First Appointment

Parties often regard the First Appointment as relatively unimportant, because they don’t have to say anything and much of what happens goes over their heads.

In reality? Ignore what is going on at your peril!

Before the First Appointment, each party will have exchanged a document known as Form E, which contains financial information. At the First Appointment hearing, discussions will take place with the judge as to what, if any, additional information is required before the case is ready to proceed to the next stage.

It is vital to play your part and make sure everything that should be disclosed between the parties, has been disclosed. You also need to confirm that all the valuations that need to be produced and agreed are set in train, ready for the next stage: the Financial Dispute Resolution hearing. At the FDR hearing, negotiations will take place on a Without Prejudice basis and a presiding judge will attempt to bring about a settlement.

Chronology Statement of Issues and Questionnaire

Before the First Appointment, each party will also have prepared a Chronology: a brief history of what they see as the relevant facts. Sometimes these will be contentious, but don’t worry too much, they are merely to assist the court. A draft Questionnaire will also be prepared, intended for the other party to answer. This Questionnaire is based upon a Statement of Issues, which is another document filed with the court. In a Statement of Issues document the party explains, as succinctly as possible, what the issues are in the case and what still needs to be answered by means of the Questionnaire, before the FDR hearing can proceed.

The Questionnaire aims to sweep up all outstanding matters the other party may have “forgotten” to deal with when filling out his or her Form E. It may also require further amplification. I have seen opponents value their interest in a company at “nil” or simply leave figures blank or “to be assessed”. How can the case proceed without that information?

At Stowe Family Law we are greatly assisted by our in-house forensic accountants, who assist in the preparation of clients’ Questionnaires and who help to assess the information subsequently provided. We are solicitors, not accountants, so having this facility on tap is greatly appreciated by our clients and is frequently invaluable.

In straightforward cases, the Questionnaire may be surplus to requirements. In complicated cases, it most certainly is not. However the judge has to decide whether each question is necessary.

One trick I have noticed is that at the First Appointment hearing, the lawyer on the other side may sidle up to the opposing lawyer, for a conversation beforehand. In the course of trying to “amicably agree” the questions to remain in each party’s Questionnaire, “to save the court’s time”, that lawyer might suggest that one or other of the questions are “irrelevant” and should therefore be struck out without further ado.

Beware! If in doubt, do your best to keep it in because while the lawyer on the other side is acting on his client’s instructions and may not know the truth, the client may not be so honest. This could be his or her last gasp effort to keep information hidden, knowing that a judge will keep that question in and that it should be answered.

You will frequently find that valuations are contentious. You may see no need of another valuation. You may already have one. Or you may believe that a valuation is desperately required, to prove that your spouse has placed a ridiculous value upon a major asset. Or if valuation is agreed, you may want your own valuer. It is up to the judge, remembering everything we have previously discussed in connection with the new Family Procedure Rules, to act in accordance with the overriding objective to decide what to do that is proportionate to the issues involved. Usually that means jointly instructing just one expert, who will give a valuation of a property or shares or pensions, or other valuable items. If it is a complex case, however, and you feel that a single expert is not appropriate, you can still argue for your own.

When the First Appointment is over, and you leave court with directions in place, the judge will also have ordered a new hearing date, and the case moves on. All directions given by the court must be complied with, so that the FDR hearing can go ahead.

The FDR Hearing

This is a private court hearing, which provides a very good opportunity for the case to settle. However this, as I noted in my previous post about FDR hearings, is not a certainty.

Settling a case at an FDR hearing is far from easy, because clients know they can still go to a Final Hearing if they wish. I have read letters written after FDR hearings, which set this out as follows:

“I regret the FDR did not result in a final settlement because as you [X] know, although you were prepared to compromise, unfortunately[Y] was not, and sadly continued to hold out for a disproportionate share of the assets so that a reasonable settlement was impossible…..”

In such a case, there is no possibility of compromise between the parties. So the case has to plod on to the third more terrifying stage: the “no holds barred” Final Hearing, in which control is surrendered to the judge as the parties finally walk through the courtroom door…

I have often thought that for a judge, conducting a negotiation is a far tougher job than arriving at a judgment, particularly if the judge does not have the presence or sharpness of some of the formidable advocates who appear before them. If the judge doesn’t give it a really good go, pushing both sides to extremes, then the intractable dispute will go to a lengthier – and even more expensive– Final Hearing.

So why do FDR hearings fail?

In my experience, one of the most common reasons why FDR hearings fail is that there is an insufficiently firm, authoritative figure at the helm who can steer the parties towards a settlement.

In such situations there will, of course, be tough lawyers on both sides. The lawyers will be happy to slug it out and demonstrate to their clients exactly why they are in safe hands. The judge needs to be even tougher. When this is not the case – perhaps an inexperienced deputy has been assigned to the task, or perhaps there are insurmountable time constraints – it can be difficult for the judge to stage manage the deal.

The parties leave deflated. Outside the courtroom door, aggression can turn into melancholy, as the wasted time and costs are lamented. It is a great pity, because an FDR hearing is a good opportunity to settle. But the parties, cocooned by their lawyers and not actually taking part in the court hearing, simply sit back while it takes place around them.

In the heat of the moment, they can forget that a good settlement is one where both parties walk away thinking that each  of them could have done better. That is the price they pay for achieving resolution. I think it is a small price. The parties need to consider whether or not it is worth the wait, the additional cost and the stress of going to a Final Hearing. If this happens, the adversarial process will get into full swing and the parties will have to give evidence and be subject to rigorous cross examination.

If the FDR hearing takes place in the High Court, it can be a different matter. A High Court judge will have greater stage presence;after all, the courtroom setting is somewhat different to the chambers of the local district judge. The judge has the ability to challenge both sides so acutely that even intractable disputes may settle – unless, of course, the parties are so bloody-minded that the outcome is inevitable.

Reading of Ashley’s fame, I contacted him and he has kindly agreed to write a post for this blog about Jones v Jones. It will be a privilege to post his thoughts and I can’t wait to read them; his last post here, which was concerned with Radmacher v Granatino, remains popular.

In the meantime, let’s take a look at Jones v Jones. The case was heard in the Court of Appeal late last year, and the decision was taken to increase an award to Mrs Jones from £5.4 million to £8 million.

Coincidentally another judgement, Goldstone v Goldstone, was published at the same time. This case also featured a multi-million pound couple. The Goldstones enjoyed a very glamorous lifestyle, with properties in England, Switzerland and Monaco. This case was also heard in the Court of Appeal, with Mrs Goldstone arguing that she was entitled to a share of assets worth £7.5 million, allegedly deposited offshore by Mr Goldstone.

Judges, sitting and scratching their heads in the Court of Appeal, have criticised the amount of money being spent on the litigation.

“The bills incurred by the families mount to shocking summits”, notes Lord Justice Thorpe in the Goldstone case.  Lord Justice Wall, President of the Family Division, comments: “whether a wife ultimately gets £5 million or £8 million she will still be a very rich woman”.

Cue the banging of the drums and perhaps the familiar refrain: gold digger wives at it again….

But I would like to pose a question, and a potentially controversial one at that:

How much is £5 million to a woman accustomed to a bottomless piggy bank?

Will she still be a very rich woman? Most of us would be able to answer that question straight away, without a second thought. “In my dreams! £5 million is more than enough for anyone to live on. I wouldn’t even know what to do with half of it!”

Sadly, unless a lottery win is forthcoming, most people can only dream about such a sum.

But let us draw some wavy lines, and suppose for a second that you are the wife of a multimillionaire. You have been married for many years, but a divorce has been demanded. Your divorce lawyer will advise you how best to adapt to the situation. Meeting reasonable needs applies to you, the very rich lady, too.

First thing to consider: where would you like to live?

Monaco? Switzerland? London?

All three? Well, that’s certainly what you’ve been used to.

And how much would homes in all three places cost? You could exhaust £5 million before you’ve even started – and that’s just property.

Hmmm. Perhaps you need to set your sights lower. Perhaps from now on, Monaco and Switzerland would suffice for – dare I say it – holiday destinations?

Gulp. Ok.

But where would you like to live in London? Don’t even think about one of those amazing houses in Chelsea or Belgravia, where prices start at more than £10 million. And as for an apartment overlooking Hyde Park… Well, your housing budget wouldn’t fetch a single room in one of those new builds, would it?

You must set your sights rather lower, a little further out. Hampstead? Primrose Hill? Or are these  too highbrow, with all those socialists and politicians moving in? Certain streets are still out of reach, true, but some of the housing is more affordable. And on the plus side, Michael McIntyre and George Michael live in Hampstead… That could be quite fun!

So you plump for the Hampstead borders. Not exactly Hampstead but near enough to buy you a house within reach of  trendy cosmopolitan eateries. That’s going to cost at least £2 million for  a reasonably sized house. Then you have to add in the cost of the conveyancing, doing it up, furnishing and so on. And yes, it’s going to be smaller than any of your previous family homes. Not much change out of £2.5 million I’m afraid.

What income are you going to have?

What can you spend out of what’s left?

You begin to add up the monthly costs. Running your home. A sensible car for you and the children to run around in and maintain.  A cleaner. A babysitter. The regular holidays to which you and your children have become accustomed. Medical bills. Dental bills. Clothing. Social events. Entertainment.

A rich woman’s budget can run to hundreds of thousands a year. As for you: your budget has been suddenly and severely downsized. Your lawyer reaches for the Duxbury tables, and points to the figure that applies to you. Now you are going to have to cut down dramatically, to – dare I say it – around £4000 a month.

Relative values

Yes, £4000 is an awful lot of money to you and me. But consider how this wife has lived for decades. A new dress by her favourite designer might cost £1,000. Add in the coat, shoes, bag and the till is soon ringing up £2,000. That’s how this wife has always dressed.

She certainly doesn’t have to agree with a judge who describes her as a “very wealthy woman”. Her golden piggy bank has a new bottom, pushed firmly into place. There is no more to come.

She will have to manage, because she has no choice. However even if she walks away with £5 million, her lifestyle will not resemble the lifestyle she enjoyed as a wife. This is why divorcing wives will fight so hard for the difference between £5 million and £8 million. If they succeed, their lives will be transformed.

Meanwhile her husband still has his income stream from his businesses. He still enjoys the international lifestyle that they once shared. Life will improve for him, no matter how long and hard he complains during the divorce. His capital can be used to work for him, to invest and replenish his depleted asset base. His wife has no such opportunity.  Her money has to be spent on housing and meeting her income needs. And as we all know, children cost a small fortune. Maintenance payments for children rarely meet all their needs.

Neither party will give up without a fight – and in my experience, many of these super-wealthy husbands are extremely good fighters.  Indefatigable and armed with a phalanx of sophisticated financial advisers, they expect to outgun their wives financially, forcing them into as many pointless rounds of the most expensive litigation they can, as they fight to ring fence from a settlement the valuable assets they have transferred to secure offshore structures. They keep hoping their wives will surrender as legal bills mount as fast as a Swiss taxi meter, well into seven figures. And let’s not forget that legal bills are usually paid by each party. So the more the wife’s legal costs grow, the more her overall settlement will decrease. So the harder she has to fight.

Who is right and who is wrong? Different people have different opinions, and I will leave you to yours. But what is happening here is, in reality, no different to financial battles on a smaller, more familiar scale. All these wives know that in keeping up the fight to share in all the family wealth, they will make a real difference to the rest of their lives. I’m not so sure, therefore, that I would direct criticism to the wives who seek to make that difference.

Rather I would respectfully suggest that if these very wealthy husbands do not understand what a difference £3 million can make to a divorce settlement, it will have cost them very dear indeed when they eventually find out.

This post was selected for the 94^th Carnival of Money Stories, hosted by Invest It Wisely and the 26th Carnival of Wealth, hosted by Value Stock Guide.

But Mr Justice Mostyn appears to be unhappy with the actions and findings of a District Judge below in a bitterly contested children case. That the case was fraught with difficulties, there is no doubt. But it is the manner in which it was dealt with by the judge that concerns him.

This case included a total of 17 days of hearings over a lengthy period. Thirteen other witnesses gave evidence, there were 300 pages of handwritten notes, a court transcript of the evidence running to over 1600 pages, and costs estimated at £120,000 for the father, who was paying privately. Similar sums were spent on the legal aid budget for the mother and the court-appointed Children’s Guardian.

It is unusual for an appellate court to set aside findings of fact in the lower court on the basis that the original judge is in a unique position to make those findings, having actually heard all the evidence. However, Mr Justice Mostyn set aside all the district judge’s findings and then enquired whether it was legitimate for him to conclude that “there was in fact no purpose to the inquiry at all”.

So it seems that nearly £400,000 – including a substantial sum of taxpayers’ money – was spent on a completely useless exercise. Ouch!

A High Court Judge is in a position to make his concerns about a particular judge public – as he should when the occasion warrants in order to retain public confidence in our legal system. It is important for all of us, within and outside of the legal system, to have confidence in the abilities of the judiciary and to speak out on the occasions when judges do not appear to meet the standards we expect of them.

My concern is along slightly different lines. From time to time practitioners have concerns about the decisions made by a judge, not usually in such spectacular circumstances, but when they appear to lack uniformity in line with decisions of other judges at the same level in the same courts, or elsewhere. If a judge’s decision is “plainly wrong” in terms of the case itself, then an appeal is probably the answer. But not always. The Judge may not be “plainly wrong” but the decisions coming from that judge still attract overall criticism because they are markedly dissimilar from the outcome before different Judges.

I recently attended a family law conference at which one experienced barrister, who sits as a judge himself, expressed concerns about judicial abilities lower down the scale. He told the conference audience how, when advising his clients in one particular city, when there might be 12 judges sitting on the same day, his advice would boil down to these words:

“If you walk through the courtroom door, it is a lottery as to which judge will deal with your case, and there is no guarantee as to what the outcome will be. My advice to you is DON’T walk through that door. Settle your case now.”

The standard and quality of judges making vital decisions that will affect people for the rest of their lives can not only sometimes differ from city to city, but sometimes, from room to room within the same courthouse.

One reason why I became a solicitor is that I don’t enjoy handing over control of my client’s case to an independent third party, who has to make a decision that must be fair to both sides and the outcome may not even be predictable. I much prefer to reach an out of court settlement, on terms that my client and I have negotiated together with the other side, and with which both parties are happy. The client can move on, with a tailor-made settlement – and preferably without the memory and cost of an unpleasant courtroom battle haunting them. They are better placed to establish a relationship with their former spouse that is at least cordial.

For most cases judicial input is required at the outset in order to set the timetable for the case, with the aim of keeping control of it. In financial cases within a divorce, the procedure itself is “front loaded” in terms of time and costs. This means that when a new client instructs us, a great deal of work will need to be done in order to begin to shape the case for the future. That is particularly so where the spouse is likely to be obstructive in relation to disclosure. Experienced judges do recognise and understand the problem.

In London last week at the 1KBW Party, I heard about one case where a QC and junior barrister had compiled a 100-page, 1000-question questionnaire to start a case. In the Principal Registry in London the questionnaire was allowed in its entirety. If it had been the provinces, however, this could have caused some problems particularly had the case come before a deputy district judge. The Questionnaire may have been allowed in its entirety – or it may not. Some questions may have been allowed by one judge, different questions by another.

I have additional concerns about the decision making abilities of some part-time deputy district judges, who sit in the first tier of the system and are expected, unfairly I believe, to deal with complicated family law issues. Even when they have insufficient experience of the issues, they deal with them in order to get through the court’s caseload within the time scales allotted by the court. Some of these deputy judges have little or no family law background at all. If certainty and uniformity is one aim of our justice system, deputies do not always provide it.

Some deputy judges are sensible enough and indeed brave enough, to decline the challenge, rather than make a mistake that could have a serious impact on a technically complex case. However in some cases they decide(or believe they have no choice), but regrettably, to plough on, whilst complaining about the workload. Then it can become necessary to salvage the outcome. In cases involving difficult children matters, or the investigation, determination and distribution of millions of pounds between couples, this should not happen. But I am afraid sometimes it does.

In our court circuit in Harrogate, there was a court report produced in 2007 (York: Family Courts Report, April 2006-March 2007), which commented specifically on the amount of additional work that our family law firm had introduced to the court. Sensibly, the court administrators have dealt with this situation by ensuring that there are almost always two full-time district judges available to deal with the vast majority of our work. They adjudicate at every stage of a case, and the judges have seniority and experience. Consequently we can be confident that our clients’ cases will be met with the skill, expertise and objectivity they require the outcome being uniformity and certainty. That is not to say these judges do not give us an easy ride, and nor should they. They are demanding and perceptive, applying high standards. So much so, that in one recent case involving the hearing of a contested children application, in which both clients and the children were living in Southeast Asia, both parties (the other being represented by London lawyers) were content for the Harrogate court to adjudicate. The outcome resolved the problems that the parents had encountered in every respect.

However up and down the country, as practitioners know only too well, outcomes cannot always be predicted with confidence – and we witness the lottery that the barrister at the conference described. This is a prickly and difficult topic, one which practitioners do not usually have the opportunity to air in public for fear of offending the judiciary. But if concerns in relation to the lack of uniformity and certainty are not made public, they are unlikely to be fully addressed or corrected.

Had the case been heard in England, Mrs Agbaje would have received at least half of the couple’s assets. As it was a Nigerian court left her virtually penniless, with her former husband retaining assets worth £616,000. The case has been in and out of our courts for years now, with Mrs Agbaje seeking a fairer settlement here in England.

Today the Supreme Court ruled in her favour – and I was delighted. So when journalists contacted me for comment, I didn’t exactly mince my words (below). UPDATE: Mrs Agbaje’s peerless Queen’s Counsel, Nigel Dyer QC, tells me that the Supreme Court ruled 5-0 in her favour.

I don’t necessarily share the same opinions about matrimonial jurisprudence as Frank Arndt, Head of our International Law department, who was quoted in The Lawyer. We hail from differing backgrounds: mine is rooted in the common law with discretion as its key, whereas German family law is strict and codified. And the difference in our approach actually works well in the office, where we can advise clients from differing perspectives.

Incidentally, I have never been keen on the description of London as the “world’s divorce capital”. Even though Stowe Family Law is opening a new London office, I feel obliged to point out that good settlements aren’t curtailed by the M25!

Nigeria divorce judgment attracts attention

By Jane Croft

Law Courts Correspondent

The Supreme Court reinforced London’s reputation as “divorce capital of the world” after it found in favour of a Nigerian woman who took her case to the UK courts after disputing the divorce settlement she was awarded by a Nigerian court .

Family lawyers said the keenly watched judgment could open the floodgates for wealthy spouses in “big money” divorce cases who are unhappy with divorce awards made by overseas courts to seek a bigger payout in the UK.

London has been dubbed ”divorce capital of the world” because recent changes in the law meant wives are now favoured in big money break-ups.

The Supreme Court ruled that Sikirat Agbaje had not received an adequate financial settlement from her barrister husband when the couple divorced in Lagos in 2003 after 38 years of marriage. Continue reading»

For me it is White v White: the decision of the House of Lords, delivered in 2000. This was when the concept of equal sharing became the accepted starting point (and usually the finishing point) for financial settlements between a wealthy divorcing couple, irrespective of one party’s role as the bread winner and the other party’s role as the homemaker. Gone was the entitlement of the breadwinner (usually the husband) to retain the lion’s share of the family wealth. The court made it clear that no distinction was to be made.

That decision is now ten years old. With the benefit of hindsight, has White v White unwittingly accelerated the decline of marriage in English society? In short, was it the right decision for our society as a whole? It is not a simple question to answer.

Until White v White, wives of wealthy men could not hope to argue successfully for parity or anything approaching it. They usually had to make do with the Duxbury tables to calculate their ”reasonable needs” for life. The Duxbury tables, which are still used in some cases, give the wife a capital sum based on an income need determined by the court if the parties fail to agree.  The lump sum is arrived at on the basis that every year the wife will spend some of the capital and some of the interest earned, so that when she reaches the actuarial age at which it is assumed she would die, there will be no capital left. It is therefore a cheaper option than a lifetime annuity. However it leaves recipients stuck to a rigid lifestyle from which they cannot depart, and in many cases unable to leave a penny to their children from their estate. In some cases a wife’s “reasonable needs”, as calculated prior to White, bore little resemblance to the lifestyle that she had enjoyed during her marriage. Since White, reasonable needs have been more generously interpreted.

Dart v Dart

The family law case of the 1990s adjudicated by the court was Dart v Dart (1996), which demonstrated the need for a new approach. The Dart family originated from Kentucky, USA, but was living in England when the husband began divorce proceedings. The wife tried in vain to have the case heard in the USA. She pursued every avenue to avoid the relatively derisory settlement that would be forthcoming at the hands of the English courts. The couple was spectacularly wealthy – the husband’s fortune was calculated at about £400 million – and had enjoyed a spectacular standard of living during the marriage.  The wife sought in the region of £100 million for her settlement.  However her legal team suffered a pasting at the High Court and subsequently the Court of Appeal. The wife was awarded £8.5 million and was ordered to pay her husband’s costs.

Dart v Dart was a watershed case for wealthy husbands – and had it been heard several years later, the result undoubtedly would have been different.  Once again, hIndsight is a wonderful thing. When White v White came to court in 2000, it was welcomed by family lawyers who had been waiting for it on behalf of their female clients.

The judgments of the House of Lords, particularly of Lord Justice Nicholls in White v White, have now become the norm. If a couple begins married life with little, gathering wealth during the course of their marriage, the wife can reasonably expect to receive half of that wealth. She can do this even if she has never or rarely worked outside the home.

Charman v Charman

This was the argument opposed by Mr Charman, when Charman v Charman came to court in 2007. The couple had started married life with very little, had two children and were married for the best part of 30 years. By the time they divorced, Mr Charman had secured a place on The Sunday Times Rich List and the couple’s assets were assessed at £131 million. Mr Charman insisted that his wife should be satisfied with his proposed settlement of £20 million. He described her as “a housewife” and contended that his contribution to the couple’s wealth entitled him to the larger share.

The court rejected his argument. In the full glare of publicity Mr Charman was ordered to pay his wife some £48 million, with a discount on a 50:50 split only achieved because the court accepted that he had made a “stellar” contribution to the family fortune.

Most high earning husbands cannot secure such discounts. The 50/50 split is more often than not a given. The husbands concerned often believe that they deserve extra credit, having earned fortunes with blood, toil, tears and sweat. However the courts, following the case of White v White, usually disagree. Their fortunes are split 50:50. It is not just high earning men who find their fortunes divided in this way; the rule applies equally to high earning women.

Is it fair?

Miller v Miller and McFarlane v McFarlane

Almost ten years later, many high earners have found themselves on the “wrong end” of these decisions. Some have attempted to use the provisions of section 25 of the Matrimonial Causes Act 1973 (which is still in force) to escape the rigours of a 50:50 division. We have had variations on the White v White theme, some of which have been ingenious. In addition to the cases about stellar contributions, there have been arguments about illiquidity impacting upon a 50:50 split, the valuations of assets, the impact of premarital wealth on wealth acquired during the marriage, the impact of a short marriage on assets acquired during the marriage, assets placed into trusts before and after the marriage, the impact of post-separation wealth on equal distribution, and cases about sharing income and bonuses, when a clean break between the parties was not possible.  Then there have been arguments about the validity of the deal after the agreement has been signed and court orders made. All of these cases have been determined in the shadow of White v White, and in a desire to achieve post-White “fairness”.

Some individuals have turned to the media. Headlines have told of angry husbands who have publicly berated the system. It is true that “the system” has its flaws. I have sympathy for fund manager Alan Miller, whose multi million pound payout to his wife – after a very short, childless marriage – seemed to me to be harsh because the approach followed the sharing principle of White v White. I also sympathise with accountant Kenneth McFarlane, who did not seek publicity but whose case was very public, because it took the arguments in White to even more esoteric levels. In his admittedly “paradigm” (i.e. rare) case, the wife had given up her career as a lawyer to raise the couple’s children. Her settlement was calculated to reflect the loss of earnings she had sustained by becoming a homemaker. As a result she now receives substantial slugs of annual income each year until her former husband retires, which are substantially in excess of her reasonable needs.

More seriously, it also appears that the numbers who marry have steadily declined over the decade; instead, many couples are choosing to cohabit. A coincidence? I think not. Many high achieving clients of mine decline to marry at all, knowing full well that their liability if the relationship breaks down will be peanuts compared to a divorce settlement. Others are exploring the possibilities presented by prenuptial and postnuptial agreements.

Politicians and judges are quick to lament the decline of family values, arguing that marriage should be the gold standard. Ten years ago these arguments did not exist. Ten years is clearly a long time.

We now have many prominent lawyers, academics and judges, all practitioners in the field, agitating for a change in the law. Some look to European models, which have no room for flexibility and no maintenance at all for wives, who are now perceived to have far too much.

There are now regular arguments about the rights and wrongs of divorce settlements. The media coverage appears to have polarised the public, but often it highlights uncommon cases and ignores the rest.

However that is all we are in fact discussing: a tiny fraction of cases, featuring wealth sufficiently substantial to attract media attention. The vast majority of cases – hundreds of thousands of them, every year – pass under the radar with nary a sound.

So in the wake of what appears to have become a vigorous campaign for change in financial divorce settlements, given what has happened to our society, was White v White correctly decided? Or do we need change?

From my perspective as a practitioner, as someone who sees ordinary people day in day out, we still need discretion coupled with flexibility in order to achieve fair maintenance and capital settlements. The 50:50 split of assets simply does not apply to most couples because it usually will not meet the parties’ needs. We need the flexibility that our law gives us, to allow for the individual circumstances of every couple’s case. We don’t need a change in the law.

What we do need, in my opinion, for the more high flying cases, is just one thing.

It is common sense.

We need to “temper justice with mercy”, so that the outcome reflects a practical, common sense approach to the case such that the ordinary man or woman in the street would think it fair.  Many cases do deserve a 50:50 split, but many simply do not. I would not have awarded the 30 something Mrs Miller £5 million for her very short marriage. I would not have treated Mrs Macfarlane as exceptional. I would have awarded Mrs Charman £48million, as a fair sum that reflected Mr Charman’s “stellar” contribution but recognised also the vastness of the family assets and the contribution she made to the family.

And what of the next decade? What will we see happening? Ambitious legislation? Fresh approaches to divorce and financial settlements? The legalisation of prenuptial and postnuptial agreements?

If we have learned anything from the application of White v White during the Noughties, it is this. Innovation is not the catch all answer. Sought after reforms may solve a very few problems – but can create many new ones.

Hindsight is a wonderful thing. But usually by then the damage has been done.

Image credit: walknboston.

Last week White, who has been estranged from his wife Mati since 2007, won his appeal against a High Court ruling that had halted his bid to seek damages from his wife’s lawyers for wrongful interference with his property.

The action relates to documents including a contract from P&O and a heartfelt letter from White’s daughter by an earlier marriage, which White said he had never seen until the originals were produced by his wife’s lawyers in court. In the Court of Appeal, Lord Justice Ward noted that Mati White had removed documents following alleged threats from White – which White denies – that she would not get a penny and that he would “pull the plug” on everything.

Full disclosure

In my next post I will examine the judgment in greater detail. In the meantime I would like to take a look at disclosure and clients’ concerns. In matrimonial proceedings both parties have an obligation to provide full, frank and clear disclosure of their financial position to the court.

It is common for clients to seek advice as to the steps that they may take to collect evidence. This happens when a client suspects that a spouse will not provide full disclosure. In cases such as these, clients often want to turn detective and uncover evidence that they believe will otherwise remain hidden. They wish to do so by stealth, using improper means – but at the same time they want their lawyer’s blessing so that if things go wrong, they can shelter behind the lawyer’s back.

Most, if not all family lawyers are motivated by a genuine desire to help a client as much as possible. However a family lawyer who has little knowledge of any other field of law may believe that financial negotiations amount to little more than a squabble between spouses, bearing no resemblance to relatively unfamiliar rules governing commercial law and, in particular, commercial espionage. They just don’t see the similarities. Commercial law firms operate in the “dog eat dog” world of international commerce; family lawyers’ safe little practices are light years away from this cutthroat environment (or so they believe). As Officers of the Court, they would never expect to unwittingly infringe a draconian and alien set of rules.

Unfortunately, they couldn’t be more wrong. 

The Hildebrand Rules

In family law there is a set of principles known as the “Hildebrand Rules”, which has grown up over time following the eponymous case in which a crate-load of illicitly obtained documentation was obtained for use in the financial case by a husband against his wife. The Hildebrand Rules (summarised here by Family Lore) aren’t particularly easy to understand or interpret, and so some family lawyers pay them little more than lip service.

However the Hildebrand Rules, their consequences and the challenges faced by family lawyers have featured prominently in the Marco Pierre White case: the Rules applied to various of the documents upon which the case is centred. Of the 42 documents, 24 are originals and some of them had no relevance to the case.

Casebook

I once experienced a situation that was very similar to the Hildebrand case. It involved a London-based client, who was married to a powerful businessman who didn’t take “no” for an answer. He enjoyed a string of affairs with various women and my client finally decided that she’d had enough. She decided to divorce him, and he threatened her. She instructed me because she felt that I was strong enough to take him on.

The first thing her husband did was break into the safe in which she kept all her correspondence from my firm. He read it all, including the leading counsel’s advice about her settlement. He laughingly told her that we were all in “La La Land”, and that he intended to make sure she got nothing.

I asked her to keep calm. I advised her to ignore him. I told her I was certain he would not be able to prevent a multi-million pound settlement coming her way. I also pointed out that any sympathy of the court towards the husband would evaporate when the judge discovered that he had forced her safe open.

However my client was deeply stressed and frightened by her unpleasant husband, who continued to threaten her and make derogatory comments about her “powerless lawyers”. So she decided to take matters into her own hands. While he was away on a business trip, she raided his office.

She apparently had keys to it. She let herself in and photocopied sufficient documents to fill three boxes, making no distinction between personal documentation and business-related documentation that had nothing to do with the case. She then drove 200 miles and hand-delivered them to my office while I was out at lunch.

When I returned the receptionist told me about the delivery and pointed to the three boxes behind her desk. I had to think and act fast. I won’t print my reaction, but my instructions to my staff were clear. I required the immediate removal of those boxes. My client was accordingly telephoned and instructed to remove them and return them to her husband’s office. She protested that I might be missing something, but I refused to even give them a cursory glance. They were duly returned.

Her husband learned what had happened and did his best to argue that I had acted improperly. He said that I must have read the documents, and therefore had illegally obtained knowledge of valuable commercial information that was not connected to the case. Through his company lawyers he took full advantage of the situation to threaten to sue me for damages and to try and stop me acting for his wife.

He was wasting his time. I continued to act and, with the assistance of my excellent leading counsel, ensured that this bully of a man received his deserved comeuppance in court.

Was I right to do what I did? Could I have lawfully inspected all the photocopied documents, kept copies of the relevant documents and returned the rest, disclosing the relevant documents at the appropriate time?

I will be frank. I did not wish to take the risk. I wanted those boxes gone from my office. I am sorry to say that there are times when a client’s best intentions, combined with your own choices if they are misguided, can lead you into disaster.

Advice for solicitors

I believe it is a mistake to become too close to a client, or to want to help a client so much that your own self-interest becomes compromised.

It is a mistake to become too involved in a case, gearing yourself to “take on the fight” even when you know the other spouse is gunning for you personally. The better known you are and the greater your reputation, the more likely it is that this will happen. I would suggest that instead, you remind yourself that the other spouse is emotional and may be out of control. If possible, work with other lawyers in the office, sharing the heat. Undoubtedly, the other spouse will be used to giving orders but not taking them.

The best advice in such a situation is to stand back, keep calm – and keep going. Never let your feelings towards your own client get in the way. You, not a trainee, should always check what documents you have been given by the client. You should satisfy yourself that you know exactly what all the documents are and whether they should be properly on your file. There is no reason why you should have an original document that belongs to the other spouse on your file.

I am fortunate: I have a background in commercial law. Because I am aware of the draconian attitudes of other courts towards “self help” and the potential, deadly implications for solicitors, I am careful not to advise a client to take measures that could cause them – and us – to face criticism and worse.

Don’t underestimate the potential fallout. Personally, I do not see a client without another solicitor present (whose time is not charged to the client). The other solicitor is there to take detailed notes and ensure that there is no conflict between what is actually said, and what the client thinks was said.

As the saying goes: “Just because I’m paranoid doesn’t mean they’re not out to get me”.

Image credit: rubber_bullets.

Newspapers reported that the judgment in this case was academic, because the parties had already reached a further financial compromise before the ruling in the Court of Appeal was made. In fact, I believe the judgment has important implications for all parties and their lawyers. This is because the safety net to set aside court orders has all but been removed. Although it is not my practice to comment publicly on my clients’ cases, I intend to make an exception referring only to facts which are in the public domain. I would stress that the advice and client examples I give thereafter are not connected with that case.

However, I am pleased to say that Julian Hawkhead, Head of the Domestic Family Law Department at our Yorkshire family law firm represented Mrs Walkden and was able to assist her to reach the financial compromise in advance of the Court of Appeal’s ruling. The details of the case are as follows:

• Martin and Kim Walkden divorced in 2006. The husband’s timber company was valued, and split 58:42 in his favour. Mrs Walkden received a fixed settlement of around £482,000 and ongoing maintenance of £1,100 a month. Case closed? Not quite.
• Less than three months after the divorce settlement was finalised, the husband’s company was sold for more than £3,700,000 – an amount that far exceeded the original valuation. In effect, that 58:42 split became 82:18.
• The county court gave Kim Walkden permission to return to court to seek an increased settlement, on the basis that a “new event” had occurred.
• In the judgment handed down, the court set out the law in great detail, leaving no-one in any doubt about their views. Lord Justice Thorpe, Lord Justice Wall and Lord Justice Elias found that Mr Walkden was not obliged to make additional provision for his former wife and child.

In such a case, the first question to be asked is whether an agreement has been rendered invalid by misrepresentation, mistake, breach of duty of full frank and clear disclosure, fraud or undue influence. If that cannot be established, then under Barder principles, a supervening event may have occurred to wholly frustrate the agreement. However, such an event will be very rare indeed, and certainly not because of the unexpected – but even so, not unforeseeable- increase or decrease in asset valuation from the original, no matter how starkly different the value may be.

Lord Justice Wall also added another obstacle to overcome: the legal advice given not to enter into the agreement, citing the leading case of Edgar v Edgar. He added that while he did not wish parties to be deterred from entering into an agreement, any such settlement “if properly arrived at is likely to be binding and the opportunities to unravel it will be limited in the extreme.”

There we have it, loud and clear, from the Court of Appeal. Don’t rely on Barder. You cannot return to court easily or at all. You certainly can’t complain if assets turn out to be worth far more or far less than you think. This latest, stark judgment is one that all family law practitioners should read. Their Lordships have now set the bar so high, it is almost impossible to set aside a Court order for any reason, let alone where an order has been made by consent on the basis of values that are subsequently subject to dramatic alteration.

Let’s move away from the Walkden case, and look at some practical ideas. Clients: if you are currently in negotiations, what can you do to help ensure that your situation is properly and fairly resolved?

Firstly, you mustn’t close your mind to sound advice in order to do the deal “your way”. You may regret it. Countless times new clients have said to me, having had time to reflect on their actions, “I wish I had seen you first” or, when there is nothing more that can be done, “I wish I had listened”. Remember: you get one chance only. Your decision will affect you for the rest of your life. Please don’t blow it!

Stay commercial. Don’t let your emotions run away with you. You may be “king of the castle” elsewhere, but this does not- repeat not- make you a clued-up divorce lawyer, forensic accountant or commercial valuer.

I always insist on full disclosure, which is given by court-sanctioned documentation and is sworn on oath to be true. If there is anything in the documentation that looks fudged, or odd, or ignored, it needs to be clarified. Documentation needs to be considered objectively. You can still play an important role, even you are commercially unaware. For example, you should think hard about any comments made in passing about the business.

Is it going to be sold? Is it going to be floated? What are the long-term intentions?

Has the other party talked about buying somewhere abroad?

Has the other party been to see solicitors other than divorce lawyers? Why? What is that party’s long term plan?

Ask yourself these commercial questions – and keep asking them. Write down things you remember. Then let your lawyers and other professionals get on with the job of analysing the information, asking the questions that will protect you and valuing the assets. Once, a client of mine found a phone bill in the house. She analysed it. One number kept coming up – incredibly, it led to a trail of undisclosed companies located around the world. Of course, that husband could not have got away with non-disclosure, even with this latest judgment, but it is an example of how sometimes clients can still, legally, help.

Always attempt to analyse the possible risk to each of the assets in the case in advance. Clients and advisers should deal with those risks accordingly, remembering the general rule that assets should be revalued and disclosure must be given fully, frankly and clearly up until the date of settlement. I don’t understand why clients often don’t want to value assets, preferring instead to rely upon what their spouse is telling them – or worse, what they themselves consider of the asset to be. If the opportunity to value is lost, the spouse could stand to do very well at the other party’s expense. Are those assets likely to increase or decrease or if currently illiquid, be sold on? What is really intended for them once the divorce is out of the way?

If you are paying for advice, take it. If your advisers recommend a professional valuation from qualified valuers, they are doing so in your interests. Please obtain one. Consider this. Your spouse gives you a valuation to read of his company, prepared by his accountants. It looks ok to you. He offers you half of this figure. You accept and breathe a sigh of relief that everything is agreed so easily. However, do you know that there are several different ways of valuing a business? Is the correct method adopted here?  Do you know that properties may be included at values years out of date? Do you know that sometimes business interests are discounted by a significant percentage, when a discount may not be applied by the court at all?

You didn’t know?! Exactly!

If you still refuse to agree to a valuation, and your advisers produce letters for you to sign, indemnifying and absolving them from any liability in the event that things go pear-shaped for you, please, start worrying. Clearly your advisers are so concerned about your steadfast decisions, they naturally want to protect themselves in case you decide to sue them in the future.

Where assets may be “subject to swing” e.g. if liable to decrease, arguments could be advanced to discount their value in negotiations and thus lower a potential pay out. Similarly, when assets may be liable to increase, arguments could be advanced to increase the pay out in the event of certain events arising.

(Note that arguments could also be applied to pensions, if the parties are young and have to live to pension age to make use of their pensions. Should their value be discounted against assets which are immediately available?)

How does this work in practice?

One of my clients entered into a maintenance agreement pending a sale of a property. She preferred this to a clean break and a larger capital sum. Indeed, she has profited by this arrangement; she knew that the property would stick on the market.

Another client was invited to choose between a fixed sum or a percentage amount from the sale of a property. This was before the recession. She chose the fixed sum, which seemed risky at the time. In fact it has now netted her a substantially greater sum, as the sale price of the property has now been vastly reduced – to her former husband’s horror.

Yet another client was faced with a balance sheet analysis. This down valued her husband’s company, which was involved in a hefty law suit. The client accepted a partially deferred payout which could increase her share, once the outcome of the litigation is known.

The point is that potentially risk in divorce is substantial, and risk shouldn’t be ignored. Not every client will take good advice about asset values, and how they may be protected in relation to risk. Some clients want to settle fast with as little expense as possible, because they want an end to the proceedings. They want to get on with their lives. They think they know best.  But those decisions frequently come back to haunt them down the line when emotions have settled and they may be thinking more clearly.

Now that the “Barder” safety net has been all but removed by the Court of Appeal, clients must make a concerted effort to face up to the risks in their cases and take the best advice they can get. This principle applies no matter how clever, how unwilling, how amicable, how pressured, how stressed they may feel - and no matter how much they wish to get the case over and done with on their terms.

Image credit: ArtemFinland.

I have found, however, that those who enter into such marriages are often oblivious to the financial consequences that can be incurred if the relationship breaks down at a later date. The risks are all the more acute when one party is much wealthier than the other.

Let’s put aside the dependency claim that the less wealthy party has against the other on that person’s death. Good legal advice should ensure that a carefully drafted will can avoid nasty claims between a dependent co-habitee – whether married or not – and the family of the deceased.

Instead, let’s consider what might happen in a worst case scenario, if the marriage breaks down. It’s a gloomy approach, I know, but it is worth bearing in mind that second marriages have a higher failure rate than first marriages. This may be because in some cases, a new spouse is unlikely to be warmly welcomed into the other’s family, giving rise to bitter arguments.

If the parties were simply cohabiting then, unlike on death, there is no entitlement to any form of provision. They go their separate ways, taking what belongs to each of them. A cohabitation agreement and trust declaration at the outset can sort out how asset and property division will occur in the event of a breakdown.

But what happens if they are married? The case of MD v D (2008) EWHC 1929 is a salutary reminder of the financial pitfalls of a short marriage between older couples.

The bare facts of this case: the wife was a newly qualified barrister, aged 48 when the couple married. The husband, aged 64, was a circuit judge nearing retirement.  The marriage lasted 4 ½ years. The husband had assets in his name of £562,272. The wife had £45,479. The family home, jointly owned, was worth £287,000 net of mortgage. The wife had paid some £110,000 into the house. Total assets came to around £895,000.  The wife had a small pension; the husband had a much larger pension and income from his judging, although this was due to end due to his age. The wife had a net income of £20,000 but argued her needs were £38,000. At first instance, representing herself, she appears to have sought 73 per cent of the assets, together with maintenance and pension provision.

The court awarded the wife all the net equity in the house to meet her housing needs, and maintenance totalling £45,000 over three years. Dissatisfied, the wife appealed, arguing that this was insufficient to meet her pension needs. The President of the Family Division awarded her an additional lump sum of £35,000, which gave her 41 per cent of the assets. It left the husband with 59 per cent together with his relatively modest pension and the earned income that was shortly to cease. The husband had already forfeited part of his pension, to give the wife a widow’s pension on his prior death. However, the wife’s decision to seek a divorce settlement meant that this benefit was lost to both of them.

To a lay person, was this a fair award after just 4 ½ years of marriage? The answer might be no, it isn’t. However, the law requires that both parties’ reasonable needs for the future are considered. As parties age, the ability to meet needs out of all the assets for the rest of their lives will be taken into account by the court. Those needs are likely to be substantial, far more so than if the marriage had foundered without children and after just 4½ years when the parties were younger.

So if you are thinking of marrying later in life, please take good legal advice before you do so.  You may also wish to consider a prenuptial agreement. As you know I’m not a fan of these, but  if you both receive independent and sound legal advice before signing, such an agreement could be upheld under English law. There are no guarantees though.

From the Guardian’s comment is free blog, 07/04/2009.

Brian Myerson should abandon his bid for his £9.5m divorce settlement to be set aside, but he’s a risk-taker.

By Marilyn Stowe

The City tycoon Brian Myerson has been pilloried in the press after failing to convince the court of appeal to set aside the £9.5m divorce settlement that he must pay out to his former wife. He argues that the economic downturn has “rendered his divorce settlement unfair”, because it will now leave him half a million pounds out of pocket.

In truth I feel a little sorry for Myerson. As a family lawyer, I have encountered many men of his ilk. They are sharp-suited, high-flying Big Boys: fabulously confident, fabulously wealthy and fabulously successful. They play hard – and they always play to win.  Continue reading >

Wives and mothers usually wish to remain in the marital home – but it isn’t always a good idea to postpone a sale.

A Mesher order is a court order that postpones the sale of the marital home and gives a chargeback to a husband exercisable on the occurrence of specified events. It originated in an eponymous case in 1980, when the Court of Appeal permitted the wife to remain in the marital home with one child until the child was 17 or further order of the court.

When there are no children, the court can still make a similar order for one party to remain in the marital home and thus postpone the sale. This is known as a Martin order, after an eponymous case in 1978, when the Court of Appeal held that the wife could remain living in the property for the rest of her life. The court postponed the husband’s interest from being realised until then, having found that the husband had no immediate need of a capital sum, and the wife would have had insufficient equity to re-house herself had the marital home been sold.

These types of orders were common in the 1980s and 1990s, when there was a need to keep less wealthy mothers and children in their homes, because there would have been insufficient capital to re-house them. They fell out of fashion because they were fraught with difficulties. These difficulties surfaced when the time periods expired and the houses came to be sold.

Typically, the children had reached their majority by this point. When the mother had to sell the home, she discovered that despite inflation, there was still insufficient equity in her share to enable her to buy another property. The Mesher order had been a temporary alleviation of the problem – but nothing more. In fact, in many cases the woman was left worse off, because her reduced amount of time left in the workplace meant that she was unable to raise a mortgage.

I do of course understand that many wives and mothers wish to remain in the marital home. All sorts of arguments – some practical, some child-related and some plainly emotional -are advanced and it is hard not to be sympathetic. However, a lawyer must always think about the client’s overall best interests not only in the short term. That is what we are paid for.

Last week, the BBC reported that a woman who had taken her much litigated divorce settlement to the Court of Appeal had finally settled out of court with her former husband. According to the Daily Telegraph, “Mrs Bokor-Ingram, 38, had applied to vary the terms of her settlement because her 40-year-old ex-husband allegedly failed to tell her he was negotiating a better-paid job when they split.” Mrs Bokor-Ingram argued that had she known the truth, she would never have agreed to the “Mesher” arrangement that the couple had made in relation to their former marital home. The BBC reported that under the terms of the out-of-court settlement, the ownership of the house will now be transferred to her in full.

I think that Mrs Bokor-Ingram has been fortunate, in that the allegations about non-disclosure enabled her to renegotiate her settlement. A Mesher order is one that I would advise a client to avoid if possible. Such a proposal is commonly made during negotiations by the spouse who continues to pay maintenance.

If the other spouse has hopes for an amicable settlement and wishes to remain in the marital home, a Mesher order can appear to be an attractive option. Unfortunately, it can result in far more long-term problems than it solves in the short-term and – and agreeing to one of these orders can lead to a good deal of regret.

If you are faced with this dilemma, consider the following options:

1. Should you negotiate instead for all the equity in the home, so that you can re-house your household immediately?

Or

2. Should you hold out for a transfer of property order, which would you the entire equity in the house?

Only as a last resort would I advise a charge back – and only then if the wife is acutely aware of the long-term impact of such an order. How will she manage when the charge is redeemed?

But there is also a warning to husbands who might be thinking that this is a good way of ensuring a long term windfall:-A further sting in the tail of a Mesher or Martin order is that the husband may have to pay capital gains tax when he finally receives his payout. This applies if he has purchased a principal residence elsewhere, unless the actual amount to be paid to him from the marital home is specified in the order. However, few husbands will agree to an inflation-hit – and therefore diminishing – figure over a long period of time. It would render their “investment” practically worthless.