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Finance & Divorce Update, July 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 June 2016

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

This month's update is divided into two parts: the first part is a News Update and the second comprises a Case law update.

This month's update is divided into two parts:

A. News in brief

Sharia Law inquiry launch

The Home Affairs Committee is launching an enquiry into Sharia law and how councils operate, the work of councils resolving family and divorce disputes and the relationship of councils with the British legal system.  The Committee is inviting written evidence, submissions to be submitted online by midday on 20 July 2016.  Click here and here for the relevant links:

Unregulated divorce providers servicing 10-13% of the market

Legal Services Board research has found that 10 to 13% of the divorce market is serviced by unregulated providers, being essentially online divorce providers and fee charging McKenzie Friends.  A market share of 10 to 13% is perhaps smaller than had been thought and, commenting on the research, Law Society Chief Executive Catherine Dixon referred to the expertise of solicitors that comes from "rigorous training" and to the code of conduct binding solicitors.  She also referred to the fact that the term "lawyer" is not a "protected title" and to consumers not knowing the difference between a regulated and an unregulated offering.

Resolution on the impact of LASPO

The latest Legal Aid statistics show that the number of mediation assessments is down 14% compared with the same period in 2015 and that those mediations resulting in agreements are about 60% of what they were prior to LASPO, with 62% of all mediation outcomes involving successful agreements. 

The Legal Aid statistics can be found here

Resolution Chair, Nigel Shepherd, has called for steps to be taken to remedy the situation urgently, "including looking at funding for other forms of dispute resolution, and to immediately carry out the full review into the impact of LASPO that was promised when the reforms were introduced… over 3 years ago".  Mr Shepherd's comments can be seen in full here

Latest Family Court statistics released

The statistics can be found here

Commenting on the statistics, Resolution Chair, Nigel Shepherd, referred to the fact that divorce centres are "under significant strain, where the number of divorce petitions has far exceeded the levels that were anticipated or planned for".  Mr Shepherd also flagged up specific concerns over reports that petitions are "being needlessly rejected", citing one reported example of a petition based on unreasonable behaviour being returned due to the fact that the behaviour alleged was not considered sufficiently unreasonable.  Mr Shepherd's comments can be found here

Progress report on the Bury St Edmunds Divorce Centre

One year in, the centre is, according to family law solicitor and arbitrator Tony Roe (who made a series of FoI requests of the MoJ), heading for between 40,000 and 45,000 petitions issued in 12 months.  The centre receives 1,200 items of post daily, along with 150 emails and 700 telephone calls. 

Somewhere between 13,000 and 18,000 petitions are, however, still being returned annually.  The top 10 reasons for this can be seen here

Divorce settlements and the new stamp duty charge

The Telegraph has reported that thousands of divorce settlements "could be left open to appeal because the Government's new stamp duty surcharge is leaving estranged partners unable to buy their own home following a split".

The issue relates to an extra 3% of stamp duty payable by anyone buying an "additional property".  According to the article, experts are reporting that family lawyers remain "largely in the dark about the new law – meaning that the tax is not being factored into settlements".

The article is available here

EU referendum result

Resolution Chair, Nigel Shepherd, has issued a statement following the UK's vote to leave the EU.   In the statement, Mr Shepherd makes it clear that it is "too early to know the full implications for family law" and indicates that there is clearly going to be a period of "great uncertainty".  Mr Shepherd refers not only to those areas of family law, such as Brussels IIA, which are likely to be affected directly by a UK exit, but also to wider issues relating to family law, such as the impact that any changes in the financial markets will have on financial matters.

Mr Shepherd's statement can be found here:

EU regulations on issues of jurisdiction

18 EU member states (not including the UK) have signed up to two regulations dealing with issues of jurisdiction and applicable law in matrimonial property matters.  They will bring greater certainty and put an end to parallel, conflicting proceedings where more than one member state is involved.  Whilst only 18 member states have signed up to date, other states will be free to do so going forward.

The relevant regulations can be accessed here

Court fee rises condemned by Select Committee

The Guardian has reported that a report by a Conservative-dominated select committee has referred to the increased cost of divorce, from £410 to £550 (approximately double the cost to the courts of providing the service), as unjustified.  The committee's report indicates that, where "there is a conflict between the objectives of achieving cost recovery and preserving access to justice, the latter objective must prevail".   The report goes on to recommend that the increase in the divorce petition fee to £550 be rescinded.

A copy of the article can be found here

Family Justice Council publishes "Guidance on Financial Needs on Divorce"

The Family Justice Council has published its "guidance on financial needs on divorce", which can be accessed here

The guidance follows the Law Commission consultation on "Matrimonial Property, Needs and Agreements", which was published in February 2014.

Focusing on needs (and not on sharing and compensation), the guidance sets out how needs should be approached and goes on to deal with the issue of duration. One of the accompanying annexes contains useful annotated worked examples and table of relevant cases with short summaries. Another contains a useful commentary on the approach to be taken to pensions, and a third provides practical examples of different types of need, detailing relevant authorities.

It is important to note, however, that the guidance does not change the law itself.   Its purpose is to disseminate information about the ways in which the Court's discretion in relation to the assessment of needs is currently exercised and to encourage consistency.

B. Case Law Update

De Renee v Galbraith-Marten [2016] EWCA Civ 537

This was an application by a wife for permission to appeal against an order dismissing her application for permission to apply for financial relief pursuant to Part III of the Matrimonial and Family Proceedings Act 1984.  

The parties had married in Australia in 2006 and had an 8 year old daughter.  The wife was of Australian nationality with a permanent right of residence in this country.  The husband was a British citizen and the parties had spent their married life in England, separating in 2008.  Since then, the wife had been living in Australia, on her case as a result of the intimidating and violent behaviour of the husband.

An application had been made in 2009 for financial orders in Australia, the parties entering into 3 agreements, dealing with spousal maintenance, child maintenance and capital respectively. 

The spousal maintenance had continued until the daughter had turned 5 in December 2012 and child maintenance remained payable at a little over £800 per month.  Under the capital agreement, the wife had received approximately £72,500.

The agreements were binding under Australian law, the Australian Court not having the residual discretion as to whether to approve the agreements of the English Court.

The wife's case was that the agreements had not been fair and that they had not made proper provision for either her or the daughter.  She had already applied to set aside the agreements in Australia on the grounds of non-disclosure and duress, but her application had been dismissed and, instead of appealing, she had commenced proceedings here under Part III.

The first hearing was ex parte, but Mrs Justice Parker declined to deal with the matter without notice first being given to the husband, for which she was criticised by the wife's counsel.  Lady Justice Black, however, was not prepared to permit such a procedural matter to be argued on appeal, indicating that it had to be the case that a Judge could go straight to a with notice hearing if it appeared to be appropriate in the circumstances. 

The wife also complained about Mrs Justice Parker's decision to dismiss her application for permission on the basis that:

• provision had been granted under the Australian agreement, the Australian system being very similar in principle to our own;

• the wife had sought to set the agreements aside, there being a process that could be followed in Australia which entitled her to air her allegations of non-disclosure, fraud and duress, and the Australian Court had not been persuaded by the wife's arguments;

• the wife should not be permitted to have a rehearing of her application here; and

• anything new that the wife had uncovered since the dismissal of her application in Australia was a matter for the Australian Court.

Mrs Justice Parker had not considered, therefore, that there was "solid ground" for making an application in England, there being "no gap which needed to be filled by the English court". 

The wife alleged that the Judge had failed to recognise the difference between the English and Australian systems, specifically the fact that the Australian Court did not have an independent jurisdiction to assess and approve agreements, and fact that the agreements had left the wife in real need.  Proceedings should be permitted in England.

Lady Justice Black was not persuaded, however, that there was mileage in the wife's proposed grounds of appeal.  Whilst there was no dispute that the Australian provision was a material factor in the consideration of whether leave should be given, the wife had had the benefit of advice, when she had reached the agreements in Australia, and she could have sought provision from the Australian Court if she had not considered the proposed agreements fair and sufficient to meet her needs.  Nothing had in fact been produced that suggested that the agreements were actually unfair and, given that the Australian Court had subsequently rejected any suggestion of duress, the English Court could assume that the wife had accepted that proper provision was being made.  It could be assumed, furthermore, that the wife's Australian lawyer had been looking after her interests.  If not, that was a matter between the wife and her lawyer.

Lady Justice Black indicated, furthermore, that any capital provision for the wife by the English Court, had the matter been heard in England, might not have been any more generous to the wife than that provided for by the Australian agreement.  Lady Justice Black also referred to the fact that periodical payments for the wife for a relatively short period until the daughter reached school age would not have been a surprising outcome in England. 

The jurisdiction of the Australian Court had not, furthermore, been ousted by the agreement as the wife had been able to air her complaints of non-disclosure and duress, and Mrs Justice Parker had not erred in believing that any new material should be a matter for the Australian Court rather than the English Court.

Lady Justice Black recognised that there had been some factual errors in Mrs Justice Parker's judgment, but found that they had not been material as to her conclusions.  Ultimately, the difference between the two systems was not sufficient to "undermine" the decision of Mrs Justice Parker.  Permission to appeal was, therefore, refused.

Hart v Hart [2016] EWCA Civ 497
This was a renewed application for permission to appeal in financial remedy proceedings relating to judgments made by his Honour Judge Wildblood QC sitting in the High Court.  Both parties had sought to appeal Judge Wildblood's decision.  The wife had been granted permission to appeal and the husband had been refused.  The husband appeared before Sir James Munby in person and detailed 20 different grounds of appeal.

The husband's first complaint arose out of the fact that the Judge had not reduced the wife's needs to account for the fact that she had, for some years, been cohabiting.   Sir James Munby held, however, that the Judge's decision had been a matter of fact and that the Judge had reached a conclusion that was "plainly open to him on the evidence he had".  The husband had, therefore, no realistic prospect of "disturbing" the factual finding by way of appeal.

The second complaint, which was linked to the seventh, was based on the fact that the Judge had "prevented him from deploying the whole of his armoury" in the form of a substantial volume of case law (the Judge already being familiar with the relevant principles).  The husband also pointed to an imbalance in time afforded to him and to Counsel for the wife to make their respective final submissions.  Sir James Munby referred to the fact, however, that the husband had failed to put before the Court a transcript of the relevant part to the proceedings which meant that the instant court was not in a position to evaluate the merit of the husband's assertions.

The third complaint related to, on the husband's case, the inappropriate treatment of a family trust, the benefit of which was divided equally between the husband, the wife and each of the two children.  The Judge had treated the wife as having a 25% share and the husband the remaining 75%, excluding the children.  Sir James Munby held, however, that the Judge could hardly be criticised for coming to the conclusion that he had come to in the light of findings that he had made on the evidence that he had heard in circumstances where the husband had been unable to provide appropriate and satisfactory evidence.

The fourth matter related to the Judge's treatment of short-term loans from a company, in respect of which Sir James Munby believed that the Judge's analysis displayed no error in reasoning.  

The fifth complaint related to the potential Capital Gains Tax liabilities which might or might not attach to the wife in the future.   Sir James Munby held, however, that the Judge was fully entitled to make provision for the wife in relation to a prospective Capital Gains Tax liability which was more likely to accrue than not.

The husband's sixth complaint focused on a sum of £298,000 which the husband asserted was owed by a company that was now the wife's company to a company which was referred to, in the judgment, as being in "the husband's camp".  Sir James Munby pointed to the fact, however, that the debt nevertheless remained and was entirely outside, therefore, the ambit of the Judge's order. 

Sir James Munby held that the husband had "no reasonably arguable basis of challenge" in relation to any of the seven complaints and that there was "no substance" to any of the other points that made up the husband's grounds of appeal.  The husband's renewed application for permission to appeal, therefore, failed.

Wyatt v Vince [2016] EWHC 1368

This was a hearing before Mr Justice Cobb in the long running dispute between Mrs Wyatt (the "wife") and Mr Vince (the "husband").  The wife had issued financial remedy proceedings against the husband some 19 years after the grant of decree absolute of their divorce.  Following a direction from the Supreme Court, the wife's application was listed for a Financial Dispute Resolution Appointment.  No settlement was reached at that hearing, but a compromise agreement was reached some months later.

Two subsidiary issues arose for determination at the hearing before Cobb J:

1. Whether the terms of the settlement could be made public; and

2. Whether the husband should be ordered to pay the wife's costs of the hearing on 20 May, which had been listed pursuant to a summons issued by the wife in line with the practice promulgated in Dean v Dean [1978] Fam 161.

Cobb J heard detailed arguments about publicity of the terms of the settlement and, in summary, he concluded that:

1. The starting point of privacy for these parties in respect of the proceedings was readily displaced, given that the lives and financial circumstances of the parties had already been trailed extensively in the public domain;

2. This was not a case in which the husband had disclosed any, or any material, financial evidence under compulsion which might attract protection.  The husband had run the 'rich man's defence'.  There was, furthermore, no commercially sensitive (or other similar) financial information to protect;

3. There was a legitimate interest in the publication of the conclusion of the case, and specifically the figure which (whether a conscientious appraisal of the merits, or a figure computed by reference to strictly commercial considerations) the parties had agreed would be the right one to reflect an appropriate award to the wife; and

4. There was a public interest in disseminating the fact that these parties had, in the end, been able to reach a negotiated settlement without a trial.  Given the ambitious objectives of each party along the way (their open positions, widely publicised, pitched them £2m apart) and the heavily contested litigation to the Supreme Court and back to the High Court, the public should know that a compromise had been achievable even at a late stage of such a hard-fought case.

The husband's agreement to the publication of the terms of settlement was qualified by his submission that he should be enabled to publish the likely net benefit to the wife of the lump sum payment, once her costs liability to her solicitors had been taken into account.  At the time of the hearing before Cobb J, the wife had not yet been presented with her final bill from her solicitors, and it was possible that there could be negotiation on some aspects of it.  Cobb J observed that it was, therefore, "impossible at this stage to know what the 'net' figure will ultimately be".  Cobb J also said that "it is plainly not in the public interest for potentially misleading information to be published about the outcome of this case, and its actual financial impact on the parties. I therefore prohibit any disclosure of the sum which is said to be the approximate outstanding costs bill".

Cobb J's view was reinforced by the fact that the husband had not shared any information about the level of his own legal costs.  Cobb J decided that it was neither fair nor just to authorise the release for publication of an estimate of the wife's possible outstanding liability for costs, without the publication of any comparable figure from the husband.

Cobb J concluded that the final order settling the financial remedy proceedings should be made public.  In summary it provided that:

1. In full and final satisfaction of all forms of financial relief, the husband would pay the wife a lump sum of £300,000; and

2. The wife would retain the husband's payment on account of £200,000 towards her costs of the appeal to the Supreme Court, in addition to the award of £125,000 towards her costs made in December 2012.

Cobb J observed that he was "perfectly satisfied that it [was] reasonable and that the wife [was] entitled to receive a modest capital award following the breakdown of this marriage; the lump sum payment agreed between the parties fairly represent[ed], in [his] view, a realistic and balanced appraisal of the unusual circumstances of the case, having particular regard to the factors set out in section 25(1) and (2) of the Matrimonial Causes Act 1973".

Cobb J also ordered that the husband pay a contribution of £1,000 in respect of the wife's costs of issuing the Dean summons.

CP v Secretary of State for Work and Pensions (CSM) [2015] UKUT 391 (AAC)
This case involved a successful appeal to the Upper Tribunal in a child maintenance case where it was found that the First-Tier Tribunal had failed in its duty to enquire into the mother's allegations.  Whilst the details of this case are fact specific and beyond the scope of this update, it is worth considering in greater detail if arguments are raised about a variation of child maintenance payments due to an inconsistent lifestyle and potential diversion of funds.

In this case, the father went from being a sole trader to moving his business into a company and, at the time of that change in circumstance, received a lower assessment than had been previously made.  The mother alleged that the father was understating his declared income, and she applied for a variation from the formula assessment on the grounds of (i) lifestyle inconsistent with declared income, (ii) diversion of income and (iii) income not taken into account.  Due to a series of procedural errors and errors in law when the First-Tier Tribunal had heard the matter, the Appeal Chamber remitted the matter for a rehearing.

KC v RC and Anor [2015] EWFC B215 (24 November 2015)

This is the first of two judgments in the same matter by His Honour Judge Booth, both dated 24 November 2015.  The case related to financial remedy proceedings brought by the husband against the wife which involved a third party, GBL, a company belonging to the husband's brother, Raj.  

The background to the case was complex, the essential question for the Judge being to determine whether the husband had indeed invested in a housing development opportunity which had, to use the judge's words, "gone horribly wrong" so that, once legal fees had been factored in, the position was one of debt.

The husband was 41 years old and had a background in finance and banking.  He was a partner in a family business, GE, with his father, his mother and his eldest brother, Ravi.  The husband's parents had, when the husband had entered the partnership, transferred funds from their own capital accounts into the husband's, which stood at £480k at the time of the hearing.  The husband's position was, however, that GE had entered into long term lending contracts with another company, GFL (about which more below), and a subsidiary rendering it impossible for the husband to access any monies standing to his credit.  

The wife was 39 years old and was working part-time.  There were two children, aged 6 and 3 respectively.

A detailed account of the background to the case is, out of necessity, beyond the scope of this update.  In short, however, the property that was the subject of the housing development opportunity referred to above had been purchased by Raj in 2007.  Raj was the sole shareholder and director of GBL, the business of which was purchasing and developing houses for profit.  When, in 2010, Raj decided to sell the property, the husband indicated that he wished to acquire it.  A mortgage application was made to NatWest which contained figures which were described by the Judge as "fictitious".  The Judge reached the conclusion that either the husband and Ravi had, together, dishonestly represented the husband's financial position in order to obtain the mortgage and/or the fictitious figures were true, at least to the extent that the husband was much wealthier than he was now wishing the Court to believe.  The Judge concluded that both were probably correct.  

Following the purchase of the property by the husband, Raj offered his services as project manager.  On his and the husband's cases, a contract was entered into which provided for his company to be paid by the husband at the rate of £9,500 per month but on the basis that payment would only be made at the conclusion of the matter.  The husband's aim was to achieve a sale price of £1.5m on the basis that such a sale price would bring with it a profit of around £200,000, factoring in a cost of £200,000 to carry out the work.  As the Judge pointed out, however, the figures did not work as the project had been anticipated to take approximately 18 months, which would use up £171,000 of the £200,000 set aside to cover the cost of the work, with no allowance being made for labour, materials, kitchens or bathrooms.  The Judge described the "plan" as "plainly nonsense".  

In any event, however, the project did not go according to plan and the work was never completed.   A very significant loss was going to be made. 

Following the parties' separation, Raj instructed solicitors to seek a second charge over the property and requested payment of £576,000 from the husband within 7 days.   At the same time, the wife's solicitors sought an undertaking from the husband that he would not deal with or dispose of any assets in settlement of the alleged debt, which the wife's solicitors suggested was not legitimate.  In the end, the husband granted a second charge to GBL, failing to indicate that he had done so at a return date in relation to an application made by the wife pursuant to section 37 of the Matrimonial Causes Act 1973.   The Judge's view of the husband's actions was that the husband had, simply, made plain "that his loyalty his brother exceeded his loyalty to the wife and the children". 

The wife claimed that the contract between the husband and GBL in relation to the project management was a sham and the Judge referred, in his judgment, to the words of Diplock LJ in Snook v London and West Riding Investments Ltd [1967] 2 QB 786, in which shams were described as "acts done or documents executed by the parties to the "sham" which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intended to create".

The Judge also referred to the leading case on sham transactions in financial remedy proceedings, A v A & St George Trustees [2007] EWHC 99 (Fam), which established that the burden of proving a sham transaction lies on the party alleging it.  Whilst the wife had failed to discharge that burden, the Judge nevertheless found that the scale of fees payable to GBL rendered the project not viable to make money.  The Judge referred to the fluidity of the family's finances and indicated that he had no doubt that support for the husband would continue, "whatever the position on "paper" appear[ed] to be".  The debt to GBL was something that Raj would never enforce against his brother.  

The wife's also alleged that a nominee agreement between the husband and Ravi in relation to GFL was a sham.   GFL was a money lending company, and the husband's explanation as to his shareholding and directorship was that Ravi had needed his and Raj's involvement for incorporation purposes to satisfy requirements relating to companies lending money to members of the public.  The Judge found the entire arrangement to be a sham, with the nominee agreement (which had been entered into years after the company's incorporation and merely recorded, the husband maintained, the existing position) to be part of the deception.  The outside world "was meant to believe that the three brothers were shareholders and directors whereas pursuant to the nominee agreement the shares were all owned and under the control of Ravi". 

However, the Judge had already referred to his view that the husband's family had a "fluid approach to family wealth" and he indicated that, "Whatever may be the position on paper I am satisfied that the husband is entitled to and will share in the family wealth in the future".

The Judge found that the extent of the husband's dishonesty led him to believe that he was hiding something of substance.   The difficulty, however, was putting a figure on the husband's resources.   The Judge pointed, however, to the fact that the husband had been able to access funds as and when he had needed to do so to pay for holidays and cover his legal fees during the course of the proceedings.   The husband had indicated that, in 2010, he had been worth £1 million, and the Judge estimated that his worth remained at that level.  He found that the husband could afford to pay £500,000, which would cover the wife's housing needs, her debt to her solicitors and part of a debt of £100,000 owed to her mother.  Whilst her husband did not, on paper, have that amount, the Judge indicated that he expected the co-operation of the family members to be forthcoming to enable the payment to be made.  The Judge was satisfied that the housing development could, properly managed, make a profit and that the husband had a share in the family wealth.  Even though he could not find the contract between the husband and GBL to be a sham, furthermore, he found that the fee of £9,500 per month was never intended to be recovered.  The existing level of maintenance was to continue and the issue of school fees was to be left to be agreed between the parties.  The wife was to have a charge over the property, the charge being ranking ahead of GBL's charge.

As a final point, the Judge was critical of the size of the bundles produced for the final hearing, although he chose, on this occasion, not to make any adverse costs orders as per the President's suggestion.

KC v RC and Anor [2015] EWFC B216 (24 November 2015)

This was the second judgment handed down by His Honour Judge Booth, dealing with a number of matters arising out of the first judgment.

One of the matters in question was the timing for the payment of the lump sum.  The husband had maintained, during the final hearing, that he had £150,000 that could be paid more or less immediately.   The Judge ordered, therefore, that this sum should be paid within 28 days.   The balance of £350,000, making up the lump sum of £500,000, was to be paid within 6 months, that period being judged to give the husband sufficient time to realise the value in the assets to which he was entitled.

The Judge refused an application by the husband for permission to appeal in respect of two aspects of his first judgment, relating to the shareholding that the husband had in Ravi's company and in relation to the funds available to the husband to meet the lump sum.  The findings of fact and the inferences drawn from those findings meant that the conclusion that the Judge had come to was, in the Judge's judgment, well within the bounds of fair outcomes and could not, therefore, be said to be wrong.

In relation to the issue of costs as between the husband and the wife, the Judge indicated that the lump sum of £500,000 had to include some element of costs recovery as, if it did not, the wife would have insufficient funds available to meet her housing needs.  The Judge felt that the husband's litigation misconduct and dishonesty had not been sufficient to justify an indemnity costs order but indicated that, if the husband was paying "within the lump sum roughly what [was] likely to have been awarded against him at the end of an assessment where he was ordered to pay the whole of the [wife's] costs on a standard basis then that seem[ed] to [the Judge] to be the right outcome".

In relation to the issue of costs as between the wife and GBL, the Judge identified three potential starting points, the first being the civil procedure cost rules, the second being financial remedy proceedings with the starting point being no order for costs and the third being financial remedy proceedings falling outside the normal rule and, therefore, starting with a clean sheet of paper.  The Judge preferred the third option, referring to the need to take into account the factors that would be taken into account were the proceedings civil whilst also looking at the outcome on the parties by carrying through a net effect calculation of the impact of the costs order on the parties.  Having carried out this "balance sheet approach", the Judge made no order for costs.

SM v Secretary of State for Work and Pensions and BM (CSM) [2016] UKUT 245 (AAC)

This was an appeal to the Upper Tribunal, Administrative Appeals Chamber in relation to a decision made by a first-tier tribunal relating to child maintenance payable under a Child Maintenance Service assessment.

Whilst not strictly directly a finances on divorce case, it is worth flagging it up so that practitioners are aware of it.  It dealt with the following issues:

• Whether sums spent on school "extras" are items in connection with education or training and are therefore excluded from consideration for the purposes of child support by virtue of section 8(7) of the Child Support Act 1991 (as amended);

• Whether sums spent by a non-resident parent on extras can be taken into account in deciding whether a variation in child support is justified and equitable; and

• Whether voluntary payments, pursuant to section 28J of the Child Support Act 1991 (as amended) can be taken into account when deciding whether it is just and equitable to agree to a variation in the level of child maintenance.

Harb v HRH Prince Abdul Aziz Bin Fahd Bin Abdul Aziz [2016] EWCA Civ 556

This was a successful appeal by the son of the late King of Saudi Arabia against a finding that he had breached a legally binding agreement to transfer assets to his late father's wife.

By way of background, the wife claimed to have married the King in 1968 and to remain married to him under Sharia law, despite having left Saudi Arabia in 1968.  In 2003, having previously threatened to write an auto-biography, she prepared an affidavit containing sensitive and personal information with a view to making an ancillary relief application but was persuaded to withdraw her claims on the basis of an agreement, on her case, with the Prince (the King having been incapacitated), that she receive £12m and two properties in Chelsea.

Draft documentation, including a draft contract, was prepared to give effect to the agreement, but the Prince subsequently denied the existence of any agreement, and the wife's trustee in bankruptcy commenced proceedings in 2009 to enforce the contract (before the expiry of the limitation period).

The Prince argued that, even if the Court found there to be a contract, he had entered into it not in his personal capacity but as agent for the King.    

The Prince failed to attend court for reasons which the Judge at first instance found to be unsatisfactory, and this led the Judge to afford little weight to the Prince's untested testimony despite clear concerns over the consistency of the wife's evidence.  The Judge went on to find in favour of the wife, that there was a contract in respect of which the Prince was personally liable.  The Prince appealed.

The Prince argued that the Judge had erred, both in rejecting his evidence and in finding there to be a binding contract, and that, even if there was a contract, the Judge should have found that he had acted as the King's agent and that he had, therefore, no personal liability.

On appeal, the Court found, whilst recognising that it was not surprising that the Judge had not placed the same weight to the Prince's evidence as he placed on that of the wife (and a witness), that the Judge had nevertheless failed to examine "the evidence and the arguments with the care that the parties were entitled to expect and which a proper resolution of the issues demanded".  The deficiencies in the judgment were such that the case had to be remitted. In his judgment, the Master of the Rolls indicated:

"In a case (such as this) which largely turns on oral evidence and where the credibility of the evidence of a main witness is challenged on a number of grounds, it is necessary for the court to address at least the principal grounds.  A failure to do so is likely to undermine the fairness of the trial.  The party who has raised the grounds of challenge can have no confidence that the court has considered them all; and he will have no idea why, despite his grounds of challenge, the evidence has been accepted.  That is unfair and is not an acceptable way of deciding cases." 

An additional ground of appeal, which the Court did not need to deal with as a result of its finding above, alleged bias founded on the fact that the Judge had been criticised in an article by a member of the same chambers as the son's Counsel.  The allegation of bias was, nevertheless, considered by the Court and was dismissed, the Court applying the test from Porter v Magill [2002] 2 AC 357:

"The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was real possibility that the tribunal was biased."

Whilst the Court was prepared to assume that such an observer would conclude that there was a real possibility of the Judge being biased against the members of the relevant chambers, at least in the short term, "the observer would not conclude without more that there was a real possibility that this bias would affect the judge's determination of the issues in a case in which a party was represented" by a member of the chambers.   The Judge had, furthermore, already given a provisional view, immediately after the conclusion of the evidence, that there was an agreement.  The Court thought it "fanciful to suppose that the judge made major changes to his assessment of the evidence simply as a reaction to the Article or that his decision on the agency issue owed anything to a bias against the Prince". 

Bataillon & Anr v Shone & Anr [2016] EWHC 1174 (QB)

This case involved a claim made by creditors under s.423 of the Insolvency Act 1986 ("s.423") to set aside the transfer of property between a separating husband and wife.  Whilst not directly relevant to the majority of matrimonial cases, it is useful to be aware of how the Chancery Division is approaching the transfer of assets on divorce where there is a subsequent bankruptcy.

Mr Bataillon and Mr Marquaire (the "Claimants") had invested in Global Distressed Assets Fund III Limited Partnership ("GDAF"), in which Mr Shone (the husband) was a shareholder and principal. After the publication of GDAF's audited financial statements for the year ended 2012, the Claimants had serious concerns about its management and the whereabouts of its money (including their contributions) which appeared to have gone to service various third-party dealings.  Those concerns were expressed by the Claimants to Mr Shone, who eventually signed a settlement agreement by which he agreed to buy out the Claimants' interests in GDAF for around $2m.  Mr Shone reneged on this agreement and the Claimants commenced proceedings against him.

Simultaneous to these events, Mr Shone and Mrs Shone (Mr Shone's wife) separated and a number of assets, including five properties, various cars and cash, were transferred between them.  Mr and Mrs Shone contended that these transfers were an informal separation agreement by which Mrs Shone agreed not to initiate divorce or financial remedy proceedings.  The Claimants argued that these transfers were at an undervalue with no consideration and intended to put assets beyond their reach.

Pursuant to s.423, the Claimants sought to set aside the transfer of various items of property from Mr Shone to Mrs Shone.

HHJ Waksman QC (sitting as a judge of the High Court) held that the Claimants' claims under s.423 were made out and that the various transfers from Mr Shone to Mrs Shone had either been made with no consideration or at an undervalue.  HHJ Waksman QC held that the transfers were intended to defeat the claims of the Claimants, commenting that he did not generally consider the wife "to be a reliable witness on many of the key issues".

Mrs Shone was ordered to pay to the creditors 50% of the net sale proceeds of three properties which had been transferred into her sole name.  The figure reflected a finding that, at all relevant times, Mrs Shone had held a 50% beneficial interest in the properties herself.

Mrs Shone was ordered to pay a further lump sum of £434,500 in respect of the Claimants' other claims.  In the exercise of his discretion, HHJ Waksman QC reduced this sum by £100,000 to make provision for the school fees of Mr and Mrs Shone's daughter who was found to be "an innocent victim".