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Finance and Divorce June 2014 Update

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

Jessica Craigs, Senior Solicitor, Mills & Reeve LLPDavid Salter


Jessica Craigs, Senior Solicitor, and David Salter, Joint National Head of Family Law, Mills & Reeve LLP

As usual, this month's Finance & Divorce update is divided into two sections:

  1. News in brief
  2. Case law update

News in brief

Increased uptake in pre-nuptial agreements
The Telegraph
reports that law firms have indicated an increase in people seeking pre-nuptial agreements following the latest report from the Law Commission on Matrimonial Property, Needs and Agreements.

Click here for the full article.

The Chai v Peng saga continues
Mr Justice Holman expressed his anger over the business tycoon, Khoo Kay Peng failing to appear at court for the second time (case summary and link to full report below).

The Independent provides a critical analysis of the case so far and some interesting quotes attributed to the lawyers involved. 

Click here for the full article.

Magistrates complain of LiPs increasing their workload
Research produced by the Bureau of Investigative Journalism appears to indicate that magistrates are very concerned about the rising number of litigants in person in family courts since the introduction of cuts in legal aid.

A sample group of 461 magistrates was surveyed.  The results concluded:

More generally, magistrates voiced concerns about delays in hearings, an imbalance between parties in family proceedings and the possibility that justice is not being done.

Click here for the full survey.

Grant Thornton criticise Judge's decision in the Young trial
The Independent
reports that Grant Thornton wrote a controversial letter to Mr Justice Moor who awarded Scot Young's ex-wife £26million last year. 
The letter was sent in private to the High Court judge presiding over the proceedings and allegedly criticised his findings.

It is reported that His Lordship wrote a robust response.

For the full story click here.

Case law update

Chai v Peng [2014] EWHC 1519 (Fam)

The husband (74) and wife (68) were married for 42 years. On 13 February 2014, the wife petitioned for divorce in England.  The husband appeared to live in Malaysia and began proceedings in that jurisdiction.

The jurisdiction dispute was listed in the English court in October 2014.

In March 2014, the wife's application for maintenance pending suit reported as Chai v Peng [2014] EWHC 750 (Fam) was heard before Mr Justice Holman. 

Since the March 2014 hearing the Malaysian appellate court had determined that one element of the wife's appeal was allowed.  The appeal was from the decision of the judge at first instance in Malaysia, who had decided that the wife was necessarily domiciled in Malaysia.  The appellate court decided that the judge at first instance could not, or should not, have decided the issue of domicile merely on examination of the statements and documents and that an oral hearing needed to be held to determine the issue.  The other strand of her appeal was the decision at first instance not to grant a discretionary stay of the Malaysian proceedings, so as to allow the divorce proceedings in England and Wales to take priority.

Both the husband and wife were considering appealing the decisions of the Malaysian appellate court.

Prior to the hearing in April 2014, the parties had attended a settlement meeting in Paris.  Mr Justice Holman puzzled over the choice of location and lists the extensive number of advisors and experts who attended (and notes the consequent cost of such attendance). However, he congratulated the parties on trying to reach a conclusion and draw an end to the enormous legal costs.

At paragraph 11, Mr Justice Holman reminds us of Rule 27.3 of the Family Procedure Rules 2010 as follows:

"Attendance at hearing or directions appointment

Unless the court directs otherwise, a party shall attend a hearing or directions appointment which that party has been given notice."

The husband failed to attend.  The court had not directed, or even been asked, whether the husband could be excused from attending.  The judge was extremely critical of his failure to attend and equally critical of the costs incurred by both parties (which came to over £2m).

The wife's application to issue a fresh petition for divorce
The wife's first petition stated that:

"The petitioner has resided in England and Wales for at least a year, or the petitioner has resided in England and Wales for at least 6 months and is domiciled in England and Wales' 

She further identified the following ground of jurisdiction namely:

"The court has jurisdiction other than under the Council Regulation on the basis that no court of a contracting state has jurisdiction under the Council Regulation and the petitioner is domiciled in England and Wales on the date when this application is issued.'

In the husband's acknowledgment of service he challenged this and said that the wife was neither domiciled in England and Wales nor habitually residence for 6 (or 12 months) prior to the date of the petition and therefore the court did not have jurisdiction.

The new petition presented to Mr Justice Holman added the wording:

"the petitioner is habitually resident as she has resided in England and Wales for at least a year immediately before the petition was issued.  Further or alternatively the petitioner is habitually residence as she had resided in England and Wales for at least 6 months immediately before the petition was issued and is domiciled in the United Kingdom."

The wife's reasoning behind the change in wording was to eliminate the potential challenge by the husband in the Court of Justice of the European Union in relation to the ambiguity in some of the indents in Article 3.1 of Council Regulation EC 2201/2003.

Despite the 'attractive and valiant' argument put forward by the husband's team that the wife's application was counter to public policy, Mr Justice Holman (at paragraph 48) agreed to the wife withdrawing her original petition and presenting a fresh petition. 

The wife's application for further maintenance pending suit and legal funding provision
The order at the end of March 2014 was for maintenance pending suit at the rate of £35,000 per month.  The husband had made an offer to continue to pay MPS at that rate.  The judge made an order along those lines.  The question then turned to whether any provision should be made for the wife's legal funding.

Mr Justice Holman states at paragraph 54: 

"In my view, there must plainly be further provision for legal funding.  To leave the wife high and dry at this stage would, frankly, be to do the utmost injustice to her."

The judge ordered a legal funding payment of £60,000 specifically earmarked to fund the next round of negotiations (which were scheduled) and, in addition to that payment, an order for legal funding payments of £60,000 per month until the 10 day jurisdiction hearing in October 2014.

Price v Price [2014] EWCA Civ 655

The wife had issued a divorce petition on 14 November 2012 based on the husband's unreasonable behaviour (specifically his reckless spending).  The husband filed his acknowledgement of service on 30 November 2012 which indicated his intention to defend the proceedings.  However, no answer was filed nor received by the wife.  On 24 January 2013, the wife applied for decree nisi on the basis that the petition was undefended; and on 24 January 2013, the court certified the wife's entitlement to a decree and ordered the husband to pay her costs.  Decree nisi was listed to be pronounced on 18 February 2013. 

On 14 February 2013, the husband (who acted in person throughout the proceedings) applied for the hearing to be vacated and for the certificate to be set aside.  He asserted that he had posted an answer on 12 December 2012.  As the court had no record of receiving his answer, the husband also applied for leave to file an answer out of time. 

At first instance, the district judge dismissed the husband's application, satisfied that the husband had not filed an answer in time – not only because the court had no record of it but also because the husband had provided no evidence that he had sent the answer (e.g. by proof of posting or a copy of the covering letter).  Significantly, the district judge had no witness statements nor heard any oral evidence. 

The husband appealed and pronouncement of decree nisi was stayed.  On 28 May 2013, the husband's appeal was dismissed and a circuit judge pronounced decree nisi and ordered the husband to pay the wife's costs.  The circuit judge upheld the district judge's reasons for dismissing the application and added that, as it was plain that the marriage had irretrievably broken down, the husband had no reasonable prospect of successfully defending the petition. 

The husband appealed to the Court of Appeal. 

Held:  The husband's appeal was allowed and the case was remitted back to a district judge for re-hearing.  There were two principal reasons for the Court of Appeal allowing the husband's appeal: 

The Court of Appeal focused on the decision in Nash, where it had been held that there were three situations in which a court might set aside a decree to enable to a spouse to file an answer:

This case went, the Court said, into the third category as described by Nash (and indeed likened it to Lawlor).  Therefore, the test was whether the husband was able to satisfy the court that there was a case which he wished to put forward and which, if accepted, "might well lead to a different result".  The court also had to be satisfied that his application was not an abuse of process (in accordance with Lawlor). 

Finding that the husband's application was not an abuse of process, the appeal judges looked at the petition and draft answer.  They concluded that it was not clear whether a decree would be granted on admissions alone and therefore the husband did have a case to present which might well lead to a different outcome. 

Underhill LJ identified that "normally", the correct approach in a case where a party asserts that a document has been sent to the court which for one reason or another is not on the court file, is to hear oral evidence on oath which can be tested by questions from the court and cross-examination. The approach to be taken depends, nonetheless, on the circumstances of the case and what is required to give the applicant a fair hearing.

Lady Justice Black commented: 

"...I am extremely reluctant to see these parties continue to litigate in what will be emotionally and financially draining proceedings... It is with considerable regret...that I have concluded that the appeal will have to be allowed."

Rapisarda v Colladon [2014] EWFC 1406 (In the matter of 180 irregular divorces)

This was a very unusual case requiring the President to consider whether the Judicial Proceedings (Regulation of Reports) Act 1926 applied to an application by the Queen's Proctor for the dismissal of a large number of divorce petitions and the set aside of an equally large amount of decrees of divorce (obtained in the course of "a conspiracy to pervert the court of justice on an almost industrial scale").  It was found that the whole proceedings could be published and guidance was given on how a similar approach could be taken in financial remedy proceedings. 

What the judgment doesn't tell us is why the Queen's Proctor was intervening – nor do the press reports.  Ruth Langford ( however has offered an explanation – it would appear that all 180 divorces involve Italian couples and of the 180, 179 of the petitions had the same postal address (a post box in Maidenhead – a bit of a squash, one would have thought, for all those people in one post box) in order to establish residence in England and Wales (the 180th case cited an address in Epsom).  In fact, the couples lived in Italy (where divorce is complex and requires a mandatory three year period of legal judicial separation before divorce) and therefore the jurisdiction criteria for a divorce in England were not met.  Allegedly, all the couples were promised a quick English divorce and the whole exercise was organised by a divorce agency charging €4,000 per divorce.  Italians, dissatisfied with the potential five year wait for a divorce, are apparently shopping around Europe to obtain a divorce (England and Romania are the preferred options). 

To conclude this month's case law review it is worth mentioning a further judgment that highlights the availability of a seldom used remedy.

Maughan v Wilmot [2014] EWHC 1288 (Fam)

This judgment of Mostyn J provides a useful reminder that, in the right circumstances (i.e. where the default has been extreme and it is obvious that the defaulter has been, and will continue to be, obstructive), appointing a receiver can be a method of enforcing an order.  In this case there were significant arrears of child maintenance plus costs totalling £185,000.