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Finance and Divorce Update September 2017

Sue Brookes, Principal Associate with Mills & Reeve LLP analyses the news and case law relating to financial remedies and divorce during August 2017.










Sue Brookes, Principal Associate with Mills & Reeve LLP.

As usual, this month's update is divided into two parts: News in Brief and Case Law Update.

A. News in Brief

Mills v Mills to go to the Supreme Court
Back in February, the Court of Appeal allowed the wife's appeal against a refusal to increase the husband's monthly maintenance payments to her (whom he divorced over 15 years ago) from £1,100 per month to £1,441 per month to meet her basic needs. Following their divorce in 2002, a consent order had provided the wife with a capital sum and spousal maintenance of £1,199 per month.  In 2014, the husband had sought to discharge the maintenance or at least vary it downwards as the wife was in a position to increase her own income.  The wife applied to increase her maintenance, contending that she was unable to meet her basic needs, including housing, having lost her capital award as a result of financial mismanagement. 

The Supreme Court has granted permission to the husband to appeal on the single ground: whether, provision having already been made for the wife's housing costs in the capital settlement, the Court of Appeal erred in taking these into account when raising her periodical payments.


Owens v Owens to go to the Supreme Court
Mrs Owens has been granted permission to appeal to the Supreme Court in her much publicised defended divorce suit. 

The Court of Appeal upheld the first instance judgment of HHJ Tolson QC, with the President of the Family Division saying that the court could not interfere with the initial decision made.  Mrs Owens will argue that the court's emphasis on trying to find a respondent's behaviour is "unreasonable" is wrong. She argues that this "linguistic trap" ignores the fact that the statute does not require unreasonable behaviour but behaviour such that the petitioner cannot be reasonably be expected to live with the respondent.

Resolution has lodged written submissions in support of Mrs Owens' appeal and will be applying to intervene in the substantive hearing. 


Child maintenance application fee – updated guidance
The guidance relating to exemptions from payment of the child maintenance application fee for victims of domestic violence has been updated. The updated guidance now states that witnessing the abuse of one's child by a current or previous partner, or by a member of one's own or one's partner's family, is itself a form of domestic violence.  The guidance explains how it is decided whether a person is a victim of domestic violence or abuse and who the person applying for maintenance must have reported the violence or abuse to. For the updated guidance click here.


Appointment of Gwynneth Knowles QC and Jonathan Cohen QC to High Court Bench
With effect from 2nd October 2017, Gwynneth Knowles QC, currently an Upper Tribunal judge, will fill the gap on the Family Division High Court Bench left by Sir Peter Jackson's elevation to the Court of Appeal. She will be known as The Honourable Mrs Justice Gwynneth Knowles.

Gwynneth Knowles was called to the Bar in 1993 and took Silk in 2011. She was appointed as a fee-paid Tribunal Judge of the First-tier Tribunal, Health, Education and Social Care Chamber in 2007, as a salaried Judge of the Upper Tribunal, Administrative Appeals Chamber in 2014 and authorised to sit as a Deputy High Court Judge in 2016.

On 24 August 2017 it was announced that Jonathan Cohen QC has been appointed to be a Justice of the High Court with effect from 2 October 2017 consequential to the retirement of Sir Antony Edwards-Stuart.  He will be assigned to the Family Division. Jonathan Lionel Cohen QC, aged 66, will be known as The Honourable Mr Justice Cohen.

He was called to the Bar (L) in 1974 and took Silk in 1997. He was appointed as an Assistant Recorder in 1993, as a Recorder in 1997 and as a fee-paid Judge of the First-tier Tribunal, Health, Education and Social Care Chamber in 2000 and authorised to sit as a Deputy High Court Judge in 2005. 


B  Case Law Update
Joy-Morancho v Joy [2017] EWHC 2086 (Fam)
This is the latest round in a set of financial remedy proceedings which have been ongoing since the wife (W) initially commenced them in 2011. In addition to English proceedings, there have been separate proceedings in France, where W is living with the three children.

In August 2015, Sir Peter Singer heard what should have been the final hearing in W's financial remedy application (Joy v Joy-Morancho & Others (No. 3) [2015] EWHC 2507 (Fam)). He had ordered the husband (H) to pay W periodical payments of £10,000 per month to include any child maintenance (€3,600 per month) pursuant to orders made by the French court and rental payments of €2,200 per month which H had to pay on behalf of W. The maintenance was to be paid in advance and backdated to 1 November 2014.

In light of the judge's findings about H's financial position, he had taken the unusual step of adjourning W's capital and pension claims and provisionally listed a directions hearing for 26 May 2017 and a three day final hearing for 3 July 2017. He had also ordered H to provide a succinct summary of his capital and income position each April, so that W could ascertain H's finances and either bring forward the hearings or adjourn them as required.

Sir Peter had made very clear findings in 2015 about H, TB and NHT (a trust which H had established in the British Virgin Islands, the trustee of whom had been RFG, a Hong Kong based company of whom TB was a director). H had argued that he could only make modest payments to W and their children and nothing by way of capital because of his dire financial position. He argued that he had been permanently and irrevocably excluded from any potential future benefits from NHT and that NHT were pursuing him for a debt of £7million.

However, the judge had found that the position of H, NHT, TB and RFG had been "an elaborate charade, the stage management of which has been conducted ruthlessly and without regard to cost". The judge concluded that, when the time was ripe, TB would find a way to help H.  H would more likely than not secure employment with an NHT entity, which would enable him to maintain a very affluent lifestyle.

The judge had found that H would be able to earn at least £200,000 per year plus potential bonuses. He therefore awarded W £120,000 year, not with reference to her needs, but on a broad-brush basis as a reasonable sum for W to have to meet her outgoings, and without any element of capital adjustment.
The judge also made a costs order of £334,263 against H, which had not been paid. 

H had sought permission to appeal the quantum of the maintenance (but not the judge's findings that his debts were a charade). King LJ had refused permission in writing and refused to stay the maintenance order.

On 1 December 2015, only 3 months after the hearing, H applied to vary the periodical payments down to a nominal order, to backdate the variation and to remit any arrears which may remain.

Having filed forms E and following DJ MacGregor making directions (including a conditional stay of the periodical payments) in April 2016, no further steps were taken in the proceedings by either party until H stopped paying the rent and reduced the child maintenance to €500 per month, at which point W applied to enforce the original order. This coincided with the 2017 hearings, which the judge had previously provisionally listed.

Eventually hearing H's application to vary in July 2017, the judge dismissed it.
An application to vary was not another opportunity for H to appeal the original order or to seek to undermine the judge's original findings which had not been appealed. Following Garner v Garner [1992] 1 FLR 573, where an order has not been appealed, or was made by consent, the presumption must be that the order was correct when made and there will usually be no justification for varying it unless there has been a change in circumstances.

The only changes to H's financial position since August 2015 were that he had got a job in November 2015 (shortly before he applied to vary) and he was now earning €120,000 per year working part time to tie in with his child care commitments and his debt had increased by a further €300,000.

H was living hand to mouth, reliant upon loans from a dwindling list of supporters. However, that was no different from his position at the original hearing when he already had personal debts of €154,000 ignoring the £7million he was said to owe NHT and the hundreds of thousands he owed in legal fees.
The judge had not read or heard anything in H's evidence to dissuade him from his original unchallenged, and now unchallengeable, conclusions about H. H had been far from transparent in his disclosure and the judge did not accept H's various assertions.

The judge remained of the view that H's apparent difficulties would be resolved at some point. Due to the exceptional circumstances of this case, H's apparent inability to pay the sum ordered was not a consideration which swayed his decision either in 2015 or 2017.

Although W had not supplied any form of budget to demonstrate her needs or reasonable requirements, there is no rule that a budget is a pre-requisite to an order. A broad-brush approach can be used to balance the financial needs of both parties in light of the available resources and the standard of living before the marriage broke down.

In response to concerns about abbreviating the variation application, referring to Crossley v Crossley [2007] EWCA Civ 1491, S v S (Arbitral Award: Approval) [2014] EWHC 7 (Fam), Wyatt v Vince [2015] UKSC 14 and Morris v Morris [2016] EWCA Civ 812 the judge highlighted the need to further the overriding objective by promptly identifying the issues, isolating those which need full investigation and tailoring the procedure accordingly.

A variation application requires the court to have regard to all the circumstances of the cases, but this does not require the court to undertake the section 25 exercise all over again. To require the judge to do so would be contrary to the overriding objective and the requirement for cases to be dealt with proportionately.

Of course a finding against H does not mean that W will actually get her money. The judge therefore acknowledged that it must make sense for W to accept a much lesser sum and for H and TB to find what she would be prepared to accept. TB and H could then "dismantle the cumbersome and no doubt the distracting protective façade which has been erected" and move on.


Gaspar v Zaleski & Ors [2017] EWHC 1770 (Ch)
The wife (W) is Belgian and the husband (H) is British. They were married in Belgium in 1996 under the Belgian matrimonial regime of "separation des biens" or separation of property, meaning any property bought in one person's name belongs wholly to that individual and any property bought in joint names belongs to both equally. There is no system of discretionary property adjustment in Belgium, as there is under the Matrimonial Causes Act 1973 in England and Wales.

The parties separated in 2011 and they were divorced in Belgium in 2012.

In June 2012, H tried to revoke a number of gifts he had made to W, which is allowed in Belgium under certain circumstances. The gifts included W's rights in a property in England said to be given to her pursuant to a trust deed entered into in 2008 (the deed).

W did not accept H's revocation of the gifts, so H commenced proceedings in Belgium to claim restitution. The court found that the gifts were not the sort of gifts that could be revoked. H appealed and the appeal court ultimately allowed the appeal on some of the gifts but declined to make a ruling in relation to the English property share pending a determination by the English court as to W's beneficial interest.

The Judge Elizabeth Cooke (the judge) considered three issues.

What was the effect of the trust deed?
The deed stated that H's sister and brother-in-law (who owned the legal title) held the property "on trust for themselves and H and W as tenants in common in equal shares". It then went on to say that, upon a future sale of the property, the net proceeds of sale would be used to repay the mortgage, repay £450,000 owed to H and W and thereafter to each party in equal shares.

W argued the deed created four shares in the property as tenants in common. H argued that it created two shares because his sister and brother-in-law were "party 1" and H and W were "party 2" and the deed was intended to regulate the relationship between the two couples and not the four individuals. He therefore argued that H and W's share was held on a sub-trust and governed by a separate agreement between H and W, which in turn formed a separate common intention constructive trust.

The judge concluded that the deed was not well drafted as the wording was ambiguous. However, as W and H were subject to the "separation des biens" regime, if they had not intended to own the property jointly they would have said so explicitly in the deed. For there to be two sub-trusts was needlessly complicated and unlikely to have been anyone's intention.

It was also extraordinary to suggest that a common intention constructive trust could take effect in relation to a property at the same moment as an express trust, as this would "drive a heavy goods vehicle through the law set out in Goodman v Gallant [1986] Fam 106 that the express trust is determinative unless changed later".

W was therefore entitled to half the sum of £450,000 and a further one quarter of the net proceeds under the terms of the deed.

The nature of a prior agreement reached by H and W
As the 2008 trust deed set out the beneficial interests of the parties, that was the end of the matter unless the deed had been subsequently varied by further deed, the operation of a common intention constructive trust or proprietary estoppel, and the nature of the parties' prior agreement was irrelevant on that basis. However, in case the judge was wrong on her finding in relation to the trust, she went on to consider the nature of H and W's prior agreement.

As the property was not the family home and it was purchased as an investment, the starting point is not that equity follows the law as per Stack v Dowden [2007] UKHL 17 and there was no presumption of equality Laskar v Laskar [2008] EWCA Civ 347. It was common ground that there was an express agreement about the beneficial interest, but there were two possibilities as to what that agreement was based on each party's respective case, the judge did not have to look at the whole course of dealing or the multiple factors including the nature of their relationship and she did not have to impute any intention. She simply had to decide which party was telling the truth. 

H argued that they had agreed that H would pay £450,000 towards the purchase of the property without W initially contributing anything but that she would reimburse him from the sale proceeds of some shares in due course and she would receive an interest in the property if she reimbursed him.

W argued that because they were married under the "separation des biens" regime, and because she had given up work to look after the children, they had agreed that H would buy some assets in joint names so she had some financial security and in order to recognise the contribution she was making to the family.

The judge preferred W's evidence and rejected H's arguments. It was inconceivable that H would have entered into the deed if he had not intended to own in equal shares with W. Furthermore, because only gifts given purely as gifts could be revoked under Belgian law, H had argued within the Belgian proceedings that W's share in the property had been a gift made in the spirit of giving and that no consideration past or future was expected. It was now therefore inconsistent for him to argue to the contrary and try to suggest that W would only have had a share if she had made a contribution.

Did H have a claim for proprietary estoppel as a result of actions after the property was purchased?

H also argued that, even if W had initially held a 25% share, she had later represented that she no longer had any interest in the property and H relied on that to his detriment by buying out his sister and brother-in-law's shares without any contribution from W.

The judge accepted that H buying out the other share would have been a sufficient detriment to justify proprietary estoppel. However, there was no clear evidence that W had renounced her share in the property and such a representation must be found before proprietary estoppel could be said to arise.

Equitable accounting
Having found that W was entitled to half of the £450,000 and a one quarter share of the proceeds, she acknowledged there may be some equitable accounting to be done. She therefore ordered an account to be taken by a Master to take into account any money spent by H and not W on the upkeep on the property as well as any money received by H and not W by way of rent from the tenants.