AlphabiolabsHousing Law WeekBerkeley Lifford Hall Accountancy ServicesIQ Legal Training

Home > Articles > 2018 archive

Divorce and Financial Remedy Update, August 2018

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

Naomi Shelton,  Associate, Mills & Reeve LLP

As usual, this update is provided in two parts:

Part A: News in brief and
Part B: Case Law Update

Part A: News in brief

Sir James Munby retires
Many tributes have been paid to Sir James who retired as President of the Family Division and Head of Family Justice for England and Wales on 28 July 2018.  Appointed in 2013, Sir James's legacy has been one of reform and innovation.  He drove the family justice transparency agenda, established standard family orders and was not shy of publicly highlighting his concerns with the justice system. 

Public Accounts Committee's concerns over court modernisation

The Public Accounts Committee has expressed little confidence in the government's ability to carry through its planned modernisation of the courts and tribunals system.  HMCTS's £1.2billion programme to modernise the courts is "hugely ambitious", will be "extremely challenging to deliver" and, given HMCTS has already fallen behind in its timetable, there are concerns that the pressure to deliver quickly may mean changes are made with limited meaningful consultation with stakeholders. 

Divorce (etc.) Law Review Bill introduced in House of Lords

Draft "duty to review" legislation designed to encourage the government to make major changes to divorce laws received its first reading in the House of Lords on 18 July 2018.  Introduced by Baroness Butler-Sloss, the bill is the result of collaboration between legal and relationship experts, politicians and family lawyers following Professor Liz Trinder's research "Finding Fault". 

The Bill requires the government to consider in its review, a scheme where one or both parties could register that their marriage (or civil partnership) has broken down irretrievably. The divorce or civil partnership dissolution would be granted if one or both confirmed the application after a nine-month 'cooling off' period.

To follow progress of the bill, click here.

Civil Partnership Act 2004 (Amendment) (Sibling Couples) Bill second reading on 20 July 2018
This short private member's bill (sponsored by Lord Lexden) seeks to amend the Civil Partnership Act 2004 to include sibling couples aged over thirty who have lived together for a continuous period of twelve years.  Lord Lexden says "Brothers and sisters in such committed, platonic relationship— and indeed many other long-term cohabitants can be hit hard because they are denied all legal safeguards and fiscal protections. The rights available under the Civil Partnership Act are vital to give security to every cohabitant particularly the right to inherit a joint tenancy or a jointly owned home free of inheritance tax." To follow progress of the bill, click here.

Supreme Court unanimously dismiss Mrs Owens' appeal against the dismissal of her petition for divorce

The much anticipated Supreme Court's judgment was handed down on 25 July 2018 dismissing Mrs Owens' appeal against the dismissal of her petition for divorce.  The result is that Mrs Owens must remain married to Mr Owens for the time being.  The judgment is considered in the case law update below.

B.  Case Law Update

Harris v Harris [2018] EWHC 1836 (Fam) (Mr Justice Cohen) 3 July 2018
This case concerned an appeal against an order which capitalised spousal maintenance and increased child maintenance.

The final order made in 2009 provided for the payment of various lump sums, a term order for spousal maintenance at the rate of £1,250 a month and child maintenance at the rate of £850 a month.  The marriage had lasted for three years and the child, who had been a baby at the time of the order, was now aged ten. 

In 2015, the husband ("H") applied to vary the spousal maintenance order.  In an "unusual" consent order, it was agreed that the spousal maintenance (referred to as "representing only childcare costs") would be reduced to £500 a month until June 2017 and then it would be reduced again to £250 until June 2018.  At that point, the maintenance would stop altogether with a s.28(1)(a) bar.  The consent order also required the wife ("W") to provide H with copies of her employment contract, breakdowns of childcare costs and an estimate of future childcare costs.  H earned in the region of £200,000 a year gross; W earned less than £2,000 a month. 

When W failed to provide the documents required, H unilaterally stopped paying the maintenance (with effect from June 2016).  In September 2016, he applied for an order discharging him from the obligation and sought the repayment of £3,500 in "overpaid childcare costs".   In October 2016, W cross-applied to capitalise and was given permission, in November 2017, to vary the child maintenance. 

Following a trial (in May 2017), judgment was delayed until November 2017 and the order was eventually made in January 2018.  The judge ordered that the spousal maintenance should be capitalised in the sum of £9,500 and paid by H by December 2017 (some seven months earlier than under the consent order), with payments of £250 a month to be paid in the meantime.  Interest would also be due on the capitalised sum.  The effect of this was that a total of £11,693 would become payable by 30 June 2018 (assuming that H did not make the capitalised maintenance payment until then).

An issue that H and W were alive to at trial (but perhaps not the judge until afterwards) was the impact of Belgian tax on the maintenance payments received by W.  As the recipient of a maintenance order, she had to pay 40.9% tax on the maintenance meaning that an order of £850 a month only gave her £509 a month income.  H was also paying tax on his earnings so, effectively, each was paying tax on the same income. 

The effect of the Belgian tax rules were that when the judge increased the child maintenance order to £1,600 a month, it meant that W was only receiving a little over £900.  The increased child maintenance was backdated to June 2017. 

H was given permission to appeal on various grounds including whether the spousal maintenance should have ended when the child maintenance increased, whether payment of the capitalised sum could fall before 30 June 2018, whether it was proper to order maintenance payments and interest in default of payment and, in respect of the child maintenance, the overall quantum.

Mr Justice Cohen allowed H's appeal in respect of the spousal maintenance to the extent that awarding W capitalised maintenance, plus continuing maintenance, plus interest was double-counting. He considered that it was open to the trial judge either to make an order for capitalised maintenance with spousal maintenance continuing at the rate of £250 a month until payment or to make an order for capitalised maintenance with interest running on that sum and child maintenance at the increased rate, backdated to June 2017.

H's appeal in respect of the quantum of the child maintenance was dismissed with Cohen J satisfied that the trial judge had found that W needed in excess of £900 a month net although this was maintaining her at a subsistence level.  Given the inequality in monthly incomes, it had been fair to place the burden of the tax on H.  However, if the increased child maintenance figure was to start in June 2017, then it was only right for the spousal maintenance to stop at that point. 

A substituted order provided that W will receive capitalised maintenance of £6,500 plus interest with the increased child maintenance payments.  Although there was no order for the costs of the appeal, the costs of the trial were dealt with.  H was ordered to pay 60% of W's costs taking into account his litigation conduct and the no order principle applicable to variation applications. 

Owens v Owens [2018] UKSC 41 (Lady Hale, Lord Mance, Lord Wilson, Lord Hodge, Lady Black) 25 July 2018
The much anticipated Supreme Court judgment was handed down on 25 July 2018.

The husband ("H") and wife ("W") had married in 1978 and separated in February 2015 when W left the family home.  The couple have not lived together since.  In May 2015, W issued the petition at the centre of the proceedings.  It was based on s.1(2)(b) MCA 1973 and alleged that the marriage had broken down irretrievably and that H had behaved in such a way that W could not reasonably be expected to live with him. 

The petition was drafted in "anodyne" terms but, despite this, H defended the suit, arguing that the marriage had largely been successful. 

In October 2015, a case management hearing set out directions ahead of the trial.  These directions included W being given permission to amend her petition so as to expand the allegations of behaviour, a day being set aside for the trial and that there should be no witnesses other than the couple themselves. 

W duly amended her petition so as to include 27 individual examples of H's moody, argumentative or disparaging behaviour.  At the trial, only a handful of the allegations were focused on.

The trial judge concluded that despite the marriage having broken down, W had provided flimsy and exaggerated examples of behaviour and that those being relied upon at the hearing were isolated incidents. As such, the test under s.1(2)(b) MCA 1973 had not been met and W's petition was dismissed. 

W unsuccessfully appealed to the Court of Appeal, who found no error of law or procedure to justify their interference.  W appealed to the Supreme Court.

The Supreme Court unanimously dismissed W's appeal, with the result that W must remain married to H until February 2020 when she will be able to issue a petition based on five years' separation.  Lord Wilson gave the majority judgment, with Lady and Lord Mance each giving a concurring but separate judgment. 

Lord Wilson confirms the correct test, when applying s.1(2)(b) is:

• determine what the respondent did or did not do;

• assess the effect which the respondent's behaviour has had upon the petitioner in light of all the circumstances in which the behaviour occurred; and

• evaluate whether expecting the petitioner to continue living with the respondent would be unreasonable.

The trial judge had, Lord Wilson said, given himself the correct self-direction and had understood that he was applying an objective test with subjective elements. 

Nevertheless, the majority and Lady Hale all had misgivings about other aspects of the trial judge's analysis.  In particular, concerns were raised that the allegations of behaviour related to an "authoritarian course of conduct" and that the judge had only scrutinised very few of the examples raised by W in her amended petition.  Lady Hale's misgivings meant that she considered that the proper disposal of the appeal was to allow it and send the case back for a re-trial; however, given W was not seeking this, Lady Hale was "reluctantly" persuaded that the appeal should be dismissed. 
Parliament was invited to consider review and reform of the current divorce laws. 

Mills v Mills [2018] UKSC 38 (Lady Hale, Lord Wilson, Lord Carnwath, Lord Hughes and Lord Hodge) 18 July 2018
This Supreme Court judgment relates to the proper approach to applications to vary periodical payments order made pursuant to s.31(1) and s.31(7) MCA 1973 after the grant of a decree of divorce. 

The husband ("H") and wife ("W") divorced in 2002 after a 15 year marriage.  Under the terms of a consent order, W received £230,000 and H agreed to pay spousal maintenance of £13,200 a year.  It was anticipated by H that W would use the capital to buy a home for herself and their son mortgage-free.  As it turned out, W was able to get a mortgage and she bought a more expensive house for £345,000.

Between 2002 and 2009, W sold and purchased a series of different properties, and with each purchase the amount which she borrowed increased. She did not necessarily reinvest all of the sale proceeds from one property into the next and seemingly spent the balance, with the result that the amount of capital she had decreased over time.

In 2009, W sold her final property and began to rent accommodation. By April 2015, when the first-instance judge heard the case, W had no capital and she had debts of around £42,000.

The April 2015 hearing was to determine two cross-applications under s.31(1) MCA 1973.  H had applied for the discharge or downwards variation of W's maintenance whereas W had applied for her maintenance to be varied upwards. The trial judge noted that there was a shortfall of £4,092 a year between W's needs and her income (earnings and maintenance combined). He held that W's actions, whilst not profligate, had not been wise and she had not managed her finances sensibly.  Her current needs had been increased by the choices which she had made.  The trial judge declined to vary the maintenance either way which meant that H was continuing to pay about 60% of W's rental costs but W was told she would have to adjust her expenditure accordingly to accommodate the shortfall. 

W successfully appealed to the Court of Appeal.  The Court of Appeal concluded that the trial judge had not given sufficient reasons why all of W's basic needs should not be met by the maintenance paid by H and increased the maintenance to cover the shortfall.  H appealed to the Supreme Court.

The Supreme Court unanimously allowed H's appeal, concluding that the trial judge had been entitled to decline W's application to increase the maintenance to cover the shortfall.

It important to remember that H was only given permission to appeal on one, narrow, single ground - whether, in light of the fact that provision had already been made for W's housing needs in the capital settlement, the Court of Appeal was entitled to interfere with the judge's decision not to increase the periodical payments so as to cover all of W's current rental costs.

The Supreme Court were satisfied that the Court of Appeal had erred in saying that the trial judge had given no reason for declining to increase the order for periodical payments – the judge had given a clear reason, namely that W's unwise decisions in relation to her capital had increased her basic needs by requiring her to pay rent and that it was consequently unfair to expect H to meet these increased needs in full.

The Court of Appeal should have considered the impact of the original capital payment on W's current need to pay rent, and this involved a consideration of three earlier Court of Appeal authorities: Pearce v Pearce [2003] EWCA Civ 1054, North v North [2007] EWCA Civ 760, and Yates v Yates [2012] EWCA Civ 532.  These cases had been correctly decided and in light of this the trial judge had been entitled, although not obliged, to decline to require H to fund payment of the rent in full.  This, the Supreme Court said, respected the wide discretion conferred upon the court under s.31(1) and (7) MCA 1973 in determining an application for varying maintenance. Moreover, a court would need to give very good reasons for requiring a spouse to fund payment of the other spouse's rent in the circumstances of a case like this. A spouse may well be obliged to make provision for the other spouse, but an obligation to duplicate that provision in situations such as this is likely to be improbable.

Thum v Thum [2018] EWCA Civ 624 (Lady Justice King, Lord Justice David Richards and Lord Justice Moylan) 12 July 2018
This Court of Appeal judgment concerned the construction of effective service of divorce proceedings under Article 16 of Council Regulation (EC) No 2201 / 2003 ("BIIa")

The wife's ("W") petition had been issued in England in October 2015.  W did not immediately effect service of the issued petition on the husband ("H").  Then, in February 2016, W attempted to serve the husband with the petition in Germany where he was then living.  However, because the address details were deficient, service failed.  H was eventually served on 27 February 2016.  In the meantime, H had started divorce proceedings in Germany which had commenced in January 2016. 

The question before the court was had W taken all of the necessary steps for effective service? And was England or Germany seised of the divorce proceedings? 

At first instance Mr Justice Mostyn dismissed H's application seeking a stay or dismissal of W's petition on the basis that the English court had been second seised.  Mostyn J concluded that the English court had been first seised because W had lodged her petition first. 

H appealed, arguing that service had been ineffective because he had initially been served at his business address in Germany and that a time limit should be implied into r.7.8 FPR 2010 that service be effected "as soon as possible" or "as soon as practicable". 

H's appeal was dismissed. Lord Justice Moylan gave the lead judgment.  With regard to a party implying a time limit, Moylan LJ said:

"Service is a critical part in the conduct of proceedings and parties need to know easily and clearly what they must do in order to comply with the rules as to service. It might be sensible or even appropriate for some additional specific obligation to be included but I can see no principled basis on which such can be implied. What period would be selected and why would that period be appropriate? In this context, what would "as soon as possible" or "as soon as practicable" mean?"

However, that is not to say that the difficulties with a party seising the jurisdiction of one court without the respondent being served promptly weren't recognised. As a result, the FPR Committee have been invited to consider whether any additional obligations in respect of service should be included in the FPR 2010.

Chaston and another v Chaston [2018] EWHC 1672 (Ch) (HHJ Paul Matthews) 5 July 2018
This was a decision of the High Court (Chancery Division) on appeal in Trusts of Land and Appointment of Trustees 1996 ("TLATA") proceedings.
Following their parents' death, four children inherited a property in equal shares.  In 2014, one of the children sold and transferred her 25% share in the property to one of her siblings (the respondent).  The respondent wanted to buy out the other two siblings' interests (the appellants).  They were resisting; despite agreeing that the property should be sold, they wanted to put it on the open market and not sell to their brother.  At first instance, the respondent successfully obtained an order under s.14 TLATA 1996 that gave him permission to the buy out the appellants at a price to be determined by a valuation report. 

The appellants unsuccessfully appealed.

HHJ Matthews confirmed that the court had power to order the sale of a property to only one of the beneficiaries, that a previous agreement between the appellants and the respondent to sell to the respondent was a relevant consideration and that there had been no error of law or procedural unjustness in the decision at first instance.  The trial judge's decision fell within the generous ambit of discretion afforded to him under TLATA.