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CASE INDEX
1. Equality or Not?
A v L (Departure from Equality: Needs) [2011] EWHC 3150 (Fam)
R v R (Financial Remedies: Needs and Practicalities) [2011] EWHC 3093 (Fam)
R v R (Financial Orders: Contributions) [2012] EWHC 2390 (Fam)
2. The Assessment of Assets
(1) Pre-Marital Property
B v B (Assessment of Assets: Pre-Marital Property) [2012] EWHC 314 (Fam)
GS v L (Financial Remedies: Pre-Acquired Assets: Needs) [2011] EWHC 1759 (Fam)
F v F (Financial Remedies: Pre-Marital Wealth) [2012] EWHC 438 (Fam)
(2) Personal Injury awards
Mansfield v Mansfield [2011] EWCA Civ 1056
(3) Lottery Wins
S v AG (Financial Orders: Lottery Prize) [2011] EWHC 2637 (Fam)
(4) Trusts
BJ v MJ (Financial Orders: Overseas Trust) [2011] EWHC 2708 (Fam)
G v G (Financial Remedies: Short Marriage: Trust Assets) [2012] EWHC 167 (Fam)
RK v RK (Financial Resources: Trust Assets) [2011] EWHC 3910 (Fam)
(5) Inherited Wealth
AR V AR (Treatment of Inherited Wealth) [2011] EWHC 2717 (Fam)
(6) Third Party Assets
Gowers v Gowers [2011] EWHC 3485 (Fam)
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Hope v Krejci and Others [2012] EWHC 1780 (Fam)
Petrodel Resources Limited and Others v Prest and Others [2012] EWCA Civ 1395*
3. Maintenance & Capitalisation of Periodical Payments
Yates v Yates [2012] EWCA Civ 532
S v M (Maintenance Pending Suit) [2012] EWHC ???? (Fam)
4. Practice Points
ND v KP [2011] EWHC 457 (Fam)
Young v Young [2012] EWHC 138 (Fam)
G v G (Financial Remedies: Strike Out) [2012] EWHC ???? (Fam)
X v X (Financial Remedies: Preparation and Presentation) [2012] EWHC 538 (Fam)
HMRC v Charman and Charman [2012] EWHC 1448 (Fam)
5. Nuptial Agreements
Z v Z (No. 2) (Financial Remedies: Marriage Contract) [2011] EWHC 2878 (Fam)
Kremen v Agrest (Financial Remedy: Non-Disclosure: Post-Nuptial Agreement) [2012] EWHC ???? (Fam)
B v S (Financial Remedy: Marital Property Regime) [2012] EWHC 265 (Fam)
6. Appeals & Beyond
NG v SG (Appeal: Non-Disclosure) [2011] EWHC 3270
L v L (Financial Orders: Remission After Appeal) [2011] EWHC 3040 (Fam)
NLW v ARC [2012] EWHC 55 (Fam)
7. Civil Partnerships
Lawrence v Gallagher [2012] EWCA Civ 394
8. Schedule 1, Children Act 1989
O v P (Jurisdiction under Children Act 1989 Schedule 1) [2011] EWHC 2425 (Fam)
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DE v AB (Financial Provision for Child) [2011] EWHC 3792 (Fam)
PK v BC (Financial Remedies: Schedule 1) [2012] EWHC 1382
PG v TW (No1) (Child: Financial Provision: Legal Funding) [2012] EWHC 1892 (Fam)
KS v ND (Schedule 1: Appeal: Costs) [2013] EWHC 464 (Fam)
9. Costs
Fisher Meredith v JH and PH (Financial Remedy: Appeal: Wasted Costs) [2012] EWHC 408 (Fam)
GS v L (No. 2) (Financial Remedies: Costs) [2011] EWHC 2116 (Fam)
Ezair v Ezair [2012] EWCA Civ 893
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1. EQUALITY OR NOT?
A v L (Departure from Equality: Needs) [2011] EWHC 3150 (Fam)
The Husband and Wife were married for 14 years and had two children, now aged 21
and 18. When the parties met, the Wife owned her own home and the net proceeds of
sale were used as a deposit for the matrimonial home. The Husband worked part time as
a self-employed letting agent and the Wife had worked, but had mostly been a housewife
and mother, throughout the marriage. Both parties suffered from health issues. When
the parties separated neither applied for a financial order for approximately 10 years and
by agreement the Husband continued to pay the mortgage and made contributions to the
care of the children. The Wife remained in the matrimonial home with the 18 year old
and the 21 year old returned home during university vacations. The Husband lived in
rental accommodation and had incurred debts of £35,000.
In the financial proceedings the judge found there was insufficient capital and income to
meet the needs of both parties but that the Husband had significantly higher earning
capacity than the Wife, who, aside from the Husband’s contributions, was largely
dependant on State benefits. In addition to a gross income of £26,000 pa the Husband
also had the benefit of properties he owned jointly with his family in his home country of
Egypt, of which some were let and others were available for use by family members. He
had also cashed in an endowment policy worth £9,000 with the Wife’s permission but
had not used it to reduce the mortgage, as he had claimed. As a result the district judge
ordered the sale of the matrimonial home to be postponed for 2 years to allow the Wife
time to adjust, and the proceeds to be divided 70% to the Wife and 30% to the Husband
with periodical payments of £500 pm to the Wife for 4 years. The Husband appealed.
On appeal, Moor J upheld only the division of capital 70:30 in the Wife’s favour. He set
aside the periodical payments order and ordered an immediate sale of the matrimonial
home:-
1) The Family Procedure Rules 2010 (FPR) 30.12(3) provided that an appeal court
would allow an appeal where the decision of the lower court was wrong or unjust
because of a serious procedural or other irregularity in the proceedings in the lower
court. In this case the judge had been wrong in his failure sufficiently to reason the
very significant departure from equality, his failure to explain how the capital order
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would fairly meet the needs of both parties and his failure adequately to explain the
interplay between the periodical payments and capital orders;
2) In financial remedy cases the law under the Matrimonial Causes Act 1973 (MCA) was
the same for everyone, whether rich or poor. There was an obligation to be fair but
where it was necessary for a departure from equality there had to be good reason for
so doing;
3) In justifying a departure from equality the needs of both parties must be considered.
Disparity in earning capacity could justify departure but that must be considered in
the context of the needs of both parties. In particular there has to be consideration
of how such a departure could be justified if there was also a substantive periodical
payments order;
4) The disparity in earning capacity, notwithstanding the Husband’s ill health combined
with consideration of the parties’ respective needs were good reasons to depart from
equality but only on a clean break basis. There should, therefore, be no periodical
payments to the Wife.
5) The 2-year delay on the sale of the home was arbitrary and unjustified; the younger
child could still be at university in 2 years’ time and the elder child might still be
dependent for a home on the mother.
R v R (Financial Remedies: Needs and Practicalities) [2011] EWHC 3093 (Fam)
Wife aged 44, Husband 57. 7 year marriage with one 6 year old child of the marriage.
Both had been married twice previously and the Wife had a 10 year old child from a
previous marriage. Prior to the marriage the Husband was already a successful and
established chartered surveyor; he owned several properties including one worth
£800,000, as well as a holiday home in Spain and he also had his own savings. By the
time the marriage ended the couple had assets of £4m including a number of properties
and the Husband was earning £186,000 per annum, but in previous years had been
awarded much higher pool payments.
Approximately half of the assets were unavailable for immediate distribution due to
investments in a property development enterprise which in all probability would be
highly profitable and would be realisable at an uncertain time in the future. During the
marriage the Wife stayed at home to care for the children and, therefore, had no up-to-
date qualifications. The matrimonial home had previously belonged to the Wife’s parents
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and she wished to remain living there following the divorce. The Husband agreed to that
insofar as it did not justify a greater proportion of capital or income.
Due to protracted pre-hearing processes the total costs were in the region of £600,000.
The Wife claimed her costs were unnecessarily inflated due to the Husband’s failure to
provide adequate disclosure and he submitted that the imbalance in costs should be
reflected by way of an add-back.
Held – awarding the Wife the equity in three of the matrimonial properties, a lump sum
of £450,000; ordering the Husband to pay periodical payments in respect of the Wife at
£55,000, plus 20% of any pool payment received by the Husband, capped at £20,000,
and in respect of the children: £15,000 per annum until the end of tertiary education;
awarding the Wife £650,000 of the deferred assets, subject to a 5% uplift per annum,
periodical payment of £55,000 to cease upon complete payment and the Wife’s claim for
periodical payments will then stand dismissed –
1) The instant case had been driven mostly by needs and practicalities. Where that
seemed likely from an early stage time and energy should not be spent on the
preliminary theoretical discussions but proceedings should rather be swiftly moved
on to look at the practicalities of the suggested outcomes while keeping the primary
considerations of s 25 of the MCA in mind.
2) Applying principles extracted from recent case-law to achieve fairness, the approach
ideally seemed to be to define the pre-existing assets and remove them from account
and then split the remaining value 50:50 as being the sum generated during the
marriage. Having done that, the assets were then split in species somehow to reflect
the notional division. There were other more ‘by and large’ approaches to this
essentially discretionary exercise, but this one did at least have the benefit of some
logic to it.
3) Bearing in mind that this was a fairly short marriage, the Wife’s entitlement to
continue to receive a very high income order long after separation was limited. Also
the Husband’s income would be likely to fall considerably and eventually disappear
after he was 60. Upon payment in full of the deferred funds the Wife would have
sufficient capital to provide for herself either on Duxbury principles or otherwise.
4) It was desirable to fix the sum to be paid to the Wife in respect of the deferred fund
now, in order to avoid any complex arguments about the percentage to be shared in
the future and in order to achieve a clean break as soon as possible.
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5) As a matter of principle the pursuit of an add-back principle or approach should be
discouraged, which inevitably led to a quasi-taxation or assessment of costs during
the hearing, but without the court having all the material that would be available to a
costs judge. It also flew in the face of the no order starting point and led to debates
about costs by the back door, which the new rules were designed to reduce or
prevent.
R v R (Financial Orders: Contributions) [2012] EWHC 2390 (Fam)
The wife, now aged 58, and the husband, now aged 61, had married in 1983 and
separated in 2008. There were two children of the marriage, now adults. The assets
after deduction of liabilities were approximately £7.675m. The husband owned a
successful company which he had formed subsequent to the marriage with financial
and other support from the wife. The wife had been an equal driving force of the
company at its inception, had become an equal shareholder with the husband upon
its incorporation and had remained involved with the business throughout the
marriage. On separation she gave up her shareholding for reasons that were in
dispute. The financial position of the wife by the date of trial was dire. She was a
solicitor but had been suspended from practice due to events which had led to the
collapse of her large solicitors’ firm (which had been the registered address of the
husband’s company and through which the wife had provided legal assistance to the
company). The wife had taken out an IVA, had significant debts and suffered from
very poor health both mentally and physically. The husband was secure financially
and had a 91.75% shareholding in the company.
The husband sought a departure from equal division of assets on the grounds that
the wife’s contributions to the marriage had not been equal, her debts should be
attributed solely to her and that the company had grown post-separation and was
illiquid.
Held – ordering inter alia the husband to transfer his interest in the former
matrimonial home and accompanying land to the wife, to pay her a lump sum of
£4m (£1.25m within 28 days to meet the wife’s debts and the remainder deferred)
and periodical payments of £7500 per month after the initial lump sum payment –
(1) The wife’s debts were not to be regarded as exclusively her burden; her initial
financial success had benefited the husband, the company and the family, and her
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ultimate downfall was to be treated as a family misfortune. The husband’s
conduct had increased the costs of the wife’s IVA. The wife’s indebtedness was
to be top-sliced before appropriate division of assets.
(2) The company was undoubtedly a matrimonial asset. Its development had taken
place over many years and the wife had played a role throughout. Contributions
to the welfare of the family were not confined to the pursuit of commercial
interests. The wife’s early contributions to the family had in fact outmatched
those of the husband. Post-separation the company did nothing other than
achieve its latent potential accrued during the course of the marriage. Whatever
post-separation credit was to be given to the husband was more than matched by
the wife’s past contributions. The husband’s shareholding was not an illiquid
asset; the company was marketable albeit that such a course was not presently
advised, and it was not dynastic. Furthermore, liquid sums could be raised by or
extracted from the company upon the husband’s discretion.
(3) This was a case for equality of division. It was not in the circumstances
appropriate to achieve this by transfer of shares to the wife; a minority
shareholding might lead to satellite litigation. A deferred lump sum order could
be secured by loan notes.
2. THE ASSESSMENT OF ASSETS
(1) Pre-Marital Property
B v B (Assessment of Assets: Pre-Marital Property) [2012] EWHC 314 (Fam)
Wife 40, Husband 61. 15 year marriage. Total assets £4,301,575. The Husband claimed
the vast majority of the assets were owned prior to the marriage and sought to exclude
the same from the pot, offering the Wife 20% of the total assets (£873,750).
The court re-emphasised the importance of the observation of Mostyn J in N v F
(Financial Orders: Pre-acquired Wealth) [2011] EWHC 586 (Fam) that, "if a party is going to
assert the existence of pre-marital assets then it is incumbent on him to prove the same
by clear documentary evidence"
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The Husband’s failure to produce evidence of the value of his assets at the start of the
relationship resulted in the Court finding only £820,000 should be excluded as non-
matrimonial. The Court refused to apply any ‘springboard’ effect to those pre-marital
assets, preferring the argument that any growth on those investments was matrimonial in
nature.
The Court awarded the Wife just under £1.75m, or 40% of the assets, on the basis that
her capital needs could be met with such an amount. This effectively excluded the
Husband’s pre-marital wealth and divided the remainder equally.
GS v L (Financial Remedies: Pre-Acquired Assets: Needs) [2011] EWHC 1759 (Fam)
The marriage had lasted 10 years. The wife was aged 41 and the husband 43; the
children were aged 10 and 9.The liquid assets were approximately £4m. Both spouses
had had successful careers in the banking industry; the wife had given up work to act
as homemaker and parent. The parties had in 2002 signed a post-marriage agreement
in Spain to the effect that all future assets would be held equally under a Spanish
matrimonial property regime. The wife petitioned for divorce and ancillary relief. The
matter was transferred from the Principal Registry to the Family Division of the High
Court only because of issues of Spanish law raised by the husband. At the date of the
final hearing in financial remedy proceedings, both parties and the children lived in
Spain. Shortly prior to the final hearing, the husband had issued an application to stay
the English proceedings, which was withdrawn before trial. The husband, albeit now
accepting the jurisdiction of the English court, accused the wife of forum-shopping,
although he had himself consulted lawyers in both England and Spain 3 years prior
to the wife’s petition. The husband initially invited the English court to approach the
case as if it were being heard in Spain and to make an order applying Spanish law; his
open position was formulated by his Spanish lawyers and wholly failed to provide for
the needs of the wife and children. The husband sought to ‘ring-fence’ £1.49m of
pre-acquired assets, relying on their derivation and on the terms of the Spanish
agreement. Spanish expert evidence was adduced at trial, but the Spanish experts did
not agree on how a Spanish court would deal with the 2002 agreement, given the
unusual circumstances of the case and the novel issues of law potentially arising. In
giving his evidence on the third day of the final hearing, the husband admitted that
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his open position was unfair, for the first time approached resolution of the case
from an English perspective, and significantly increased his offer in respect of
maintenance. The costs were more than £300,000. The wife sought an add-back,
asserting that the husband overspent since separation, both generally and in relation
to legal costs.
Held – dividing the assets equally, subject to an adjustment of capital division to
reflect capitalisation of the wife’s maintenance for 5 years at £31,000 pa –
(1) The case was to be determined wholly in accordance with the principles of
English law.
(2) This was first and foremost a case about the needs of the wife and children.
(3) Neither party had had a full appreciation of the implications of the Spanish
nuptial agreement. There had been no common understanding between
themselves of what they had believed and intended the contract to achieve in the
event of marriage breakdown; further, given the disagreement between the
Spanish experts, neither husband nor wife could have had a full appreciation of
what the agreement meant under Spanish law. The parties’ primary intention had
been to give the wife financial security in the event of the husband’s death. In the
circumstances of the case, the agreement provided little or no assistance to the
court in carrying out the s 25 exercise.
(4) There was no doubt that the husband had come into the marriage with
substantial assets. However, those assets (with the exception of the husband’s
pension, which could not be drawn down for many years) were required to satisfy
both the immediate and long-term needs of the wife and children.
(5) In all the circumstances, the right term for spousal maintenance was 5 years. This
would allow the wife time to rebuild her career and if necessary to retrain. An
adjustment of capital to reflect the wife’s entitlement was in this case more
appropriate than the making of a maintenance order.
(6) This was not an appropriate case for an add-back; the alleged overspend did not
satisfy the criteria set out in Vaughan v Vaughan [2007] EWCA Civ 1085, [2008]
1 FLR 1108. Issue-based costs could be considered subsequently.
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F v F (Financial Remedies: Pre-Marital Wealth) [2012] EWHC 438 (Fam)
Wife aged 50, Husband aged 81. 16 year marriage. This was the Husband’s third
marriage and he had four children, now adults, from his first marriage. The Husband and
Wife had three children together, aged 17, 16 and 12. The Wife relinquished her career
during the marriage and was the main homemaker.
At the time of the marriage the Husband was a wealthy man and the chairman of a
company he founded which was the family’s main source of income and enabled them to
enjoy a high standard of living. The Husband settled a family trust for the benefit of the
children, remoter issue and spouses.
The matrimonial home was purchased following the sale of two of the Husband’s
properties and was conveyed into the parties’ joint names. The property was later settled
by the Husband for the benefit of the Husband and Wife and their children.
A share agreement was also drawn up between the Husband and Wife and the family
trustees. By agreement the shares were reclassified and assigned between the Husband,
the Wife and the family trust.
Shortly before the parties separated, a London property was purchased in the Wife’s
name for £2m and a further £470,000 was spent on refurbishments. A share portfolio
worth approximately £2.477m was transferred into the Wife’s sole name. The Husband
had also gifted substantial sums to his four older children.
The FMH was worth £4.5m, the Husband’s company worth £17.5m. The Husband had
net assets of £5.981m and the Wife £4.842m.
The Court determined that the value of the Husband’s business at the time of the
marriage in 1993 was £5m and applied an uplift of 100% to represent growth. The
resulting £10m was excluded from the pot and the Wife retained 45% of the remaining
matrimonial assets on a clean break basis
(2) Personal Injury awards
Mansfield v Mansfield [2011] EWCA Civ 1056
The Husband and Wife were married, including a period of cohabitation, for 6 years and
had 4-year-old twins. The Husband received £0.5m compensation from a personal injury
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claim prior to meeting the Wife. He invested the money in a bungalow which
subsequently became the matrimonial home and an investment flat which he let out for
rent. The bungalow was adapted to meet his special needs, partially funded by £30,000
from the sale of the Wife’s pre-marital flat. Upon separation the Wife was awarded
£285,000 to provide a home for herself and the children. If the award could not
otherwise be met, the Husband was ordered to place the bungalow on the market for
sale. The Husband appealed, seeking a lower award for the Wife and the possibility of a
Mesher order.
The Court of Appeal found that the fact that family capital came by way of
compensation did not exclude it from the court’s consideration but each case had to be
looked at on its own facts and in many instances the application of the general sharing
rule had to be tempered to reflect the particular needs of the recipient and the very
nature of the acquisition of capital, ie compensation for personal injury.
Special consideration of the origin of family capital and the special purposes for which it
had been provided could be properly reflected by converting the order into a Mesher
order. There had been a fixed amount of family capital; the Wife’s substantial need rested
on her function as primary carer which would terminate on the children’s maturity or
completion of tertiary education; at that stage it was likely that the Husband’s need for
the return of capital would be augmented by the ordinary processes of ageing which
would be likely to accentuate his disabilities
The Husband’s appeal was allowed and the order for £285,000 converted into a Mesher
order with a 1/3 reversionary interest to the Husband to be redeemed upon the
children’s maturity or completion of tertiary education.
(3) Lottery Wins
S v AG (Financial Orders: Lottery Prize) [2011] EWHC 2637 (Fam)
Wife aged 51, Husband aged 55. Both parties from Columbia. A 27 year marriage. Two
children, now aged 25 and 23.
Parties moved to the UK in 1991 to better the family’s fortunes. The marriage had been
in difficulty for a number of years; the Husband was an alcoholic and was abusive
towards the Wife.
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The Wife and a friend entered into a written syndicate agreement for the National
Lottery and won £1m. The money was paid into accounts opened in both their names.
In 1999 the Wife used her share, £500,000, to purchase and renovate a home in her sole
name which the family moved into. Despite the unhappiness of the marriage the parties
did not separate until 2003. The Husband issued divorce proceedings in the UK and the
Wife countered by issuing divorce proceedings in Colombia, seemingly to avoid any
claim by the Husband. Three years later the Husband applied for financial relief in the
UK following the Colombian divorce, and was granted leave to apply under the
Matrimonial and Family Proceedings Act 1984; in response the Wife paid £250,000 to
her friend. A freezing order was subsequently made against the friend. During
proceedings in which neither party was professionally represented, the Husband and
Wife had both failed to provide wholly truthful evidence; the Wife played up the
difficulties in the marriage while the Husband played them down. The Husband and
Wife were both employed, had sufficient income to meet their expenditure needs and the
Wife had remarried. However, while the Wife had capital resources from the lottery win,
the Husband was 10 years away from retirement and in need of a pension fund. The
court’s defined task was consideration of the treatment to be accorded to a lottery prize
in financial remedy proceedings.
Mostyn J found that where one party unilaterally bought a lottery ticket from his own
income, without the knowledge of the other party, then any winnings were to be treated
as his alone, akin to an external donation and, therefore, as non-matrimonial property.
The case had been fortified because the ticket was bought as part of a syndicate and
more so because the marriage had become troubled and unhappy with the parties drifting
into separate lives, socially and economically.
However, in purchasing the family home with part of the lottery prize, the Wife had
converted that part of the non-matrimonial assets into matrimonial property and thus it
was capable of being subject to the sharing principle. Given the source of the property
and the relatively short period that the Husband lived there, he was not entitled to an
equal share. A share of 15–20% was fair in the circumstances and coupled with his need
for a pension provision, a lump sum of £85,000 was appropriate, on a clean break basis.
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(4) Trusts
RK v RK (Financial Resources: Trust Assets) [2011] EWHC 3910 (Fam)
The parties had been married for 8 years and shared the care of their three young
children. The matrimonial home worth £580,000 was owned by a family company of
which the principal activity was farming. There were eight discretionary family trusts
which owned some of the shares in the company; the trusts had liquid and illiquid
assets of £600,000–£700,000. The trusts had provided some income and advanced
modest capital sums to the family. The family had lived beyond its means and had
been afforded loans by the trusts to meet debts. The husband was employed by the
company on a net income £49,000 pa and benefits in kind of around £33,000 pa to
meet living expenses. The wife had £10,000 pa in child benefits and only a modest
future earning capacity. The wife currently had debts of £245,000, including unpaid
legal costs of £200,000 in respect of which she had entered into a Sears Tooth
agreement. The husband had large debts and had been lent £86,000 by the trust
towards legal fees.
The wife sought £400,000 for housing from the trusts under a life interest and
£25,000 lump sum for costs of purchase and for a car. She sought a further £245,000
to meet her debts, a half share of the husband’s company pension and maintenance
for herself and the children. The trustees offered £375,000 for the wife to purchase a
house and a sum for a car.
Held – awarding the wife a capital fund of £425,000 for housing and a car, £50,000
towards her debts, and £28,000 pa maintenance, and ordering a transcript of the
judgment to the trustees and the order to be deferred until receipt of their response –
(1) Resources held within a bona fide discretionary trust are a party’s resources under
s 25(a) of the Matrimonial Causes Act 1973 to the extent that, on the balance of
probabilities, they are likely to be made available to that party either now or
within the foreseeable future. This would encompass provision for that party’s
own needs as well as provision to enable that party to meet an award made
against him in favour of the other party. The form in which provision can be
made available will vary. It may be by way of income or capital distributions, by
way of loans or by way of occupation of a trust property. The question of
whether resources are available is one of fact.
(2) The wife’s reasonable housing needs were £400,000. Given that the house would
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remain in the trust, the trustees could reasonably be expected to provide
marginally more than they had offered without damaging the interests of the
trusts or of other beneficiaries. It was reasonable for the trustees to decline to
provide £245,000 to cover the wife’s debts, but it was likely that they would agree
to provide £50,000 as to contribution, either directly or through the husband.
The wife had an income need of £40,000. The husband could afford the
maintenance ordered, in the light of his salary and benefits in kind.
(5) Inherited Wealth
AR V AR (Treatment of Inherited Wealth) [2011] EWHC 2717 (Fam)
The Husband and Wife separated after a relationship that had lasted about 25 years,
including almost 20 years of marriage; they had one child, now 18. The family’s total
assets were in the region of £21–24 million, all but about £1.1 million of which was in
the Husband’s name. Almost all these assets had been gifted to or inherited by the
Husband; the source of the assets was a manufacturing business created by the
Husband’s father. During the marriage the income from these inherited resources had
been used by the family to supplement the Husband’s earned income.
In the financial order proceedings the Wife was seeking an award of £6 million, which
would enable her to leave the marriage with £7 million – approximately 30% of the total
assets.
The Husband was proposing that the Wife receive a lump sum of £1.3 million, which
would give her total resources of about £2.4 million.
The Husband, now 66, earned about £100,000 pa as a farmer; he had remained in the
matrimonial home, which was valued at about £1.1 million and in order to maintain his
current level of expenditure he needed £140,000 pa.
The Wife, now 54, had worked during the cohabitation period, but not since the
marriage; she estimated her future income needs at about £136,000 pa, plus £1.5 million
for housing.
The Husband’s key submission was that, given the source of the assets, there should be
no sharing; the Wife argued that she was entitled to an award additional to her needs
based on the sharing principle.
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The Wife was awarded £3.2 million, in addition to her own assets of £1.1 million, the
court concluding that:
a) When addressing future income needs the court’s task was not to arrive at a
mathematically exact calculation, but to determine the notional annual income which,
in the circumstances of the case, would be fair.
b) Given the level of expenditure incurred by the family during the latter years of the
marriage, the Husband’s own Form E budget, and the level of the Husband’s
expenditure since the separation, a reasonable annual income need for the Wife was
£115,000 pa;
c) The Duxbury lump sum to produce this income was £2.5 million, however, this did
not include discretionary expenditure. In a case such as the present, the Wife was
entitled to have sufficient resources to enable her to spend money on additional,
discretionary, items, which would vary from year to year and which were not
reflected in her annual budget.
d) The Wife also required about £1.1 million to obtain housing of an equivalent
standard to the matrimonial home;
e) Absent reliance on exceptional contribution and/or on conduct, evidence was not
required about the nature of each party’s contributions during the marriage beyond a
broad history of the marriage. If more detailed evidence was given, it too easily fell
into an attempt to persuade the court to evaluate the quality of a spouse’s
contributions and encouraged allegation and counter-allegation, which did not assist
the court in achieving justice, but did add unnecessarily to the cost, both financial
and emotional, of the proceedings;
f) The sharing principle could apply to non-matrimonial property if such an approach
was justified by the circumstances of the case. Such circumstances were not restricted
to the exceptions identified in K v L (Non-matrimonial Property) [2011] EWCA Civ
550; fairness required a broader approach.
g) However, in this case, nothing had happened to the bulk of the non-matrimonial
wealth to change it into matrimonial property, or to diminish the weight to be
attached to it as a factor, and the sharing principle did not justify any additional or
enhanced award above the Wife’s needs;
h) when determining a spouse’s substantive financial claims on the basis of need, the
court had a wider discretion to depart from the mathematics of the Duxbury tables
than it did when seeking to capitalise an existing periodical payments order under the
18
Matrimonial Causes Act 1973, s 31(7B); this was because at the substantive stage the
framework for the assessment had not already been set by an earlier order;
applying Pearce v Pearce [2003] 2 FLR 1144. When justified by the circumstances of
the case a flexible application of Duxbury would better achieve justice than a narrow
approach, with sufficient predictability to be acceptable. Duxbury was a tool, not a
rule, applying F v F (Duxbury Calculation: Rate of Return) [1996] 1 FLR 833, and the
court’s objective was fairness not certainty. The Wife should have a measure of
financial security above that which would be offered by a simple Duxbury calculation
in respect of her income.
(6) Third Party Assets
Gowers v Gowers [2011] EWHC 3485 (Fam)
This was a marriage of 12 years; there were five children. All the wealth had been
generated during the marriage. The husband had founded and was the main driving
force behind a company. He had formerly been the company chairman and was
currently an employee, although personally bankrupt. The majority (67%) of the
shares in the company were owned by another company which in turn was wholly
owned by a discretionary trust settled by the husband of which he and the children
were beneficiaries. There was no evidence of the trust having distributed monies.
The husband had borrowed £370,000 from the company. Shares in another company
owned by the company were sold for £10m, of which proceeds the company was
entitled to 67%. It was likely that the husband would receive a share, but the
quantum was unclear.
A High Court judge on a without notice application by the wife made a freezing
order, with provision that if £500,000 were paid into court by the company, the
freezing order would cease to be effective. The company paid the money into court
on the understanding that it would be tied up for only a few weeks.
The district judge hearing the financial proceedings found that the husband was in
effect the company in the sense that he appeared able to deal with company finances
in a haphazard way, including obtaining loans. The district judge ordered the
£500,000 to be paid directly to the wife by way of part payment of a lump sum
award. The husband and the company appealed.
Held – allowing the appeal and setting aside the order –
19
(1) The court had no jurisdiction to make an order that the sum of £500,000 held in
court be paid to the wife. The company was not a party to the marriage in terms
of s 23(1)(c) of the Matrimonial Causes Act 1973, and s 24A(1) applied only to
the proceeds of sale of property in which either or both parties to the marriage
had a beneficial interest. When the company had made the payment into court,
there was nothing to suggest that it was agreeing or intending to put itself under a
different or greater obligation than that created by the freezing order. The
payment was simply made in order to put the money in a secure place, free from
any argument about the scope of undertakings. The district judge had made no
finding that the husband owned the company. The case came nowhere near any
situation in which the court could pierce the corporate veil. The veil could not be
pierced unless there was both control and impropriety, ie misuse of the company
as a device or façade to conceal wrongdoing. The district judge had found that
the husband had treated the company as a cash cow, but she had treated the
monies obtained by the husband as loans. No finding of impropriety had been
made.
(2) The order made by the district judge could not be justified or upheld on the
authority of Thomas v Thomas [1995] 2 FLR 668. That and subsequent authorities
provided no support for making an order directly against a company with which
a spouse might be closely connected.
Edgerton v Edgerton & Another [2012] EWCA Civ 181
Husband and wife had an on-off relationship over 25 years. The three adult children
were all in further education. The husband had been involved in entrepreneurial
activities worldwide, including dealing in property and cars. In 2009 the wife filed for
divorce and ancillary relief and obtained an injunction under s 37 of the Matrimonial
Causes Act 1973 to protect her claim. The husband successfully applied to discharge
the injunction on the basis of his undertaking not to dispose or otherwise deal with
various properties and company interests. In his incomplete form E, the husband
referred to debt of £1.2m to an individual subsequently identified as Mr Shaik, a
Dubai businessmen. Mr Shaik failed to comply with a direction to file a statement
and attend the FDR. The matter was listed for final hearing. Mr Shaik brought a civil
loan action against the husband, claiming repayment of more than £1.5m plus
interest, and later applied to intervene in the ancillary relief proceedings. However,
20
instead of pursuing his intervention application, Mr Shaik discontinued the loan
action and stated a fresh action against the husband in the Chancery Division for
partnership dissolution and an account. He pleaded a partnership at will and claimed
that the partnership assets included the former matrimonial home. A circuit judge
transferred the ancillary relief proceedings to the Family Division High Court and the
partnership action from the Chancery Division to the Family Division, listed a case
management conference in both proceedings before a judge of the Family Division,
and ordered that the wife be a third party in the partnership action and file a defence.
The wife contended that the alleged partnership was a sham and that the assets in
question belonged to the spouses. At the case management hearing the judge
transferred the partnership action back to the Chancery Division but gave directions
for final pleadings. The wife was in receipt of public funding for representation only
for the ancillary relief proceedings and not for the separate partnership proceedings
in the Chancery Division. She failed to comply with directions, her defence was
struck out and her application for relief against sanctions was refused, effectively
debarring her from defending the partnership action. In November 2010, the
husband and Mr Shaik disposed of the partnership action by consent order which
entitled Mr Shaik to repayment of his capital from the partnership assets. When the
ancillary relief proceedings came before the judge, he held that the consent order in
the partnership proceedings did not bind the court in the ancillary relief proceedings
and did not stop the wife from pursuing in those proceedings any issues relating to
the ownership of the disputed assets. The judge declined to release the husband from
his earlier undertaking. The wife subsequently obtained an injunction freezing a sum
equivalent to the proceeds of sale of the former matrimonial home which had been
transferred to an offshore account in Mr Shaik’s name. The husband and Mr Shaik
appealed these interlocutory orders.
Held – allowing the husband’s appeal on the estoppel issue but dismissing his appeal
in respect of his undertaking, and dismissing Mr Shaik’s appeal, subject to
conditions –
(1) The judge’s decision that the wife could in effect ignore the Chancery order in the
ancillary relief proceedings could not stand, at least in the absence of a pleaded case
that it had been obtained by fraud or collusion, and – ideally – an application to set it
aside. The Chancery Division order was on its face a regular final decision of the
High Court which was binding on the parties to it and which conclusively
21
determined the ownership of the assets to which it referred. The parties to the order
were not just the husband and Mr Shaik, but also the wife because she had been a
party to the partnership action who had been debated from defending it. So long as
the Chancery order remained in force, it operated as an estoppel, notwithstanding
that it was a consent order and a default order as far as the wife was concerned. The
judge had been wrong to consider that the normal rules of issue estoppel did not
apply in ancillary relief proceedings where the court had an inquisitorial or quasi
inquisitorial role. The first task of the court in ancillary relief proceedings was
computation of assets: at that stage, determination of asset ownership when
embodied in a court order created estoppel between the parties.
(2) In the unusual circumstances of the case, including the wife’s loss of public funding
as a result of the judge’s case management decision, the wife should be given the
right to seek to have the Chancery order set aside. The husband’s undertaking should
be continued for the time being on the condition that the wife issue a claim as soon
as possible in the Chancery Division to set aside the order on the ground of collusion
and/or fraud, and that that action be transferred to the Family Division.
(3) It was appropriate in the circumstances to dismiss Mr Shaik’s appeal on the same
terms.
Hope v Krejci and Others [2012] EWHC 1780 (Fam)
In financial remedy proceedings the husband was ordered to pay the wife a lump
sum of £268,000 and a contribution to her costs of £100,000. The husband paid
nothing and unsuccessfully sought to appeal the orders. The wife made a
portmanteau application for enforcement under Family Procedure Rules 2010, r 33.3
and restored her adjourned application for variation of a nuptial settlement. She
sought to vary the Krejci Family Trust (an offshore trust) by pulling out of it a fund
of £373,082 for her absolutely, to include real properties and motor vehicles which
were located in England. The family trust owned a Jersey company which owned a
UK company. The only assets within this jurisdiction were the real and personal
properties which the wife sought to have vested in her. The wife also sought a non-
statutory civil restraint order under the court’s inherent powers to prevent the
husband embarking on satellite litigation without the permission of the court.
Held – varying the trust to satisfy the wife’s claim to a fund of £373,082, appointing
to her absolutely the real and personal property to be deducted from the total fund,
22
ordering the wife to sell those properties and to give credit, adjourning her
enforcement application with liberty to restore, and declining to make the civil
restraint order –
(1) The power to vary nuptial settlements under s 24(1)(c) of the Matrimonial Causes
Act 1973 was almost limitless. In most overseas trust situations there was likely
to be an offshore company interposed between the trust and the underlying asset.
The interposition of a company had never been argued, let alone found, to be an
impediment to effective variation of the settlement. In this multiple structure
context, a short-circuited or ‘telescoping’ approach was legitimate: Mubarak v
Mubarak [2001] 1 FLR 673. In a variation of trust settlement case, the court
could (metaphorically) travel right down the lift-shaft from the top floor to the
basement, without having to stop at any floor in between.
(2) The wife’ application for a civil restraint order was highly innovative, being made
not pursuant to Family Procedure Rules 2010, r 4.8 and Practice Direction 4B
but under the inherent powers. It would be quite wrong in the particular
circumstances of this case for the court to deploy its inherent powers to outflank
the statutory scheme.
Per curiam: In respect of the court’s power to pierce the corporate veil, when what is
sought was a telescoping order in the specific factual context almost invariably
encountered in financial remedy proceedings, Nicholas v Nicholas [1997] 1 FLR 649 is
binding authority, and nothing said in VTB Capital plc v Nutritek International Corp and
Others [2012] EWCA Civ 808 (in which Nicholas was not refereed to) should be taken
as altering that.
Petrodel Resources Limited and Others v Prest and Others [2012] EWCA Civ 1395*
Husband and wife married in 1993. They had four children, now teenagers. During
the marriage the family had lived an affluent lifestyle with properties in London,
Nigeria and the Caribbean. The husband was prominent and successful in
international oil development and trade. In financial proceedings following the
breakdown of the marriage, the wife claimed that the husband was worth tens if not
hundreds of millions of pounds and sought an overall award of £30.4m. The
23
husband claimed that his liabilities exceeded his assets by £48m and proposed a £2m
package for the wife. The husband repeatedly breached his duty to give full and frank
disclosure, was obstructive in the proceedings, breached multiple orders, and failed
to pay costs awarded against him. Moylan J awarded the wife £17.5m as being fair in
all the circumstances. He ordered the husband to ‘transfer or cause to be transferred’
to the wife four London properties and an interest in a fifth all held in the name of
Petrodel Resources Ltd and two London properties held in the name of V Petroleum
Ltd. The companies were incorporated in the Isle of Man. The judge found that the
husband was the only effective shareholder of these and other companies, that he
exercised sole control over the companies, that all the assets held within the
companies were effectively the husband’s property and that he was (conservatively)
worth some £37.5m. Moylan J rejected the assertion that there had been impropriety
on the husband’s part in setting up the company structure, which had been
established for conventional reasons including wealth management and tax
avoidance. The judge purported to make his order under s 24(1)(a) of the
Matrimonial Causes Act 1973, which provides that a party to the marriage may be
ordered to transfer to the other party ‘such property as may be so specified, being
such property as the first mentioned party is entitled, either in possession or
reversion’.
The husband’s appeal was struck out because of his failure to comply with conditions
of court orders. The companies appealed, arguing that the husband was not entitled
to the properties in question within the meaning of s 24(1)(a).
Held – (Thorpe LJ dissenting) – allowing the appeal –
(1) Salomon v A Salomon and Co Ltd [1897] AC 22 provided the highest authority
for the principle that a duly incorporated was a legal entity wholly separate from
its corporators, with rights and liabilities of its own. A company’s assets belong
beneficially to the company and its corporators have no interest in them. Such
assets cannot be looked to in order to satisfy the personal obligations of the
corporators. It made no difference to the fact of a company’s separate entity that
a single individual controlled all its shares. The judge’s reasoning that ‘power
equals property’ had been wrong. It was heretical to suggest that the total control
which a single individual was and always would be entitled to exercise over the
affairs of his one-man company resulted in the company’s assets becoming assets
24
to which that individual was entitled.
(2) In the present context, save in cases where it was legitimate to pierce the
corporate veil, the separate corporate identity of a company is a fact of legal life
that all courts are required to recognise and respect, whatever jurisdiction they
are exercising. It is not open to a court, simply because it regards it as just and
convenient, to disregard such separate identity and appropriate the assets of a
company in satisfaction either of the monetary claims of a corporators’ creditors
or of the claims of a corporator’s spouse. Salomon precludes any such approach
and the Salomon principle must apply equally in all jurisdictions. The obiter dicta
in Nicholas v Nicholas [1984] FLR 285 to different effect were inconsistent with
Salomon.
(3) Authorities including Woolfson v Strathclyde Regional Council (1978) SC (HL)
90, Ben Hashem v Al Shayif [2009] 2 FLR 115 and VTB Capital plc v Nutriek
International Corp [2012] 2 BCLC 437 showed that there may be factual
circumstances in which it will be legitimate for the court to pierce the corporate
veil and, to an appropriate extent, to disregard the fact of its separate identity
from that of its corporators. However, that could be done only in limited
circumstances, central to which is the demonstration of relevant impropriety in
the corporators’ use of the company. That jurisdiction is an exceptional one.
There was no rational ground to regard family courts as exempt from the need to
be satisfied as to the conditions affirmed in VTB Capital v Nutriek International
Corporation before piercing the corporate veil. Inconsistent dicta in Nicholas v
Nicholas should no longer be regarded as of any authority.
(4) In this case, once the judge had rejected the impropriety assertion, he had no
choice but to reject the claim that the companies’ London properties were or
could be regarded as properties to which the husband had any entitlement. He
had no jurisdiction under s 24(1)(a) to make the orders he did in relation to those
properties. Insofar as he was suggesting that s 24(1)(a) enabled the court to treat a
company’s property as belonging to its 100% owner, he was wrong. Section
24(1)(a) do no more than confer a jurisdiction to make a transfer order in respect
of property to which the respondent spouse is beneficially entitled. Whether such
spouse is or is not so entitled will be a question of fact, to be answered in the
same way as it would regardless of the making of an application under s 24(1)(a).
25
Per Thorpe LJ dissenting: The simple question was whether an individual is entitled to
property within the meaning of s 24(1)(a). Family Division judges with particular
expertise in this field have on many occasions stressed the need to get to the realty in
determining the assets to which a spouse is entitled. The judge had found a complete
absence of boundaries between the husband and his companies; the companies were
wholly owned and controlled by him and there were no third party interests. On the
exceptional facts of this case, the judge had been entitled to order the husband to
transfer or cause to be transferred to the wife the assets which he did.
3. MAINTENANCE & CAPITALISATION OF PERIODICAL PAYMENTS
Yates v Yates [2012] EWCA Civ 532
In financial proceedings a consent order had made provision for the Wife to receive a
lump sum of £978,000, partially in order for her to discharge the mortgage of £451,000
over the matrimonial home, and continuing periodical payments for a term of 3 years.
On the advice of a financial advisor the Wife, instead of paying the mortgage, purchased
a non-income bearing bond. The Wife subsequently applied to extend the 3-year term of
periodical payments and for capitalisation of £1.3m. The district judge granted the Wife’s
application and fixed upon a sum of £456,000. This was achieved by setting the Wife’s
monthly budget at £4,000, including mortgage payments of £500 per month and
deducting £10,000 to reflect her earning capacity. This was quantified on a straight line
12-year calculation.
The Husband challenged the extension of the term by 12 years and asserted that the
judge had included mortgage payments and substantial expenditure on the children in the
annual budget which was impermissible because the Wife had received a lump sum to
discharge the mortgage and there were continuing periodical payments orders in respect
of the children.
In his appeal before the circuit judge the straight line calculation was substituted with
a Duxbury calculation but otherwise the order remained intact. The Husband then
appealed to the Court of Appeal.
26
The Court of Appeal allowed the appeal, reducing the capital sum payable by the
Husband to the Wife by £58,000, holding that:-
1) Fleming v Fleming [2003] EWCA Civ 1841 cautioned against extensions of the term
of a periodical payments order unless exceptional circumstances were established. In
this case the decision rested on the facts as found by the district judge as to the
understanding of the parties at the date of negotiations and it was not for the
appellate court to interfere.
2) It was self-evident that if the recipient of a lump sum twice the size of the mortgage
on the final matrimonial home elected to hold back capital made available for the
mortgage discharge in order to invest in a bond that bore no income, she could not
look to the payer thereafter for indemnity or contribution to the continuing mortgage
interest payments. The courts below had erred in principle in the calculation of
capitalisation and the inescapable conclusion was that the Wife’s true needs were
£3,500 per month, excluding any mortgage obligation.
It was made clear in the judgment that the assessment of the needs of the Wife were for
the Wife and did not include these which were child-centred. The point had not, as it
were, passed under the judge’s radar: there were extensive arguments about it and the
appeal had to fail on that point.
S v M (Maintenance Pending Suit) [2012] EWHC ? (Fam)
The husband was Iranian and the wife Lebanese. They married in 2007 and lived
with the husband’s family in London. A year later, the wife moved out and occupied
a flat owned by the husband’s father, where she remained. The couple divorced in
2011. The husband was dependent upon his father for financial support, including
for the payment of £1.5m compensation to HMRC for VAT-fraud. The wife was
supported by her own family. In 2012, the father gave the wife notice to quit the flat
and she responded by applying for maintenance pending suit. Her legal team applied
ex parte for an urgent interim hearing which was heard 14 days later and given a 30
minute slot. At that hearing, an order worth around £50,000 pa was made. A couple
of months later, at a hearing in connection with enforcing the maintenance order the
wife obtained a freezing injunction against six bank accounts involving about £5,000.
The husband appealed against both orders.
Held – allowing the appeal, discharging both orders ab initio and awarding the
27
husband his costs in the freezing application and appeal –
(1) A step by step approach must be taken in cases of this kind where the ultimate
payer or source of funds is unlikely to be the respondent himself. It is of the
essence in these types of family money cases to establish as clearly as one can
what the true historical position is, in particular, the extent of the provision by
the family to the payer and the extent to which there has been an established
payment stream or other regular financial provision to the claimant in the
application. These are not straightforward matters that can be dealt with in a 30
minute hearing but require much more than usual attention by the court to try to
discern the underlying reality of the past arrangements: TL v ML (Ancillary Relief:
Claim Against Assets of Extended Family) [2005] EWHC 2860 (Fam), [2006] 1 FLR
1263 followed.
(2) The approach recommended in Thomas v Thomas [1995] 2 FLR 668 must be
preceded by good evidence to enable the court to conclude that if they make an
order which requires third parties to act there is some reason and confidence to
believe that the order will be obeyed.
(3) The evidence showed that the spouses had always been very heavily dependent
on their respective families. The husband had provided almost no support to the
wife other than paying back money he already owed her and making a few small
and infrequent cash payments. So far as the husband’s own support was
concerned, this was largely confined to paying his debts to avoid prison or
bankruptcy. There was no pattern of regular support although the father was not
going to see his son on the street. These facts did not lead to the assumption that
the husband would be expected to provide significant financial support to the
wife by way of capital or income. The wife had also had, and continued to enjoy,
the benefit of rent-free accommodation, which constituted sufficient interim
provision.
(4) The order for maintenance was plainly wrong. The judge had failed properly to
consider the husband’s resources and carry out any balancing exercise of his
resources and the parties’ individual needs.
(5) There was never any evidence properly before the court of an intention to
dissipate relevant to the making of a freezing order, and freezing so insignificant
an amount was of no practical purpose. The court needed to be satisfied that
enforcement was both appropriate and possible.
28
4. PRACTICE POINTS
ND v KP [2011] EWHC 457 (Fam)
Ancillary relief proceedings had proceeded to an FDR without resolution. One week
later on 21 December 2011 the wife applied ex parte to the urgent applications judge,
Roderick Wood J, for a freezing order under the inherent jurisdiction. The
application was supported by a professionally drawn affidavit. The judge granted the
application made in respect of the husband’s Swiss bank accounts and furthermore
froze certain properties. The orders were to run until 9 February 2011. On 29
December 2010 the wife obtained a mirror order from the Swiss court in respect of
bank accounts. The husband applied to discharge the orders and also sought an in
personam order that the wife obtain discharge of the Swiss order.
Held – discharging ab initio the orders made by Roderick Wood J and directing the
wife to obtain discharge of the Swiss order –
(1) Whether an application for a freezing order is made under the court’s inherent
jurisdiction or under s 37 of the Matrimonial Causes Act 1973, there must be
before the court a demonstration of objective facts that evidence the likelihood
of movement or dissipation of assets with the intention of defeating the
applicant’s claim.
(2) No order should be made in civil proceedings without notice to the other side
unless there is very good reason for departing from the general rule that notice
must be given, eg when notice might defeat the ends of justice. An injunction
granted without notice is an exceptional remedy: Moat Housing Group-South
Ltd v Harris [2005] EWCA Civ 287, [2005] 2 FLR 551. An application for ex
parte relief should only be made where there is positive evidence that to give
notice would lead to irretrievable prejudice to the applicant.
(3) If an applicant chooses to move the court ex parte, a high duty of candour
applies.
(4) On the material that had been put before the court, there was nothing that
brought this case anywhere near the threshold needed to obtain freezing relief on
an application ex parte, whether under the inherent or the statutory jurisdiction.
The wife’s real motive was to freeze the husband’s assets for no reason other
than that it would be desirable to freeze them until trial. She therefore had had
29
no reason to have moved the court ex parte. Furthermore, the wife had not
complied with her duty of candour.
(5) It followed that the Swiss mirror orders should not have been obtained. The
court could make an in personam order requiring the wife to obtain discharge of
the Swiss order if its obtainment and continued existence was both oppressive
and vexatious. The court was satisfied that this was the case.
Young v Young [2012] EWHC 138 (Fam)
In ongoing financial proceedings the Husband’s passport was seized by the court and
had been held by the tipstaff for almost 3 years. In the action for enforcement of orders
for disclosure and interim maintenance he was also sentenced to a period of
imprisonment for contempt. The Husband claimed he was bankrupt and in debt of tens
of millions of pounds which the Wife disputed, claiming his bankruptcy was fraudulent
and that he had secreted away hundreds of millions of pounds.
The Husband sought a return of his passport so that he could travel to help set up a
charity in Africa but the Wife asserted that the Husband needed to remain in the
jurisdiction in order to answer questions regarding his financial means before the final
hearing in 9 months’ time. He currently owed the Wife £715,000 in maintenance arrears.
Held – dismissing the Husband’s application –
1) The power to impound a passport pending the disposal of a financial remedy claim
existed in principle in aid of all the court’s procedures leading to the disposal of
proceedings. But it involved a restriction of the subject’s liberty and so should be
exercised with caution and the authorities emphasised that the restraint should be of
a short-term nature. The law favoured liberty.
2) It was necessary to establish a good cause of action, and a probable cause for
believing that the respondent was about to quit the jurisdiction unless restrained and
that the absence of the respondent from the jurisdiction would materially prejudice
the prosecution of the action. Provided the principles were carefully observed, a
passport impounding would represent a proportionate public policy-based restraint
on the freedom of movement founded on the personal conduct of the respondent.
3) The Husband remained in contempt of court in respect of his failure to disclose and
grossly in contempt of his maintenance obligations. It was for the Husband to
demonstrate he had complied with the disclosure requests. The Wife established a
30
good cause of action for a substantive award and it was plain that the Husband was
about to quit the jurisdiction. His asserted intention was highly implausible and it
seemed there was an ulterior reason for his wish to leave the country. His departure
would materially prejudice the Wife’s claim for financial remedies.
4) To withhold the passport for a further period of 9 months until the final hearing was
at the extremities of the court’s powers given the emphasis in the authorities of any
restraint being of a short-term nature. However, on the exceptional facts of the case
it was justified provided the Husband had liberty to apply again for a discharge.
G v G (Financial Remedies: Strike Out) [2012] EWHC ???? (Fam)
By consent order in financial remedy proceedings the husband was to pay the wife a
deferred lump sum of £4.7m, subsequently reduced to £3.7m when an asset was sold
and the proceeds paid to the wife. The husband applied to discharge, vary or
postpone the lump sum payment, on the ground that he was without means because
of a dramatic reduction in the value of his share of the assets caused by the global
economic downturn and bad investment decisions. This was vigorously disputed by
the wife. The husband failed to provide full financial disclosure and the wife served a
lengthy questionnaire to which the husband did not serve his replies. The wife
applied to stroke out the husband’s application to re-visit the lump sum. The court
made an ‘unless’ order under Family Procedure Rules r 4.4(1)(c) of the Family
Procedure Rules 2010, requiring the husband to file and serve his replies with all
supporting documentation by 16 November 2011, and in the event of his non-
compliance and failure to satisfy the court that: (a) he had taken all necessary and
reasonable steps to procure the document; and (b) his application could properly be
determined in the absence of the documents, his application would be struck out. On
15 November 2011 the husband served his replies; it was common ground that not
all the questions had been properly answered and that not all the required documents
had been supplied. The wife served a lengthy schedule of deficiencies. The husband
served further documents on the last working day before the hearing on the wife’s
strike-out application. The documents revealed substantial expenditure on credit
cards.
Held – declaring that the husband’s application to re-visit the deferred lump sum
payment was struck out –
31
(1) Rule 4.4(1)(c) of the FPR 2010 gives the court specific power to stroke out a
statement of case if there has been inter alia a failure to comply with a court
order. Such is a draconian step, since it extinguishes as a result of procedural
failings a claim which may or may not have substantive merit (subject to the right
to apply under r 4.5(1) for relief from the sanction).
(2) In respect of outstanding documents, the husband had not shown that he had
taken all necessary and reasonable steps to obtain them. The question whether
his application could properly be determined in the absence of the information
ordered was one of fact and degree. On balance, the application could not be
properly determined without the outstanding documents, nor in the absence of
proper answers to the outstanding questions.
X v X (Financial Remedies: Preparation and Presentation) [2012] EWHC 538 (Fam)
The final hearing of a financial remedies case had to be adjourned at the end of the
seventh day because crucially important information was outstanding. The case
settled after the adjournment. Settlement notwithstanding, Charles J delivered a
judgment in order to comment on the preparation and presentation of the case,
having received written submissions thereon.
Although no criticism was made of any individual concerned, this case represented
another example of endemic failure in this field of litigation to prepare and present a case
in such a way that prior to the commencement of the trial the issues have been properly
identified and the evidence necessary for their determination has been gathered and
prepared. Such concerns had already been raised in Jones v Jones [2009] EWHC 2654
(Fam), at paras [475]–[485]. It had been necessary to adjourn the instant case because the
presentation of a central issue had not been properly prepared, namely the ‘bricks and
mortar’ value of a hotel (in addition to its value as a business) and its alleged gift to the
husband. Furthermore, the substantive law, particularly on the sharing rationale, was the
subject of inconsistent judicial approaches even at appellate level. The application of that
rationale in non-paradigm cases has introduced into this field property and commercial
issues which the present system was not designed to deal with and with which
practitioners had historically been unfamiliar. Those property and commercial issues
have for example introduced a need to identify assets by applying company, trust and tax
law and to consider commercially and pragmatically viable options.
32
HMRC v Charman and Charman [2012] EWHC 1448 (Fam)
In 2006 the wife was awarded £48m by Coleridge J in ancillary relief proceedings:
Charman v Charman (No 2) [2006] EWHC 1879 (Fam), [2007] 1 FLR 593. The
husband’s appeal was dismissed: Charman v Charman (No 4) [2007] EWCA Civ 503,
[2007] 1 FLR 1246. One issue impacting upon Coleridge J’s determination of the
wife’s claim was the extent of the husband’s potential tax liability which depended on
the date of his change of residence. HMRC subsequently issued an assessment of
£11.5m unpaid tax for the years 2001–2008, which the husband disputed and
appealed. For the purposes of the tax appeal, HMRC sought sight and use of
transcripts of documents filed and other evidence in the ancillary relief proceedings
and requested the husband and wife to produce them. The wife did not object but
the husband did. HMRC issued an application for disclosure.
It was common ground that absent the consent of both husband and wife, the
documents and other evidence were not disclosable without court order and that the
court had a discretion to order their production. Both parties relied on public
interest. Coleridge J treated the application as being brought under Family Procedure
(Amendment) Rules 2012 r 29.12, which provides:
‘ Access to and inspection of documents retained in court
29.12(1) Except as provided by this rule or by any other rule or Practice
Direction, no document filed or lodged in the court office shall be open to
inspection by any person without the permission of the court, and no copy of
any such document shall be taken by, or issued to, any person without such
permission.’
Held – dismissing the application –
(1) As a general rule, documents and other evidence produced in ancillary relief
proceedings (now called financial remedy proceedings) are not disclosable to
third parties, save that exceptionally and rarely for very good reason they can be
disclosed with leave of the court. The fact that the evidence may be relevant is
not by itself a good reason to undermine the rule.
(2) It is in the public interest for the right amount of tax to be paid by taxpayers.
Further, there was no doubt that the documents sought in this case would be
relevant to proceedings before the First Tier Tax Chamber. However, that was
33
not the test.
(3) Considering and balancing the competing public interests, there was nothing rare
or exceptional about this case which took it outside the general rule. The
husband was entitled to say that he had complied fully with the rules of
disclosure and that the confidentiality/privilege attached to the documents and
other evidence produced thereby should not be breached. HMRC had advanced
no discernible compelling reason why the general rule should be relaxed in this
case. This was a routine tax assessment: there was no suggestion that the husband
was guilty of tax evasion or criminal conduct. The husband had to prove his case
in the tax appeal. The judgments at first instance and on appeal were already
available to HMRC.
5. NUPTIAL AGREEMENTS
Z v Z (No. 2) (Financial Remedies: Marriage Contract) [2011] EWHC 2878 (Fam)
The spouses were French nationals who, having lived together for 4 years, entered
into a marriage contract under the ‘separation de biens’ regime before two notaries
and in accordance with French law in 1994. They had three children. The husband’s
work took him to London, where the family moved in 2007. By that time the
marriage was in difficulties and the spouses separated in 2008, for a trial period of 3
months. At that time, the husband wrote to the wife undertaking that, if he took the
initiative to divorce, he would pay her half his after-tax net earnings and maintenance
of up to €200,000 per annum while his employment continued. The wife
subsequently issued a divorce petition and jurisdiction was established in a ruling by
Ryder J in Z v Z (Divorce: Jurisdiction) [2009] EWHC 2626 (Fam), [2010] 1 FLR
694. The parties agreed that there were total capital assets of around £15m, of which
£1,285,000 was in the wife’s name and the rest in the husband’s. Over half of the
wife’s assets consisted of her half share interest in the former matrimonial home in
Paris, and a 15% share in an investment property with the husband, worth around
£40,000. Most of the rest consisted of savings and inherited properties in France
which were subject to a usufruct (life tenancy). The husband had inheritances which
effectively balanced out those of the wife. Apart from his share in the marital home
and investment property, the rest of his capital derived from his remuneration from
34
his employer. His gross annual income over the past 5 years was between over €5m
and €2m but was projected to reduce to around €700,000 in the future as he became
less productive.
Held – ordering a lump sum payment to the wife of £6m –
(1) This would undoubtedly have been a case for equal division of the assets absent
the ‘separation de biens’ marital property agreement.
(2) It was relevant to the issue of fairness to know what the position would have
been in France but not to reduce the award simply because the wife would have
got less there.
(3) The burden on someone raising the argument that a marital agreement has
subsequently been varied, whether orally or in writing, is a heavy one. There has
to be the clearest possible evidence before a court could even contemplate using
this as a reason for not enforcing the agreement. Any other approach would
encourage false testimony and potentially drive a coach and horses through the
need for such agreements to be varied formally. No such evidence was present in
this case.
(4) As the husband did not bring divorce proceedings, the proviso in his letter of
undertaking to the wife had not been fulfilled and the terms of the letter did not
come into play as a matter of strict contract law. But the letter also failed to
satisfy the test set out in Edgar v Edgar (1981) 2 FLR 19 by Ormrod LJ. Neither
party had had any legal advice and both were under significant emotional
pressure. The letter was simply a reassurance by the husband that he would not
take advantage of the 3 month trial separation to commence divorce proceedings.
It was not a good reason for departing from the terms of the marital agreement,
which would be upheld.
(5) The agreement had not purported to exclude maintenance claims and it was
therefore appropriate to consider the wife’s reasonable needs.
(6) A housing budget of around £3.25m, plus costs of stamp duty, purchase and
furnishing, was appropriate. The parties had lived relatively frugally apart from
expenditure on holidays. An appropriate budget for the wife was £100,000 pa
with £25,000 per annum for each child until they had completed tertiary
education to first degree.
(7) The wife’s inherited properties should be excluded from calculating the capital
sum needed to support the income she required. Nor should the possibility that
35
she might trade down her properties in the coming years be taken into account,
which would be a matter for her. Taking all these issue together, a total capital
sum of £6m would be appropriate.
(8) While sharing was not appropriate, the cross-check should be performed if only
to make sure the award was not in excess of half the assets. On the basis of a
total of £15m, it represented 40%, which was a suitable departure from equality
to reflect the marital agreement. If the husband’s tax liabilities proved higher than
expected, he had the choice either to require an indemnity from the wife, in
return for a nominal maintenance order to meet any shortfall in the maintenance
she required, or he could assume all liability for tax and make a clean break.
Kremen v Agrest (Financial Remedy: Non-Disclosure: Post-Nuptial Agreement)
[2012] EWHC 45 (Fam)
This was a further stage in protracted and complex proceedings. The marriage had
lasted 16 years and there were three children, the two younger in private education.
The wife applied for financial orders under Part III of the Matrimonial and Family
Proceedings Act 1984. The parties had been divorced in Israel in 2003 but had not
separated until 2007. In 2010 the husband obtained a nullity decree from the Russian
court on the basis that he was already married to another woman. The wife claimed
that the husband was worth £100m, although there was only £1m within this
jurisdiction. The husband claimed that he had no assets whatsoever and was earning
only £150 per month in Russia. There had already been a number of judicial findings
that the husband was a serious and serial non-discloser, determined to thwart the
wife’s financial claims. He had failed to comply with orders for interim provision and
had fled the jurisdiction. A warrant for his committal had been stayed. The former
matrimonial home had been repossessed and the wife and children were living in
modest rented accommodation. The parties had entered into a post-nuptial
agreement in 2001 in Israel.
Held – awarding the wife a lump sum of £12.5m, of which £8.3m was certified as
constituting maintenance –
(1) The court’s task was to make a fair financial award, having regard to all the
circumstances of the case, including those set out in s 25 of the Matrimonial
Causes Act 1973 which was applied by s 18 of the 1984 Act. The distributive
36
principles of needs and sharing were to be applied, giving first consideration to
the welfare of minor children. Key considerations were: (a) whether the husband
had been guilty of material non-disclosure and if so what was the scale of his
resources; and (b) how to treat the post-nuptial agreement.
(2) The approach to non-disclosure was as summarised in NG v SG (Apeal: Non-
Disclosure) [2011] EWHC 3270, at para [16]. The court had to make its assessment
anew, but the litigation history and previous judicial findings were clearly
relevant. The husband had not made true disclosure; rather, he had set out from
the start to mislead both the wife and the court. Inevitably, when the court was
conducting the inferential exercise as to the scale of resources of a non-discloser,
the evidence was far from perfect. Having regard to hard evidence, the scope of
the husband’s business activities and lifestyle, his fortune lay in the bracket of
£20m–£30m.
(3)(i) The post-nuptial agreement had to be considered in the light of the definitive
guidance provided in Radmacher (Formerly Granatino) v Granatino [2010]
UKSC 42, [2010] 2 FLR 1900 but viewed through the lens of s 16(2)(d) of the
1984 Act, which required the court to have regard to any financial benefit
received by an agreement or operation of law of an overseas country. It would
only be in an unusual case that, absent independent legal advice and full
disclosure, a party could be taken to have freely entered into a marital agreement
with full appreciation of its implications. There would have to be clear evidence
of economic capacity before needs would be suppressed to a minimal level.
(ii) For reasons to do with asset protection, the husband had in 2001 prevailed on
the wife to enter into a post-nuptial agreement which was highly disadvantageous
to her, giving her only £1.5m out of a large fortune accumulated during the
marriage. There had been no disclosure by the husband and the wife had not
received independent legal advice. The wife’s consent had not been informed,
since she did not know what rights she was foregoing under English law. The
exercise had in fact been a charade. The husband had not complied with the
agreement and moreover had repudiated it.
(iii) The wife had not entered freely into the agreement with full appreciation of its
implications. It was the result of pressure from the husband. There was a material
absence of disclosure and legal advice. It was doubtful whether the parties had
ever intended the agreement to govern the financial consequences of marital
37
breakdown. It would be grossly unfair to hold the wife to an agreement which
deprived her of her fair share in a fortune to which she had in her own way
equally contributed. Accordingly, the agreement should be accorded no weight
whatsoever and should be discarded from the court’s assessment of what was a
fair award.
(4) Applying first the needs principle, the wife needed £8.3m, comprising capitalised
spousal and child maintenance plus school fees. Applying second the sharing
principle, the wife was entitled to an equal share of the fortune to which she had
equally contributed. This made the total award £12.5m.
B v S (Financial Remedy: Marital Property Regime) [2012] EWHC 265 (Fam)
The spouses married in Catalonia, Spain in 1995. The wife was Spanish and the
husband had dual nationality of two other countries. The marital property regime in
Catalonia is of separate property, but with a wide discretion for the court to provide
compensation for ‘unjust enrichment’ as between divorcing spouses. The spouses
bolstered this arrangement when they moved, for a time, to live in another country
with a community of property regime, and made a notarised separation of property
agreement in respect of an apartment they bought there, which the husband gifted to
the wife. The husband ran an international business incorporated in the British
Virgin Islands involving export of goods to a number of countries which were
politically unstable. Threats against the husband led the family to relocate to England
in 2004 where they rented a house in London and bought a property in the country
for £2.5m. The husband later acquired land adjoining the property for around
£475,000. The parties divorced in 2010. Excluding the husband’s interest in the
company and his wife’s non-matrimonial property, their capital assets were roughly
equal at around £1m each. The wife sought a lump sum of £3m (half the balance
sheet net asset value of the company), a joint lives periodical payments order of
£175,000 pa and periodical payments of £7,500 for the two children, who divided
their time equally between the parents, with the husband to pay the school fees. The
husband offered no lump sum payment based on the value of the company, claiming
the company assets were uncertain and illiquid; £100,000 pa periodical payments to
the wife and no child maintenance payments given his equal residence and payment
of over half of the child care costs.
Held –
38
(1) A civil law matrimonial property agreement is different in character and objective
to a ‘common law’ pre-nuptial agreement which seeks to abrogate or influence
the right to invoke a statutory discretion to redistribute fairly (or equitably) all the
resources of the spouses following their divorce.
(2) It is important to note that the UK is not participating in the development of a
EU Council Regulation on jurisdiction, applicable law and the recognition and
enforcement of decisions in matters of matrimonial property regimes. There is
therefore no prospect in a future case of the application of a foreign law in
determining rights under a civil law marital property agreement. The court must
guard against the introduction of applicable law rules by the back door. The only
possible relevance of foreign law is to evidence the intentions of the parties at the
time of the formation of the agreement ( Radmacher (Formerly Granatino) v
Granatino [2010] UKSC 42, [2010] 2 FLR 1900 followed).
(3) The requirement in Radmacher of a ‘full appreciation of’ the implications of the
agreement does not carry with it a requirement to have received specific advice as
to the operation of English law on the agreement in question. But in order for it
to have influence here, it must mean more than having a mere understanding that
the agreement would just govern in the country in which it was made. It must
surely mean that the parties intended the agreement to have effect wherever they
might have divorced and most particularly were they to be divorced in a
jurisdiction that operated a system of discretionary equitable distribution. Usually
the parties will need to have received legal advice to this effect and will usually
need to have made mutual disclosure: Kremen v Agrest (Financial Remedy: Non-
Disclosure: Post-Nuptial Agreement) [2012] EWHC 45 (Fam), [2012] 2 FLR
(forthcoming) applied.
(4) The evidence showed that the spouses did not intend, by their entry into the
separate property agreement, to alter their mutual understanding of the effect of
the law of Catalonia under which they were married, which was of separate
property subject to flexible discretionary judicial variation. The entire object of
the exercise in making the separate property agreement was to prevent the
property they acquired from falling into community property. There was no
discussion, still less no advice, as to whether the agreement was intended to affect
the position if the parties divorced in an equitable distribution jurisdiction.
Neither party had therefore entered into the agreement with ‘a full appreciation
39
of its implications’ and accordingly no weight would be placed on either the
default matrimonial regime under which they married or on the separate property
agreement in determining a fair award to the wife.
(5) Save in the exceptional kind of case exemplified by Miller v Miller; McFarlane v
McFarlane [2006] UKHL 24, [2006] 1 FLR 1186 a periodical payments claim
(whether determined originally or on variation) should be adjudged or settled,
generally speaking, by reference to the principle of need alone. To allow
consideration of the concept of sharing to intrude in the assessment of a
periodical payments award is based on a doubtful principle and is replete with
problems of quantification by any sure standard.
(6) A fair figure to take for the value of the company was £6m but the husband
would need time to raise the lump sum awarded by way of application of the
sharing principle to this asset and so he should pay £3m in instalments over 3
years. The instalments would not carry interest; the wife would be compensated
for being kept out of her money by the generous award of £10,000 pm reducing
to £7,500 pm once the husband had made the first capital instalment which
would enable the wife to buy a home for around £1.8m. The payments would
reduce to £4,300 pm on payment of the second instalment of capital, and would
be capitalised on payment of the final instalment, on a Duxbury basis to produce
a clean break lump sum of £344,000.
(7) In circumstances where the children exactly divided their time between the
parents, the father was paying more of the child care costs and would pay all of
the school fees, it would not be fair or reasonable for him to be required to pay a
separate allowance for the children. The mother was no more the primary carer
or residential parent than the father. She could reasonably pay the expenses of
the children from her own income.
6. APPEALS & BEYOND
NG v SG (Appeal: Non-Disclosure) [2011] EWHC 3270
In ancillary relief proceedings the Wife was awarded £70,000 per annum spousal
maintenance and £10,500 per annum child maintenance for each of the couple’s three
40
children. The Husband duly paid the maintenance for 10 years but then ceased making
payments, citing his inability to pay.
The Husband had sold his business shortly after the order had been made for £6.7m and
had not worked since. He initially emigrated to Monaco but when he returned he
became liable to pay Capital Gains Tax (CGT). Other expenditures had been a property
purchase, a substantial loan to a property development company of which he was now
the owner (although some of the loan had been repaid) a swimming pool and the
children’s school fees.
Overall, £1.7m had been unaccounted for but the Husband and his second Wife had
lived a lavish lifestyle during the 9-year period, as was evidenced by credit card
statements. The property company had been affected by the economic downturn and
had not been as prosperous as the Husband had envisaged.
The Husband applied for a downward variation of the order. The Wife applied for a
variation and leave to enforce the maintenance arrears which were more than 12 months
old. The time estimate of 3 days for the hearing had been inadequate and in an attempt
to minimise costs the judge ordered further disclosure, with closing submissions and the
Husband’s response to the Wife’s closing submissions to be sent via email or post. The
Husband disclosed a 101 page document which contained important material clarifying
his financial position. In the Wife’s final submissions the suggestion of capitalisation was
made. The district judge found that the Husband had failed to provide full and frank
disclosure and that he had the means to pay the Wife’s deficit in annual income of
£42,420.
He capitalised the order at £675,000, ordered that all arrears be paid and £30,000 of the
Wife’s costs. In total the Husband was ordered to pay £996,419.40. The Husband
appealed and claimed that if the order were to stand he would be forced into bankruptcy.
Mostyn J granted permission to appeal, set aside the district judge’s order and directed a
retrial on the basis that:-
1) Where the court was satisfied that the disclosure given by one party was
materially deficient, the court was duty bound to consider by the process of
drawing adverse inferences whether funds had been hidden. Such inferences had
to be properly drawn and reasonable. If the court concluded that funds had been
41
hidden then it should attempt a realistic and reasonable quantification of those
funds, even in the broadest terms. The district judge had at no point attempted
even a broad estimation of what he believed the Husband had hidden away in
residue. His findings had been stale, inconsequential and incapable of leading to a
finding that the Husband had salted away a vast sum;
2) The decision to capitalise the award, in circumstances where the Husband had
not received any notice of the intention and the proposal to capitalise the award
was only made during final submissions by the Wife’s counsel without any formal
application, had been demonstrably wrong in principle. It was elementary that
the proposed payer of a capitalisation award should actually receive, with ample
notice, an application for that relief.
3) Procedurally it could not be right or proper for further important disclosure to be
submitted after oral evidence had been closed and for such material to be
addressed merely by written submissions.
L v L (Financial Orders: Remission After Appeal) [2011] EWHC 3040 (Fam)
Upon divorce the Wife was awarded a lump sum of £600,000 and mechanisms were put
in place for her to obtain it via property sales if the Husband could not provide the cash.
Since the order had been made the Husband had not paid the money and had not
effected the sale of a property in Portugal in order to pay the Wife. He had doubled his
overdraft to £1.22m which, it now transpired, at the time of the original hearing was fully
secured and registered against the matrimonial home. The Husband applied without
notice for permission to appeal to the Court of Appeal on four grounds including his
assertion that HMRC were becoming more active in pursuing him for unpaid tax.
The Husband’s tax liabilities had been dealt with during the hearing and the judge
concluded that there had been a long running dispute with HMRC with no end in sight
and, therefore, they could not properly be considered immediate liabilities. The Husband
placed before the Court of Appeal lengthy letters and assessments from HMRC which
considered alone, without their context, appeared to indicate that the Husband’s
liabilities were now more pressing. The Court of Appeal focused entirely on the tax issue
and considered the arrival of the HMRC material to be a dramatic turn of events.
The court found that the judge’s estimation of overall fairness would have been markedly
different had he had available to him the up-to-date evidence. The order was not set
42
aside and the Court of Appeal did not identify particular shortcomings in the judgment
but the case was remitted to the judge for a reconsideration of fairness.
On remission to Coleridge J, he refused the Husband’s application to vary the original
order, placed a charge in favour of the Wife over the matrimonial home and ordered that
the Wife should take charge of the sale of the Portugal property if a sale was not effected
by 1 Jan 2012 on the basis that:-
1) The hearing could not be treated as an application to vary the lump sum on a
change of circumstances arising since the previous hearing. Absent a Barder v
Caluori [1988] AC 20, [1987] 2 FLR 480 type event or, very exceptionally, fresh
and compelling evidence in relation to a fact or matter before the court at the
original hearing, the parties did not have the ability to invite the first instance
judge to alter the original order. Even where the new evidence or event was
compelling, or sometimes overwhelming, the Court of Appeal would rarely
interfere.
2) Events since the hearing had not undermined the order but reinforced it. The
Husband had not been required to settle the debt to HMRC and was not keen to
do so of his own accord. The dispute was forecast to continue for at least
another 2 years and could take up to 10. As at the original hearing, this could not
be classified as an immediate liability. The documents placed before the Court of
Appeal had been incomplete and not properly placed in context. There was no
basis to warrant an adjustment of the order.
NLW v ARC [2012] EWHC 55 (Fam)
In December 2011 the Wife applied for permission to appeal a consent order made in
December 2009 in financial proceedings on the basis of undue influence and non-
disclosure. Pursuant to the Family Procedure Rules 2010, the Husband was directed not
to attend the permission application. His solicitors wrote to the court stating that the
Husband would not attend but that it was "assumed" that no irrevocable orders would
be made and permission to appeal would not be given in the Husband's absence.
Mostyn J considered the new procedure in Part 30 FPR 2010, which he considered was
intended to align the procedure for appeals from district judge to judge with the
procedure under which an appeal from judge to the Court of Appeal takes place. His
43
Lordship identified the only material difference as being that permission applications are
considered at an oral hearing, rather than on paper.
Mostyn J further considered the options open to a judge at the permission hearing,
which included granting permission, directing a further inter partes hearing and/or
dismissing certain grounds, attaching conditions and dealing with fresh evidence. On the
question of permission, the court must assess whether the appeal has a real prospect of
success, which Mostyn J considered to mean the appeal is more likely to succeed than
not.
In the instant case, Mostyn J granted permission and directed an inter partes hearing on
the question of fresh evidence and a three day hearing of the appeal.
7. CIVIL PARTNERSHIPS
Lawrence v Gallagher [2012] EWCA Civ 394
The parties cohabited from 1997 and entered into a civil partnership in December
2007. They separated in September 2008 and their partnership was dissolved in
January 2009. Mr Lawrence now aged 47 was an equity analyst, earning at least
£200,000 a year plus deferred share options; he had a pension worth £580,000. Mr
Gallagher now aged 54 was an actor who had been in and out of employment. At the
hearing date he had a leading theatrical role and was earning some £100,000 pa. Mr
Lawrence had purchased a London flat in 1995 for £285,000; at the date of the
hearing it was worth £2.4m, due to the rise in London property values. During the
cohabitation the parties kept their finances largely separate; from time to time Mr
Lawrence lent Mr Gallagher money. In 1998 the couple bought a country cottage
together, which was subsequently sold and the proceeds used to buy another cottage,
worth £900,000 at the date of trial. Under a declaration of trust, Mr Gallagher’s share
of the cottage was worth £230,000. In addition he had assets of some £40,000. The
total assets were approximately £4.1m.
It was common ground from the beginning of proceedings that exactly the same
principles should be applied to the financial consequences of dissolution of civil
partnership as to those of divorce. Mr Gallagher invoked the sharing approach to
asset division, with a 5% discount from equality because the London flat had been
44
pre-owned. Mr Lawrence rejected the sharing approach, arguing that the London flat
being pre-acquired was not a partnership asset and further that this was a case of a
dual career relationship. He proposed a needs-based award of £420,000 for re-
housing plus a pension share of £183,000.
Parker J held that the London flat was to be treated as a partnership asset because it
had been used as the parties’ home and that there was in law no category of dual
career couples to which the sharing principle did not apply. The judge awarded Mr
Gallagher 42% of the liquid assets and pensions, made up of the cottage, a £200,000
pension share and a lump sum of £577,000. In addition, Mr Gallagher was to receive
45% of the deferred share schemes when he came into payment, which could achieve
£90,000. Mr Lawrence appealed.
Held – allowing the appeal and varying the judge’s order by reducing the lump sum
to £350,000 and deleting the share options element –
(1) The judge had found that the flat had been used as the parties’ home and as such
it was partnership property, even though it had been pre-acquired: per Lord
Nicholls in Miller v Miller; McFarlane v McFarlane [2006] UKHL 24, [2006] 1
FLR 1186, at para [22].
(2) This was not a dual career arrangement. Rather, the couple had clearly
intermingled and combined their available capital and income to enjoy a high
standard of living of their own design.
(3) Pending examination by the Law Commission of the treatment of non-
matrimonial property, judges had consistently to apply the s 25 criteria to the
facts of the individual case, wherever possible avoiding the over-complication of
the resulting judgment.
(4) This was a comparatively simple case which had been made unnecessarily
complex as the advocates had sought to achieve their goals by praying in aid one
judicial creation or another. Mr Lawrence’s case below had been so far from
achievable as to be almost fanciful. Each party needed a home; it was self-evident
that Mr Lawrence should have the flat (which pre-dated the partnership and was
necessary for his work) and Mr Gallagher the cottage (which was his pride and
joy and could be used in the bed-and-breakfast market). The court had to
consider whether fair sharing required a balancing payment to reflect the
difference in values of the properties and also what funds were necessary for
45
each party to live comfortably in his own home. The judge’s pension share order
could not be criticised. However, there had been no rationality in the lump sum
figure, which had simply been the sum mathematically necessary to bring the
award up to £1.6m after the pension-share. The route that the judge chose to
achieve a fair outcome had followed too theoretical a map. It would have been
safer and more orthodox for the judge to have assessed the fair lump sum from
the foundation that Mr Gallagher would have the cottage and the pension share.
On such an approach, the lump sum would have been significantly lower.
Whether approached on the basis of needs or fair sharing, the appropriate lump
sum was £350,000. The share options were largely acquired post-separation; in
any event they were not capital assets but part of Mr Lawrence’s income stream
on which he was taxed at the top rate. They could not be treated as a present
capital asset.
8. SCHEDULE 1, CHILDREN ACT 1989
O v P (Jurisdiction under Children Act 1989 Schedule 1) [2011] EWHC 2425 (Fam)
The parents lived together in a substantial property in Kent and had a child born in
1997. The relationship broke down and the mother took the child to her parents in
Scotland. She then went to Australia, the father applying on the same day for parental
responsibility, residence and contact in the English court. The father obtained an
order in Australia requiring the child’s return to the UK and the mother was
permitted to take the child back to Scotland on surrender of her passport. In 1999,
the father obtained false passports and took the child to Australia while having
staying contact. The father and child were discovered and the mother was reunited
with the child. On 29 February 2000, she began Sch 1 proceedings in the Children
Act proceedings that the father had commenced. The Family Court of Australia ruled
that the child’s habitual residence was in Scotland at the time of the wrongful
removal and ordered her return once more to the UK. The father appealed and in
the meantime, was charged with incitement to murder the mother. He was convicted
in 2001 of this and then further offences and remains in custody in Australia. In
2004, his house was sold for over £1m and the proceeds held by the mother’s
solicitors pursuant to a freezing order. In 2008, the mother, who, together with the
46
child, was not living in England and Wales, sought to revive the Sch 1 application.
Held – holding that the court had jurisdiction to hear the application, and that the
question of whether it would be appropriate to do so was a matter to be determined
after hearing further evidence –
(1) Under the Civil Jurisdiction and Judgments Act 1982 which incorporated the
Brussels Convention on Jurisdiction and Enforcement in Civil and Commercial
Matters 1968 (later superseded by Brussels I (EC No 44/2001) which was in
identical terms), the courts of England and Wales had jurisdiction in 2000 if the
respondent was either domiciled in England and Wales (Art 2); or in another
contracting state or in Scotland, England or Northern Ireland and the child, as
the ‘maintenance creditor’ was domiciled or habitually resident in England and
Wales (Art 5.2); or the respondent had entered an appearance in the proceedings
(save for the purpose of challenging jurisdiction) (Art 18); or the respondent was
not domiciled in a contracting state and the courts in England and Wales
otherwise had jurisdiction under domestic law.
(2) Under domestic law, the court has power to make an order under Sch 1
whenever it has the jurisdiction to make welfare orders under the Children Act.
The primary basis of the welfare jurisdiction under the Children Act, both under
Brussels IIR and under domestic law, is the child’s habitual residence at the date
the application for a residence order under s 8 is made. There is also jurisdiction
under domestic law if the child was habitually resident in England and Wales at
the date of the Sch 1 application. However, mere service of the process is not
sufficient to establish jurisdiction: Re Dulles Settlement (No 2) [1951] Ch 842
explained.
(3) On the facts it was manifestly clear that the father was domiciled in England and
Wales when the Sch 1 application was filed.
(4) Although the father had, from prison in Australia, served notice of acting in
person in the Children Act proceedings and indicated his awareness of the Sch 1
application, no formal appearance had ever been entered and it was important,
for the purposes of prorogation of jurisdiction, that procedural steps were
followed clearly and properly. Accordingly, jurisdiction did not arise by virtue of
Art 18 of the 1968 Convention.
(5) If the father was not domiciled in England and Wales on the date of the Sch 1
application, the court had jurisdiction because the child was habitually resident
47
there on both the date of the s 8 application and that of the Sch 1 application.
Although the Australian court had concluded that the child was habitually
resident in Scotland, the court must make up its own mind on the evidence
before it, and had had the benefit of oral evidence from the mother.
DE v AB (Financial Provision for Child) [2011] EWHC 3792 (Fam)
The mother had become pregnant following a brief relationship and the father had no
ongoing relationship with either the mother or the child. The father withdrew support
and the mother made an application to the CSA and to the court for a lump sum order
under Schedule 1 Children Act 1989.
The mother owned a property worth £725,000 but it had a substantial mortgage upon it
of £600,000 and she had accrued additional debt of over £100,000. Although she had
previously been in a position to earn £60,000, the mother was currently on job seeker’s
allowance and, unable to pay the substantial mortgage payments of almost £30,000pa,
was slipping further and further into debt.
The father was held to have an earning capacity of £100,000pa and owned a property in
London with equity of £364,000.
The judge at first instance made it clear that the mother would have to sell her home, but
ordered the father to pay a lump sum of £335,000, which included a trust fund of
£250,000 for the benefit of the child together with a lump sum of £85,000 towards the
mother’s debts.
The father appealed the additional payment of £85,000 as it would leave him with only
minimal capital to rehouse himself.
On appeal, Baron J held that, given the amount of net equity in the property available to
the father the trust fund of £250,000 was absolutely justified and was unappealable.
However, the effect on the father of the additional sum of £85,000 had not been
assessed and was unfair given his very significant contribution towards housing for the
child.
Reducing the sum to £40,000 would leave the father with capital of £68,000 from the
sale of his property which would provide him with a modest deposit for a home for
himself.
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PK v BC (Financial Remedies: Schedule 1) [2012] EWHC 1382
The parties had previously been married to each other and had an 8 year old child. Upon
divorce the Wife received a lump sum of £950,000 on a clean break basis and the
Husband agreed to pay child maintenance of £15,000pa plus school fees. The Husband
subsequently lost his job and applied to the CSA and maintenance was assessed at
£8,468pa. The Husband continued to pay the school fees and extras. The Husband’s
income was below the CSA maximum level of £104,000 pa. The Wife made an
application under of the Children Act 1989 Sch 1 for a lump sum to recoup the
difference in maintenance (about £6,500pa) to better her standard of living in relation to
housing and also to purchase a new car.
She received short shrift from the High Court, Moor J holding that even though MB v
KB [2007] [2007] 2 FLR 586 provided authority for the court to consider the question of
whether or not to award a further lump sum pursuant to Schedule 1, even where there
had been a clean break in divorce proceedings, the circumstances of such cases had to be
exceptional.
The Wife’s application was found to be misconceived: in so far as her claim for a car
was concerned, the court had no jurisdiction to make an order to provide a car or, if it
had jurisdiction, it should decline it. Provision for a car regularly featured in Schedule 1
orders, but this was a case in which there was a consent order for financial provision in
divorce. Any provision for cars would either have been encompassed in the lump sum of
£950,000 that the mother accepted on a clean-break basis, or it would be incorporated in
the maintenance provision that was ordered in favour of the child.
In relation to the costs of the appeal, this was not a case where there was a principle of
no order as to costs. The court was entitled to consider a wide range of factors, including
the Wife’s financial position, which in terms of liquid resources was not strong. The
father was entitled to a proportion of his costs, although it would be wrong in the
mother’s circumstances to make her pay a large sum.
49
PG v TW (No.2) (Child: Financial Provision) [2012] EWHC (Fam)
In an earlier decision of Theis J in these proceedings, heard in May 2012 but only
directed to be reported in February 2013, made an A v A order directing the Respondent
father provide funds specifically for the purpose of enabling the Applicant mother to be
legally represented in the proceedings.
In the judgment following the substantive proceedings a point of interest arose.
Notwithstanding the limited claims which can be made under Schedule 1 a Respondent
cannot rely upon the Millionaire’s Defence in resisting claims for disclosure of his financial
position. Instead the inquisition into a Respondent’s financial position should be
approached upon a proportionate approach which avoids excessive detail but provides to
the court an accurate outline of relevant financial affairs. The justification for this is the
court’s requirement to avoid excessive disparity between the lifestyles a child will be
exposed to when their time is shared between the respective parents.
KS v ND (Schedule 1: Appeal: Costs) [2013] EWHC 464 (Fam)
The Facts:
(a) The proceedings concerned a single child and the parents had significantly
different incomes but not excessively disparate. F was a QC, now semi-retired
and working as a consultant to a solicitors’ firm with a salary of £170,000 (gross)
with a potential bonus dependent upon his fee income. M was a Parliamentary
Assistant earning £42,000 p.a.
(b) The original order had been made in 2005. M sought to increase it in 2012 and F
sought a decrease. After a 3 day trial the District Judge made orders closer to F’s
overall position than M’s but made no orders for costs.
(c) M appealed and permission was given on two points: school fees (F was now
required to pay only 75% of the school fees) and costs. M argued that the DJ
was wrong not to make an order for costs in her favour as (a) she was the
effective winner, (b) F was guilty of litigation conduct and (c) M needed her costs
to be met in whole or part as the economic impact was otherwise significantly
more adverse to her.
50
The Court (Mostyn J) held:
1. Schedule 1 Children Act 1989 proceedings have, since 6 April 2011, been
excepted - along with certain other proceedings (of which the most
prominent is maintenance pending suit) - from the "general rule of no
order as to costs principle" introduced for almost all family financial
proceedings with effect from 3 April 2006 by the insertion of rule 2.71
into the then Family Proceedings Rules 1991 (and which now is found in
FPR 2010 rule 28.3).
2. These, and the other specified proceedings, have thus been restored to
the position in which all family financial proceedings were before 3 April
2006. Then, the position was that the general rule in RSC Ord 62 rule
3(5) of costs following the event was formally disapplied, but by virtue of
the decision of the Court of Appeal in Gojkovic v Gojkovic (No. 2) [1991] 2
FLR 233, [1992] 1 All ER 267 an equivalent, but perhaps less unbending,
principle should prima facie apply, at least to ancillary relief proceedings
between husband and wife.
3. An open question since the promulgation of Part 28 of the FPR 2010 on
6 April 2011 has been whether this principle of costs prima facie
following the event has now been resurrected following the exception of
these, and the other specified proceedings, from the general rule of no
order as to costs now found in rule 28.3. It is certainly arguable that this
principle should now apply in such proceedings when they are between
husband and wife or between civil partners. However it is doubtful
whether it should apply in Schedule 1 proceedings where the mother in
effect makes her application in a representative capacity for the child. In
Schedule 1 proceedings the court should start with a "clean sheet", as
Wilson LJ (as he than was) put it in Baker v Rowe [2010] 1 FLR 761.
4. Even if the rule in Gojkovic once again does apply it is by no means clear
that this mother can be said to have "won" this case. In fact, objective
analysis would suggest that overall the father was rather more successful
than the mother. A consequence of FPR 2010 rule 28.2(1) and its
51
incorporation of CPR 44.3(4)(c) is that in relation to those proceedings
excepted from rule 28.3, protection in respect of costs can be achieved by
making a Calderbank offer. Yet no such offer was made in this case by
either party. Only open offers were made and the result was much closer
to the father's position than the mother's.
5. It is certainly correct that by virtue of CPR 44.3(4) (which is applied to
these proceedings by FPR 2010 rule 28.2(1)) the court has to consider the
conduct of the parties; whether a party has been successful in whole or in
part; and any admissible offers made by the parties (which include
Calderbank offers). These would be the first things to write on the clean
sheet.
9. COSTS
Fisher Meredith v JH and PH (Financial Remedy: Appeal: Wasted Costs) [2012]
EWHC 408 (Fam)
The husband had been allocated shares in a property company set up by his family, 3
years before his marriage in 2001. In 2008 or 2009, he transferred his shareholding to
his uncle’s wife. Shortly after, the spouses separated and the wife began divorce
proceedings. She contended that the husband was the beneficial owner of the shares
despite his claim and that of the aunt to be mere nominees, and sought a reversal of
the share transfer under s 37 of the Matrimonial Causes Act 1973. The aunt was
joined in the proceedings. Various hearings took place concerning the possible
joinder of the company in the divorce proceedings and for orders restraining the
aunt from dealing with the shares. The wife’s solicitors invited the uncle to seek to
intervene in the proceedings but he declined. Two days before the scheduled final
hearing, the aunt’s solicitors disclosed heavily redacted documents to her solicitors,
and her skeleton argument was not effectively served until the first day of the
hearing. It argued that it was negligent of the wife’s solicitors not to have joined the
beneficiaries to the proceedings and sought a wasted costs order. The trial judge
ordered an adjournment and made the order for wasted costs. The solicitors
52
appealed.
Held – allowing the appeal and awarding costs against the husband and aunt on the
standard basis –
(1) The husband and aunt had the burden of showing that the solicitors failed to act
with the competence reasonably expected of ordinary members of the solicitors’
profession and had to prove as much as they would in an action for negligence.
(2) The demonstration by the husband and aunt of a causal link between the
solicitors’ conduct and the wasted costs was essential.
(3) Having satisfied these conditions, they would still have to persuade the court to
exercise its discretion to make a wasted costs order.
(4) Where respondent lawyers are precluded by legal professional privilege from
advancing a full answer to a complaint made against them, the court should only
make an order for wasted costs exceptionally where: (a) it is satisfied that there is
nothing the lawyers could say, if unconstrained, to resist the order; and (b) it is in
all the circumstances fair to make the order.
(5) There is a clear distinction to be drawn between the state of affairs where a
claimant is saying that a property held in the name of a third party is the property
of the respondent, and the situation, as here, where the respondent says that
property to which he has legal title is beneficially owned by a third party. In the
former case, the discipline set out in TL v ML (Ancillary Relief: Claim Against Assets
of Extended Family) [2005] EWHC 2860 (Fam), [2006] 1 FLR 1263 should be
followed. In such a case, there is a clear obligation on the claimant to apply to
join the third party at an early stage so that the pool of assets over which the
dispositive powers of the court range be established and an effective FDR take
place. In the latter situation, as here, the duties are not so clear cut. If an asset is
(say) in the sole name of the respondent husband then the starting point is that it
belongs to him both legally and beneficially. The duty to bring the claim of the
non-legal owner third party before the court lies primarily and equally on the
respondent to the application and on the non-legal owner and not on the
claimant.
(6) The trial judge’s findings against the solicitors were wholly untenable. All the
parties had either expressly or tacitly assented to the preliminary issue being
decided without joinder of other members of the husband’s family. If this was
the wrong decision, the blame fell equally on the husband and aunt for not
53
inviting other family members to intervene and on those family members for not
seeking to protect their (alleged) property.
(7) The wife’s counsel’s decision to seek an adjournment rather than push on with
the claim was understandable given the extraordinary nature of the bundle of
heavily redacted papers received only 2 working days before the hearing which
would probably have required an adjournment anyway.
(8) Since it could not be known what instruction the wife had given her lawyers
regarding the decision to seek an adjournment as this was covered by legal
professional privilege, it was impossible to rely on that decision for the purposes
of deciding if the solicitors were negligent.
(9) There was nothing in his judgment to suggest that the trial judge had performed
the discretionary second stage of the decision-making process as he was required
to do, which amounted to another fatal defect.
GS v L (No. 2) (Financial Remedies: Costs) [2011] EWHC 2116 (Fam)
Following a contested hearing the wife made an application for costs. The wife’s
unassessed costs were £162,362. She sought to recover the sum of £97,797.
Held – ordering the husband to pay £55,000 towards the wife’s costs –
(1) The applicable costs regime was contained in Family Procedure Rules 2010
Part 28.2 and 28.3. The general rule in financial remedy proceedings is that costs
lie where they fall, but the court has a discretion to make an order for costs in
certain circumstances. Regards also had to be given to the overriding objective in
FPR Part 1.1, which required the court to deal with a case in a way proportionate
to the resources involved.
(2) This was an appropriate case for an issue-based costs order. The husband’s
approach throughout the entire proceedings had been erroneously founded on
his dogmatic belief that the case should be heard in Spain or, if not, that the
English court should apply Spanish law. As a consequence:
(a) The matter had been transferred to the Hugh Court only because of the issues of
Spanish law raised by the husband.
(b) The husband’s application to stay the English proceedings had been doomed and
had been rightly withdrawn before trial.
(c) The evidence of the Spanish experts did not assist the court on any single
54
relevant topic.
(d) Following the judgment in Radmacher (Formerly Granatino) v Granatino [2010]
UKSC 42, [2010] 2 FLR 1900 it was hard to see what justification there could
have been in pursuing an argument in relation to the Spanish agreement or in
calling Spanish evidence.
(e) The husband’s open offer had been based on Spanish law and had wholly failed
to provide for the needs of the wife and children from an English law
perspective.
(f) On the third day of the trial the husband had accepted that his open proposals
were not only inadequate but unfair and had for the first time approached the
case from an English law perspective.
(g) Had the case proceeded as it should, essentially as a ‘needs’ case to be determined
under English law, it could have been heard over 2 days in the Principal Registry.
(3) Pursuant to Civil Procedure Rules 1998 Part 44.3(7), it was fair to order the
husband to pay a proportion of the wife’s costs, namely one-third. It was
appropriate to translate that percentage into a stated sum.
Ezair v Ezair [2012] EWCA Civ 893
In ancillary relief proceedings, the parties agreed that their assets were worth £2.63m
as to business assets and £2.04m as to privately owned assets. They both agreed that
this was a 50/50 case and the area of dispute was as to how the assets were to be
redistributed. The husband contended that each should receive shares in both types
of assets, while the wife argued that she should receive all the privately owned
properties and a balancing lump sum. The judge found that the husband was
untrustworthy and that it would be risky to give him absolute control over the
business assets assigned to the wife. He concluded that a sum of £322,000 was
required but that, in addition, to reflect the husband’s misconduct in the proceedings,
this should be increased to £500,000. The husband appealed.
Held – allowing the appeal in part –
(1) The judge was fully entitled to have regard to the submissions by the wife’s
counsel that the husband’s conduct of the case, as a litigant in person, had
inflated her legal costs above what they would otherwise have been. It was
perfectly open to the judge to conclude, in the application of FPR 2010, r 28.3,
55
that this was not a case that fell comfortably within the general rule that there
should be no order for costs and that he could penalise the husband and
compensate the wife for that element of wasted costs. However, it was
unorthodox simply to inflate the lump sum as he had done. It produced the
result that the wasted costs order came out at £178,000 but that was simply a
mathematical consequence rather than a reasoned and considered quantification.
(2) The safe and orthodox approach was to make an assessment of the lump sum
having regard to all the s 25 criteria, and then to make a distinct costs order that
marked the litigation misconduct of one party and quantified it in a reasoned
manner.
(3) The lump sum order should be re-written in the sum of £322,000. An order
would be added that the husband pay to the wife the costs she had unnecessarily
incurred in consequence of his misconduct, to be quantified by the trial judge,
having regard to the fact that the husband was a litigant in person in complex
proceedings and that he had already been condemned in costs at earlier stages of
the litigation, and that the wife’s costs had yet to be assessed by a costs judge.
MALCOLM SHARPE
ATLANTIC CHAMBERS
20TH MARCH 2013