Financial Remedies Case Round-Up: February to April 2022

Published: 06/07/2022 07:14

From the Chair of the Editorial Board

The Mostyn’ award for this issue: WC v HC (Financial Remedies Agreements) (Rev 1) [2022] EWFC 22.

In our first issue, I indicated that the main aim of this Case Round-Up would be to feature a concise summary of judgments from all levels of the judiciary which have emerged since the previous issue, but that in each issue I would identify one outstanding judgment in this category considered to be a must read for all financial remedies practitioners. In deference to the then imminent retirement of Mostyn J from the position of national lead judge of the Financial Remedies Court (FRC), and in genuine admiration of his phenomenal contribution to the FRC and the wider field of financial remedies in general, I announced that henceforth we would call the judgment receiving this award ‘The Mostyn’.

The first award went to Mostyn J himself for his judgment in BT v CU [2021] EWFC 87, and his judgment in Xanthopoulos v Rakshina [2022] EWFC 30 (discussed at length in other parts of this issue) is a strong candidate for a second eponymous award, but it is fitting that for this second issue of the FRJ, the award of The Mostyn is to Mostyn J’s successor as national lead judge of the FRC, Peel J, for his judgment in WC v HC (Financial Remedies Agreements) (Rev 1) [2022] EWFC 22.

The judgment may be most remembered for Peel J’s strong deprecation of the conduct of the wife’s legal team in simply ignoring provisions in court orders, practice directions and statements of efficient conduct as to the length of statements and other documents. Reducing the font size of text to gain token compliance was:

‘completely unacceptable … Why is it fair for one party to follow the rules, but the other party to ignore them? Why is it fair for the complying party to be left with the feeling that the non-complying party has been able to adduce more evidence to his/her apparent advantage?’

He also strongly deprecated the tone of many of the lawyer-produced documents:

‘Parties, and their legal advisers, may be under the impression that to describe the other party in pejorative terms, and seek to paint an unfavourable picture, will assist their case. It is high time that parties and their lawyers disabuse themselves of this erroneous notion. Judges will deal with relevant evidence, and will not base decisions on alleged moral turpitude or what Coleridge J once famously described disapprovingly … as a “rummage through the attic” of the marriage.’

The judgment is also, however, remarkable for the breadth of issues of law it summarises with an admirable and unusual level of concision. An overview of the general law of financial remedies in 16 crisp and concise sub-paragraphs is given in [21]. The law on agreements is summarised in five crisp propositions in [22]. The same task is performed for the law on inter vivos subventions from third parties and potential inheritances in [23] and [24]. It might be said that, for many cases, the court will need to go no further than to master these paragraphs to identify the governing principles for any decision it needs to make.

Henry Pritchard provides a concise round-up of other recent financial remedies judgments.

Bailey v Bailey & Ors [2022] EWFC 5 (Peel J)

Peel J made committal orders against the respondent husband and two of his associates. H had fled the jurisdiction shortly after being served with a passport order, having failed to comply with a financial remedy order. H’s counsel argued that the rule in Hollington v Hewthorn [1943] KB 587, that previous findings of fact were not admissible in subsequent civil proceedings as they were opinion evidence, prevented the judgment below from being admitted into the committal proceedings. The judge rejected this, noting that the rule applied only to distinct sets of proceedings or those with different parties, and that he could take it into account. It would be an absurdity if the order being enforced was not admissible in a subsequent application for committal. The judge found that H and his associates had committed breaches and sentenced H to 12 months and the others for 4 months each, the latter suspended for 28 days.

Xanthopoulos v Rakshina [2022] EWFC 30 (Mostyn J)

Mostyn J strongly criticised the level of legal costs incurred by the parties, regarding them as ‘apocalyptic’. He urged the Lord Chancellor to ‘consider whether statutory measures could be introduced which limit the scale and rate of costs run up in these cases … steps must be taken’. The judgment also features a majestic analysis of the history of anonymisation of judgments in financial remedies cases, at the end of which ([140]) Mostyn J reaches the:

‘fundamental conclusion … that, irrespective of the terms of the standard rubric, section 12(1) of the 1960 Act, following long established principles, permits a financial remedy judgment (which is not mainly about child maintenance) to be fully reported without anonymity unless the court has made a reporting restriction order following a Re S balancing exercise. In my opinion this freedom can only be restricted by primary legislation and not by rules of court … The power of the Family Procedure Rule Committee to make rules under this subsection is strictly confined to making something presently punishable as contempt not so punishable. It cannot make rules the other way round to make punishable as contempt something that is not presently so punishable. Therefore, any change to make financial remedy judgments systematically anonymous has to be done by primary legislation.’

The consequences of this decision are fully discussed in the articles in this issue of the FRJ by Sir James Munby1 and Christopher Wagstaffe QC.2

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

Moor J allowed an appeal against the judgment of a Recorder in which W had been refused permission to pursue a Part III claim in England pursuant to section 15(1)(c) of the Matrimonial and Family Proceedings Act 1984. H had an interest in a property in England which had at one point been used as a family home. There had been extensive proceedings in New Zealand in which the courts there had declined to make orders in respect of this property, despite W having been ordered court to pay substantial ‘relationship debts’ to H, some of which being referable to this property. Moor J found that the judgment below had applied the law incorrectly in dismissing W’s application on that basis that she had failed demonstrate a ‘substantial connection’ to the jurisdiction. The judge found that this was not the correct test as set out in Agbaje v Agbaje [2010] UKSC 13, [33] and decided to re-exercise the discretion to grant permission. H was ordered to pay W’s costs of her application for permission on the basis that he ought to have conceded this.

Re A (Schedule 1: Overspend: Costs Clawback) [2022] EWFC 21 (Recorder Chandler QC)

Recorder Chandler QC, in the context of an application under Schedule 1 to the Children Act 1989, considered whether F should be liable to clear M’s debts and whether he should also have to make provision for a nanny. The judge found that M, an influencer, had made no attempt to moderate her spending and should not have her debts to her family discharged, but just her hard debts to banks. The judge subjected these payments to claw-back provisions for the sums he found W to have overspent and the sums she had spent on an unsuccessful appeal. The judge also did not allow costs of a nanny on the basis that M’s stated justification that it would allow her to build up her earning capacity was not truly for the benefit of the child.

DX v JX [2022] EWFC 19 (Moor J)

Moor J heard a variation application concerning a spousal periodical payments order which had been made by consent and calculated payments so that W shared a percentage of H’s very considerable income. H attempted unsuccessfully to vary this order in W’s domicile of Luxembourg, as then required by the Maintenance Regulation.3 W challenged jurisdiction on H’s latest application in England, contending that H still needed to apply in Luxembourg. Moor J did not accept this, the Maintenance Regulation having been replaced by the Hague Convention 2007,4 which required an application in the ‘contracting state’, England. The judge also rejected W’s submission that the issue was res judicata. Moor J held that he would not have acceded to H’s application to terminate the spousal periodical payments had H not taken a very large pay-cut by moving back from the United Arab Emirates to the United Kingdom. Moor J was not convinced that the element of sharing of income in the original order was impermissible, since the parties had consented to it. The judge found that the parties now had equivalent incomes and assets and so determined that the order would be discharged.

J & K v L (Schedule 1: Older Children) (Rev 1) [2021] EWFC B104 (HHJ Hess)

The judgment by HHJ Hess deals with the latest round of litigation under Schedule 1 to the Children Act 1989 between parents who had been engaged in court proceedings for most of the past 20 years, ‘a ghastly disaster for all the individuals involved’. The judgment engages in a detailed analysis of the complex ‘baton-passing’ provisions in Schedule 1 as to when an application for a financial remedy should be made by a child rather than by a parent. The narrow point decided is that Schedule 1, paragraph 1(5)(a) does not prevent the court varying an existing child periodical payments order after the child is 18. In any event, an application made before the child is 18 (as was the case here) can still be determined after the child is 18 and is not extinguished by the effluxion of time. The wider points in the judgment are the comments made about the decision of those drafting Schedule 1 for producing such a complex sequence of ‘baton-passing’ provisions and concludes ‘It is not easy to understand why those drafting Schedule 1 did not simply allow a co-existence of parental and child remedies for children older than 18 (or perhaps 16)’. The judgment makes decisions on what financial provision can reasonably be expected by a child likely to be moving into tertiary education in due course.

ND v LD [2022] EWFC B15 (DDJ Arshad)

DDJ Arshad’s judgment (in a financial remedies case which is unremarkable for its financial facts) is notable for the way in which the court dealt with a litigant-in-person husband who evinced some challenging behaviours and was on the borderline of not having capacity, but whose engagement in the hearing had to be properly secured to ensure procedural fairness. The judgment highlights the need in such cases for careful case management, including the use of a separate ground rules hearing, in relation to the appointment of a suitable McKenzie friend, the selection of special participation measures tailored to the particular aspects of the behaviour of the unrepresented husband and the consequences of such behaviour on the wife and other participants.

MG v GM [2022] EWFC 8 (Peel J)

Peel J heard an application for Maintenance Pending Suit and a Legal Services Payment Order. The judge considered the impact of the underlying jurisdiction dispute, concluding that it was not so strong that he should reflect any pessimism in the interim award as to the underlying jurisdiction for W’s application, since W had been found to be habitually resident in previous Hague Convention5 proceedings. The judge had to draw inferences as to H’s resources given his lack of disclosure and held that H would have to unlock liquidity in his funds to meet an award, particularly in circumstances where he had done so in the last year of the marriage in 2021 in order to invest in his business. The judge granted W’s applications, although he declined to make costs orders in respect of the Hague Convention proceedings, which he found to have been entirely distinct and historic. He stayed the payment of sums in respect of the Children Act 1989 proceedings pending the outcome of the mediation process.

Collardeau-Fuchs v Fuchs [2022] EWFC 6 (Mostyn J)

Mostyn J heard an application for Maintenance Pending Suit (MPS) in a case where H had net assets of some £1.2b and where he had made an application for Notice to Show Cause as to why W should not be held to the terms of a pre-nuptial agreement. The judge had given directions for limited financial disclosure, including for H to provide a schedule of the parties’ annual expenditure in the last 2 years of their marriage. W then worked backwards from that schedule to provide her claimed income needs. Mostyn J held that, although MPS could be calculated with a broad-brush approach, that he would in this case ‘paint this decision in a fine sable’, given the time and information he had available to him. H was ordered to pay £855,600 p.a. to W, on top of his undertaking to pay for all staff and overheads associated with W’s property.

P v Q (Financial Remedies) [2022] EWFC B9 (HHJ Hess)

The judgment of HHJ Hess identifies the guiding principle of equal division in sharing cases ([27]):

‘I want to say something at this stage about the sharing principle. As a starting point in the division of capital after a long marriage it is useful to observe that fairness and equality usually ride hand in hand and that (save when an asset can properly be regarded as non-matrimonial property) the court should be slow to go down the road of identifying and analysing and weighing different contributions made to the marriage.’

The judgment also suggests some principles to be followed on how a court should distinguish between hard and soft debts for the purposes of computation ([19]):

‘[T]he inclusion or exclusion of a technically enforceable debt in an asset schedule can depend on its softness/hardness … Once a judge has decided that a contractually binding obligation by a party to the marriage towards a third party exists, the court may properly wish to go on to consider whether the obligation is in the category of a hard obligation or loan, in which case it should appear on the judges’ computation table, or it is in the category of a soft obligation or loan, in which case the judge may decide as an exercise of discretion to leave it out of the computation table.’

The judgment identifies certain features which may place a debt on one side of the line and certain other features which may place it on the other side of the line and concludes ([19]):

‘It may be that there are some factors in a particular case which fall on one side of the line and other factors which fall on the other side of the line, and it is for the judge to determine, looking at all of these factors, and maybe other matters, what the appropriate determinations to make in a particular case in the promotion of a fair outcome.’

The court should take care not to allow one party to ‘repay’ a debt which would not otherwise have been repaid to manipulate the computation exercise.

Baker v Harthill Baker [2022] EWFC 15 (Mostyn J)

Mostyn J heard an application for Maintenance Pending Suit in a case where he noted that the respondent husband’s disclosure had been so contradictory that the judge required that his replies to questionnaire be exhibited to an affidavit and sworn to be true in order that H should know that any untruths would make him vulnerable to a sanction for perjury, rather than just a false statement of truth. Mostyn J rejected a submission by W that reliance should be placed on a pre-nuptial agreement (PNA) in circumstances where he considered that this might amount to an inappropriate pre-recognition of the PNA on an interim basis. Although the award fell far short of what W had sought, H had not provided a Calderbank offer and so H was liable to pay W’s costs, albeit after the judge had pruned them back.

Traharne v Limb [2022] EWFC 27 (Sir Jonathan Cohen)

Sir Jonathan Cohen heard a case in which W argued that she had been subject to coercive and controlling behaviour and that, as a consequence, she had not entered freely into a pre-nuptial agreement (PNA). H argued that this PNA should be a ‘magnetic factor’ in the outcome of the proceedings. A single joint expert (SJE) psychologist was appointed at the first directions appointment to assess whether W had been subjected to such behaviour and whether this might have affected W’s ability to freely enter into the PNA. The judge found that coercive and controlling behaviour could be an Edgar6 vitiating factor within the pre-existing categories of undue pressure or exploitation of a dominant position, or as conduct. However, with the benefit of the SJE evidence, he did not find that H’s behaviour was of the sort complained of. The judge concluded that W’s sharing claim was also entirely misconceived and made a needs award. As to costs, the judge criticised W’s insistence on litigating H’s conduct and her misconceived sharing claim. H was ordered to pay some of W’s costs, but these were scaled back to leave W with her own debts, including a costs award against her in H’s favour.

Simon v Simon & Level (Joinder) (Rev 1) [2022] EWFC 29 (Nicholas Cusworth QC)

Nicholas Cusworth QC heard an application to discharge the joinder of a litigation lender who had been joined to the proceedings without notice when the lender had come to suspect that the parties had reached an agreement with the intention of preventing it from recouping its loan (made to W). This agreement involved W being granted a life tenancy of a property owned by a trust of which H was a beneficiary. This appeared to have been calibrated so as to leave nothing for the lender to recover. The parties had sought to have this agreement turned into a sealed order in the teeth of the lender’s protests. The lender sought joinder to try to prevent any such sealing. It appeared that Mr Cusworth, who had approved the order, was not at that time informed of the lender’s application for joinder. H argued, in W’s absence, that the parties had resolved their proceedings and should not be forced to continue to litigate simply for the lender’s benefit. H eventually conceded the set aside application, and the judge concluded that joinder was appropriate so that the proceedings could be fairly and expeditiously resolved.

Goddard-Watts v Goddard-Watts [2022] EWHC 711 (Fam) (Sir Jonathan Cohen)

Sir Jonathan Cohen heard the second re-hearing of W’s application for financial remedies following two successful set aside applications and a previous rehearing in 2016. H had been found to have not disclosed significant trust interests in the original proceedings, and then not to have disclosed circumstances (including an offer to purchase H’s shares in his business) in 2016 which suggested those shares had been worth far more than the judge in 2016 had been led to believe. This had been found in 2018 to have been a deliberate failure to disclose on H’s part. W then argued that there should be a complete rehearing (rather than a bespoke Kingdon v Kingdon [2010] EWCA Civ 1251, [2011] 1 FLR 1409 approach) and that she had an outstanding sharing claim to H’s business. The judge found that W did not have an extant sharing claim against the business, that having been settled in the original proceedings where the value of the business as asserted by H turned out to have been largely accurate as at that time. Instead, the judge adopted the Kindgon approach and made a needs-based award, providing W with a sum of £1.1m to constitute a Duxbury fund. This was based on W’s continuing contributions to raising the children. Notably, W was not criticised for having alienated significant funds by buying her children flats in London, although as a consequence she was not permitted to ringfence her award from amortisation.

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