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Financial Remedies and Divorce Update, September 2018

Rose-Marie Drury, Senior Associate, Mills & Reeve LLP analyses the news and case law relating to financial remedies and divorce during August 2018.

Rose-Marie Drury, Senior Associate with Mills & Reeve LLP.

As usual, this update is provided in two parts:

A. News in brief

£150,753 to raise a child

Child Poverty Action Group's latest Cost of a Child report shows what it costs to raise a child to age 18, based on what the public thinks is a minimum standard of living. CPAG estimates that the overall cost of a child (including rent and childcare) is £150,753 for a couple and £183,335 for a lone parent. For the Family Law Week news item and the link to the report click here 

Civil partnerships on the rise
2017 saw a 2% rise in civil partnerships compared with 2016. Interestingly, the rise resulted solely from civil partnerships between women increasing; the number of men entering into civil partnerships decreased. 

Enforcement of financial orders set to be reformed
Back in 2016, the Law Commission recommended reform, finding that this area of law was too complicated and, at times, ineffective. The Government has now agreed to explore amendments to the Family Procedure Rules 2010 and operational procedures to ensure the process is fit for purpose. We can expect new guidance (aimed at litigants in person), amendments to court forms and a streamlining of the system to cut down on unnecessary hearings.  The Government is still considering additional reforms including arming the courts with powers to obtain information from third parties about a debtor's assets, additional penalties aimed at encouraging debtors to comply (e.g. disqualification from driving or removal of passport) and extending methods of enforcement so that assets such as pensions will now be within the court's reach.

Fast-track entry to the court

A scheme allowing practicing legal professionals direct entrance to courts without the need to be searched is being piloted by HM Courts & Tribunals Service in five courts.  The Bar Council has led the development of an app for its members to use as ID, and Law Society members will benefit from the pilot, using approved photo ID. While tightened security procedures introduced during the last year will continue, the 'Professional Entry Scheme' intends to ease queues to get into court buildings and allow easier and swifter access for legal professionals who come to court regularly.

Online divorce pilot update

Beta testing of the online divorce pilot has begun. Four solicitors' firms have been selected to test the process which allows users to issue divorces online.  The details can be shared with clients and once approved the divorce petition is submitted online. Marriage certificates can be "posted" as PDFs and there are options for payment to follow by cheque or directly by the existing Pay by Account system (PBA).  The pilot will be rolled out to a further 16 firms before launching to the legal profession in the autumn.

Legal bloggers pilot launches 1 October 2018

Pilot Practice Direction 36J comes into force on 1 October 2018 to allow certain lawyers ("legal bloggers") to attend family proceedings in the Family Court and Family Division of the High Court with a view to reporting on proceedings. The pilot will run for nine months.
There are three categories of lawyers eligible within the pilot, a lawyer:

• holding a valid practicing certificate;

• working for a Higher Education institution; or

• working for an educational charity.

All legal bloggers will be required to provide evidence of their eligibility within the pilot scheme, as well as photo identification on the day of the hearing to enable court staff to verify that they are authorised lawyers. Court staff will check the evidence produced and notify the court of the legal bloggers' attendance at court. The judge may also request production of the evidence in the courtroom. Para 5.1 sets out the evidence required which includes a signed written statement by the lawyer that their attendance is for journalistic, research or public legal educational purposes and that the lawyer has no personal interest in the proceedings, that they are not attending in the capacity of agent or instructed lawyer for any client and that they will abide by any restrictions on publication. New Form FP301 (notice of attendance of duly authorised lawyer) will need to be used and brought to the hearing.

Siobhan McLaughlin wins Supreme Court case

The Supreme Court has ruled that the Northern Ireland Department for Communities' decision not to pay Siobhan McLaughlin the widowed parent's allowance because she was living with her partner rather than married to him before his death was incompatible with her rights under the ECHR. The case has been heralded as highlighting the need for reform for cohabitants. The DWP has responded to the judgment saying it will consider it carefully.

For the Family Law Week news item and a link to the judgment click here

B. Case law update

Akhter v Khan v The Attorney General [2018] EWFC 54
The very detailed factual background is set out in full in paragraphs 18-26 of the judgment and is worth full consideration to understand the context of the case.

In brief, W and H undertook a Nikah in December 1998. There was no civil registration although Williams J found it had been the parties' intention and expectation at the point of their Nikah to undergo a civil ceremony and Walima (although H had denied the same). He found further that this was an issue that was returned to at several stages during the course of the marriage.  In 2005 the parties moved to Dubai where their marriage was recognised. In 2011 W returned to live in the UK with the parties' children. H moved back in January 2014. In November 2016 W petitioned for divorce. H applied to strike out the petition on the basis that the parties were not legally married.

Williams J considered that for 18 years the parties had considered themselves to be husband and wife. Every person in their family and community considered them to be husband and wife, state authorities in England probably treated them as husband and wife and in the UAE they had been treated as husband and wife.
The issue was whether there was a valid marriage or a void marriage or if this was a case of non-marriage. The implication of non-marriage being that the parties could not divorce or seek an annulment and so could not ask the court to exercise its jurisdiction pursuant to the MCA 1973 and they would be left in the position of cohabitants.

W argued that the marriage should be considered valid by presumption, in particular focusing on a presumed ceremony having taken place in the UAE by proxy because she had signed a power of attorney which would enable H to marry her in an Islamic country without her knowledge and H had been seeking to pursue a foreign marriage.

Williams J found that the evidence of both parties established that the Nikah ceremony did not create a valid English marriage and so the court could not presume that the proper formalities in English law were followed nor could the court presume that by cohabitation and reputation there was a valid marriage following the Nikah. His Lordship further found that there was no foundation on the evidence to suggest there had been a further ceremony in the UAE conducted without W's knowledge
The issue therefore arose as to whether or not the Nikah created a void marriage or not. Williams J considered that the starting point in interpreting and applying s.11 MCA 1973 was the net result of the cases considered by Moylan J in MA v JA [2012] EWHC 2219 (Fam)  that:

1. Unless a marriage purports to be of the kind contemplated by the marriage acts it will not be within s11. 
2. What bring a ceremony within the scope of the act or at what stage the cumulative effect of the failures is to take the ceremony outside the scope of the 1949 Act has to be approached on a case by case basis.
3. The court should take account of the various factors and features including particularly, but not exhaustively a) whether the ceremony or event set out or purported to be a lawful marriage, b) whether it bore all or enough of the hallmarks of marriage, c) whether the three key participants (most especially the officiating official) believed, intended and understood the ceremony as giving rise to the status of lawful marriage.

Williams J considered that this should be supplemented by human rights issues and the court should further consider:

1. Article 8 ECHR supports an approach to interpretation and application to finding a void marriage rather than a wholly invalid marriage.

2. The Court should where it is appropriate be able to take into account the best interest of the children as a primary consideration and weigh with other Article 8 ECHR rights of the parties.

3. Article 12 ECHR on a horizontal effect together with general principles of fairness or equitable principles supports the proposition that if the parties had agreed to or it was their joint understanding that they would engage in a process which would ultimately lead to a legally valid marriage means that should be taken into account in determining whether or not it falls within the parameters of s.11 MCA 1973.

4. The competing Article 8 ECHR rights of the parties can be considered which in the case of one party may be in favour of the marriage being held to be invalid and in respect of the other being held to be void.

Williams J considered:

1. It was understood by H and W that they were embarking on a process which was intended to include a civil ceremony in which the marriage would be registered.

2. W's understanding and H's position was that this civil ceremony was to follow shortly after the Nikah.
3. The failure to complete the marriage process was entirely down to H's refusal after the Nikah to take action to complete the process by arranging a civil ceremony.

4. W thereafter frequently sought to complete the marriage process by seeking H to undergo a civil ceremony.

5. The nature of the ceremony undertaken bore all the hallmarks of a marriage that was held in public, witnessed, officiated by an Imam, involved the making of promises and confirmation that both H and W were eligible to marry.

6. Thereafter the parties lived as a married couple for all purposes.

7. The couple were treated as validly married in the UAE.

Taking these into account, he concluded the marriage fell within the scope of s.11 MCA 1973 and was a marriage entered into in disregard of certain requirements as to the formation of marriage. It was therefore void and W was therefore entitled to a decree of nullity.

A v A [2018] EWHC 2194 (Fam)

This case follows on from Cohen J's judgment in A v A [2018] EWHC 340 (Fam). Having allowed H's appeal against an Order of HHJ Hughes QC in his first judgment the parties agreed rather than remit the case Cohen J would determine matters.

The remaining issue between the parties was the extent, if at all, to which W should be excused from the liability to pay back to H the sum of £1.365m (being the aggregate of loan and mortgage payments which he had made to or for her and which she had given undertakings to repay in 2011 when the parties' had entered into a consent order). 

H's position was W should not be excused from any repayments. If she used all of her capital as a Duxbury fund she would have an income of circa £110k pa and a mortgage free house which she could trade down in the future. W was not left in a position of 'real need' and in the circumstances it was right for W to amortise her non-housing resources.

W's position was that the repayments would leave her in a position with assets far short of those she had anticipated at the time of the consent order (some £5.5m compared to £2.1m under H's proposals at the start of the hearing although this increased by the end of the hearing to £2.3m). It was not reasonable for W to be expected to amortise her assets, in particular anything beyond her pension assets when H was financially secure. 

W's needs were put at £140k pa. H's position was with a fund of £2.3m W would have £115k pa which was as much as she needed. Cohen J found that an appropriate figure for W's needs was £120k pa, taking into account that W did not have a long-term need to provide a home for two grown up children and her mother.

Cohen J noted that he had to achieve fairness against the background of the parties' agreement. He considered Lord Phillips' comments in Granatino applied just as equally to a consent order as to a nuptial agreement.

He considered that it was clear in 2011 W had expected to end up with capital of around £5.5m plus her home. Although W might have expected a small repayment to H it was not anticipated to be significant and what had happened subsequently was beyond the parties' anticipation. Although H was owed sums by W it was not a part of his case that he would feel it in any significant way having become extremely successful.

Cohen J did not consider 'real needs' was a helpful alternative to the test of 'needs' and in the circumstances of the case W's needs had to be judged against a pre-existing agreement.

Absent an agreement against the background of H's wealth Cohen J indicated he might have been reluctant to consider significant amortisation. However, there was an agreement and it was fair in the circumstances for W to amortise some, but not all of her award.

Cohen J considered it fair that W's pension assets of £1.19m should be amortised. In respect of her other capital he considered 50% should be amortised. That would produce a Duxbury income of £91k in total. Her remaining £562k would bring in a further £12,645 net pa and she would therefore have a shortfall of some £16,355 pa. Adding back in the state pension there was a shortfall of £25k pa, producing a total shortfall of £389k.
Cohen J considered it was fair to relieve W from her liability to repay H £170k relating to the Spanish property (which H had offered in return for a transfer of the property) and £389k (being the shortfall) on W's income needs. This resulted in a reduction of W's repayments to H from £1.625m to £1.066m. Cohen J considered it was unfair for W to be left in a position of having to pay H further funds of an uncertain amount and discharged her from that obligation.

Re C (A Child) Schedule 1 Children Act Variation
The reported judgment of HHJ Booth deals with the determination of Schedule 1 claims. It follows on from the Court of Appeal's decision in Re M-A [2018] EWCA Civ 896 in which the Court of Appeal upheld HHJ Jordan's decision for C to live in Canada with F and spend time with M in England.

F applied to vary an existing Schedule 1 order made in December 2016 (which included child maintenance and provision of a property) to discharge it in its entirety. M applied to enforce the existing order.

It was agreed that notwithstanding the effect of the Court of Appeal's decision was C would live in Canada and further applications relating to his welfare would take place in that jurisdiction the Family Court in England was properly seized of the Schedule 1 claims. There was an existing binding order made in December 2016. The court's jurisdiction to vary/enforce/discharge the order arose from:

1. The fact the court had already made an order pursuant to s.31F MFPA 1984 and FPR rule 4.1(6)); and

2. The Maintenance Regulation - relying on the authority of Baker J in O v P [2011] EWHC 2425 the Maintenance Regulation applied and under Article 3 the court had as jurisdiction as M was habitually resident in England at the relevant time under Article 9.

HHJ Booth considered:

1. C's welfare was central to his consideration but it was not the paramount factor.
2. The order made in December 2016 reflected the circumstances as they did at the time and must be the starting point of his considerations. The significant change in arrangements for C must be set against that starting point and he must reflect the current reality of C's circumstances.
3. Para.4(1) of Schedule 1 Children Act 1989 must be the guide in the exercise of the court's discretion and the court must have regard to all the circumstances including:

a. The income, earning capacity, property and other financial resources which F and M has or is likely to have in the foreseeable future.

b. The financial needs, obligations and responsibilities which F and M are likely to have in the foreseeable future.

c. The financial needs of the child

d. The income, earning capacity, property and other financial resources of the child.

e. Any physical or mental disability of the child.

f. The manner in which the child was being or was expected to be educated or trained.

HHJ Booth considered there was no justification for the monthly periodical payments continuing. M was to make an appropriate financial contribution to meet C's needs within her ability to pay and there was no good reason why she should not be in full-time employment.

In relation to the provision for housing M had very significant debts, she had a poor credit rating and no prospect of finding a deposit for a rented property or a deposit for a purchase or a prospect of raising a mortgage. HHJ considered in all the circumstances that there should be a settlement of property for C when he was in England with M which would revert to F upon the end of C's minority or when he ceased full-time education. Bearing in mind that C's occupation of the property would, on current arrangements, be limited to 8 weeks a year and would be subject to a limitation that C lived with F and spent time with M the amount of funding needed to reflect the reality. He considered £200,000 net of SDLT would be sufficient to purchase a two-bedroom flat or a small house.

Tattersall v Tattersall [2018] EWCA Civ 1978
This is the latest instalment in the long-running proceedings. In 2012 H was ordered to pay W periodical payments at the rate of £1,070 pcm less any child support payments until the first of various trigger events with nominal payments thereafter and a dismissal with a s.28(1A) bar from September 2027. H did not make the periodical payments. W issued enforcement applications and H applied to vary the order.

H was given permission in February 2016 to appeal the following:

1. The provisions in the order of HHJ Wright of 23 September 2014 which gave W permission to enforce arrears of periodical payments which were over 12 months old and required H to pay at least part of the total arrears. H argued that:

a. The court erred in law in determining W's application to enforce prior to determination of his variation application.

b. W had not made any formal application for permission to enforce arrears more than 12 months old.

c. Non-payment was reasonable because the order was subject to a stay granted by the Court of Appeal.

2. The order of HHJ Tolson QC of 1 June 2015 by which he ordered H to pay W a lump sum to capitalise the periodical payments. H argued that:

a. The order predetermined his variation application.

b. The judge was wrong to determine the lump sum should be £83,488.

3. The order of HHJ Tolson of 11 January 2016 directing the payment to W of the sum of £7,600 held by conveyancing solicitors pursuant to the order of 23 September 2014. H argued that HHJ Tolson had no jurisdiction to vary or discharge the stay granted by HHJ Wright.

Moylan LJ gave the lead judgment of the Court of Appeal and dismissed H's appeal save for giving him credit for £6,000 of CSA payments against the capitalised sum due to W. Dealing with the points of appeal he found:

1. The judge was entitled to make the decision and gave reasons for doing so. Dealing with the particular points raised by H:

a. There was nothing in the circumstances of the case which meant the judge should have stayed enforcement of payment of all the arrears until the variation application had been determined. The judge had deal with the existence of the variation application by staying payment of part of the arrears which was a decision she was entitled to make. 

b. No formal process is stipulated by which an application under s.32 of the 1973 Act must be made. What is procedurally required will depend on the circumstances of the case. The arrears were at most 1 or 2 months old and there was no need for a formal application. Even if the period was longer the judge was entitled to deal with matters as she did as part of a case management decision.

c. The appeal had been determined on 9 July 2013 and therefore the stay had lapsed.

2. Whilst there might have been force in H's submission W's application should have been adjourned pending determination of the variation application in 2015 or 2016 there was no force in it now. H had more than sufficient time to procure the determination of his application. It was H's responsibility to progress his application and he must bear the consequences for failing to do so.

There could be no appeal of the judge's decision to order payment of the arrears of just under £9,000.

Although the judge had taken a robust approach to determining matters save for CSA payments which should have been deducted from the sum due no argument had been advanced which effectively challenged the decision and the judge had complied with the guidance in both Pearce and Vaughan.

Although the judge had used the Ogden tables rather than Duxbury it was not an error of law for him to do so. 

3. The Husband's argument on this issue was dependent upon his appeal from the order of 1 June 2015. That appeal had been dismissed.  In any case HHJ Tolson was entitled to vary or discharge the stay granted by HHJ Wright. The argument he had no jurisdiction to do so and that a more formal process was required were without merit.

Green v Secretary of State for Work and Pensions and Adams (Diversion of Income) [2018] UKUT 240 (AAC)
The case dealt with an appeal under the 2012 scheme for child support on the basis of diversion of income. F's liability had been assessed as nil under the scheme. M sought a variation on the ground that F had diverted income that would otherwise be taken into account by transferring a property from a trust, APF, of which he was trustee, to PT, a trust in which he was neither trustee or beneficiary.

At the Upper Tribunal, Judge Jacobs considered regulation 71. He noted that there were two conditions to find diversion of income within the regulation:

1. Control – this focused on the present tense and required a particular source of income that the non-resident parent was able to control.
2. Diversion – there must be a reduction and the diversion was the means of achieving that result.

A person wanting to show there was a diversion must show there is a reduction and the means was diversion. It was not sufficient to show that the non-resident parent had reduced income there must be a diversion of that income and that diversion must be possible and be achieved though the non-resident parent's control. Regulation 71 did not apply just because a non-resident parent had failed to take advantage of an opportunity to generate income.

If a parent transferred an asset which generated income or had the potential to do so to someone else but retained control of it the diversion criteria would be met. However, if the parent transferred an asset and did not retain control of it regulation 71 was not met because the parent had no ability to control it.

Applying the regulation to the facts for the period of time that F was the owner of the property and did not let it regulation 71 did not apply because he did not divert the income to another person. Once the property came into the ownership of PT, F ceased to have any control over it. The control condition was not satisfied under regulation 71.