Cobb J. Interlocutory applications prior to substantive Barder hearing. Applications for stay and Hadkinson order dismissed. Application for security of costs granted owing to residence outside the jurisdiction.

Background

H is a foreign national of country X, with permanent leave to remain in the UK. W has dual nationality, both British and of country X.

Throughout the marriage, the parties lived between England and city Y, although W was primarily based in England, whilst H was in city Y. Since separation, H has travelled widely for business. In 2023, H spent around 90 days in England, and a similar amount in country Z, 50 days in city Y, and the rest of the time visiting elsewhere. When in England and city Y, H rents an apartment, despite maintaining a residence in city Y, and when in country Z H stays in hotels.

A financial remedy order was agreed by consent before Moor J at an FDR in 2021, at which time the assets of the marriage amounted to US$76m. Amongst other things, the order provided for:

(i) H to pay W several non-variable lump sums amounting to US$16m (H had already paid US$5m by settlement). The balance was payable in lump sums as to:

1. US$1m by 1 November 2021;
2. US$4m by 1 April 2022;
3. US$2m by 30 December 2022;
4. US$4m by 30 June 2025; and
5. 50% of H’s interest in ‘asset B’ managed by H up to US$65m.

(ii) H would retain a property in city Y, save for in default of payment of any of the lump sums it would be sold, and the net sale proceeds paid to W.

(iii) H to pay periodical payments of US$650K per annum, payable monthly in advance by standing order, the same reducing by an agreed formula, and discharged upon payment of the lump sums provided above.

Since the order, H had maintained payment of the periodical payments and paid W US$10m in respect of asset B but had failed to pay the lump sums due on 1 April 2022, and 30 December 2022 (US$6m).

In May 2023, W secured a freezing order in a foreign jurisdiction against a bank account in H’s name, freezing US$6m, with reference to the outstanding lump sum payments. At the time of the hearing, the parties were negotiating the transfer of the funds to an escrow account in W’s name, such that in the event of a dispute, the account shall be operated in accordance with an order made in the English court. The terms of the agreement had not yet been concluded, but once agreed, the parties would need to seek the approval of the foreign court to transfer the monies in accordance with the agreement.

Applications

In June 2023, H applied to vary, discharge and/or set aside several of the financial remedy orders pursuant to the Barder jurisdiction which is due for determination in July 2024. H also sought several interim orders, including:

(i) a stay of the order requiring lump sums to be paid;

(ii) a stay of the order requiring property in city Y to be sold in the event of default on the lump sum payments; and

(iii) an order that the above orders shall not be enforced.

W subsequently applied for interlocutory orders seeking:

(i) a Hadkinson order, barring H from taking any further steps in the proceedings until he has paid at least the interest on the outstanding lump sums (c.£760K); and

(ii) an order for security for costs of c.£640K, to include costs to date and up to the conclusion of the final hearing, owing to difficulties in enforcing the same owing to H’s assets being offshore.

In addition, both parties invited the court to make case management orders including:

(i) whether H’s application to vary W’s periodical payments should be considered as part of the final hearing in July 2024;

(ii) what evidence should be made available to the court from the FDR appointment to provide a reference point of information against to consider whether the Barder event was reasonably foreseeable; and

(iii) whether W should file evidence of her financial circumstances.

Held

(i) H’s application for a stay (dismissed)

W’s position, supported by a letter from a lawyer in the foreign jurisdiction, was in the event the order was stayed, the freezing injunction would lose its effect because it can only act against an enforceable order which would not continue if the orders were stayed.

Accordingly, Cobb J accepted an undertaking by W not to enforce the payment of the lump sums prior to conclusion of the current proceedings, dismissing H’s application, and allowing the agreement to transfer the funds into escrow to continue.

(ii) W’s application for a Hadkinson order (dismissed)

As confirmed in Tattersall v Tattersall [2018] EWCA 1978, it is perfectly proper for a party to continue enforcement action notwithstanding a live application for a variation of orders. Not allowing an enforcement application to continue in such circumstances may lead to manipulation, or subversion of the process.

A Hadkinson order is a draconian order of last resort preventing a party access to the court and should only be made if the principles set out by Peter Jackson LJ in DeGafforj v DeGafforj [2018] EWCA Civ 2070 at [11] are satisfied, namely:

(i) the respondent is in contempt;

(ii) the contempt is deliberate and continuing;

(iii) as a result, there is an impediment to the course of justice;

(iv) there is no other realistic and effective remedy;

(v) the order is proportionate to the problem and goes no further than necessary to remedy it.

H argued his contempt was not deliberate in that it was not wilful, and he had sought to negotiate with W in 2022 and 2023 to defer the payments when his financial position had downturned, before making his application to court to vary. It was not a last resort case.

W argued H was in contempt and there was no other option available to her. W did not seek payment now, but preservation of the interest, pending the outcome of H’s substantive Barder application.

Dismissing W’s application, the court found whilst H was in contempt, which was continuing, it was not satisfied it created an impediment to justice, nor was it proportionate to the problem when considering the parties’ respective financial positions. H had attempted to negotiate with W, maintained payment of the periodical payments, and had seemingly explained his default in payment of the lump sum, whilst himself bringing the matter before the court. Requiring H to place the interest within a frozen account risked injustice.

(iii) W’s application for security for costs (granted)

Applications for security for costs are rare owing to the general rule as to costs in financial remedy proceedings (FPR 28.3(5)). However, H’s substantive Barder application was not subject to the general rule (FPR 28.3(9)).

FPR 20.6 and 20.7 (which materially mirrors CPR 25.12 and 25.13) provides jurisdiction and allows the court to determine the value and way costs are to be secured (FPR 20.6(3)). Before doing so, one or more of the ‘gateway’ criteria in FPR 20.7(2) must be met, which includes the applicant being resident out of the jurisdiction, before the court has a general discretion and value judgment as to whether it is just to make such an order in all the circumstances of the case.

Whether H was resident in the jurisdiction was contentious. W argued that residence for the purposes of the gateway should be taken to mean "habitual residence" as stated "unambiguously, and without elaboration" by Mostyn J in MG v AR (Security for Costs) [2021] EWHC 3063 (Fam). Meanwhile, H argued he was "resident", or as Cobb J put it, "not resident out of the jurisdiction", with reference to Lazarychev (and Others) v Lyndou [2024] EWHC 8 (Ch) noting residence is a question of fact and degree, and connotes some degree of permanence, continuity, or an expectation of the same.

Considering the discretionary stage of the application, Cobb J adopted Mostyn J’s checklist in MG v AR, [53]. H argued, with reference to the checklist, the effect of the order would stifle H’s application owing to H’s, now, limited liquid resources.

In granting the order for security, Cobb J found the gateway crossed with reference to H’s time spent in various jurisdictions, and the fact H’s assets were held predominantly offshore, he could not be said to be resident in England. The court accepted W may face a real risk in enforcing a costs order in a different jurisdiction should such an order be made at the conclusion of the substantive Barder application but reduced the sum to be secured to £480k in accordance with MG v AR reflecting a potential reduction on a detailed assessment. Assessing H’s liquid resources, Cobb J found H had access to c.US$2.2m liquid resources, and in any event would likely have means to borrow should it be necessary.

In the event of default of payment for security, W was invited to return the matter to court for consideration of whether the application should be summarily dismissed as adopted in MG v AR; [52].

(iv) Case management

There was merit in delaying the consideration of variation of the periodical payments until after the substantive Barder decision to allow the parties to consider their respective capital positions, H’s ability to pay, and W’s ability to meet her own outgoings from her own resources. In any event, the court did not consider there would be sufficient time at the five-day hearing in July 2024.

Having considered Myerson v Myerson [2008] EWCA Civ 1376, Cobb J determined some understanding of the factual basis on which the final order was agreed at the FDR would be helpful, and whether the Barder event now pleaded by H was then in contemplation, and if so to what extent. In absence of agreement, permission was granted to refer the matter back to Moor J for further consideration.

Both parties were ordered to file Forms E2 with updating financial disclosure.