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Financial Orders On Divorce

These are the notes of a talk given to the Norfolk & Norwich Law Society on 18 June 2015 as part of a seminar given by EA Law - East Anglian Chambers entitled “Family Finance”
Financial Orders On Divorce Andrew Marsden
The First Meeting
Do we need to do anything at all? If client a likely payer, will the payee’s claim get worse if there is delay or get better? Need for an order. Risk of long-deferred claims: claim 18 years post-divorce in Wyatt v Vince [2015] UKSC14.

Duty of full and frank disclosure. Explain what it entails and why it matters. Does ‘fraud unlock everything’? SC decision in Sharland [2014] EWCA Civ 95 awaited. Warn of court’s powers to draw adverse inferences: V v V [2010] 2 FLR 516.

ADR, but no obligation to settle at any price. Warn (especially vulnerable clients) of timescale/MIAMs (Family Mediation Information and Assessment Meetings).

Client’s mental state. Fit to give instructions? Do they need time to calm down?

Conduct. Tell it to them straight: in nearly every case conduct makes no difference. Don’t have any truck with client’s wishes to lard Form E with direct or sideways attacks. It will only (a) antagonise O/S and (b) give a poor impression of client to DJ. Useful summary of all reported conduct cases Fiona S v James S [2006] EWHC 2793.

Confidentiality? Do you see them with new partner? To discuss own finances but what about confidentiality of O/S?

The Form E
Some pitfalls to avoid:
  • (1.5) Does the date of separation really matter?
  • (1.8) The secret lover. Explain why this information affects (i) pps and (ii) need for accommodation/capital not to give ex a share of new partner’s assets.
  • (1.10) Don’t forget adult children: sometimes W’s only contribution.
  • (1.11) Health. Not an opportunity to whinge about stress caused by divorce/damage desertion causes the children.
  • (2.1) Value of FMH. Obligation to release copy if within 6 months. Care if client dissatisfied with valn obtained. Disclose and disclaim.
  • (2.2) Other property. Again obligation to release recent valn: e.g if H has had all business properties valued to support company bank loan.
  • (2.3) “All personal bank, BS and Nat Savings Accounts”: arguably not business accounts, even if self-employed.
  • (2.5) Life insurance. Get policies with values sorted early and don’t muddle endowment with term policies.
  • (2.8) Beware the fatuous contents valuation. Resale not replacement.
  • (2.9) Liabilities: if not all client’s own say why, e.g. ‘although this credit card is in my name it has been used exclusively to support the whole family’.
  • (2.11) Business accounts for last 2 years. Must disclose documents on which you have based valn of business, If you trust company acct, get him to value and DJ will often run with it and shut out other valns. In difficult case, get a decent valuer on board early e.g Jon Dodge of Walton Dodge or Andrew Strickland of Scrutton Bland. Need to explain material change since last accounts.
  • (2.14) “Any asset likely to be received in the foreseeable future”. Inheritances? Penniless couples with millionaire parents and the virtue of adjourning applications till inheritance falls in. Think of reserving rights by a nominal order for pps that can be varied/capitalised.
  • (2.14) Income. If last 3 payslips are not a good guide, say why. Estimate of net income for next 12 months. If differs significantly, explain why.
  • (2.16) S/e and partnership income: again explain if differs significantly from previous year and produce mgt accounts.
  • (2.19) Any other income. Warn client of risks of trawl through bank statements and unexplained credits. Have they been subbed by parents? Are they dealing on eBay?
  • (3.1) Income needs. Follow exactly instruction: “State your current income needs and, if these are likely to change in the near future, explain the anticipated change and give an estimate of the future cost”.
  • (3.2) Capital needs. “FMH is worth £750k. I need a house worth £750k”.
  • (4.1) Significant past and future changes in assets, 12 months back and forward.
  • (4.3) Contributions. Summarise but don’t witter on like Sybil Fawlty or boast.
  • (4.4) Conduct. See above.
  • (4.5) Other circs that could affect provision. Get client to think carefully about each.
  • (4.6) New or intended cohabitee’s assets: ‘I don’t know’? Tongue in head?
  • (5.1) Order sought. Be as specific as you can but say if you can’t. Try to identify what assets you are seeking by way of transfer.
The Questionnaire
Possibly the most abused and misunderstood document. It is supposed to be a genuine request for (a) clarification of what understood or (b) information you lack. It is not a chance to cross-examine H into agreeing factual disputes with W or to score points. Be precise. “Was this said to have been agreed on the telephone or at a meeting? If the former who telephoned whom and when? If the latter, when, where and in whose presence was the meeting? In either event give details of what was said.”

As a general rule, don’t ask for TP documents to be created if they don’t exist. Court can make separate order for TP info.

FDA
Valuations: should have been sorted long before FDA but this gives you another chance.
  • Companies: if valuation is needed from an external valuer, make sure he is instructed to say which basis he chooses (assets, earnings etc or mixture) and why. Make sure that if he has access to H he has access to W as well, if she has any knowledge. Make sure that is resolved before he reports.
  • Properties: don’t allow reductions for non-existent encumbrances (doubtful agricultural tenancies).  Make sure valuer addresses possible planning issues. In extreme case, seek planning indication.
Pensions: do you really need a report? Do they ever give a % more than 55%?

Conduct: get it struck out of a hostile Form E. Orders for redaction are perfectly feasible. DJs should case-manage to a settlement and some will be sympathetic.

Norris add-backs. Get an order that party alleging puts up or shuts up by a definite date, so that issues are focussed and party alleging is facing a costs risk. Such an allegation could amount to alleging fraud without evidence, so consider your position if alleging. See MAP v MFP [2015] EWHC 627, where W tried to add back H’s alleged expenditure on prostitutes. Moor J rejected this, stressing need to find not merely wanton dissipation but specific motivation. Flawed character: take your spouse as you find them. But J accepted loss of entrepreneurial relief add-back because W sacked.

FDR
The client who wobbles. If DJ approves proposed settlement it is too late to change mind even if order still to be drafted: Rose [2002] 1FCR 639.

Apples and pears
The obligation to provide a schedule: Behzadi [2008] EWCA Civ 1070.

The classic case criticising a judge for wrongly treating pension CETV as equivalent to bricks and mortar: Maskell [2001] 3 FCR 296:
That passage seems to be fundamentally flawed, for the judge is making the seemingly somewhat elementary mistake of confusing present capital with a right to financial benefits on retirement, only 25 per cent of which maximum could be taken in capital terms, the other 75 per cent being taken as an annuity stream. He simply failed to compare like with like. 

But is this now valid given govt freeing us from obligation to buy an annuity? Are pension assets worth more by way of offsetting, not less?

If H keeps company and W the house, how do you offset? Discount for liquidity. See award of lump sum = 35% company shares in SJ v NS [2014] EWHC 4183.

Pre-nuptial
Sliding scale of relevance depending on what has been earned during marriage, length of marriage and needs trump-card. See Radmacher v Granatino [2010] UKSC 42.

Spousal pps
The yardstick of equality has never applied to post-divorce earnings. Put simply, H does not have to work for both of them. There is no magic %.

A useful paste: in VB v JP [2008] 1 FLR 742, the President said:
“On the exit from the marriage, the partnership ends and in ordinary circumstances a wife has no right or expectation of continuing economic parity (“sharing”) unless and to the extent that consideration of her needs, or compensation for relationship generated disadvantage so require. A clean break is to be encouraged wherever possible.”

Pps should always be needs-based. See vital decision of SS v NS [2014] EWHC Fam 4183. Will the CA interfere with this statement of the law?

H’s remarriage. See Bromfield [2015] UKPC19. Jamaican court wrong to say that H with W2 and new children had assumed further responsibilities which meant that he ought not to be expected to maintain W1 indefinitely. Neither W should be given priority in accordance with Vaughan v Vaughan [2010] EWCA Civ 39. Capitalised pps £3 million to stand.

Term orders. If you represent W, quote C v C [1997] 3 FCR 360.
The question is, can she adjust, not should she adjust...the court will pay attention not only to the duration of the marriage but to the effect the marriage and its breakdown and the need to care for any minor children has had and will continue to have...the extent to which she is no longer in the position she would have been in but for the marriage, its consequences and its breakdown...any difficulties the payee may have in entering or re-entering the labour market, resuming as fractured career and making up any lost ground.   The court cannot form its opinion that a term is appropriate without evidence to support its conclusion. Facts supported by evidence must, therefore, justify a reasonable expectation that the payee can and will become self-sufficient. Gazing into the crystal ball does not give rise to such a reasonable expectation. Hope, with or without pious exhortations to end dependence, is not enough.

Useful arguments:
(i) Divide pension earned during marriage, but not outside it, either before or after. A popular approach with some DJs. But note that in Harris [2001] 1 FCR 68, CA said that this was not a rule of general application.

(ii) For a short marriage, unless needs dictate otherwise, much to be said for giving back to each what they brought to marriage and dividing equally what earned during it. This approach approved by CA in Foster [2003] EWCA Civ 585.

(iii) Mesher orders may still be the only fair route, but see Munby J in B v B [2002] EWHC 3106 on W’s difficulties in raising money.

Lifestyle and the horsey wife - S v S [2008] 2 FLR 113:
“Whereas it would have been unreasonable to have awarded the wife sufficient means to enable her to keep up her life with horses if the parties' means had been insufficient to permit the husband comfortably to accommodate such spending, so long as the husband's income was well able to permit him to continue to finance an aspect of the wife's life that had been integral to the marriage, such an award was not unfair. However, if the husband were to be made redundant or he retired, the horses would become an unjustifiable extravagance...”

Inherited money
Still inconsistency at DJ level. Sliding scale of relevance according to length of marriage and proximity of inheritance to date of hearing, but see
  • SK v WL [2010] EWHC 3768 on post-separation accrual and H trading with W’s notional half-share;
  • Jones [2011] EWCA Civ 41 on post-separation and inherited wealth;
  • K v L [2010] EWHC 1234 and AR v AR [2011] EWHC 2717.
  • In Critchell [2015] EWCA Civ 436, FMH worth £190k with 10k mortgage. H bought £85,000 house with money borrowed from dad and £63k mortgage. Given 45% chargeback. Dad died month after consent order. Barder appeal allowed and charge removed on needs grounds: W’s difficulties in raising money in future and H no longer needed ls to discharge debts.
This is a problem area where cases can support almost any argument.

Rules of evidence and procedure.
Should a court hear a contemnor? See Hadkinson [1952] P285. Now hedged about with restrictions: nexus between contempt and justice. Is the ability of court to do justice impeded? See JSC BTA Bank v Ablyazov [2015] EWCA Civ 70. But also see Arif v Anwar [2014] EWHC Fam 4669, where W was on a Sears Tooth and H’s application to vary and remit allowed to proceed only on payment of £25,000 towards arrears of c £150,000.

Hildebrand and Tchenguiz. This is still a fudge. Distinction between W who has access to documents during relationship and one who has been denied. Are they ‘common property’? See now Arbili [2015] EWCA Civ 542, where ‘ability of wrongdoer to challenge the sufficiency of disclosure confined to memory of the contents of the material’ but that was admissible.

Beware the client who wants you to say one thing in his divorce and another e.g. when making a civil claim against another person. Vernon v Bosley (No 2) 35 BMLR 174 is a salutary tale.

Arguable that all discussions direct between spouses are WP whether stated as such or not: McTaggart [1948] 2AER 754; Pool [1951]; Re D [1993] 2AER 693. Letter advisable to other side: ‘We are not preventing our client from being involved in financial discussions direct but make it clear that they will remain without prejudice pending confirmation of a settlement between solicitors.’

Do DJs need law?
The general rule is: if in London, quote law because the judge will be impressed and decide that you aren’t a country hick. In East Anglia, quote it sparingly and only to make a surprising point, because all East Anglia judges are deemed to know all the law, and will apply it faultlessly.

Ward LJ:
“I would, accordingly, warn the legal profession against regarding this case as a precedent. In every case the court must ask itself the two questions: (1) is the outcome fair in all the circumstances of the case? and (2) is it in any way discriminatory? Of course, the court must follow White and look at the extent to which the court has departed from equality. But in my judgment, this latter exercise is a check: the primary objectives remain fairness and an absence of discrimination.”

This handout is (c) Andrew Marsden 2015 and the author reserves the right to disagree with its contents passionately if cited against him in court.

If you would like to contact Andrew Marsden about your case, please get in touch with the clerking team at EA Law - East Anglian Chambers on 01473 214481.

Andrew Marsden 

Download a copy of these notes here