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Finance & Divorce Update August 2014

Jessica Craigs, senior solicitor with Mills & Reeve LLP analyses the financial remedies and divorce news and cases published in July

Jessica Craigs, Senior Solicitor, Mills & Reeve LLP

This update is provided into two parts:

1 News in brief
2 Case law update

News update

Mother's names included on marriage certificates
The BBC has reported that the Home Office is considering including mother's names on marriage certificates in England and Wales.

Currently the certificate only requires the father's name and occupation for both the bride and groom.

Marriage certificates in Scotland and Northern Ireland already include mother's names.  MPs are calling for a change to the "offensive and outdated" law.
For the full story click here

The Divorce (Financial Provisions) Bill receives second reading
The Bill, introduced by Baroness Deech in February 2014 was given its second reading in the House of Lords.

Provision is made in the Matrimonial Causes Act 1973 to make pre-nuptial and post-nuptial agreements binding.  It also proposes the sharing of the net value of matrimonial property equally between the parties and to limit maintenance payments to three years.

Baroness Deech said it will reintroduce 'transparency, democracy and understandability' to the law when marriages end.

The Bill will now be considered by the committee of the whole house.

Introduction of 'best interests of the animal' test introduced
Deborah Rook of Northumbria Law School has published an article "Who Gets Charlie?" in The International Journal of Law, Policy and the Family (Oxford Journals).   With an increasing number of pet custody disputes arising in family law, the 'best interests of the child' test is suggested as being appropriate to resolving issues about the family pets.

In England and Wales the courts tend to emphasise the property status of pets, apply the property law test, and dismiss the 'best interests of the animal' test.  Ms Rook advocates that this approach dismisses the emotional bonds that exist between the pet and carer.

Media allowed to report on Cooper-Hohn divorce
In a preliminary skirmish, Mr Hohn attempted to prevent the media from reporting on his divorce from Mrs Hohn.

Jamie Cooper-Hohn, 49, the American wife of Sir Christopher Hohn, 47, is seeking hundreds of millions of pounds in what will potentially be the largest divorce award ever made by a British court. Her lawyers argue that she is entitled to half the property, shares and businesses held by her husband.
For The Guardian's article on the case click here

92% of Citizens Advice Bureaux report problems with referrals following legal aid cuts
Citizens Advice has reported that it is extremely hard to get legal aid concerning issues such as relationship breakdown, housing or employment disputes. Where limited provision of legal aid remains people have to meet very stringent criteria.

Gillian Guy, Chief Executive of Citizens Advice, said:

"Cuts to legal aid have created an advice gap, stranding people with nowhere to turn. At precisely the time when people's need for specialist advice on issues such as housing and welfare increased, provision for this support has been slashed.

"Modern life presents increasingly complex problems and people need help to understand, adjust to, and in many cases challenge decisions affecting their income, housing and work status.

"In a rapidly changing world, where people's expectations of services are rising, accessing the right advice at the right time will be critical to help people solve problems and understand what government changes mean for them."

Think tank recommends "family hubs" in place of children centres
The Centre for Social Justice (CSJ) has recommended that children's centres be replaced with family hubs offering advice for couples facing relationship difficulties.

The CSJ is particularly concerned about the high rate of relationship breakdowns among low income families. It claims that by the age of five, 48 % of children are not living with both parents.

It wants family hubs to focus on long-term family stability by offering antenatal and postnatal services as well as advice on debt, careers support and relationship advice.

For more information click here

Case law update

Murphy v Murphy [2014] EWHC 2263 (Fam)
On 7 November 2013 the parties participated in a FDR at the Principal Registry before a deputy district judge.  The parties reached an agreement on most, but not all issues.

They agreed final capital apportionment, including the making of a pension sharing order. They agreed the rates of periodical payments for their two children and certainty that the husband would pay current nursery school fees. They also agreed current levels of periodical payments by the husband to the wife.

The two areas of disagreement were:

a) whether there should be some "step down" in the relatively near future in spousal maintenance; and

b) whether those periodical payments payable to the wife should be the subject of some ultimate term or cut off.

An order was made but with provision that the case should be transferred to the High Court for determination of the issue of maintenance.

Statements were exchanged relating to earning capacity and current incomes.  The present hearing before Mr Justice Holman was to determine the outstanding issues relating to spousal periodical payments.

At paragraph 6, Mr Justice Holman commented that this was somewhat unusual as what commonly happens was "that as part of a negotiated outcome (or even a court imposed outcome) there is some further capital adjustment or capital provision from a payer to a payee spouse to reflect or compensate for subsequent cessation or reduction in levels of maintenance".  In this case, as the capital award had been agreed, there was no power left to the judge to make any further capital adjustment.

The wife was aged 42 and the husband, 35.  They met in 2004 and began living together in 2005.  They married in 2007.  The marriage broke down and they finally separated in April 2013 when the wife petitioned for divorce.  The relationship was therefore about 8 years.

At the time of the marriage and up until shortly before the parties' children were conceived, they both had good employment.  The wife received a salary of £30,000 p.a. in her last job.

In December 2011 the parties' twins were born, now aged 3 ½.  The wife stopped working.  By the time of the FDR in November 2013, the wife was still engaged in full-time childcare.  In her replies to questionnaire, she stated she planned to embark on teacher training as soon as she could.

It was agreed that the former matrimonial home (worth approximately £700,000) be transferred to the wife.  She reduced the previous mortgage as a result of the lump sum payable by the husband.  There was net equity of approximately £430,000 in the house.  In addition, she had capital of approximately £28,000.  She had pension provision of approximately £44,500.  The husband had a similar amount.

The husband was working in Hong Kong and returned to work in London where the tax burden was considerably higher.  Consequently, during these proceedings, the husband had intimated that he would be making an application for a downward variation of the maintenance he was currently paying. That application was not before the court.

The wife, in submissions stated that after some research she had concluded that training to be a teacher was not going to be viable given her child care commitments and that consequently, a "step-down" in spousal maintenance should not be made, nor should there be an overall term for maintenance.

After an analysis of the wife's ability to work full time and provide childcare, Mr Justice Holman declined to agree to a step-down of maintenance.  He added that to put a figure on what the wife could be earning in three years time was 'totally speculative'.

Turning to the question of whether and when maintenance should cease, His Lordship stressed the material change that the twin children had brought to the couple's lives and consequent finances.  The judge was mindful of the duty in s25A(2) of the Matrimonial Causes Act 1973 namely:

"Where the court decides in such a case to make a periodical payments…order in favour of a party to the marriage, the court shall in particular consider whether it would be appropriate to require those payments to be made…only for such term as would in the opinion of the court be sufficient to enable the party in whose favour the order is made to adjust without undue hardship to the termination of his or her financial dependence on the other party."

Mr Justice Holman concluded that on the husband's proposal, maintenance should cease when the wife was aged 57.  She would have limited earning capacity; limited pension and would not receive the state pension until she was 67.

Consequently, and despite the relatively short length of the marriage, the judge declined to make a term order.

Cooper-Hohn v Hohn [2014] EWCA Civ 896 
On 8 April 2014, Coleridge J refused an application by the wife for permission to adduce expert evidence as to the value of management entities through which the husband received financial reward for the profitable management of a hedge fund.

The final hearing was listed for 30 June 2014.  The question whether the management entities had any intrinsic value was not taken by the wife until 28 March 2014, some three months before the final hearing date.

The refusal was on three bases:

1. the proposed evidence was speculative and unlikely to be relevant to an issue in the case;

2. the issues have been identified and disclosure before procedural preparations have been made in accordance with consent orders made long ago in the full knowledge of the asserted issue now identified by the wife;

3. the application was made very late and in breach of the court's timetable and orders.

The appeal judges concluded that Coleridge J was right on each basis and that there was no real prospect of success in the appeal.

The husband is a successful hedge fund manager.  The application by the wife was in relation to the alleged value of the husband's interests in vehicles known as TCI management entities.  The income stream of the management entities depends upon the husband's continued willingness and ability to manage the fund and the funds' continued willingness to have him manage the funds rather than appointing a new fund manager.

The management entities had always been disclosed.  He asserted a value in respect of the same limited to their net investment asset value.  The husband's position was that he is the sole investment decision maker and "key man".  If he chose not to manage the fund, this would trigger an inevitable liquidation of the fund and cessation of the income stream.

The assets in the case are significant and have attracted media attention.  The wife claimed that the husband was only proposing a share of 25% for the wife.  The value attributable to the management entities was, on her case, relevant.

The husband asserted that the value of the entities had always been included in his disclosure.  It had only been challenged by the wife some 16 months later.

Ryder LJ reviewed the wife's application against FPR r.1.1 – the overriding objective. He also reviewed the rules relating to expert evidence.  At paragraph 37 he said:

"Some assets cannot sensibly be ascribed a capital value.  It is a fallacy that every asset must be valued in every case or even in every sharing case.  Of course, the court will need to draw a balance sheet or asset schedule, but that does not lead to the conclusion that every asset must be valued in order for the court's statutory duty to be complied with.  The valuations sought in this case would likely be theoretical.  It would not be a valuation of assets available for distribution between the parties."

The appeal judges were also critical of the timing of the wife's application.  A reminder of Rule 25 and an expectation that the rules should be complied with was explicit

BE v DE [2014] EWHC 2318 (Fam)
This case involved an application before Mr Justice Bodey brought by the husband on 15 May 2014 asking that the wife redact a statement dated 28 April 2014 where she referred to an occasion which the husband maintains was a without prejudice meeting between them on 22 April 2013.  A copy of the proposed form of written agreement "the document" was exhibited to her statement.

The wife's position was that the without prejudice protection did not attach in this instance and/or if it would have attached, the protection was waived by the husband thereby entitling her to refer to the contents of the document concerned.

The issue in question related to the habitual residence of the wife.  The wife had petitioned in England for divorce on the basis that she had been habitually resident for a period of 12 months prior to the presentation of the petition.  The husband said that this was not true.  He had issued proceedings in another country.  The husband's case was that the wife was forum shopping.

The document was relevant because it contained a proposed provision that the wife should be entitled to continue living at her address in London "…which she currently lives in".  The wife said that this supported her case about having her main residence in England.

The wife is 40 and is from country Y.  The husband is 54 and is from country X.  They married in 2002 and have no children. The husband is a highly paid higher executive officer of a well known financial institution.  The parties lived a rich, international lifestyle.

In 2013 the marriage was in difficulties but both parties hoped it could be repaired.  They differed over where the wife should live: in England (according to the wife) or in country X (according to the husband).

On 2 April 2013 the wife issued a protective petition in England.  She did not tell the husband, nor did she instruct service of him.  On 5 April 2013, the husband issued a protective petition in country X.  He did not tell his wife, nor was it served on her.

On 22 April 2013 the couple went for dinner together.  The wife asserted that the husband presented her with a document to sign and that when she had refused to sign it, the husband had become very cross.

The wife's statement which exhibited the document led to the husband's notice of application of 15 April 2014 for redaction.  He stated in his affidavit that the discussions were settlement discussions and that the wife had been fully aware of this.

The judge was presented with a lever arch file of authorities.  He concluded that the starting point is that written or oral communications made in a genuine attempt to settle a dispute between the parties will not be admitted in evidence.  Parties should be encouraged to settle their disputes without resort to litigation such that they can speak freely.

Bodey J concluded as follows:

1. There was not clearly a 'dispute' or sufficiently definable dispute between the couple which the law envisages and requires for the without prejudice protection to attach.

2. If he was wrong and there was a dispute, was it "clear from surrounding circumstances" that the parties were seeking to compromise such dispute?  The husband averred that the wife was fully aware that they were meeting to discuss settlement.  The wife says she had no idea that the dinner was intended as a negotiating opportunity.

3. If the judge was wrong on both 1 and 2 above (i.e. there was a dispute which it was clear from the circumstances that the husband was evincing a genuine wish to settle), then had the husband waived privilege?  The judge did not consider any question of waiver arose for so long as the wife was only referring to the fact of the dinner on 22 April 2013 and to the fact of the husband's having produced the document for her to sign.  Hence, it was not waiver by the husband for him not to have taken the without prejudice point in answer to the wife's earlier affidavits.

Consequently, Bodey J was not persuaded that the wife should redact any part of her statement nor the exhibit to it be removed.  The husband's application was dismissed.