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Finance and Divorce September 2013 Update

Jessica Craigs, senior solicitor and David Salter, Joint Head of Family Law at Mills & Reeve LLP analyse the financial remedies and divorce news and cases published in August.



Jessica Craigs, senior solicitor, and David Salter of Mills and Reeve LLP

As usual, this update is divided into two parts:

1. News in brief
2. Case law update

News in brief
This section of the update highlights some of the news items that will be of particular interest to practitioners who advise on divorce and financial remedy cases.

Surge in maintenance payment enquiries for higher education
The Times reports that an increasing number of mothers are seeking legal advice about whether ex-husbands can extend support payments for children at university.

The rise in tuition fees coupled with the rise in the cost of living is blamed.

To read the article in full click here

School holidays prompt warning of forced marriages
The government warned teachers, doctors and airport staff to be alert to the problem of forced marriages over the school holidays.

Figures suggest that more than 5,000 people from the UK are forced into marriage every year.  More than a third of these are estimated to be aged under 16. 

For an overview of the statistics and details of the Forced Marriage Unit click here

Biggest ever divorce payout reported
The previous record of £48m paid to Mrs Charman in 2006 was beaten in August 2013 by an award of £54m by an application brought under Part III of the Matrimonial and Family Proceedings Act 1984.  M v M [2013] EWHC 2534 is reviewed in full below.

Expectant parents put marriage as a secondary consideration
Research for Santander Insurance found that overall, 54% of people who plan to start a family said they did not expect to be married by the time they had their first child.

45% of those surveyed thought they would own their own home before having children.  40% did not expect to have a secure job or regular income when expecting entering parenthood. 

The figures are thought to reflect the cost of living and increasing uncertainty in the jobs market.

Click here for the full article reported in the Telegraph

Women reportedly happier after divorce
Researchers at London's Kingston University surveyed 10,000 people based in the UK between the ages of 16 and 60.  They were asked to rate their own happiness before and after major milestones in their lives. 

The study shows that women are significantly more content than usual for up to five years following the end of their marriages.

General divorce rate declines but 'silver' divorces buck the trend
The Office for National Statistics produced figures which showed that the number of people getting divorced every year has been falling steadily since the mid-1990s.  However, the number of people aged 60 and over divorcing has been rising during the same period.

For the full ONS report click here

Mr Justice Coleridge encourages honesty between divorcing couples
The Telegraph reports that a husband who lied to his wife about the success of his investments was ordered to rip up the settlement agreed with his wife.  The private agreement reached between the husband and wife which gave the wife £1.8m was based on information that Sir Paul Coleridge found to be 'deliberately false'. 

The judge encouraged the couple to renegotiate the settlement to facilitate a further capital payment to the wife.

Click here for the full article.

Case Law Update

Thursfield v Thursfield [2013] EWCA Civ 840

The appellant husband (Mr Thursfield) appealed against an order of HHJ Purle QC made on 9 November 2012.  The order committed Mr Thursfield to prison for 24 months for contempt of court for his breaches of an earlier order of the same judge made on 6 December 2011 by way of a disclosure order ancillary to a freezing order.

Mr Thursfield had not served any part of the sentence as he was, since the date of the order, outside the jurisdiction.  The appeal was as of right because the order was a committal order and falls within the exceptions for requiring permission for appeal.

2005 - The parties were divorced in Michigan (USA).  Mrs Thursfield brought proceedings in Michigan for breach of contract against her former husband, alleging, among other things, failure to disclose assets.

August 2006 – Mrs Thursfield secured a judgment in her favour but this was followed by further applications and orders.

3 January 2011 – judgment in Mrs Thursfield's favour against Mr Thursfield for sums in the region of $5.8m (approximately £3.5m at that date).

Mr Thursfield appealed.  The appeal did not challenge the whole of the judgment.

March 2011 – the appeal was dismissed for want of prosecution but the appeal was then reinstated later that year and the appeal is still pending. 

HHJ Purle was satisfied that even if Mr Thursfield's appeal were to be wholly successful there would still be a liability on his part in favour of Mrs Thursfield of approximately $240,000.  An order was made for an interim payment of $240,000 together with costs assessed at £37,000, otherwise adjourning the application.

May 2011 – Mrs Thursfield brought proceedings in the UK to enforce the US judgment she had then obtained.  HHJ Purle granted a freezing order and this was continued until a date in September and then extended until after the full hearing that was planned for the end of November 2011.

28, 29 November and 5, 6 December 2011 – HHJ Purle made an order in favour of Mrs Thursfield, maintaining the freezing order and he also made a disclosure order, breach of which led to the committal order which was appealed.

July 2012 – Mrs Thursfield applied to commit Mr Thursfield to prison for breach of the order.

The Judge adjourned the application to 9 November 2012 and ordered Mr Thursfield's attendance.  Shortly before the hearing, Mrs Thursfield was informed that Mr Thursfield would not be attending the hearing and would be applying for an adjournment.

The judge heard that application and gave a short judgment declining the application for the adjournment and proceeded to hear the application on its merits.  He held that there had been breaches of the order, which were continuing, and that accordingly, Mr Thursfield was in contempt of court and should be committed to prison for 24 months.

Mr Thursfield's appeal was brought on the basis that the judge refused to adjourn the case and second; the sentence was manifestly excessive.

His appeal was unanimously dismissed.  The court found that the appeal against the refusal of HHJ Purle to adjourn proceedings had to fail because, firstly, it was made so late in the day and second, there was still an outstanding liability to Mrs Thursfield, regardless of the outcome of the appeal in the US and so the disclosure order would still have been helpful to the case.  The appeal on the ground that the sentence was manifestly excessive was also refused due, largely to Mr Thursfield's attitude to the litigation.

Lord Justice Lloyd provided the leading judgment but Lord Justice Jackson summarises succinctly the basis of the decision at paragraph 44:

"It is repugnant to the proper administration of justice that a contemnor can [flout] throughout the orders of the court then absent himself from the committal hearing, then avoid serving whatever prison sentence is imposed and then finally avail himself of the procedures of the Court of Appeal whilst enjoying the shelter of some safe haven overseas."

Saward v Saward [2013] EWCA Civ 1060
This was an application by Mrs Saward for permission to appeal an order made by HHJ Newton on 25 October 2012 in divorce proceedings.  HHJ Newton had set aside a decree nisi that had been granted on 11 November 2011 in relation to the marriage of Mrs Saward and Mr Saward.  The basis for the order that the judge made was that the English court had no jurisdiction to entertain the divorce proceedings.

Mr and Mrs Saward were in their 60s.  Mr Saward was a British national.  Mrs Saward was a national of Romania and Canada.  Mr Saward had been living in Spain since 2002 and the parties met in Spain 2005.  They were married in Gibraltar in 2009 but the marriage broke down in June 2011.  Mrs Saward petitioned for divorce on the basis of Mr Saward's unreasonable behaviour on 1 July 2011.

Despite unsatisfactorily addressing the issue of jurisdiction on the petition, Mr Saward did not question the court's jurisdiction to deal with the divorce in his acknowledgment of service.  He did indicate that he was habitually resident and domiciled in Spain.

The dispute as to jurisdiction arose after Mrs Saward made an application for ancillary relief.

On 11 December 2011 Decree Nisi was pronounced.  Shortly after instructing new solicitors, Mr Saward challenged the issue of jurisdiction.  An application to set aside the decree nisi was filed and heard by HHJ Newton.  The fact that Mr Saward had not challenged jurisdiction and had actively participated in both the divorce and ancillary relief proceedings did not prevent him from making an effective challenge to jurisdiction later [paragraph 6]. 

Mrs Saward did not seek to criticise the judge on the approach to, and interpretation of, the law as to habitual residence.  The argument was that the judge focused on residence rather than on the husband's centre of interests, and that led to her giving insufficient weight to a number of factors which would have suggested to her that Mr Saward was, in fact, habitually resident in England. Specifically, Mrs Saward argued the judge should have given weight to:

• His business interests and the source of his income were in this country (rental property and UK based state and private pensions)

• The majority of his assets were in the UK

• He transferred some damages from some Spanish litigation in 2010 to the UK and also the proceeds of a property which he sold in Spain in 2011

• He paid taxes as if he is domiciled in the UK

• He continued to use a UK address for significant legal documents such as his will and tenancy agreement

• He had not renewed his residence certificate which expired in Spain in 2009

Lady Justice Black revisited the judgment and notes the careful evaluation exercise that HHJ Newton took when assessing Mr Saward's habitual residence.  It was not suggested that the trial judge took account of any irrelevant factors.  LJ Black said at paragraph 12 that, "The most that could be said by way of an appeal is that she gave the wrong weight to the factors, that she took them into account or viewed them in some way from the wrong end of the telescope looking at residence rather than centre of interests.".  The Court of Appeal was therefore satisfied that there was no real prospect of success in the appeal.

At paragraph 11 LJ Black concludes:

"I am conscious that there is no Court of Appeal authority as yet concerning the question of habitual residence in the Brussels Regulation, but I am not persuaded that this is a case in which permission to appeal should be given so that this court can consider that matter."

M v M [2013] EWHC 2534 (Fam)
The husband and wife were Russians who had lived in England since August 2005.  The husband is 49 and the wife 48.  They started to live together in 1989 and were married in 1991.  They separated in 2008 and a divorce was granted on the wife's petition on 6 February 2009. 

There were two children of the marriage age 19 and 15.  The husband and wife each had a chid from a previous marriage.  The wife's daughter, Francesca (age 28) was legally adopted by the husband.  Francesca suffered from bipolar condition and remained financially and emotionally dependant on her mother.

When the husband and wife met in 1987 they both worked in a factory.  Initially they lived in a modest two-bedroomed flat that the husband's parents had given to him.  About the time the parties started living together the husband began to import computers and thereafter set up an electronics business in 1991.  The husband's businesses grew from this and rather than renting business premises, he bought the properties and worked hard to pay off the borrowing.  The commercial properties generated rent of approximately US$800,000 per month and formed the bedrock of the matrimonial capital.

Following the husband's success in business, the parties started to enjoy a lavish lifestyle.

In August, 2005, the family left Russia and moved to London.  In August 2006 the family home was bought in central London in the joint names of the husband and wife.  The husband paid £3.825m for the property.

In 2007, the husband bought more properties in London which were registered in the name of Snowden Properties Limited (a UK registered company in which the husband and wife each held one of the two issued shares and of which the wife was the company director). 

As the marriage deteriorated, the husband changed the pattern of buying property in London.  The wife stated in evidence that as the marriage collapsed, the husband took steps to put the property out of her reach.  This included forging her signature to put the wife's interest in Snowden Properties Limited out of her reach.

On 12 January 2009 the wife petitioned for divorce in Russia.  She wrongly believed that as she was a Russian who had married in Russia she would have to divorce in Russia.  On 6 February 2009 a Russian divorce was granted and the marriage was formally dissolved on 3 March 2009. 

Following the final separation, the wife left the FMH and moved to rental property.

The assets from the marriage involved a series of complex off-shore corporate structures set up by the husband.  Consequently, there were five Respondents to the wife's application. Due to the husband's failure to provide adequate disclosure the wife had to undertake a complicated tracing exercise to ascertain what, in her opinion, were assets belonging to or under the control of, the husband.  The judge accepted at paragraph 256 that these included £14m of properties in England, £1.4m residential property in Russia and £92m of commercial property in Russia.  A total of £107m all accrued during the marriage. 

The Judge notes at paragraph 45:

"The common feature of the English properties is that each of them was bought for the exclusive use of the family: the FMH, Flat 6, Effes Road and Flat 4 Effes Road as matrimonial homes, Flat 1, Effes Road as the husband's office and Broadwalk Way and Quinta Castle as the husband's London and country homes after the marriage broke down."

On 10 September 2009 the husband made his last voluntary spousal maintenance payment. On 20 July 2010 following the withdrawal of financial support the wife sought leave to commence Part III proceedings.  The order was granted.

The husband was criticised for his litigation conduct; embarking on a series of satellite litigation both in the UK and Russia; failing to comply with orders and generally being obstructive.  The Judge noted this only served to increase costs and anxiety for the wife.  As a consequence adverse inferences were drawn against the husband.

By comparison the wife was praised for her 'calm, balanced and convincing evidence'.  The husband failed to attend the final hearing and was held to be in contempt of court 'many times over'.

The issue for determination was brought by the wife that the properties in the corporate structure were held beneficially for the husband on a resulting trust.  Mrs Justice Eleanor King provides a comprehensive review of resulting trusts at paragraphs 164 – 222 and reiterates the finding in Prest that even the Family Division cannot ignore the corporate veil.

The companies argued in defence that the properties were the subject of a planned tax-mitigation scheme which had necessitated them being both legally and beneficially held by the companies.  This argument was rejected.  The Judge found that at all times the husband was the beneficial owner and no evidence had been produced to rebut this. 

At paragraph 210 the Judge summarises here opinion of the correct approach to this situation.  She states:

'In my judgment the proper approach in law is as follows:

i) Whether assets legally vested in a company are beneficially owned by its controller is a highly fact-specific issue.

ii) The court must search for evidence of the subjective intention of the transferor (Lord Philips) or evidence of actual intention.

iii) In determining the intention of the parties the courts may, where appropriate draw adverse inferences against the parties, either in respect of their failure to give or call evidence to rebut the presumption, or by their failure to make proper disclosure within the proceedings.

iv) Only in the absence of evidence of intention will the law of presumption apply, which presumption will be easily rebutted by evidence of the transferor's intention to make an outright transfer.

v) Where the company in whose name the property in question is held is owned by the same individual who asserts that he has retained the beneficial interest by virtue of a resulting trust, there is less room for such a resulting trust to be established by a presumption in the absence of evidence of intention however :

a) The burden remains on the transferee to rebut the presumption

b) Positive evidence of the source from which the purchases are funded establishes the ordinary inference that the provider of the funds is the beneficial owner of the property absent any evidence to rebut that ordinary presumption of equity.

vi) In the case of the matrimonial home the facts are quite likely to justify the inference that the property was held on trust for a spouse who owned and controlled the company

The judge ordered that the UK properties (held by the various respondents) were transferred to the wife, the sale proceeds from the FMH were transferred to the wife and a balancing lump sum of £38m was also transferred to the wife.  This equated to approximately half of the identified assets.