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Finance and Divorce Update, June 2018

Naomi Shelton, Associate, Mills & Reeve LLP considers the news and case law relating to financial remedies and divorce during May 2018

Naomi Shelton, Associate, Mills & Reeve LLP

As usual, this update is provided in two parts:

A. News in brief

"What is family law?"

This question was posed by Sir James Munby, President of the Family Division, at his recent lecture as part of the University of Liverpool's Eleanor Rathbone Social Justice Public Lecture Series.  In addressing what constitutes a modern family, he said:

"In contemporary Britain the family takes an almost infinite variety of forms . . . The fact is that many adults and children, whether through choice or circumstance, live in families more or less removed from what, until comparatively recently, would have been recognised as the typical nuclear family. This, I stress, is not merely the reality; it is, I believe, a reality which we should welcome and applaud."

In identifying the current problems with the family justice system, he advocated the need for "a one stop shop in an enhanced re-vamped family court capable of dealing holistically … with all a family's problems, whatever they may be".  You can read a transcript of the lecture here

First reading of the Courts and Tribunals (Judiciary and Functions of Staff) Bill

Heralded as the first legislative step that will take the justice system from slow, paper-based systems to stream-lined, efficient digital systems, the Bill had its first reading on 23 May 2018.  It provides for the judiciary to be flexibly deployed across jurisdictions, allowing judges to gain experience in a wide variety of areas as well as allowing some authorised staff to carry out straightforward judicial functions. 

Two Family Law cases heard in the Supreme Court

It's not often that a family law case gets all the way to the Supreme Court; to have two heard in the same week is surely unprecedented.  Rebecca Steinfeld and Charles Keidan attempt to secure civil partnerships for opposite-sex couples in R (on the application of Steinfeld and another) (Appellants) v Secretary of State for the International Development (in substitution for the Home Secretary and the Education Secretary) was heard first, followed by Mrs Owen's appeal against the refusal to grant her a divorce based on her husband's behaviour in Owens v Owens.  Judgments in both appeals are awaited.

Digital divorce launched for litigants in person
The new online divorce application process was launched last month.  The announcement highlighted that the previous high level of paper applications being returned for containing errors (40%) had dropped to less than one per cent where the online system was being used.  Development continues with the acknowledgment of service, decree nisi and decree absolute all now being digitised.  A separate online service for legal professional is being tested. 

In a joint letter written by the President of the Family Division, Sir James Munby, and the Chief Executive of Her Majesty's Courts and Tribunals Service, Susan Acland-Hood, to judges and court staff, they state:

"As part of our £1bn reform programme to modernise the courts and tribunals service, we have been developing a simplified and intuitive online application process for divorce, which can be used by anyone without legal representation wishing to apply for a divorce across England and Wales, making the process easier to understand for separating couples."

Fast-track procedure for financial remedy applications
Chapter 4 of Part 9 of the Family Procedure Rules 2010 contains the standard procedure that applies after an application is issued (FPR 9.12-9.17) and Chapter 5 (FPR 9.18-9.21A) now contains a shortened fast-track procedure for less complex cases. The changes were introduced on 4 June 2018 by the Family Procedure (Amendment) Rules 2018 (SI 2018/440).  Form A and Form A1 have been updated to take account of the changes. Form A is now for use where standard procedure applies, and Form A1 is for use where fast-track procedure applies. Form D50C has also been updated.

B.  Case Law Update

Versteegh v Versteegh [2018] EWCA Civ 1050
(Lord Justice Lewison, Lady Justice King and Lord Justice Holroyde) 10 May 2018
This case concerned a Swedish couple who signed a Swedish pre-nuptial agreement the day before their wedding; the pre-nup. adopted a separation of property regime that would "encompass and keep inviolate" the husband's pre-marital assets but also, anything he acquired thereafter during the marriage. Twenty-one years later, the couple separated having lived their entire married life in England. 

The wife sought to argue (both at first instance and on appeal) that, having had no legal advice on the pre-nup, she had anticipated that the proposed agreement would cover only the husband's non-marital assets derived from family wealth and that she had had no idea of its effect (particularly in light of the English discretionary system to dividing finances) and that it should be ignored entirely and a sharing approach adopted.  At first instance, the judge found that the wife had known of the effect of the agreement. Consequently, she was awarded half of the non-business assets (of £51.4 million) and a 23.41% interest in H's business held as ordinary shares. 

On the wife's appeal, the Court of Appeal agreed with the first instance judge that the wife had understood the terms of the pre-nup. and had, in fact, been seeking to ameliorate its effects during the marriage.  Referring to Radmacher v Granatino [2010] UKSC 42, the judges highlighted that where a party has a full appreciation of a nuptial agreement's implications, the agreement should be given effect unless it would be unfair to do so. Legal advice, whilst desirable, is not essential particularly in cases where the nuptial agreement is simple and is signed in a country where such agreements are commonplace. 

The judgment casts doubt on B v S (Financial Remedy: Marital Property Regime) [2012] EWHC 265 (Fam) in which Mostyn J held that for a foreign nuptial agreement to carry weight, the parties must intend it to apply wherever they might be divorced, including a jurisdiction operating a system of discretionary equitable distribution and will "usually" need to have received legal advice to that effect.

Hart v Hart [2018] EWCA Civ 1053
(Lord Justice Kitchin, Lord Justice Moylan and Lady Justice Asplin) 11 May 2018
This comprised a further instalment of this long-running litigation relating to the 83 year old husband's appeal against his 14-month prison sentence for breaches of an undertaking of a financial order and various orders.  The husband's appeal was dismissed by the Court of Appeal.  The court found there was no reason to interfere with the sentence although it did provide a good opportunity to distil some good practical guidance on similar applications, including:

• undertakings often form part of a financial remedy order, frequently dealing with issues outside the scope of the Matrimonial Causes Act 1973, and creating obligations that continue beyond the implementation of the orders made;

• it is not possible to appeal from an undertaking and the court cannot impose a variation. A litigant may apply for release from it, often with an offer of a further undertaking in different terms (Birch v Birch [2017] UKSC 53); and

• the court can make orders to enforce or implement a substantive order. It can also make interim orders (Family Procedure Rule (FPR) 20.2) and orders under section 37 of the Senior Courts Act 1981, both before and after judgment (FPR 20.3).

LKH v TQA Al Z (Interim maintenance and costs funding) [2018] EWHC 1214 (Fam)
(Mr Justice Holman) 19 April 2018

This case concerned a wife's application for interim periodical payments in Part III MFPA 1984 proceedings after a foreign divorce.  The wife sought provision for both past (i.e. incurred but unpaid costs) and future costs.  She had already incurred unpaid costs of £200,000 and was anticipated to spend a further £250,000 going forward.  Her solicitors told the court that, unless the wife's unpaid costs were paid, they would no longer be able to act for her. 

Mr Justice Holman was persuaded to order legal funding provision for the wife's future costs, calculated as £250,000 to be averaged out over the next six months, making it just over £40,000 per month to be paid by the husband.  Mr Justice Holman was far from persuaded that now was an appropriate time to order the husband to pay the historic costs.  With a word of warning, he noted that the fact that the wife's solicitors had extended credit to her was a decision they would have to live with pending a later costs order or capital award in the wife's favour. 

Significantly though, he did clarify that had the solicitors provided a "clear and unequivocal" witness statement setting out their position, then he would have considered that.  The fact that the solicitors had dealt with the issue by mere submission alone was their downfall. 

A v B [2018] EWFC 4
(Mr Justice Baker) 26 January 2018

This was a highly unusual case involving an application brought by a wife to strike out a financial remedy claim made by the husband from whom she had been divorced 25 years ago.  During the marriage, the wife had been the main breadwinner whilst he had been the primary carer of the couple's two children.  When the husband had petitioned for divorce a quarter of a century ago, he had included an application for financial orders but had decided not to pursue it at the time.  The couple had subsequently divided their assets by agreement and the wife had gone on to financially support the husband. This included, in 2006, funding a house for him and the children. 

However, following the economic crash, the wife's financial position deteriorated.  In 2015, when the children were adults, she asked the husband to leave the house so it could be sold.  He argued that the property had been purchased because of concerns about his health and that it had been agreed he could live there as long as he wanted. 
In 2016, when the husband belatedly issued his Form A, W issued an application to strike it out on the grounds that the delay was an abuse of process. 

Mr Justice Baker refused to grant the strike out application but did find that the circumstances justified an abbreviated hearing of the husband's claim. The passage of time did not prevent a fair trial as the wife had contended.  This was particularly so where the claim was not based on the level of support during the marriage, but rather on the level of support provided subsequently.  The success of the claim would depend, critically, on evidence about the basis for the purchase and occupation of the property in which the husband had lived.

Villiers v Villiers [2018] EWCA Civ 1120
(Lady Justice King, Lord Justice David Richards and Lord Justice Moylan) 17 May 2018

This case concerned the interpretation of the Civil Jurisdiction and Judgments (Maintenance) Regulations 2011 in the context of an application by the wife under section 27 of the Matrimonial Causes Act 1973 seeking interim spousal maintenance to include an allowance for legal fees.

The parties married in 1994.  They moved to live in Scotland and separated in 2012.  The wife moved to London in 2013 and issued a divorce petition in England.  In 2014, the husband contested jurisdiction of the English court and issued a write of divorce in Scotland.  The writ contained no prayer for financial remedies.  Neither party made an application for financial relief in Scotland.

By consent, the wife's English petition for divorce was dismissed since the parties had last lived together in Scotland.  The husband applied to stay the wife's application under section 27 of the Matrimonial Causes Act 1973 and challenged the English court's jurisdiction to determine her application for interim spousal maintenance.

At first instance, the judge refused the husband's application and order him to pay interim maintenance including an element for legal fees.  The judge found that the husband's issue of a write in Scotland did not constitute, or include, an application for maintenance in Scotland and the English court therefore had jurisdiction to determine the wife's application under section 27.

On the husband's appeal that the judge's decision was wrong because the writ of divorce in Scotland involved a "related action", allowing a discretionary stay under Article 13(1) or (2) of Article 13 of the EU Maintenance Regulation.  The Scottish writ of divorce related only to the couple's marital status because, significantly, the husband's petition had not included a prayer for any financial orders.  The English proceedings related only to maintenance and therefore it was entirely possible for two sets of proceedings to be ongoing at the same time in more than one part of the UK.  

The Court of Appeal was also required to consider whether the English court had a residual discretionary power to stay the wife's proceedings on the principle of non conveniens. The Court found that where the 2011 Maintenance Regulations apply, the court retains no residual discretion (to stay proceedings) of the type found historically under the secondary legislation of the Civil Jurisdiction and Judgments Act 1982 Act and therefore the wife's application was governed exclusively by the 2011 Maintenance Regulations.

VS v RE [2018] EWFC 30
(Mr Justice Mostyn) 16 May 2018
This case provided a stern rebuke from Mr Justice Mostyn to all those attempting (wrongly) to have complex cases heard in the High Court rather than in the family court. The case, which had involved a freezing injunction, a final order and then enforcement proceedings, had all taken place in the High Court.  When this was queried by Mr Justice Mostyn, it was revealed that it had been wrongly thought that only the High Court could make a charging order and that only the High Court or county court could order the sale of a property subject to a charging order.  Mostyn J emphasised that if that thinking were correct then "the family court [would] in fact [have] less power than the divorce county courts it replaced".  Applying s.31E(1)(a) of the Matrimonial and Family Proceedings Act 1984, Mostyn J reasoned that an order for sale of a property subject to a charging order was "a supplemental order giving effect to the substantive order". 

He went on to say that where both the family court and the High Court have jurisdiction to deal with a matter, the proceedings relating to that matter must be started in the family court and that cases should only be heard in the High Court in very limited and exceptional circumstances.