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Finance and Divorce Update, January 2018

Sue Brookes, Principal Associate and Rose-Marie Drury, Senior Associate, both of Mills & Reeve LLP analyse the news and case law relating to financial remedies and divorce during December 2017.

Sue Brookes, Principal Associate and Rose-Marie Drury, Senior Associate, both of Mills & Reeve LLP

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

A. News in brief

Proactive discussions with NRPs over child maintenance arrears are ineffective, say DWP

The Department for Work and Pensions has published a report presenting the findings of a trial to determine whether discussions is a good tool to recover arrears owed to parents with care.  The trial tested both discussing the option of part payment with non-resident parents first and parents with care first. If the first party called was open to part payment the offer was put to the other party. Offers were passed between parties by the Child Support Agency until an agreement was reached or payment refused.  The trial established that proactive discussions of part payment are not an effective tool for recovering arrears. There was no significant difference in the number of cases with arrears paid, or the average value of arrears paid, between the control group and other cases in the trial.

Meanwhile, the DWP is asking for views on options to give the Child Maintenance Service stronger compliance, collection and enforcement methods to make sure parents are meeting their responsibilities towards their children. The proposals include:

• removing passports – parents who persistently do not pay the child maintenance they owe could face being banned from holding or obtaining a UK passport for up to two years;

• improved calculations – income from capital, foreign income, notional income from assets and unearned income could all be taken into account when the CMS works out how much maintenance a parent owes; and

• deductions from business accounts – the CMS could seize funds from sole trader and partnership accounts to pay off a parent's unpaid maintenance bill.

The consultation also outlines proposals to address historic unpaid child maintenance built up under the old CSA, and options for writing it off. New analysis shows that it would cost the government £1.5 billion to collect the debt, most of which is owed on CSA cases where the children are now adults. The consultation closes on 8 February 2018.

MIAMs between July and September down 5% on a year ago

Mediation Information and Assessment Meetings (MIAMs) were down by 5 per cent in the last quarter compared to the previous year. Between July and September 2017 there were 2,752 MIAMs. That number stands at just over a third of pre-LASPO levels. The figures have been revealed by the Ministry of Justice.

There were 1,614 mediations started between July and September 2017. This was down by 14 per cent on the corresponding period last year. Mediations are now running at around half of pre-LASPO levels.

For the full statistics click here

New Family QCs appointed

Seven new specialist family lawyers have been awarded silk. The new Queen's Counsel will formally become silks when they make their declaration before the Lord Chancellor at the ceremony on 26 February 2018. For the complete list of appointments, click here

Law Society publishes behavioural research of consumers choosing divorce services

The Law Society has responded to the Solicitors Regulation Authority (SRA) consultation Looking to the Future: better information, more choice.

The consultation makes a number of proposals, including a new requirement that solicitor firms should be required to publish price and service information on their websites for certain areas of law relating to individuals and small business customers.

The Law Society states that some consumers will not be able to assess the extent of their legal needs at the time of initial enquiry. It is therefore unlikely that accurate and meaningful price information can be provided on a website. Any elements of litigation or disagreement can result in uncertainty. Divorce customers are more likely to understand that unforeseen complications can cause price changes.

Simply requiring more information to be published on websites is unlikely to result in people making more informed choices. Solicitors are already required to provide the best possible information on cost to their clients, and the SRA should allow the market to respond to consumer demands for information in an appropriate way.

For the Law Society response and the behavioural research, click here. For the consultation paper, click here.

Rise in LiPs are a key challenge for family lawyers

The rise in the number of LiPs in the Family Court since the 2013 legal aid reforms has topped a poll of the causes of discontent among family law practitioners for the fifth year running. The annual matrimonial survey by Grant Thornton found one in five of the family lawyers it consulted named the rise of LiPs as being the biggest single issue facing their legal practice. Other central issues were overburdening of the family courts, delays resulting from court closures and courts not being fit for purpose.

The result came as Lord Judge, the former Lord Chief Justice, speaking on the legal aid proposals of Lord Bach, warned the House of Lords the crisis was eating up judges' time and building delays into the justice system. He spoke of judges having to "delve through mounds of papers" and disordered bundles put together by inexpert, emotionally-charged and frightened litigants-in-person desperately seeking justice".  He observed that where there were litigants-in-person on both sides "with the same vast bundles only in a completely different order", a "concertina effect" was created with delay increasingly being built into the system with cases taking much longer to deal with before at every level of the court with judges working harder but getting through fewer cases. 

More legal aid support for victims of domestic violence, pledged by MoJ

The current five year time limit on abuse evidence in the family courts will be scrapped, while the range of documents accepted as evidence of abuse will be widened to include statements from domestic violence support organisations and housing support officers. The changes will come into effect from January 2018.

The government has also committed to bringing forward a landmark Domestic Violence and Abuse Bill.

President of the Family Division Circular: Financial Remedies Courts

The President is proposing to pilot the Financial Remedies Court in London, the West Midlands and South-East Wales, starting in February 2018.
For more information click here

B. Case Law Update

AB v CD (Jurisdiction Global Maintenance Orders) [2017] EWHC 3164 (Fam)

Mrs Justice Roberts heard an appeal by the husband (H) against an order made by HHJ Everall QC (the judge), awarding the wife (W) 61.4% of the available non-pension capital (or 52.9% of the overall capital including pensions) and global maintenance of £39,000 per year index-linked for the benefit of W and the three children of the family for a ten year extendable term plus school fees.

Both parties were qualified lawyers, but W had not worked since the birth of their eldest of three children in 2006.  They had been together since 1999, save for a temporary split in 2002 and they had been married since September 2005. In 2006, they had moved to Dubai where H's career had flourished, meaning they had a very comfortable standard of living as he was earning a very high tax-free income. They purchased a property England in 2012 because their eldest child had been diagnosed with diabetes and was being treated here. By April 2015, they had agreed to separate and W moved back to live in the English property with the three children. H subsequently relocated here to be closer to the children, meaning his financial position reduced and he needed to rebuild his career in this country. It was also agreed that the English property would have to be sold.

By the time of the final hearing, H was paying voluntary interim maintenance of £2,000 plus various additional outgoings. He had offered W 50% of the capital and spousal periodical payments of £1,000 per month reducing to £500 in March 2019 and £300 in March 2020.

The judge found that H had underestimated the difficulties in W returning to work whilst looking after three children. It was neither realistic nor practical for W to return to employment until the eldest child started secondary school because of his medical condition. W could not return to being a solicitor but could hopefully work part time in a flexible role (e.g. an unqualified librarian) earning approximately £19,000 per annum with effect from January 2020. However, any income W could potentially earn was purely speculative.

The judge also found that H would continue to earn £11,000 net per month and that there was a real possibility of his income rising considerably in the future.

The total net assets were just over £1.8million plus H's pensions of approximately £350,000 and W's pensions of £67,200.

The judge found W's housing needs to be £1.085million and that she needed £30,000 for unexpected contingencies. H could rehouse for £800,000 including a mortgage of £200,000. These findings led to the capital split and the maintenance provision set out above.

H appealed, arguing that the judge did not have the jurisdiction to make a global maintenance order which included maintenance for two of their three children when W had not applied to the CMS and there was no maximum assessment in place. There was also no written agreement which may have given the court jurisdiction under section 8(5) of the Child Support Act 1991 (the 1991 Act). The third child was not in issue as he was in receipt of disability living allowance so arguably fell within the court's jurisdiction under section 8(8)(a) of the 1991 Act.

On appeal, Mrs Justice Roberts concluded that the judge was aware that he had no jurisdiction to order periodical payments directly for the benefit of the two children, but that it was appropriate to make a global order to include an element referable to child maintenance, with a view to an assessment still being carried out in the future, as judges regularly do in courts up and down the country. She also noted that the judge's order reflected the standard draft precedents created by Mostyn J and approved by the President of the Family Division, initially in July 2013, and more recently in Practical Guidance: the Standard Financial and Enforcement Orders, 30 November 2017.

Mrs Justice Roberts considered the use of so-called "Segal orders", including District Judge Segal's subsequent clarification that a "Segal order" was not intended to be a long term order to include the child's periodical payments as the judge had ordered here but a short-term interim order where there had as yet been no CMS assessment. She also considered the case of Dorney-Kingdom v Dorney-Kingdom [2000] 2 FLR 855 in which the Court of Appeal held that the court has no jurisdiction to make provision for the children by way of an order for spousal support where a spouse had no substantive right to spousal support.

Mrs Justice Roberts concluded that, the judge having found that H's net income was £132,000 per annum, he was entitled to assume that any future CMS assessment would be a maximum assessment and he could take this into account in his overall consideration of what W needed to sustain her and the children in their new home. The judge's failure to apportion the order between spousal and child maintenance was not a reason to set it aside.

Although the parties were not required to do so, as a maximum CMS assessment had been carried out between the final hearing and the appeal, HHJ Roberts invited the parties to submit a fresh consent application to the Central Family Court to reflect this and to focus the parties' minds in the event of any future application to vary the spousal element of the periodical payments order.

H also argued that the judge was wrong because it was unfair to order him to pay periodical payments which left W with more net income than him. Awarding W global maintenance of £3,250 on top of her tax credits gave her £4,700 per month mortgage free, whereas from his net income of £11,000, H had to pay maintenance, school fees, rent and some fixed employment costs leaving him only £3,300 by way of disposable income. However, the judge took into account that the school fees would reduce as the children were going to attend grammar school for their secondary education, W was at risk of her benefits reducing, W's foothold in the employment market was weaker and more vulnerable than H's, and H's income was expected to increase (although there was no guarantee). The judge had therefore found that £3,250 per month was a fair proportion of H's income, the sum was modest in the circumstances and it would be unreasonably low if there were more money coming in. In these circumstances, Mrs Justice Roberts found that the judge could not be said to be plainly wrong.   

H's third argument was the judge was wrong because it was unfair for W to receive more than 50% of the available capital meaning H had a reduced share from which to meet his future housing needs. As W had already purchased a property after the final hearing and before the appeal and could not raise a lump sum to pay H without selling it, H argued that there should be a Mesher order in his favour which should not be triggered before the youngest child finished her education. However, HHJ Roberts found that the judge had carefully considered both parties' evidence regarding their respective housing needs. In the year since the final hearing, H had purchased a property worth £1.1million subject to a mortgage of just over £250,000 (more than his housing needs were found to be), so he did not need more capital. She therefore rejected the argument for a Mesher order on the grounds that W would lose her personal and financial autonomy and she W would be in her late fifties when it was triggered and it would be difficult for her to rebuild her capital. H was left with his pensions and he would have another 12 – 16 years of a substantial income with diminishing financial responsibilities for the family. The small uplift in W's favour was wholly reasonable and entirely justified on a needs footing and well within the band of outcomes the judge could have settled upon.

Appeal dismissed.

HC v FW [2017] EWHC 3162

The wife (W) was 64 and Singaporean and the husband (H) was 68 and German. They had met in 2001 and lived together from 2002 (or 2004 on H's case). They were married in December 2006 and separated in August 2014. Both had been married before and there were children from the previous relationships.

W was litigating through a litigation friend, (a solicitor with expertise in Court of Protection) due to a lack of capacity. In 2013, after a serious assault, W had a CT scan which revealed a large benign brain tumour. She underwent five operations, after which medical complications left her with neurological and neuropsychological impairments.

H had initially been involved in the proceedings. However, he had taken no overt steps in the proceedings since attending the FDR hearing in January 2017and his legal team had applied to come off the court record which was granted by the court in August 2017.

The judge had conducted a directions hearing in September 2017, at which H was neither present nor represented and listed a 10 day final hearing in May 2018, ordering substituted service of the directions via a variety of means as H's whereabouts were unknown.

In October 2017, W's legal team applied to bring forward the final hearing due to concerns that H's lack of response reflected his deliberate refusal to engage in the process and a fear that H would seek to transfer or otherwise place assets out of W's reach. The judge agreed to bring forward the hearing provided that he was satisfied that all proper efforts had been taken to notify H.

The final hearing therefore proceeded in H's absence on the basis that the judge was satisfied that H was given reasonable notice of both W's application and the hearing itself and that the circumstances of the case justified proceeding in H's absence (FPR rule 27.4). The judge acknowledged that he was under an obligation to try the case justly and proportionately, ensuring that the parties were on an equal footing whilst also ensuring that expense was saved by dealing with the case expeditiously and fairly (FPR rule 1.1).

It was clear on the evidence that the parties had lived an extraordinarily luxurious standard of living. They did not have a matrimonial home, but lived in a series of suites in deluxe hotels around the world. They also had apartments in Singapore and Monaco.

The wealth had derived from H's long-established business and a substantial inheritance from his mother in 1997. It was therefore accepted by W's legal team that the assets were predominantly pre-acquired, and therefore non-matrimonial, and that this was a needs based case.

W's team argued that the assets were overall c£42.5m on a broad brush basis, including a notional value of £5m for undisclosed assets in light of the partial and/or selective evidence from H's forms E which was now more than 12 months out of date, questions over non-disclosed income producing assets and H's general failure to cooperate. The judge considered W's arguments and reflected on the countervailing position and concluded that the assets were in the region of £38m which he then rounded up to £40million in view of H's lack of transparency and failure to co-operate with his orders for disclosure.

Cobb J then assessed W's general reasonable needs and then on her specific needs arising from her medical condition. He accepted that W needed a property in England and a property in Singapore and that it was reasonable for her to travel to Monaco for up to three weeks per year, to New Work and to Singapore. He also found that she needed £65,000 per year for food/ dining/household, shopping, restaurants, socialising, clothing, handbags, entertainment and hobbies (which would have been approximately £5.4million by way of a Duxbury). He then considered the medical evidence, both from W and by way of an SJE and concluded that W also needed a part-time personal assistant, a financial deputy and extensive medical care.
His Lordship had considered whether the basis of computation for future provision should be with reference to Duxbury tables (as used in family cases) or the Ogden tables (the actuarial tables used for assessing general damages for future pecuniary loss). Ogden tables result in higher awards because of their reduced discount rate. The wife's litigation friend had argued for the Ogden tables as the Duxbury tables factor in a range of imponderables which more commonly arise in the family law context but which were not likely to be relevant to W such as remarriage. However, W's counsel did not pursue the argument for the Ogden tables and the judge concluded it was appropriate to adopt Duxbury in this case.

Taking into account all of the circumstances of this somewhat unusual case, and keeping in mind the principles of fairness, the judge awarded W a total of £15,251,098.

Cobb J then also agreed to make a freezing injunction of the relevant proportion of H's assets on a without notice basis on the basis that it was both necessary and proportionate to do so given H's lack of co-operation over the previous 10 months.

HRH Prince Louis of Luxembourg v HRH Princess Tessy of Luxembourg (Publication of offer) [2017] EWHC 3095 (Fam)

H was the third son of the Grand Duke of Luxembourg. W and H commenced their relationship in 2004. They married in 2006 and had two children, age 10 and 11. In 2009 W was formally recognised as a member of the Royal Family and granted her title. The parties' relationship broke down in 2016 and W applied for divorce.

W made an open offer on 22 September 2017, amended on 18 October 2017.

There was extensive publicity regarding the parties' separation and the proceedings. W was described in an article in Lëtzebuerg Privat as being desperate to cling to her Royal title and contended W had married H for reasons of self-aggrandisement and financial gain. H accepted some of the coverage amounted to a 'personal attack' on W.

At the FDA leading counsel for W indicated that the article suggested she was a gold digger and the wife wished to put the record straight. In response H applied for a reporting restriction order contenting that W's submission was evidence she intended to take the parties financial dispute to the media. An interim order was granted until the matter could return on notice limited to publication of material that referred to or concerned any of the parties' financial information including compulsory written disclosure, replies to questionnaires, solicitors' correspondence, witness statements, oral evidence or referred to in submissions made on their behalf save for information already in the public domain until the matter could return on notice.

In the interim articles appeared in the English media based on information already in the public domain and included reference to the assertions made in the Lëtzebuerg Privat article. Several articles used 'gold digger' in the headline.

H sought a prohibition of publication of information, including disclosure, evidence, correspondence, submissions referring to the parties' finances, the parties' children, the FMH, a third party and settlement offers made. H also sought that publication of information in the public domain should be limited to information which was in the public domain because of publication by media organisations in the UK prior to service of the order.

Both H and W agreed that a reporting restriction order should be made limited to their financial information and information concerning their children. W sought to make public the terms of her open offer to H and certain information concerning the FMH. The Telegraph Media Group (TMG) sought that W should be able to provide the information for publication.

Macdonald J made a reporting restriction order which prevented W from publishing the terms of her open offer and prevented publication of details regarding the FMH to last until conclusion of the proceedings and to then be subject to review. The media were not restricted from publishing information already in the public domain outside of the jurisdiction save in relation to that prohibited by the reporting restriction order.

Whilst there was a question mark whether the details in the offer were subject to the implied undertaking both parties' Art 8 rights were engaged in relation to details within the offer. The parties' Art 8 rights were also engaged in relation to the FMH as well as the children's Art 8 rights.

In relation to their Art 8 rights, W and H had no official public role in Luxembourg and much less in this jurisdiction and were private individuals rather than public servants or individuals with a public role. Whilst details of their separation had been made public this was not a case in which either H or W had sought to litigate details of their disagreement in public. W and H were engaged in financial remedy proceedings held in private and unless the court exercised its discretion under r27.10(1)(b) FPR any media in attendance would be attending a private hearing. Negotiations should take place without undue pressure or external influences being brought to bear.

The children's Art 8 rights were also important and their stability should be persevered although there was no presumption that publicity will inevitably be harmful to the children.

Macdonald J was satisfied that publication would constitute an interference in the art 8 rights of the parties and the children. In dealing with whether there were justifications for such an interference W had a legitimate complaint that she had been unfairly and unjustly traduced in the press but that did no itself liberate her from duties of confidentiality or justify removing limitations on the use of court documents. W was not prevented from speaking out in general terms about her mischaracterisation. Whilst principles of open justice might weigh in favour of publication, in particular publication would make it less likely journalists would have to rely on partisan or inaccurate material in their reports it was important that the question in issue was not whether the proceedings should be heard in public but whether an aspect of negotiations should be made public. There was an express exception to the principle of open justice within the context of conciliation or negotiation in FPR r 27.11(1)(a).

Whilst details of the FMH were in the public domain at the Land Registry the address of and title information were not currently widely known to the public. Publication of that information would fundamentally change the position and result in widespread dissemination of the parties' and the children's home address.

A public interest argument was not made out simply on the basis that the case concerned members of a Royal family, particularly where they did not hold the position or a public role in this jurisdiction or in Luxembourg. Whilst there might be a public interest in reporting the fact that court time and resources were being deployed to determine the financial remedy proceedings between two foreign nationals the order did not prevent the media reporting that fact.

Preventing the publication of the open offer did interfere with W and the media's right to freedom of expression. That was justified in the context that the financial proceedings would be heard in private and related to the parties' personal financial affairs, H and W had no official public role in Luxembourg or in this jurisdiction, they were private individuals not public servants and neither sought to litigate thee details of their disagreements in public. Regarding the nature of the information sought to be publicised there was a need to protect the administration of justice and it was important that negotiations could take place without undue pressure being brought to bear or external influences. Parliament had expressly provided in FPR r27.11(1)(a) for the media to be excluded from hearings conducted for the purpose of judicially assisted conciliation or negotiation and Art 6(1) permitted the press to be excluded from all or part of a trial to the extent necessary in circumstances where publicity would prejudice the interests of justice. If publication were allowed H would be likely to be compelled to indicate publicly his position and thereafter extensive comment was likely to follow in the media. In concluding Macdonald J indicated that at the conclusion of the proceedings the balancing exercise may produce a different result.

On a procedural note Macdonald J indicated that:

1. H had sought undertakings from TMG before consenting to W's statement in response to his application to be released. Normally a media organisation has a right to be given notice of the evidence in support of the application so that they can properly argue their case. FPR PD 12I para 3.3 records that legal advisers could differentiate between information provided for legal as opposed to editorial purposes.

2. FPR PD12I makes clear that steps must be taken to notify the respondents to an application for a reporting restriction order before it is made. Where issues of publicity are likely to arise in financial remedy cases consideration should be given to the issue in advance of the FDA and an application made on notice.