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Mahon v Mahon [2008] EWCA Civ 901

Case No: B4/2008/1071
B4/2008/1072
Neutral Citation Number: [2008] EWCA Civ 901
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE PRINCIPAL REGISTRY OF THE FAMILY DIVISION
(MR JUSTICE BODEY)
(LOWER COURT No. FD06DO1527)
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Tuesday, 24th June 2008

Before:

LORD JUSTICE MUMMERY
and
LORD JUSTICE WILSON
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Between:

BRIAN ROBERT MAHON (Applicant)

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IOLA MAHON  (Respondent)

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(DAR Transcript of
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Mr Philip Cayford QC & Mr Jonathan Crystal (instructed by Messrs Stock Fraser Cukier) appeared on behalf of the Applicant husband.

Mr Stewart Leech (instructed by Withers LLP) appeared on behalf of the Respondent wife.

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Judgment

(As Approved by the Court)

Crown Copyright©

Lord Justice Wilson:

1. Mr Mahon applies for permission to appeal against two orders made by Bodey J in the High Court, Family Division, dated 19 March 2008 and 23 April 2008, which, taken compendiously, represent the judge’s determination of Mrs Mahon’s application against him for ancillary relief for herself and two of the children of the family.  At the substantive hearing of the application, which took place over four days beginning on 10 March 2008, Mr Mahon appeared in person and Mrs Mahon was represented by Mr Leech.  But Mr Mahon instructed Mr Crystal to appear in his place both on 19 March 2008, when the judge delivered his substantive reserved judgment, and on 23 April 2008, when he applied the finishing touches to his determination.  Today Mr Cayford QC appears on behalf of Mr Mahon, leading Mr Crystal, while, in response to the court’s direction that today’s application should be heard on notice, Mr Leech again appears on behalf of Mrs Mahon.

2. Although he also has British nationality, Mr Mahon is primarily South African.  He is an entrepreneur and during the marriage was heavily involved in the promotion and organisation of a high profile annual football tournament between the states of Southern Africa.  Mrs Mahon is also by origin South African.  They married in South Africa in 1983 and moved to England in 1996.  By then their three children had been born, now aged 22, 19 and 12.  In 1997 they set up their home in Sunningdale, where Mrs Mahon and the two younger children presently continue to live.  But, following the breakdown of the marriage in 2006, Mr Mahon returned to South Africa and lives in Camps Bay, the well-known suburb of Cape Town.

3.  The judge computed the value of Mrs Mahon’s net capital, which was not substantially in controversy, at about £400,000.  The judge’s award of ancillary relief to Mrs Mahon, on a clean break basis, was to bring her assets up to about £9 million.  This was substantially achieved by an order for transfer to her of the house in Sunningdale, valued at about £3million gross or £2,800,000 net of costs of sale, and for a lump sum payment to be made to her by Mr Mahon of £5,500,000.  It is the burden of this proposed appeal that the judge’s award was plainly excessive.

4. At the outset of the substantive hearing Mr Leech put before the judge a schedule of the parties’ visible assets amounting to about £10,500,000.  The judge broadly accepted that such was the value of the visible assets.  How, then, asks Mr Cayford, could it be appropriate for an award to be made to Mrs Mahon in the sum of about £9million?  The judge’s answer, explained in great detail in the course of his judgment running to 134 paragraphs, was that, to adopt Mr Leech’s own comments about his schedule, it was scarcely worth the paper upon which it was written.  For, so the judge found, Mr Mahon had substantial assets which he had dishonestly refused to disclose.  Because of his non-disclosure the judge felt unable to place a figure upon Mr Mahon’s undisclosed resources but he expressed confidence that, in favouring a total award of about £9million to Mrs Mahon, he was making an award with which Mr Mahon could reasonably comply and that, if and to the extent that the award was inapt, it was as likely to be too low as to be too high. 

5. It would be the central plank of Mr Cayford’s appeal that the judge fell into error in considering that this was a case in which the evidence justified the inference that Mr Mahon held such substantial further resources as to justify an award of about £9 million instead of -- perhaps, and as a maximum -- an award of about £5 million.  Mr Cayford, coming into this case today, has deployed all his forensic charm and has clothed Mr Mahon’s case with as much attractiveness as any leading counsel in the Division could.  He has, wisely, stated that Mr Mahon’s presentation to the judge was abysmal.  He has wisely accepted that the judge was entitled to infer that Mr Mahon had significant further resources.  Mr Cayford stands his ground upon the argument that the evidence did not justify the judge in finding that the resources hidden by Mr Mahon were so substantial as to make it appropriate that Mrs Mahon should exit with an overall award of £9 million. 

6. My experience of hearing applications for ancillary relief regularly over 12 years in the Family Division, and then of considering appeals to them in this court during the last three years, leads me to the conclusion that spouses, particularly husbands, who face claims for ancillary relief made through the courts of England and Wales have come to recognise that our legal system has become sophisticated in detecting and dealing with dishonest disclosure and that a refusal to make clear, candid, early disclosure very seldom benefits the party who adopts that strategy.  It is, as Mr Cayford rightly reminds us this afternoon, not the function of the family court to punish such a litigant, although, in that he or she has probably committed perjury, such can, occasionally, lead to criminal proceedings.  But assets are now daily uncovered in the family courts despite the most ingenious efforts of their owners to cover them up; and, even when not uncovered, the attempt to cover them up is often so obvious as to justify an inference that they exist.  So the party who adopts that strategy very seldom engineers an award more favourable to himself; on the contrary, in that by his conduct he has increased the other party’s costs of the case, often very substantially, and in that, as in the present case, he is almost invariably ordered to pay the other’s costs on the indemnity basis, the strategy, designed dishonestly to reduce his financial exposure to the other party, usually instead leads to an enlargement of it. 

7. The present was a case in which Mr Mahon, a highly intelligent man, qualified as a lawyer and well-versed in finance, took a whole number of steps which, in the view of the judge and also in my view, bear only one construction: that he thought that he could outflank the English court; deceive the court; intimidate and pressurise Mrs Mahon into early submission; and cheat her out of her entitlement under English law.  I offer a few examples. 

8. When in March 2006 Mrs Mahon issued a petition for divorce, Mr Mahon challenged the jurisdiction of the English court to entertain it on the basis that, despite all appearances, she was not and had not been habitually resident in England.  He issued rival proceedings in South Africa; he applied for a stay of the English proceedings; and, days before the hearing of that application, which was scarcely arguable, he withdrew it, thus having forced Mrs Mahon to incur a substantial sum in respect of costs, part of which he has already been ordered to pay and has not paid. 

9. Four days after service of the English petition Mr Mahon removed US $3 million from an account held by him in the Isle of Man to an account in South Africa in the name of the company, namely Global African Football Inc (“Global”), of which, through an offshore discretionary trust, The Stableford Trust, he owns 50% and which is the vehicle by which the football tournaments have been promoted and organised.  Three months later, and contrary to an assurance given by his then solicitor to the court, Mr Mahon transferred a further US $1 million in the same way.  These two transactions were the subject of an avoidance application by Mrs Mahon under s.37 of the Matrimonial Causes Act 1973; and the judge duly set them aside on the basis that at any rate a significant part of Mr Mahon’s intention in making the transfers had been to defeat her financial claims. 

10. Later in 2006 Mrs Mahon discovered that the Ferrari motorcar which was used by her in England had been taken away and shipped to South Africa on the instructions of Mr Mahon.  Then he ceased to pay the outgoings on the property in Sunningdale, as a result of which Mrs Mahon became subject to pressure by creditors and had to sell items of jewellery in order to keep them at bay. 

11. When an order for maintenance pending suit was made, Mr Mahon refused to comply with it and, belatedly, began to make payments only at the rate which he had offered and which the judge had ruled to be insufficient. 

12. At two points during the proceedings Mr Mahon told Mrs Mahon that he proposed to seek residence of the youngest child of the family, so that the boy could live with him in South Africa. 

13. Mr Mahon has broken numerous directions for financial disclosure.  He served two versions of the requisite affidavit in Form E, one sworn and one unsworn, substantially inconsistent each with the other and unsupported by the requisite documentation.  He disobeyed orders for disclosure, including two orders for him to respond to a Schedule of Deficiencies served upon him on behalf of Mrs Mahon.  Even by the end of the substantive hearing there were numerous areas of his financial circumstances in relation to which he had refused to produce ostensibly significant documents. 

14. In the usual way Mrs Mahon had planned to present to the court an analysis of Mr Mahon’s circumstances by a forensic accountant; but Mr Mahon’s disclosure was so exiguous that the accountant was unable to make any such presentation.  It seems that many of the documents most helpful to the judge proved to be documents which Mr Mahon had left in the home in Sunningdale and which Mrs Mahon had found and disclosed pursuant to the case of Hildebrand and documents produced pursuant to production orders by solicitors and tax consultants, both of whom had been acting on his behalf in respect of his financial affairs in England. 

15. The home in Sunningdale was vested in an offshore company, which was made the second respondent to Mrs Mahon’s application and which in turn was owned by a second offshore discretionary trust, namely the Rocquaine Trust.  By affidavit Mr Mahon asserted that he did not own the Rocquaine Trust.  Unfortunately for him, however, one of the wife’s Hildebrand documents was an attendance note of a meeting between him and his financial advisers in 2005, by which he was recorded as having asserted that he was not only the settlor but also the beneficiary of that trust.  His case before the judge appeared to be that his former legal advisers had, to his surprise, informed him that documents indicated that he was the beneficiary of the Rocquaine Trust but that the documents were in error. 

16. The Rocquaine Trust was the owner of a South African company which held a second property in Camps Bay, i.e. a property other than his current home.  Recent accounts for that South African company state that Mr Mahon’s girlfriend is now its owner.  Mr Mahon told the judge that such was another mistake.

17. Another of the wife’s Hildebrand documents was a statement of a bank account held by Global in the Isle of Man which indicated that in October 2005 it held almost U.S. $10 million.  Mr Mahon’s response during the hearing was that the entry on the statement represented a mistake by the bank.  Following the hearing and just prior to the judge’s delivery of judgment, however, Mr Mahon, apparently now accepting that the entry had not been a mistake, made a written submission to the judge in which he sought to explain it. 

18. In the same attendance note of the meeting in 2005 Mr Mahon was recorded as telling his advisers that a certain payment had been made directly from Global to his account in the Isle of Man “rather than via the Foundation”.  This was agreed to be a reference to a Liechtenstein foundation called the “Eight Blocks Foundation”.  In September 2007 Mr Mahon had informed Mrs Mahon’s advisers that, so far as he was aware, the Eight Blocks Foundation did not exist.  But a document dated 1 May 2007, produced to the court by the solicitors who had been subject to the production order, stated that they had been handed the statutes of the Foundation by Mr Mahon’s agent and that its beneficial owners were Mr Mahon and his family.

19. The evidence of Mr Mahon to the judge about his receipts from Global, which apparently came via the Stableford Trust, was vastly confused.  At one stage he was presenting them as loans, quite possibly because such was the way in which he had presented them, or had planned to present them, to Her Majesty’s Revenue and Customs.  A few months later, however, Mr Mahon averred that the Stableford Trust had never received funds from Global, however described, and thus that it had never remitted any such funds to him.

20.   The documents indicated the existence of a third offshore trust, namely the “Maintenance Trust”.  The evidence before the judge was that Mr Mahon deployed the assets of the trust.  But he did not admit to beneficial ownership of it and certainly produced no documents referable to it. 

21. Mrs Mahon gave evidence to the judge that Mr Mahon had repeatedly told her that none of his assets could be traced to him; that his financial structures were watertight; that he had a friend who was a judge in South Africa; and that he would employ senior counsel there to protect his assets from any enforcement of any English order for ancillary relief.  This evidence the judge in effect accepted.  Mrs Mahon also asserted that, in happier times, the husband had stated that his assets were worth “50-60million” and that she had understood his reference to be to US dollars.  At the hearing Mr Mahon accepted that he had made the reference but asserted that it had been to South African rand.  But, as the judge observed, he would in that event have been placing his wealth at only about £3,500,000.  On any view such would have been absurd. 

22. In all the circumstances, to only some of which I have referred, Bodey J was in my view demonstrably entitled to infer that Mr Mahon had substantial hidden assets.  The judge, as Mr Cayford concedes this afternoon, correctly reminded himself of how he should approach the question of inferring assets beyond those disclosed.  Mr Cayford’s complaint relates not to the question which the judge posed to himself but to the manner in which he chose to answer it.  The judge correctly reminded himself that Mr Mahon’s gross obstruction of Mrs Mahon’s enquiries and indeed of the court’s investigative duty did not necessarily betoken hidden resources.  In the end, however, he expressed himself satisfied that the only reasonable construction which could be placed upon Mr Mahon’s conduct was that such resources existed.  Mr Cayford relies on dicta of Munby J in Al-Khatib v Masry [2002] 1 FLR 1053, in particular at [42-45] and [96], for the proposition that a judge has to go beyond a finding that there are hidden resources and to attempt to quantify them or at least to be satisfied that they exist at a level which relates to the award which he is making.  Munby J referred, at [96] to the fact that, in that case, he was satisfied that the hidden resources were “very comfortably” and “significantly” in excess of the resources disclosed to him.  Insofar as Mr Cayford is arguing (in his written skeleton argument Mr Crystal was certainly so arguing) that there is a proposition of law that a judge can complete this exercise lawfully only if he makes a finding of that character, I entirely disagree.  It is clear to me that Munby J was attempting only to describe the scale of the inference apt to that case.  I perceive no logical reason for the proposition which at any rate Mr Crystal was making.  In any event, however, it is obvious from the scale of the order made by Bodey J and from what he said in judgment that, had he felt it appropriate, he would have applied each or both of those adverbs to the facts of the case. 

23. Nor does the court need to be in a position to quantify the hidden resources: such would almost be a contradiction in terms, as was pointed out by Charles J in Rye v Rye [2002] 2 FLR 981 at [164].  In his submissions this afternoon Mr Cayford relies, in particular, upon the decision of this court in Baker v Baker [1995] 2 FLR 829.  He has asked us to look carefully at the findings made by the trial judge in that case -- Ward J, as he then was -- which were held in this court to have been open to him to make.  In particular, Mr Cayford points out that the material before Ward J enabled the judge to conclude that about £300,000 was hidden and that, Mr Baker’s income also having been partly hidden from view, he did, in terms both of declared income and of hidden income, have about £66,000 net a year upon which to live.  Mr Cayford makes the bold submission that, unless the evidence justifies an inference of such specificity, there is no room for any such inference to be made.  As I sought to point out to Mr Cayford in the course of the dialogue this afternoon, that proposition, if accurate, would have a curious effect: because the less which a husband disclosed, and thus the more blank the page upon which the judge was expected to write his judgment, the less, on Mr Cayford’s analysis of our law, would the judge be entitled to draw adverse inferences.  Mr Cayford has taken us through parts of the judge’s long judgment, which are said to be objectionable not only to Mr Mahon but also, if properly analysed, to this court.  Mr Cayford points to the passage where Bodey J says:

“I therefore find that there are undisclosed resources, whether capital or income or both, which the husband has not been willing to place on the table for consideration as part of the kitty.”

“Yes,” says Mr Cayford, no doubt reluctantly, “the judge was entitled to make that finding but it was not”, so he submits, “a finding which went far enough.”  But, shortly after that passage in the judge’s judgment, the judge went on as follows:

“I have to do the best I can to produce a just result, by which I mean just to both parties.  Somehow I have to try to get a feel of what there might be in the kitty given the context of what we do know.”

Then, as one possible mechanism for getting a feel of what might be in the kitty, he analysed the reference by Mr Mahon to “50-60 million” surely in dollars, which Mr Mahon had made to Mrs Mahon, and then, shortly thereafter the judge continued:

“All I can do is to look at the wife’s reasonable needs and ensure that they are met out of funds which I find must be sufficient fairly to do so, without (I hope) producing a result which is in truth unjust to either party.”

It seems to me that in those two further passages of the judge’s judgment, the judge showed himself patently alive for the need for his inference of hidden resources to be of resources sufficiently substantial to justify, by reference to ordinary principles, an award to Mrs Mahon totalling £9 million. 

24. Another substantial complaint which Mr Cayford would place before this court relates to the judge’s treatment of Mr Mahon’s assertion that the facility for Global to continue to promote and organise the international football tournaments had been brought to an end and, along with it, the family income.  Mr Mahon put before the judge, as has Mr Cayford before us, certain documents, at least one of which on its face raises obvious question marks, about the apparent non-renewal by the sponsors of the annual tournament, namely South African Breweries Ltd (“SAB”), of its contract with Global for their promotion and organisation of the annual tournament.  It was Mr Mahon’s case that Global’s involvement with the tournament in 2007 would be its last.  One way in which the judge had wanted to explore the allegation of a sudden loss of income was to discern whether Mr Mahon’s lifestyle, which, as with that of Mrs Mahon, had on any view been lavish, had been reduced following the alleged termination, or notice of termination, by SAB of its relationship with Global.  Mr Mahon, however, disabled the judge from conducting that exercise by failing to produce more than a few of the statements referable to the credit cards which he had been using; indeed the judge’s perusal of those few statements in no way indicated a reduction in Mr Mahon’s standard of living.  The judge also accepted the evidence of Mrs Mahon that during the marriage Mr Mahon had represented his income from the tournament via Global as “being the icing on the cake” i.e. in effect a welcome top-up to his income from other sources.  Mr Cayford says to us “Where is the evidence of income from other sources during the marriage?”  He took us through various paragraphs of the judgment, raising question marks.  It seemed to me to be almost an absurd situation in which counsel for Mr Mahon was raising the very questions which his client should have answered.  In the light of the fact that Mr Mahon’s credibility in the proceedings was zero, the judge was in my view entitled to express himself as “highly sceptical” as to whether the contract with SAB had totally failed and entitled to observe that “there must be a real probability… that the income source has been redirected, or else put on hold in some way, for the duration of these proceedings.”

25. Mr Cayford has made other points in the course of his submissions, which we allowed to continue for over one hour.  One is that the judge had no power to avoid Mr Mahon’s dispositions totalling US$4 million to Global in that Global was not joined as a party to the proceedings and in any event required the monies which Mr Mahon had transferred to it.  The judge’s order, however, recites that, in accordance with Rule 2.59(3) of the Family Proceedings Rules 1991, Global was duly served with the application for the avoidance order and, presumably by its inaction, elected not to intervene in the proceedings.  Such rendered the judge’s order legitimate.  Indeed, in that the judge found the dispositions to be reviewable, it follows that he found that they had not been made for valuable consideration to a person who had acted in relation to them in good faith; in such circumstances whether or not Global needed the money became in substance, and subject to the residual discretion which exists in the court under section 37 of the Act, irrelevant.  Mr Cayford’s argument in this area was, in my view and without meaning any disrespect to him at all, most curious.  He seemed to be submitting at points that the judge had made some sort of order for a transfer of the US$4 million either to Mrs Mahon or to Mr Mahon, in circumstances in which Global is owned only as to 50% by Mr Mahon and is thus not controlled by him, and that accordingly the judge had no jurisdiction to do so.  The analogy between a transfer of property under section 24 of the Act and an avoidance of a disposition to a third party under section 37 of the Act is quite misplaced.  This was no transfer.  This was a restoration to Mr Mahon of monies which he had wrongly transferred, just after the proceedings were launched, to a third party; and the fact that the third party was not controlled by Mr Mahon is nothing whatever to the point. 

26. I would not wish to end this judgment without adverting to two features of the case which have emerged since the judge delivered his substantive judgment on 19 March 2008. 

27. First, the judge in judgment referred to the fact that among the wife’s Hildebrand documents was a statement which indicated that, at the time of the issue of her petition, a life assurance policy held by the husband with Clerical and Medical had a value of US$111,000.  The judge noted that Mr Mahon had cross-examined Mrs Mahon on the basis that, as she well knew, the policy had been cancelled long before the proceedings had begun.  While inevitably rejecting that suggestion, the judge in effect left the matter of the policy there.  He could do nothing else.  When, however, the parties reassembled before him on 23 April 2008 in order to finalise his determination, Mr Leech told the judge that Mrs Mahon had discovered that, four days after the end of the hearing before the judge but prior to delivery of judgment, Mr Mahon had surrendered the policy and had received in effect US$112,000.  By a separate order dated 23 April 2008 the judge attempted to freeze the proceeds of the policy in the bank account of the husband into which it was understood that the monies had been paid; but, upon service of that order upon the bank, it was (so Mr Leech tells us and Mr Cayford does not dispute) discovered that Mr Mahon had already moved the funds onwards. 

28. Second, in directing on 6 June 2008 that this application should proceed orally and in granting to Mr Mahon a stay of execution of the order for a lump sum until its determination, I nevertheless made clear that the interim periodical payments directed by the judge to be made by Mr Mahon to Mrs Mahon prior to payment of the lump sum, namely equal to interest of 4.25% upon the lump sum but sensibly cast for tax purposes in terms of periodical payments rather than of interest, should indeed be made and that today we would need to be satisfied that they had been made.  Mr Mahon however, as Mr Cayford concedes, has made no payment referable to the interim periodical payments.  At the outset of the case we had a discussion in court as to whether it was right to hear Mr Cayford in the light of that brazen contempt; but the ruling of my Lord and myself was that it was better to proceed and to hear Mr Cayford’s full submissions. 

29. I am in no doubt that this application for permission should be refused.  The judge’s orders will stand and the wife will now enforce them wherever and whenever she can.  Insofar as Mr Mahon really believes that the South African judiciary is corrupt or, more generally, that there is other than the closest cooperation between our two states in the reciprocal enforcement of each other’s matrimonial orders, he is, I confidently forecast, likely to prove seriously mistaken.

Lord Justice Mummery: 

30. I agree.

Order:  Application refused