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Financial Remedy Update, July 2020

Sue Brookes Principal Associate, Family Lawyer, Collaborative Lawyer and Mediator for Mills & Reeve LLP considers the important news and case law relating to financial remedies and divorce during July 2020.

Sue Brookes Principal Associate, Mills & Reeve LLP

As usual this update is provided in two parts


Divorce, Dissolution and Separation Act 2020

The Divorce, Dissolution and Separation Bill received Royal Assent on 15 June 2020.  It came into force immediately for the purpose of conferring powers to amend the FPR 2010 but the rest of the Act will come into force on a day yet to be named. 

Update on remote court hearings

• A new video platform – Cloud Video Platform – has been rolled out to the family and civil courts.  Already in use in crown courts and some magistrates' courts, the platform can be accessed by any device that has a microphone and camera.  HMCTS says that anyone can join easily, and securely, through a web browser, and sessions can be locked to make sure only appropriate parties join. Training rooms can also be set up so that sessions can be tested before they go live.

• The latest updated version of the Remote Family Access Court has been published.   Hybrid hearings are now covered in detail (including a template order), there is more detail on Cloud Video Platform, updated protocols on remote and fully attended hearings, an updated section on judicial discretion and more information on support for litigants in person. 

• The President of the Family Division, Sir Andrew McFarlane, has published The Road Ahead for the Family Court in England and Wales, a document which seeks to set out a broad framework for the operation of the family justice system for the next six months. 

Family Division Liaison Judges

Mr Justice Williams has been appointed as the Family Division Liaison Judge for the South Eastern Circuit (Kent, Surrey, Sussex & Thames Valley) with effect from 30 September 2020 where he will succeed Mr Justice Moor.

Mr Justice Keehan has been appointed as the Family Division Liaison Judge for the South Eastern Circuit (London) with effect from 2 November 2020 where he will succeed Mrs Justice Theis.

Mrs Justice Knowles has been appointed as the Family Division Liaison Judge for the Midland Circuit with effect from 2 November 2020 where she will succeed Mr Justice Keehan.

Family court business declines prior to lockdown

The latest Family Court statistics show that:

• 65,553 new cases started between January and March 2020 (a drop of 3% on the previous year) with a 15% decrease in financial remedy cases and a 3% drop in divorces

• on average it took 28 weeks to get to decree nisi stage and 55 weeks to get to decree absolute

• the number of domestic violence remedy order applications increased by 12%


Villiers v Villiers [2020] UKSC 30

The husband unsuccessfully tried to appeal a decision that the English court had jurisdiction to make a maintenance order in favour of his ex-wife under s.27 Matrimonial Causes Act 1973 (MCA 1973) (the failure to maintain provisions) in circumstances where the divorce itself was proceeding in Scotland.

The couple had lived in Scotland for most of their married life.  Following their separation, the wife moved to England with the couple's daughter. In 2013, she issued a divorce petition in England which included a prayer for financial orders. In 2014, the husband issued a writ of divorce in Scotland; significantly, the writ did not include a prayer for financial orders.

The rules that allocate jurisdiction within the UK for divorce and all ancillary claims (other than maintenance) are found in the Domicile and Matrimonial Proceedings Act 1973 (DMPA 1973).   Where there are competing divorce proceedings, in most cases the court that will prevail is the one in the place where the couple last lived together. Until 2011, these rules also allocated jurisdiction within the UK for maintenance claims.

Pursuant to DMPA 1973, the divorce proceedings had to be heard in Scotland and the wife agreed to an order dismissing her English petition.  However on the same day she made an application under s.27 MCA 1973 seeking maintenance from the husband. 

The husband argued that the English court did not have jurisdiction to deal with her application. At first instance, the judge held that the English courts did have jurisdiction and made an order that the husband pay the wife £2,500 a month in interim maintenance plus £3,000 a month for legal funding. The Court of Appeal upheld that order.

The Supreme Court was effectively asked to decide whether or not it was possible to have one part of the UK deal with the divorce and all other financial claims apart from maintenance and another part of the UK deal with just the maintenance claims.  As practitioners will be well aware, the significance of this lies in the more generous financial awards available south of the border. 

It is crucial to the understanding of this case to remember that in 2011, at the same time as the EU Maintenance Regulation (Maintenance Regulation) came into force in the UK (which deals with competing proceedings between a UK and EU member state other than Denmark), the UK government changed the rules for the allocation of jurisdiction for maintenance claims within the UK. This was done in the Civil Jurisdiction and Judgments (Maintenance) Regulations 2011 (CJJMA). Schedule 6 CJJMA provides for the allocation within the UK of jurisdiction relating to maintenance claims.

This case was ultimately all about the CJJMA :

• did CJJMA implicitly remove a residual power in the courts to stay proceedings on forum non conveniens grounds?

• was CCJMA ultra vires (having been introduced beyond the Secretary of State's powers to make subordinate legislation for the purpose of dealing with matters related to the UK's obligations under the Maintenance Regulation)?

• if not, were the husband's divorce proceedings in Scotland sufficiently "related" to the wife's maintenance claim in England that the English court should decline jurisdiction?

The Supreme Court were not unanimous in their verdict and it was a 3:2 majority that ultimately dismissed the husband's appeal.  Lords Sales gave the leading judgment, a short summary of which is:

• Within the UK, disputes over jurisdiction for maintenance claims are governed by the Maintenance Regulation and Schedule 6 CCJMA. The court cannot entertain an application under s.27 MCA 1973 unless it has jurisdiction under either the Maintenance Regulation or Schedule 6 CCJMA. Here, the court was held to have had jurisdiction under Schedule 6 CCJMA.

• The English court had no discretionary power to stay proceedings on forum non conveniens grounds. As part of replicating the Maintenance Regulation for cases within the UK, this discretion had been removed.

• The legislation was found not to be ultra vires.  The purpose and effect of Schedule 6 CCJMA was to ensure one predictable set of rules which applied to all maintenance claims with a cross-jurisdictional dimension, whether the crossing of jurisdictions occurred on between states or between the constituent parts of the UK.

• The Scottish and English proceedings were found not to be related actions meaning the English court could not decline jurisdiction to deal with the maintenance claim. The Supreme Court found there was no relevant connection between the wife's s.27 maintenance application in England and the Scottish proceedings that dealt with the couple's marriage status. If "related actions" meant any legal proceedings, this would undermine the Maintenance Regulation's objective of giving a maintenance creditor the right to choose jurisdiction.  As a maintenance creditor, the wife had an unfettered choice of jurisdiction within those listed in Article 3 in which to bring her maintenance claim.  She was entitled to bring her claim in England whether that be on grounds of its convenience for her or that she believed the law would be more advantageous for her.

In her concurring judgment, Lady Black agrees with Lord Sales' conclusion on "related actions" despite this leading to the potential fragmentation of the financial proceedings required to resolve financial affairs upon divorce.

In his dissenting judgment, Lord Wilson (a judgment with which Lady Hale concurs) concludes that the English and Scottish proceedings are "related actions" and the English court had the power to stay or decline the wife's maintenance application. He advocated adopting a broad, common sense approach to the interpretation of "related actions".  As a result, Lord Wilson would have allowed the husband's appeal. 

Montreuil v Andreewitch (Contempt No 2) [2020] EWHC 1301 (Fam)

At this re-hearing (see Montreuil v Andreewitch [2020] EWCA Civ 382 for further background), it was found that the respondent had breached a freezing order by deliberately making and/or procuring transfers and/or payments.  The freezing order, which had been made in March 2019, had prevented the respondent from dealing with the income and assets of a company of which he was a director.  Amongst other actions, he subsequently transferred the applicant's entire shareholding in the company to their 15 year old son within 48 hours of a letter before action. 

Cobb J took the opportunity of addressing some procedural points including:

• there is no explicit remote court guidance dealing with the management of contempt or committal proceedings.  He conducted the hearing in "open court" albeit by way of Skype for Business;

• it is not appropriate to apply to vary a freezing order at the same hearing as an application to commit is being heard.  The effect is to deny the respondent the right to silence which is a serious procedural error; and

• respondents are entitled, but not obliged, to give oral evidence and the right to silence is a core element in criminal proceedings and proceedings of a criminal character. A respondent should be warned of the potential for adverse consequences or inferences being drawn from a party exercising that right to silence.

V v W [2020] 6 WLUK 292

The couple had been in a relationship from 1995 until 2017 and had two children aged 19 and 14 years.  V was an accountant earning £4,500 net a month. Due to illness W had been unable to work since 2015 and had limited income. Since their separation, both parties had continued to live in the house with the younger child but home life was becoming increasingly intolerable and having a detrimental effect on the child. 

One day before the final hearing, W conceded that the declaration of beneficial interest in the house should be 50:50 (previously he had argued that it should be divided 85:15 in his favour). V wanted the house to be sold as soon as possible but W wanted to wait until the younger child turned 21 or finished his education, whichever was later.  Potentially this meant delaying the sale until 2028.

W applied under Schedule 1 Children Act 1989 for V's share of the property to be held on trust for the benefit of the child until he finished his education, and then to revert to V. W also sought a stay of his application until arrangements for the child's care had been resolved. 

Having refused W's application for a stay, the judge concluded that the house should be put on the market as soon as possible.  The atmosphere at home was difficult for all and the child's welfare needs were not being met; the judge was not persuaded that his physical needs could only be met by staying in the family home and the couple needed to live separately.  At the current time, there was sufficient equity in the house to clear the mortgage and it was not reasonable to expect V to continue to contribute towards the mortgage in circumstances where she was not living at the house, not receiving rent from W and putting her own financial stability at risk.  Unable to provide evidence of how he proposed to find funds to keep the house in a good state of repair if a sale was delayed, W also risked defaulting on the mortgage payments. 

R v Inkster (Stuart Charles) [2020] EWCA Crim 796

The husband had breached a non-molestation order prohibiting him from directly contacting the wife.  He accepted that he had sent communications but said that he had a reasonable excuse for doing so and that the wife had breached her own undertaking to reply within six hours.  Unrepresented at trial, prior to the jury being sworn in, the judge told the husband that a technical breach was still a breach, that he should not be pleading not guilty and that a trial would not assist him.  Counsel instructed by the court to cross-examine the wife intervened and spoke to the husband; after that conversation, the husband changed his plea to guilty. 

It was clear that the judge had concerns about the position the husband had found himself in. Unfortunately, his efforts had not resulted in the provision of appropriate assistance or advice. His comments had carried the clearest judicial indication that the husband had no defence and should be pleading guilty. However, the advice was not correct. A breach of a non-molestation order did not of itself render the husband guilty of any of the offences of which he had been charged and the potential defence of reasonable excuse was clearly set out in each of the charges.

The judge's unsolicited interventions were found to have placed pressure on the husband to plead guilty.  It followed that the guilty pleas subsequently entered did not represent a true acknowledgement of guilt and were a nullity.  Each plea was set aside and the convictions quashed. 

Crowther v Crowther [2020] EWCA Civ 762

The husband and wife were married in 1996 and together ran a business which operated vessels providing services in the construction of offshore wind farms and oil and gas sub-sea operations. The husband's expertise was in shipping, and he was responsible for chartering out the vessels and for their management and operation. The wife dealt primarily with the financial side of the business and also with property management. The vessels were owned by subsidiaries of a company (MMC) controlled by the couple, while a limited partnership (AMA) dealt with the operation and management of the vessels.

In 2012 the ownership of five vessels was transferred to one of the respondent companies (CSM) which was owned by the second respondent (K), a Gibraltar businessman, under an agreement by which CSM took on MMC's debt and agreed to bareboat charter the vessels back to AMA.

In 2019 divorce proceedings began. The wife obtained an injunction preventing the respondents from disposing of, charging, or diminishing the value of the vessels, on the basis that the 2012 arrangements were a sham whose purpose was tax evasion. Her case was that she and the husband remained entitled to the beneficial interest in the vessels, and that there was a fraudulent conspiracy between H and K to understate the value of the assets available for distribution in the financial proceedings. (Note that the arguments over the beneficial interest are complex and are the subject of a separate Admiralty claim). 

At the return date of the injunction, K's evidence was that CSM had terminated the bareboat charter and urgently needed to sell or charge one of the vessels to raise funds to maintain the other vessels so that they could be chartered out.  Holman J discharged the injunction against K and his companies on the basis that he was not satisfied that there was any intention to defeat the wife's claims.

The wife successfully appealed the decision due to the unsatisfactory way in which the hearing before Holman J had unfolded.  The pressure of time, the lack of assistance from the parties and never actually seeing the material on which the wife had relied upon in support of her case meant the decision to discharge the injunction against K and his companies was found to be flawed.  Unusually though, the Court of Appeal substituted its own order because of the "extremely urgent" circumstances.  The freezing injunction was re-imposed (the wife being found to have a good arguable case that the 2012 arrangements were indeed a sham) but with the caveat that one vessel could be sold or the fleet could be mortgaged up to the value of the most valuable vessel. This allowed the assets to be preserved at the same time as the fleet being able to trade and be maintained. 

Akhmedova v Akhmedov [2020] EWHC 1526 (Fam)

The latest development in this long-running multi-billion-pound divorce litigation deals with third-party litigation funding. 

The wife had secured funding from Burford Capital to enable her to pursue proceedings to enforce the award made in her favour back in December 2016.  She alleged that the couple's son had played a key role in helping the husband put assets beyond her reach.  The son applied for an injunction forbidding his mother from instructing any lawyers financed by a litigation funder on the basis that such an arrangement was contrary to public policy.  He also sought disclosure of the retainer and funding documents between his mother, her lawyers and Burford. 

In January 2018, the wife had entered into a Deed of Assignment in respect of her funding arrangements; the effect of which was that she retained sole control over the litigation unless and until she defaulted in paying Burford. The son challenged this, arguing that "significant control" had been ceded by his mother to Burford and emphasising that under the funding arrangement, Burford was required to consent to any settlement of the enforcement proceedings.

In dismissing the son's application, Mrs Justice Knowles concluded that public policy would only intervene to prohibit a funder from exercising rights of control where the funder was seeking to suppress evidence, influence witnesses, or "procure an improper settlement". She noted that in circumstances where the son had accepted without reservation that the litigation was being pursued entirely properly and appropriately by his mother and her solicitors, it was difficult to see a great deal of substance in this submission.  With respect to settlement, the judge observed that, even if the wife was required to obtain Burford's consent before settling, that was perfectly proper protection for Burford. 

In dealing with the further argument the son raised that as solicitors cannot enter into conditional fee arrangements in family proceedings, Parliament must also have intended to prohibit those solicitors from receiving third party funding, the judge said the fact that Burford stood to profit from any settlement did not render the agreement unlawfully champertous.  She recognised that whilst there was a valid concern about a lawyer having a financial interest in a result which could "improperly influence" the advice or representation provided, that was distinct from a third-party funding arrangement.  Third-party funding, she acknowledged, had provided a necessary and invaluable service given the lack of legal aid in family cases

Insofar as the son's application for disclosure was concerned, this was refused because neither the wife's solicitors nor Burford were parties to the litigation and the documents were not ones which were in the wife's control.