Failed to comply with a Court order? There will be consequences!

If you have opened a newspaper recently then you will no doubt have acquired at least some knowledge about the divorce of Michelle Young from tycoon Scot Young.  This divorce has been in and out of the press for various reasons over the last seven years and the final hearing in the financial remedy proceedings have been ongoing at the High Court before Mr Justice Moor over the last few weeks. If you believe Ms Young then the total value of the assets being disputed is a whopping £700m but according to Mr Young he is bankrupt and in debt to the tune of approximately £28m.  Mr Young claims that he lost his millions around the time the couple split and has been living (somewhat extravagantly) since then off the generosity of his rich and famous friends. Ms Young’s case is that Mr Young planned an exit strategy to keep the money from her once he realised that the marriage was in difficulties and that the money has been hidden in various offshore schemes and is being fed back to him via the aforementioned friends one of whom is currently paying Mr Young’s rent of £4,000 per month.

Several of these benefactors submitted witness statements on Mr Young’s behalf to help prove that the vast amounts of money they are paying him are indeed generous gifts and not part of some greater fraud. Mr Young seemed to think that submitting said statements would be sufficient to achieve this and has argued that there was no need for any of his witnesses to be  cross examinationed. Mr Justice Moor disagreed and the likes of Sir Philip Green (Topshop) and Richard Caring (The Ivy/Annabel’s) were called to be cross examined by Ms Young’s lawyers last week. 

Procedure for Relying on Hearsay Evidence in Family Proceedings

Whilst the issue of whether the witnesses would need to attend for cross examination may have been dealt with as a pre-trial issue at the start of the hearing, if Mr Young was playing by the Family Procedure Rules 2010 then he should have issued a notice to rely on the witness statements as hearsay evidence under FPR 23.2 (which in turn refers to section 2(1)(a) of the Civil Evidence Act 1995) together with an explanation as to why those witnesses need not attend.  This would have then given Ms Young the opportunity to make an application under FPR 23.4 to call those witnesses herself, which may have been what has happened here, and/or give notice of her intention to challenge the credibility of such witnesses under FPR 23.5.  If it was found that the witnesses need not attend then Ms Young would still have had the option of asking that the Court gives reduced weight to the evidence set out in the statements under section 4 of the Civil Evidence Act 1995. This would have still be the case in the event that any of the witnesses failed to turn up which would have been a very risky thing to do if the Court had ordered them to attend as this would put them in breach of a Court order.

Why so risky?

There can be no doubt that the Family Courts are taking breaches of Court orders more seriously these days and indeed Mr Young himself has already spent time in prison earlier this yearfor failing to comply with a Court order which stipulated that he had to provide financial disclosure to his wife. This trend is no doubt set to continue following Sir James Munby’s comments in his 7th View from the President’s Chambers where he said that attitudes to orders made by the family courts were “slapdash, lackadaisical and on occasions almost contumelious.” He went on to say that “The court is entitled to expect – and from now on will demand – strict compliance with all such orders.” These comments are aimed at everyone involved in the family law process including public bodies, parties and non-parties to proceedings and these sentiments were further spelled out by Sir Munby in his judgment in the recent cases of Re W (A Child), Re H (Children) [2013] EWCA Civ1177 in which he said “Non-compliance with orders should be expected to have and will usually have a consequence”. The message is far from ambiguous and there have been other recent decisions where there have been serious consequences for contempt of court:

• Re Davies [2013] EWHC 3294 – A mother had removed a child from the jurisdiction and her parents and her sister were ordered to provide information as to their whereabouts. Mr Justice Keehan found that each of them had lied to the Court and / or failed to provide information in accordance with Court orders and found them in contempt at a hearing on 25 October 2013. The parents and sister were remanded in custody until the sentencing hearing on 31 October 2013 by which time the daughter had heard what had happened and agreed to return to the jurisdiction with the child (a factor which weighed heavily in their favour). They were each sentenced to 12 days in prison, to serve 6 of which time served would count. Keehan J indicated that, had the daughter not been located and agreed to return, the mother would have been looking at months in prison (See Brown v Davies ([2013] EWHC 3523 (Fam) for sentencing judgement).

• Ball v Shepstone [2013] EWCC 7 (Fam) – A father was found to be in contempt for failing to file a Form E in accordance with the terms of a court order dated 15 July 2013. He was due to file the Form E on 12 August 2013 but failed to do so. He was subsequently served with committal proceedings on 16 September 2013, and at a hearing on 03 October 2013, he was found guilty of contempt and sentenced to fourteen days in prison and ordered to pay the wife’s costs.

Being cross examined is not fun, it can be a stressful and unpleasant experience, and it is therefore not surprising that people will try to avoid it if they can. The lesson from the Young case, or at least the most recent lesson, would seem to be that if you are asked to, or are advising someone on, providing evidence in family proceedings then you/they had better be prepared to stand up in court and answer some difficult questions on that evidence. In terms of complying with Court orders, few practitioners would ever advise a client not to comply but the emphasis on the consequences of non-compliance may need to be cranked up a notch in light of these recent developments.

As usual thoughts and comments are welcome.

A final judgment in the Young v Young divorce is expected to be given on Friday, 22 November 2013.

Bankruptcy! Can the Family Court handle it?

Family Law has a tendency to spread its tentacles into other practice areas and bankruptcy is no exception, not least because financial difficulties are often cited as a contributing factor to the breakdown of the relationship but also because the sudden need to support two households can cause cash flow problems.

When a relationship breaks down there can be a lot of mistrust and resentment between the spouses and so it is no wonder that, in the context of financial remedy proceedings, an application for bankruptcy can be viewed as a spiteful attempt to ensure that the money goes to anyone except the ex.  Further suspicion could be aroused when the bankruptcy petition is made by the bankrupt themselves and the creditors are also members of the bankrupt’s family.  This was the scenario in Arif v Zar where the wife, unsurprisingly, made an application for the husband’s bankruptcy petition to be annulled on the grounds that his debts were shams and that he was not balance sheet insolvent as he claimed.  The Family Court cannot look at assets that are not owned by the spouse when making a financial remedy order, so if her application failed then, unless she could demonstrate a significant surplus of assets over liabilities, her claim for a financial remedy would be severely prejudiced.

The recent judgement of the Court of Appeal in Arif v Zar did not look at the details of the husband’s financial position, nor did it consider the merits of the wife’s application for the bankruptcy order to be annulled.  In fact, it only dealt with the limited procedural question of whether Mostyn J had acted within his jurisdiction when he transfered the annulment hearing to the Family Division as he had done at a case management hearing in the family proceedings. The original bankruptcy registrar, Registrar Derrett, had considered the issue of the annulment to be one which required swift resolution and so had timetabled a summary hearing in the Chancery Division.  Mostyn J had considered that it was more appropriate for the matter to be dealt with in the Family Division together with the financial remedy hearing (avoiding multiplicity of hearings) and so had transferred the proceedings under CPR 3.1(7).  In the family proceedings the husband (and the wife of course) would have been subject to a higher level of disclosure and could have been subjected to cross examination which would not have been the case at the summary hearing because Registrar Derrett had not ordered it.  The Court of Appeal held Mostyn J did not have the powers to make such a decision as there had been no material change of circumstances since Registrar Derrett’s decision and any appeal would have to be made in the appropriate court.

So was Mostyn J a little too keen to take this matter out of the hands of the Chancery Division, and in doing so overstepped his judicial limits?  Or was Registrar Derrett reluctant to let a matter involving the Insolvency Act 1986 go to the Family Division.  After all, the circumstances where the Insolvency Act 1986 and the Matrimonial Causes Act 1973 clash are not uncommon and judicial confusion as to where best to resolve such issues is to be avoided. It is perhaps no wonder then that the Court of Appeal took this opportunity to give some useful guidance as to how bankruptcy registrars should deal with annulment applications that arise in conjunction with matrimonial proceedings.  In his judgement, Lord Justice Patten said (at paragraph 21):

• Registrars should be “alive to the real possibility that a spouse may attempt to use the protection of a bankruptcy order as a shield” in financial remedy proceedings; and 
• Where there is credible evidence of such an attempt then Registrars should not be afraid to use their powers to:
• order full disclosure;
• order witness attendance and cross examination; and
• consider whether a transfer of proceedings to the Family Division would be the most appropriate way to determine the issues and save costs.

In conclusion, he said that the court will have to “balance the need to secure justice for the spouse against the need to ensure that all issues in the bankruptcy proceedings are resolved at a minimum cost to the creditors”.  So the Family Division can look at matters involving the Insolvency Act 1986 but the discretion to transfer lies with the registrar in bankruptcy or the Chancery Division judge.  If there is any dispute as to how that discretion was exercised then an appeal should be lodged against the decision before proceedings could be transferred. Something that family practitioners, and judges, should be aware of when dealing with such cases.

Everything I have, with you I share...

...except my bank statements, my diary and the vintage Porsche I haven’t told you about.

Should married couples share everything?

A recent internet statistic claims that one third of people would be willing to snoop on their partners to see if they are having an affair.  But what if you’re after more than evidence of an indiscretion?  If partners are willing to snoop to discover the true extent of their other half’s social exploits then what about their financial exploits?

The law recognises the need for privacy and confidentiality, even against one’s spouse.  The subject was considered in the much publicised case of Imerman [2010] EWCA Civ 908 which went to the Court of Appeal. In that case Lord Neuberger MR stated that:

“The notion that a husband cannot enjoy rights of confidence as against his wife in respect of information which would otherwise be confidential as against her if they were not married, seems to us to be simply unsustainable.” (para 82) and

“Subject of course to the court being satisfied that the normal equitable principles would otherwise be in play, a claimant is not to be denied equitable relief merely because the defendant is, or has obtained the material or information in question from, his or her spouse.” (para 85)

In other words, if a spouse gathers evidence surreptitiously, their other half will still have all the remedies available to them which would exist had their spouse been a complete stranger, such as ‘breach of confidence’, ‘theft’, or ‘offences under the Computer Misuse Act 1980’.

The equitable relief that Lord Neuberger was referring to in Imerman was the return of hundreds of thousands of documents that the wife’s brothers had stolen from the husband’s computer.  These documents were confidential to the husband, and the wife had no more right to retain them than the husband would have had to retain a copy of the wife’s personal diary (assuming she kept one).

So, there exists a right to confidentiality between spouses (which I am sure many people will be very relieved to hear) but what happens when the parties separate and there are financial proceedings on foot?  The Court requires both parties in proceedings to give full and frank disclosure of their financial circumstances.  Documents, including bank statements, asset portfolios and property valuations, which can be kept secret during the marriage, must be laid bare.  This did not help the wife in Imerman as it was held that the fact that the husband would have been under an obligation to disclose the disputed documents was not relevant to the principle of confidentiality.  Interesting then, that a couple who are going through a divorce owe each other a greater obligation to disclose their financial affairs than a couple who is happily married.  

Should the same level of financial disclosure exist within a marriage as on divorce?   After all, it is not just the assets which couples are keeping from one another but debts too, £41billion according torecent reports.  Such dishonesty could lead to bankruptcy, and further financial consequences for the whole family, so perhaps there is an argument for saying that spouses must share such information with each other?  It does still leave the problem of actually obtaining the information as, even if spouses were obliged to share their financial position with one another then, according to Imerman, a spouse who sought to obtain information from their other half through dishonest methods could still be breaking the law.  The only solution would be to remove the principal of confidentiality against one’s spouse and the Courts have made it quite clear that they are not prepared to do that.

If you’d like to read more on this topic then Mr Justice Mostyn gave an excellent analysis of marriage and the economic relationship between spouses in his address to the All ParliamentaryGroup on Family Law in 2010.

Don’t be shy!  Tell me what you think.