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Finance and Divorce Update (March 2016)

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 February 2016

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

This month's update focuses on the important financial remedies cases that were published last month.

AB v CD [2016] EWHC 10 (Fam)
This is a case with a complex litigation history, the judgment itself runs to 52 pages.  In short, the wife was the founder and director of a technology company (B Ltd) in which she held a 37% shareholding. Investors provided funding, including the husband who held a 4% shareholding.

The parties had each been married previously and were independently wealthy.  The husband was a successful venture capitalist and the wife was a successful entrepreneur.  Their marriage lasted less than two years with their total assets amounting to c.£6m.  A little over £930,000 was held in the wife's name and the balance in the husband's. 

In financial remedy proceedings, the husband and wife agreed a clean break consent order on 6 February 2012.  In part, it provided that the husband would transfer his shares in B Ltd to the wife.  The husband would receive monies depending on the price the wife achieved if she disposed of her shareholding within a two year period (the anti-embarrassment clause).

The husband's application to set aside the consent order on the basis of material non-disclosure was issued as long ago as July 2012.  The case has been before various judges in the Family Division since then and the parties have incurred combined costs of almost £1m.

Although the husband made an application to adjourn the hearing pending the outcome of Sharland v Sharland [2014] EWCA Civ 95 and Gohill v Gohill [2014] EWCA Civ 274, Roberts J dismissed that application because of the significant delay since the husband had issued his application.  However, Roberts J agreed to reserve her judgment at the conclusion of the set aside hearing until the judgments from the Supreme Court became available.

In brief, the background is that the husband alleged that the wife failed to disclose that a hedge fund ("Odey") had invested £3.5m in B Ltd, which was tendering for a Ministry of Justice contract. The husband became aware of Odey's involvement through press reports after the parties entered into the consent order.  The husband raised detailed questions in relation to the investment as a result of the press reports.  The wife delayed responding and the husband sought findings that, when she did, she gave misleading replies.  The wife submitted that she felt restrained by her employment contract not to divulge confidential information (there being a series of letters sent on behalf of B Ltd's board of directors reminding her of this obligation), and she feared that the husband would contact the press (as she alleged he had done in the past).  The husband applied to set aside the consent order, arguing that Odey's involvement in B Ltd was transformative.

The exact point of involvement of Odey was in dispute between the parties, and Roberts J heard detailed evidence on the matter.

The wife argued that the funds from Odey could either be treated as (i) a loan or (ii) paid up but unissued share capital and that, given that B Ltd was pursing the Ministry of Justice bid, it was important that the company was seen to be in a position of solvency.  It is for that reason that the wife maintained that she was justified in not disclosing the information, either at the time of the original agreement on 6 February 2012 or subsequently, when the husband was seeking further information.  On the wife's case, Odey's injection of cash had made no material difference to B Ltd's underlying share price.  It had simply enabled the company to repay its existing loans and carry on trading.

The husband's case in relation to material non-disclosure was based on two limbs:

• He contended that Odey's investment at £35 per share would have represented a significant undervalue of his own and the wife's shareholding as at the date of their agreement in February 2012; and

• He said that, had he known that a blue chip investor of this calibre was prepared to back the company, he would not have agreed to part with his shares on the terms he did.

The husband's case was that the "Odey investment in B Ltd was transformational in terms of potential future value and he maintain[ed] that case from the perspective of an experienced venture capitalist".

Roberts J set out a summary of the law in her judgment and, in particular, of the cases of KG v LG (No 2) [2015] EWFC 64, Sharland and Gohill.

Roberts J observed that "the shares in the company have continued to rise in value over the currency of this litigation.  That fact, in itself, cannot be a reason for setting aside the consent order since the focus of the court's enquiry must be on the extent to which [the wife] had complied with her disclosure obligations at the time agreement was reached".

Roberts J reminded herself of the relevant principles of law.  Was the information provided by the wife full and frank?  Roberts J found that it was not.  However, she was not prepared to go as far as finding that this was a deliberate fraud or deception perpetrated by the wife.  Roberts J was persuaded that the wife believed, at the time, that she had properly complied with her obligations of disclosure in the representations she made in her Form E.

In Roberts J's view, it was "incumbent upon [the wife] to disclose the existence of Odey's involvement with, and financial support for, the company prior to allowing [the husband] to commit to their agreement in ignorance of that fact.  But I absolve [the wife] of any deliberate attempt to mislead [the husband] or the court on that occasion.  Where I believe [the wife's] conduct does properly attract censure is her response to the enquiries which were subsequently raised on behalf of [the husband].  Much time and expense would have been avoided had she responded openly and at an early stage to his solicitors' questions."

Roberts J found that "[the wife] placed undue reliance on the terms of her employment contract in order to avoid some of the more penetrating questions which were asked of her."

Roberts J then went on to consider materiality.  She"[had] no hesitation in finding [the wife's] non-disclosure to be material".  Despite the fact that the agreement was presented to the court in a consent order, Roberts J found that "[the husband] was deprived of the opportunity of deciding whether or not to agree to the terms proposed on the basis of a fully informed decision.  He was not provided with the disclosure of information which he says would have been highly material to his decision to accept or reject the terms proposed, or to insist upon a renegotiation of those terms. In such circumstances, it is difficult to see how he can be said to have given full consent."

Roberts J said, "the 'anti-embarrassment clause' [was] not a sufficient defence to the failure to disclose".

Roberts J granted the husband's application because of the wife's material non-disclosure.  The husband had proved that a substantially different order would have been made had he known of Odey's involvement in B Ltd when the parties entered into the consent order. 

Roberts J listed the matter for further directions and urged the parties to reflect on her judgment and try to settle the matter.

David Lee Rapp v Francoise Margueritte Sarre (Formerly Rapp) [2016] EWCA Civ 93
This was an appeal by a husband against a financial remedy order which had divided the assets unequally, with 54.5% going to his wife in order to reflect her needs and his reckless conduct.

The husband argued, in short, that:

• The judge had incorrectly taken the husband's assets to have been only $1m when the parties had married;
• The parties' respective needs should have been assessed as being equal;
• The judge had left him with the risk-laden assets; and
• The husband's conduct should not have been reflected in the order.

The parties had begun living together in 1993, marrying a year later.  They had subsequently separated in December 2009 and divorced in 2014.

The wife was French and the husband American and they had met in Monte Carlo, before moving in 1993 to London, where the husband worked as an oil broker.

The marriage ran into difficulties in around 2003, when the wife discovered that the husband was taking cocaine and drinking excessively.  The wife also suspected the husband of using female escorts.  Attempts by the husband to address his problems proved unsuccessful and the wife concluded that the marriage had come to an end in 2009.  The wife had since remained in the marital property, a flat in London, and the husband had returned to Monte Carlo, losing his job in 2010 (his addictive behavior having been discovered).

Proceedings were commenced by the wife in 2011, and the husband failed to engage in the process (with a "woefully inadequate" Form E, no details of his financial needs and a failure to respond to the wife's questionnaire).  When the final hearing took place over three years later, therefore, the information available to the court was very limited.

The assets in the case totaled just over £13.5m, £7m of which was accounted for by real property in the form of the London flat and three properties in St Tropez (one owned through a French company and the other two held in the wife's name with attached liabilities of nearly £1.7m).  The husband's investments were worth just under £2m and the wife's just over £6.5m.

The judge had found that it was not reasonable to expect the wife to work.  Whilst the husband had a substantial earning capacity, he had not overcome his addictive behaviour and was unlikely to find further employment in the oil industry.  However, his ability to manage his investments was not affected and he was likely to continue to make successful investments.  In his Form E, the husband had anticipated investment income of nearly £390k over the course of the following 12 months.

The judge had proceeded on the basis that the husband had had $1m at the time of the marriage (as his was what the husband had indicated to the wife that he had been worth at the time that the parties had met).  The division of the assets had been based on the needs of the parties and the objective of sharing the assets fairly.

On appeal it was held that:

• The judge had not erred in working on the basis that the husband had $1m at the time of the marriage in the absence of evidence from the husband to the contrary;

• The judge's approach to needs had been open to him and he had had to do his best to assess the husband's needs in the absence of information from the husband.  The wife, on the other hand, had "taken the trouble to itemize her budget" and the judge had critically assessed it;

• The judge had not erred in the distribution of the assets which had left the husband with those which were more risk-laden.  The assets in question had been invested in by the husband and the husband remained an astute business able to manage the assets.  It would not have been fair to have expected the wife, who was not financially astute, to have to take over any management role; and

• Finally, in relation to the assertion that the judge had erred in the approach that he had adopted in relation to the husband's addictive behavior, it was not necessary to consider the issue as the award was justified on the basis of the wife's needs alone. 

Aburn v Aburn [2016] EWCA Civ 72 
The husband and wife had been married for 20 years and had two children, aged 19 and 14.  At first instance, a financial order was made predominantly in the wife's favour.  The focus of the appeal was upon a provision in the order for an automatic upward variation of the wife's periodical payments. 

The Deputy District Judge at first instance had ordered the husband to pay monthly spousal maintenance of £1,000, index linked, to increase automatically when the parties' youngest child completed full time private secondary education.  The husband would then pay to the wife the equivalent of 50% of the private school fees and associated costs relating to the younger child's last school year, divided by 12.  Essentially, the Deputy District Judge had found that, once both children had completed secondary education, the saving in education costs should be split equally between the parties.

The husband had appealed and HHJ Scarratt had commented, on appeal, that "whilst it [was an] unusual [order], it [was] not wrong".  HHJ Scarratt had dismissed the appeal because it had seemed to him that there would be a substantial amount of money available to the husband when the child left school, and that the wife should share in that.   The initial level of the wife's periodical payments had been quantified taking the husband's commitment to pay school fees into account.

The husband appealed to the Court of Appeal.  The Court of Appeal noted that the wife's maintenance had been assessed on a needs basis.  The Deputy District Judge had then failed to justify why, after four years, the wife would need the increased amount.  The Court of Appeal said that there was nothing in the Deputy District Judge's judgment about this, and it was not possible to identify any principle that was being relied upon.

The husband argued that the Deputy District Judge had failed to address (i) what the wife's apparent needs were going to be once the child finished secondary education, (ii) the fact that the husband was likely to incur expenditure in relation to the child's tertiary education and (iii) the future financial circumstances of both parties in and after 2018.  If, furthermore, which was not accepted by the husband, some form of upward variation was within the court's discretion, the figure of 50% was arbitrary and unsupported by reasoning.

Commenting that, whilst it might well be necessary for a full review to take place in four years' time, the Court of Appeal said that it was impossible to predict now what the outcome of that review might be when there were so many variables.  The Deputy District Judge had therefore been wrong, both as a matter of law and in the exercise of his discretion, to order an advanced variation based upon only one known element of the parties' finances.

The appeal was, therefore, allowed and the paragraph in relation to the automatic variation was struck out of the Deputy District Judge's order.  The Court of Appeal commented that "it remains open to the parties, either upon [the child] leaving school or, indeed, at any other point, to apply to the court to vary the periodical payments order. Should they do so, the court will evaluate that application in the light of all of the known relevant factors at the time".

R (on the application of Rights of Women) v (1) Lord Chancellor (2) Secretary of State for Justice [2016] EWCA Civ 91 
This was an appeal by the registered charity, Rights of Women, in relation to an application to quash Regulation 33 of the Civil Legal Aid (procedure) Regulations 2012 (as subsequently amended), on the basis that the Lord Chancellor had exceeded his powers in making the Regulation or the Regulation frustrated the purpose of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 ("LASPO") by prescribing supporting evidence too rigidly and, as a result, excluding many women who ought to be eligible for legal aid.  The primary focus of the matter was on the requirement that the supporting evidence be less than 24 months old.

In his judgment, Lord Justice Longmore refers to preservation of legal aid "for victims of domestic violence who seek protective court orders or who are parties to family law proceedings against the perpetrator of the violence", the reason for the preservation being that such victims would be disadvantaged in legal proceedings were they to have to represent themselves.

Longmore LJ refers to a "cross-governmental definition of domestic violence" that has been adopted, which as follows:

"any incident, or pattern of incidents, of controlling, coercive or threatening behaviour, violence or abuse (whether physiological, physical, sexual, financial or emotional) between individuals who are associated with each other"

The above definition is now contained in paragraph 12(9) of Part I of schedule 1 of the Regulations.  Longmore LJ reviews the relevant sections of LASPO with particular reference to Section 12, which contains the authority under which the Lord Chancellor made the Regulation.  Longmore LJ then considers Regulation 33 itself, providing a helpful broad summary, as follows:

"… Regulation 33 provides that legal aid will not be available unless documentary verification of domestic violence is provided within the 24 month period before the application for legal aid was made save for incidents of an unspent conviction, un-concluded criminal proceedings and existing police bail for a domestic violence criminal offence."

Rights of Women claimed that the Regulation went beyond the power contained within Section 12 and was, thus, ultra vires.  Alternatively, they claimed that the Regulation frustrated the purpose of the Act, which was that women suffering from domestic violence should be eligible for legal aid provided that they qualified in respect of their financial resources and the overall merits of their case. 

Longmore LJ did not agree that the Regulation is ultra vires.  The statutory provisions needed to be read together and Section 12 should be not construed as relating to procedural matters only.  In particular, (e) empowers the Lord Chancellor to introduce conditions which have to be satisfied by an applicant.  A condition that evidence be dated within the previous 24 months falls within the statutory wording.

In relation to the purpose of the Act, however, Longmore LJ felt that its purpose is "partly to withdraw civil legal services from certain categories of case in order to save money but also to make such services available perhaps not to the entire membership of most deserving categories of case (such as victims of domestic violence) but at any rate to the great majority of persons in the most deserving categories.  That will be catered for partly by the requirements of financial need and merit …. but can also be catered for by requirements which the Lord Chancellor is entitled to impose under the section 12 regulation-making power".  The question that Longmore LJ then asked, however, is the extent to which the additional requirements are "rationally connected" with the purpose.

Longmore LJ referred to many situations in which victims of domestic violence may become involved in legal proceedings more than 24 months after incidents of domestic violence and, indeed, 24 months after it is practical for them to obtain the evidence required by Regulation 33.  For example (and the judgment contains many more), victims of financial abuse will not be able to produce the evidence required by Regulation 33 and victims of psychological or emotional abuse may also experience difficulties in providing the necessary evidence.  Longmore LJ referred to the examples as "a formidable catalogue of areas of domestic violence not reached by a statute whose purpose is to reach just such cases".  The 24 month requirement has no rational connection with the purpose of the statute, operating in a "completely arbitrary manner", with no "safety valve" enabling an individual to explain why they have not been able to produce verification of the violence less than 24 months before proceedings have commenced. 

Accordingly, Regulation 33 was declared invalid, by Longmore LJ, in so far as it requires verification of domestic violence to be given within a 24 month period before any application for legal aid and does not cater for victims of domestic violence who have suffered from financial abuse.

DB v DLJ [2016] EWHC 324 (Fam)
This was an application by a husband for his former wife to show cause why an arbitral award should not be made into a financial remedy order.  

By way of background, the parties had both been married before and had adult children by their first marriages.  They had subsequently married in 1999 and had a daughter who had been born in 2005.  They had separated in 2013, the wife commencing divorce proceedings in October of that year and then financial proceedings in January of the following year.   In January 2015, however, the parties had signed up to arbitration as a means of resolving financial matters.

Gavin Smith, as arbitrator, had heard evidence over 3 days in April 2015, and his award had been finalised in July 2015. 

In short, the award had provided for the equal division of the parties' property, cash and pensions (requiring a lump sum payment from the husband to the wife of just under £160,000), and a 60/40 division in the husband's favour of the value of the husband's business once the business had been sold.  Pending its sale, the wife was to receive periodical payments on an extendable term basis, Mr Smith having not been able to foresee the extent to which, by the time of the payment of her share of the business, the wife would have been able to adjust without undue hardship to the determination of the periodical payments.  

The effect of the arbitral award had been that the husband would receive 55% of the assets and the wife 45%.

The wife had, however, subsequently refused to co-operate with the conversion of the arbitral award into a financial remedy order.   The reason for this had been that, during the arbitration process, a value of approximately £360,000 had been attributed to a property that was to be retained by the wife in Portugal.  That value had assumed that the wife would be able to obtain planning permission retrospectively for substantial works that had already been carried out to the property (including the building of an annex).  Unfortunately, however, whilst the parties had anticipated that the application for planning permission (which had been pending at the time of the arbitral hearing) would be granted, it had been refused and evidence subsequently produced by the wife suggested that the value of the property had dropped, as a result, over £220,000.  The effect of this had been that the wife would, under the arbitral award, receive only 40% of the assets, rather than 45%.

The wife maintained that the correct figure, for the purposes of the arbitration, should have been the reduced value and the fact that the higher value was taken had meant that there had been a "vitiating mistake".  Alternatively, she maintained that, by virtue of later events, the value of the property had fallen and the fall had invalidated the basis of the award.  The fall, according to her Counsel, had "devastated" and "decimated" her financial position.  The wife sought, therefore, an additional lump sum award of approximately £110,000.

In his judgment, Mr Justin Mostyn explored what he referred to as "the traditional grounds" for challenging financial remedy awards in family proceedings, identifying them as mistake, fraud and a supervening event.  He explored, furthermore, the extent to which, by signing up to arbitration, parties limit their right to challenge the resultant award.  He identified an important difference between the family and civil arbitral processes in that, whilst civil arbitral awards are final and binding, family ones require incorporation into an order, at which point, the court exercises "an independent inquisitorial discretion". 

Mostyn J referred to the Form ARB1 signed by the parties, furthermore, and was satisfied that the parties had agreed that they would each be able to argue that the Court should not exercise its discretion to incorporate the award for reasons beyond the very limited rights of challenge under the Arbitration Act 1996 (which did not include any right of challenge based upon a mistake or a supervening event).  Mostyn J indicated that, were a challenge to be made out on the basis of either a mistake or a supervening event, it would be "a plainly wrong exercise of discretion for the court to incorporate an award nonetheless", although a challenge based on an assertion that the award was wrong or unjust would "almost never get off the ground".

Mostyn J then examined the authorities relating to supervening events, most notably Barder v Barder [1988] AC 20, and foreseeable, Cornick v Cornick [1994] 2 FLR 530. 

Turning to mistake, Mostyn J drew a distinction between a mistake and a Barder event in that, in the case of a mistake, the relevant facts exist at the time of the order but are unknown.  In the case of a Barder event, however, the relevant facts arise after the order. 

Mostyn J then went on to set out principles relating to mistake.  These principles are set out in paragraph 57 of his judgment.

In relation to the wife's arguments, Mostyn J found that the refusal of the planning permission had not been unforeseeable.  An application had been pending at the time of the arbitral hearing and, whilst the parties had been confident that permission would be granted, it must have been recognised that it might be refused.  It was, therefore, "eminently foreseeable".

Even had the decision not been foreseeable, the refusal had not invalidated the arbitral award as it had merely resulted in the wife receiving 40% rather than 45% of the assets, a percentage which remained entirely within the arbitrators' discretion.

Turning to the wife's argument in relation to mistake, Mostyn J felt that this was a stronger ground, but he was, nevertheless, not satisfied that she had exercised due diligence in trying to discover whether the council was likely to grant permission.   There seemed to have been a "blithe assumption that all would be well".   Mostyn J therefore rejected the wife's case on mistake.

In either case, however, Mostyn J felt that the wife's claim failed because, ultimately, the extendable term maintenance provided the wife with an "alternative mainstream relief which [could] broadly remedy any injustice caused".

On a procedural point, the Judge indicated that, in future, any notices to show cause in relation to arbitral awards should be made, for London and the South Eastern Circuit, to the Royal Courts of Justice and immediately placed before him for allocation to a High Court Judge.  Cases outside London and the South Eastern Circuit should be placed before the Family Liaison Judge.

By way of obiter, the Judge also commented that he felt that a Barder application could be made to the original court and did not have to be made by way of an appeal.

NR v AB & Ors [2016] EWHC 277 (Fam) 
This was an application by a former wife for a financial remedy in a case involving issues relating to the husband's ownership of properties and a nuptial settlement.

The husband and wife both came from wealthy families. The majority of the assets had been inherited by the husband.  The husband, his mother and his sister held the assets of the husband's deceased father's estate jointly in a family arrangement.  Each had an inseparable one-third share, it being acknowledged that the husband, after his father's death, was the head of the family.  However, the husband, his mother and his sister worked as a unit in relation to the family arrangements, with all three needing to agree to decisions as to how money was spent.

Roberts J found that the former matrimonial home ("18SPM") and an adjoining flat ("18A") were legally owned by a company ("BCO").  The husband did not control the company and was not a director.  The shares in BCO were held on trust for the husband, his mother and his sister jointly.  Monies were loaned by the family arrangement to BCO to purchase 18SPM and 18A.

18SPM was purchased six months before the parties become engaged and there was a dispute as to whether the property was, in fact, purchased before their relationship started. 18A was acquired 10 years later, during the course of the marriage.

The parties agreed that BCO had granted the parties a licence to occupy 18SPM and 18A, although the grant lacked formalities.

Roberts J said that she had "reached a clear conclusion that [the wife's] case in relation to the existence of a constructive and/or resulting trust in relation to 18SPM/18A must fail.  The company, BCO, [did] indeed hold the legal and beneficial titles to these properties".

Roberts J said that it was the clear intention that the husband, his mother and his sister should have a one-third beneficial interest in the assets held within the framework of the family arrangement.

Roberts J held that the purchase of 18SPM had not had any nuptial element.  However, the grant of the licence could be construed to have been a nuptial settlement at the time when the parties took up occupation of the property and so was subject to the court's variation powers under s24(1)(c) of the Matrimonial Causes Act 1973.

Roberts J found that the grant of the licence had been a disposition that had made some form of continuing provision.  As 18A had been purchased because of its proximity to 18SPM, to provide additional space for the family and their staff during the marriage, the licence for that property also constituted a nuptial settlement.

Roberts J noted that a precise computation of the husband's resources was not required in a case where all agreed that the wife's claim was needs-driven.  There were issues as to valuations and the husband's interest in a number of assets.

The wife's father was exceedingly wealthy (on the husband's case, he was worth £500m), and Roberts J observed that it was clear that the wife would inherit a significant amount, should she survive him.

Roberts J established that the total net assets were either £8.9m, £12.4m, £14.5m or £15.7m (approximate figures), depending on the value of one of the properties in Saudi Arabia.  Roberts J found that the total liquid assets were £1.64m.

Roberts J stating that the needs of the three children of the family, and their welfare, was her first consideration.  She also reminded herself that it was "not a sharing case and, whilst the court [needed] to understand in as much detail as the evidence [would] permit the broad parameters of the wealth available to this couple as individual parties, there [was] not the imperative to undertake a forensic dissection of that wealth as would be appropriate in a case where the assets fell to be shared in equal proportions".

The wife had confirmed in evidence that, if her father had perceived her to be "in need", he was likely to make sure that she was appropriately accommodated.

Roberts J's order provided that the wife's housing needs be met by being able to continue to occupy 18SPM/18A on a rent-free basis.  Roberts J observed that, in light of her findings in relation to the beneficial ownership of the properties, she had no power under the Matrimonial Causes Act 1973 to order a sale.  Roberts J ordered that the husband was to pay to the wife a lump sum of £2m in respect of her future income needs.  The husband was to provide an additional sum of £25,000 for a replacement motor vehicle. 

Child maintenance was to be paid by the husband at the rate of £15,000 per annum per child. Roberts J took the view that this was the appropriate level of support for the children in the light of the husband's likely future earning capacity.  It was agreed that the husband was to pay the children's educational costs.  Roberts J ordered that security be provided by means of a fund of £400,000, which was to be deposited with the husband's solicitors on terms to be agreed but on the basis that the fund would reduce pro tanto as his obligations diminished.

Roberts J said that she would be keen to ensure that the legal documentation which would need to be put in place to ensure the security of the wife's rights of occupation in 18SPM/18A was sufficiently tightly drawn to reflect the underlying intention which underpinned her orders.  Roberts J did not order any security in respect of any potential default in the lump sum of £2m.  She noted that 18SPM/18A belonged beneficially to the company and that she did not have jurisdiction to order their transfer.

Mann v Mann [2016] EWHC 314 (Fam) 
This was a hearing before Roberts J of an application made by a former wife for a suspended order for the husband's committal to prison in respect of his alleged refusal to pay her a lump sum.

This case concerns a long-running enforcement dispute. The parties have been locked in litigation for almost 17 years, more than twice the effective length of their marriage.  The last reported judgment in the case was almost exactly two years ago (Mann v Mann [2014] EWHC 537 (Fam)).  Then, the High Court held that, where there is a written agreement to mediate in financial remedy proceedings, the court can adjourn an enforcement application for a specified period to enable mediation to take place, even if one party does not want to abide by the agreement.  The judgment endorsed the use of non-court dispute resolution (NCDR) to resolve disputes in family proceedings and reminded practitioners of certain principles when adjourning to allow NCDR to take place.  Mr Justice Mostyn ordered an adjournment of eight weeks to give the parties a final opportunity to engage in NCDR, and coupled this with an Ungley order to make clear the costs consequences for either party unreasonably refusing to participate. 

Prior to this, however, the wife had been seeking to enforce a financial consent order made in April 1999.  Each party had subsequently applied to vary it, and the wife had applied for the maintenance order to be capitalised.  In 2005 Mr Justice Charles had ordered the husband to pay a lump sum of £1.3m on a clean break basis as well as child support and costs of £324,000.  The husband had appealed that decision, but mediation took place which substituted a new lump sum figure of £926,000, payable in instalments.  The agreement was incorporated into a consent order in January 2006 and the first instalment of £700,000 was due by 31 December 2006.  It was agreed that, if an instalment was missed, the mediated agreement and consent order would be dissolved, and Charles J's order revived.  By 31 December 2006, the husband had paid less than half of that which was due. 

In April 2010, the wife issued a statutory demand for payment, claiming the husband owed her just under £2million (including interest).  Over a year later, in November 2011, the couple entered into a detailed agreement in which the wife withdrew her statutory demand.  The agreement included an intention to mediate and for the husband to pay various sums of money.  The agreement broke down again and the wife once again applied to enforce the lump sum due to her. 

It is fair to assume that any further attempts at NCDR were unsuccessful because this reported judgment deals with the wife's general enforcement application for the capitalised maintenance ordered back in 2005.  Mrs Justice Roberts was asked to consider enforcement, and specifically a suspended order for the husband's committal based on the husband's wilful refusal to pay the lump sum. 

The thrust of the wife's case throughout this litigation has been that the husband has undisclosed assets; the husband meanwhile insists that he is penniless.  Although he had described himself as a businessman, the husband's declining health had indeed impacted upon his ability to match the income he had been able to achieve earlier in his lifetime.  The husband's Form E disclosed debts of £864,000.  He had an income need of £146,000 a year with outgoings of £52,000 in respect of rent.  He currently had no income. The wife also had no income and had debts of £70,000, including rent arrears. She assessed her income need at £130,000 a year.

It was common ground that although the total sum due had not been paid to the wife, payments had been made from the husband to the wife since 2005 totalling just under £1.5m.  This included rent payments and other living expenses.

A particular difficulty for the husband had been adverse inferences and findings of fact made against him by Charles J.  Whilst he had always denied the findings made, he had never appealed them. 

The wife was looking to enforce payment of the lump sum of £1.3m, c. £74,500 in maintenance arrears, costs of £323,902, £118,680 in arrears of child support, and rent arrears of £272,674 – plus interest on the unpaid judgment debt. 

The hearing before Roberts J took place over seven days.  The judge heard oral evidence from the parties, from the husband's former accountant and from the purchasers of a flat in London in which the husband had formerly lived.  The wife had subpoenaed the husband's partner, and the partner also gave evidence.  Finally, written evidence was available from the husband's sister, who had been making payments to the husband.

In a detailed judgment (185 paragraphs), Roberts J set out the background and the history of the litigation in detail, before making the necessary findings.

After hearing the evidence in relation to the ownership of the London flat, Roberts J was entirely satisfied that the husband no longer held a legal or beneficial interest in the property. It was, therefore, not a financial resource to which he could look for the purpose of satisfying any debt due to the wife.
It had already been agreed between the parties that the total sum left outstanding to the wife was £1,698,330. It was, as mentioned above, also agreed that the husband had paid sums of £1,535,704 to the wife. Roberts J was not prepared to compensate the husband though for any voluntary payments made to the wife without her prior consent. 

Child support payments of £118,680 also remained outstanding, and the wife was granted permission to enforce those sums due since it was not possible to distinguish between the husband's payment of capital and income.  Roberts J found that the parties had not applied their minds to "how the payments being made on an ongoing basis by the husband should be treated in terms of any apportionment between his capital and income liabilities (the latter including [the wife's] rent)".

Additional sums also remained due in respect of rent for the wife and children (reflecting the fact that the wife had been "kept out of the capital which would have enabled her to achieve a measure of security by investing in the central London housing market at a time when she would have had the benefit of the exponential growth reflected in that market over subsequent years"), which left a total of £624,886 outstanding. This did not include interest.

Roberts J considered the arrears of interest arising from 2005 to date.  She reflected on s.24(2) of the Limitation Act 1980, which provides that no arrears of interest on a judgment debt are recoverable after six years from the date that the interest became due. The recovery of interest is limited to a six year period from the payment due date (Lowsley and Another v Forbes (Trading as LE Design Services) [1999] 1 AC 329).  The wife attempted to argue that s.32 of the Matrimonial Causes Act 1973 prescribed an alternative limitation period (i.e. because it provides that leave must be obtained to enforce maintenance arrears that are more than 12 months old) and that the Limitation Act 1980 was therefore ousted when it came to financial orders.  Roberts J rejected this argument. 

Roberts J concluded that, thanks to Lowsley v Forbes, the wife's entitlement to interest on a matrimonial judgment debt ran for only six years from the date that interest becomes payable.  The wife was therefore precluded from recovering arrears of interest from 2005 to the present.  Interest would be allowed for a period of six years from when it became due and payable and not six years backwards from the present date.  The wife would not be permitted to be paid interest on the child maintenance arrears or on the rent since the husband had been making payments during that period, albeit not the total sums – in those circumstances, requiring the husband to pay the wife interest on unpaid child maintenance was said to be "unfair". The interest on the other sums was allowed at the judgment rate of 8% to reflect the compensatory nature of the award, but the wife would be entitled to simple and not compound interest to reflect fairness to the husband in terms of the ongoing payments which he was continuing to make throughout this period.

Finally, Roberts J turned her attention to the wife's application for the husband's committal.  Taking into account all of the evidence, including the evidence as to the husband's current level of indebtedness, Roberts J found no basis for drawing the inference that the husband could immediately procure the sort of sum which underpinned the wife's judgment summons.  Roberts J stated "I am unable to say that I am sure that the husband has had, or currently has, the means to pay the sums which I have found to be due to [the wife]. It makes no sense to me at all that [the husband] would have paid over the sums he has over several years (albeit inconsistently)".

Roberts J commented that she could find no reliable evidence of hidden or secret funds belonging to the husband or within his direct control which had enabled or would now enable him to expunge what he owed. The wife had, therefore, failed to discharge the burden of proving that the husband had the means to pay her the sums due but had wilfully neglected to do so.  Roberts J declined to make an order for the husband's committal to prison, suspended or otherwise.

2 March 2016