at a phenomenal speed.  This lifted the company from a "bit part to major player" in the industry.  It was the husband's case that this development had taken place since 2012, the shareholders having invested heavily since 2011 to develop this and other products through reduced dividends.

In his judgment, the Judge refers to the words of Mostyn J in JL v SL (No.2) [2015] EWHC 360 (Fam), as follows:

"41. … for those assets which were in place at the point of separation.  They remain matrimonial property but the increase in value achieved in the period of separation may be unequally divided.  I emphasise may.  Obviously passive growth will not be shared other than equally, and there will be cases where on the facts even active growth will be equally shared …

42.  On the other hand there will be cases where the post-separation accrual relates to a truly new venture which has no connection to the matrimonial property or to the assets of the partnership.  In such a case the post-separation accrual should be designated as non-matrimonial property and save in a very rare case should not be shared."

Since both parties sought a simple percentage figure to express the wife's interest in the husband's shareholding, the Judge only had "the tools to perform … an exercise 'lawless science'".

Among other things, the Judge found that (i) the profits reinvested in the company must have included the wife's share in those profits (as well as those of the husband and his colleagues), (ii) there was "a greater degree of 'continuum'" than the husband had admitted and (iii) this was a case where the husband had taken the wife's undivided share for onward investment and the wife was therefore entitled to some of the resulting uplift, "albeit greatly discounted to reflect [the husband's] subsequent efforts".  The Judge found that "significant value in the shareholding is attributable to H's post-separation endeavour, and that the award to W must in fairness reflect that.  It is clear that this is not a situation where there has been only or even largely passive growth, which should be shared equally, but rather growth as a result of active and unmatched economic endeavour over a significant period of years". 

The Judge determined, therefore, that the wife's share in the current value of the husband's shareholding should be expressed as 20% of the whole, on the basis that 60% of the value represented post-separation accrual and the remaining 40% a matrimonial asset to be shared equally.  The 20% would be paid upon the sale of the company, which was envisaged to be within 4 years (with liberty to apply in relation to timing).  This meant that the wife received just short of 25% of the total asset pot, which the Judge then indicated was sufficient to meet her needs.


Prest v Prest [2015] EWCA 714
Background
The facts of this case will be familiar to most and will, therefore, not be rehearsed in detail in this summary.  In brief, the couple were married in 1993 and separated in 2008 with decree nisi pronounced on December 12, 2008. They had four teenage children. Following financial remedy proceedings in 2011, Moylan J found that the husband was worth approximately £37.5million. On November 16, 2011 the court issued the final order under the Matrimonial Causes Act 1973. It provided that:

(a) the husband was to pay a lump sum (by way of property transfer) to the wife of £17.5million; and

(b) pending the discharge of the lump sum, the husband was to pay periodical payments at the rate of 2% per annum on the amount outstanding in relation to the lump sum.

The order was designed to eventually achieve a clean break between the couple. Separate provision for periodical payments were made in respect to the children.

Judgment summons
On April 11, 2013 the wife issued a judgment summons under The Debtors Act 1869 ("the 1869 Act") s.5 alleging wilful non-payment of the periodical payments to a total sum (including interest) of £428,220. Under s.5 of the 1869 Act, a judgment creditor can apply to the court for the committal to prison of a judgment debtor, for a maximum period of 6 weeks, in respect of, among other things, a maintenance order.

The wife's judgment summons was listed for hearing on three occasions prior to the final hearing in July 2014. This was due to numerous attempts by the husband to adjourn due to medical issues. The hearing date was finally set for July, 28 and 29, 2014. The husband did not attend those hearings allegedly due to health reasons. However, as Moylan J pointed out, the medical reasons were simply not credible given that the father was abroad on holiday with the children. Moylan J stated "if he had been insufficiently well to attend court, I would have thought he might also not have been well enough to go on holiday to the USA for upwards of three weeks". The hearing proceeded.

Moylan J found that the husband was in wilful default in the sum of £360,200 and held that while the husband paid school fees and met some of the costs of running the former matrimonial home instead of making payments under the order, that could only be relied upon in mitigation and could not trigger a pound for pound discount in the calculation of what was due.

On July 29, 2014, Moylan J was satisfied that the husband had the means to pay, and imposed a penalty of 4 weeks imprisonment, suspended on condition that the husband pay the sum due within three months ending on October 28, 2014. It is against that determination that the husband appealed to the Court of Appeal.

The appeal
The appeal was heard on March 19, 2015 with judgment being given on July 7, 2015.

In brief, the husband submitted that the judge:

1) should have adjourned for further investigation of his medical condition;

2) had taken improper account of his previous findings about his financial situation reached on the civil standard of proof and applied an incorrect standard and burden of proof;

3) failed to give him credit for the outgoings he had discharged;

4) should not have proceeded with the committal proceedings while his application to vary the periodical payments order was extant; and

5) imposed too long a prison sentence and had no basis for concluding that he could pay £360,200 within three months.

MacFarlane LJ highlighted that the judgment summons process may result in the respondent serving a term of imprisonment. The court could not rely on findings made in the financial remedy proceedings because they had been made on the civil standard of proof. Instead the court had to be satisfied to the criminal standard of proof for which the following requirements must be satisfied:

"(a) The fact that the respondent has or has had, since the date of the order or judgment, the means to pay the sum due must be proved to the criminal standard of proof;

(b) The fact that the respondent has refused or neglected, or refuses or neglects, to pay the sum due, must also be proved to the criminal standard;

(c) The burden of proof is at all times on the applicant; and

(d) The respondent cannot be compelled to give evidence."

McFarlane LJ thus rejected each of the husband's six grounds of appeal as follows:

1. Moylan J's decision to refuse an adjournment, so as to further investigate the husband's ill-health, did not deny him a fair trial. McFarlane LJ considered that Moylan J had approached the matter properly, considered the material, heard oral submissions and allowed a renewal of the application late when fresh evidence became available. McFarlane LJ considered that it was, essentially, a case management decision for the judge.


2. The fact that the same judge had previously conducted a fact finding process as to the husband's finances (based on the civil standard of proof) did not create a real risk, or even a real perception of risk, that the judge would take improper account of those previous findings. McFarlane LJ stated that if there was a real and valid concern on the part of the H, then the point could have been raised at any stage between March 2013 and the final hearing in July 2014.  The point was not raised and McFarlane LJ concluded it was simply too late to argue this point.

3. McFarlane LJ found that Moylan J had set out five specific factors which drove him to be satisfied that he is sure that the H had the means to pay the sum due. McFarlane LJ found that it was simply not made out that Moylan J had failed to apply the correct burden of proof and/or relied upon matters previously found to the civil standard of proof.

4. There was no evidence that the wife had acquiesced or encouraged the husband to pay certain outgoings rather than honour his maintenance obligations under the order. McFarlane LJ found that "it cannot be acceptable for the husband persistently to fail to discharge his responsibility under a court order to make periodical payments, whilst at the same time choosing to make payments on his own terms in substantial sums".

5. The fact that the husband's application to vary the periodical payments order remained outstanding was not a factor that should have impeded the judge from proceeding with the judgment summons.

6. The four-week prison sentence was "unremarkable" and considered by McFarlane J as not excessive when viewed against a backdrop of a default payment of £320,000.

The Court of Appeal found that the H's appeal failed on each of the grounds of appeal. The appeal was dismissed and the outcome of the July 2014 hearing enforced. McFarlane LJ amended the order of 29 July 2014 to read that "[the committal order] shall not be executed and the warrant for arrest shall not be issued if [the husband] pays to the [wife] the sum of £360,200 by 4pm on Monday 28th September 2015".


JM v Secretary of State for Work and Pensions and Another (Child support: calculation of income) [2015] UKUT 323 (AAC)

Background
The mother is the parent with care.  The father is the non-resident parent. The case was in respect of the parties' youngest child, who was at the time of the appeal, aged 21.

The father paid 6% of his gross earnings in additional voluntary contributions (AVCs) during the parties' 18 year marriage.  After separation the father increased his AVCs to 25% of gross earnings.  The Child Support Agency made incorrect assessments of the father's statutory child maintenance liability for the parties' child by not fully deducting the AVCs.  The mother argued that the AVCs were unreasonably high and were a diversion of income.

The case was heard in the First-tier Tribunal in August 2014.

The mother's appeal to the Upper Tribunal on 10 June 2015
The Upper Tribunal upheld the First Tier Tribunal's decisions that the Child Support Agency had no discretion to (i) consider whether the AVCs were paid at a reasonable level, or (ii) take account of the fact that the payments were voluntary. Under the 2003 scheme pension contributions are fully deductible from gross earnings, except only that the relevant deduction is 75% where the pension is intended partly to provide capital to discharge a mortgage on the non-resident parent's home.  The AVC payments were deduced in full.

The child support case was closed with effect from 31 August 2012, as the child was 18. 

The Upper Tribunal noted that the mother could have applied to vary maintenance but she could not do so now as the case was closed.

Conclusion
Cases assessed under the 1993 and 2003 child maintenance schemes are being closed and gradually replaced by the 2012 Child Maintenance Scheme ("CMA"). This gradual replacement is due to be completed by 2017/18. Anyone under the old schemes will be invited to either (i) enter into a family-based arrangement, or (ii) apply to 2012 CMA scheme. 

The issues raised in this case are, therefore, going to become increasingly rare. However, it does highlight that under the 2003 scheme non-resident parents can make high level pension contributions that are deductible when assessing their child maintenance liability.  However, doing so could result in a variation application if the contributions are excessive based on diversion of income.


DN v HN [2014] EWHC 3435 (Fam)
The wife ("W") applied under Part 7 CPR 1998 for a mandatory interlocutory injunction to require the husband ("H") to pay £8.49million (plus interest and fees) to complete the purchase of a property.

Background
Financial remedy proceedings commenced in 2013 with one of the principal asserts being the former matrimonial home valued at approximately £55million.  H wanted to sell the home and W agreed on condition that H would fund the purchase of an alternative home for her and the children ("the Property").  The application before the court concerned the purchase of the Property.  W pleaded that an agreement was made in February 2014 which included provisions that the parties would purchase the Property, that H would pay £10million towards the purchase price, and the payment H made would be treated as an on account payment towards the settlement reached, or ordered, within the financial remedy proceedings. 

In November 2013, with H's knowledge and agreement, W made an offer to purchase a property in London for £16.7million.   There was further correspondence between the parties which led to W not proceeding with that proposed purchase.   In approximately late January 2014, W made an offer to purchase the Property for £16.25million.   On 30 January 2014, a memorandum of sale was drawn up reflecting what are called "the key terms" including in respect of the completion.   These terms included that H would pay £10million out of the funds released from the sale of a company towards the purchase price.  This formed a deposit of £1.6million, which would be paid on exchange of contracts, with the balance of £8.4million to be paid into an escrow account by the Respondent for the specific purpose of discharging the outstanding purchase price on completion.

In reliance on the authorisation made by H on 14 February 2014, the conveyancing solicitors exchanged contracts with the vendor's solicitors for the purchase of the Property and paid the deposit of £1.6million provided by H.   The completion of the property was due to take place initially on 5 August 2014 and subsequently on 1 August 2014. 

On 29 July 2014, H's solicitors sent an email asking for a copy of the completion statement and clarifying the figures required to complete.  The conveyancing solicitors replied by email on 30 July indicating that the sum required was £8.49million.  The letter made it clear that completion was set for the 1 August 2014 and asked for the sum of £8.49million to be transferred that day.

On 30 July 2014, H signed a guarantee in respect of the mortgage.  The parties agreed between them that the Property would be purchased in the wife's sole name rather than in joint names and the mortgage would be obtained in the W's name and guaranteed by H.

On 31 July 2014, H's solicitors sent a further email to the conveyancing solicitors stating "we are waiting to hear from [the wife's] solicitors as there has been some small complication which we hope will not be controversial."  The letter also stated "presuming matters are agreed and the order can be finalised ready for completion to take place tomorrow, please confirm that these monies can be sent from our client".

The reference to the "order" was to a draft order which was moving between H's and W's solicitors in respect of W's financial remedy claims.

Financial Remedy Proceedings
An FDR took place in June 2014 and W's claims were settled as set out in an exchange of letters between the solicitors ("the Xydhias Agreement").   The settlement included that H would pay W a lump sum of £33million with the sum of £10million paid in respect of the property purchase being part of that sum.

An issue arose as to the form of security to be provided for the balance of a lump sum to be paid.  Moylan J considered it clear from the exchange between the parties that both understood the issue at the agreement remained a binding agreement even if they could not agree the form of security, which would then be determined by the court.

H, as a result of this, would not provide the monies required for the completion of the purchase until the terms of the financial remedy order were agreed.  H was concerned that W might seek to renege from the Xydhias agreement. However, the court did not consider that H had any basis for this belief.

W submitted the application was brought pursuant to claims in contract and/or trust and not under the MCA 1973.   W submitted that the agreement made in February and the Xydhias agreement were distinct.   H did not accept that the agreement from February was exclusive to the overall financial remedy settlement.  H submitted that the remedy being sought was not open to W because she was seeking to enforce one element of a financial remedy agreement and such agreements were not amenable to enforcement under contract or trust law.

Judgment

Moylan J said, "the primary question [he] asked himself is whether the wife's application is an attempt by her to enforce one element of a financial remedy agreement made in the court of financial remedy proceedings or whether it is an application to enforce, what [he is] proposing to call, a distinct agreement.  If it is to be former then applying Edgar v Edgar [1981] WLR 1410 and Xydhias, it is an application which would be bound to fail because normal contractual principles do not apply to financial agreements made for the resolution or compromise of financial remedy claims, as set out in Xydhias."

Moylan J said that he must address whether a distinct agreement has been reached which was separate from the agreement to compromise W's financial remedy claims.  He came to the conclusion that the agreement made in February was a sufficiently distinct agreement because when it was reached there had been no compromise of W's financial remedy claims.   Moylan J did not consider that it was so linked to the process leading to the compromise of W's financial remedy claim that to enforce it as a contract would undermine the principle set out in Xydhias or would undermine the manner in which the parties sought to resolve financial remedy claims.

In the agreement in February the parties reached distinct terms under which it was agreed that H would supply the funds to enable W, first to exchange contracts and, subsequently, to complete the purchase of the property. 
Moylan J was satisfied that W would establish her rights to enforce the agreement at trial.

Moylan J said that he also had to turn to the issue of the least risk of injustice if it turned out that he was wrong in that assessment and remarked, "This requires me to balance the likely consequences if I do not make the sought and, conversely, if I do."

Moylan J explained that H had set out that there was a potential loss of £1.8m (in respect of capital gains tax on the former matrimonial home which he was to move into when the wife moved out) would reduce the parties' assets significantly and it was in neither of their interests.   Moylan J said that in his view "It is very likely, that if I do not make the order sought by W this would lead to the deposit of £1.6m being forfeited and to the other financial loses being incurred as referred to above."

Moylan J said that "[he] cannot conceive how it could be said to be an interest of this family to risk losing these sums out of their liquid resources.  In [his] view [he] would risk causing very substantial injustice if [he did] not make the order, because of the likely financial consequences for the wife and indeed for the parties collectively".

Conversely, Moylan J found that if completion took place there would be an asset that was purchased for just under £11m, which would form part of W's financial remedy claim.   Moylan J could not see that the H would suffer any financial prejudice or injustice if the order was made. Accordingly, it was ordered that H pay the sum required to complete the purchase, namely £8.49million plus interest and fees.

6 August 2015