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Home > Articles > 2016 archive

Finance and Divorce Update November 2016

Claire Molyneux, Senior Associate and Naomi Shelton, Associate, both of Mills & Reeve LLP, analyse the news and case law relating to financial remedies and divorce during October 2016.










Claire Molyneux, Senior Associate and Naomi Shelton, Associate, Mills & Reeve LLP   

As usual, this month's update is divided into two parts:

A. News in brief and
B. Case Law Update


A. News in brief

Government opts in to replacement for Brussels IIa Regulation
In a written statement to the House of Commons, Sir Oliver Heald, Minister of State for Courts and Justice, noted that Brussels IIa has applied since 1 March 2005 and is the main instrument for families involved in cross-border divorce or children proceedings.  He said that notwithstanding the Brexit vote, it would be in the interests of the UK to opt into the European Commission's proposal to replace Brussels IIa.  There was a concern identified that by way of not opting in, the UK risked the existing Regulation not applying due to it being deemed inoperable and an acknowledgement that even after exit, the Regulation will continue to affect UK citizens and it would be better to be involved in the negotiations than sit on the outside.  For the full text of the statement click here.


Couple challenge government's ban on different-sex civil partnerships
The Court of Appeal has heard an appeal from a London couple against a judgment dismissing their application for judicial review of the Government's ban on different-sex civil partnerships. (Judgment is awaited).


Child maintenance debt
Nationally, unpaid child maintenance stands at close to £4billion.  Gingerbread (the charity for single-parent families) has published statistics revealing those areas with the highest level of child maintenance remaining outstanding.  The charity is calling on MPs across the country to back its campaign to improve the child maintenance system, and ask the government to take action to collect unpaid maintenance.


New Local Direction at the Financial Remedies Unit
The eFiling local direction has been introduced as part of a pilot scheme which will be reviewed in April 2017.  You can read it here.


Bankrupt cannot be compelled to draw pension to repay debts
The Court of Appeal handed down its long-awaited judgment in Horton (as Trustee in Bankruptcy of Michael Gerard Henry) v Henry [2016] EWCA Civ 989.  The High Court had held that the court did not have the power to require Mr Henry (or indeed any bankrupt) to elect to draw down his pension in any particular way within the context of an application by a trustee in bankruptcy (trustee) for an income payments order ("IPO") under s.310 Insolvency Act 1986 ("IA 1986").  This was upheld by the Court of Appeal.  Many IPO applications issued in light of Raithatha v Williamson [2012] EWHC 909 (Ch), [2012] All ER (D) 57 (Apr) had been stayed pending the appeal in Horton. In dismissing Mr Horton's appeal, the Court of Appeal confirmed that a trustee may not apply for an "IPO" in circumstances solely where the bankrupt has an uncrystallised pension but has decided not to make any election, which had generally been thought to be the position before Raithatha because of the policy reasons behind s.11 Welfare Reform and Pensions Act 1999 ("WRPA 1999"). The decision is likely to put off creditors from petitioning for a debtor's bankruptcy where they are aware that the debtor has valuable pension policies, is entitled to make an election, and has little or no other assets that would form part of the bankruptcy estate. Had the appeal been allowed, that may have been an option available to them.


Practitioners reminded of duties to litigants in person
Mr Justice Peter Jackson has reminded practitioners of their obligations to litigants in person when preparing for trial.  Re B (Litigants In Person: Timely Service of Documents) [2016] EWHC 2365 (Fam) arose from a final hearing in a child abduction case where counsel for the father served legal documents comprising counsel's position statement (14 pages) and four law reports (100 pages) at the door of the court on the mother, a non-English-speaking litigant in person. Whilst Peter Jackson J acknowledged that the position statement was of real assistance to the court, time was wasted before the hearing while the mother studied the documents with the help of the court-appointed interpreter.


B. Case Law Update
Thum v Thum  [2016] EWHC 2634 (Fam) (Mr Justice Mostyn) (21 October 2016)
This case centres around a wife ("W") who issued her divorce petition on 26 October 2015 but took no steps to serve it until almost three months later, on 19 January 2016.  "Perfect" service on the husband ("H") was then not achieved until 27 February 2016, being four months and one day after issue. 

As H was living in Germany, W had sent the papers to the Foreign Process Section for service under the EU Service Regulation (No 1393/2007) on 19 January 2016 but gave an incorrect address for H.  W had provided H's office address; his home address was next door.  Because there were a number of units at the office address, and the name of H's business had not been included, the papers had been returned to W marked "address unknown".  Service was eventually achieved just over a month later. 

On 19 January 2016, H issued his own German petition which he took the correct steps to serve on W on 3 March 2016.  H also applied to dismiss or stay W's English petition.  During the hearing, he accepted that, on 26 October 2015, the English court had become seised of the proceedings when W's petition was issued; in order to succeed in getting the stay he needed to demonstrate that the court had become "unseised" by showing that W subsequently did not take the steps required of her to effect service. 

The question before Mr Justice Mostyn was a simple one: what are the service requirements for a divorce petition under English law? 

Noting the "curious" position that there is no time limit within which to serve the petition under r.7.8 Family Procedure Rules 2010 ("FPR 2010") and that the family law system has never been designed to promote service within a certain timeframe, Mostyn J swiftly concluded that a strategic petition, one filed and left to hibernate for years whilst the couple carried on their marriage, would likely be struck out as an abuse of process under r.4.4(1)(b) or for disclosing no reasonable grounds under r.4.4(1)(a) FPR 2010.  The statement, confirmed by a declaration of truth, that the marriage had irretrievably broken down would be plainly dishonest and allegations of adultery and behaviour would fall foul of s.2(2) or s.2(3) Matrimonial Causes Act 1973 ("MCA 1973").

But, subject to that, Mostyn J considered, rightly or wrongly, that the only formal requirement imposed by the law on a petitioner for divorce is to serve the petition at some unspecified point in the future.  "Forthwith" or "as soon as practicable" could not be read into r.7.8 FPR 2010; indeed, the furthest Mostyn J was prepared to go was to say that a requirement to act reasonably and promptly should be inferred and that "promptitude should be informed in a broad way by the (extendable) time limits in r.7.5 Civil Procedure Rules 1998". 

Noting that the address error (if indeed it was an error), was a minor one, Mostyn J said it could not be demonstrated that W had failed to take the steps required of her to effect service under the EU Service Regulation.  He was content that W had acted with "reasonable promptitude" in perfectly serving the petition four months and a day after issue and that the English court had been seised, and had at all times remained seised, of her petition.  H's application was dismissed, with the consequence that the German court must now decline jurisdiction. 

Comment
Although helpful in clarifying the service requirements under the rules, practitioners should remain wary about deliberately delaying service of an issued divorce petition where jurisdictional factors are at play.  As Mostyn J did confirm, there remains a requirement to act 'reasonably and promptly'.


Thakkar v Thakkar [2016] EWHC 2488 (Fam) (Mr Justice Moor) (8 June 2016)
This case concerned a contested application by the respondent to the divorce to make the decree nisi absolute.  Mr Justice Moor described this case as "exceptional." 

The wife ("W") alleged that the husband ("H") was a billionaire who ran a group of companies (in the British Virgin Islands) for his own benefit, and, insofar as the assets of those companies were held by other entities or individuals, she said they were held on H's behalf.  H denied this.  His Form E declared that he had net assets of less than £500,000 and that the group of companies were held by his mother and sister.

W petitioned for divorce on 27 June 2014 following the couple's separation on 27 February 2013.  Her solicitors were keen, from the beginning, to secure an undertaking from H that he would not apply for decree absolute until the finances had been determined by the court.   W was clear that she had no intention of applying herself until the finances were settled.  On 20 August 2014, H's solicitors indicated that H had no intention "at present" of applying for decree absolute.  On 24 March 2015, H gave an undertaking to provide 14 days' notice of his application for decree absolute, as well as a copy of his application and the draft statement on which he intended to rely.  Decree nisi was pronounced on 30 July 2015.  With the finance proceedings still ongoing, H applied for decree absolute on 23 December 2015, his application was contested by W.

Mr Justice Moor examined the provisions of s.9(2) MCA 1973 which states:

"Where a decree of divorce has been granted and no application for it to be made absolute has been made by the party to whom it was granted, then, at any time after the expiration of three months from the earliest date on which that party could have made such an application, the party against whom it was granted may make an application to the court, and on that application the court may exercise any of the powers mentioned in paragraphs (a) to (d) of subsection (1) above."

The powers referred to in paragraphs (a) to (d) simply say that the court can make a decree absolute or it can rescind the decree or it can require further enquiry or otherwise deal as it thinks fit.

The judge went on to apply the test set out by Lady Justice Butler-Sloss in England v England [1980] 10 Fam Law 86 where she said:

"Consequently one starts with this position, that the husband has the right to a decree absolute after the appropriate period following decree nisi and that period has now elapsed.  In the normal course of events he would be able to obtain the decree absolute unless the wife is able to show special circumstances to defer it.  At the end of the day it is an exercise of the discretion of the trial judge, but that exercise of discretion weights the granting of the decree absolute against the special circumstances very heavily in favour of the grant.  It is not a balancing exercise in the ordinary sense."

W submitted that there were indeed special circumstances to defer the normal course of events and that, whilst she could not say to what extent, she could say that she would be prejudiced if decree absolute were granted now. 

Moor J was persuaded by W's argument that there were special circumstances emphasising the presence of offshore trust structures and the inevitable issues surrounding enforcement where assets are overseas.  He commented that it can make a very real difference, particularly in offshore jurisdictions, whether a litigant is a wife or a former wife.  He outlined that, as a trial judge being presented with questions surrounding H's interest in the offshore structures, he could not determine the truth and no judge would be able to do so until they had considered the matter in very great detail and, almost certainly, heard significant oral evidence from the main participants.  As such, practical evidential restrictions prevented him from making any findings of fact at this stage of the proceedings.

He recorded his considerable sympathy for a party who comes along and says, "you cannot determine at this interim stage the factual matrix behind this case, so I cannot tell you the exact prejudice I would face by pronouncement of decree absolute".  He did not agree with H that the court needed to be satisfied of the "exact" prejudice before being able to defer the grant of decree absolute.  Rather, the test to be applied is of the presence of "special circumstances".  Distinguishing the cases of Re G (decree absolute: prejudice) [2002] EWHC 2834 and Dart v Dart [1996] 2 FLR 286, Moor J dismissed H's application, being satisfied that special circumstances existed that were sufficient to override the otherwise strong presumption in favour of ending the marriage.

Furthermore, Mr Justice Moor ordered H to pay W's costs of the application on the standard basis, disregarding H's argument that the costs of the application should be determined at a later hearing (and on the basis of W being able to prove her allegations as to H's financial interests).


Parkinson v Daley [2016] EWFC B78 (HHJ Rowland) (19 October 2016)
This case concerned an application by the wife ("W") for the committal of her former husband ("H") to prison for failure to file and serve his completed Form E.  H had failed to comply with the court's directions and to attend both the First Appointment and adjourned First Appointment.

Despite being satisfied to the criminal standard that H was in contempt of court, the judge (prompted in part by H's absence from the hearing) gave him one last chance to comply with the court.  A committal order was made for three months' imprisonment, suspended for 14 days following personal service of the order upon him. 

The judge noted that the powers of a circuit judge, set out in the Family Court (Contempt of Court) (Powers) Regulations 2014, are to sentence to a maximum of two years' imprisonment or up to a level 5 fine.


Roocroft v Ball [2016] EWCA Civ 1009 (Lord Justice Elias, Lord Justice Kitchin and Lady Justice King) (14 October 2016)
Ms Roocroft (the Appellant ("A")) and Ms Ainscow were in a same sex relationship for a number of years before entering into a civil partnership in December 2008.  Ms Ainscow was the breadwinner.  She was a successful businesswoman with commercial interests in the property investment and development industry.  She paid for the luxurious lifestyle that the couple enjoyed.  A was notionally employed by Ms Ainscow but took no day-to-day role in the company. The "salary" paid by the company represented a personal allowance of £2,300 per month and was paid from 1999 until the couple separated ten years later.

Between July 2005 and April 2009 the couple underwent what was, ultimately, unsuccessful fertility and IVF treatment in both the UK and abroad. The couple separated in September 2009.  A moved out of the matrimonial home in October 2009 and her "employment" was terminated.  In August 2010 the civil partnership was dissolved.

In the immediate aftermath of the separation (and during the proceedings) feelings inevitably ran high. There was however a rapprochement prior to Ms Ainscow's death in September 2013 to the extent that the couple had resumed their friendship and A told the court that Ms Ainscow had once again provided financial assistance to her. This was disputed by Ms Ball (the Respondent ("R")), Ms Ainscow's personal representative. 

Following their separation (being years previous to Ms Ainscrow's death) and at a time when neither party had instructed legal representatives, Ms Ainscow made A an offer to settle the financial arrangements.  She proposed to give a lump sum of £200,000 to A together with maintenance of £35,000 a year for four years.  A, without the benefit of legal advice, refused the offer, saying that she had no way of knowing whether the offer made was fair.  Accordingly, on 5 December 2009 A issued her petition to dissolve the civil partnership. followed on 7 July 2010, by an application for financial remedy and maintenance pending suit.   A sought £4,000 a month (including legal costs) in interim maintenance. 

In her statement filed in response to the MPS claim, Ms Ainscow disclosed that her net capital assets amounted to £628,917, she had a gross income of £55,312 a year and a pension with a CETV of £250,000.   In response, A asserted that Ms Ainscow was a woman of considerable wealth and made reference to her inclusion in the 2009 "Times Rich List" as having wealth of "£30million +".  Ms Ainscow was ordered to pay A £1,250 a month in interim maintenance with no provision for legal costs. A appealed. 

In the meantime, negotiations continued between A and Ms Ainscow and led, on 26 November 2010, to Ms Ainscow's solicitors writing to the court to say that the parties had reached an agreement and were seeking an order by consent.  The terms of the proposed order were that Ms Ainscow would pay a lump sum of £162,000 to A in instalments and periodical payments of £18,050 p.a. for two years, with a clean break thereafter.  The statement of information showed Ms Ainscow's gross income to be £55,312 p.a. with net assets of £766,000 and pension assets of £285,000. 

When the draft consent order was put before the court, the judge had a number of reservations about the proposed order, including that the draft order was silent as to the outstanding MPS appeal.  More importantly, the judge was concerned in relation to what "appeared to be the relatively modest nature of this proposed award" in circumstances where he was aware that it had been central to A's case that Ms Ainscow was a wealthy woman. The judge was also conscious that he was being asked to approve this consent order when A was no longer professionally represented.

In response, on 1 December 2010, Ms Ainscow's solicitors wrote to the court enclosing an amended draft order with a letter saying that they believed that, whilst A continued to act in person, she had sought advice on the agreement.  The letter said that both parties were anxious to conclude matters.  A also wrote to the court.  However, this letter, whilst written in the first person as if from A and signed by her, had been drafted by the solicitors acting for the late Ms Ainscow.  The letter confirmed that A was aware that she could seek independent legal advice on the terms of the order and that she had "had legal advice on the content of the documentation".  She too, the letter said, wished to conclude matters.

The order was approved and sealed by the judge on 1 December 2010.  On 6 December 2011 Ms Ainscow signed off accounts for the year ending 30 June 2010, the draft of which had not been disclosed in the proceedings.  A contended that these showed shareholder funds of £5.5million and an annual salary for Ms Ainscow of £150,000. R disputed this.

Following Ms Ainscow's death, R obtained the Letters of Administration.  On 1 May 2014, A issued an application to set aside the consent order on the basis of material non-disclosure at the time of the making of the order.

R sought to have A's application struck out and, on 11 July 2014. This was successfully achieved at an abbreviated hearing with an order dismissing A's claim, refusing her permission to appeal and ordering her to pay R's costs.  The judge, His Honour Judge Barnett, said that A's case had no merit and that whilst there "had certainly not been full disclosure", mere non-disclosure was insufficient.  The non-disclosure had to be material. 

A's application for permission to appeal on the papers was refused on 18 September 2014. However, by the time the case came before Lady Justice Black on 30 January 2015 for an oral renewal of A's application for permission to appeal, things were rather different.  The Supreme Court was about to give judgment in Wyatt v Vince (Nos 1 and 2) [2015] 1 WLR 1228, Sharland v Sharland [2015] UKSC 60 and Gohil v Gohil [2015] UKSC 61.  A was given permission to appeal. 

Her appeal was centred on the following grounds:

• That the judge had been wrong in law and on the facts to summarily dismiss her application;
• That the judge had failed to apply the correct test of materiality; and
• That the judge had misdirected himself.

R submitted that the three Supreme Court judgments had no impact on the case, that the judge had been entitled to conduct an "abbreviated hearing" and that A's delay in issuing proceedings entitled the judge to summarily dismiss the application. 

The Court of Appeal unanimously allowed A's appeal.  The judge had indeed erred in summarily dismissing the application.  The hearing which had taken place was not an "abbreviated" hearing but had had all the hallmarks of a summary judgment, a method of disposal which simply was not open to him to take.  In any event, a true abbreviated hearing could only have taken place against the backdrop of factors identified in Sharland and Gohil. 

Whilst the judge had correctly held that he did have jurisdiction to strike out the claim, the Court of Appeal confirmed that the test he had applied (being "no reasonable prospect of success") was wrong and it was clear that this case was not one where a strike out claim could be made out.

The judge had also been wrong not to make findings of fact as to the non-disclosure.  In approaching the case by taking A's submissions at their highest, he had failed to "place the necessary building blocks prior to a consideration of materiality" (i.e. he had not identified the fact and extent of disclosure).  Without that information, it was impossible for the court to determine whether, with the benefit of full disclosure, the outcome would have been substantially the same. 

Finally, the judge had failed to address the issue of materiality against a finding of whether the non-disclosure was deliberate or inadvertent, with the consequent failure to consider the proper evidential approach to ascertaining whether the outcome would have been substantially different absent the non-disclosure.  Instead, the judge had peremptorily dismissed any question of the non-disclosure having been material on the basis that A had agreed the order knowing there had been non-disclosure and in doing so fell into the trap of exonerating non-disclosure on Ms Ainscow's part. 


Al-Baker v Al-Baker (No 2) [2016] EWHC 2510 (Fam) (Mr Nicholas Cusworth QC sitting as a Deputy High Court Judge) (12 October 2016)
The couple had been married for 46 years. The husband ("H"), an Iraqi national, was now 76.  The wife ("W"), now 71, had been born in China.  They had married in Japan in 1969 and had separated in 2014.  W held both Japanese and Portuguese passports and was entitled to apply for British naturalisation.  H also held Portuguese and British passports.  There were three adult children. 

The family had lived an international life, enjoying a high standard of living.  After marrying, the couple had moved to Kuwait where H worked.  In 1987, they moved to London and then, in 1994, they moved to Portugal.  However, they retained their London home and successfully applied for indefinite leave to remain in the UK. 

W issued her divorce petition and Form A in England in January 2015.  H filed his Acknowledgement of Service contesting jurisdiction, relying on the parties' habitual residence in Portugal and the lack of W's domicile in the UK.  He asserted that only the Portuguese courts had jurisdiction.  It quickly transpired that H had issued his own divorce in Portugal, and with jurisdiction being an issue, the Portuguese proceedings were eventually stayed pending a decision by the English courts.  W applied for maintenance pending suit. 

Matters took a dramatic turn in July 2015 when H's solicitors served W with a Talaq, notwithstanding both sets of European proceedings.  The document stated that H had divorced W by way of Talaq on 20 March 2015 and that the divorce had been confirmed by a judge of the Sharia court in Sharjah, United Arab Emirates.  The period of Iddah had expired meaning the couple were divorced. 

At an interim hearing, Mr Justice Mostyn ordered H to pay W £35,900 per month interim maintenance, £13,333 per month in legal costs and £123,288 to clear her legal fees debt.  W was also given permission to pursue a Part III Matrimonial and Family Proceedings Act 1984 ("MFPA 1984") application and shortly afterwards also obtained a worldwide freezing order for £125 million and various enforcement orders. 

As the proceedings continued, H failed to comply with Mostyn J's order (arrears eventually totalled £740,000) and did not provide financial disclosure.  He dis-instructed his English solicitors, leaving only the Portuguese solicitors representing him, and although they pleaded "a willingness to negotiate", they only provided witness statements which "made selective self-serving assertions designed to obstruct the court getting to the truth of matters".  W applied for a revised timetable to trial with a penal notice attached. H instructed his Portuguese solicitors to write directly to the Royal Courts of Justice setting out their client's objections to this course of action.  W made a subsequent application seeking to abbreviate the final hearing, owing to H's continued non-compliance.  An unless order was made.

Meanwhile, in Portugal, W's Portuguese solicitors sought the recognition and enforcement of the freezing order.  H contested this and, whereas he had been conspicuously absent from the English proceedings, he was and is heavily engaged in the Portuguese proceedings.  So far, the Portuguese courts have upheld the enforcement of the order. 

The parties' sons also filed a "third party opposition" claim in the Portuguese proceedings asserting that their father had gifted them various shares which were now subject to the freezing order.  That did not proceed, and Mr Nicholas Cusworth QC (sitting as a deputy High Court judge) continued to treat those shares as H's given the timing of the alleged transfer and the fact that the claim was being made in Portugal and not in England.  Accordingly, it was left to the judge to deal with the trial of W's Part III claim.  H did not attend nor was he represented.  None of the children (nor any other family members) indicated any formal intention to intervene and none of them attended or made representations. 

The judge first looked at the law regarding the drawing of adverse inferences in cases of non-disclosure.  In particular, he referred to NG v SG (Appeal: Non-Disclosure) [2011] EWHC 3270 (Fam) and US v SR [2014] EWHC 175 (Fam)

He said:

"So, it seems to me that in this case I must seek to apply these principles to the determination of what the matrimonial assets can properly be found to be, in circumstances where, despite his manifest engagement with and manipulation of the proceedings in Portugal, this husband has chosen to file a regular stream of statements into these proceedings challenging parts of what the wife has said about his assets, but has never sought to set out in a clear and coherent way his own account of what he owns, still less attach any credible evidence of the value of his wealth."

He confirmed that just because the claim was made under Part III as opposed to MCA 1973, that would make no appreciable difference to the outcome.  This was particularly so given the circumstances here, where H had acted unilaterally, in the face of two sets of European divorce proceedings. 

He then turned to computation.  W's asset schedule totalled £286,162,58.  The vast majority of the assets were H's business interests (£255,171,478 after tax).  Despite the lack of H's Form E, the judge did not slavishly adopt the valuations and business shares put forward by W.  The court had to be mindful, he said, of the specific assertions made by H in relation to the size of shareholdings (which sometimes had been corroborated) and so the judge looked at each asset in turn.  Highlighting the very difficult task of assessing the couple's wealth in these circumstances, and with no criticism of W in her analysis, the judge calculated the overall asset pot at £129,595,687.

It was beyond argument that, after a 46 year marriage, during which time all the available funds had been built up, W's claim amounted to 50%.  She was therefore awarded a lump sum £64,797,844; a figure Mr Cusworth QC was satisfied that, on the basis of the information before him, was "in the right bracket for an award at the conclusion of this marriage".  After deducting the existing equity in three properties, plus the sums owed under Mostyn J's order, W's revised lump sum was £61,559,339. 


AB v CD [2016] EWHC 2482 (Fam) (11 October 2016)
This case was a costs application made by a husband ("H"), following a successful application to set aside a consent order made in 2012 (see AB v CD [2016] EWHC 10 (Fam)). 

H sought costs on an indemnity basis with an immediate substantial payment on account. 

To recap, the court had found that the wife ("W") had failed to disclose the existence of a substantial injection of cash from an external investor into the fledging technology company she had incorporated prior to the marriage.  There had been no hesitation in finding that non-disclosure to be material. 

The combined bill of costs was just short of £1.32 million, "an astonishing figure" after a very short marriage of little more than two years.  H's costs stood at £841,700. 

Whilst there had been attempts to resolve the dispute, W had not accepted H's offers (the most recent being that H would accept £450,000 towards his costs) and H had not accepted W's offer (W had offered £50,000 on the basis that H's own litigation misconduct mitigated his position substantially).  H contended that the starting point was whether he had "won or lost" his application and he had undoubtedly succeeded in setting aside the consent order.  He buttressed that by highlighting the extent of W's non-disclosure and, in particular, her failure to disclose the true state of affairs once H had started to make enquiries. 

W submitted that H's aim had been to destroy her financially and reputationally and that the costs order sought was "savage".  She pointed to the manner in which H had waged this "crusade" or "campaign", which, she said, had been entirely disproportionate and heavy-handed.  The repeated and consistent reference to "fraud" had been deliberately made, with H fully aware of the commercial consequences for W if that charge were to be made out.  The irony was that W was now in the position of severing her connection with the very company they had been arguing over, having been forced to liquidate her founder's shareholding as a result of pressing debt.  She had been unable to afford legal representation throughout (unlike H) and had had to represent herself at the final hearing. 

Although sensitive to W's position, Mrs Justice Roberts found that W's action in refusing to provide clarity and proper disclosure to H in response to his enquiries was a clear dereliction of her ongoing duty of disclosure in the context of the matrimonial proceedings.  W was absolved of any deliberate attempt to mislead H in the disclosure she made in her Form E.  Nevertheless, Roberts J found that "as H clung tenaciously to his enquiries, W's responses became less helpful to the point of being thoroughly misleading".  Most of the current costs could, and should she said, have been avoided by a clear and transparent response from W at the outset. 

However, Her Ladyship considered that H could not go uncriticised.  Crucially, he had disclosed confidential information, including part of W's Form E, to a journalist.  Roberts J was entirely persuaded that his intent was not innocent.  Rather, it had been spiteful and designed to harm W's reputation and standing.  Her Ladyship considered that it had been likely to be the forerunner to a "smear" piece about W in the national press.  And whilst H's course of conduct did not excuse W's failure to disclose relevant information at the early stages of his enquiry, Roberts J was satisfied that it went some way to explain her and the board's unwillingness to engage with the process and why they had misgivings about disclosing highly sensitive commercial information into the litigation arena.  H had, by his own actions, been responsible for much of the climate of hostility which existed.  He had also unreasonably pursued allegations of fraud against W.  Both had failed to properly negotiate. 
Roberts J bore in mind the fact that she had never found W's non-disclosure to be fraudulent, although it had been both material and a breach of her obligation to provide full, frank and complete disclosure of all matters. She had accepted W's subjective belief in respect of its relevance to the valuation of the shares in the company.  However, W's concerns about the potential for H to leak information could not, and did not she said, justify the manner in which a series of misleading statements were made to H, both in correspondence and in documentary evidence.  H's success in his application was a critical factor but his own litigation misconduct justified a discount to be applied to the costs award.  

Taking into account H's litigation misconduct, W's success in resisting findings of fraud and that she had made an early and sensible offer to settle, Roberts J awarded H 50% of his costs of the set aside application on an indemnity basis.  To do otherwise, she said, would be to penalise H unfairly and give too little weight to W's misconduct.  Enforcement of the order was stayed until the conclusion of the rehearing of the financial remedy proceedings (due to be heard this month).

7 November 2016