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Financial Remedy Update, June 2022

Rose-Marie Drury, Principle Associate at Mills & Reeve LLP considers the most important news and case law relating to financial remedies and divorce during May 2022.

Rose-Marie Drury, Principle Associate at Mills & Reeve LLP

A. News

Domestic Abuse Act 2021 (Commencement No 4) Regulations 2022

These regulations bring into force various parts of the Domestic Abuse Act 2021 on various dates in May and June 2022:

• Sections 62 (special measures in criminal proceedings for offences involving domestic abuse) and 67 (orders under section 91(14) of the Children Act 1989) on 19 May 2022.

• Section 70 (strangulation or suffocation) and Schedule 2 (strangulation or suffocation: consequential amendments) on 7 June 2022.

• Section 64 (special measures in civil proceedings: victims of domestic abuse etc) on 14 June 2022.

Prohibition of Cross-Examination in Person (Civil and Family Proceedings) Regulations 2022

The Prohibition of Cross-Examination in Person (Civil and Family Proceedings) Regulations 2022 (SI 2022/568) were made on 18 May 2022 and come into force on the day after sections 65 and 66 Domestic Abuse Act 2021 (DAA 2021) come into force, which is expected to be in June 2022.

Section 65 DAA 2021 introduces new Part 4B into the Matrimonial and Family Proceedings Act 1984 and prohibits cross-examination in person between a party and a witness in defined circumstances, including where there is evidence of domestic abuse. Section 66 of the DAA 2021 introduces new Part 7A into the Courts Act 2003 and makes similar provision in civil proceedings.

The prohibition on cross-examination in person in family and civil proceedings (sections 65 and 66, DAA 2021) will automatically apply where:

• A party has been convicted of, or given a caution for, or (in relation to family proceedings) is charged with a ''specified offence''.

• A witness is protected by an on-notice ''protective injunction'' against another party.

• ''Specified evidence'' is adduced showing there has been domestic abuse between a party and a witness.

The Regulations specify the types of offences (Schedule 1), protective injunctions (Schedule 2) and forms of evidence of domestic abuse (Schedule 3) that will trigger the automatic prohibition on cross-examination in person.

The types of offences specified in Schedule 1 go beyond those relating to domestic abuse and include child abuse, sexual abuse and other violent offences. This is to protect witnesses in family and civil proceedings who may be vulnerable for reasons other than domestic abuse.

The forms of evidence of domestic abuse specified in Schedule 3 include letters from an appropriate health professional or independent domestic or sexual violence advisor and letters from organisations providing support services and local authority housing officers. The court may also accept evidence demonstrating that a party has been the victim of economic abuse.

Civil and Family Proceedings Fees (Amendment) Order 2022

Made on 11 May 2022, this order amends the Family Proceedings Fees Order 2008 (SI 2008/1054) and the Civil Proceedings Fees Order 2008 (SI 2008/1053). The amendments provide an exemption from paying specified fees in relation to applications for orders or directions made under section 31R to W Matrimonial and Family Proceedings Act 1984 and section 85F to K Courts Act 2003. These provisions were inserted by sections 65 and 66 Domestic Abuse Act 2021 and relate to the prohibition of cross-examination in person in family and civil proceedings.

The Order comes into force on the day on which and immediately after sections 65 and 66 of the DAA 2021 come into force.

Child Support (Amendments Relating to Electronic Communications and Information) (England and Wales and Scotland) Regulations 2022 (SI 503/2022)

In March 2022, the Department of Work and Pensions published its response to a consultation on proposals to modernise and improve the Child Maintenance Service.  In it, the DWP stated that changes would be made to legislation to enable more CMS notifications to be sent, received, and accessed digitally where appropriate. The CMS would no longer be restricted to a specific method of communication and would permit electronic communication with employers and third parties. The DWP also stated that it would expand the list of persons and organisations from whom the CMS could require information relevant to the calculation, collection and enforcement of child maintenance.

The Child Support (Amendments Relating to Electronic Communications and Information) (England and Wales and Scotland) Regulations 2022 (SI 503/2022) make these changes by amending the following regulations:

• The Child Support (Collection and Enforcement) Regulations 1992 (SI 1989/1992).

• The Child Support Information Regulations 2008 (SI 2551/2008).

• The Child Support (Management of Payment and Arrears Regulations) 2009 (SI 3151/2009).

• The Child Support Maintenance Calculation Regulations 2012 (SI 2677/2012).

CMS users will be able to choose whether to have communications from the CMS electronically or by post, so that the needs of vulnerable users can be met. Statutory notices sent electronically will have the same legal validity as when sent in the post. The CMS will continue to send letters that have serious consequences for the recipient (such as the removal of a non-resident parent's passport) in the post as well as electronically.

The additional persons and organisations who will have a duty to provide information requested by the CMS are the trustees, managers and administrators of personal pension schemes, academy proprietors, the Motor Insurers' Bureau (or its officers) and persons engaged in investment management or share trading activities.

Family Justice Council Bridget Lindley Memorial Lecture 2022

The Bridget Lindley Memorial Lecture, now in its fifth year, was set up to commemorate the life and work of Bridget Lindley OBE who died in 2016. Bridget served with distinction as a member of the Family Justice Council and as the Family Rights Group's Principal Legal Adviser and Deputy Chief Executive.

This year's lecture was given by Helen Adam, Mediator and chair of the Family Solutions Working Group. The title of the lecture was "Is it Time for Climate Change in the Family Justice System?"  You can view the lecture here

Aviva survey reveals divorcing couples don't understand implications for their pensions

The survey found that one in six divorced people said they did not realise their pension could be affected by splitting up.  More than a third said they made no claim on their former partner's pension and 8% did not have their own pension savings, instead relying on their partner to fund their retirement.  As a result of divorce, 19% say they will be, or are, significantly worse off in retirement.  You can read the full report here

B. Cases

VV and VV [2022] EWFC 41

H and W were both 57 years old. They met in March 2018 and their relationship then developed although H was living in the USA at the time and W in the UK. There was a dispute as to when they started cohabiting with W claiming it was November 2018 and H December 2019 (when the parties moved into a property in London together).

They became engaged in March 2019 and married in January 2020 with the marriage ending in June 2020.

In August 2020 H issued Form A. The matter came before Peel J for a final hearing. H offered W a lump sum of £400,000 on a clean break which was effectively nil taking into account the sums he had advanced W for her legal fees and W sought 50% of the sale of H's remaining units in AB company and proceeds of sale to date which was over £6m gross less any tax payable.

Dealing with the dispute as to the period of cohabitation Peel J found that there was a difference in perception between the parties. W had embraced the relationship as more profound than H and they had differing views as to the durability of the relationship. Whilst cohabitation did not require spending every night together under the same roof in the period 1 November 2018 to 31 October 2019 the parties had spent 164 nights together, 59 of which had been on holiday. Peel J rejected W's evidence that she had managed H's properties in the USA or been a full-time housewife between November 2018 and November 2019 when their time together at their respective properties had been 105 nights out of 365. He found it of some relevance that W spent little time in the USA while H lived at a flat which she found to be small and dark but that even after H moved flats, she only went 3 times. On the basis of W's evidence he formed the impression that long term W would only have accepted living permanently together in London.  Peel J further noted that the parties had kept their finances almost entirely separate and that H's financial support to W and paying for holidays, meals out and gifts were acts of a man showing generosity towards his girlfriend rather than indicative of cohabitation.

There was a dispute between the parties as to whether or not H's units in AB were matrimonial. In July 2018 H had made contact with a colleague who worked for AB, a start-up tech company, and in August 2018 H was offered a position there. As part of H's contract he was awarded the right to acquire units in AB subject to working for the company for a period of 1 year and the units vesting over 4 years. H subsequently became entitled to acquire 1.6 million units in February 2019. In September 2019 H reached an agreement with AB he would leave and a separation agreement was reached in October 2019 under which he was entitled to acquire 700,000 units upon AB listing without any vesting period. In August 2020 H joined another tech company. 

Having found that the parties did not cohabit until December 2019 Peel J was satisfied that H's units with AB were not matrimonial assets and W was not entitled to a share of them. He found W's involvement in H's decision to join AB was minimal and little more than general encouragement and H's decision to join AB was his alone. He further found whilst H had known people in the tech company he now worked for from early 2019 his involvement in a new business was after the marriage had ended and no sharing claim could be made in respect of it. Peel J further held that the parties' engagement in March 2019 did not give rise to a sharing claim. Whilst engagement might be an indicator of the strength of commitment of a relationship it was not a separate event by itself giving rise to a sharing entitlement.

A further issue arose as to both parties' conduct following separation. Between August 2020 and early Summer 2021 W was in direct communication with AB's founder (X) regarding H's units.

Over an 11-week period in early 2021 H pre-sold his prospective entitlement to receive 438,732 units. The transactions were not disclosed to W or to the court nor were the bank accounts into which he deposited the proceeds until July 2021. H intended to sell further units upon the listing completing. As events transpired, he was unable to do so and unable to fulfil all his pre-sale obligations.

Unbeknown to H upon X's encouragement W had instructed her lawyers in Spring 2021 to write to AB requesting that they did not release the units to H pending resolution of her financial claims. The letter was not copied to H's solicitors. Following receipt of the letter AB wrote to the parties advising they could not distribute the units to H until receipt of a joint authorisation from both parties or a valid court order. Further correspondence ensued with H pointing out to AB there was no freezing injunction, and the units should be released to him. On listing day W's solicitors wrote to AB on listing day stating that W would seek damages from AB in the event the units were released without her agreement. H started legal proceedings against AB for breach of contract and settlement terms were agreed in early summer 2021. It was only on 14 July 2021 that W made an application for a freezing injunction.

Dealing with H's conduct in failing to disclose the pre-sales to W or the court Peel J was satisfied that his actions were litigation misconduct which would ordinarily sound in costs. However, he was further satisfied that H had been acting prudently to pre-sell the units and whilst he had concealed the pre-sales he had not done so with the intention of defeating W's claims. All the monies had been paid into an account which had subsequently been disclosed and had only been drawn upon to pay W and H's fees. Whilst W claimed H could have sold the units at a higher price had they not been pre-sold he was satisfied that argument melted away given W's conduct in preventing pre-sales and that had H not needed to refund purchasers the price would have been broadly similar.

Dealing with W's conduct her behaviour in communicating with the X behind H's back was conduct the court was entitled to take into account and she was reckless in her interference with H's contractual rights. At the very least she should have applied to court rather than acting unilaterally. Had W not acted this way H would have been able to sell units upon listing and she caused him financial loss running into tens of millions of dollars. He was unpersuaded by W's argument that as she did not seek a freezing injunction there was nothing to prevent H receiving his units and she could not be responsible for their non-release given the letters she instructed her lawyers to right. Although H had pleaded the loss attributable to repaying purchasers of pre-sales Peel J was not satisfied that W could be blamed for this given H should not have undertaken the pre-sales without notifying her and he declined to find W's conduct should be measured in H's legal fees relating to the compromise agreement. He noted that if he was wrong in his analysis of W's sharing claim then any claim she had was outweighed by her misconduct.

Having found that there were no martial assets to which the sharing principle applied Peel J determined W's claims upon her reasonable needs finding they totalled £747,000 comprising of £60,000 to redeem her mortgage, £237,000 to clear her liabilities and £450,000 comprising of £150,000 rehabilitative maintenance for 3 years. Given the brevity of the marriage a Duxbury sum was not appropriate. H was ordered to pay W a lump sum of £750,000 in addition to the £400,000 he had already paid towards her costs. W would exit the marriage with total assets of £1.2m comprising of £750,000 pre-owned non-marital property and £450,000 capitalised maintenance. 

G v W [2022] EWHC 1101 (Fam)

M and F had a 2 year old child together. M earnt a negligible income as a social influencer and F was a successful sportsman. M pursued claims for financial provision for the child pursuant to Schedule 1 Children Act 1989.

In advance of a final hearing M and F agreed:

1) F would provide a housing fund of £1.35m together with a furnishing fund.

2) F would pay periodical payments at the rate of £8,000 pcm.

3) F would pay nursery and school fees.

4) F would provide a car for M to be replaced every 4 years.

The issues which remained between them were:

1) Whether F should clear all of M's liabilities of £316,133 which comprised unpaid legal costs to her former advisers, personal debt owed to financial institutions and monies loaned from family members.

2) Whether F should pay additional periodical payments to M to employ a nanny on the basis it would enable her to have some respite related to her health problems and to rebuild her career. F offered a sum of £50,000 at the final hearing.

3) Whether F should pay a lump sum of £9,000 to cover the costs of a prospective operation to remedy M's gynaecological problems.

4) Whether F should pay a lump sum of £13,000 relating to security and moving costs for M's new property.

5) When the agreed periodical payments order should start.

At first instance Recorder Chandler QC ordered:

1) M's legal costs should be paid by H subject to a potential clawback of £130,000.

2) No provision for a nanny or childcare fund.

3) No provision for M's medical treatment.

4) No additional security for M's property.

5) Backdating of the periodical payments order to the start of proceedings which would provide M with a sum of £60,000 to repay her commercial debts. No provision in respect of her other debts.

M sought permission to appeal and was granted permission in respect of the nanny and backdating/her other debts. She further sought permission to appeal the other aspects of the order at the appeal hearing.

Sir Jonathan Cohen found that the judge was wrong to dismiss M's need for a nanny. Whilst a claim for a nanny to rebuild a career did not fall within Schedule 1 the parties had expressly agreed the sum of £8,000 pcm excluded childcare costs. He noted M had not lived on her own before, she had various health difficulties and she would not have any assistance with childcare from F. He considered that proper provision would be for F to fund 15 hours of childcare a week until September 2025 when C would start school and thereafter until September 2031 6 hours per day for 2 days a week and no provision beyond September 2031 (when the child would be age 11). M had already incurred costs of £49,000 a significant part of which was paid to her mother. No provision would be made for reimbursing those costs and the allowance for child costs would be backdated to the time when a professional nanny was employed. Those costs would have produced a figure of £19,400. Given M had chosen to employ the nanny notwithstanding there was an interim court order refusing an allowance for those costs the sum was reduced to £10,000 as 50% of the costs.

No further provision was made in respect of M's other debts which had been caused by her over-expenditure. To the extent her family had lent her money they went in with their eyes open, it was highly unlikely they would make her bankrupt and the existence of the debt would not impact upon C's welfare.

In terms of costs clawback Sir Jonathan Cohen was satisfied that whilst unusual the provision was within the discretion of the judge and noted M's overspend on legal costs from LSPOs which had been made included c. £70,000 for an appeal against the interim maintenance order of which M recovered £3,000 and £60,000 overshoot from the LSPO.

M's appeal in respect of sums for the gynaecological operation and additional security were dismissed. There was no evidence the operation was necessary or urgent and it was likely to be carried out on the NHS. F had agreed to pay for gates for the new property and that M could spend funds within the £1.35m housing fund for CCTV and an intruder alarm.

XZ and YZ [2022] EWFC 49 (Fam)

In advance of the final hearing of H and W's financial remedy claims H applied for a Reporting Restriction Order ("RRO"). W was neutral as to H's application.

Mostyn J concluded it was not possible to complete the balancing exercise envisaged in Re S [2005] 1 AC 593. He noted H had advanced the following considerations:

1) Art 8 ECHR was engaged by reporting of information disclose in the proceedings obtained under compulsion where H had not instigated the proceedings.

2) A significant proportion of the final hearing would focus on the valuation of a business in which H was a 50% shareholder. Dissemination of that information could affect existing relationships and enable the business' competitors to obtain an advantage.

3) Reporting of the business information would affect the commercial interests of third parties including H's business partner.

4) Aspects of H's evidence regarding a prospective liability could be exploited and used for collateral purposes and prejudice his position in those proceedings. The nature of those allegations could expose H to criminal sanctions.

5) Most of the evidence filed by the parties was done so with a reasonable expectation that their anonymity would be preserved.

However, it was unknown to what extent the oral evidence or submissions would disclose matters that could adversely prejudice H and related third parties and to what extent if at all the press opposed the RRO. H's application would be considered substantively during final submissions once the evidence had been heard and the press had considered whether they wished to be heard on the application with an interim blanket RRO made until such time. Whilst an interim RRO would deny the press the opportunity to 'live' report the proceedings on balance that prejudice was minor compared to the prejudice H would otherwise suffer.

Mostyn J noted that the approach of an interim RRO would be useful in many cases to avoid wasting time at the beginning of a case and ensure the balancing exercise is carried out on the best evidence available.