UPDATE: Shooting Tigers in a Barrell - Court of Appeal Decision

The Court of Appeal has made a ruling on the case of Quan v Bray and Others [2017] EWCA Civ 405. The case involved a dispute over a trust, known as the Chinese Tigers South African Trust, which had been set up in 2002 by a husband and wife to help repopulate Chinese tigers to the wild. The couple subsequently separated and the wife issued a claim for a financial remedy in divorce proceedings. She argued that the trust, which held approximately £25m in assets at the time, was nuptial in nature and could therefore be considered a resource available to the parties from which her financial claims could be met. There were minimal matrimonial assets outside the trust so this question was fundamental to outcome of her claim.

 

In 2014, Sir Paul Coleridge found against the wife concluding that the trust had been set up for the benefit of the tigers and not to support the couple financially. The wife sought to immediately challenge the finding through a Barrell application which was the subject of a post on this blog. She was unsuccessful and drew criticism from the judge for trying to “have another go” without going through the correct procedure.

 

Unsurprisingly then, the wife appealed Sir Paul Coleridge’s decision and the Court of Appeal handed down its decision last week. Lady Justice King delivered the leading judgment in which she considered whether Sir Paul Coleridge had provided adequate reasoning for his finding, whether or not he had dealt with all of the relevant issues and, if not, whether his conclusion would have been different. King LJ was cautious about the shortness and lack of detail contained in the original judgment, stating:

“Whilst economical judgments are to be applauded, it is hard to resist a submission that this judgment, if not actually short of background and of analysis of the surrounding arguments, was perilously close to it.”

Notwithstanding this comment, the wife’s appeal was dismissed. The Court of Appeal found that the wife had not successfully challenged the original findings and, as such, the trust was not nuptial in nature and therefore not available to the parties on the divorce.

The status of the trust was a preliminary issue which has taken years to get to this stage at considerable financial cost. King LJ referenced over £3.5m in legal costs with £340,000 alone spent on the wife’s appeal. If this is the end of the matter then the wife’s financial claim can proceed to be determined without reference to the funds in the trust. That said, given the wife’s determination in this case so far, it would not be surprising if this case were to find its way to the Supreme Court.

The original post on the case can be found here.

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.

Privacy v The Press: When can divorce proceedings become public knowledge?

We are entitled to a certain amount of privacy. This is enshrined and supported by Article 8 of the European Convention on Human Rights.

The act of marriage itself though is not private. It must take place in a public building, notice must be given and witnesses must be present. Beyond that, however, no one else is entitled to know the details of how a couple conduct their marriage unless, that is, they choose to share them or they live out their private lives in the public sphere.

Divorce also requires a certain amount of publicity. Court proceedings must be started and the marriage is brought to an end first by the grant of decree nisi and finally by the granting of a decree absolute at least six weeks later. Information on the making of these orders is available to the public. The procedural side of a divorce is seldom contentious with court proceedings relating to the division of finances or child care arrangements being much more likely.

Financial proceedings require a comprehensive and invasive look into the financial lives of both parties. The standard of disclosure is high. The Court requires a full, frank and honest picture of the parties economic life to be able to adjudicate on a fair outcome. The standard format to provide this disclosure (Form E) runs to 28 pages and requires documents to be attached which include recent payslips, banks statements and pension information.

In order to protect the parties’ right to privacy, financial proceedings are heard in private but there are circumstances in which they may be opened up. These were considered by Mr Justice Mostyn last year in Appleton & Gallagher v News Group Newspapers and PA [2015] EWHC 2689 (Fam).

The case related to the financial proceedings in the divorce of Nicole Appleton and Liam Gallagher in which they jointly made application to exclude the press from the financial proceedings. There was a great deal of public interest in their divorce due to the celebrity status of the couple. In the case of most divorces the press will have little interest in attending a hearing but when celebrities divorce the case is very different. Mostyn J reviewed the legal position and frame work for considering when the press should be allowed access to such proceedings and, if so, to what extent.

The legal position is found in Family Proceedure Rule 27.11 which states that all hearings are held in private, this prevents the public from attending. FPR 27.11(2) provides a list of who may be present at these private hearings, which includes “duly accredited representatives of [the press]”. It should be noted that the court also has the power to exclude any member of the press, or indeed anyone else, if it sees fit (FPR 27.11(3)).

The press are also limited as to how they report the case. It is a contempt of court if they repeat outside of court anything that is said before the court. This applies to the parties as well. The press are also not allowed access to any documents. So the parties can be assured that journalists will not be able to go through their bank statements. Indeed, Mostyn J commented that, when the press is allowed to attend a hearing, their presence is more akin to that of an observer or watchdog.

What then of the judgement itself? Matrimonial judgments do not have to be made public by virtue of the Judicial Proceedings (Regulation of Reports) Act 1926. Such judgments can contain a great deal of personal information which would undoubtedly be an invasive breach of the right to privacy of the parties. That breach is not, in itself, a bar to judgments being published. The court must balance the parties’ right to privacy against the right of freedom of expression. In family proceedings a great deal of weight is given to the right of privacy but this can be countered where:

• one or both parties have acted with iniquity and sought to use the press to their advantage (Lykiardopulo v Lykiardopulo [2010] EWCA Civ 1315);
• there already exists a great deal of information in circulation about the case, perhaps from previous proceedings (Young v Young [2013] EWHC 3637); or
• the information in the public domain is incorrect and it is in everybody's interests for this to be corrected (McCartney v McCartney [2008] EWHC 401 (Fam))

These issues do not just apply to celebrities. Shortly after his decision judgment in Appleton& Gallagher, Mostyn J made public a judgment in financial proceedings which involved no element of celebrity and no information about the case was already in circulation. The case was Veluppillai & Others v Veluppillai[2015] EWHC 3095 (Fam) which involved a husband who was a litigant in person and whose conduct throughout the case had been particularly bad. At paragraph 17 of his judgement Mostyn J stated:

“There is no doubt the husband's misconduct has been at the extreme end of the spectrum. It is in the public interest for his conduct to be exposed. The public should be aware of the scale of problems that courts administering justice and implementing the rule of law have to face at the hands of unrepresented and malevolent litigants determined to do everything they can to destroy the process. I appreciate that the wife, who is wholly innocent, will lose her rights to privacy by virtue of this judgment being published without anonymisation but in my opinion the public interest in the whole truth being known outweighs her privacy rights.” 

This shows that, when considering whether or not to publish a judgment, the balancing act is not just between the right to privacy and freedom of expression but also extends to the public interest and can be applied to any case being considered by the courts.

Arguably, there will always be some uncertainty as to what private information may be made public if a case goes to a final hearing. Different approaches between judges adds to that uncertainty and there are calls for further guidance to clarify the position. If nothing else, this issue highlights the benefits of resolving financial claims outside of court.

This post is based on an article written for the Spring Law Update, February 2016. You can read the original article here.

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 28^th 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?”

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.