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MG v GM [2022] EWFC 8

A judgment determining an application for Maintenance Pending Suit and a Legal Services Payment Order, tried on the basis of submissions in the absence of full financial disclosure.

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A decision of Mr Justice Peel, determining an application for Maintenance Pending Suit and a Legal Services Payment Order made by a W in circumstances where jurisdiction was disputed and so Forms E had not been exchanged, or required.

Background

H is a citizen of Countries A, B and C, and W is a citizen of Countries B and D. The parties met in 2016, married in London in 2017, and have two children aged 3 and 1 (who are citizens of three Countries, including the United Kingdom). The parties lived in London until February 2021 before moving to Country E, there being a dispute between the parties as to whether this move was temporary or permanent.

The parties' marriage ended in Summer 2021. In June 2021 H applied in Country E for interim measures in respect of the children and possibly, although disputed and unclear on the information before the court in these proceedings, in respect of divorce. In August 2021, W came to the United Kingdom with the children and immediately issued a petition for divorce, asserting that she was domiciled and habitually resident in England. H applied for the return of the children to Country E under the 1980 Hague Convention.

At the time of the hearing before Mr Justice Peel, the court in Country E had declined jurisdiction on the basis that the parties are habitually resident in England (which H confirmed he would appeal), H's Hague Convention application had been dismissed and an application by H for Permission to Appeal that dismissal was refused by the Court of Appeal. Jurisdiction remained in dispute, with a 4 day hearing listed later in the year to resolve this question.

H is a successful and prominent businessman, having run a successful hedge fund until its collapse in 2018 and being actively involved in a number of projects since then. Whether W is a successful businesswoman in her own right was a matter disputed by the parties. Within the certificate of complexity justifying allocation to a High Court Judge, W asserted net assets in excess of £50m and H asserted net assets of £25-50m.

The parties enjoyed a luxurious standard of living during their marriage, the court being satisfied that, prior to separation, W had largely unfettered access to funds from H enabling her to sustain a very high level of expenditure, in the region of £43,000 per month in the 12 months prior to separation. Since separation, H had ceased all financial support for W and the children. Despite the absence of financial support from H, W had continued to spend £72,900 per month on average in the 7 months since their separation, having secured personal loans from friends totalling nearly £500,000.

W's application for interim maintenance was substantial, seeking provision of nearly £1m per annum and almost £900,000 in respect of outstanding and ongoing legal fees designed to cover i) the concluded Hague Convention proceedings, ii) Children Act proceedings, iii) the divorce jurisdictional dispute, and iv) the present application.

The dispute between the parties as to H's wealth was considerable, with W assessing H's wealth at not less than £100m. H contended that his wealth was considerably less, with his only income at that time being a return on investments in the sum of £115,000 per annum. H, like W, asserted reliance upon the support of friends and/or family and claimed impecuniosity. The court was unable to explore fully the various areas of dispute in respect of H's wealth but proceeded to concentrate on the most significant alleged financial resources.

H is the CEO of two special purpose acquisition companies ('SPACs') and has made significant investment in a technology company. W asserted H made a $20m return on that investment in 2021 whereas H contended that he had received nothing from the investment and would not do so before 2025 at the earliest. H invested $2.89m in private lending funds which, on his own case, commit him to providing capital on demand of up to $6.5m for a 5-7 period from 2019. He has investments in SPV's in the USA worth in the region of $8m, owns property in Country A and invested in a condominium in Country C. H evidenced borrowing in December 2021 from 3 individuals totalling £1.77m repayable between June and September 2022, applied to the running costs of one of SPACs of which he is CEO. H owes US Inland Revenue Services $1.112m, subject to a repayment plan at $15,445pcm. 

As to a further company, A Ltd, in respect of which there remained a dispute as to W's involvement and remuneration, it was accepted that H invested $1.2m in May 2021 and a further $600,000 in September 2021.

In September 2021, H sold a London property for which he personally received $4.3m, which he invested into business interests. H contended that W was fully aware of this sale, which W denied, and the court rejected. The court did not consider it plausible that W would simply ignore the sale at a time when she was receiving no financial support from H. In addition, the Judge was particularly concerned about an exchange of messages between the parties in November 2021 within which H talked about the property as being one which would be perfect for the family despite it having been sold two months earlier.

Forms E had not been exchanged, nor were they required, and financial disclosure had not been ordered. W nevertheless disclosed a full run of bank and credit card statements which enabled her finances to be analysed in some detail. H, by contrast, provided none, save for a summary balance and a single bank statement.

The Law

The judgment sets out the principles previously identified in TL v ML [2005] EWHC 2860 (para 124) as the law applicable to W's application for interim maintenance [para 4] and does similarly to those identified in Rubin v Rubin [2014] EWHC 611 (para 13) when setting out the law applicable to the application for legal services funding [para 5]. As relevant to the present case, it was expressly observed that a jurisdictional dispute does not prevent the court from making an interim order, but a cautious approach should be taken both as to whether to make an order at all, and as to quantum.

The court's decision

Although satisfied that the existence of a jurisdictional dispute was relevant, the court did not consider that it weighed too heavily in the circumstances. Notably, habitual residence was found in W's favour within the Hague Convention proceedings and Country E had recently declined jurisdiction. Consequently, W's prospects of success could not be regarded as so remote as to limit the present application by a pessimistic prognosis of the outcome of her suit.

The court noted that interim maintenance applications are almost invariably tried on the basis of submissions, as was the case here. The decision observes that in many, and perhaps most, cases there remains sufficient information available for the court to exercise its jurisdiction with a tolerably accurate assessment of the finances. However, the approach was hampered in the present case by each denying any liquid assets while being accused by the other of having a great deal of wealth.

Mr Justice Peel considered that, in such circumstances, the court must be circumspect, not being afraid to draw adverse inferences if warranted but not to make orders without either i) credible evidence that one or other party is able to access large sums of wealth; or ii) being satisfied that the disclosure by either party is so deficient as to justify, even at this stage, making an award which that party denies is capable of being met. In this exercise the court is most assisted by objectively verifiable facts and contemporaneous documents [para 41].

In making his assessment, the Judge considered the parties' respective approaches to financial disclosure to be highly relevant. Despite the absence of a procedural requirement or order for financial disclosure, the court considered it must have been obvious to H that such documents would be necessary given the nature of his case was an inability to pay anything for W and the children. The Judge went so far as to consider the absence of bank and credit card statements from H extraordinary and, as a consequence, it was more difficult to accept what H said at face value.

It was significant, in the view of the Judge, that the available financial disclosure (from W) demonstrated H's income and resources had fully supported W and the children in an expensive lifestyle with no indication of 'impending financial doom' right up to the point of separation. Similarly, the Judge considered H's conduct in investing millions into various business interests in 2021 as being highly unlikely if knowing that, on his own case, he would not then have any monies left to meet even his own personal needs. These investments included not just capital injections into his own existing businesses and investments, but also fresh investment not related to capital calls or ongoing operational costs. By electing to prioritise these business interests and opportunities over the interests of his family he could not now complain that W brings an interim application for financial support. H also paid €176,000 upfront for 8 months' rent of a property in Country E shortly prior to the parties' separation, which was not viewed as the actions of a man who anticipated cashflow difficulties.

It was, in the view of the court, more than just coincidence that H's claimed liquidity issues were so acute precisely at the point of separation despite no previous reduction in an undiluted ability to spend money. In any event, and despite being sceptical about H's stated liquidity issues, the Judge considered that it was for H to find a way to unlock liquidity, particularly where he invested so much family wealth in his businesses in 2021. 

Conversely, the Judge rejected, on an interim evaluation, that W had access to large sums from A Ltd. This was principally due to the lack of any document evidencing that W has or had a legal or beneficial interest in the business, nor any documentation evidencing that she had ever received any money from the business.

Having formed the view that it was appropriate to make an award to W, the Judge then proceeded to quantify that award, both in respect of interim maintenance and legal funding. In so doing, the Judge bore in mind that H also needed to be able to meet his own needs but was satisfied that H was well able to access funds to enable him to do so. The Judge considered W's budged to be grossly exaggerated and observed her expenditure since separation as being irresponsibly excessive. The Judge was satisfied that almost all items of claimed expenditure should be reduced significantly. Being satisfied that it was appropriate to take a broad approach to quantifying W's award, W's claim for MPS was more than halved to circa £400,000pa plus school and nursery fees when payable. The Judge made no award for the period prior to W's application for MPS at a time where she elected to borrow funds rather than make her application and spent, in the court's view, at an excessive level.

The Judge made similarly significant reductions to the sums claimed by W within her application for legal fees in respect of future costs. As to those costs already incurred, any costs referrable to the Hague Convention proceedings were completely discounted, the court being satisfied that there were entirely distinct historic costs incurred prior to the issue of the present application and so irrecoverable. As to the remainder of those costs, they were to be paid by H save that a discount of 30% was applied to reflect a notional standard basis of assessment. 


Case summary by Oliver Riley, Barrister, St John's Chambers

For full case, please see BAILII