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Financial Remedy Update March 2020

Sue Brookes, Principal Associate, Mills & Reeve LLP analyses the news and case law relating to financial remedies and divorce during February 2019.

 

Sue Brookes, Principal Associate, Mills & Reeve LLP


As usual, this updated is provided in two parts:


News

Mrs Justice Theis to stand in during the President's absence
The President of the Family Division, Sir Andrew McFarlane, has announced that he is to undergo open-heart surgery. The operation is likely to take place in late March or early April, and he expects to have three months' recovery time before returning fully to normal duties.  Theis J will stand in as McFarlane P's deputy during his absence. She will be assisted by Hayden J as Vice President of the Court of Protection, Mostyn J as judge in charge of the Financial Remedy Courts and Keehan and Cobb JJ, who will continue to take the lead on reform of public and private children law.


Training for judges on issues of consent and sexual stereotypes

The Lord Chief Justice, Lord Burnett, and Sir Andrew McFarlane P have announced that they have asked the Chairman of the Judicial College to oversee preparation of an online resource for family judges, which deals with issues of consent and stereotypes in sexual cases. The request follows concerns raised about a fact-finding hearing in proceedings for child arrangement orders that involved the issue of sexual consent (F v H (Fact-Finding) [2019] 8 WLUK 304).


The Family Procedure (Amendment) Rules 2020 (SI 2020/135)
Made on 10 February 2020 and in force from 6 April and 6 July 2020, they contain some important changes.

From 6 April 2020:

• Justices' legal advisers will be able to exercise specified judicial functions in the Family Court. New Practice Direction 2C transposes into the FPR the functions that can currently be carried out by justices' clerks and their assistants (Justices' Clerks and Assistants Rules 2014).

• New r. 5.7 FPR 2010 requires all correspondence sent to the court to be copied to all parties except for "routine, uncontentious and administrative" communications. Non-compliant communications will be returned to the sender without being considered and the court may, subject to hearing the parties, exercise its case management powers under FPR 4.

From 6 July 2020:

• Amended r.9.17 requires parties to financial remedy proceedings to provide estimates of costs to one another and the court before the First Appointment, FDR and final hearing. Costs particulars, or a failure to comply with this new requirement, are to be recorded in a recital to the order made.

• New r.9.27A imposes a duty on parties to make open proposals for settlement 21 days after an FDR hearing or 42 days before a final hearing where there has been no FDR hearing. Amended FPR 9.28 refers to the duty to make open proposals before a final hearing.

• Amended r.12.4 and 14.4 clarify that in Part 12 and 14 proceedings, the court may direct that notice need not be given to persons with foreign parental responsibility (PR).

• Amended r.14.21 clarifies that in adoption proceedings, a direction that notice need not be given to fathers without PR may be sought from the Family Court.

• New r.12.42B permits an application to set aside an inherent jurisdiction order, and new FPR 12.52A permits an application to set aside a 1980 Hague Convention return order, using Part 18 procedure where no error is alleged.

• Amended r. 25.5 refers to a new PD regulating toxicology testing in family proceedings that will be made once an impact assessment has been completed. The PD is likely to stipulate that the court is required only to admit toxicology evidence if produced by a laboratory accredited to UK Accreditation Service standards, or international equivalents.

• New Part 41 allows for PDs to outline the procedure in cases proceeding electronically.


Cases

Attorney General v Akhter (1) and Khan (2) and  Hussain (1) and Southall Black Sisters (2) as interveners [2020] EWCA Civ 122

This is the appeal by the Attorney General against the decision of Williams J to pronounce a decree of nullity in relation to an Islamic marriage ceremony, a Nikah, which the parties clearly knew had no legal effect, and which they had intended would be followed by an English civil ceremony, but where the civil ceremony never took place.

Neither the petitioner nor the respondent took part in the appeal as they had already reached a settlement.

At first instance, having rejected a presumption of marriage on the evidence, Williams J had considered the question of whether the Nikah was either a "non-marriage" or a void marriage which entitled the petitioner to a decree of nullity and financial remedy claims. He concluded that the Nikah was a void marriage as it was a ceremony within the scope of the Marriage Act 1949 ("the 1949 Act"). Supplementing his conclusions on the human rights arguments, he adopted a holistic approach and a more flexible interpretation of s11 Matrimonial Causes Act 1973 ("the 1973 Act"). He had also taken into account the best interests of the children as a primary consideration, viewing the case as an action concerning children because of the direct impact on the mother's financial remedy claims.

Sir Terence Etherton MR, Lady Justice King and Lord Justice Moylan considered two issues:

1 whether there are ceremonies or other acts which do not create a marriage, even a void marriage, within the scope of the 1973 Act; and

2 whether the parties' Nikah was such a "non-marriage" or as the Court of Appeal preferred a "non-qualifying ceremony" or, alternatively, a void marriage, as Williams J had concluded.

The judgment contains a detailed consideration of the status and the statutory regulation of marriage under the law of England and Wales (recognising that some of the questions raised may also apply to civil partnerships).

The Court of Appeal concluded the following:

• The 1949 Act sets a threshold which must be crossed before a ceremony or other acts fall within its scope.

• A decree of nullity could be said to be declaratory only as it does not make the marriage void.

• Whether the court can grant a decree of nullity because a marriage is void is determined by s11 of the 1973 Act and the 1949 Act which sets out how a valid marriage is contracted.

• R v Bham [1966] 1 QB 159 is authority that there can be ceremonies of marriage outside the scope of the 1949 Act and the 1973 Act. These are "non-qualifying ceremonies".

• They considered whether to define when a marriage will purport to be a marriage but decided not to do so for the reasons set out in the judgment.

• With respect to Williams J, who was clearly seeking a fair outcome for the petitioner, they could not agree with his approach.

• Williams J had considered the "horizontal effect of Art 12 ECHR" together with the general principles of fairness to conclude, if the parties had agreed to engage in a process which would ultimately lead to a legally valid marriage, this should be taken into account when considering the parameters of s11 of the 1973 Act. However, it is irrefutable that there is no absolute right to divorce under Art 12 (Owens v Owens [2017] EWCA Civ 182) and Art 12 does not apply to nullity. If it does not cover the dissolution of marriage, it cannot cover a situation where a marriage is declared null and void ab initio. No one can be forced to marry and the petitioner did not possess any type of private law right requiring the respondent to marry her or have any claim against him for refusing to do so. Art 12 was not therefore engaged and, even if it were, it would not have been breached in this case.

• Williams J had held that, where the parties intended to effect a legal marriage, Art 8 ECHR supported a finding of a void marriage rather than a wholly invalid marriage. However, this couple did not intend to effect a legal marriage. The judge had relied on the continuum argument that they were planning a future legal ceremony but this falls foul of s1 of the Law Reform (Miscellaneous Provisions) Act 1970, which abolished breach of promise actions. The question of whether a marriage is void depends on the alleged solemnization and it cannot be dependent upon future events. Whilst Art 8 is undoubtedly engaged in the context of the family, it is not engaged in the context of the right or otherwise to grant a decree of nullity and the failure to recognise the Nikah as a legal marriage is not a breach of Art 8 rights.

• This was not an action concerning children and the best interests of the children could not turn a non-qualifying ceremony into either a void or a valid marriage. The children would be "illegitimate" whether it was a void marriage or a non-qualifying ceremony. The action relates solely to the status of the adults and, whilst it inevitably had an impact on the children, it was not an "action concerning children".

• At first instance the petitioner had argued that, as a wife, she would have acquired a share in the matrimonial property and that this was a right to property. The Court of Appeal concluded that this was to put the cart before the horse as, even if the wife's claim to share matrimonial assets was a property right (which was far from clear), the gateway to that right was a decree of divorce or nullity and without either of those the right did not exist.

• The parties' Nikah was therefore a non-qualifying ceremony and the parties were not married under the scope of the 1949 Act. The original order was therefore set aside.

Comment
This decision restores the long-established position that faith marriages are non-qualifying ceremonies and the parties are not therefore entitled to consequential financial orders.

There have been various calls to reform the law, to afford Muslim women the full protection of family law, following concerns about sharia councils discriminating against women who seek assistance with marriage issues and divorce.  However, progress on law reform in this area remains a long way off. While the Law Commission began work on proposals to reform wedding laws in July 2019, these will be subject to public consultation. The Law Commission review, including a final report, is expected to take two years. 


Haskell v Haskell [2020] EWFC 9

Mostyn J heard the Wife's financial remedy claims, having previous given judgment on her application to enforce arrears of interim maintenance ([2019 EWHC] 3434 (Fam)).

This was a family with three children, two of whom went to private school in London and the third was severely disabled and living in Belarus with her maternal grandmother and 24 hour professional care. The couple had lived together for 11 years and were married for 8 years.

The Husband (H) was a very astute businessman who was changing direction in his business activities and whose finances at the time of the hearing were not representative of his overall resources. The snapshot he had presented that his net worth excluding trust interests (minus £50million) was therefore unrealistic and did not pay proper regard to the statutory requirement for the court to take into account his resources in the foreseeable future. The judge accepted H's evidence that he needed about two years to turn his various ventures around.

He had assets in a significant number of jurisdictions including Russia, the US, West Indies, South Africa, Sweden Mauritius, Australia, Jersey and British Virgin Islands. The judge noted that H had not made any efforts to sell any of his assets, as he would if his financial position was really as dire as he proclaimed.

The parties had separated in 2016 and initially H continued to support the Wife (W) and children and to live a high lifestyle himself. However, after initial talk of reconciliation, H concluded in January 2019 the marriage was over and he became unremittingly punitive and coercively controlling of W and the children.

After W applied for interim maintenance, the court ordered H to pay c. £47,500 per month exclusive of school fees, satisfied that this was a sum H could well afford to pay. However, H ignored the order and continued to pay what he wanted, so arrears soon mounted up. H also stopped paying rent on W's apartment in London, so W and the children were due to be evicted after the final hearing with arrears of rent and costs amounting to over £90,000.

W was claiming a settlement based on needs alone, which Mostyn J confirmed was the correct approach in circumstances where there was no marital acquest. The sharing principle was not engaged in view of the present downturn.

The intellectually pure way to approach the settlement would have been to defer W's capital claims, but neither party argued for that approach. W highlighted the legal and practical difficulty of future claims and Mostyn J acknowledged there is no reported case of a claimant successfully reviving adjourned capital claims.

Mostyn J found H had enough money to keep W and children afloat for the next two years and that he would then have sufficient assets to fund a clean break. Although he could not put even an imprecise figure on H's likely future wealth, it would be very substantial.

For two years, W needed £72,000 per year for rent and a further £140,000 for her other needs. W received properties she could rent out and had an earning capacity of £20,000 per year, meaning she needed £151,240 per year from H. This was to be paid up front because H had already breached the interim maintenance order. W's debts should also be cleared, so W should receive an initial instalment of £647,732.

W's long term housing need was assesses at £3.5m.

Given her young age (39) and the medium length of the marriage, a full Duxbury was inappropriate and it should be stepped on a 50% basis at age 60, meaning W needed a Duxbury sum of £2.7million. Adding that to her housing fund but subtracting the value of the properties she was already retaining, she would receive a lump sum of £5.181m as the second instalment in 2 years.

As it was a lump sum by instalments, H could therefore apply to extend the payment date if he needed to, or even vary the amount, but he would need very clear evidence to be able to do so.

The court had jurisdiction for child maintenance as H was not habitually resident in England. The judge could not apply the formula as he had no scale for H's true earnings. He therefore assessed the children's needs at £20,000 per year each plus school fees.

H had taken an inexplicable approach to his disabled daughter, threatening to remove her from Belarus and arguing that she was not a beneficiary of a trust established by his father which paid $50,000 to each of the other two children because she needed less than the able-bodied children. The judge concluded that would be a perverse and unreasonable exercise of the trustees' discretion not to pay to all three children and proceeded on the basis that it would do so and H would have that money to cover the child maintenance ordered.


Moutreuil v Andreewitch (1) and Pier Investment Company Limited) [2020] EWHC 252

This is an application for committal for the breach of a freezing order.

The claimant was not seeking immediate committal but findings in respect of the breach of an order, with an adjournment to give the defendant chance to remedy the breach before being committed in line with Reilly v Shamrez [2019] EWHC 3112 (Fam) and Shokrollah – Babaee v Shokrollah – Babaee [2019] EWHC 2975 (Fam).

The freezing order had been granted after the defendant had purported to transfer shares in Pier Investment Company Limited following a letter before action setting out the claimant's claim to the shares and the family home which was owned by the company.

The order provided that, until such time as the claims had been determined by the court neither party must dispose of the property, the shares in the company or any other income or assets of the company except insofar as is necessary for it to meet its tax or "other liabilities".

The defendant did not dispute that he had made various payments from the company, but he disputed that he had breached the order as he argued that the payments (including to himself and his solicitors) were in respect of the company's "other liabilities".

Lieven J concluded:

• Whether or not a freezing injunction has been breached turns simply on the proper construction of that order.

• To establish contempt, you do not have to demonstrate an intention or belief that the breach in question constituted a breach. It is sufficient to show merely that an intention to commit the act/omission in question. Following Pan Petroleum AJE Limited v Yinka Folawiyo Petroleum Co Ltd [2017] EWCA Civ 1525, the power of the court would be inappropriately curtailed if it was also necessary to establish, to the criminal standard, a belief that it was a breach of the order.

• Nevertheless, the contemnor's state of mind is relevant as it would not justify commitment or sequestration if it was a casual, accidental or unintentional disobedience of an order.

• In the absence of any documentary evidence to support the defendant's case, his arguments were not credible and he was clearly in breach of the order. The judge went further and found to the criminal standard of proof that he was knowingly so.

• The defendant had argued that the application was defective because it did not state the date of the payments. The judge disagreed finding that the dates covered a period and not one specific day, so there was no defect.


MB v EB (No.2) [2019] EWHC 3676 (Fam)

In June 2019 Cohen J had determined three issues: the length of the marital partnership; whether there were any grounds for vitiating an agreement made in 2011; and whether there was any marital acquest. However, he had been unable to assess if the husband (H) had needs which the wife (W) should meet and this was the issue now back before him.

W was pleading the millionaire's defence and accepted that she could meet any needs based sum awarded by the court. However, she had argued that any claim should be limited because the judge had found they had separated in 2004 and they had entered the agreement in 2011, both with the benefit of legal advice, which had given H exactly what he had asked for by way of a flat he could rent out and a studio he could work in as an artist. Both parties had intended that agreement to be the full and final settlement and it had been a short marriage of only four years.

H had accepted and lived on the settlement for 6 years before applying to the court. However, the judge found the agreement hard to fathom as it left H living in the studio he was working in and it was plainly insufficient to meet his needs.

W argued that, as they were both autonomous adults, and it was now 8 years after they had entered into the agreement, she should not have to pay any more. However, she had made two offers to settle: initially proposing in June 2018 the sum of £300,000 which would give H £125,000 cash and clear his outstanding legal fees and then, in September 2019, she had offered £336,000 which included writing off a charge securing the sum of £236,000 she had paid towards his legal costs and a further £100,000 cash.

The £236,000 was the legal services order made by Roberts J in November 2018 which had been secured against H's flat, with Roberts J making it very clear to H at that stage that he was running the risk that he may have to sell his property to clear the costs at the end of the day.

H made no proposals until the week before the hearing when he sought £1.3million to include the transfer of a flat owned by W, the charge being removed from his property and a lump sum of £527,000, an offer which Cohen J described as being as wide of the mark as can be imagined.

He felt the case should have been easily settled on a Duxbury for £325,000 which would give H £25,000 per year for the rest of his life. He thought that W would have settled at a reasonable figure if H had made a sensible proposal earlier on. The problem was the way H had chosen to run the case. As a result, H had incurred £650,000 in legal costs, of which W had paid £236,000, H had paid £36,000 and H's solicitors were owed the rest. This was wholly disproportionate to the sums and issues involved.

H had health problems, with a long history of depression and his functioning had been impaired by a fall causing a cerebral haemorrhage. The judge concluded that H had overestimated his ability to earn money and/or underestimated his health problems when he entered into the 2011 agreement.

Whilst the judge was attracted by W's arguments, and was very critical of the way H had litigated, he could not bind H to the terms of the agreement.

• It did not, and nor ever could, meet H's income and capital needs. It could meet one but not both.

• W knew H could not earn enough and he had nowhere to live without provision made by her.

• She knew of his health difficulties.

• Even though she had provided what H requested, it was not satisfactory for him to live in a small converted garage so he could rent out his house to make an income.

• Although the judge had agreed with W that the marriage ended in 2004, there was a certain amount of ongoing co-dependence which could not be disregarded.

• Giving H more to meet his needs was only a small pinprick in W's wealth.

• Making further provision for H now was not "after the event insurance" but meeting a need which was always there.

The judge therefore ordered H to receive the total sum of £485,000 to provide him with a Duxbury of £325,000, £10,000 for a car and a further sum of £150,000 to pay toward his outstanding costs.

This left H owing a significant sum to his solicitors, but that was a matter for them. The judge considered that the costs should have been no more than £100,000 each - £150,000 maximum – even with top firms of solicitors. They were so much higher because H had unreasonably litigated. Taking into account FPR 28.3 and para 4.4 of PD28A, it was not for W to bankroll this litigation. H had conducted the litigation in a manner which was irresponsible and unreasonable and, whilst W did not seek her costs from H, there was no reason why he should expect her to pay his costs unreasonably incurred.


DS v HR [2019] EWHC 2425

The Wife (W) sought a Hadkinson order barring the Husband (H) from appealing Family Law Act proceedings unless he made good his admitted default of child maintenance payments.

In March 2019, one of the children of the family, supported by H, applied for an order under the Family Law Act to exclude the wife's new husband from the matrimonial home. The wife (W) and her husband opposed the application which was dismissed by the court. H was ordered to pay the new husband's costs in the sum of £37,000 on the basis that he was behind the litigation.

The child sought to appeal but the application was dismissed. H sought to appeal the costs order. He also immediately stopped paying child maintenance, making it clear in correspondence that this was a direct result of the costs order being made. He also made clear that he expected the family home to be sold, making the children homeless unless W's husband did not pursue the costs order in his favour.

W therefore applied for the Hadkinson order.

Following Denning J in Re Clements (46.L.J. Ch 383), the fact that a party has disobeyed an order of the court is not of itself a bar to being heard, but if his disobedience is such that it impedes the course of justice, by making it more difficult for the court to ascertain the truth or to enforce the orders which it may make, then the court may in its discretion refuse to hear the party until the impediment is removed or good reason is shown why it should not be removed.

Following Ryder LJ in Mubarak [2004] 2 FLR 932, the following questions should be answered:

1 Is the husband in contempt?

2 Is there an impediment to the course of justice?

3 Is there any other effective means of securing compliance for the Court's orders?

4 Should the court exercise its discretion to impose conditions having regard to the question: is the contempt wilful, i.e. is it contumacious and continuing?

5 If so, what would be proportionate?

The judge concluded that H was obviously in breach and there was no other effective way to enforce the order on the facts of this case.

H's main argument was that the two sets of proceedings were not the same. The Hadkinson order was sought in the Family Law Act proceedings and the child maintenance was ordered in financial remedy proceedings. However, Cohen J concluded that there was a very clear link between the two sets of proceedings.

This may have been the first time that the Hadkinson principle has been extended to cover separated proceedings, albeit related, but the judge decided this was a remedy which could be extended to this situation.

Although the Hadkinson order could be draconian, in this case it was not. The sum due was a very small amount to H and it was a sum which he had agreed to and been ordered to pay to his children. He therefore has no defence and should pay it before being allowed to appeal.


T v T [2020] 2 WLUK 170

The parties had met in 1989 and married in Russia in 1992. They had two children aged 23 and 19. In 2003, the husband (H) had encouraged W to move to London with the children and he had stayed in Russia. W discovered in 2016 that H had led a double life and had four children with another woman in Russia.

W issued English divorce proceedings in 2017 but H obtained a valid divorce in Russia without her knowledge whilst appearing to negotiate with her. She therefore pursued a Part III claim under Matrimonial and Family Proceedings Act 1984 in the English court.

H provided no financial disclosure, ignored an order for interim maintenance and did not attend any hearings.

W had no financial resources. H's income was unknown but it was understood that he owned a flat in Moscow, a flat in Barcelona and shares in a company which owned a large hotel.

It was not appropriate to guess H's wealth. H only had himself to blame if the court ordered him to pay more than he could afford. The court had to ensure that a non-discloser could not procure a result which was better than that which would have been ordered if he had told the truth. An order which was unfair to the non-discloser was better than an order which was unfair to the claimant.

The court therefore ordered a lump sum of £2.25million with anything unpaid by June 2020 attracting interest and with interim maintenance of £2,600 per month until payment.