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Finance & Divorce Update November 2015

Edward Heaton, Principal Associate and Jane Booth, Associate, both of Mills & Reeve LLP analyse the news and case law relating to financial remedies and divorce during October 2015

Edward Heaton, Principal Associate and Jane Booth, Associate, both of Mills & Reeve LLP 

This month's bumper Finance & Divorce update is provided in two parts:

A. News in brief

House of commons briefing paper published on transparency in the family court

The House of Commons library have published a briefing paper considering transparency in the Family Court, including communication of information and media attendance, and background on recent changes in the area.

The briefing paper also considers the issues of confidentiality and openness within the family court.  

The briefing paper can be accessed here

Mediation starts in the last quarter up by a third

The Ministry of Justice has published the legal aid statistics for April to June 2015. 

Over the last year the number of mediation assessments has been at around half the pre-LASPO levels.  The number of mediation starts fell by a similar proportion to assessments following LASPO but have recovered more strongly and were up by 33% in the last quarter compared to the same period in the previous year.

Over the last year, 64% of mediation outcomes involved successful agreements.  Of these, the children category had the highest proportion of agreements being successful at 67%.

The report can be found here.

Further progress report on the divorce centres

Family Law solicitor, Tony Roe, made a series of information requests of the Ministry of Justice and, as a result, HMCTS have explained how the new system is working.  The update is briefly as follows:

o The work of all 45 London and South East courts is now transferred to the Bury St Edmunds divorce centre. 

o The centre is receiving between 1,250 to 1,300 petitions per issue per week.  In September, 18.5% of petitions were returned due to errors.

o The centre expects to issue upwards of 40,000 petitions per annum, with an average of approximately 800 petitions per week. 

o Petitions are currently being processed in an average of 4 days (between 1 and 8 days of receipt).  

o There have been delays because of a problem at the acknowledgement of service stage and at the point of directions for trial, but those issues have now been addressed.

The centre has said that their revised goals are that all work is to be processed within 5 days of receipt by the end of October 2015, and within 2 days of receipt by the end of December 2015.

MP says couples should be allowed to apply for "no fault divorce"

On 13 October 2015, Richard Bacon MP proposed an amendment to family law which could enable couples to say that there is no fault for the break up and apply for a "no fault divorce".  This would involve both parties signing a declaration stating that the marriage has broken down "irretrievably".
MPs passed the first reading of Mr Bacon's no fault divorce bill on Tuesday 13 October.

Mr Bacon made it clear that he did not want to make divorce "easier" and increase the number of divorces.   However, he indicated that he wanted to raise the option of divorce without blame rather than having to rely on one of the five facts currently required.

Family mediators move towards self-regulation

In an effort to boost public confidence in mediation, the Family Mediation Council has established a professional register both for fully accredited mediators and for those mediators who are working towards accreditation.

It is also working on setting up an independent standards and regulatory body, comprised of three mediators and three independent members.  The Family Mediation Standards Board would sit under the umbrella of the Family Mediation Council and be chaired by Robert Creighton, a retired NHS chief executive and former civil servant. 

The council hopes that these measures will protect against poor practice and provide recognition and support for registered family mediators.

C v C (8 October 2015) – mental health, earning capacity and the needs of children

The Court of Appeal (Civil Division) judgment in this case has yet to be reported but, in short, the matter was an appeal in relation to an alleged failure on the part of a judge to take account of a wife's mental health problems in assessing her earning capacity.

The husband had secured a child arrangements order that the child of the family live with him due to concerns over the wife's care.  The wife's contact with the child was supervised by her parents.

An award was made of 60:40 in favour of the husband who was in a new relationship and had a second child through that relationship.  The division allowed the husband to purchase a property, with the help of a mortgage, for himself, his partner and the two children and the wife to purchase a smaller property for herself, mortgage-free.  There was to be a clean break.

The wife argued that the Judge had failed to take into account her mental health problems in assessing her earning capacity, but it was held that any failure had not impacted upon the award – there were limited assets in the case and the needs of the child of the family were the priority, the husband's housing was at the bottom end of the bracket and the husband's financial position was such that he simply did not have the capacity to make periodical payments.

B. Case law update

Sharland (Appellant) v Sharland (Respondent) [2015] UKSC 60

This appeal, by the wife, considered the impact of fraudulent non-disclosure in relation to a financial settlement agreed between the husband and the wife on divorce.  

The parties married in 1993 and separated in 2010.  They had three children, one of whom has severe autism and will require care from the wife throughout his life.  The husband is an entrepreneur who has a substantial shareholding in the software business that he had developed, AppSense Holdings Limited.  In the financial proceedings between the parties, the value and manner of distribution of this shareholding was the principal matter in dispute. 

Both parties instructed valuers who provided valuations on the basis that there were no plans for an Initial Public Offering of the company.  The trial took place in the High Court before Sir Hugh Bennett in July 2012.  The husband gave evidence confirming there was no Initial Public Offering "on the cards today".  The parties reached a settlement by which the wife agreed to receive 30% of the net proceeds of sale of the company, whenever that took place, together with further assets including £10m in cash and property. 

The judge approved the agreement and a draft consent order was prepared.  Before it was sealed, however, the wife became aware, due to reports in the press that the company was being actively prepared for an Initial Public Offering.  This was expected to value the company at a figure far in excess of the valuations prepared for the hearing (between US$750m and US$1,000m).

The wife immediately invited the judge not to seal the consent order and applied for the hearing to be resumed.  At the hearing of her application in April 2013, the judge found that the husband's evidence had been dishonest and that, had he disclosed the Initial Public Offering plans, the court would have adjourned the financial proceedings to establish whether it was going to go ahead.  However, by the time of the hearing, the Initial Public Offering had not taken place and was not now in prospect.  The judge declined to set aside the consent order on the ground that he would not have made a substantially different order in the financial proceedings, applying the decision in Livesey (formally Jenkins) v Jenkins [1985] AC424.

The Court of Appeal upheld the judge's order and the wife appealed to the Supreme Court.  

The Supreme Court unanimously allowed the wife's appeal.  The consent order would not be sealed and the wife's application for financial relief is to return to the Family Division of the High Court for further directions. 

Lady Hale said that it "is in everyone's interests that matrimonial claims should be settled by agreement rather than by an adversarial battle in court.  The financial resources of the family are not whittled away by the often substantial legal costs involved. The emotional resources of the family are not concentrated on conflict. The future relationship between the adult parties is not soured, or further soured, by that conflict".

However, Lady Hale went on to say that "it is not possible for such an agreement to oust the jurisdiction of the court to make orders about their financial arrangements".  Such an agreement does not give rise to a contract enforceable in law, but the court will make an order in terms agreed unless it has reason to think there were circumstances into which it ought to enquire.  

Lady Hale said that, although the court still has to exercise its statutory role, it will be heavily influenced by what the parties themselves have agreed.  She explained that, allied to this responsibility of the court, it is the duty of the parties to make full and frank disclosure of all relevant information to one another and to the court.

Lady Hale said that the present case was one of fraud.   The general principle that fraud unravels all is correct.  The only exception to this is where the court is satisfied that:

(i) at the time when the consent order was made, the fraud in question would not have influenced a reasonable person to agree its terms; and

(ii) had it known then what it later knows, the court would have made a significantly different order, whether or not the parties had agreed to it. 

The burden of establishing the above must lie with the perpetrator of the fraud.
Lady Hale said that, on the facts, the judge would not have made the order he did, when he did, in the absence of the husband's fraud.  Accordingly, the consent order should have been set aside. 

The judge had misinterpreted Livesey (formerly Jenkins) v Jenkins [1985] AC 424, which had drawn a distinction between triviality and materiality at the date of the order and not at some later date.  Livesey was not, in any event, a case involving fraud.  The judge had been wrong to deprive the wife of a full and fair hearing of her claims by remaking his decision at the hearing of her application on the basis of the evidence before him.  Lady Hale said that the consent order should, therefore, not have been sealed, and the matter should return to the Family Division for further directions.  

Lady Hale said "the divorce court retains jurisdiction over a marriage even after it has been dissolved. While it is now possible for the court to achieve a clean break between the parties, the issue raised by an application to set aside for fraud, mistake or material non-disclosure is whether it was consistent with the court's statutory duties so to do".

Lady Hale explained that section 31F(6) Matrimonial and Family Proceedings Act 1984 gives the family court the power "to vary, suspend, rescind or revive any order made by it".  Lady Hale endorsed the observations of Lord Wilson in the judgment in Gohil v Gohil [2015] UKSC 61 (see below) on the question of how such applications should be made, while emphasising that the renewed financial remedy proceedings need not start from scratch.  The court may be able to isolate the issues to which the misrepresentation or non-disclosure relates and deal only with those issues.

Lady Hale went on to refer to the fact that the Supreme court had recently emphasised, in Vince v Wyatt (Nos 1 and 2) [2015] UKSC 14, the need for active case management of financial remedy proceedings, "which … includes promptly identifying the issues, isolating those which need full investigation and tailoring future procedure accordingly".  There is enormous flexibility to enable the procedure to fit the case, and this applied just as much to cases of this sort as it did to any other.

Gohil v Gohil [2015] UKSC 61

This is a case where the Supreme Court unanimously allowed the wife's appeal and reinstated an order setting aside a financial consent order on the grounds of fraudulent non-disclosure.

Background to the appeal

The appellant wife ("the wife") used to be married to the respondent husband ("the husband"), a former solicitor.  In 2002, the wife petitioned for a divorce.   In response to her financial claims, the husband asserted that all of his ostensible wealth represented assets that were held by him on behalf of his clients.  Shortly before 30 April 2004, the husband produced a balance sheet of what he alleged his personal assets to be which, when set against his liabilities, yielded a net deficit of £311,512.  On 30 April 2004, the parties settled at an FDR.  Whilst the ancillary relief proceedings were compromised, the wife suspected that the husband had not fully disclosed his assets.  

The order provided for the husband to make a lump sum payment in final settlement of the wife's claims (which was eventually paid) together with periodical payments (which the husband stopped paying in 2008).  The consent order contained a recital setting out the wife's suspicion that the husband had not provided full and frank disclosure of his financial circumstances and stating that she was compromising her claims despite this to achieve finality.  In 2007, the wife applied to set aside the 2004 order on the grounds that the husband had fraudulently failed to disclose his assets.  The ensuing proceedings were delayed, largely because the husband was charged, in 2008, with serious money laundering offences dating back from mid-2005.  The husband was convicted and committed to prison in 2011.  The husband remains in prison, serving a 10 year sentence, and confiscation proceedings against him are ongoing.

The wife alleged that new evidence had come to light in the criminal proceedings that showed that the husband had not given full disclosure when the consent order was made.  In September 2012, after an 8 day hearing, Moylan J set aside the 2004 order.  His decision was made on the basis that (a) there had been serious non-disclosure by the husband when the 2004 order had been made and, had the husband made full disclosure, the outcome would have been different, and (b) because the wife's evidence had satisfied the criteria in Ladd v Marshall [1954] 1 WLR 1489 (which governs when fresh evidence may be produced on appeal), it followed that the wife's application should be allowed.

The husband appealed.  The Court of Appeal allowed the husband's appeal.   It held that Moylan J had incorrectly applied the Ladd v Marshall criteria.  The effect of the order of the Court of Appeal was, therefore, "to prevent the wife from asking the court to revisit the level of capital provision made by the husband for her under the order dated 30 April 2004".

Appeal to the Supreme Court

The wife appealed to the Supreme Court, which unanimously allowed her appeal and reinstated Moylan J's order.  

The husband had suggested that, as a High Court judge, Moylan J had not had jurisdiction to set aside an order of the High Court.  Whilst this argument had not been pursued in the Court of Appeal, the Supreme Court made the following observations:

(i) "The Court of Appeal has long recognised that it is an inappropriate forum for enquiries into non-disclosure issues raised in proceedings for the setting aside of a financial order:… The Court of Appeal is not designed to address a factual issue other than one which has been ventilated in a lower court";

(ii) "That the Court of Appeal is an inappropriate forum is clearly demonstrated by the present case: there is no way in which it would have devoted its resources to the conduct of an intensive eight-day fact-finding hearing, upon controversial evidence given by live witnesses and contained in a mass of documents, such as was conducted by Moylan J;

(iii) There is an urgent need for definitive confirmation of the High Court's jurisdiction to set aside a financial order made in that court;

(iv) The Supreme Court endorsed the conclusion of the Family Procedure Rules Committee in relation to its "Setting Aside Working Party", set out in the minutes of its meeting on 20 April 2015.

The Supreme Court said that the recital in the consent order had no legal effect on a financial order in divorce proceedings.  The Supreme Court stated that "… the spouse has a duty to the court to make full and frank disclosure of his resources, without which the court is disabled from discharging its duty under section 25(2) of the Matrimonial Causes Act 1973 and any order, by consent or otherwise, which it makes in such circumstances is to that extent flawed.  One spouse cannot exonerate the other from complying with his or her duty to the court".

The Supreme Court stated that the Ladd v Marshall criteria would have no relevance to the determination of an application to set aside a financial order on the grounds of fraudulent non-disclosure.  The Supreme Court said that the Court of Appeal was wrong to accept an argument that the criteria should apply to determine what evidence should be produced because:

(i) the Court of Appeal would not have conducted the necessary fact finding exercise;

(ii)  it pre-disposes that there had already been a trial whereas, in this case, the wife's first opportunity to produce the evidence had been at a hearing before Moylan J;

(iii)  the evidential criteria should not depend on the level of the court; and

(iv)  "overarchingly the argument loses sight of the basis of an application to set aside a financial order for non-disclosure.  It is that the respondent failed to discharge his duty to make full and frank disclosure.  The Court of Appeal held that it was open to the wife in the present case not to have consented to the order on 30 April 2004; instead to have proceeded to a substantive hearing of her financial claims; and, if reasonably diligent, there to have adduced the evidence of the husband's resources which she adduced before Moylan J in 2012.  But at that hypothetical hearing the onus would not have been on her to adduce evidence of the husband's resources.  The onus would have remained on him".

The Supreme Court said that, through no fault of his own, Moylan J had relied upon evidence from the husband's criminal proceedings obtained from sources outside the UK (which had been held inadmissible and been discounted by the Court of Appeal).   However, even if Moylan J had referred only to the remaining evidence, he would still have concluded that the husband had been guilty of material non-disclosure. 

The Supreme Court ordered that Moylan J's order from September 2012 be reinstated and that the wife's claim for further capital provision should, therefore, proceed before him.

The Supreme Court observed that "it is unclear whether her claim will succeed and, if so, to what extent.  Moylan J will need to decide, no doubt with the assistance of the CPS, how best to synchronise his conduct of her application with the confiscation proceedings pending against the husband in the Crown Court; and he will need to investigate not only the extent of the husband's current assets but the extent to which they represent the proceeds of his crimes.  For, although the court has jurisdiction to order a transfer to the wife of property so tainted, it will ordinarily, as a matter of public policy, decline to exercise its jurisdiction to do so (CPS v Richards [2006] EWCA Civ 849) and, in the present case, the wife has made clear that she will not ask it to do so.  In its submissions to Moylan J, the CPS informed him of its allegation in the confiscation proceedings, disputed by the husband, that he had realizable assets of almost £35m.  With respect, the Court of Appeal was wrong to say that, to the extent that they existed, the husband's realisable assets would necessarily represent the proceeds of crime; but some or indeed all of them may well do so and Moylan J faces an unenviable task in keeping the scale of his inquiry within tight bounds".

BR v VT [2015] EWHC 2727 (Fam)

This was an application made by a husband for an interim order for the sale of the matrimonial home.  

By way of background, the parties had married in London in 1998.  They had a son, 14, and a daughter, 10.   The matrimonial home had been purchased in 2012 and had been extensively renovated.  By the time of the application, there was a significant mortgage and over half a million pounds in the form of a loan from the husband's sister.  Other debts that had been incurred included tax that would be falling due in the sum of approximately £165,000, and debts owing to the husband's business partner and sister in relation to paid tax in the sum of £83,000 and a further loan from the husband's employer and credit card debts of approximately £48,000.

The matrimonial home had been marketed for sale and an offer had been made in respect of it of £2.47m which would, once all of the debts had been taken into account, including outstanding legal fees of £310,000, leave the parties with just over £100,000.

The husband was earning £163,000 net per annum, but the families' outgoings outstripped that amount by £20,000 per annum even before day to day living expenses were taken into account, leaving the parties, in the words of Mr Justice Mostyn, "in a position of serious revenue deficit".

The application for the interim order had been necessitated by the wife's withdrawal of her agreement to the sale, which she sought to justify on the basis that, at the time that she had been agreeable to the sale going through, she had been looking to relocate, with the children, to California.  An application for an order allowing this had, however, since been refused.  

In his judgment, Mostyn J identified the three procedural routes whereby the order sought by the husband could have been awarded.  The first was an order under s17 of the Married Women's Property Act 1982, the second was an order under s13 and s14 of the Trusts of Land and Appointment of Trustees Act 1996 and the third was an order under FPR 2010 r.20.2(1)(c)(v).  Ultimately, Mostyn J made an order under the Family Procedure Rules, which provide that the Court may make, as an interim remedy, an order "for the sale of relevant property which is of a perishable nature or which for any other good reason it is desired to sell quickly", relevant property being defined as including land.  Mostyn J also ordered that the wife's rights of occupation be terminated and that her matrimonial home rights notice be vacated.

The Judge was "very critical" of both parties, the husband for his "reckless and irresponsible conduct in spending such a large sum of money in the year of separation" and the wife for "reneging on her clear agreement to sell and sticking her head in the sand like an ostrich".  Taking into account the factors under s33(6) of the Trust of Land and Appointment of Trustees Act 1996, the Judge concluded that he had "no alternative" but to order that the house be sold "to impose financial sanity" on the family.

C v C & Another [2015] EWHC 2795 (Fam)

This matter related to the continuation or otherwise of an injunction which had initially been obtained by the husband against the wife and one of the parties' sons, referred to in the judgment of Mrs Justice Roberts as "N".

By way of background, there had been a 34 year marriage, during which the parties had had two sons, N (31) and "A" (34).  The husband was a Cypriot national and the wife was Lebanese, by birth.  Both parties were in their early sixties. 

On the wife's case, the husband had formed a relationship with a third party, a woman in Cyprus, and had executed a power of attorney in the woman's favour.

During the marriage, the husband had been "the driving force" behind a successful property investment group through a London based trading company, "C Ltd", and various offshore offshoots.  D Ltd and R Ltd were property investment companies in which the husband and the wife each owned 50% of the shares (the wife holding her shares, according to the husband, on trust for the husband).  The wife and N were the directors, and C Ltd collected the rents arising from the properties held by the companies under what was described as an informal arrangement that had been put in place by the husband.  The underlying property portfolios were said to be of a net worth of in excess of £32m.

Shortly before serving the petition, the wife had transferred £12m to an offshore account (due, she later said, to a fear that the husband would otherwise have transferred the funds to the woman in Cyprus).  Despite the fact that (i) the funds had subsequently been transferred, by agreement, into a joint account, and (ii) the husband and the wife had given undertakings to the effect that neither would diminish the value of the assets held by any of the companies other than in the ordinary course of business, the husband commenced proceedings against N, suspending his employment with C Ltd and removing both N and the wife as directors of C Ltd.  This had prompted the wife and N, in their capacities as directors of D Ltd and R Ltd, to resolve to take steps to commercialise the relationship of those companies with C Ltd, which would effectively take them out of the control of C Ltd (and the husband).  The husband's solicitors described the steps as "highly aggressive and destructive" in a letter to the wife's solicitors in which injunctive action was threatened.

The husband's subsequent injunction application, which was made without notice in February 2015, was said to be "extremely urgent because…the steps…proposed…were prejudicial to the husband and included an attempt by [the wife] and N to obtain immediate access to… company bank accounts", all of which needed to be viewed within the context of the wife's prior actions in relation to the £12m. 

The injunction effectively stopped the wife and N from taking steps to implement the board resolutions.  It was subsequently modified slightly at a hearing in March, before an interim holding agreement was reached in April, pending a full hearing of the matter in June. 

At the hearing before Roberts J, the husband sought, in broad terms, the continuation of the injunction, in a further slightly modified form. The wife sought the discharge of the injunction due to "inherent procedural and legal defects".  N also sought the discharge of the injunction, together with his costs.

The issues for Roberts J to determine were:

(i) The extent to which the court had the jurisdiction to make the order sought by the husband; and

(ii) The extent to which it should exercise that jurisdiction.

Roberts J considered Sections 37 of both the Matrimonial Causes Act 1973 (the MCA) and the Senior Courts Act 1981 (the SCA), together with the Court's inherent jurisdiction (raised as a fall-back position by the husband).
Section 37 MCA

N's case was that:

(i) There had been no basis for the Court to make an order under the MCA as the reference to "any property" in s 37(2)(a) was anchored to "any property in which either or both of the parties to the marriage has or had a beneficial interest, either in possession or reversion" and not to "any property generally, regardless of whomever it may below to".  The MCA could not be engaged, therefore, to prevent a dealing with property belonging to a company;

(ii) In any event, the MCA enabled the Court to restrict dealings between parties to a financial remedy application and, in the absence of a finding that companies were the alter ego of the parties, they retained their own separate legal identity.


N and the wife argued that (i) an injunction could only be granted if the circumstances were such that an injunction would be likely to be available as a remedy in the Chancery or Queen's Bench Division and (ii) the husband needed to establish, as a prerequisite, that there existed a cause of action against N.

Inherent Jurisdiction

N and the wife argued that there was no inherent jurisdiction for the Court to fall back upon in circumstances where an injunction could not be granted under s37 MCA.


(i) The injunction should not have been sought on a without notice basis as there had been no "immediate threat in terms of the movement… of assets with the intention of defeating [the husband's] claim for financial remedy orders".  There had, in short, been time to serve notice.

(ii) The Judge was critical of the husband's failure in February 2015 to disclose to the Court the fact that he had removed both the wife and N as directors of C Ltd.  This had been a "fundamental omission".  It had been "a misrepresentation of the position to present himself as a victim of a unilateral attempt by them to change the status quo".

(iii) The District Judge had failed to give proper consideration as to how the injunction would impact upon D Ltd and R Ltd, which were properly constituted corporate entities of which the husband had never been a director.  The Judge referred to Prest v Petrodel Resources Ltd and Others [2012] EWCA Civ 1395.  Whilst it would not be in every case that the separate legal identity of a company would be used as a shield, in the context of an injunction, it would depend upon "the circumstances and whether the actions or intended actions upon which the injunction is to bite relate to the actions of the individual per se or the actions of that individual in discharge of his or her corporate obligations and responsibilities".

(iv) The Judge differentiated between the wife, who was a party to matrimonial proceedings, and N, who was not, and she referred to the case of McGladdery v McGladdery [1999] 2 FLR 1102, which stood as a "fundamental jurisdictional obstacle to any relief flowing from s37 MCA".  Whilst an order limited in scope to the wife as director and party to the proceedings might have been available, such an order was not available against N.

(v) In relation to s37 SCA, the Judge declined to make the order sought by the husband in the absence of any clear evidence of a cause of action against N and on the basis of both a lack of merit in any event and the husband's failure to discharge his duty to provide a "full, frank and fair presentation" at the time of his without notice application.

(vi) Even were there scope to make an order under the court's inherent jurisdiction (on the basis of a lower test applying to that under s37 MCA), which she doubted, the Judge declined to do so.

(vii) On the basis of undertakings that the wife and N were prepared to give, the Judge felt that the reinstatement of the April holding agreement was a more sensible way forward if the parties could agree to this.  Absent agreement, the husband's application was to be dismissed.

Mackay v Mackay [2015] EWHC 2860 (Fam)

This case was heard before Holman J.  There had been divorce proceedings between the parties and, in November 2014, there had been a final consent order. 

The consent order had been agreed on the basis of certain factual presentations as to the parties' respective financial positions.   These included evidence as to the value of the husband's majority shareholding in a company, which appeared to be the principal asset.  

After the consent order had been made, the wife had learned that, in a period prior to the order being made, and whilst these proceedings had been ongoing, the husband had been, or may have been, in communication or negotiation with a possible purchaser of his shares, or all of the shares, at a figure considerably greater than the figures disclosed. 

As a result, the wife made an application for an order setting aside the consent order on the basis of material non-disclosure. 

Holman J observed that the Supreme Court had not yet made its decision in the cases of Sharland and Gohil (which would involve consideration of the appropriate principles and approach on set aside applications of this kind) and explained that this hearing could not take place until after that Supreme Court judgment had been handed down.

It was pointed out to Holman J, to his surprise, that he shared a common interest of sailing with the husband and that there was a potential overlap of mutual friendships.  Holman J was presented with a list containing 14 names.  Holman J said that, although he recognized every name on that list, he did not know the majority of the people named personally.  However, there was one name on the list with whom he did have a friendship.  Holman J noted that neither party had applied for him to recuse himself as the judge.  

Holman J explained that leading authority on the circumstances in which a judge should recuse himself probably remained Locabail (UK) Limited v Bayfield Properties Limited and others [1999] EWCA Civ 3004.  Holman J said that there was no question, in this case, of him having any kind of interest in the outcome of the proceedings and, in his view, no question of any possible objective or apparent bias.   However, at paragraph 21 of the judgment, there was reference, albeit in passing, to a judge recusing himself "If, for solid reasons, the judge feels personally embarrassed in hearing the case".  Holman J indicated that he might feel so embarrassed.   He explained that there was a common friendship and that it could be a source of personal embarrassment to him in his friendship with the other person if he had to find that another friend of his had acted in a fraudulent, devious or untruthful way.

Holman J explained that there was the further consideration in that, currently, a two stage hearing was envisaged, with some months between the first and the second stages.   Holman J observed that, during that interval, there would be occasions upon which he would be meeting the mutual friend as he was a friend who he met from time to time.  Holman J recused himself, therefore, from any further involvement in the case.

AE v BE [2014] EWHC 4868 (Fam)

This was a final hearing before Mr Justice Moor who needed to determine the computation of the assets, and then the computation and structure of the award. 

By way of background, both the husband and the wife were 75 years of age.  The husband was of Greek/Cypriot origin and had moved to the UK in 1959 and had subsequently made his fortune in property refurbishment and letting before returning to live in Cyprus in 2002.  His wife was a homemaker and had cared for the couple's two children, who were 48 and 50.  She continued to live in North London.  The situation was complicated somewhat by the extremely complex company structure that had been established by the husband, the fact that a number of investments made by the husband following his return to Cyprus had failed, by litigation both in Cyprus and here, the latter against the parties' son, and the existence of a second son of the husband through a relationship with a third party in Cyprus.

It is beyond the scope of this summary to go into exhaustive detail and it should be borne in mind that the eventual structure of the award was very much case specific.   In short, however, the wife sought 50% of the assets, totalling £24,621,000, together with an order for costs.  The husband, on the other hand, proposed an award in the wife's favour of 40% of the assets, totalling £9,923,000.

The Judge found that the total assets amounted to £16,000,730 and that there was no reason for there to be any departure from equality.  Having factored risk into the assessment of the husband's liabilities, the wife's award was in the sum of £8,365,000.

As to structure, the Judge rejected the wife's submission that she should receive only cash, not least because the husband already had to find £14m to discharge bank loans that would fall due in 2016.  The Judge referred, however, to the well-known case of Wells v Wells [2002] EWCA Civ 476 and to the fact that, in general, "fair sharing is achieved by fair division of the copper-bottomed assets and the liquid and risk-laden assets".  The wife's award was, therefore, made up of a combination of shares in various companies (some of which involved liabilities, exceeding £1m in total) and a lump sum payment of £1.6m.  Whilst the husband sought any payment to the wife to be payable over a 5 year period, the Judge determined that the lump sum should be payable within 15 months, with interest payable by way of maintenance at the rate of £8,000 per annum reducing proportionately in the event of part payment of the lump sum.  The period of the payments was subject to a s28(1A) bar on the basis that, if a lump sum payment was not made on the due date, interest would accrue at the High Court judgment debt rate of 8% (i.e. at the rate of £128,000 per annum).

FB v PS [2015] EWHC 2797 (Fam)

This is a case with a complex factual history.  It concerns an application for financial remedies made by the wife where the quantum of the assets was between £18.2m and £19.7m.  There was virtually nothing in the name of the wife despite the fact that she was an equal partner in the family business.  There was a dispute as to whether she was an equal partner with just the husband or with the husband's father as well.

The business had been sold for £17.6 million in 2012.  The husband (44) and the wife (42) had started to discuss a business venture together as early as in 1990, their personal relationship having developed by 1993.  They had subsequently set up a telecommunications consultancy company, referred to "Co X", in 1995.  The husband had been the sole shareholder and director on incorporation. 

In 1996, a trust had been established by the husband's father.  An overriding factor in setting up the trust had been the desire for protection against Capital Gains Tax in the event of the company being sold, which was something that was considered to be desirable from the outset, if the right price could be obtained.

At the time of the hearing before Moor J, it was said by the husband's father that Co X was, in essence, a three way joint venture between the husband, the wife and him.  The wife disputed this and said that it was a joint venture between the husband and her.  It was, however, accepted that the husband's father had provided valuable assistance as "treasurer" to the business until 2006, when a Finance Director had been appointed.  The wife argued that the husband's father had been more than handsomely remunerated for the work that he had undertaken.

The parties had married in August 1998, and there were no children of the marriage.

The wife moved into a property, known as "AR" in the judgment, which the husband's father had acquired as a matrimonial home in 1982.   AR had subsequently been put in trust. 

The husband had purchased AR from the trust for £850,000 in November 2003.  This money had been gifted to him in two equal tranches of £425,000 in November 2003 by the husband's mother and father.  There had then appeared to have been a delay in the payment of stamp duty, delaying completion until May 2006.

AR had been registered in the husband's sole name.   In July 2006, the husband took out a mortgage secured over the property for £1m.   He had subsequently made a loan of £980,000 to Co X at 12% interest.   The wife had loaned £20,000 to Co X at the same time.  The husband says that this had been to provide working capital.

Moor J commented that, overall Co X, had been a "tremendous success" and there was "no doubt that both parties worked phenomenally hard".  "The wife was an incredibly successful sales women who secured enormously valuable contracts for the business.  The husband's role was, essentially, that of chief executive."  Whilst a full time finance director had been appointed in 2005, Moor J accepted that the husband's father's involvement had not then come to an end.  

The husband and wife had not taken large salaries from the business.   The husband had, on average over the period from 1997 to 2012, taken approximately £57,000 per annum.  The wife had taken approximately £40,000 per annum over the same period.

This was to be contrasted with the remuneration paid to the husband's father by way of "management charges".  Between 1996 and 2013, the total management charges had been £3,112,167.  These had been paid into a company owned by the husband's father in which he had a very significant Director's Loan Account and was able to draw from, tax free (although there would have been Corporation Tax on the company's profit).  

There had been a number of loans made to Co X over the period of its ownership by the husband, the details of which are outside to scope of this summary. 

Moor J said there was "no doubt that the standard of living enjoyed by the parties during the marriage was considerably higher than could have been achieved by their net salaries".  It was equally clear that a significant part of the expenditure had been funded by the husband's father. 

Moor J indicated that two issues arose.  The first was the quantum of the financial support by the husband's father and the second was one of credit. 

When Co X had been sold, the only person who to have benefited had been the husband.   Moor J said that he had benefited to a very considerable extent, albeit the vast majority of the benefit had been by way of loans.

Settlement offers 
The wife had made an open offer in April 2015.  She had stated the assets to be worth £20 million, and she had sought an award of £9 million.  She had not spelt out any reason for departure from equality apart from referring to the legal costs of a contested hearing.

The husband's open offer had been made in May 2015.  He had asserted the net assets to be £18,520,301 and had argued that the value of AR should be deducted as non-matrimonial property.  He had asserted that the wife should then be awarded 40% of the remaining assets to reflect the interests of the wider beneficiaries in the husband's father's trust.   He had calculated the lump sum payment as £6m and had further reduced this to £5.8m.

Issues to be determined
Moor J heard the best part of a week's worth of evidence and, as he saw it, there were three main issues:

(i) The quantification of the asset schedule.  In particular, Moor J said that he had to determine three separate matters:

- the approach to the profit made on the sale of the property;

- the approach to the value to be attributed to some French properties; and

- whether or not a sum of £161,300 that had been repaid to the husband's father following the sale of Co X had actually been an asset of the husband;

(ii) Whether the entire assets of the trust were to be viewed as a resources of the husband / wife or whether a proportion of them should be allocated to the husband's father and/or the husband's sisters and half-brother; and

(iii) How the value of AR (the matrimonial home) should be treated.

Moor J referred to the fact that, in the absence of good reason to the contrary, the fruits of the marriage should be divided equally.   He referred to the three strands of award in Miller v McFarlane (namely sharing, needs and compensation).  Moor J said:

(a) Compensation did not apply; and

(b) The resources of the parties were sufficient such that, whatever the award, the reasonable needs of each of them would be more than satisfied; and

(c) The concept of sharing was "undoubtedly" fully engaged.  The issues were the identification of the matrimonial assets and the extent to which there was good reason for any departure from an equal division of those assets.

The judge found that the total assets were £19,057,361.

He accepted entirely that the husband's father had performed a valuable function as, in effect, finance director and treasurer, indicating that he had been "a useful sounding board".  It had, however, been "the husband and the wife who ran the business, albeit with his assistance" and he had been "handsomely rewarded for his efforts, even allowing for the payments he subsequently made on their behalf".   Moor J said "his attempt to portray himself now as a founder is dishonest and does him no credit".  

Moor J found that the founders of Co X had been the husband and the wife and that the  husband had engineered a situation in which he had been in complete control with the wife, despite all of her hard work, having nothing.

Moor J accepted that the husband's father made expenditure which went towards the husband's and wife's living costs.  Moor J said that he considered that likely expenditure was around £500,000 in total.  Moor J said that this was approximately £35,000 per annum.  The husband's father benefited to the tune of £1,896,000 net from the management charges.  This was £135,000 per annum.  Moor J said that he considered that this "did compensate him fully for the considerable work that he did but, in any event, this was the arrangement agreed and he cannot now complain".

Moor J found that the trust in the husband's father's name was a resource of the husband, every request of the husband having been agreed by the trustees.

In relation to AR, the transfer itself had been a very significant unmatched contribution, now worth some £3.5 million gross.  The cost of the refurbishment works had also been a large unmatched contribution.  The husband was "entitled to a significant departure from equality to reflect these unmatched contributions".

Moor J considered whether or not he should simply deduct the entire value of AR before he undertook the sharing exercise.   He referred to two points that the wife had made on this issue.  The first had been that £1 million had been invested in Co X and had become an integral part of the matrimonial assets.  The second had been that the parties had not purchased their own property which would have appreciated significantly in value in accordance with the dramatic increases in the property market in London.  The wife had produced a schedule suggesting that a flat which they had considered buying might have increased by around £1.4m since the parties had chosen not to proceed.  

Moor J said that he felt there was force in this second point.  He was sure that the parties would have purchased another property had AR not been gifted.  This did not, however, detract from the very significant unmatched contribution by the husband's father in relation to AR.  

Moor J said that there were two ways in which the court could approach the matter:

(i) To allow a discount to reflect this unmatched contribution; or

(ii) To remove an appropriate share of the value of AR from the matrimonial assets to reflect the unmatched contribution and then divide the balance equally.

Moor J chose the second approach, cross-checking it against the first.

Moor J said he was satisfied that it would be wrong for him to allow sharing of the full £1.4 million "lost" by reason of non-investment in the property market.  An appropriate way to mark the fact that AR was matrimonial property would be to include a sum of £500,000, and this meant the removal of £2,912,500 from the schedule (the mortgage being ignored given that it was reflected in the rest of the husband's assets).

Moor J assessed the matrimonial assets as £16,144,861 (£19,057,361 less the £2,915,500 figure) and found that these should be divided equally on the basis of a clean break, the wife's claims (including an application that she had made to vary the trust) to be dismissal upon payment in full by the husband.

Veluppillai v Veluppillai & Ors [2015] EWHC 3095 (Fam)

This was a final hearing before Mostyn J which he described as a routine needs case following a 20 year marriage with net assets of approximately £1.3m.  The case had been listed in the High Court because of the conduct of the husband which was described as having been "truly abysmal".

Since the claim had commenced in September 2012, there had been over 30 hearings, including 4 appeals mounted by the husband.  This had been the result of litigation misconduct on the part of the husband.  In parallel proceedings, concerning a "bogus loan asserted by his sister", the husband had threatened to kill the wife and her counsel and had been committed to prison for contempt. 

In the ancillary relief proceedings, furthermore, he been removed from the court on at least one occasion.   The husband had, according to the judge, been "repeatedly warned by judges about his unpleasant menacing conduct in court.  On one occasion [the husband had] assaulted the wife's counsel and the wife in court for which he was later convicted of assault in the magistrates' court. [He had] skipped his sentencing hearing and fled abroad from where he [had] bombarded the court with abusive emails claiming that he [had] a fatal illness and demanding that the proceedings be adjourned indefinitely.  In the course of the proceedings [the husband had] entered into a number of transactions designed to defeat the wife's claims".

The husband had tried to adjourn the final hearing by completing a From D11 and enclosing a medical certificate.  However, Roberts J had found that had been insufficient medical evidence, as set out in Levy v Ellis-Carr & Others [2012] EWHC 63 (Ch.), although she had allowed for the husband to be able to participate in the hearing by video or telephone.  However, the husband had subsequently submitted a further application in Form D11 seeking an adjournment based on the same medical evidence.  Mostyn J observed that was "obviously abusive for repeated applications to be made in relation for the same relief where there has been no material change of circumstances… the only proper way of challenging it [being] by way of appeal".  Accordingly, Mostyn J rejected the further application and proceeded to hear the wife's ancillary relief application. The husband did not seek to participate by telephone or video but rather kept up a stream of emails to Mostyn J's clerk.

Mostyn J made a number of findings in relation to the assets.  These included that the husband was the beneficial owner of a property which had been placed in the names of his son and sister.  This finding was binding on the son, who was a party to the proceedings.  It was also binding on the sister, as District Judge Hess had made an order on 16 December 2013 requiring her to file a witness statement if she wished to claim any legal or beneficial interest in the property in issue.  She had failed to do so and had also failed to comply with a third party disclosure order.  Mostyn J found that she was, therefore, estopped from denying his finding.

Mostyn J found the husband to be of very considerable funds which he had chosen not to disclose.  Inferences were drawn that the husband's undisclosed assets, either held by his sister, children or elsewhere, amounted to at least £500,000. 

Mostyn J also found that the husband had sold the wife's jewellery which was of considerable value.

Mostyn J accepted the wife's open proposals for settlement as being "eminently reasonable and fair and should be adopted".  Mostyn J made an order accordingly on the basis of a clean break.

The wife sought a cost order.  Up until the final hearing, she had been funded by legal aid.  Mostyn J explained that she would need to abandon her legal aid certificate in the event of a costs order and indicated that this was a very reasonable course.  Mostyn J said that the wife's solicitor's charges, if this were not a legal aid case, would have been £146,609 including VAT.  This was "a case where the husband's conduct [had] been so abysmal that he should, within the terms of the FPR 28.3(6) and (7) pay all of those costs. This [was] a case which should have been resolved with minimal costs".

Mostyn J ordered that the husband pay the wife's costs, assessed at £146,609, and that this sum be charged on the flat which he had already found to be beneficially owned by the husband.  Mostyn J said that he was entitled, under section 3(1) of the Charging Orders Act 1979, to make an immediate absolute order.

Mostyn J said that the husband had made three totally meritless applications for adjournments and has bombarded the court with emails, and these too were to be treated as applications for the purposes of making a civil restraint order under FPR4.8 and PD4A.  An extended civil restraint order was made, pursuant to PD4A para 3.1, which would last for two years from the date of the order.

Mostyn J also directed that all of the husband's emails to the court since 8 October 2015 be sent to the Commissioner of the Police for the Metropolis for him to decide if any of the threats contained in them amount to criminal offences.