Financial Remedies
May 2023
Judgment of HHJ Reardon striking out a Husband’s confusing and contradictory application to set aside a Financial Remedy Order made 27 years prior.
- H makes an application in April 2022 for an order setting side a financial remedy order made by District Judge Davies on 3 November 1995. The order provided for H to transfer his property (which was the FMH) to W and a clean break.
- Since 1995, W has lived in the property (initially with the children of the marriage) and paid all of the outgoings however that transfer never took place between 1995 and 2022, it appears that a loan was secured upon the FMH which caused issue for W in that the original lender of the loan and/or the current holder of the debt could not be traced – therefore it could not be paid and/or removed.
- The Court file on the matter had been destroyed however there were odd pieces of information that the Judge had sight of including an application made by W in 2007 for implementation directions. It was unclear as to what happened to that application and why this was unresolved.
- The Judge in this case struggled (understandably) throughout the entirety of the proceedings to grasp quite what H’s case was on the set aside application, despite her asking numerous questions regarding this. She found that his case was inconsistent and referred to H having not consented to the Order in 1995 and/or fraud. H also attempted to rely on matters that had no legal basis. Towards the conclusion of her Judgment, the Judge is of the view that H’s application appears to be premised on the fraud aspect, of which there is no evidence of.
- On her own initiative, the Judge asked the parties to address her on an order striking out H’s application pursuant to FPR 4.4. H’s legal team chose not to address this at all.
- The Judge set out the relevant law that she considered in relation to set aside applications and strike outs:
- A financial remedy order may be set aside include fraud (see Sharland v Sharland [2015] UKSC 60) and, in the case of a consent order, a lack of valid consent (MAP v RAP [2013] EWHC 4784).
- An application to set aside an order where one of the vitiating grounds is said to be present must be made reasonably promptly once the vitiating factor is known.
- The court may strike out a statement of case in financial remedy proceedings as per FPR 2010, r 4.4(1).
- PD4A sets out a non-exhaustive list of examples of when the court may consider that a statement of case discloses no reasonable ground for bringing the application including where the facts are incoherent and make no sense; facts that do not disclose any legally recognisable application; cases where the application cannot be justified e.g frivolous, scurrilous or obviously ill-founded.
- As per Wyatt v Vince [2015] UKSC 14: the absence from the FPR of a power to give summary judgment meant that r.4.4(1) should be construed without reference to whether or not the application had a real prospect of success. The "touchstone" for an application to strike out should be whether the application was "legally recognisable". The Court considered, and rejected, an argument that had succeeded in the CA that an application which had no real prospect of success could come within the scope of the power under r.4.4(1) because it was an abuse of the court's process (see Lord Wilson at para 27).
- The Judge comes to the conclusion in this matter that H’s application and case was factually incoherent, and the pleadings in different documents were mutually inconsistent – firstly, that he was not aware of the proceedings in 1995 and secondly that he participated in the proceedings, but they were vitiated by fraud. The Judge found that H’s case did not make sense and the legal basis of H’s application is unclear. Regarding H’s position, the Judge took note of the serious delay in bringing the application.
- For those reasons, the Judge formed the view that H's application discloses no reasonable grounds for bringing this claim and strikes out the application.
King LJ gives lead judgment on an appeal against a refusal to approve a consent order in a situation where H faces a potential liability of over $4 billion.
- An appeal against a case management order made by Peel J on 12 July 2022 refusing to approve a proposed consent order in financial remedy proceedings on the basis of the “unclear” picture of H’s liabilities given that H was a co-defendant in proceedings where it is alleged he was central to a substantial fraud which, if the ‘victim’ namely, PrivatBank, is successful, H could face liabilities in excess of $4.2billion.
- Upon the parties separation in March 2016, they terminated a previous pre-nuptial agreement and agreed a separation agreement. At the time of that separation agreement, H’s wealth was estimated to be $1billion and the agreement provided for W to receive a minimum of $95million.
- At the time of the separation agreement, there was already a Worldwide Freezing Injunction against H by a company, Tatneft. Those proceedings were dismissed and the injunction ended, however, in December 2017 PrivatBank had issued against H and they also succeeded in obtaining a Worldwide Freezing Order.
- This was in place in October 2021 when the parties’ entered negotiations to turn the separation agreement into a consent order (albeit H’s estimated wealth was said to have increased to c.$3.2billion). An application was made in December 2021. When PrivatBank were made aware of the application to approve the consent order, they applied to the Court to intervene, to stay the proceedings and for disclosure.
- H and his legal team accepted that if PrivatBank succeeded in their litigation, it would “wipe” H out asset wise, and also that if this matter had proceeded contested the court would have most likely stayed or adjourned the proceedings pending the outcome of the PrivatBank litigation.
- Peel J (who the application to approve was before) refused to approve the consent order and instead adjourned the financial remedy proceedings. The Judge sets out Peel J’s reasons for refusing that approval between paragraphs 21 and 28.
- That decision was appealed. King LJ within this judgment, comprehensively considers the legal framework regarding this appeal starting with S.33A MCA 1973: 'the court may, unless it has reason to think that there are other circumstances into which it ought to inquire, make an order in the terms agreed on the basis only of the prescribed information furnished with the application’.
- The Court then sets out other law considered as per Haley v Haley [2020] EWCA Civ 1369; [2021] Fam 317 and the relevant Family Procedure Rules 9.26 and PD9A paras 7.1 to 7.3.
- The Court further refers to the duty of the Court to scrutinise the statement of information, with the list of factors from s25 MCA 1973 at the forefront of its judicial mind and the description in L v L [2006] EWHC 956 (Fam), [2008] 1 FLR 26 that whilst the Court’s role is not 'a rubber stamp' but that, whilst the court must always exercise a discretion, it should not be to the extent of acting as 'a bloodhound or a ferret.'
- The Court further considers Sharland v Sharland [2015] UKSC 60, Radmacher v Granatino and Xydhias v Xydhias [1999] 2 All ER 386.
- King LJ concludes that Peel J was correct in his decision to refuse to approve the consent order and was entitled to conclude that, notwithstanding the fact that the agreement was Radmacher compliant, the uncertainty underlying the order was of such a scale that there were other circumstances into which he ought to inquire, namely the Chancery Division litigation.
- Within the judgment, given H’s current situation, the Judge then goes onto consider criminal confiscation and the Proceeds of Crime Act 2002 which is concerned with ensuring criminals do not profit from their crimes and considers how this balances with a parties’ rights under MCA 1973.
- The Judge considers the judgments of MCA & Anor; CPS v Richards & Richards [2006] EWCA Civ 849; Stodgell v Stodgell [2009] EWCA Civ 243, all of which provide key and helpful principles.
- The appeal was dismissed.
Wife benefits from £1million payment to make “amends” from Husband’s infidelity during the marriage, and, consideration as to an ongoing interest in a business set up during the marriage.
- This judgment following final financial remedy proceedings before Sir Jonathan Cohen.
- The parties situation is not unusual, they met in 1991, married in 1998 and separated in July 2020. There are two children of the marriage, aged 19 and 13, both in private paying education.
- During the marriage, W gave up her career to be the homemaker and full time Mother. H during the marriage flourished in his career and set up his own hedge-fund business (the initial investments being from the parties joint capital), a business that he accepts W fully supported him in.
- The case involved substantial assets of over £24million including a London property and a country property (which the parties agreed that W would have both). The majority of the issues in the case are relatively standard however some points of interest arise:
- The £1million payment for the affair.
- In 2017, some 3 years prior to the parties’ separating, H had a short 6 week affair which he ended and told W about. Following the cessation of the affair, the former girlfriend commenced a campaign of private and public stalking and harassment (for which she faced criminal consequences). She also told H that she was pregnant (turns out this was not true). H took advice on what he would be likely to pay under schedule 1 of the Children Act 1989, and in January 2018, paid W the sum of £1million.
- Within these proceedings, W asserted she should keep this as a gift. H asserts it is a resource open to W and it should be subject to the sharing principle.
- The Judge concludes that the sum was a payment from H to “make amends” for his behaviour and the appalling aftermath, and on that basis, given the circumstances which it was given to W, she is entitled to keep that sum to herself in its entirety.
- Post separation accrual:
- H attempted to run an argument that the Court should ringfence some £2.4m on the basis that this was net income post-separation. The Judge considers the facts and with reference to Rossi v Rossi [2007] 1 FLR 790, where Mr Mostyn QC (as he then was) said that he would not allow a post-separation bonus to be classed as non-matrimonial unless it related to a period which commenced at least 12 months after the separation.
- The Judge excluded only £203,000 of the income received post-separation.
- Whether W should have an interest in H’s business?
- A lot of the judgment is focused on this aspect of the case, the valuations and estimated income streams from it. Despite two experts attempting, the current value of the business could not be reliably ascertained. There was also the issue with regards to how the business could be sold, but the experts did agree that the business is a large profit generator to H over the coming years.
- W’s case is that she should have a Wells v Wells [2002] 2 FLR 97 award in respect of 25% of the business by way of lump sums equal in value to one quarter of H’s share of profits and of any capital realisation, unlimited in time. Her reasoning being that the business is the product of marital endeavour in which she has fully supported H in every possible way and therefore its current and future profits are from the initial build up. W seeks 25%.
- H’s case is that the parties should go separate ways and W should not have a claim over the business profits as this is in essence her attempting to share his earning capacity after the end of the marriage and his future endeavours should not be subject to a claim.
- The Judge considers the case of Cooper-Hohn v Hohn [2015] 1 FLR 745 at length in the judgment. In Cooper-Hohn, the Court had to consider the distribution of enormous personal wealth built up through a hedge fund business.
- The Judge also considered the comments of Mostyn J in JL v SL (No.2) [2015] 2 FLR 1202 at paragraphs 40-42.
- The Judge agreed with the analysis of Mostyn J in JL v SL and noted that if H were left with all future returns of the business, it would mean he was receiving the benefit of what was built during the marriage – the business is a continuation of what was created throughout the time the parties were together and on that basis the Judge was of the view that for W not to have any future share would be unfair.
- The Judge did accept that the further from separation the smaller the interest W should have but did not accept that it was some claim against H’s future income.
- The Judge concluded that the proper approach was for W to receive a fixed percentage for a limited period of time and orders that W should share in H’s profits to the tune of 17.5% in the years ending 2023, 2024, 2025, and 2026. In the event of H disposing of his shareholding during this period, W will share to the same extent of 17.5%.