Standard of Proof: When Non-Payment Means Prison

When any Court makes a decision to issue a custodial sentence it does not do so lightly.  If a person’s freedom is at risk then a high level of proof is required to justify removing that freedom.  In family cases, a custodial sentence can be issued if, for example, one party is in contempt of Court by failing to provide information under a Court Order or by failing to make payments in accordance with the terms of a financial order.  The Court will always give the party in contempt an opportunity to purge themselves of that contempt by providing the information or making the payment within a reasonable deadline.  If the party still does not comply then a custodial sentence can be imposed.  In the case of non-payment the payee can make an application for a judgment summons and the Court will consider whether a short custodial sentence is appropriate for the defaulting party. The Court will not take such a step unless it is satisfied that the defaulting party has the means to pay, or had the means when the payment fell due, and has wilfully or neglectfully not paid. One might expect the same high standard of proof to apply to this test as in criminal proceedings however that is not the case. 

In the case of Magliaccio v Magliaccio [2016] EWHC 1055 (Fam), a former wife made an application for a judgment summons in respect of arrears of child maintenance and an unpaid costs order.  The parties were divorced and a financial order had been made in which the husband was to pay the wife maintenance for herself and their child by way of periodical payments.  The husband had failed to pay and arrears of £64,000 had accrued.  The wife had returned the matter to Court for enforcement and it was during those proceedings that a settlement was reached and a further order was made.  The new order stated that the husband was to pay a total of £19,000 consisting of £13,500 for the outstanding maintenance payments and £5,500 towards the wife’s costs.  There was also to be continued child maintenance of £1,150 per month with maintenance for the wife dropping to a nominal level.

 

The husband paid the £13,500 for the arrears but did not pay the sum ordered for the wife’s costs.  He also took it upon himself to reduce the periodical payments for the child below the level ordered.  The wife once again returned the matter to Court and by the time it came before Mr Justice Mostyn further arrears of £4,100 had accrued.  The husband did provide an explanation, by way of email, as to why he had not made the payments. He claimed that he was facing financial hardship because he was soon to be made redundant and because he had recently remarried. He also thought that he should not have to pay maintenance for the month that the child visited him. Significantly, the husband failed to supply any evidence to substantiate his position.

Mostyn J was not impressed. He said, referring to the husband’s e-mails: 

“These writings show a profound misunderstanding of obligations under an Order of a Court of law.  An Order of a Court of law which provides the child periodical payments is not some indicative suggestion; it is a judgment that must be complied with.

By the husband’s writings he seems to believe that because he has in mind that there are circumstances which might justify a variation application that he is entitled unilaterally to reduce the payments to what he thinks is just; not what the Court has determined to be just. This is completely unacceptable and if such behaviour were to be tolerated it would strike at the very heart of the rule of law.” (paras 17 & 18)
 

Mostyn J went on to consider the legal position in relation to the judgment summons for non-payment of periodical payments.  Specifically, he considered Section 5 of the Debtors Act 1869 which sets out that a person may only be punished by imprisonment in relation to certain specified unpaid debts. Mostyn J satisfied himself that non-payment of periodical payments ordered in the context of matrimonial proceedings were enforceable in this way.  This was by virtue of paragraph 2A ofSchedule 8 of the Administration of Justice Act 1970.

 

Mostyn J had previously considered this very issue in the case of Bhura v Bhura [2013] 2 FLR 44 in which he noted that the Court of Appeal had provided principles to consider in the case of Karoonianv CMEC [2012] EWCA Civ 1379 which he was bound to follow. He specifically identified two principles as being relevant which he set out are set in his Judgment.

These were:

“It is essential that the Applicant adduces sufficient evidence to establish at least a case to answer. Generally speaking, this need not be an elaborate exercise.  Proof of the Order and of non-payment will likely give rise to that inference which establishes the case to answer”; and

“If the Applicant establishes a case to answer and evidential burden shifts to the Respondent to answer it if he fails to discharge that evidential burden then the terms of Section 5 will be found proved against him or her to a requisite standard”.

(para. 23)

This may seem straightforward and sensible in light of circumstances where there has clearly been a failure to pay.  However, in the very recent case of Prest v Prest [2016] 1 FLR 773 Lord Justice McFarlane made some comments which brought these principles into doubt.

 

McFarlane LJ’s concern was that when considering issuing a custodial sentence for non-payment it was not sufficient to rely upon findings in family proceedings as these would have been made to a civil standard of proof (balance of probabilities) rather than a criminal standard (beyond reasonable doubt).  McFarlane LJ pointed out that if the case to answer had been proven then it must be decided whether the Respondent has had since the date of the Judgment the means to pay the sum due and whether he had refused or neglected to pay the sum.  He said that this should be proved to the criminal standard and that the burden of proof should at all times remain on the Applicant.  He went even further to say that the Respondent could not be compelled to give evidence. 

 

Mostyn J considered McFarlane LJ’s comments and rejected them outright.  He pointed out that the consequences of McFarlane LJ’s approach would be that every fact would need to be proved from scratch to a much higher standard than had been required in the original proceedings.  Mostyn J satisfied himself that he had relied on binding principles from the Court of Appeal and relied on comments from Lord Justice Richards who had, in Karoonian v CMEC, considered the issue from a human rights perspective. He stated that, in cases where there was clearly a case to answer there would be an evidential burden on the Defendant to answer it and that was unobjectionable to Article 6 (referring to the right to a fair trial as set out in the European Convention on Human Rights).  In following this approach Mostyn J made it quite clear that the criminal standard of proof is not required in order to make a committal order for a breach of non-payment of periodical payments in matrimonial proceedings.

 

It is difficult to see how MacFarlane LJ’s approach would not bring the entire system of enforcement to a grinding halt. It would lead to extensive enforcement proceedings that could require evidential investigation above and beyond what had been required to make the original order, a re-trial to a higher standard.

 

Perhaps the nature of financial evidence in family proceedings is also relevant. In the earlier enforcement proceedings, the husband had provided the evidence which the Court had relied on to determine that the husband did indeed have the means to pay the maintenance, his Form E. The husband had completed this himself and signed a statement of truth to confirm the contents were accurate. The husband had disclosed in this form that he held significant funds and the email evidence he had presented prior to the judgment summons hearing did nothing to address that but simply stated that he did not think he should pay because of an impending redundancy and further financial hardship by virtue of the fact that he had recently remarried. Mostyn J therefore had no hesitation in imposing a suspended 14 day custodial sentence on the husband.

 

Mostyn J has given a definitive answer on the issue of the burden and standard of proof in these circumstances. However, should care be taken when considering how to deal with these issues particularly in light of the increase in Litigants in Person who might not appreciate the evidential requirements on them or the serious consequences of failing to discharge that burden? The husband in this case was unrepresented and had presented a case without due reference to the legal principles being considered. He may have had “a profound misunderstanding” of the obligations under a Court Order but had he received legal advice he might have been able to correctly address these and avoid the committal order being made against him. Again, this needs to be balanced against the unquestionable need to ensure that parties comply with Court Orders.

 

As usual, comments are welcome.

Big City. Big Money. Big Divorce

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The jurisdiction of England and Wales, and London in particular, has gained a reputation over recent years for being the divorce capital of the world and the favoured jurisdiction for wives to get big pay outs from their wealthy soon to be ex-husbands. The recent decision of M v M [2013] EWHC 2534 (Fam), where the wife was awarded a cool £54m (the largest ever pay-out in a contested divorce), will no doubt fuel this perception. But should it?

According the Matrimonial Causes Act 1973, when deciding how the matrimonial assets should be divided up the English Courts are required to take into account “all the circumstance of the case” and a list of non-exhaustive factors to which the court is to give regard are included in section 25 of the Act.  Those factors include the length of the marriage, contributions made within the marriage and the standard of living enjoyed before the breakdown of the marriage. In M v M all of the family’s wealth had been generated during that time through the husband’s business enterprises. Under English law, a spouse who contributes to the marriage by taking care of the family’s home life (and in doing so often sacrifices her own earning capacity) is usually held to have made an equal contribution to the marriage and after a long marriage the starting point for division of assets will generally be 50/50. In M v M the parties had been married for 17 years and so the wife’s award, whilst record breaking, represented only 50% of the ascertainable matrimonial assets.

Those coming from jurisdictions where wives do not receive such generous pay outs, may find such a judgement difficult to accept particularly if they consider that the wife did not really “work” herself during the marriage and enjoyed a high standard of living thanks to the husband’s efforts. However, there is more to this case than a simple division of matrimonial assets after a long marriage and it would be a mistake to think that the case of M v M was nothing more than an example of a wife looking to use the English court’s generosity to get her hands on as much of her husband’s hard earned cash as she possibly can.  A read through of Mrs Justice Eleanor King’s judgment quickly reveals that much of the wife’s three year legal battle was preoccupied with the husband’s flagrant disregard for the legal system and his attempts, at all costs, to keep all of the family’s wealth out of sight and out of reach.  His infractions included hiding assets within company structures, forging signatures to facilitate the transfer of assets, moving assets offshore, using his employees and other family members to distance himself from transactions, lying in his affidavit, disobeying court orders, issuing malicious satellite litigation and failing to attend hearings. The final award was not 50% of all of the matrimonial assets but only those which the wife’s legal team had managed to find and the court actually acknowledged that the wife could have asked for more on the basis that there was likely to be many more millions squirreled away as a result of the husband’s schemes.

It would also be a mistake to think that Mrs M is enjoying her big pay out. The award is only the first step to actually getting what the court had decided she is entitled to particularly given her husband’s determination to avoid participating fairly in the process. Just like Yasmin Prest (whose husband’s non-disclosure contributing to the Supreme Court upholding an order for £17m worth of property to be transferred to her) and Michelle Young (whose husband served time in prison for failing to comply with court orders), Mrs M will appreciate that a court order is little more than a piece of paper if you can’t actually enforce it. Enforcement can often mean more costs and many more months of fighting and if the assets are offshore there may be little light at the end of the litigation tunnel.

But despite such difficulties, London’s reputation as the divorce capital of the world is unlikely to be challenged any time soon and not just because wives want their fair share of the wealth but because that wealth wants to be in London in the first place. London is an incredible city with many international high net worth families traveling from other jurisdictions to experience everything that it has to offer whether on a temporary or more permanent basis.  Those wanting to enjoy the benefits of having a home in here may want to give some thought as to the consequences of the English courts being able to accept jurisdiction should their marriage come to an end.  The risks (for both parties) can be mitigated through the use of a pre-nuptial agreement (or post-nuptial agreement if already married) and such agreements have become increasingly popular in recent years since word got out that the English courts will uphold them as long as certain conditions are met.

UPDATE: Supreme Court Hands Down Judgment in Prest

Supreme Court Unanimously Decides in Wife's Favour

The Supreme Court of the United Kingdom has today delivered its decision in the case of Prest v Petrodel Ltd & Others, finding that, for the purposes of section 24(1)(a) of the Matrimonial Causes Act 1973, the husband was indeed "entitled" to various properties which are held within a corporate structure and which had formed part of the wife's award at first instance. It is a huge decision, particularly for big money divorce cases, and one which many people may be surprised at following the judgement of Lord Justice Rimer at the Court of Appeal.  The judgement and summary press release can be found here and previous discussions on this topic, including on the husbands failure to provide adequate disclosure can be found here and on Chambers Women in Law Blog here.

No doubt this is a decision which will generate a huge amount of debate and is arguably as significant a family law decision as Jones v Kernott (cohabitation) and Radmacher v Granatino (pre-nuptial agreements).

UPDATE: Supreme Court Decision in Prest

Decision due in Big Money Divorce

The family law world is anxiously waiting for the Supreme Court’s decision in Petrodel Ltd & Or v Prest which could mean a significant change to the way big money divorce cases are dealt with in this country, particularly when there are international assets and/or poor financial disclosure.  For some further thoughts and details of the case, please see my guest post on Chambers Women’s in Law Blog at http://womeninlaw.chambersandpartners.com/?p=2230.

Non-Disclosure in Financial Remedy Proceedings. Show me your teeth!

Is the Family Court doing enough to discourage non-disclosure and are the penalties sufficient for those who blatantly flout the rules?

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If you have not heard about the case of Petrodel Resources Ltd& Ors v Prest & Ors then you must have been living under a family law rock!  It is not often that such a case causes such a divide within the judiciary and touches on everything from the fundamentals of company law to division of assets on divorce. I’d better give a (very) brief summary of the facts for the benefit of those under-rock-dwellers before I go any further:

The husband, Mr Prest, was appealing the decision of Mostyn J who had ordered that various UK properties owned by a company, of which the husband had complete control and was the sole shareholder, be transferred to the wife as part of the divorce settlement. The Court of Appeal upheld the husband’s appeal 2 to 1 with Thorpe LJ dissenting on the grounds that the company, and not the husband, owned the properties and so they could not be considered part of the matrimonial pot. The full Court of Appeal judgement can be viewed here.

There is very little parity between the reasoning of Thorpe LJ and Rimer LJ, with each Lord Justice sticking to their judicial guns and coming to completely dichotic conclusions.  So who is right?  Well, that is a question that the Supreme Court will no doubt consider and family lawyers will be waiting with cautious anticipation for the answer.

One item that was not in dispute between the judges was the lack of financial disclosure provided by the husband.  This was summarised by Mostyn J at first instance:

“I have sought to make sense of the husband's factual case. Ultimately I have decided that this has been a vain task because the husband has failed so comprehensively to comply with his obligation to provide full and frank disclosure...”(para 12)

Whilst this lack of financial disclosure allowed for adverse inferences to be drawn, it did not provide a route to the impropriety necessary to pierce the corporate veil and get to the assets which were tied up in the company.  This left the family judges (Mostyn J at first instance and Thorpe LJ in the Court of Appeal) reaching for a way to implement a fair outcome whilst arguably stretching their powers under s.24 (1) of the MCA 1973 while the commercial lawyers applied the less flexible company law to the scenario.  There has been plenty of discussion about the impact this decision may have on the way in which family law is practiced and I do not intend to add further to that particular debate at the moment.  I want to consider what the Family Court can do to encourage full and frank financial disclosure and penalise those who willfully disregard that obligation.

The duty to provide full and frank disclosure is an inherent part of UK family law and is set out in the pre-action protocol annexed to Practice Direction 9A – Application for a Financial Remedy of the FPR 2010.  If a party fails to provide such disclosure, particularly if they have been specifically ordered to do so by the Court, then in addition to adverse inferences being drawn, that party could also face imprisonment, a fine, a costs order against them, inability to proceed with their application (Hadkinson Orders) or they might even face criminal consequences under the Fraud Act 2006.  These are serious penalties which family solicitors are obliged to inform their clients of at the outset of proceedings. But are they enough of a deterrent for people like Mr Prest who viewed the proceedings as“a game in which he has sought to manipulate the process to his advantage” (see Thorpe LJ's judgement para 28).

Committal Proceedings are generally considered a last resort and there can be a great deal of disregard for court orders before the family court deploys those particular teeth, after all you are talking about taking away someone's liberty. But the Family Court has not shied away from using the threat of such a penalty in extreme cases.  Recent instances include property tycoon Scot Young who was ordered to explain the vanishing of his vast fortune (which occurred suspiciously at around the same time that his wife asked for a divorce) or face a prison sentence. The recently reported Winter v Winter also involved committal proceedings for willful breach of a Court Order to bring funds into this jurisdiction. In that case, Mrs Justice Baron said of the husband’s approach to the proceedings “the time has come to put an end to his disrespectful approach to a court of law. Courts are not toothless bodies. They make orders in order to regulate positions between human being so that society may work in a proper fashion.”

But is this enough to discourage those who see the family court as something to play with while tormenting their former spouse or should the family judges be quicker to show their teeth when they are faced with someone who obviously has no interest in playing by the rules.

What is your experience of the Family Court with non-disclosure and/or failure to comply with Court orders? Don't forget to vote in the poll on the right!