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Finance and Divorce Update, August 2017

Naomi Shelton, Associate with Mills & Reeve LLP, analyses the news and case law relating to financial remedies and divorce during July 2017.

Naomi Shelton, Associate, Mills & Reeve LLP

As usual, this month's update is divided into two parts.

A. News in Brief

The Supreme Court allows wife's appeal in Birch v Birch [2017] UKSC 53
The Supreme Court has determined that a wife's application to be released from an undertaking to sell the former matrimonial home in recitals to a consent order may be heard.  A summary and analysis of the Supreme Court's judgment can be found below in Part B of this update.

Amendments to the Family Procedure Rules 2010 to come into force on 7 August 2017
The Family Procedure Rules 2010 ('FPR') are to be amended by the Family Procedure (Amendment No.2) Rules 2017 from 7 August 2017.   The amendments will address the allocation and process of proceedings for financial remedy following an overseas divorce/dissolution (amended Rules 3 and 4), the holding of a Financial Dispute Resolution appointment (amended rule 7), the requirement of a statement of truth in certain matrimonial and civil partnership applications and answers to such applications (amended Rule 8) and insertion of a transitional provision to the amendment by Rule 8 (by Rule 9).

Amendments to FPR Part 9 proposed
Following the President of the Family Division's declaration of support, in May 2017, for the "de-linking" of divorce and money proceedings, the Ministry of Justice has launched a consultation on the proposed amendments to Part 9 of the Family Procedure Rules (application for a financial remedy).  The consultation will close on 8 September 2017.

The President of the Family Division issues guidance in support of settlement conferences pilot
Sir James Munby, has issued guidance in support of settlement conference pilots in which family judges are able to adopt an inquisitorial approach in order to encourage cooperation between parties with a view to reaching an agreement that is the children's best interests.  The pilots are currently being piloted in some Designated Family Judge areas.

The President has given the pilot his full support and is of the view that, despite divided opinions on settlement conferences, the pilot is worthwhile in deciding whether to take them further.   Evaluation of settlement conferences will continue throughout the pilot, to seek the views and experiences of both judges as well as professional and lay parties.

Bar Standards Board publishes research on client satisfaction of barristers' services
The Bar Standards Board (BSB) has published the findings of its most in-depth research to date of those that have used barristers' services during family legal proceedings. 

The results indicate that where family matters go to court (which only a minority do), 13% of people used a barrister, the majority of which were referred to a barrister by a solicitor.  79% of the 1,200 respondents were either "satisfied" or "very satisfied" with the overall quality of the service they had received.  The data revealed that most were positive about the service they had received from their barrister.  Some issues identified through the interview included respondents' views of limited contact with their barrister before going to court, not being provided with enough information or that their barrister did not have all the details they needed to provide effective representation.

BSB Director of Policy and Strategy, Ewen MacLeod, said this research it will help inform the BSB's future regulatory response to these important issues.

Cafcass publishes guidance on the use of professional time to benefit children, effective from 1 July 2017
Cafcass published the final version its guidance on the use of professional time to benefit children, applicable to all public and private children cases, which can be found here.

Applications to Cafcass in June increase
In June 2017 Cafcass received a total of 3,913 new private law cases, representing a 12% increase from June 201 and the highest number of new cases in a single month for more than 3 years.

Also in June 2017 Cafcass received 1,319 care applications which represents a 2.8% increased from June 2016.

End of pension inequality for same-sex couples
In a landmark judgment the Supreme Court has ruled unanimously that an exemption in the Equality Act 2010, which allows employers to exclude same-sex partners from spousal benefits paid into pension funds prior to December 2005, is discriminatory and breaches EU equality law. The ruling results in the immediate disapplication of the exemption in the Equality Act, meaning companies taking advantage of the exemption will be acting illegally.

In Walker v Innospec Limited and others [2017] UKSC 47, the appellant, John Walker, secured equal pension benefits for his husband which could benefit thousands of same-sex couples across the UK. Mr Walker had worked at Innospec Limited for 20 years before retiring and had, as required, paid into its pension scheme, and had done so in the same proportions as his heterosexual colleagues.  Without this ruling, on Mr Walker's death, his husband would have been left with a pension of a few hundred pounds a year as opposed to £45,000 if he were in a heterosexual relationship.

Lady Hale appointed next President of Supreme Court
It has been announced that Baroness Hale of Richmond will succeed Lord Neuberger as President of the Supreme Court.  Three additional appointments to the Court include Lady Justice Black (who will become the second woman ever to be appointed to the highest UK court), Lord Justice Lloyd Jones and Lord Justice Briggs.  They will be appointed on 2 October 2017 when Lady Hale will be sworn-in officially as President.

Plain English guidance for families and professionals
The Transparency Project has published an unofficial guidance note on the publication of judgments. The guidance is aimed to be used by anyone involved in a family law court case including parents, older children and legal or social work professionals, either separately or together. It seeks to help people make informed choices about publication, including the potential advantages and disadvantages of publication as well as the potential practical consequences.

The guidance note is available here.

Children's Commissioner urges EU not to use residency status as 'bargaining chip'
The Children's Commissioner for England, Anne Longfield, has written to the EU's Brexit Chief Negotiator, Michael Barnier, urging the EU to take a more constructive approach to the residency status of hundreds of thousands of children born to EU nationals resident in England and thousands of UK-born children living in other EU member states, the determination of which is currently in limbo.  

The Children's Commissioner has separately written to the UK Government's Brexit Secretary, David Davis, asking for clarification on the British Government's proposals around nationality. 

Court of Appeal to decide whether English courts can consider section 27 maintenance application when the Scottish court is dealing with divorce
The Court of Appeal has granted a husband permission to appeal in a case raising important issues concerning jurisdiction relating to applications for maintenance within the UK. 

The Court will decide whether a spouse or civil partner whose marriage or civil partnership is being dissolved in Scotland can move to England and apply for a maintenance order which is likely to be generous than the one awarded by the Scottish court, pending divorce or dissolution.  The decision will require interpretation of the Civil Jurisdiction and Judgments (Maintenance) Regulations 2011.

The case has attracted media coverage, particularly focusing on whether London could see an influx of divorcees from other home nations due to its generous maintenance system.

Marriage and divorce rising for those 65 and over
The number of individuals marrying aged 65 and over has increased by 46% in a decade from 7,468 in 2004 to 10,937 in 2014, as revealed by recent ONS marriage data.  Whilst divorce in England and Wales generally is in decline, older people are not following that trend with the number of men aged 65 and over divorcing increasing by 23% and the number of women of a similar age divorcing increasing by 37%.

The ONS says that the increase in older people forming new relationships is likely to be because they are living longer.

B. Case Law Update

Veluppillai v Chief Land Registrar and others [2017] EWHC 1693 (Fam) (Mr Justice Mostyn) 11 April 2017

Here we see Mostyn J making a general civil restraint order after the husband ("H") issued County Court claims, despite the existence of an extended civil restraint order ("CRO").  In earlier financial remedy proceedings, Mostyn J had ordered the transfer to the wife (W) of a property subject to a mortgage with Bank of Scotland Plc and made an extended CRO because of what he considered to be H's extreme litigation misconduct (see Veluppillai & Others v Veluppillai [2015] EWHC 3095 (Fam)).

Despite the CRO, H issued claims in separate County Courts against the bank for disclosing his mortgage details, and the Chief Land Registrar for registering a restriction against the property. He claimed there was identity fraud, that he was not the person involved in the divorce proceedings and he had never been married to W. Both the bank and the Chief Land Registrar applied to strike out H's claims, having discovered the existence of the CRO.

In granting the applications, Mostyn J made a general CRO lasting two years in both the civil and family proceedings.  An indefinite CRO can only be made on application by the Attorney General and Mostyn J directed that a copy of his judgment be forwarded to the Attorney General to consider such an application, given the extreme facts.

Most noteworthy was Mostyn J's comment {at 27] that,

"Attention needs to be given, in my respectful opinion, to putting in place effective machinery whereby there is an up-to-date fully accessible register of all civil restraint orders together with an automatic flagging system when an application is made in breach of that order which brings about automatic dismissal as the terms of the Practice Directions provide."

Birch v Birch [2017] UKSC 53 (Lady Hale (Deputy President), Lord Kerr, Lord Wilson, Lord Carnwath, Lord Hughes) 26 July 2017

In a tweet:  The court has jurisdiction to hear W's application for release from her undertaking

The husband ("H") and wife ("W") entered into a consent order on 28 July 2010.  Part of the order provided that H should transfer to W his legal and beneficial interest in the matrimonial home subject to the mortgage so that W could continue to live there with the two children of the family. In return W undertook at para 4.3 of the recitals to discharge all mortgage payments, to indemnify H against any liability under it and to use her best endeavours to release him from the covenants under it. Then, crucially, she undertook at para 4.4 of the recitals that, if H had not been released from his mortgage covenants by 30 September 2012, she would secure his release by placing the home on the market for sale and proceeding to sell it.

On 18 November 2011 W, who had (and still has) duly discharged the mortgage payments, issued an application to "vary" her undertaking at para 4.4. She explained that she had not been able to secure H's release from his mortgage covenants and would not be able to do so by 30 September 2012. The children were in schools in the vicinity of their home and it would be gravely damaging to their interests for them to have to move home while still at school. In such circumstances she sought a "variation" of the undertaking at para 4.4, so as to postpone for seven years her obligation to secure H's release from his covenants under the mortgage by sale of the home until 15 August 2019, being the date of their son's 18th birthday.

H argued that the court had no jurisdiction to hear W's application and requested that the court rule on that preliminary issue. He argued that W's undertaking was equivalent to an order for sale under section 24A Matrimonial Causes Act 1973 ("MCA 1973"). He relied on the Court of Appeal's decision in Omielan v Omielan [1996] 2 FLR 306 that jurisdiction to vary the latter did not exist where it related to the "territory" of the property adjustment order.

When W's appeal from an adverse decision below came before the Court of Appeal it held that its jurisdiction to hear the application was a "formal" jurisdiction which existed only "technically"; that scope for its exercise was "extremely limited indeed"; and that there was no basis for its exercise upon W's application.

The Supreme Court, by a majority of 4 to 1, allowed W's appeal and held that jurisdiction exists to hear W's application. Lord Wilson gave the lead majority judgment, with which Lady Hale, Lord Kerr and Lord Carnwath agreed. Lord Hughes gave a dissenting judgment.

The description of the application as being to "vary" W's undertaking is confused. The court's power is only to grant or refuse an application for release from the undertaking. Although the court's exercise of its power may result in something which looks like a variation of an undertaking, if it decides to accept a further undertaking, it is the product of a different process of reasoning.

The courts below had wrongly concluded that they did not have jurisdiction to release W from her undertaking. However, they failed to distinguish between the existence of the court's jurisdiction to release W from her undertaking, and the exercise of its jurisdiction. The case law indicated that there was full jurisdiction to hear W's application. Further, in circumstances where the undertaking in para 4.4 could have been framed as an order for sale of the property under s. 24A MCA 1973, variable under s.31(2)(f), it would be illogical for the existence and exercise of jurisdiction to grant release from the undertaking to differ from those in relation to the variation of any such order. The equivalence of W's para 4.4 undertaking with a s.24A order for sale seemed clearly to confirm the existence of the court's jurisdiction to hear her application for release from it. 

Lord Wilson was unable to subscribe to the Court of Appeal's determination of the appeal in Omielan by reference to the non-existence of jurisdiction rather than a refusal to exercise its jurisdiction. Where Parliament has conferred jurisdiction on a court, there is no scope for a court to say part of it does not exist. The terms of a financial order are often interlinked and therefore it is difficult to apply the concept of different territories to such an order. The demarcation of territories within the order is no proper criterion for identifying the existence of a jurisdiction.

Parliament did not in s.31(7) or elsewhere in the MCA 1973 make a change of circumstances a condition for the exercise of jurisdiction to vary a s.24A(1) order for sale. However, unless there has been a significant change of circumstances since the order was made, grounds for variation of it under s.31 seem hard to conceive.

The court remitted to HHJ Waller the inquiry into whether the court's jurisdiction to vary the undertaking should be exercised. In light of the equivalence of W's undertaking with a s.24A order for sale, his inquiry will be conducted in accordance with s.31(7) MCA 1973. He will need to give first consideration to the welfare of the two children; but it is a consideration which may be outweighed by other factors. He will have to have regard to all relevant circumstances including in particular, whether W can establish a significant change of circumstances since her undertaking was given and whether, and if so to what extent, H has suffered, and is likely to continue to suffer, prejudice by remaining liable under his mortgage covenants. If the court finds that H has suffered, and/or would be likely to suffer, prejudice as a result of delay in selling the home, the court might favour compensating him by asking the wife to make provision for him out of the ultimate net proceeds as a condition of release.

Lord Hughes gave a dissenting judgment, not on the existence of the jurisdiction to vary a s.24A order for sale, or its equivalent achieved via an undertaking, but on the principles for its exercise. It must be kept in mind that the s.24A order is ancillary to a capital order and that final capital orders cannot be varied in their substance (whether or not there is a change of circumstances). Lord Hughes states that the acid test should be whether the application is in substance (impermissibly) to vary or alter the final order or whether it is (permissibly) to support it by working out how it should be carried into effect. The application in the present case, he says, is one which attempts to vary, not to carry into effect, the originally agreed and court-endorsed order and therefore the Court of Appeal was right to hold that it was bound to fail.