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Financial Remedy Update, May 2022

Nicola Rowling, Professional Support Lawyer, and Emily Elvin-Poole, Associate, at Mills & Reeve LLP consider the most important news and case law relating to financial remedies during April 2022.













Nicola Rowling, Professional Support Lawyer, and Emily Elvin-Poole, Associate at Mills and Reeve

News

Divorce applications up in the first week of no-fault divorce

HMCTS has reported they received 3,000 divorce applications in the week following the introduction of no-fault divorce – a 50% increase on the amount they would usually see. 

Relationship breakdown should be treated as "transactions, not litigation"

Delivering the Bridget Lindley Memorial Lecture at the Family Justice Council conference, Chair of the Family Solutions Group Helen Adam said the need for lawyers to take a different approach to family separation was part of the "paradigm shift" required to have child welfare leading the design of family law.  She said:

"We could ignore the evidence, or deny the evidence, for this is unwelcome; it's easier to carry on as we are. As with climate change, government is slow to catch on. But the evidence for climate change is real and growing, we see it all around us, it becomes impossible to ignore. I say the same for an adversarial system for separating families being harmful."

She went on:

"Family cases are not legal disputes as with other types of law; they need a different approach, alongside other professionals. We need to work creatively and collaboratively alongside each other, and with curiosity.

"We do not have all the answers ourselves; we can be curious about what other agencies or professionals bring to the family dynamic and learn from each other."

House of Commons Library publishes "Same-sex marriage in the UK's Overseas Territories" Insight examining Privy Council decision

In March 2022, the UK Privy Council ruled the constitutions of the Cayman Islands and Bermuda (two Overseas Territories) do not provide the right for same-sex marriage, with the choice instead with their local assemblies.  The Insight explains the background to the judgments, the situation in other UK Overseas Territories, and what the next steps might be.

In the case of Bermuda, the Privy Council held that Bermuda's 2018 Domestic Partnership Act is constitutional. It allows same-sex couples to form partnerships but prohibits them from marrying.  Under the Territory's constitution, which was introduced by the UK in 1968, the Privy Council determined there were insufficient grounds to support the challenge brought by local Bermudians.

In the separate Cayman Islands case, the Privy Council determined there is no right to same-sex marriage under the Cayman Islands' Constitution, but its Parliament can introduce legislation to recognise it.  The ruling does not affect civil partnerships, which were introduced in 2020 and confirmed in a local legal judgement.

Four Overseas Territories allow neither same-sex marriage or civil partnerships - Turks and Caicos, Montserrat, British Virgin Islands and Anguilla.

In response to the Foreign Affairs Committee in 2019, which urged the UK Government to prepare to "step in" and set a date for all Overseas Territories to legalise same-sex marriage or face UK legislative intervention, the Government said:

"As policy on marriage law is an area of devolved responsibility it should be for the territories to decide and legislate on. […] We are working to encourage those Territories that have not put in place arrangements to recognise and protect same sex relationships […]"

It is not inconceivable for the Government to step in more firmly.  In 2000, the Government legislated through an Order in Council to decriminalise consensual homosexual acts between adults in private in five Territories including the Cayman Islands.  And the Cayman Islands' 2020 Civil Partnership Law was introduced by the Governor following an instruction from the UK Government.

However, in Bermuda, both same-sex marriage and civil unions were rejected in a non-binding referendum in 2016. Its government has welcomed the Privy Council decision and emphasised other protections in place for LGBT+ people.

New guidance on online divorce and FR applications published by HMCTS

At the beginning of the month, HMCTS published a range of new guidance to assist practitioners using the new divorce services online.  The guidance is for all new divorce applications submitted from 6 April 2022 and covers:

• submitting a sole application;

• submitting a joint application, for applications where both applicants are represented and applications that involve an unrepresented applicant; and

• general and alternative service applications. 

Clarification on e-bundles for LiPs

The Financial Remedies Court has published an advisory notice clarifying the rules and guidance about electronic bundles to assist LiPs and also legal representatives. The notice is intended to clarify the rules and guidance about electronic bundles contained in:

• PD27A Family Procedure Rules;

• Statement of efficient conduct dated 11 January 2022;

• President's guidance on e-bundles dated 21 December 2021; and

• General guidance on electronic bundles dated 29 November 2021.

The note explains that LIPs must produce forms ES1 and ES2. If one party is represented, the legal representative should produce the electronic bundle. If both parties are LIPs, then the applicant should produce the electronic bundle. If neither LIP has sufficient IT knowledge to prepare an electronic bundle the court should find a solution.

FPR committee meeting minutes from February and March 2022 published

Points of note are:

• The FPRC is considering amending PD27A given the President's guidance on e-bundles and the FRC efficiency statement. The need for "lead in periods" when efficiency statements are issued is highlighted.

• Guidance has been drafted for applicants together with new statutory declaration forms for the new process for parents applying to change a child's name by deed poll.

• New rules about return proceedings with linked asylum applications are being drafted for insertion into Part 12. FPR 2010 An overhaul of PD12F on international child abduction is being considered.

• The pilot for the new standard directions order for general enforcement applications will now not start before 1 July 2022.  Three courts will be involved and a further three will be used as comparisons.

• The government is implementing conversion rights for opposite sex couples in England and Wales in accordance with the 2019 consultation proposals.  A statutory instrument with changes required to the FPR and other legislation is expected to be laid before Parliament later in 2022.

National Archives Find Case Law launched

The National Archives has taken on responsibility for the external publication of court judgments, creating the first publicly available government database of judgments. 

The new service - Find Case Law - will begin by publishing court and tribunal decisions from the Supreme Court, Court of Appeal, High Court and Upper Tribunals. Going forward, The National Archives will work on inlcuding judgments from more courts and tribunals and to add historical judgments to the service.

The initial collection of judgments and decisions will total 50 000 dating back to 2003 for court judgments and 2015 for tribunal decisions. Users are able to search by neutral citation, party name, judge's name, court / chamber and date.

Cases

DX v JX [2022] EWFC 19 (Mr Justice Moor)

The husband ("H") sought to vary and/or terminate a spousal maintenance consent order that was made in favour of the wife ("W") in July 2017. H's application was successful.

In Mr Justice Moor's judgment he comments on and explores:

1. the unusual nature of the periodical payments order dated July 2017 which was structured not by reference to W's needs, but rather as a fixed percentage of H's income;

2. whether the English court has jurisdiction to deal with the H's application (previous decisions in the case having been heard in Luxembourg where W was habitually resident); and

3. whether in circumstances where the parties are now earning at similar levels (the W's having increased and the H's having fallen), it would be appropriate to vary/terminate the spousal periodical payments order.

The parties are British, but they (and their three children) lived for many years in Luxembourg before they moved in 2013 to the UAE for H's work. W petitioned for divorce in early 2015. Decree absolute was made in March 2017 and the parties reached a financial settlement by consent in English proceedings in July 2017. W and the children then moved back to Luxembourg.

At the time the financial remedy order was made, the parties had a similar (modest) level of capital assets (around £400,000/£500,000 each), but a huge disparity in income. H was earning £35,000 net a month including bonus. W was "hardly working".

The consent order provided for an equal division of existing assets, and H was to pay periodical payments to W at a rate calculated as a percentage of his net salary. The periodical payments order was split as to 25% payable as spousal maintenance to W and 8.33% to each child until they respectively attained the age of 18. From 2028 the spousal maintenance would then reduce to 20% and would terminate on the first to occur of the retirement of either party or W turning 65. There was a separate provision relating to H's bonus whereby W was to receive 50% of the bonus until 2020, and the percentage would thereafter reduce year on year until 2033 or H's retirement. W was receiving all in all around £150,000 a year in maintenance. Crucially, it was accepted openly by H at the time, that W should be entitled to redevelop her earning capacity over time without it affecting this level of maintenance.

H also undertook to share the income that he would derive from his Luxembourg pension with W on receipt at 65, it being agreed that this pension accumulated during the marriage; and he was to pay the children's school fees for so long as he received a school fees allowance. If the allowance ended, the children would attend a non-fee paying school.

The periodical payments order was not a needs-based order. It was, as W put it in her skeleton, based on entitlement and was self-regulating. It was to remain constant even if W earned good money. It was common ground that the idea behind it was so that she would be able to stockpile a substantial pot of capital over time to achieve a clean break at the age of 65.

Moor J acknowledged that this was a "slightly unusual approach" but he commended it, given the huge income that H had suddenly obtained towards the end of the marriage. He expressed his view that the order was a sensible way of dealing with this case, as it allowed both parties to achieve independence in retirement at a good standard of living (Parlour v Parlour [2004] 2 FLR 893, Q v Q [2005] 2 FLR 640 and AB v FC [2016] EWHC 3285 (Fam)).

Mr Justice Moor explored whether the order offended the principle that post separation income cannot be shared. He concluded that "even if there is some force" in that suggestion, "income sharing was what they agreed and they did so for good reason at the time".

Following the consent order in 2017, H made several variation applications, the first only two years after the order was agreed. He applied to the Luxembourg court to vary/terminate the order in September 2019 and then appealed the court's decision in 2020. Both applications were dismissed. At the time, Luxembourg was the only court with jurisdiction to hear the case.

The present application was brought in England Wales in early 2021. The UK had by then left the EU and so the Maintenance Regulation no longer applied. This meant that Article 18 Hague Convention 2007 applied instead. This provides:

"(1) Where a decision is made in a Contracting State where the creditor is habitually resident, proceedings to modify the decision or to make a new decision cannot be brought by the debtor in any other Contracting State as long as the creditor remains habitually resident in the State where the decision was made."

W contested jurisdiction on the basis that she was still habitually resident in Luxembourg. Moor J found that the English court did have jurisdiction because the decision that H was asking to modify was not the Luxembourg decision, but the original English consent order. It followed that he was entitled to vary the order previously made in this jurisdiction if there was good reason to do so.

When H made the current application, it was early 2021. W was by then earning fairly well as a teacher and had inherited some money following the death of her father. At the outset of proceedings, H was still earning well in the UAE. However, during the course of the proceedings H's circumstances changed. H was told that his appointment in the UAE was to be terminated with three months' notice and he returned to the UK on 5 December 2021. This brought the parties' respective incomes to a similar level of around £60,000 to £70,000 net a year, with H's income being around £10,000 more than W's depending on his bonus.

H sought a capitalisation or termination of spousal maintenance, and for the child maintenance to be reduced to the CMS level, with a further reduction to account for his travel expenses from the UK to Luxembourg to see the child (although at the time, H wasn't seeing the child at all).

W sought a transfer to her of two UK properties owned by H mortgage free worth a total of £671,400 plus a lump sum of £200,000 and capitalisation of child maintenance at £68,592. This, on H's figures, would have left W with £2.2 million and H with around £400,000.

Moor J considered whether it was appropriate for the periodical payments order to simply continue, albeit on the basis that 25% would be much lower than it was when the H was earning more. He rejected this solution, concluding that this would not be appropriate given how far H's income had fallen.

Instead the judge ordered a clean break. He said that "[t]here is no principle of equality and the Wife cannot justify a maintenance order on the basis of need, given an income of £60,000 per annum net as well as investment income. Even if she could, it would not be right to expect the Husband to pay, given that he has responsibilities for C and needs of his own."

He found (by reference to Duxbury tables) that W could adjust without undue hardship to the termination of her maintenance given that she had accumulated capital over the years (such that she now had capital of circa £1.2 million), and a valuable state pension in Luxembourg.

He did however order a modest sum of capitalised maintenance of £38,000. This was to cover the arrears in periodical payments that H had not paid during the last three months of his employment in UAE; and to cover W's 50% share of the income H was due to receive from his Luxembourg pension.

Child maintenance was ordered at the CMS figure of £800 a month. The judge did not reduce the sum to take into account any notional travel expenses, particularly when no contact was taking place. H was also ordered to continue to pay the child's private school fees at a fixed sum of £6,000 a year (the sum offered by H) for as long as the child remains at his current school.

Mr Justice Moor concluded that W's share of H's future bonuses should not be capitalised, because the quantum is uncertain, and he had already determined that W could adjust without undue hardship. All in all he said "the simple fact is that the goose that laid the golden egg is no more, with significant financial consequences for both parties." 

Her Majesty's Attorney General v Dowie [2022] EWFC 33 (Mr Justice MacDonald)

On 3 March 2022, Mr Dowie was found to be in contempt of court for interfering with the administration of justice. He published several videos on YouTube relating to Children Act 1989 proceedings which were heard in private at the Family Court at Preston (Attorney General v Dowie (Committal Proceedings) [2022] EWFC 25).

The sentencing hearing took place on 13 April 2022 at which Mr Justice MacDonald (taking into account the early admissions given by Mr Dowie), imposed a custodial sentence on Mr Dowie of 8 months imprisonment, which was to run consecutively to the custodial sentence he was already serving at the time for an unrelated criminal conviction. He also ordered for Mr Dowie to pay the Attorney General's costs (minus the costs of an aborted hearing which was adjourned through no fault of Mr Dowie).

In his judgment, Mr Justice MacDonald explained that a penalty for contempt has two primary functions:

1. it upholds the authority of the court by marking the disapproval of the court and deterring others from engaging in the conduct comprising the contempt; and

2. it acts to ensure future compliance with that order.

He commented that in the present case he considered the main objective was the former, as the relevant Children Act proceedings had already concluded. He emphasised very strongly, that in deciding upon the above custodial sentence he had considered the need to deter others from recording private family proceedings and publishing those recordings online. He went on to say that

"[t[he prohibition on recording family proceedings and on publishing certain information relating to family proceedings is vital to the integrity of family proceedings…" and "…the statutory prohibition on recording in court without the permission of the court, and on publishing such recordings, reflects what Parliament considers to constitute a serious risk to the administration of justice if those actions are taken. If those giving evidence in private proceedings were to be required to do so in the knowledge that their evidence may be recorded and relayed to the public at large they will be reticent in giving full and frank evidence to the court in the future. The same risk arises if parties know that deeply personal matters relayed in evidence in private proceedings risk being disseminated to the public at large.

Within this context, it is important that those involved in family proceedings appreciate that if they fail to adhere to the statutory prohibition on recording in court without the permission of the court, they are interfering with the administration of justice and will likely face a sentence of immediate imprisonment".

Mr Justice MacDonald also summarised the approach that a court must take to sentencing in committal/contempt of court cases, stating that the court must consider:

1. the seriousness of the matter and the contemnor's culpability (R. v. Montgomery [1995] 2 Cr App R 23, in which Potter LJ held that "an immediate custodial sentence is the only appropriate sentence to impose upon a person who interferes with the administration of justice, unless the circumstances are wholly exceptional");

2. aggravating factors (Re Yaxley (Practice Note) at para.80 for publication cases);

3. mitigating factors (including any admission, whether any admission was made early, any apology for the contemptuous conduct, and personal circumstances.); and

4. in this particular case, whether, the court can impose a custodial sentence consecutive to a current term of imprisonment, or whether that sentence must be concurrent. (R v Anomo [1998] 2 Cr App R (S) 269 and Wilkes [1770] 19 St Tr 1075).

He held that in this case, he could not see a principled reason why the court should not impose a custodial sentence for contempt to run consecutive to any current custodial sentence imposed by the Crown Court if the circumstances of the case so justified, subject always to that consecutive sentence not exceeding the maximum term that the court has the power to impose.

Xanthopoulos v Rakshina [2022] EWFC 30 (Mr Justice Mostyn)

The husband ("H") applied for a legal services payment order and the wife ("W") applied to be released from an undertaking that, pending determination of H's financial claims, she would preserve a bank account and its contents. She also applied for the parties to be anonymised in any judgment.

H described himself as a homemaker. W held a senior position in a large chain of shops in Russia and, H contended, an interest in that business worth at least £300 million. They had two children, the litigation about whom had concluded subject to any appeal by H. They both lived in valuable London properties funded by W.

In January 2021, H had applied for and had been granted a legal service payment order of £750,000.  This had been designed to take him to the conclusion of the hearing to determine jurisdiction in the children proceedings and the divorce and proposed mediation. Later, W gave an undertaking in respect of a bank account, which contained about £11 million. In October 2021 she was released from that undertaking to enable the payment of £590,355 to H's solicitors and £496,267 to hers.

H's solicitors had come off the record the day before this hearing. He was seeking an order to clear all of their outstanding costs of about £250,000, and to cover future costs of about £673,000, for any appeal in the children proceedings, and to reach the conclusion of the first appointment of financial remedy proceedings under Part III MFPA 1984. 

Legal costs funding

H, Mostyn J said, had greatly overspent the award intended to take him to the conclusion of the first appointment. Generally, a legal services payment order should be made only in respect of outstanding costs to current solicitors where without payment those current solicitors would likely cease acting for the party in question (i.e.so to ensure that that party can continue to access representation. H's solicitors had come off the record, so the court would not make any award in respect of their costs.  The position is entirely different in relation to former solicitors as they have already ceased acting for the party in question (i.e. so payment of their outstanding costs has no relevance to the question of whether a party can continue to access representation).

Even if the solicitors had stayed on the record, the court doubted whether it would have made any substantive award in respect of their outstanding costs given the husband's overspending.  As they had come off the record, H would have to instruct new solicitors and make a fresh application. In any event, the court would have been very unlikely to make any award to H for future costs.  Mostyn J accepted that whilst it was possible to seek a payment where the basis of a previous legal service payment order had been undermined by a change of circumstances there might be a further payment it would be scrutinised carefully. 

He also accepted that the court had jurisdiction to make an order to fund an appeal, but it would be exercised extremely cautiously, particularly where permission to appeal had not been granted. Any application would always be considered against the sums already allowed and the consequences of previous overspending could lead to refusal. He was clear that funding the defence of claim by former solicitors was an interim lump sum and not legal service payments order and so could not be ordered.

Undertaking

The war in Ukraine was a significant change in circumstances which was likely to have a material effect on the wife's finances (Birch v Birch [2017] UKSC 53). Further, Mostyn J determined that the undertaking was too restrictive and likely to lead to further litigation. W should be able to discharge her own legal costs without having to seek H's agreement or a court order.  W was therefore released from her undertaking on terms that an injunctive order was made restraining her from dealing with the bank account save as to payment of her legal fees and H's interim maintenance.

Conduct

Mr Justice Mostyn described how:

• skeleton arguments for both parties exceeded the prescribed 10-page limit and were filed late;

• H's statement had been filed late (it was dated a day later than the deadline and served on W two days later);

• both parties' statements exceeded a 16-page limit;

• the bundle ran to 1,878 pages rather than the 350 prescribed limit; and

• the preparation for the hearing could "only be described as shocking".

In obvious frustration, Mostyn J continued:

"This utter disregard for the relevant guidance, procedure, and indeed orders is totally unacceptable. I struggle to understand the mentality of litigants and their advisers who still seem to think that guidance, procedure, and orders can be blithely ignored. In Re W (A Child) (Adoption Order: Leave to Oppose) [2013] EWCA Civ 1177 Sir James Munby P, having referred to "a deeply rooted culture in the family courts which, however long established, will no longer be tolerated" . . . That was nine years ago. But nothing seems to change . . .

It should be understood that the deliberate flouting of orders, guidance and procedure is a form of forensic cheating, and should be treated as such. Advisers should clearly understand that such non-compliance may well be regarded by the court as professional misconduct leading to a report to their regulatory body."

Anonymity and transparency

As you can probably tell, Mostyn J determined that there was no reason to depart from the principle of open justice in relation to the parties, particularly as he concluded that public interest demanded that the exorbitance of the litigation should be fully reported.

However, it is what Mostyn J goes on to say that is proving food for thought.  As set out in BT v CU and A v M, Mostyn J's default position is "open justice" meaning litigants should be named in any financial remedies judgment. He goes on to say that permission is not required to publish a financial remedy judgment and that Munby P's Practice Guidance (Transparency in the Family Courts) [2014] EWHC B3 (Fam) was wrong in relation to financial remedies judgments. These judgments can be fully reported without permission unless a reporting restriction or anonymity order is made after conducting the balancing exercise set out in Re S (a child) [2004] UKHL 47. In particular, he highlights that s.12(1) Administration of Justice Act 1960 allows a financial remedy judgment (which is not mainly about child maintenance;) to be fully reported without anonymity.

If a case-specific reporting restriction order is to be made, it will need to comply with r.29.2(4) CPR 1998 as well as satisfying the "ultimate balancing test" - balancing a duty of fairness towards parties and persons called to give evidence as against the public interest in open justice in specific cases.  The judge notes that guidelines for exercising the court's power to order anonymity were set out by Lord Neuberger MR in H v News Group Newspapers Ltd [2011] EWCA Civ 42.  Following a comprehensive analysis of the law concerning the anonymisation of judgments, Mostyn J whittles the question practitioners need to ask when making such an application is "Why is it in the public interest that the parties should be anonymous?" rather than 'Why is it in the public interest that the parties should be named?'

We are also provided with the following guidance:

• Celebrities / those with a high media profile will get no special treatment.

• An order should not be made only because both parties' consent. Parties cannot waive the rights of the public.

• Interim anonymity orders must be reviewed.

• The judgment about the anonymisation application should be published regardless of its outcome (subject to editing if required).

• Notice of any hearing should be given to the defendant, absent a good reason not to do so.

Very significantly, current practice follows McFarlane P's report Confidence and Confidentiality: Transparency in the Family Courts (29 October 2021), with the court restricting publication of confidential financial information disclosed in financial remedies proceedings but Mostyn J says that this is not the law. Unless the court prohibits reporting, any blogger or journalist can report on the proceedings effectively meaning that a general expectation of privacy has been extinguished. The burden of proof is shifted and now falls on the party desiring anonymity, not the individual wishing to publish.

Lockwood v Greenbaum [2022] EWHC 845 (Fam) (Mr Justice Moor)

The wife ("W") sought to appeal an order refusing her permission to bring a Part III MFPA 1984 application following her divorce in New Zealand. 

W and the husband ("H") lived in New Zealand. They had New Zealand and British citizenship and met when they were both working in England. They began cohabiting in London around 2004/2005, in a large property gifted to H by his father. The couple travelled to New Zealand to marry in 2006 then returned to London. In 2007, they rented accommodation while they renovated the London house using money loaned from H's mother. In 2009, they returned to the London house, by which time they had two children. A few months later, the family relocated permanently to New Zealand. The marriage broke down in 2011 and was dissolved in 2013.

Problems swiftly arose in the ensuing relationship property proceedings in the New Zealand courts. Under New Zealand law, the court could not deal with assets outside the jurisdiction and was therefore unable to take account of the London house as an asset. However, relationship property could include liabilities, and H successfully argued that the debt he owed his mother concerning the London house renovations was a liability that W should share. The net result of those proceedings was an order that W pay H NZ$397,000. When she failed to pay, H instigated bankruptcy proceedings against her. Consequently, she applied to the English court for permission to apply for financial provision under Part III MFPA 1984 and grounded her application on the London property being used as a matrimonial home at some time during the marriage.

Her application was refused at first instance with the recorder determining that W had not established a substantial connection with England and that the London needed to have been part of the fabric of the marriage for many years. He also refused the application in light of the fact that H had offered to discontinue the bankruptcy proceedings and waive the debt if W undertook not to bring any further proceedings anywhere in the world.

W's appeal before Moor J was successful.  He found that the recorder had erred in setting out the test for granting permission to apply for financial provision following an overseas divorce. There was no precondition that the court must be satisfied that the case had substantial connections with England and Wales. The correct test was simply that s.13(1) Part III MFPA 1984 required there to be substantial ground for making the application, with "substantial" taken to mean "solid" (Agbaje v Agbaje [2010] UKSC 13). The connection to England and Wales was merely one of the factors to take into account when, in deciding whether to grant permission, the court looked at s.16 to consider whether the application had merit.

Here the judge considered there to be merit in W's application:

• The fact that H had made the offer he had about the bankruptcy proceedings indicated that there was likely to be some substance to the application.

• The case was not one that required comity with the New Zealand judgment. The judges who had dealt with those proceedings were not happy with the lacuna created by New Zealand law and had expressly referred to the possibility of proceedings in England and Wales to deal with the London property.

• The parties had considerably greater connections with England and Wales than the recorder had found. They had British citizenship, they began their relationship when they were both working in England, they co-habited and had a matrimonial home in England, their children were born in England, and the matrimonial home was renovated with the initial intention of it being the family home in the long term. While the parties undoubtedly had a greater connection with New Zealand, that was not the issue.

• The London house was a property in respect of which a Part III order could be made that would easily be capable of enforcement.

The length of time that had elapsed since the divorce was very significant, but the responsibility for that rested with both parties. In the circumstances, the delay was not sufficient to prevent the grant of permission which Moor J duly gave.

Simon v Simon and Level (Joinder) (Rev 1) [2022] EWFC 29 and Simon v Simon [2022] EWFC 35 (Mr Nicholas Cusworth QC sitting as a deputy High Court judge)

These judgments follow on from Mrs Justice Roberts' decision in LS v PS v Q Company [2021] EWHC 3508 (Fam).  For a recap of the facts of this case, see Financial Remedy Update, January 2022.

By March 2022, Q's (who we now know to be the litigation funder, Level) application to set aside the consent order had been conceded by the husband ("H"), enabling Level to continue with its joinder application.  H argued there was no dispute between him and the wife ("W"), Level could pursue civil remedies against her and there was no nexus between Level's debt action and the proceedings, making joinder inapplicable. Meanwhile, Level argued the parties had colluded, arranging their financial affairs so W's debt was effectively unenforceable.

Nicholas Cusworth QC granted Level's application, so the issues between Level and W, and W and H could be "fairly and expeditiously" resolved. Without the application he said, H's selective communications with the court would not have been revealed. The judgment highlights that when considering whether to join a party (r.19.2(2) CPR 1998) the two key principles are:

• the overriding objective; and

• enabling parties to be heard if their rights may be affected by a decision (Price v Registrar of Companies [2017] EWCA Civ 1768).

r. 9.26B FPR 2010 is similar to r.19.2(2) CPR 1998 and should therefore be interpreted in the same way. Level's rights were unquestionably capable of being affected by the prospective consent order. Moreover, a third party who is directly affected by a judgment or order in proceedings may have it set aside or varied (r.40.9 CPR 1998).

In the second judgment, the judge set out the case management directions to move the proceedings forward.  As practitioners know, when the court sets asides a financial remedies order, it should give directions for the rehearing of the financial remedies application (r. 9.9A(5) FPR 2010).  Here, H unsuccessfully tried to persuade the judge that there should be no rehearing and that the consent order agreed between the parties should stand. 

Mr Nicholas Cusworth QC declined to re-seal the consent order without considering the consequences of the parties' agreement on Level and whether these were intended. He transferred the civil proceedings issued by Level to the Family Court, to be listed after determination of the financial remedies application. Until the court has determined the financial remedies proceedings, Level cannot know to what extent its civil claims are viable.

The court requires updating financial disclosure to discharge its statutory duties. W has not participated in the proceedings since concluding the agreement with H. However, the judge made clear that her agreement with Level means she cannot now absolve herself of the responsibility to conclude these proceedings.

Both H and W have been directed to provide updating financial disclosure by way of Forms E and questionnaires.  Level have been directed to produce a list of documents in its control emanating from the proceedings. Level is bound by an implied undertaking not to use the documents in its control, or which come into its control, for any collateral purpose. As a party to the financial remedies proceedings, Level will be entitled to disclosure within the proceedings to which it has not yet had access. If at the conclusion of these proceedings, the civil proceedings cannot be disposed of without further action, the availability of documents from the financial proceedings for use in the civil proceedings may become a live issue.

Traharne v Limb [2022] EWFC 27 (Mr Justice Cohen)

The wife ("W") was a film-maker aged 59 and the husband ("H") was a part-time a barrister, aged 68.  W suffered from complex PTSD and depression and had suffered bouts of reactive depression following the breakdown of previous relationships. The parties met in 2008, cohabited from 2012 and married in early 2013. They entered into a post-nuptial agreement in 2018, following the second of two separations but – significantly - after they had reconciled.

W petitioned for divorce in 2020 and issued financial remedy proceedings seeking an award in excess of what she was entitled to by virtue of the post-nup.  H applied for W to show cause why she should not be held to the post-nup's terms.  She claimed that the agreement was ineffective because she had been induced to enter into it by H's coercive and controlling behaviour which allegedly included verbal abuse, denigration and belittling, financial control, "gaslighting", controlling her everyday life and restricting her contact with others. H denied the allegations and claimed that, in any event, there was no causal connection between them and W's state of mind at the time she entered into the agreement. The assets totalled £4 million, although the parties' incurred costs exceeded £650,000.

In deciding what weight to give a marital agreement, Cohen J reminded practitioners that it is necessary for the court to have regard to the prior and subsequent conduct of both parties and the circumstances surrounding the making of the agreement.  Unconscionable conduct such as undue pressure is likely to eliminate the weight to be attached to it (Edgar v Edgar [1980] 1 WLR 1410).

Cohen J was satisfied that coercive and/or controlling behaviour was an example of undue pressure.  Subjectively, that behaviour has the effect of depriving an individual of the ability to enter into nuptial agreement of their own free will.

On the facts of this case though, Cohen J concluded that there was no evidence of any objective coercive or controlling behaviour on H's part. The parties had had separate finances and had run their own affairs. W had been legally advised that the agreement was in her short-term interests but would not be in her best interests if the marriage endured for many years. At the time the agreement was negotiated and signed, W had been vulnerable by reason of her past experiences; nonetheless, she had not been led into it by H's behaviour. She had had a psychological need for the relationship to continue. Her inability to make a rational and considered decision as to what was in her best interests was not caused by H's conduct but had been, the judge said, "self-created".

There were clearly some circumstances that detracted from the weight that should be accorded to the agreement including that the negotiations had taken place against the backdrop of a reconciliation that had already taken place and that W's judgment had been impaired by her need to keep the marriage going.  There were also unresolved pension issues.  However, there were also factors that enhanced the weight of the agreement including that W had proposed its terms and had been satisfied that it met her needs.

Cohen J was not satisfied that the agreement met W's needs.  Although W's mortgages would be paid off, in retirement W's income of £24,000 would fall short of her needs of £35,000 a year.   Accordingly, it was not fair to hold the parties to their agreement.  Cohen J ordered a 12.1% share of the benefits in H's pension accrued during the marriage (valued at £165,284), providing W with annual retirement income of £6,177 from age 67. When aggregated with her state pension, net rental income and private pension, W's annual net income would total £25,000. Given W's annual income need of £35,000, she received a Duxbury fund of £191,513.

On a cautionary note, Cohen J considered W's spending on costs (£403,150) to be "woefully excessive".  H had already paid £211,000 to W under a legal services order and, the judge held, it would be unfair for H to clear all of W's outstanding costs. H was ordered to pay £80,000 on account of W's costs, leaving W with a costs liability of £70,000 to £80,000 due to her approach to the litigation in setting her sights too high. W could meet this liability from her Duxbury fund or by raising a mortgage.

OE v VY (C-522/20)

Here the European Court of Justice ("ECJ") held that the periods of residence required to establish divorce jurisdiction under the fifth and sixth indents of Article 3(1)(a) of Brussels II Revised can vary according to the applicant's nationality and do not infringe the prohibition on discrimination based on nationality.

The ECJ was asked to determine whether the sixth indent of Article 3(1)(a) of BIIR (which provides for the applicant's habitual residence for six months in a member state of which they are a national as the basis of divorce jurisdiction) infringes the prohibition on discrimination based on nationality (Article 18 Treaty of the Functioning of the European Union). This is because it provides, as a precondition, for a shorter period of residence than the fifth indent of Article 3(1)(a) (which provides for the applicant's habitual residence in a member state for a year as the basis of divorce jurisdiction).

The ECJ considered that the nationality requirement demonstrates an initial connection with that member state. The same is not true of a spouse who, after separation, moves to a member state of which they are not a national.  The difference in the minimum period of residence depending on whether the applicant is a national of that member state or not is based on an objective factor that is known to the other party.  It is unlikely tobe a surprise for a respondent to learn that the applicant, having moved to a member state of which they are a national, is applying for a divorce in that jurisdiction. 

17.05.2022