Kernott v Jones is a case arising from a family break-up, but because the parents cohabited and never married, it is being dealt with in the Chancery Court where “touchy feely family law” and “reasonable needs” have no place. (That is one reason why I continue to argue for specific legislation for cohabiting couples. It would avoid any more cases such as Kernott v Jones. Instead, such cases would be returned to the Family Division, where they properly belong.)

The facts of the case are as follows:

• Mr Kernott and Ms Jones began living together in 1983 and had two children.
• In 1985 they jointly bought a home together for £30,000. Ms Jones paid the £6,000 deposit, and the rest was obtained with a mortgage. At that stage she should have protected herself by having a declaration of trust drawn up, and perhaps
  that would have avoided the subsequent legal battle, but it didn’t happen.
• Mr Kernott paid for a property extension, which increased the value of the property by £10,000. The couple added a further £2,000 to the mortgage.
• Mr Kernott and Ms Jones split up in 1993. At that point both parties beneficially owned the property in equal shares. They
  also shared the proceeds of an endowment policy equally.
• Fourteen years passed. Mr Kernott bought another home
  for himself. Ms Jones, who remained living in the original property, paid all of the outgoings on the property. She also raised the
  couple’s two children without any contribution from Mr Jones.
• In 2007, Mr Kernott sought to obtain his 50 per cent share of the original property.

• The questions for the court: has Mr Kernott and Ms Jones’ beneficial interest in the property altered since their separation – and if so, when did this happen and how?

In two lower courts, Ms Jones’ share of the property was adjusted to 90 per cent. Mr Kernott’s share was reduced  to 10 per cent, in line with the House of Lords decision in the case of Stack v Dowden.

In Stack v Dowden, a home was owned jointly by an unmarried couple but their beneficial interests in the property were not stated in the conveyance when the property was purchased. The House of Lords had to decide whether or not the parties’ interests were 50:50. In that case the interests were held to be 65:35.

Lady Hale – now a Supreme Court justice, of course – was generally agreed to have given the leading judgment with which all the other judges concurred. She referred to the common intention to vary their beneficial ownership.

But if there is nothing in writing, how does such a variation come to be? The answer: it is to be inferred…

Kernott v Jones in the Court of Appeal

However the Court of Appeal, took a more conservative view, criticised Stack v Dowden and with reference to a judgment of their own called Oxley v Hiscock, held there was no evidence of any common intention to alter the 50:50 ownership of the property in the case of Kernott v Jones.

All that was left to do was an exercise called equitable accounting, to offset relevant payments by Ms Jones to relevant entitlements of Mr Kernott, such as rent, for the occupation of “his” property.

It was at this point that Ms Jones appealed to the Supreme Court.

Kernott v Jones in the Supreme Court

Firstly, it is worth noting that when Kernott v Jones was heard by the Court of Appeal, the leading judgment was trenchantly handed down by Sir Nicholas Wall, who is now the President of the Family Division. For this reason, the Supreme Court may also follow the conservative line that there was no “common intention” to alter beneficial ownership from anything
other than 50:50.

However it is also worth noting that the Court of Appeal’s decision in Kernott  v Jones was not unanimous. So let’s take a look at the dissenting judgment of the Court of Appeal’s Lord Justice Jacob, who argued against the majority view, and consider what the Supreme Court may make of his opinion.

In the case of Kernott v Jones, the law was stated and applied by Lord Justice Jacob in the following  steps, quoting Lady Hale in the case of Stack v Dowden (my explanatory notes below):

(1) Whether property is held legally by one party or the other or is held jointly, the presumption is that the beneficial interest corresponds to the legal interest.

-          This means that the parties own the property equally.

(2) In particular: “In the domestic consumer context a conveyance into joint names indicates both legal and beneficial joint tenancy, unless and until the contrary is proved”

-          So remember: if you are cohabiting, you buy a property jointly with your partner and you don’t want the presumption of 50:50 to apply, you MUST do something about it at the time of purchase. Get your solicitor to prepare a simple Declaration of Trust, which will mean you won’t end up in this type of litigation nightmare.

(3) The burden lies “on the person seeking to show that the parties did intend their beneficial interests to be different from their legal interests and in what way”

-          If you want to argue that there was an intention to alter the 50:50 split, then it is up to you to prove it.

(4) Moreover the onus is heavy.  ”At the end of the day, having taken all this (including the host of factors mentioned by Lady Hale in cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual

-          And it won’t be easy!

(5) The legal test can be stated shortly: “The search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it”

-          The court will look at everything that happened to decide if how and why it altered.

(6) The exercise of finding whether there were shared intentions and if so what they were is not easy.  It involves a multifactorial examination of the circumstances.

-          This is what the court will do.

Lord Justice Jacob went on to quote a lengthy excerpt from Lady Hale’s leading judgment in Stack v Dowden, which I have copied here in full for reasons that will become clear:

In law, “context is everything” and the domestic context is very different from the commercial world. Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties’ true intentions. These include: any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the home was acquired in their joint names; the reasons why (if it be the case) the survivor was authorised to give a receipt for the capital moneys; the purpose for which the home was acquired; the nature of the parties’ relationship; whether they had children for whom they both had responsibility to provide a home; how the purchase was financed, both initially and subsequently; how the parties arranged their finances, whether separately or together or a bit of both; how they discharged the outgoings on the property and their other household expenses. When a couple are joint owners of the home and jointly liable for the mortgage, the inferences to be drawn from who pays for what may be very different from the inferences to be drawn when only one is owner of the home. The arithmetical calculation of how much was paid by each is also likely to be less important. It will be easier to draw the inference that they intended that each should contribute as much to the household as they reasonably could and that they would share the eventual benefit or burden equally. The parties’ individual characters and personalities may also be a factor in deciding where their true intentions lay. In the cohabitation context, mercenary considerations may be more to the fore than they would be in marriage, but it should not be assumed that they always take pride of place over natural love and affection. At the end of the day, having taken all this into account, cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual.

But here’s the crux…

Lord Justice Jacob also pointed out that intentions can change over the years.

This possibility was also acknowledged by Lady Hale in Stack v Dowden, when she stated:

There may also be reason to conclude that, whatever the parties’ intentions at the outset, these have now changed. An example might be where one party has financed (or constructed himself) an extension or substantial improvement to the property, so that what they have now is significantly different from what they had then.

Therefore when Kernott v Jones was heard in the Court of Appeal, Lord Justice Jacob found that the county court judge who had previously ruled on the case had not made an error in law.

The county court judge had stated:

Having established that principle I have to consider what is fair and just between the parties bearing in mind what I have found with regard to the whole course of dealing between them

Lord Justice Jacob commented (emphasis mine):

If this were a free-standing passage it might be arguable that the Judge was applying the wrong test – one of just deciding what was “fair and just”. Such an approach would be inconsistent with the “parties shared intentions” test of Lady Hale and, incidentally also inconsistent with a resulting trust analysis.   But the passage is not free-standing.  It follows repeated references to Stack and the need to discern the parties’ intentions.    So I do not think the Judge was at this point simply abandoning Stack.  What he is saying in context is that the parties’ shared intentions must be taken to be (they can be “inferred or imputed”) is that they should each have a fair and just share.   That is what the Deputy Judge also thought.
Accordingly I conclude that the Judge made no error of law.

Therefore it was on the facts, and in accordance with the law, that Lord Justice Jacob found the original judge was “rightly and in accordance with Stack, still focussing on the parties’ intentions.   He is saying they have changed over the years.   That is just what Lady Hale contemplates as a possibility [in Stack v Dowden].”

Lord Justice Jacob concluded (again, emphasis mine):

If one asks oneself how did these matters come to be, it is not impossible to conclude that they did so by a shared intention that the parties’ interests in the house were to vary over time, rather than that his interest as a proportion of the value of the house should remain fixed and immutable.   It is possible to infer or impute such a shared intention. And the Judge, having seen and heard the parties was in a better position to decide the matter – and particularly the intentions of the parties – than we are.

Accordingly I would not interfere with Judge’s conclusion.   It is not necessary or correct for this court to consider the matter afresh.   I would dismiss this appeal.

So what can we conclude about Kernott v Jones?

In law, can Mr Kernott and Ms Jones have started out intending to own the property 50:50 legally and beneficially, but intended their beneficial ownership to change following their separation? And if so, how?

I will leave you to make up your own mind, while pointing out that in the absence of an express Declaration of Trust, four courts have gone through the tortuous process of analysing in detail what actually happened between the two parties with regard to the ownership of their house. The answer is not cut and dried, but I hope that I have provided some food for thought.

To date two courts – the county court and the high court – have found for Ms Jones, notwithstanding the fact that nothing was in writing. One court, the Court of Appeal, has found for Mr Kernott. All three courts purported to apply the same law to the same facts.

And now for the fourth court, the most important court of them all. What will the Supreme Court decide? We cannot know, but it is to be hoped that the judgment will clarify the law, and apply it to the facts.

When you read all about it tomorrow, I hope this background proves useful. Perhaps the Supreme Court will concur with the Court of Appeal, in which case the decision will be described as all too predictable. But don’t be taken aback if there are surprises in store…

We are going to examine the interaction of three recently published cases:

• Schofield v Schofield
• Traversa v Freddi
• Chandler v Chandler

We will also be looking at the Supreme Court’s decision in Agbaje v Agbaje. And if that isn’t enough, we’ll throw in CG v IF, a High Court case involving a divorce in Switzerland, for good measure!

Overseas courts and English pensions: Schofield v Schofield

From little acorns, big oak trees grow. Thus it happened in Schofield v Schofield, which recently made it to the Court of Appeal and was reported at the weekend. I do not doubt that this relatively small money case will have a substantial impact on the outcome of many transnational cases, which will probably involve assets of far greater value. I also believe that it has set out fundamental principles for lawyers to consider when dealing with English pensions, all over the world.

Schofield v Schofield has been reported at the same time as two other Court of Appeal cases, Traversa v Freddi and Chandler v Chandler, and I think it is fair to say that those two cases have contributed to its impact.

On the face of it, Schofield v Schofield involved relatively little in terms of assets or principles. A British Army soldier, serving in Germany, divorced in Germany. He had been married to a German woman, and the couple had three teenage children. The only capital the parties had, some £87,000, was divided equally in Germany. The German court had power only to order an equal capital split.

The wife worked in a chemist shop, earning a modest income. The husband was left with his own income, his share of the capital plus… his Army pension. This had a fund value of £280,000, but the German court acknowledged that it had no legal power to deal with it.

Overseas courts do not generally have jurisdiction over English pensions. This is a big problem for anyone divorcing abroad, where one of the assets is an English pension and potentially the most valuable asset of all, as in this case. It is one of the considerations to take into account when deciding whether to divorce abroad or in England or Wales. Equally it is a problem when the divorce is taking place in England and the pension is elsewhere, so it needs considering very carefully.

In Germany, the husband had thus managed to hold onto his pension. The wife didn’t give up – as the German court clearly intended she should not. However she had to come here to England for her remedy.

At first instance in this country, when the wife applied for leave to proceed for a pension share, her application was unsuccessful.

In another case, CG v IF (2010), Mr Justice Mostyn had already stated that in order for leave to be granted, an application had to be shown likely to succeed:

“In my opinion a solid/substantial ground will be shown where the court can confidently say that the probability is greater than or equal to 50 per cent that the applicant will achieve a substantive order were the matter to be tried.”

In Schofield v Schofield, Mr Justice Mostyn took the view that the income produced if a pension share occurred would be “paltry” and  was unlikely to have affected the original overall settlement in Germany. Accordingly he dismissed the wife’s application for leave to proceed in England, under Part III of the Matrimonial and Family Proceedings Act 1984.

Was Mr Justice Mostyn right? Er… no!

It is worth reading the law in Part III because it sets out, in chronological order, who can apply for a “second bite of the cherry” in England following foreign matrimonial proceedings.

Here is the procedure. Leave of the court is first required and is given ex parte without the other side knowing or being present. In giving leave, the judge must be satisfied that there is a substantial ground for the making of the application for the order. Let’s take a look at how it works in practice.

More than a “good arguable case”: Agbaje v Agbaje

Agbaje v Agbaje is a case about which I have written previously. Heard in the Supreme Court in 2010, it involved a husband and wife who were married for 38 years. They both had British and Nigerian citizenship, and the wife had lived in London since 1999. The couple divorced in Nigeria in 2005 and, out of assets of about £700,000 the wife was awarded about £21,000 and a property in Lagos.  She sought a “second bite of the cherry” in England, and the Supreme Court ruled in her favour.

When Agbaje v Agbaje was heard in the Supreme Court, Lord Justice Collins set out the threshold to be crossed before leave to proceed is granted:

“The principal object of the filter mechanism is to prevent wholly unmeritorious claims being pursued to oppress or blackmail a partner. The threshold is not high, but is higher than ‘serious issue to be tried’ or ‘good arguable case’ found in other contexts. It is perhaps best expressed by saying that in this context ‘substantial’ means ‘solid’.

Note that he made no reference to a “50 per cent” probability of success.

Assuming there is a “solid” claim, the Statute then sets out jurisdictional requirements to be considered, which means that the proposed applicant needs to satisfy the court that the court has jurisdiction based on domicile, or habitual residence or because there is a former matrimonial home in the jurisdiction. Then there is the duty of the court to consider whether England and Wales is indeed the appropriate venue. Section 16 (2) of the Matrimonial and Family Proceedings Act 1984 sets out the considerations for the court to take into account.

If all is well, leave is granted, the case goes to a hearing and the available remedies are those available to divorcing parties in this country.

Once granted, it is very difficult to set aside unless, in the words of Lord Justice Collins, a “knockout blow can be delivered”. In all other cases, an application to set aside will be heard at the same time as the full hearing.

(NB. Important warning to any would-be applicants: don’t remarry before you proceed or you won’t be able to do so!)

Part III is brief and isn’t difficult to understand. If you read it, however, you will not find Mr Justice Mostyn’s approach there. This omission was noted by their eagle-eyed Lordships in the Court of Appeal, led by Lord Justice Thorpe, who cross-compared Mr Justice Mostyn’s approach with the higher authority of Lord Justice Collins and declared it a no contest. So in the case of Schofield v Schofield, leave was granted.

Leave refused, then granted: Traversa v Freddi

The Court of Appeal, again led by Lord Justice Thorpe but sitting with Lord Justice Munby, was coincidentally giving judgement in another, very similar case at the time. Traversa v Freddi was a case involving a wealthy woman and a restaurateur from a relatively modest background who signed a prenuptial agreement in Italy, married there and divided their time between Italy and England. The marriage ended after 20 years and the couple divorced in Italy.  After the husband was ordered by an Italian court to pay his former wife maintenance and vacate the family home in London, he applied to the court in England for leave to vary the settlement.

When the case came before Mr Justice Bodey, he refused leave to the Italian husband to proceed in this country after the Italian case had been decided, even though it involved the husband’s home in England. Mr Justice Bodey did so because the Supreme Court had not yet handed down its judgement in Agbaye v Agbaje. He therefore applied the law as it was, not as it now is.

The Court of Appeal allowed the appeal in Traversa v Freddi and spent a good deal of time rebuking Mr Justice Mostyn for his approach in CG v IF. Lord Justice Munby described that approach as “doubly wrong”.

The Court of Appeal does not mince its words! Instead, in proper English fashion, it delivers caustic rebukes in elegant style! In Schofield v Schofield the Court of Appeal referred to Mr Justice Mostyn’s “gloss” and “trenchantly rejected” his interpretation of the requirements of the law.

Schofield v Schofield: a return and reversal

The Court of Appeal’s reversal of the decision in Traversa v Freddi provided one immediate reason to reverse the decision in Schofield v Schofield. The Court of Appeal also took the view that when compared with the £87,000 capital, the pension was in fact very significant.

So despite Mr Justice Mostyn’s conclusion, Schofield v Schofield eventually passed Lord Justice Collins’ test of “solidity”.

Perhaps more importantly for lawyers who followed the case with interest, Lord Justice Thorpe also made it clear that the case raises an important policy point:

“It does seem to me very important that, where a pension is rooted and funded within jurisdiction A and where the divorce is to be pronounced in jurisdiction B, with all ancillary issues decided according to the law of state B, it is very important that there should be judicial collaboration to ensure that the applicant in state B is not deprived of her entitlement to share in the pension rooted and funded in state A.  This case is a good example of one in which the German court has sought international collaboration and has implicitly called upon the English court to determine any issue of pension equalisation.”

This, it seems to me, is exactly what Lord Justice Thorpe has done throughout his career, particularly as head of the Family Justice Council. He has worked extremely hard to forge relations across the world with other judges and courts so that seemingly barred doors have been opened to obtain swift and, where appropriate, reciprocal justice for litigants.

The limits of cooperation: Chandler v Chandler

In Schofield v Schofield the German courts were looking to the English court for assistance, and we cooperated and provided that assistance. But let’s not get carried away. Cooperation has judicial limits. It does not mean we will ever go so far as to apply another country’s own law and perhaps save everyone the (extremely expensive) need to have two sets of court proceedings in two countries. In England and Wales we are committed to applying only the lex fori: the law of the country in which the case is heard.

The third of our recently published cases is Chandler v Chandler. In this case Lord Justice Thorpe, sitting alone, upheld the decision of Mrs Justice Baron and firmly declined to apply the law of Gibraltar to a divorce case:

“It is a very important feature of our relationship with the developing family law of Europe that we tenaciously uphold our principle that only the lex fori applies in the courts of England and Wales.  We have exercised our right to abstain from developing European family law that would require us to apply the law of some other jurisdiction.”

So Germany applies its law and we will apply ours. England and Wales will cooperate and we expect other courts to cooperate with us. That is as good as it gets. Unlike certain other countries, we do not routinely apply others’ laws to cases heard here. But is this right? That is a question for another post…

This post was selected for the 20^th March 2011 edition of Carnival of Wealth, hosted by Value Stock Guide and Carnival of Money Stories #98 – St Patrick’s Day Edition, hosted by Money Thinking.

However when I wrote my article on the observations by Mr Justice Charles in Jones v Jones of the many ancillary relief issues, which are still at large in this area of the law, I did so with the intention that the judgment – while a difficult case for any busy lawyer to disseminate because of its substantial length – should nevertheless be made more accessible and understandable, if only by summary, because of the importance of many of the views expressed by this senior family law judge.

Of course the Court of Appeal has, not for the first time, emphasised that long judgments can be counterproductive for other reasons. Not least of these can be the additional costs occasioned thereby upon an appeal, which has to grapple with the many issues covered, most of which may not have been central to the decision under appeal before the Court.

As Marilyn recently pointed out in her post about Jones v Jones, the criticism of the Court of Appeal about the costs incurred (in the Jones case it was £1.7 million), in the pursuit of the “fair” judgment concerning the division upon divorce of the parties resources, has been a constant theme of judges at all levels for a number of years.

Within the profession, it is often privately observed that there is a feeling of hypocrisy engendered by such remarks, sometimes from senior judiciary whose own, often illustrious careers, attracted in fees no little financial reward themselves.

Indeed, once when in the company at lunch of a very eminent judge, I was obliged to enquire, when he made similar observations about the profession’s fees, whether I was right that he had previously appeared as counsel in certain well known “big money” cases and whether he had complained that his fees had been too high at the time. To be fair, he replied that he accepted his comments may be seen as somewhat hypocritical. This was at least a relief for my colleague, who was sitting between us and who appeared to be having, at this point, “severe indigestion” over his salad – or was he trying really to hide beneath those lettuce leaves?

Section 25

The elephant in the room in all of these debates is, I would suggest, the system itself and, in particular, the statutory divorce provision, section 25 of the Matrimonial Causes Act 1973.

Yes, the section in its language has been able to envelop nearly 40 years of change in a society which has moved from observing divorce as an admission of failure to, for some, a lifestyle badge or a ticked box. Indeed, it has remained able to take account of the increasing recognition of ante-nuptial agreements without urgent amendment being required.

However in reality, the section contains one of the widest discretionary exercises known to our law and requires divorcing couples not only to seek legal advice to explain the court’s approach under the statute. In many cases, it forces the parties with such advice to disagree as to the likely outcome of a trial on the issues between them.

Can it be right that the man and woman in the street, when reading section 25, will gain only a superficial understanding as to how the court is likely, eventually, to determine their resources distribution on divorce ? Is it fair that in any Court Centre up and down the land, the best that can be said to clients is that Judge A or Judge B could come to different conclusions about various fundamental issues, but that they, as clients, should rest assured that whichever judge determines their case, his or her decision will remain within a band of reasonable outcomes which either judge would have hit upon?

Of course, as practitioners, many of us have known for years that there has been a void in the system in certain areas of the country of an effective appeal route when the district judge has, in the decision reached, stepped outside that reasonable band of decisions that should have been made. Hopefully in this regard, the “Money Judge” scheme being tried on the Northern Circuit will finally address this problem and ensure that at the Circuit level, there are judges available with the required “recent experience” of ancillary relief work as practitioners. They can confidently take some of the heavier ancillary relief cases at first instance and a regular diet of appeals from district judge decisions, without the client having to incur the costs of appeal to the higher courts or having to just bite the bullet of a bad decision.

Returning to the theme of the costs from the lay client’s point of view…

Why cannot he or she understand the law on divorce by reading the section alone ? Why does the client have to obtain legal advice for an explanation? Why can there not be a presumption (see the Court of Appeal’s comments in Charman v Charman (2007) EWCA Civ 503) within the section as to the division of resources between the parties when there has been a marital breakdown? Is it really acceptable that it has been the position to date, by the process of case law precedent and not by statute, that rich people’s divorces shape the principles of the ordinary man and woman’s rights upon divorce? Indeed, is it acceptable that the wealthy have to fund the progression of our divorce law principles in the first place!

Like Lord Justice Wilson in Jones v Jones, I agree that the law may not be as complex as a first reading of Mr Justice Charles’ long judgment would indicate. Nevertheless, nor is the law in this area as uncomplicated as Lord Justice Wilson suggests. The fact is that the law of divorce resource distribution is not simple enough at its core, namely at the point of section 25 which, we are repeatedly reminded, is the source of every judicial journey when dividing divorce assets and incomes.

Furthermore there is now – with the absence of any Calderbank procedure of “without prejudice” offers, which can later be produced to the court or some other like procedure – no real incentive for the parties to present before any contest other than their respective “best case scenarios” under the “open offer” requirement at the 14 day and 7 day points before the trial.

What increased costs are thrown away by this inherent lack of incentive in the present system? Surely, it is time for any such required “open offers” to be moved from their present timing to no later than 14 days after the Financial Dispute Resolution hearing. It is also time for any final contest judge to be able to consider the reasonableness of such “open offers” in any costs order application made after judgment has finally been given.

Costs are rising

Certainly, my own experience in everyday practice has been that costs are increasing and, in certain cases, have indeed got out of control. In addition, there remains a lack of appetite at times for the court itself to enforce its own direction orders. Time frames ordered are slipping without costs penalty. There also appear to be a greater number of cases which are contested to a final hearing than previously. These factors, if not just local but reflected across the country, may well indicate that a more “root and branch” reform of our law on divorce is now required.

The client is entitled upon divorce not only to a fair outcome, but also a fair system which gets him or her to the judgment seat and a better assurance that, should the case be contested, the “fair” outcome is not just in the eye of the particular judge who beholds it. Let the client have, from the statute itself, some better clarity of what he or she is getting into, the likely outcome of the process and the confidence that if the other spouse acts capriciously, there are effective money penalties that will bite.

When the Court of Appeal points the finger at the practitioner or the judge at first instance about the costs position on divorce, as it has now developed, it should take a moment to reflect that there will be three other fingers of that same hand pointing back in its direction!

Ashley Murray is Barrister-at-Law at Oriel Chambers in Liverpool. One of the limited number of senior circuit specialists outside London with a recognised big money ancillary relief practice, he is known for his knowledge and ability in this area of the law.

This post was selected for the 25^th Carnival of Wealth – Valentines Edition, hosted by Personal Dividends.

Staircase image credit: courtneyBolton.

From my latest Solicitors Journal column “Family Business”, 18/01/2011.

Tainted Love

Here’s hoping this year’s fresh Family Proceedings Rules sort out this maddening self-help situation, says Marilyn Stowe

Up and down the country, family solicitors and their divorce clients are making unpleasant discoveries – in more ways than one. Until recently, if a spouse found documentation belonging to the other spouse lying around the house – bank statements, perhaps, or a building society passbook – it was considered lawful to copy and use that material. This is no longer the case – and it gets worse.

The new restriction is accompanied by a warning of the risk of civil and even criminal sanctions against a spouse who resorts to any form of self help. Injunctions to prevent solicitors from acting can also be applied to lawyers with sight or use of what is now considered to be “tainted” documentation.

All this follows the Court of Appeal’s decision last year in Imerman v Tchenguiz. For non-family lawyers, I should explain that Imerman v Tchenguiz is an extreme case of self help in a divorce. Most practitioners will never encounter such a case.

Serious Consequences

Two multi-millionaire brothers raided their multi-millionaire brother-in-law’s property and, without his knowledge or consent, copied and downloaded millions of his confidential documents for use by their sister in her divorce case against him. One of the brothers said that he did it because of fears that their brother-in-law would not give full and frank discovery of his finances.

It was no surprise that the brothers’ conduct was condemned by the Court of Appeal. The unfortunate “kicker” was that the Court took the opportunity to issue an unequivocal condemnation by the court of any form of self help.

The only way to obtain documentation legally is through the court. Of course, this process can easily become disproportionately expensive, risky and ultimately may occur too late, so that justice is never done.

The Imerman decision is having a serious impact on many cases. As practitioners know, few spouses do not have access to some documentation about the other. Fewer still are prepared to dispose of evidence which, they believe, would not otherwise come to light, especially when they fear losing out because of another’s duplicity. In many cases this can be very serious indeed. Clients are uniformly shocked when I advise them that they must return documentation, they cannot copy it, they can only try and remember the details – and that as their lawyer, I am not permitted to see it.

Thus before a case gets under way, spouses suspected of having “tainted” documentation in their possession are being subjected to a trial within a trial, as the court undertakes a balancing exercise to determine if tainted evidence exists, how it was obtained and if it is admissible. Many duplicitous spouses are fighting tooth and nail to keep it out. As the overcrowded court timetable becomes further stretched, the resolution of the case may be prolonged by many months. The legal costs rocket. It is maddening.

Ripping up the rules

As yet there is little jurisprudence on the subject, but there is now a chink of light. This year marks the publication of the Family Proceedings Rules, which come into force on 6 April 2011. They have been compiled into a laudable but herculean 300-page read.

The overriding objective of the Rules, which cover the duties of the parties and the management of each case by the court, is to swiftly, justly and cost-effectively dispose of family cases. This, together with the wider case management powers, may mean that the courts can renew their pragmatic approach to attempts to delay cases and hike costs. If so, some of the problems that solicitors and clients are experiencing could be cut off at the pass.

Much credit goes to the painstaking work of the draftsmen who have, with great expertise, melded the old with the new. We will see how it all works. In the meantime, I am not the only family solicitor who is eager to see how the new Rules will affect a current situation that is nothing short of farcical.

Marilyn Stowe is the senior partner at Stowe Family Law. She blogs at www.marilynstowe.co.uk.

The New York billionaire Leona Helmsley was nicknamed “The Queen of Mean” and once said, famously, that “only the little people pay taxes”. Those words came back to haunt her. She discovered that in the eyes of a US court, she was a “little person” too – even though her husband owned the Empire State Building. Mrs Helmsley ended up serving a jail sentence for tax fraud. I was working on another case with her New York-based lawyers during this period. I remember being told that the army of lawyers working on the Helmsley case all slept in the office, not getting home for several weeks at a time. Even so, their efforts could not save their client. When a court gets mad, it gets mad.

I was reminded of Leona Helmsley’s attitude and undoing when looking over the recent case of Lykiardopulo v Lykiardopulo [2010] EWCA Civ 1315.

The Lykiardopulos are one of the oldest and most prestigious of Greek shipping families. When Panaghis Lykiardopulo and his wife Sally divorced, however, the Greek husband and two family members presented a case of breathtaking perjury to the court.

Their perjury was exposed and the wife was awarded a £20 million settlement. The original judge, Mrs Justice Baron, in her judgement found that “the husband, his brother and another influential family member had conspired to manufacture, for the purposes of the trial, documents which, on their face, were written in 2005 in order to terminate the husband’s involvement with the family business and to divest himself of his interest therein”. The conspiracy within the family was to present “forged and back-dated documents” to the court.

As practising family lawyers, we all have cases like this at one time or another; perhaps not at that “super rich” level, but perjury still happens. Some people are so desperate and determined to ensure that their spouse gets as little money as possible, they are prepared to take a risk and lie about it. Sometimes, however, those lies can be breathtaking in their size and arrogance, and the Lykiardopulo case is one of those. As the Court of Appeal pointed out, this was an act not of omission, but commission. Such breaches are serious.

The Lykiardopulo case was heard by the Court of Appeal because the wife sought to have the judgement published with the parties’ names released to the public. She claimed to have pursued the course of action for “public policy reasons”. As her lawyer, barrister Tim Bishop, put it: “this is the worst case of non-disclosure ever before the English courts”.

Could it be that the wife feared she would have major problems getting paid the money found due to her – and thought that this would be a weapon she could hang over the husband’s head?

When the wife’s lawyer made his point about non-disclosure, the judge said, “I doubt it”.

Undaunted, the lawyer continued. “It unquestionably is My Lady. It is a fraud involving £46.5 million to £100 million, it is an unrepentant fraud”.

To that, Mrs Justice Baron then replied: “It is nothing like the case that I dealt with a year ago that has been published on an anonymised basis. That was far worse than this…”

Yes, clearly there are those who take risks that the “little people” dare not. In the interests of overall justice, the Court of Appeal is there to weigh in on the side of right, regardless of the standing or status of those who appear before them.

As it happens, there were indeed problems with payment in the Lykiardopulo case. When the case came back before Mrs Justice Baron a few months later, she said: “I have made an order…I expect that order to be obeyed….If I do not feel the family are co-operating with the enforcement of this order..I might find of my own motion that it was part of my duty that the public should know how this family have operated. I do not want to do that because I do not want to ruin their business….I want my order obeyed”.

Stern stuff. But what happened? Several months later, the payment had still not been made. A hearing about the publication of the judgement took place in December. At that point Mr Lykiardopulo was claiming a “health condition”, arguing that exposure of his affairs in the media would exacerbate it. The wife, who had been put through years of miserable litigation, argued that her husband’s litigation misconduct should be fully exposed.

The judge decided on a halfway house: ordering reporting of the judgement but keeping the parties anonymised. The wife appealed and, as can be seen, her appeal was allowed.

The Court of Appeal comprises a fearsome bunch of judges. They have previously ordered the release to the public of details of a case involving the King of Saudi Arabia, when a lower court ordered it to be kept out of the public domain.

When the case of Lykiardopulo v Lykiardopulo came before the Court of Appeal, it was heard by three judges: Lord Justice Thorpe, Lord Justice Stanley Burnton and Lord Justice Tomlinson.

In his judgement, Lord Justice Thorpe concluded that the decision about publication was about striking a fair balance. He considered the arguments presented to him by the husband against publication, and dismissed them all. He did not accept that the family business would be adversely affected, that the health of the husband would be adversely affected, nor that there would be an adverse impact on the children. Lord Justice Thorpe thus ordered the judgement to be published, subject to redaction of sensitive commercial information. He also deplored the use of publicity as a tool for enforcement.

Lord Justice Stanley Burnton gave a much more robust judgement, which I liked. It was blunt and succinct.

He said: “Different considerations apply where the information and documents provided by a litigant are false. That litigant has no entitlement to confidentiality in respect of that information or those documents. They do not evidence his private life. In general there is no good reason why his conduct should not be made public”.

Lord Justice Tomlinson agreed with both judgements.

However much the court criticised the “name and shame” approach in theory, that is exactly what it did and it was right to do so.

I am not a fan of publishing judgements about couples who get divorced in this country. I believe that their private lives should remain private. I am sure that a lot of people read these judgements not just to digest the law (informative as this is) but also to gain fascinating insights into the finances and activities of some of the most glamorous and powerful people in the world. However if you choose to play games with the court, you should be prepared to suffer the consequences including, for those scions of ancient lineage, the worst of all: dragging your family name through the mud.

Twenty million pounds is a dizzying amount of money – but a relative drop in the ocean to the Lykiardopulo family. I can also only wonder if, had the truth been the told, the sum awarded would have been less. We cannot know, but I do know for sure that if a judge has to exercise discretion in a case, no-one can expect mercy if found to have committed perjury.

As for the family members who forged documents: their actions seem so pointless. If we are, all of us, only guardians of our wealth for the short time we are on earth, couldn’t that wealth be used more wisely by those who truly are as “rich as Croesus”? As Croesus (above) discovered for himself, wealth cannot always protect you against unpleasant degradation in real life.

Lord Justice Wall dwelt upon the state of current law, the approach of the judiciary to such case and in particular, the case of Payne v Payne (2001). The full text is here. Payne v Payne, in which permission was given for a divorced mother to move back to New Zealand with her daughter, against the wishes of the young girl’s father, is regarded as the leading case on the subject.

As he pointed out, the Payne v Payne decision takes into account as an important factor the potential harm that could have been caused to the mother if leave to remove the child had been refused, and the consequential impact on the child in determining the test of the interests of the child’s welfare:

The mother’s reasons for her desire to return to New Zealand were appropriate and entirely understandable. Her situation in England was not a happy one. The judge found that the effect of her being forced to stay in England would be devastating. He found that her unhappiness, sense of isolation and depression would be exacerbated to a degree that could well be damaging to the child. The father who has had a close relationship with his daughter would be able to afford to visit her or have her visit him two or three times a year which mitigated the loss to the child and to him. (Payne v Payne [2001] EWCA Civ 166.)

Not surprisingly, critics take the view that this is incorrect and that children’s interests are better served if they have two parents to raise them.

As family lawyers, we urge our clients to put their children’s welfare above all else – and that is as it should be. However I would like to take a look at the parents’ welfare – which is not so much displaced at present, as utterly ignored. Instead the parents’ welfare is considered indirectly, and the impact assessed on the child or children. This in itself is difficult to do: experts agree that the impact of relocation and the resiliency of a child to adjust to relocation is difficult to ascertain, and I would assume that it depends greatly on each child and his or her circumstances.

An application for leave to remove

When an application for leave to remove a child is made, the court must decide which option is in the best interests of the child, on the basis that the child’s welfare is paramount. There is a welfare checklist, which the judge must take into account. The approach of the court in giving appropriate weight to each of the criteria is critical. Thus, if one parent can no longer play an active part in a child’s life by virtue of distance, the court needs to attach weight to it. But how much weight? Is the presence of two parents playing a constant role in a child’s life, of such paramount importance that it outweighs every other factor?

And so the question can simply become:  “Should a child ever be permitted to leave the jurisdiction at all, if he or she thereby loses an enduring relationship with one parent?”

In Payne v Payne, the court decided that the arrangements for contact with the father were satisfactory and ordered, in accordance with section 13 of the Children Act 1989, the removal of the four-year-old child to New Zealand to live with her mother. The court found there was no breach of human rights legislation as a consequence.

The case of Re H (2010)

In one recent case, heard by the Court of Appeal on 20 May 2010, permission was similarly given for a mother to relocate to Australia with a child. The desperate father appealed to the Court of Appeal on the basis that the original judgment was only four pages long. He argued that the judge failed to fulfil the minimum requirement of providing explanations to the parents, covering all the section 13 considerations and the weight that had been attached to each.

The Court of Appeal dismissed his appeal. It held that the judge was not obliged to go through the checklist, each in turn.

It should be noted that not all applications for leave to remove a child are granted. In another recent case, applying the same factors, the swashbuckling Mr Justice Mostyn refused to permit the relocation of a French mother and her child to France – but am I alone in thinking that he could have been powerfully affected in his decision because he is a father himself?

What about the parents’ needs?

From my perspective as a parent, losing a child halfway round the world must be the equivalent of a lifelong dagger in the heart. The carefully built nest is tipped upside down and is left starkly empty. There is little prospect of it ever again being filled with the laughter and tears of a child.  The parents undertook to raise the child together, but instead the child will grow up far away, with only one parent instead of two.

Can that ever be in the best interests of a child? Is it in the interests of both parents? Can it really be said that the interests of a child are not taking precedence to the interests of the parent who is moving away?

The answer that most of us would give to that last question is probably “no”. Sir Bob Geldof and his band of followers are calling vocally for a change to the law which they describe as “state sanctioned kidnap”. They call as parents, anxious to protect themselves from being deprived of the right to be parents.

Payne v Payne revisited

Then I wonder: from another perspective, is Payne really so wrong?

This blog is read by many desperate Englishwomen (and men) living around the world. They contact me and keep in touch because I am an English lawyer who may be able to offer them some assistance out of their misery. I have read heartbreaking stories of the circumstances in which they have found themselves. They fell in love, married and ended up living abroad, following their spouse’s career, nationality or simply the offer of a new life in a new country. Caught up in their hopes and dreams, they never gave a thought to what might happen if the marriage ended.

I am often contacted after a marriage has broken down and a mother finds that she is unable to return to her homeland with the children, because her husband refuses and she can’t leave their current home without a court’s consent. It is often near on impossible because elsewhere in the world, many courts point blank refuse permission for “their” children to leave the jurisdiction.

So these mothers are forced to stay, often without spousal support forced to live without a partner in a hostile environment. Living in misery, they suffer acute emotional and financial harm. Can that also be in the best interests of their children?

Should they and their children be obliged to continue to live in such circumstances? These women left the UK in ignorance of a future legal position that they had no idea could or would ever apply to them. But it does, and increasingly so. (As an aside, the number of child abductions from one country to another is growing and this, I believe, is why.)

So I can see both sides of the coin, having heard from various parents who have been caught up in this agonising dilemma.

Where do we go from here?

Perhaps a more pragmatic, conciliatory view is one way forward. For example, Stowe Family Law’s International Department recently had a case in which a child went to live with our client in a faraway country. There had been bitter battles, but I am pleased to say that following careful discussions and a hearing in a local English court, the  situation was resolved. (Earlier this year the case of AP v TD (2010) was also heard in an English court. This case concerned a mother who had relocated to Canada with two children. She had applied to the Canadian court in a bid to alter contact arrangements with the children’s English father, but the case was heard in England.) Even the most intractable disputes, involving great distances and time zones, are capable of settling.

In the meantime, what of these “difficult” cases? Should we condemn a parent to lead a life of misery in a foreign country, or give up any prospects of happiness altogether following the breakdown of a marriage?

The approach in Payne is now under attack from campaign groups and high profile individuals. As with so much in family law, however, there is no perfect solution.

At present, those who have to judge these cases shine a spotlight upon the child, working through the welfare checklist and examining each parent’s ability to meet the child’s needs. But if a child’s happiness is entwined with that of its parents, as the judgment in Payne v Payne would have it, wouldn’t everyone benefit if the family’s needs were given more prominence than they are currently? Perhaps it is time to bring the parents out of the shadows.

This post won Family Lore’s Post of the Month Award for July 2010.

Yesterday the Court of Appeal made a landmark ruling that has been described as a “cheat’s charter”. You can read the details here. I must warn you in advance that this is a lengthy post; however I would like to explore the horrifying implications of this ruling for divorce cases up and down the country. We will begin with an ordinary couple, and we’ll call them Jim and Mary.

Jim is a postman. He is married to Mary, a factory worker on a production line who gets paid £250 in cash every week. He doesn’t know what she does with her money. Mary decides to divorce Jim after 25 years of marriage. She has started an affair with Fred, his best mate. Jim is distraught. Frantic, he comes across 10 bank books and some Premium Bonds buried under some papers she has kept in her drawer by the bed. There is no lock on the bedside drawer and after 25 years, Jim knows exactly where to look. He can see that Mary has been quite cute, and the bank books show that she has managed to save a total of £50k – every penny she has earned in her working life – while he has supported her and their children. He notices she has even had a few wins on the Premium Bonds, about which he never knew. Furious, he phones his solicitor John, to tell him what he has discovered.

“She has £50,000!” he tells John, totally shocked by the discovery. “Ten bank books, wins on the Premium Bonds – I never knew! She was living off my money and all the time she was squirrelling away her own. Can I bring a copy of everything that’s here over to you?”

This time two days ago John would have said of course you can. Today he can’t. Because if he does he may be opening himself up to a civil claim against him and his firm by Mary, for breach of confidence and more besides. He wouldn’t be receiving the copy documents innocently. He would know that Mary doesn’t know he has them. And he would know she wouldn’t be best pleased about it. So even though John is acting as a solicitor in Jim’s best interests and putting the best case he can to the court – which is what Jim is paying him for – Mary could sue him.

“I’m afraid you can’t bring copies over” he tells John. “And what’s more, you can’t copy the bank books – or anything else for that matter.”

“Why not?” howls Jim. “It’s proof she has plenty of money! Surely what’s hers is mine because, sure as heck, what’s mine has been hers!”

“The House of Lords are up for sharing all the assets from an equal starting point”, says John patiently. “And I agree with them about sharing; but unfortunately the answer is still no, you can’t copy anything. However do try to remember what you have seen, because it might be useful if she doesn’t declare it in a few months when she has to produce her Form E disclosure.”

Jim is flabbergasted. “I was never good at memory games!” he cries. “In fact, I can’t remember now what I saw in that drawer except there were ten bank books and some Premium Bonds.”

John tries to calm Jim. “I can’t tell you very much about the law, because the law about what you can do and can’t do is about as clear as mud right now. A new case has come out and shaken everything up. So all I can tell you is that if you copy the bank books, you are opening up a can of worms for yourself as well as for me. And anyway, I can’t see the copies because if I do, there is a chance that Mary will try and get me thrown off the case! You never know, she might disclose it when it comes down to it.”

Jim is sceptical. “Why should she disclose her secret £50,000, if she has kept it secret from me and from the kids for 25 years?”

John sighs. His mind is heavy with additional concerns. Staying in practice, keeping his indemnity insurance policy intact… These are more important to him right now than his ranting client, even if Jim does have good reason to be annoyed.

“All I can advise you to do is to write down what you can remember. Then, if Mary’s Form E comes in a few months and it’s not on there, we will have to fish about for information.

“It’s going to whack up your costs by a few thousand pounds I’m afraid”, he adds, conscious of the requirement to give full costs information. “But at least you and I will be obeying the letter of the law… whatever the law is. I will put my increased cost estimate in the post to you tonight…”

Imerman v Tchenguiz

You might find the above conversation rather absurd. I do. However it is a conversation that thousands of lawyers across the country will be having with their clients. All this has come about as a result of the Court of Appeal judgment yesterday in the case of Imerman v Tchenguiz, which was heard together with the case of Imerman v Imerman. I think it is a pity that both cases were heard together, because it seems to have tainted Mrs Imerman when I think she has a very arguable case. I will explain why.

For those new to the case: Lisa Tchenguiz married Vivian Imerman, the former owner of Del Monte Foods. Her brothers are the property tycoons Robert and Vincent Tchenguiz. The three businessmen shared an office.  When the Imerman marriage broke down, the Tchenguiz brothers locked Vivian Imerman out of the office and downloaded between 250,000 and 1.5 million documents from his computer, which they then handed to their sister’s divorce lawyers. They did so because they believed he had no intention of making full and frank disclosure of his finances. They took the law into their own hands and as to what they did, there is no doubt that they were wrong.

As you may have read, the Court of Appeal has now ruled that the information obtained by Mrs Imerman’s brothers could not be used to support Mrs Imerman’s claim in her divorce case.

Is there a case for “self help”?

In a previous post about Hildebrand documents, I discussed the concept of “self help”. This, surely, was the most spectacular case of “self help” imaginable. It was an extreme example, not least because Mrs Imerman had nothing to do with it. She and her solicitors simply received the documents. Although there is no excuse for what the brothers did, surely when it is between husband and wife, there is a difference?

Here are some further questions.

• What is wrong with a measure of self help when parties have entered into a marriage contract and therefore both have a legal entitlement to share in all the assets of the marriage?
• What is wrong with one party taking a small measure of self help to ensure that all the assets are disclosed?
• If you come across documents in your bedroom or your kitchen or anywhere in your home, why does it matter whether they are yours or your spouses? You are both married to one another, aren’t you?

I would also refer you to the Court of Appeal judgement in White v Withers, about which I have already posted. You will see there was a divergence of opinion about harmless self help, such as that required by Jim. Lord Justice Ward said any self help was illegal; Lord Justice Wilson said that it was not, and that it could be justified in law.

Yesterday the Court of Appeal shrugged off the concerns of the great family lawyers, Lord Justice Wilson and Mr Justice Mostyn, the latter of whom has recently expressed practical views of the realities facing couples in divorce proceedings, saying that he saw nothing wrong with a spouse downloading information about her spouse’s finances from a family computer to which she has legitimate access. I agree with him because – as we family lawyers know for sure – without a measure of self help, some spouses would simply “get away with it”. Section 25 of the Matrimonial Causes Act 1973 would appear to provide a defence to a measure of self help.

Instead, the Court of Appeal held that between married couples there is still an entitlement to privacy between them. Perhaps, but in relation to financial disclosure I profoundly disagree. It means that a married couple is entitled to privacy from one another in relation to what are, after all, matrimonial assets.

Back to the time of Mr Bumble?

For me, the Court of Appeal’s decision is a throwback to the Victorian age – from which I thought we had long since escaped.

When I got married I entered into a solemn contract with my husband, which means that what is his is up for sharing and vice versa in terms, heaven forbid, of divorce. I therefore see no reason why I couldn’t go in his bedroom drawer or log on our family computer to download all the information I want about his share of our  joint finances. He could download information about mine, and he would be very welcome to do so. I am not his Victorian wife living in secret from him. I am his 21st century partner and I am entitled to know everything about our financial position, as he is too.

In the event of a divorce, every single penny of a couple’s assets are up for division, because of each party’s entitlement to share in those assets, which is fully enshrined in law. That is the case regardless of who owns them before a court decides. It doesn’t matter whether he has more than me, or I have more than him. It will all be taken into account, because we both have an entitlement to the assets by virtue of our marriage. How the assets will be shared however, is a different argument.

We know that since White v White, there is no distinction to be drawn in law between a homemaker and a wealth creator in a marriage, and that is right. If the wealth creator tries to pull a fast one, why should the homemaker be blamed for taking reasonable steps to protect what is already hers for division?

Unfortunately the Court of Appeal yesterday was dominated by judges who are not family lawyers and who have little experience of the realities of dealing with everyday cases such as we lawyers deal with across the country. Imerman is the most extreme case possible in terms of the vast wealth of the parties involved and the extreme lengths to which the brothers went to help their sister. A husband and wife are not two commercial entities whose entitlement is still to be determined, and then their share. They are the people who have made a lifelong contract, share the same house, the same kitchen and the same bed.

Lord Justice Wilson in White v Withers and Mr Justice Moylam, who heard the Imerman case in the court below, are pragmatic family lawyers. They know from long experience how family law operates and how vastly different the issues are from mainstream commercial law. That their views were hatched, matched and despatched yesterday was a sad day for family justice, and for the meaning of the marriage contract, which I believe was devalued by that decision.

There is, I believe, room in our legal system for differing approaches by differing divisions of the legal system. It cannot be right that in the pursuit of justice married couples, whose marriage and commitment to each other, through thick and thin, automatically entitles them to share in all their respective assets, should be treated the same in law as civil entities whose entitlement is still to be decided. The same goes for cohabitants, whose commitment to one another is not enshrined in contract and whose arguments as to privacy and confidence of the other make sense.

To me, this is where the Court of Appeal went wrong. Ironically, they failed to recognise the unique and fundamental nature of marriage, and treated the couple more as cohabitants rather than a couple who are entitled to begin with a 50:50 division of everything, as per the House of Lords in White v White.

If a husband or wife is able to lie to a spouse, and that spouse must then resort to a raft of the most  ludicrous, heavy handed and phenomenally expensive remedies to gain justice, hasn’t the law – to use Mr Bumble’s well-known quote – been made to look rather an ass?

Jim v Mary

And what of the hapless Jim?

Well, John the solicitor finds himself saying, ” Jim, leave all the bank books and the Premium Bonds where they are. Remember what you have seen. If she hasn’t disclosed her little nest egg when her Form E comes in in two months’ time, then let’s go to court and get a search and seize order, which is called an Anton Pillar order. That means I will have to get an independent solicitor and his firm to oversee a raid on your wife’s bedroom drawer. They can take away all the bank books, the Premium Bonds and whatever else they find if it’s all still there – and it will all be perfectly legal.”

Jim furrows his brow. “But that’s going over the top isn’t it, John? How much will that cost me?”

“About £50,000, Jim”, John replies. “Unfortunately, if there is nothing there by the time we get to the bedroom drawer you might have to pay her costs too. Oh, and she might sue you for damages. So add another £50,000 on for good measure. I will put it all in writing to you. But nobody can complain about you, Jim, and this course of action is what the Court of Appeal has said is the right thing to do. They want to see far more of these Anton Pillar orders….Jim??? Are you still there Jim?”

The first wife

The first wife cannot manage on her own, modest earned income following her divorce, and therefore she needs to have her income supplemented by maintenance from her former husband. He agrees and despite her being child-free and able to work, he does not insist on a cut-off point for maintenance even if she is still quite young. Perhaps he reasons that she will be self-sufficient at some point in the future. Perhaps he reasons she will remarry. Perhaps he feels guilty. Perhaps he wants it all over and done with without a fuss.

However the first wife will never get to taste the real fruits of their joint hard work begun and built up during the marriage. The rewards of status and financial success will be privileges reserved for the fortuitous second wife. By the time the second wife marries the husband and has his children, he has become financially prosperous. Together, they have a long and successful marriage.

The husband can always apply to terminate maintenance payments to his first wife, on the basis that at some point she should or has become self-sufficient. But there are a number of cases in which the divorce occurred at a time before wives were expected to become self-sufficient and maintain themselves. The only way these wives could realistically maintain themselves, hampered as they were by lack of training and by advancing age, is by the receipt of maintenance. In these cases, maintenance has been paid for a very long time. Although these wives are sometimes perceived by the media as greedy individuals, receiving hand-outs long after their sell by date was reached, realistically they have no option. They are the products of different times.

The law

In the absence of the first wife’s remarriage, or a court order terminating her maintenance obligations, the law states that payment is to be made until she dies.

However if maintenance payments are to be terminated by the court, causing undue hardship to the payee, the court may order a capital sum to be paid instead on a ‘Duxbury’ basis, under section 31 of the Matrimonial Causes Act 1973. So when the divorced wife reaches at the age at which she is actuarially expected to die, having applied the lump sum on a part investment, part expenditure basis to produce her annual net income as assessed by the court, the lump sum will have been used up. This is called amortisation of the lump sum. (For more on this, see the leading case of Pearce v Pearce EWCA Civ 1054.)

Vaughan v Vaughan

The case of Vaughan (2010) EWCA Civ. 349, centred upon a 13-year marriage that ended in divorce in 1985. The wife was working part-time as an art expert; the husband, who had qualified as a barrister at the age of 24, had just become a QC. He was 42 and the wife was 37. There were no children.

At that time, relatively few wives in their 40s went to work full-time to support themselves. Nearly 30 years later, times have changed.

Mr Vaughan married the second Mrs Vaughan; she was 15 years younger than him and they had two children. He went on to become one of this country’s leading experts in EU law. (He became so well known, in fact, that the Court of Appeal had difficulty convening an impartial bench that could hear this appeal.)

In 1989, the first Mrs Vaughan’s attempts at building a career for herself had floundered and she applied to the court. It must have been a hotly contested application. In 1991 when judgment was ultimately given, the court found that the wife’s earning prospects were only £5,000 per annum and she clearly could not manage. Conversely, the husband by then had a gross annual income of £243,000. Mr Justice Booth found that the first Mrs Vaughan had income needs of £27,000 per annum. He set maintenance payments at that level, backdating the order to 1989 with no cut-off point. He declined to give Mrs Vaughan maintenance in excess of her comparatively modest needs, notwithstanding her former husband’s vast income, setting a substantial differential between living standards of first and second wife for the rest of their lives. The outcome was not generous to Mrs Vaughan.

Mr Vaughan is now 71, and the second Mrs Vaughan is 56. His health has deteriorated in the last three years, and his income is no longer what it was. However he has a pension pot worth more than £2.3 million, from which he intended to take a considerable deduction on the income, in order to benefit his second wife substantially in the event of his death. He also gave his second wife a share portfolio worth £330,000.  He and his second wife agreed that their jointly owned London home, worth some £4.3 million, should be sold and that they would move to a smaller property worth some £2 million or thereabouts. This would also give his second wife another £900,000 of liquid capital, after costs.

Back in court

Last year, in view of the loss of his earned income, Mr Vaughan applied to the court to terminate the maintenance payments that he was making to the first Mrs Vaughan.

The first Mrs Vaughan had never applied for an increase in her maintenance. She lived on her maintenance and also had pension income of £5,000 per annum. In terms of capital, she did come into an inheritance from her parents in 1988 and 2005. After spending an incredible £200,000 in legal fees fighting this case, she was left with liquid capital of £380,000 liquid: the balance of her inheritance. She also lived in a house now valued at £1 million which, it was agreed, needed repairs and redecoration. Mrs Vaughan also had a valuable Indian desk worth £300,000 from her original divorce settlement.

Mrs Vaughan cross-applied for capitalisation of her maintenance claims under section 31 of the Matrimonial Causes Act 1973. She requested a Duxbury lump sum of £560k, based on an increased maintenance need in excess of £50,000 per annum. She was asking for a lump sum to cover almost double the present maintenance and perhaps that was too high.

Although the parties agreed that Mrs Vaughan’s income needs had increased from £27,000 per annum, they could not agree upon a new amount. Mr Vaughan argued, in an 80-paragraph opening statement, that even if her needs had increased, because of the down turn in the husband’s income and her own inherited capital, he should not have to pay her any compensatory Duxbury settlement at all. She should be expected to manage on what she had.

In the lower court, with his formidable advocate Nicholas Mostyn QC, Mr Vaughan succeeded. The judge found that Mrs Vaughan could manage by amortising all her own liquid capital to provide for her future lifetime income needs, without the need for any capital payment by Mr Vaughan.

In the Court of Appeal

Should the first wife have been expected to use her parental inheritance to pay for her maintenance needs? In the Court of Appeal, Lord Justice Wilson delivered the judgement.

Applying Pearce, he attributed a net income need of £48,000 per annum to Mrs Vaughan. He found she could not adjust to the ending of her maintenance without undue hardship. The lump sum she required under the Duxbury tables, to give her £48,000 per annum for life, was about £500,000. It was wrong for her to be expected to “amortise” her inheritance (Lauder –v-Lauder 2007 EWHC 1227). He did take into account the £300,000 value of her Indian desk: the net proceeds of the desk would be “amortised”. This left a shortfall under the Duxbury tables of £215,000, which he ordered Mr Vaughan to pay.

Question: so if you are a first or second wife, which wife takes priority?

Answer: neither of them.

Lord Justice Wilson followed the case of Roberts  v Roberts (decided forty years ago in 1970 and still good law). While the court does not give priority to the claims of the first wife, the second wife took the husband “subject to all existing encumbrances” and so priority is not given to the claims of the second wife either.

As with much so much of our law, it is a balancing exercise. It is about fairness and, ultimately, the discretion of our judges if the parties can’t agree a sensible compromise between themselves, about figures which – with all due respect – do not seem to be rocket science.

There are still quite a few of these cases around. To people who have grown up in the ‘Noughties’ such decisions may, on the face of it, seem unjust. Certainly the comments I have read on newspaper websites seem to knock Mrs Vaughan very hard.

However it is worth remembering that in the 1980s, times were different for women. Today, young childless recipients of open-ended maintenance with no reasonable prospect of self-sufficiency are rarer. I suspect that the awards to the “Mrs Vaughans” of this world will, ultimately, become far fewer in number.

Image credit: Nanagyei.

I must warn you in advance: this is a lengthy post. However if you are a family law practitioner in England and Wales, are you aware of this judgment’s implications?

It appears to be the case that, even if you have advised a client in accordance with accepted Hildebrand practice in the family law courts, you could still potentially be liable to the opposing spouse in civil law.

I have previously described my experience of a Hildebrand case and the decision that I was called upon to make in a matter of minutes. Would I inspect the three boxes of documents that my client had delivered to our offices, even though I believed that she had obtained the documents illicitly? With the alarm bells ringing, I decided not to do so. Instead, I chose caution.

Lawyers can find themselves sued for damages if documentation taken secretly by their client is copied and used in court, and the client’s spouse takes exception to this. Admittedly such a case may not get off the ground because damage may be too minimal, but in theory at least, lawyers could be liable.

In my case I had every reason to suspect that the Hildebrand Rules, as they are known, had been breached by my client. The generally acceptable defence available under Hildebrand would therefore not apply to her or to me. We could both have been sanctioned and sued by her husband and by his company, which was an entirely separate entity.

Now it may be the case that the generally acceptable defence under Hildebrand does not protect legal practitioners or their clients in any such case at all.  

Given the risk, how should a practitioner advise a client who is certain that, without a measure of self help, the truth will never come out? How is a court able to discharge its function if a devious spouse refuses to provide disclosure and is able to use the threat of civil proceedings to dissuade the other party from doing anything about it?

Marco Pierre White and the Court of Appeal

The Court of Appeal in the Marco Pierre White case decided that, when solicitors retain original documents that are the property of the other side on their file – some of which have nothing to do with the case – they are likely to be liable in the civil courts. That is understandable and I agree. Original documents should never be retained, intentionally or otherwise, by the other side.

However two of the three judges, Lords Justice Ward and Sedley, went further.

Their Lordships considered three cases including Hildebrand v Hildebrand itself, which was heard back in 1992 (1 FLR 244). Counsel for the wife was Mr Nicholas Wilson QC, now Lord Justice Wilson –and fortuitously for us all, one of the judges in the present case. His own remarks are important for family practitioners and I will refer to them later.

Hildebrand v Hildebrand (1992)

Hildebrand was not specifically about the conduct of solicitors. It centred upon the time when improperly obtained documents should be disclosed to the other side.  Lord Justice Ward quoted the presiding judge at the time, Mr Justice Waite, who remarked upon the wider problems faced by family lawyers: “These involve deep questions better left to those who have the task of framing the rules of professional etiquette”.

It is a great pity that no such guidance has been issued in the intervening years. Professional bodies have helpfully recognised the dangers to family lawyers in relation to proceeds of crime and money laundering, but the subject of “self help” in family law cases has received no such attention. Lawyers are left to make their own decisions. And they are also left to bear the consequences.

T v T (1994)

The second case, T v T in 1994 (2 FLR 1083) was also decided by Lord Justice Wilson. In this case the wife had broken into the husband’s office, using force to obtain documents. She had intercepted his mail and kept original documents. Her “reprehensible” conduct was penalised in a costs award against her. However as Lord Justice Ward also noted, her solicitor’s conduct was not in question.

L V L (2007)

The third case was L v L in 2007 (2 FLR 171), in which a solicitor assisted a client (apparently on the advice of a QC) to intercept and download the contents of the hard drive of the husband’s computer, on which all the husband’s documents were stored. The court in this civil case took an extremely dim view of this type of “self help”. It suggested there was not only a potential civil liability by the wife and her lawyers, but potential criminal liability into the bargain.

At paragraph 37 of the judgment (which you can read in full here) Lord Justice Ward summarised his understanding of the current state of the Hildebrand Rules:

The Family Courts will not penalise the taking, copying and immediate return of documents, but:

• They do not sanction force.
• They do not sanction interception of documents.
• They do not sanction retention of documents.
• They do not sanction the removal of any hard disk recording documents electronically.
• The evidence contained in the documents even those wrongfully taken will be admitted in evidence* due to the overreaching duty to give full and frank disclosure.
• The wrongful taking of documents may lead to findings of litigation misconduct or orders for costs.  

(*See the comments of Lord Justice Wilson, who does not accept this will always be the case. Note also that Lord Justice Ward did not mention the duty of early disclosure, and that such documents should not be “drip fed” which also pertains to Hildebrand.)

So where does that leave the lawyer in civil proceedings?

What the judges said: Lord Justice Ward

Lord Justice Ward stated there is nevertheless a potential claim for wrongful interference with property, perhaps jointly with the person who took the property. There is also a claim in relation to trespass to goods, and there is a potential claim in conversion, i.e. “detention adverse to the owner, excluding him from the goods”.

All three judges agreed that there was no claim for breach of confidence privacy and misuse of confidential information

Lord Justice Ward examined “self help” and public interest as potential defences if the lawyer argued they had in fact acted in accordance with the Hildebrand Rules.

He observed: “It is one thing to balance wrongdoing against the interest of justice in order to ensure a proper trial, but quite another to admit self help as a defence to the tortious activity in so garnering that evidence”.

His Lordship tempered his observations on the basis that if the infringement is “de minimis”, i.e. acting pursuant to Hildebrand, the copying and return of documents should not normally expose the solicitor to a viable claim.

 Furthermore, he says: “Nothing in the judgment is intended to cast doubt upon the Family Division’s practice to admit all relevant evidence in the search for truth”.

Except that to me as a practicing family lawyer, it certainly does!

Lord Justice Ward summarised his judgment in a single, unqualified sentence: “To resort to self help is to take a risk”.

Does a lawyer/client have no defence at all? For data protection offences, acting in the interests of justice is a statutorily recognised defence. Surely acting in the interests of justice must apply here too?

Lord Justice Sedley

Lord Justice Sedley thought that copied documents with the prompt return of the originals would likely “give rise to no appreciable damage”. He also thought that if there was a conflict between Hildebrand and a civil claim, he would expect the law “to choose doing justice between the spouses”.

So all might be well? Perhaps.

Lord Justice Wilson

Lord Justice Wilson fully recognised the serious nature of the problem for practitioners. He expressly disassociated himself from some of the remarks made by Lord Justice Ward.

 In particular, His Lordship disagreed that acting in accordance with the Hildebrand Rules would be “to take a risk”. He stated that he would be profoundly opposed to “a co-existence of admissibility of secretly obtained documents in the family court, alongside a civil liability elsewhere”.

From experience, Lord Justice Wilson knows how seriously this would compromise family lawyers, and also appreciates the knock-on effect: potentially, “to disable the courts from discharging their statutory duty”.

He believes that the Hildebrand Rules need to be tested for compatibility with principles in other areas, and “they will withstand the test”. He gives two possible defences: the first that the spouse acting in accordance with Hildebrand had a notional license to do so. The second, that there should be a recognised public policy exception so that the court can perform its duties under the s25 MCA 1973 exercise.

Courts charged with Hildebrand cases: in practice

In J v V 2004 (1 FLR 1042), Mr Justice Coleridge found that the use of Hildebrand documents was “perfectly permissible, subject to certain conditions as to early revelation to the party who owns the documents….absent these documents the picture of the husband’s finances would be even more incomplete …I find the wife’s conduct entirely understandable justified and above criticism”.

So that’s fine in the family law courts, but seemingly not fine in civil law.

I agree with Lord Justice Wilson that a suitable test case is required (i.e. where the acts complained of accord with the Hildebrand Rules). I would very much wish to see the legal position clarified and family practitioners cleared to advise their clients without worrying about being sued by vengeful opponents with money to burn.

However, I’m struggling to think of any practitioner who would ever wish to be that most unfortunate of guinea pigs. No-one springs to mind!

I hope that our respective professional bodies will give this problem their urgent attention.

Image credit: Anderson Mancini.

In the last post about coping with divorce, I wrote about how distressing the divorce process can be and how, to emerge whole at the other side, it is vitally important to do whatever it takes to keep your mind in shape.

This post is a cautionary one, about what can happen if you give in to those demons lurking in your head. I have previously written about the dirty divorce tricks born of the desire for vengeance. Earlier this week I described how bottled up emotions can result in emotionally charged choices and behaviour. Now I wish to look at how the repercussions can affect younger members of your family.

During a divorce you can be tempted to surrender to those demons, to let your baser emotions spin of control, to fight and to cause pain. However the opportunities to do so are limited. This is because the legal procedure is strictly controlled in financial cases, as misconduct is rarely of relevance and is generally frowned upon by the courts.

Proceedings involving children are different. In such cases allegation upon allegation, true or malicious, can by heaped upon parties in ”the children’s interests”. Common sense and rational thought can fly out of the window.

You mustn’t go there. But some people do.

After 26 years as a divorce lawyer, I am not easily shocked. While reading some recently reported children cases, however, I was taken aback by the bitterness and malice that leapt from every page.

The ex-wife who went to prison

In a case heard by the Court of Appeal in July 2009, the judges even had to consider an appropriate prison sentence for one wife. She had originally obtained a residence order for the couple’s children. The couple gave undertakings to the court as to their future good behaviour.

Clearly the residence order and her parental obligations had little meaning for the wife, because she ignored her undertaking on several occasions. She attempted to disable her husband’s CCTV. She encouraged the couple’s son to break the lock on his father’s gate and set fire to his father’s motorbike. The fire escalated and damaged the back of the house and some contents. She sent her former husband 117 text messages accusing him of raping their daughter. She set up a direct debit to the RSPCA using her former husband’s bank details. She screamed and shouted at him outside his house, calling him a paedophile. She tried to have his disability benefit stopped.

The Court of Appeal gave her six months’ imprisonment for breach of her undertaking. A criminal court had already sentenced her for the arson attack.

And what of her children, I wonder? How are they coping? What does the future hold for them?

Five years of litigation

Here is another case from the same period, which kept Mr Justice Munby busy in the weeks leading up to his new job heading the Law Commission. The case was described in the Law Reports as “highly acrimonious residence and contact proceedings”. This description struck me as something of an understatement…

The residence and contact proceedings had gone on for five years. A guardian had been appointed for the couple’s child. The guardian considered that the parents, by their behaviour towards each other and by their conduct of the lengthy litigation, had caused the child (now eight years old) emotional harm.

The father tried to have the child’s guardian and her solicitor removed from the case and both imprisoned for – an admitted but mistaken – contempt of court. He also applied for the release of documentation, so that he could complain to the GMC about the expert psychiatrist who had prepared reports on both parents.

All these issues required judgments from the overburdened judge – and no doubt a great deal of worry for the professionals involved. I noted that the parents in this case did not appear to have appointed lawyers. (I also wondered if lawyers’ advice and costs could have encouraged the parents to end the litgation sooner.)  

At the judge’s suggestion a consent order that focused, sensibly, on where the child was to spend time – rather than upon issues of “residency” and “contact” – was ultimately agreed by the parents. A review was fixed to take place after six months.

Was this the end? Far from it. Almost immediately the father expressed reservations. At one point before the expiry of the six month period, the father was seeking no fewer than 30 court orders including sole residence in his favour. Both parents breached the judge’s directions for succinct written submissions and both parties sought costs orders against one other. The father also sought permission to appeal the judge’s order, but refused to give the grounds on which he intended to appeal. The judge had to spend a good deal of time dealing with all these issues in various judgments.

Mr Justice Munby clearly exercised the utmost patience and consideration for the battling parents, in a case that would have tested the patience of Job. He expressed his sympathy for other litigants and children caught up in “an already overlong queue”, who were still waiting their turn because of such intensive judicial involvement in this one case.

What to do? Sally Ward of children’s charity Pro-Contact says that parents have to be good, but not perfect. I am not sure that court is the best place for private children cases. I also believe that contact centres, where are there are skilled people who can assist with the emotional aspects of such cases, should be used more and should be better funded. Such measures could help resolve cases and free up the courts’ time.

The cases described above are not isolated examples. Sadly there are many parents caught up in lengthy residence and contact disputes.

Long since forgotten, or so it would seem, is the plain fact that these parents conceived their children together. Until the divorce, they all lived together. When the parents go to war over their children and engage in protracted and bloody battle, whose needs are placed first? Who emerges with the battle scars?

Who, ultimately, pays the terrible price for such emotionally charged choices and out of control behaviour?

Image credit: arriba.