Berkeley Lifford Hall Accountancy ServicesIQ Legal TrainingAlphabiolabsHousing Law Week

Home > Articles > 2015 archive

Finance & Divorce Update February 2015

Jessica Craigs, senior solicitor of Mills & Reeve LLP analyses the financial remedies and divorce news and cases from January 2015

Jessica Craigs, senior solicitor of Mills & Reeve LLP

This update is provided into two parts:
1 News in brief
2 Case law update

News update

President opens new family court centre in East London
On 22 December 2014 Sir James Munby, President of the Family division opened a new family court in Canary Wharf. 

The 12 courtroom centre will deal with family work, including divorce, child contact, adoption and local authority child protection cases. It has been specially designed and equipped to support video-linked hearings in four of the courts for the benefit of vulnerable witnesses.

Sir James Munby said:

"The opening of the East London Family Court marks another vital step in the changes to the way family cases are dealt with in London. It will improve access to family justice for Londoners. I congratulate all who have worked so hard to bring it to fruition."

Baroness Deech criticises current system
Baroness Deech, chair of the Bar Standards Board repeats her concerns that divorce law should be tougher on women.  The Telegraph reports that the independent peer in the House of Lords believes that the current law sends out a "bad message" to young women namely that careers are unnecessary and they could just "find a footballer".

Baroness Deech is currently steering a private member's bill through the Upper House that would make prenuptial and postnuptial agreements binding.  In 2014, the Law Commission proposed that pre-nuptial agreements become legally binding (subject to certain criteria).
Click here for the full article

Sir Paul Coleridge proposes tax breaks for long marriages
The Telegraph reports that Sir Paul Coleridge proposes tax breaks at 'milestone wedding anniversaries' for married couples.

He is quoted as saying:  "Increasing the tax allowance at five years, 10 years and so on would do two things – it would make clear staying together does not cost the state a penny while splitting up does and it would send a message to couples to stay together."

Research published previously by Sir Paul's foundation concluded that children whose parents were not married were twice as likely to suffer a family break-up as those whose parents were married.

Likely venue for the London and South East Centre: Bury St Edmunds
The Ministry of Justice has provided more information about centralisation for divorce processing in England and Wales.  When asked about the London and South East Centre, the reply was as follows:

'Bury St Edmunds has been identified as the likely venue for the London and South East Centre but consultation has not been completed. If the current proposal is accepted implementation will not commence until 2015 because the Bury St Edmunds building is being refurbished and is currently unoccupied. Building works are expected to be completed in March 2015.

Bury St Edmunds was proposed as the divorce centre for the South East and London following a thorough review of the HMCTS estate, London and South East workload and resource availability. The Bury building was the most cost effective option, is a sufficient size and provides the greatest scope to improve the service delivered to court users.'

DWP reports child maintenance payments at an all-time high
The number of absent parents who are now paying towards the cost of their children through the Child Support Agency (CSA) has hit an all-time high, thanks to tough enforcement rules now in place.

Nearly 9 out of 10 of non-resident parents within the CSA system are now contributing towards child maintenance to support their children, with help from the CSA.

Last year 184,090 active Deduction from Earnings Orders were in place, taking a total of £330 million directly from wage packets to help pay for the upbringing of children.

Click here for the full article

Case law update

Y v Y (Financial Remedy - Marriage Contract) [2014] EWHC 2920 (Fam)
An application by the wife for financial remedy orders involving the extent to which the wife was entitled to a full share of the marital acquest owing to a marriage contract the parties entered into under French law.

The parties were both French nationals who contracted their marriage under French law, opting for the separation de biens regime. As a matter of law, if the divorce proceedings were being determined in France, the contract would be binding.

The marriage lasted 22 years with Decree nisi in May 2013.  The parties married in June 1991 after two years pre-marriage cohabitation.  Three children were born during the course of the marriage.  Two of the children were, by the time of the hearing adults and one, 15 years old.

The husband was 50 and the wife, 49.  They began their relationship at the beginning of 1989.  Within 6 months they had moved in together and were sharing a flat in Paris.  Having married in June 1991 (when the wife was in the early stages of pregnancy), they spent a further four months in Paris before the husband moved to London in connection with his employment as a banker.  Their son was born some three months later and the wife left France to join the husband in London.  The current family home in West London was purchased at the end of 1998. 

London was the family home throughout the course of the marriage.  However, they retained significant elements of their French heritage and identities.  Each of the children had a French education.  The parties remain domiciled in France; H has a significant number of property investments in France and submitted tax returns to the French IRS; their family connections in France remained strong, and they retained an extended network of social ties within that jurisdiction.

The husband's case was that the wife's financial claims at the end of this marriage should be considered squarely within the context of a contrat de mariage into which the parties entered some 48 hours before their wedding in France ("the marriage contract").  It was a contract which contained a specific election by this couple of a property regime known as séparation de biens.  Under French law, a marriage contract, once notarised, is absolutely binding on the spouses once the marriage is celebrated, save in very limited respects (none of which applied in this case).  Its terms follow the spouses both during the subsistence of their marriage and in the event of its dénouement.  In the absence of a specific election, spouses are deemed to have chosen the default regime of community property.  If they do not wish to adopt that regime, they are obliged to enter into a marriage contract in order to adopt one of the alternatives defined in the French Civil Code. 

In these proceedings, the husband argued that the choice of marital regime by the parties ought to be treated in the same legal context as a prenuptial agreement. Accordingly, in this jurisdiction, he contended, the marriage contract should be given central and magnetic prominence in determining the division of assets, excluding any assets accrued during the marriage. The wife sought a full share of the marital acquest.

At paragraphs 21 to 66 of her judgment, Mrs Justice Roberts provides the factual background to the parties' relationship and the circumstances when they entered the marriage contract. 

At paragraph 67, Roberts J sets out her findings of fact in relation to the marriage contract.  The judge concluded that when the wife signed the formal contract two days before their wedding, she understood that the contract would govern how the parties would arrange their financial affairs during the marriage. The wife's case that the marriage contract was sprung on her by the husband for the first time two weeks before the wedding was rejected. However, Roberts J found that the wife did not have a full understanding of the legal implications which would flow from a divorce at the time that she signed the marriage contract, nor the rights which she might be giving up in that event. In particular, the wife had no proper or informed understanding that "were the marriage to founder many years down the road and regardless of what their circumstances might be at the time, she would be confined to a financial outcome which resulted in a significant divergence of equality between the parties".

The existence of the contract was a relevant factor regardless of the wife's appreciation of the terms of the agreement.  The judge grappled with the weight to be attached to the agreement. Reviewing the authorities, including Radmacher (formerly Granatino) v Granatino [2010] UKSC 42, Roberts J considered it was difficult to see how " 'a full appreciation of [an agreement's] implications' (per Radmacher) will not, in almost every case, involve both a full understanding on the part of both parties as to (i) the nature and effect of the terms, and (ii) of the circumstances in which its implementation in a jurisdiction other than that in which it is made will, or might, affect the scope of any legal award or remedy which otherwise be available to one of the parties in the event of divorce.  That does not mean that parties will need to seek advice on all possible permutations; such a result would be plainly absurd."   On the facts of this case, the wife did not have all the information which was likely to have been material to her decision and/or that she intended that the agreement should govern the financial consequences of the marriage coming to an end.  

Consequently, Roberts J concluded that the weight the court could legitimately attach to the existence of the marriage contract and the operation of its terms during at least part of this couple's marriage was to give full recognition to the principle that, with a cross-check as to the wife's needs, the non-matrimonial property owned by either of the parties should be excluded from any entitlement to share. 

McHugh v McHugh [2014] EWCA Civ 1671 
Court of Appeal's determination in financial remedies appeal as to the extent of the appellate court's jurisdiction where permission to appeal has only been granted on limited grounds

The parties' matrimonial finances were resolved at a final hearing before a District Judge. H's application for permission to appeal was refused by the District Judge, and by the Circuit Judge on the papers. Upon the application being renewed at an oral hearing, HHJ Caddick granted permission to appeal, limited to two grounds: the treatment of W's inheritance and the order for immediate sale of the family home. 

Following the hearing of the appeal, H applied for permission to appeal to the Court of Appeal. One of the grounds was that evidence had not been given under oath. H was granted permission by Sir Robin Jacob who suggested that the appeal ought to be allowed by consent with an order for expedited retrial. When W refused to consent, the question as to the Court of Appeal's jurisdiction to hear the appeal arose.

It was held by the Court of Appeal that where permission to appeal is given on limited grounds it is not open to an appellant, nor another judge/court, to broaden the grounds. FPR 2010 PDA 30A para 4.21 is plain:

"4.21 If the appeal court refuses permission to appeal on remaining issues at or after an oral hearing, the application for permission to appeal those issues cannot be renewed at the appeal hearing (see section 54(4) of the Access to Justice Act 1999)"

Permission to appeal could be set aside where there was a compelling reason to do so. Lack of jurisdiction was a compelling reason (Athletic Union of Constantinople v NBA (No2) & Ors [2002] EWCA Civ 830). Permission to appeal was therefore set aside.

B v B [2014] EWHC 4545 (Mrs Justice Roberts)
Cross-appeals by an appellant husband (H) and respondent wife (W) against parts of a raft of final orders made by DDJ Airey in the Central Family court on 2 July 2014.

The relevant parts of the order of DDJ Airey were as follows:

• The sale of the FMH (with specific provisions about "lotting" and the time of sale).
• Liabilities to be met from the sale proceeds with the balance being divided equally between them.
• Proceeds of sale from another property to be divided equally between the parties.
• Cash held in various bank accounts to be divided equally.
• Pension funds divided equally.
• Spousal periodical payments in favour of W on a joint lives basis at the rate of £6,500 per month.
• Specific reference (by recital) in respect of the W retaining her contingent interest in her mother's property which came to her as part of the testamentary provision made by her late father under his Will.

At appeal, the total liquid assets available for division (excluding pension) had diminished to less than £90,000 if the FMH did not secure planning permission.  Even if the permission was granted, the available liquid assets were unlikely to exceed £577,000.
H appealed prior to the receipt of a sealed order.  He challenged:

• The quantum of periodical payments;
• The retention of W of the inheritance;
• The sole conduct of the sale of the FMH (by W); and
• The division of the bank accounts resulting in a lump sum payment of £10,700 to W.

W issued a Respondent's notice whereby she sought to challenge the equal division of the balance of the net proceeds of sale of the FMH.  She sought an uplift to reflect the finding made by the DDJ that H had a mortgage capacity of £340,000. She also sought to secure a periodical payments award of £100,000 in her favour.  Finally, she indicated that she would be applying for permission to adduce fresh evidence in the appeal in relation to H's failure to comply with the lump sum orders.

The husband and wife were both aged 53 at the time of the final hearing. They had been married for 30 years and had two adult children, the younger of whom, aged 19 at the time of the final hearing, was still in university education and living with W. H had, for a significant part of the latter years of the marriage, worked in Dubai, where he had enjoyed a tax free income and various allowances. Although part of their married lives together was spent in Dubai, W returned to make her home with the children in England.  H indicated throughout the trial that he wished to return to this jurisdiction to work as soon as it was financially viable for him to do so.

H's salary was £87,714 per annum and he was also paid an allowance in respect of accommodation (£38,000 per annum) and car expenses (£9,500 per annum). At least for the last two years, H had received a non-contractual discretionary bonus which had in the past year been £55,000. W had for many years been a mother and homemaker, albeit in recent years she had been involved in a local catering business which supplied her with an income of £6,000.  The DDJ held H to have an "income or earning capacity" of £170,000 and W of £10,000 per annum.

The DDJ held that that the case turned fundamentally on an appreciation of the parties' respective needs and found there to be no reason for a departure from equality in relation to capital (including pensions) and income. He acknowledged that income of £82,000 per annum was less than W's needs but held that it was a fair amount.

Both parties sought permission to appeal and their applications came before Roberts J.

H sought to challenge a number of aspects of the order, but the only point on which he would be successful was in respect of periodical payments. Roberts J granted permission to appeal only on two grounds.  First, that the DDJ had erred in treating H's housing and car allowances paid by his employer as income available to him to meet other outgoings, including spousal maintenance and second, that by treating all elements of H's remuneration package as available income, error in finding H had an earning capacity of £170,000 net per annum.

Roberts J commented that she would not necessarily have held the outcome to be inappropriate in a case where a husband had a conventional net income of £170,000 per annum. However, she held that the DDJ had failed to address the issue of liquidity and/or affordability in terms of cashflow and the element of H's income which would be available for discretionary spending and meeting W's income award. The DDJ had not tested the fairness of his award by notionally deducting the housing and car allowances from H's otherwise disposable monthly income.

On the subject of the treatment of H's bonus, Roberts J summarised the applicable principles contained in the cases of H v W [2013] EWHC 4105 (Fam), AR v AR (Treatment of Inherited Wealth) [2012] 2 FLR 1 and noted in particular the dicta of Eleanor King J (as she then was) in H v W:

'39. The proper approach would be for the District Judge to calculate a total figure for maintenance which covers what he finds to be her ordinary expenditure together with such sum as would provide for what Moylan J described as additional, discretionary, items which will vary from year to year and which are not reflected in her annual budget.  Having carried out this exercise the court will then make a monthly order to be paid from salary at whatever rate the District Judge feels to be fair, and the balance to be expressed as a percentage of the net bonus up to a stated maximum each year.'

and that of Moylan J in AR v AR:

'[71] … in my judgment the court's task when addressing this factor is not to arrive at a mathematically exact calculation of what constitutes an applicant's future income needs.  It is to determine the notional annual income which, in the circumstances of this case, it would be fair for the wife to receive.  Further in a case such as this the wife is entitled to have sufficient resources to enable her to spend money on additional, discretionary items which will vary from year to year and which are not reflected in her annual budget …..'.

Roberts J held that, disregarding the housing and car allowance resulted in the fair level of maintenance to be paid by H to W being £42,000 per annum, plus 25% of H's net bonus receipts in any one year, and therefore substituted this amount for the original amount of £78,000 per annum.

Roberts J refused permission to W to appeal the award in respect of capital. She argued that the equal division had not enabled her to purchase a suitable home. She was not satisfied that there were sufficient prospects of W succeeding in persuading the court that an equal division was unfair. Both parties would have to recalibrate their expectations in respect of the accommodation they could afford.

W also sought permission to appeal the DDJ's refusal to order security for the periodical payments. She had sought a charge over £100,000 of the proceeds of sale of the FMH as security. Roberts J refused permission to appeal, holding that the DDJ had an "unfettered discretion" as to whether or not to accede to W's request for security and he had given reasons for rejecting her application.