Financial Remedy & Divorce Update, May 2019

0
10


Home > Articles

Rose-Marie Drury, Senior Associate, Mills & Reeve LLP analyses the news and case law relating to financial remedies and divorce during April 2019.

 

Rose-Marie Drury , Senior Associate Millls & Reeve LLP

 

As always, this update is split into recent news and cases.

A. News

Pensions are the biggest asset in millionaires’ divorces
Private pension wealth is the biggest value asset in millionaires’ divorces, according to research from Succession Wealth.  The advice consolidator analysed the Office for National Statistics Wealth and Assets Survey data and the number of divorces in England and Wales, concluding that 550 couples with net financial wealth of £1million or more each will divorce this year.

Succession Wealth’s research estimates that collectively these individuals have around £1.91billion of net wealth, or £3.48million per couple.  In terms of how this wealth is broken down between different assets, the analysis suggests that 43% is held in private pensions, followed by 31% in property wealth.

Government to introduce no fault divorce
Proposals for changes to the law include:

• retaining the irretrievable breakdown of a marriage as the sole ground for divorce;

• replacing the requirement to provide evidence of a fact around behaviour or separation with a requirement to provide a statement of irretrievable breakdown;

• retaining the two-stage legal process currently referred to as decree nisi and decree absolute;

• creating the option of a joint application for divorce, alongside retaining the option for one party to initiate the process;

• removing the ability to contest a divorce; and

• introducing a minimum timeframe of six months, from petition stage to final divorce (20 weeks from petition stage to decree nisi; six weeks from decree nisi to decree absolute).

The MoJ says that starting a minimum timeframe at the initial petition stage reflects consultation respondents’ views that couples “feel divorced” when the court grants the decree nisi. This will provide a meaningful period of reflection and the opportunity to turn back. Where divorce is inevitable, it will better enable couples to reach agreement on practical arrangements for the future. Courts will retain the power to expedite the process where appropriate.

President’s address to Resolution conference
Entitled “Interesting Times“, Sir Andrew discussed the increasing caseload of the Family Court.  Whilst judicial resources assigned to “Family” next year will be greater than those assigned to the Crown Court, radical reform to working practices and processes is still needed.  Updating the audience on the digitisation of divorce, Sir Andrew anticipated that the end of 2019 will see the vast majority of divorces being handled online and administered remotely through the Courts and Tribunals Service Centres in Stoke.  He acknowledged the “unhappy state of affairs” arising from the centralisation of the regional divorce centres and stressed the need for the processes in Stoke to work efficiently. 

Referring to the Financial Remedies Court Pilot underway in Birmingham, Sir Andrew revealed that active consideration is being given to harness the data from cases to produce schedules or tables identifying the preponderant outcome in typical cases across a range of set variables. 

He also advocated the increased use of video-link technology and without notice applications (particularly for non-molestation injunctions) to be conducted over the telephone. 

B. Cases

Divorce

Baron and others (4 defective divorces) [2019] EWFC 26
Sir James Munby dealt with four divorce petitions that had been presented to the court in the first year of marriage and had proceeded to be issued. 

• In two cases, neither the petitioners’ solicitors, court staff nor judges had noticed that the petition had been presented within the first year of marriage.  These were both dismissed.

• In one case, the petition had been post-dated but had been received by the court within the first year of marriage.  Whilst this had been correctly treated as breaching s.3(1) MCA 1973 and dismissed, what then happened was the petition was simply amended and re-dated.  The amended petition was dismissed by Sir James.

• In the final case, the district judge spotted that the petition had been issued within the first year of marriage and had dismissed it.  A fresh petition was sent to the court but the file was not given a new number.  This administrative error was not enough to set aside the subsequent decrees of divorce, which remained valid.

Sir James was highly critical of the fact that in three of the cases it had been impossible to read the name of the deputy district judge or assistant justices’ clerk who had given the special procedure certificate.  In two of the cases, the assistant justices’ clerk had not made the appropriate deletions on the certificate they were signing.  The judge took the opportunity to express his support for the digitisation of divorce which should prevent errors like these arising. 

Where a petition is presented in the first year of marriage, the petition is void and the court has no jurisdiction to entertain it.  The defect cannot be cured by amendment; and the court has no power to grant discretionary relief (Butler v Butler, The Queen’s Proctor Intervening [1990] 1 FCR 336). 

Giusti v Ferragamo [2019] EWCA Civ 691
The parties were both Italian nationals. On 4 May 2012 the Husband (H) issued judicial separation proceedings in Italy, which were a necessary first step to divorce. A separation order was made on 4 December 2015. On 14 March 2018, the Wife’s (W) appeal of the Italian separation order was dismissed and H commenced divorce proceedings in Italy on 15 March 2018. 

In the meantime W had issued divorce proceedings in England – one petition was dated 16 January 2018 and the second 7 March 2018. The earlier petition was never served on H and the second was served in April 2018.

W applied for the stay or dismissal of H’s Italian divorce proceedings on the basis the Italian court was second seised (the Italian divorce proceedings having been issued on 15 March 2018). H cross-applied for a stay of W’s English divorce proceedings on the basis the judicial separation proceedings (issued 4 May 2012) seised jurisdiction in Italy for the separation and divorce proceedings. 

At first instance Francis J found the separation proceedings in Italy were ongoing and Italy remained first seised. His decision was based on his view of the declarations and rulings made by the Italian court.  He therefore stayed W’s English divorce petition and dismissed her application for an SJE to be instructed to provide an opinion on Italian Law. W appealed.

Giving the lead judgment of the Court of Appeal, Moylan LJ found that Francis J did not have sufficient evidence to decide whether or not the Italian court remained first seised as from 14 March 2018 but nor was there sufficient evidence to determine that Italy did not remain first seised.

The answer was one of Italian law. Although there was a lack of clarity about what issues the Italian court would be determining at the next hearing, it was likely W’s application in Italy to stay or dismiss H’s petition would require the Italian court to determine the relevant issue of whether the Italian court remained seised. Despite the delay that would occur in the Italian court determining the issue, the English court should defer to the Italian court to let it determine whether it remained seised or whether or not the proceedings had lapsed on 14 March 2018 and therefore only the English court was seised at that stage.

It did not make sense for the English court to consider possibly conflicting evidence from Italian lawyers when an Italian judge could determine the issue (Bentinck v Bentinck [2007] EWCA Civ 175). Moylan LJ went onto comment that if it is unclear which court is first seised, it should not be left to chance as to the court that decides the issue. In most cases, the court that appears to be first seised is likely to make the decision. However, if even this is unclear, the decision should be based on which court is better placed to determine the issue, and on assessing the course of action that better supports the objectives of BIIR. A primary objective is to avoid parties engaging in proceedings within the scope of BIIR in more than one jurisdiction.

As the English court was not determining which court was first seised, W’s divorce petition was adjourned, as was H’s application for its stay or dismissal pending the Italian court’s determination of W’s application for the stay or dismissal of H’s petition.

Pierburg v Pierburg [2019] EWFC 24
The Husband (H) and the Wife (W) were both born in Germany. They met in Germany in 1981 and began cohabiting there in 1983. They later married in 1985.

Prior to the marriage they entered into a marriage contract before a notary stating that the separation of property regime would apply and waiving any claim for maintenance even in the event of hardship, provided it would be legally possible.

During the marriage, the family had (for tax reasons) moved from Germany to Switzerland in 2000.  In 2002 H purchased a short lease on a London property (at the time their son was being educated in England). That lease was then extended to 2036.

H was ‘extremely wealthy’ and W had no assets of her own other than jewellery.

Following the breakdown of the marriage in February 2017, the wife left Switzerland for London, moving her belongings to the flat gradually between July and August 2017. W said she moved to the property on 12 July 2017 and H said 15 August 2017.

There was ongoing contact between the parties in autumn/winter including visiting a property for sale near Zurich in November 2017 and W attending the staff Christmas party at the FMH in December 2017.

On 12 January 2018 W issued a divorce petition claiming jurisdiction on the basis she was domiciled and habitually resident in England and Wales having been resident here for 6 months immediately prior to the presentation of the petition

On 12 February 2018 H issued a German divorce petition in Berlin claiming jurisdiction on the basis that both parties were German citizens. The ground for divorce was that the parties had lived apart for more than one year.
H indicated he intended to defend W’s petition and that the English court did not have jurisdiction.

W indicated in her evidence that she came to work in England in 1969 and always dreamed of living in London but returned to Germany in 1972. The subsequent move to Switzerland was for tax reasons and her contact thereafter with Germany was extremely limited. She claimed she came to London with H regularly and became more involved in charitable work in England. After the breakdown of the marriage she felt she could not live in Switzerland and the only place she could live was London. She had taken a course at the V&A and had her dentist, GP and the like in London. In the 12 months prior to January 2018 she had spent 172 nights in London and 160 in Switzerland. In the six months to 12 January 2018 she spent 154 nights in London and 26 in Switzerland. Having moved to England and formed an intention to live her permanently her position was she had established a domicile of choice here.

H contended that W had not abandoned her German domicile of origin and did not satisfy the necessary residence requirements on 12 January 2018. He argued the focus of the couple’s lives, particularly that of W remained very much in Germany and the only change was the physical place in which they slept. W had never expressed any wish to him to live in London and was in England for 33 nights from the beginning of 2017 to mid-August 2017 across 15 visits after which her time in the country dramatically increased. He provided schedules showing W spent 30 nights in England in 2015 across 16 visits, 37 nights in 2016 across 19 visits. In the period from 12 July 2017 to 15 August 2017 he indicated W had stayed in England for a total of 12 nights with 21 nights in Switzerland and one in Germany. 

W indicated in reply that she had poured her life into Switzerland after leaving Germany in 2000, her day-to-day bank accounts from 2000 were in Switzerland, she had not used her German mobile for years, she went to Germany on average once per month staying one to two nights in a hotel to see her mother and siblings. She had stopped seeing her dentist there in November 2017 and had not seen a doctor there since July 2017.

W argued that she had established a domicile of choice in England. She was habitually resident here on 12 January 2018 and in accordance with Marinos was resident for at least six months before then. In the alternative she was habitually resident here on 12 January 2018 and had been resident here for at least 12 months before that date. If she was wrong regarding Marinos, she argued that she was habitually resident for the six months prior to 12 January 2018.

H argued that W retained her domicile of origin in Germany and did not move to England until 15 August 2017. He contended W was required to establish habitual residence through the periods of 6 and 12 months leading up to the date of the petition which she had not achieved. If he was wrong regarding that, he argued that in any case W was not resident in England throughout those periods as her presence was intermittent, transient and temporary.

Moor J was not persuaded by the analysis of Munby J in Marinos and took the view that a literal interpretation would make a nonsense of the concept of habitual residence. Habitual residence could not be proved by mere residence. He preferred instead the analysis of Bennett J in Munro and those of the authors of Dicey and Rayden

Moor J found that W was not habitually resident in England until after 12 July 2017. Whilst she had come to England on 12 July and stayed here for a longer period of six nights than her previous stays (two to three nights) she then returned to Switzerland for seven nights which was far longer than required to pack a couple of suitcases. She had then spent further time in Switzerland and there was insufficient evidence to find the situation changed dramatically on 12 July 2017. In contrast the position after 15 August 2017 changed completely at which point she became habitually resident. However, this was insufficient as it did not amount to six months of habitual residence.

Even if Moor J were wrong regarding Marinos, he found that whilst W had a home in England that she visited regularly she did not reside here. Although W had indicated in oral evidence she decided in February 2017 to reside in England in the future, that was not sufficient until she moved to England. On the balance of probabilities, she did not reside in England until 15 August 2017.

He further found W had remained domiciled in Germany after moving to Switzerland.  She retained many links to Germany: for example, her mother, three siblings, doctors, dentist, beautician and florist. She retained an interest and involvement in German politics (being registered to vote in Germany). Whilst W had a clear love of England and wanted to retain a home here, that did not mean she was domiciled here. On a balance of probabilities, were W to receive funds sufficient for her to purchase more than one home she would consider very seriously doing so in Germany. He was not satisfied W had changed her domicile to that or England or at least she had not done so by 12 January 2018. 

W’s petition was therefore dismissed.

Finances

Ipekci v McConnell [2019] EWFC 19 (Mr Justice Mostyn) 4 April 2019

The Wife (W) was a wealthy American heiress with trust interests worth at least $65million. At the time the parties met in 2003 the Husband (H) was a hotel concierge and had no money beyond his earnings.

H and W began cohabiting in January 2005 and were married in late November 2005. The parties had two children, age 11 and 7. They separated in 2016.

At the time of separation the family home was a modest property owned in W’s sole name worth £1.675million (£1.074million net of the mortgage).  H was employed as a concierge earning about £35,000 gross pa. He had no assets except for a share in a Turkish property worth £50,000.  He had £100,000 worth of debt. 

Before getting married the couple had entered into a pre-nuptial agreement. The agreement had been drafted by W’s private client lawyer and it stipulated that the laws of the State of New York would govern the agreement irrespective of where either party were living or domiciled.  H received legal advice on the agreement from an English solicitor (who had previously acted for W in an earlier divorce) and who was not qualified to advise on New York law. 

The substantive provision to H was that any increase in the value of three properties in W’s name (worth at the time approximately £1.24m) would be divided equally between the parties on divorce. Whilst it was not possible to definitively establish what had happened to the proceeds of those three properties it was assumed they were rolled over into the FMH and there was therefore no increase in value and H would receive nothing.

Mostyn J found it would be wholly unfair to hold H to the agreement and attributed no weight to it as:

1. There was evidence from an SJE that the agreement had a fatal defect under New York law and would have “minimal weight, if any” in New York. 
 
2. It would be wholly unjust to attribute weight to the agreement when under New York law it would be afforded no weight.

3. H could not be said to have had a full appreciation of the implications of the agreement when he had no legal advice about the impact of New York law. Mostyn J was not satisfied that the solicitor who advised H was not compromised by apparent bias, having previously acted for W.

4. The agreement did not meet H’s needs.

As all of the assets emanated from non-matrimonial property and so H’s claim was to be decided solely by reference to needs, Mostyn J ordered that W pay H a lump sum of £1.33million which included a Duxbury fund of £445,000, money for H to pay his debts including legal fees and a housing fund of £750,000 plus costs of purchase and furnishings.  The housing fund was subject to a chargeback of £375,000 enforceable on the husband’s death. Mostyn J further indicated that the order was on the basis that W would not pursue child support from H and he awarded an indemnity in H’s favour in the event W sought to do so.

In making the award, he took into account that this was a 12-year cohabiting relationship, H had made no provision for himself from his earnings either by way of pension or savings (as a result of the way the parties organised their married life), during the marriage the couple had a fairly high standard of living, H had no savings or pensions, the children should be able to stay with their father in a reasonable home and should not view him as a ‘poor relation’, H would not be making any contribution to the maintenance of the children or their school fees save for incidental expenses when they spent time with him, it was not necessary for H’s housing to all be provided outright.

Mostyn J went on to find that, on the balance of probabilities, the trustees of a trust, of which the wife was sole beneficiary, would make funds available to her to satisfy an award.  Interestingly, Mostyn J spoke of this not being “judicious encouragement” but a “finding of a future fact”: in cases of this type, he said, the concept of judicious encouragement should be abandoned. 

Finally, Mostyn J expressed dismay at non-compliance with FPR PD27A and the Efficiency Statement of 1 February 2016, including breach of the one bundle rule and a failure to provide a chronology and agreed schedule of assets. 

H v T (judicial change of mind) [2018] EWHC 3962 (Fam)

The parties began cohabitating in 1999 and married in 2002. They separated in 2015. The parties had three children aged 12, 10 and 6 who spent their time equally between the parties.

The Husband (H) was age 48 and an equity partner with a large US law firm. The Wife (W) was age 43 and was an in-house lawyer with a large investment bank

At first instance the judge found that H’s minimum net income was £605,000 pa and W’s was £171,000. There were total net assets of between £1.84m-£1.76m.

The judge found both parties needed to purchase a property for £1.25million. W had a substantial mortgage capacity of £850,000 with a further mortgage capacity of £100,000 against a foreign property owned in her sole name. She would have a greater mortgage capacity of £1m if the foreign property were sold, as well as equity in the foreign property over and above her ability to raise funds via a mortgage on it.  

The judge ordered an unequal division of the assets in W’s favour. H was granted permission to appeal on the basis that a departure from equality was not justified when W could re-house at an appropriate level without making any or significant departure from equality and H also bore the burden of paying considerable child maintenance and school fees.

Having considered matters, MacDonald J circulated a draft judgment indicating that he believed the judge at first instance had awarded a lump sum order that exceeded W’s identified housing need. W’s counsel then invited MacDonald J to reconsider this on the basis that the figures did not factor in purchase costs and so the original judge’s reasoning produced a figure exactly matching W’s housing needs.

MacDonald J agreed to re-visit his decision and invited further written submissions from both parties before a further hearing was held.  The judgment helpfully sets out the applicable law concerning a judicial change of mind.  The essence appears to be that, when a formal judgment has not been handed down (and with due regard being had to L and B (children) [2013] UKSC 8), there is nothing to prevent a judicial change of mind provided there has been a careful reconsideration of the original decision. 

Having reconsidered his decision, MacDonald J upheld the first instance decision. He was satisfied the award met W’s housing needs (including purchase costs) and a departure from equality was justified. He declined to disturb the judge’s conclusion with respect to W retaining the foreign property – the judge had had the benefit of hearing evidence from W regarding her connections with that country and the desirability of retaining the property for herself and the children. The judge had factored all of the equity in the foreign property into his decision which was consonant with W’s identified need. The judge could have ordered the sale of the foreign property but it could not be said he was wrong to adopt the course he did when his award met W’s identified need precisely and given H’s substantially greater income.

XW v XH [2019] EWCA Civ 549

The Court of Appeal unusually made a reporting restriction and anonymisation order in financial remedy proceedings.  A similar order had been made during the first instance proceedings to prevent the jigsaw identification of the parties’ son who had a rare genetic condition. 

All Court of Appeal hearings are heard in public (r. 39.2(1) CPR 1998), so reporting restrictions tend to be rare, even more so in financial remedy cases; however, exceptions are listed in r. 39.2(3) CPR 1998 which include protecting a child’s interests. 

It was not enough that both parties supported the making of the order or that the findings at first instance were unchallenged.  The court had to consider the balance between the parties’ Article 8 ECHR rights and the public’s rights under Article 10 ECHR.  Here, the balance came down in favour of making the order.  It was in the child’s best interests that his day-to-day normality was undisturbed and it was for his parents to decide when the right time would be to tell him about his condition. 

Rogan v Rogan [2019] EWHC 814 (Fam)

Whilst the Husband (H) had in part complied with his obligation by paying periodical payments to the Wife (W) and child periodical payments, he was partly in arrears in relation to school fees and had not paid outstanding arrears and costs in the total sum of £140,993.

During the course of the hearing it was agreed that H would make further payments by specified dates. W sought an order for committal suspended on terms that H made the payments and complied with his obligations as to disclosure.

Holman J refused to grant the order for suspended committal taking into account that H had indicated a significant change in his position with an improvement in his business income. He further took into account that whilst the outstanding arrears would not be subject to H’s variation application, they were inter-related to the sums W may owe, if that application were successful.

W’s application for committal was further adjourned.

Hammoud v Al Zawawi [2019] EWHC 697 (Fam)

Williams J handed down a three month prison sentence (suspended for seven days) to a husband who had failed to file a Form E in Part III proceedings. 

At the time of writing, Holman J’s final award in Hammoud v Al Zawawi [2019] EWHC 839 (Fam) has just been reported.  He determined that the wife should receive a capital sum of £24.07million (based on needs) in Part III MFPA 1984 proceedings.  Given the family had lived in Oman for ten years prior to living in England for two, regard was had to Omani law and the negligible provision the wife would receive.  The husband had minimum assets of £300million. 

Grandison v Joseph [2019] EWHC 977

The Husband (H) had been ordered to transfer the legal title in 42 properties into his sole name (and release the Wife (W) from the associated mortgages); if he didn’t, the properties were to be sold.  He unsuccessfully tried to appeal the order on various grounds including that the order had not required him to transfer the legal (as opposed to the beneficial) ownership. 

The judgment serves as a useful reminder as to when beneficial and legal interest pass subsequent to a property transfer order encapsulated in an overall financial settlement or award (Mountenay v Treharne [2002] FLR 930 is clear authority that beneficial interests are transferred at the moment an order takes effect i.e. on its making, subject only to decree absolute). 

The judgment also considers the meaning of “best endeavours”.  H argued that within the commercial context “best endeavours” did not mean a party was obliged to enter into an arrangement or take a step that would cause a significant financial loss.  To secure W’s release from the mortgages was not impossible but, he alleged, it would be expensive. 

Cohen J agreed with the first instance judge that H simply had not used his best endeavours – or indeed any endeavours – to release W from the mortgages.  He had not taken even the most basic of steps.  And whilst “best endeavours” was not to be construed differently by the family courts, each agreement had to be seen in the context in which it arose.  Here, the final order had been agreed years before and had been implemented by one party but not the other. 

Vasilyeva v Shemyakin [2019] EWHC 932 (Fam)

Following complex and concurrent English and Russian divorce and financial remedy proceedings, the Russian proceedings ended in what appeared to be an agreed order (although it was unclear).  The Wife (W) brought Part III MFPA 1984 proceedings.  In concluding that W should be granted leave, Williams J considered the meaning of “substantial” and indicated: 

“substantial does not equate to showing a more than 50% prospect of an order ultimately being made but that there is something which can sensibly be said to amount to more than substantial issues of fact or law that require determination, more than good arguments, that the application raises substantial issues which as a matter of justice require determination, and that the application is not wholly unmeritorious or capable of being determined by knockout blow”.

Here it was significant that the Husband (H) had applied for asylum in the UK, the marriage had been based here in its final two years, there was a lack of financial disclosure from H and it was far from clear that the Russian process had led to an agreement and order that was in full and settlement of the parties’ claims. 

Whilst the H’s counsel had pointed out that it was for W to prove that her application should be granted, the fact that material which could allegedly have assisted was not produced even though H had mentioned at points that he could produce it, was relevant.

Thum v Thum [2019] EWFC 25

The Wife (W) alleged she had found relevant documents of the Husband’s (H) stored on a flash drive in the parties’ joint safety deposit box in Zurich in an envelope with the password on it.  However, to avoid a lengthy factual enquiry, she agreed to treat the documents as confidential (Tchenguiz v Imerman [2010] EWCA Civ 908). The flash drive was given to the husband’s solicitors and W’s German lawyers retained a copy.

When H did not disclose the documents, W obtained an order (unopposed by H) for specific disclosure of certain documents that she recalled from the flash drive. He refused to comply, alleging the W had accessed the documents unlawfully. She issued an enforcement application.

The day before the hearing, H applied to stay the disclosure order pending further consideration at the First Appointment (which had been adjourned). For the first time, he argued that complying with the order would put him in breach of German civil and criminal law.

Both parties submitted expert evidence on the issue. Mostyn J found W’s evidence ”convincingly demolished” H’s case. He was prepared to summarily determine the legal risks H faced, without cross-examining the experts. He ordered the documents from the copy flash drive held by W’s German lawyers to be disclosed.  Mostyn J took the view that if he had ordered disclosure from the flash drive held by H’s solicitors, more spurious objections would have been raised. 

 15/5/19 


LEAVE A REPLY

Please enter your comment!
Please enter your name here