Friday, 7 November 2014

Shooting Tigers in a Barrell: Or what not to do with a draft judgment?

Mr Justice Coleridge has ruled on a preliminary issue in financial remedy proceedings which involves a trust set up to protect tigers in China. The case is Quan v Bray [2014] EWHC 3340 (Fam) and the judgment can be found here. Chinese Tigers South Africa Trust was set up in 2002 through the efforts of wife, Li Quan, and husband, William Bray, working together with the Chinese government and various other parties. The couple were initially devoted to the plight of tigers in China and poured most of their matrimonial funds into the project. The relationship broke down and divorce and financial proceedings were issued by the wife. The wife then claimed that the purpose of the trust was not only to save tigers but also to support the couple financially. She argued that the trust, which held nearly £25m of funds, was effectively a post nuptial settlement which could be taken into account in the financial remedy proceedings.

The husband objected, as did the trust and the other interested parties. No doubt the tigers would have had something to say about this as well! Mr Justice Coleridge’s judgment provides guidance on the treatment of post nuptial settlements and in particular settlements that might not have been nuptial in nature when they were set up but which have become nuptial due to the intentions of the parties and actual use of funds from the trust. After hearing the parties in December 2012 and again in June/July 2013 in what totalled over three weeks of Court time, Coleridge found against the wife and concluded that the trust was not nuptial in nature and that there had been no intention for the parties to benefit from the trust.

As is not uncommon, Coleridge J provided his judgment to the parties in draft form on 24 July 2014 and gave the parties until 05 September 2014 to come back to him with any minor or typing amendments before the judgment was to be formally handed down. This gave the wife 5 weeks review the judgment and rather than just looking for spelling mistakes the wife used this time to prepare a 43 page “Barrell” application attacking all of Coleridge J’s findings and conclusions and asking for the judgment to be re-written.

What is a Barrell Application?

The term Barrell Application derives from the case of Re Barrell Enterprises [1972] 3 All ER 631 in which it was established that, whilst there was jurisdiction to alter a judgment prior to the judgment being sealed, it should only be done in exceptional circumstances. This test was considered and developed by the Supreme Court in L and B (Children) [2013] UKSC 8 (20 February 2013) which involved another family case where the judge changed her judgment of her own volition after it had been communicated to the parties but before it was sealed (as opposed to being asked to do so by the parties). The Supreme Court indicated that in exercising discretion when faced with such an application the Court should be guided by the overriding objective to deal with the case justly and consider the specific circumstances of each case. Barrell applications are not common and successful Barrell applications are ever rarer. Even in Barrell the judge did alter the wording of his judgment but not the overall decision. 

As Coleridge J puts it in the postscript to his judgment in Quan v Bray a Barrell application should only be used “where some particular fact or evidence has obviously been omitted, overlooked or has changed since the hearing”. He went on to clarify that it “does not afford a party the right to invite the court to start again from scratch and "have another go" at finding for them based on an entire re-arguing of the case.”

So was the wife right to try proceed with the Barrell application and in doing so exploring all options to have her case considered, or did she cross a line and misuse the legal application? Coleridge J was certainly not convinced and in fact found that the additional submissions, which totalled 99 pages once the other parties had had the opportunity to respond, only fortified his original findings and conclusions. It would seem that the appropriate avenue for the wife would be either to accept Coleridge’s conclusions or appeal.

Friday, 20 June 2014

The Pre-nup Paradox: Twenty-eight days later.

In February 2014 the Law Commission released its report on Matrimonial Property, Needs and Agreements. The report looked into several questions which have been the subject of debate and discussion in family law both in and out of court for many years, questions such as:
  • Should pre-nups be binding? - The answer was ‘yes’ in certain circumstances (see below); and
  • What do needs actually mean in the context of a divorce?  - The answer 'was…we’re not sure, we need more guidance'.
It should be noted that, at the moment, these recommendations remain just that and it is unlikely that any of the proposed changes will become law for at least another year, but they are not to be dismissed lightly, particularly after such a long and extensive consultation, and they will arguably influence both judicial thinking and the mentality of the profession.

Of particular interest was the recommendation that we should introduce Qualifying Nuptial Agreements (QNAs) which would be binding, and safe from judicial interference, if certain criteria were met. These criteria are:

  1. That the QNA must have contractual validity i.e. there can be no undue influence/misrepresentation etc.;
  2. It must be executed as a deed;
  3. If the QNA is entered into before the marriage (a pre-nup as opposed to a post-nup) then it must be entered into at least 28 days prior to the date of the wedding;
  4. There must be material disclosure of both parties' financial positions;
  5. Both parties must have taken independent legal advice; and finally
  6. The QNA must be fair i.e. it cannot be used to contract out of making provision for financial needs (obviously, once we have a better idea about what “needs” are, this will become clearer).
It is the requirement for the QNA to be signed at least a clear 28 days before the marriage (point 3 above) that I want to have a closer look at because it seems to create something of a paradox.

The Law Commission have made this recommendation to help ensure that QNAs “will be consensual and will not be the product of negotiations conducted under pressure which clouds the parties’ judgment” (para 6.65 of the Report). The thinking being that the closer you are to the big day, the greater the pressure to sign otherwise you risk having to tell the families and guests, the caterers, the church, the venue, the florist, the musicians/dj/band  that the big day will have to be postponed (goodbye deposits!) And  what to do about Cousin Morris who has already booked her flight from California! Then there is the added pressure of having to go through the entire process again re book the venue, re-send the invitations etc. It is therefore understandable that, faced with such pressure, signing on the dotted line would seem to be the easier option even if you are not entirely happy with the terms of the agreement.

But will the 28 day requirement solve this problem?

If the parties want to have a pre-nup then it is likely that they will want it to be a QNA, in all its binding glory. If that is the case then surely all you are doing is shifting that pressure forwards by 28 days.  Imagine a bride- or groom-to-be on day 28 who is faced with 24 hours to either:

  • Sign;
  • Carry on negotiating but accepting that you won’t have a QNA unless you wait until after the wedding (a QNA post-nup) in which case there is always a risk that one party won’t want to sign and by that time you are married!; or
  • Postpone the wedding.

It could be enough to make anyone go apocalyptic and one could even argue that, having been under such pressure, they should not be held to that agreement at a later date? That said, if QNAs become law, then would it not be difficult, if not impossible, to challenge an agreement that was signed on the 28th day before the wedding (unless you could rely on failure to comply with another criteria)?

Whilst the best thing may be to start thinking about a pre-nup before looking at venues or dresses, that won’t always be the case. After all, a marriage is not just a financial and legal relationship, it is an emotional and cultural one as well and those latter factors tend to have more sway over decision making in the early stages of an engagement. In addition, there are often other family members and/or trusts or family offices getting involved at various stages and financial disclosure and negotiations can take time. It is therefore safe to say that the issue of timing and nuptial agreements is not one that is going to go away and it would be interesting to see how the recommendations affect legal practice and how they stand up to judicial challenges particularly when held against a traditional nuptial agreement negotiated and signed under the guidance given in Radmacher v Granatino in 2010.

So, if you want a QNA but are not ready to put pen to paper on day 28 then be prepared to make some pretty difficult phone calls.

“Er…Cousin Morris, you’ve got travel insurance right?”

Wednesday, 26 February 2014

Is Romance Dead? The Media and Mostyn have spoken (but what will the Law Commission have to say about it)?

With Valentine’s day 2014 firmly behind us and the mother’s day and Easter promotional bunf starting to dominate well…everywhere, one might think that romance is no longer high on anyone’s agenda. But this is a big week for romance as the outcome of the long anticipated Law Commission report on Matrimonial Property, Needs and Agreements, is due out on Thursday, 27 February 2014. The focus of the report is expected to be the recommendations on pre-nuptial agreements. Arguably nothing can kill the romance of “Will you marry me?” quite like “I want a pre-nup.” However, it is difficult to argue with the latest information from the Office of National Statistics which says that 42% of marriages are expected to end in divorce.

The media seems to have already made up its mind about what the report will say, with some papers reporting that such agreements will become binding several weeks ago. There was unfortunately little discussion on what “binding” would mean and more focus on which celebrity couples had signed pre-nups. One must keep in mind that many of those celebrity couples signed their pre-nups in other jurisdictions, such as the United States, where such agreements are more accepted and the terms are more likely to be upheld without too many questions asked. New York is a notorious jurisdiction for upholding pre-nups no matter how unfair the outcome might be which was one of the reasons why the decision in Cioffi-Petrakis v Petrakis was so usual and so widely reported on. It is highly unlikely that the Law Commission will be looking to recommend that UK law align itself with the wider international community on this issue but rather will be looking to codify what has become a fairly well defined position through case law which was confirmed in the seminal decision of Radmacher v Granatino in 2010. The position is not overly complicated and can be summarised in a single sentence which can be found at paragraph 75 of the Supreme Court judgement:

“The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement.”

Further guidance on the application of this principle was given in the judgement and it is on the application and interpretation of the principle which has dominated the case law since then. There have been two recent cases on prenuptial agreements both decided by Mr Justice Mostyn. The first case of BN v MA [2013] EWHC 4250 (Fam) which related to interim financial arrangements the pre-nuptial agreement was upheld and the wife (who was asking for more) was ordered to pay the husband’s costs.

The second case of SA v PA [2014] EWHC 392 (Fam) where again a wife was trying to argue that she should not be held to the terms of a pre-nup, is more intriguing. In deciding whether a party has freely entered into a pre-nup with a full appreciation of its implications the circumstances surrounding when and how the agreement was signed will be of key importance. For example, there must not be undue pressure on one party to sign and both parties should have independent legal advice. Using the Radmacher test the circumstances would suggest that the wife had a good case for saying that she should not be held to the terms of the pre-nup. The agreement was prepared in the week running up to the wedding and was only signed by the parties the day before the ceremony. Only the husband’s notary was instructed with no independent representation provided to the wife. Despite this Mostyn emphatically found, on the evidence presented to him, that the Wife understood exactly what she was signing and was not put under any pressure to sign it. What is even more curious is that, despite his findings, he disregarded the terms of the pre-nup and instead went on to consider in detail the compensation principle from McFarlane v McFarlane [2009] 2 FLR 1322 and with only a cursory nod to the factors set out in section 25 of the Matrimonial Causes Act 1973 in his final paragraph resulting in a final award which seems heavily weighted in favour of the wife. Arguably this judgement is ripe for appeal but after spending over £160k on legal fees it is unlikely that the husband will have the appetite for a further fight. We will have to wait and see.

For anyone who practices family law they will know that the Courts will always prefer it when a couple can reach an agreement and the sooner that happens the better as it often avoids acrimonious and expensive litigation. There appears to be no objection in either legislation or case law that suggests that the fact that the agreement was reached prior to the marriage itself is a reason why the parties should not be held to that agreement. It will be interesting to see what conclusions the Law Commission has reached on this subject and remember that it is important to look beyond the media headlines to see whether their recommendations would change the current position significantly or at all.