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.

UPDATE: Non-Disclosure in Financial Remedy Proceedings

In November 2012, I wrote about Non-Disclosure inFinancial Remedy Proceedings. The question I was posing was whether the family courts were doing enough to discourage parties in financial remedy proceedings from failing to provide financial disclosure. The cases I looked at, which included Young v Young [2013] EWHC 34 (Fam), Petrodel Resources Ltd& Ors v Prest & Ors involved the Courts having to make decisions in contested hearings. Two recent decisions of the Supreme Court look at what the correct approach is when a settlement is reached outside of court and non-disclosure is discovered at a later date.

In my previous post I set out the basis for the obligation to provide full and frank disclosure and set out some of the consequences for those parties who refused to comply:

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.

The Supreme Court’s decisions in Sharland v Sharland [2015] UKSC 60 and Gohil v Gohil [2015]UKSC 61, confirms that there is a further consequence to non-disclosure. Both cases involved wives who had given up their entitlement to a full hearing of their financial claims and had instead reached an agreement with their respective husbands as to how much they would receive. It later emerged that both husbands had fraudulently withheld information that was relevant to their financial position at the time those agreements were reached and considered by the Court. In both cases the Supreme Court ruled that the original orders should be set aside.

The cases also confirmed that the duty to provide full, frank and honest disclosure is not only central to any agreement being valid but is a duty owed to the Court which cannot be eroded or vitiated by agreement or subsequent events.

In any event, it would seem that the massage from the Supreme Court is clear. Non-disclosure will not be tolerated in financial remedy proceedings!

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.

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).

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!