Financial Remedies
January 2022

The intervener - a litigation funding company referred to as ‘Q’ that had lent £1 million to the wife in three loan agreements during FR proceedings - had applied to set aside a sealed consent order reached at a private FDR in March 2021. The application is listed this month (March 2022).

Q had applied to use WP material from the FDR to prove its case in the application under FPR r9.9A and claim relief under s423-424 of the Insolvency Act 1986. Q argued a fraud had taken place in order for the consent order to be reached and that they were a creditor under s423 as the settlement had precluded them from reclaiming the sums loaned. Relying on Haines v Hill [2008] 1 FLR 1192, Q submitted that the information available at FDR was evidence of the parties’ probable foresight that the result would prevent Q recovering its monies.

Roberts J considered the offers made prior to the private FDR (not covered by PD9A para 6.2), the materials utilised at FDR, and witness evidence that had been available and Q’s statement of claim for the QBD. It was correct that such privilege can be overridden by evidence of facts that give rise to a claim under s423. Considering Unilever plc v Proctor & Gamble Co [1999] EWCA Civ 3027 regarding exceptions to the WP rule: if WP communications were part of a resulting concluded agreement then such documents are admissible; evidence of the substance of negotiations is admissible if there are grounds for misrepresentation, fraud or undue influence; a party may be allowed to give evidence of what was said in WP negotiations to prevent a cloak over perjury, blackmail or other unambiguous impropriety. Further, Sir James Munby in V v W [2020] EWFC 84 - where a party sought to rely upon privileged documents from FDR in a civil claim by the SJE for their costs - ruled that PD9A para 6.2 was an absolute bar to utilising such documents for a collateral purpose.

In the present case, the agreement was that the husband’s trust would purchase a property of up to £1 million in value for the wife to live regardless of remarriage or cohabitation as well as insuring the property during her ‘life tenancy’. h would not pursue her claims including for capitalised maintenance. The wife would be unable to repay Q and had informed them of this shortly after the FDR. It was noted that, due to a potential conflict of interest, the wife’s solicitor and counsel had withdrawn during the private FDR.

It seems a brief but confused period of correspondence took place before Q made an application that no order should be made before they had the opportunity to make representations. However, the order had now been approved. Q therefore applied to set the order aside and were joined to the proceedings.

Q argued that the evidence sought would be relevant to whether the husband and wife had colluded to breach the wife’s loan agreements with Q, amounted to an act of bankruptcy and statutory fraud, and would leave the wife with no assets with which to repay Q. The husband argued that this was a civil debt action, irrelevant to the concluded FR matter, and that Q should not have been joined. He further argued that Q was improperly seeking confidential information though their intervener status and that public interest demanded that privileged FDR documents should remain so in the face of a civil debt claim.

Roberts J noted that, in V v W, it was discussed that there may be potential problems to the bar on disclosure of FDR documents such as, for example, complaints against FDR counsel or judges. In the Judge’s view, Q could not be dismissed as a third party unsecured lender given their role in funding W.

In the end, the Judge concluded that the principles V v W were sufficient to follow. A fraud argument could still be arguable, but not on the facts of this case and the privilege of FDR documents remaining private remained too strong.

Of note, and in conclusion, the Judge added that:

“92. I take the view that, given the importance of litigation funding to the system, the Family Procedure Rules Committee may well wish to consider in due course whether the potential issues raised by this case require some reconsideration of the 'absolute bar' which Sir James Munby identified in his interpretation of para 6.2 of PD9A. It is an interpretation with which I respectfully agree for the reasons set out in this judgment, although I hope that the different underlying factual matrix of this case (and, no doubt, others) might provide a basis for revisiting when, and in what circumstances, that bar might be lifted where a case can be established for justifying the introduction into proceedings of material covered by the FDR privilege.”

Perhaps unsurprisingly, the parties were, by now, unrepresented after nine years of litigation beginning in 2013 with a final order made in 2017 and enforcement proceedings brought by the wife in 2019. In the original proceedings, a SJE was instructed to value the husband’s businesses but without a cap on their fees. The original quote had been for £60,000 but this had increased to £126,000. The 2017 final order provided for the sale of four properties and the SJE fees would be paid out of the proceeds. In the wife’s subsequent enforcement proceedings, a compromise had been reached - part of which was an agreed intention that the wife was to be indemnified from the outstanding SJE costs by the husband. However, this had been omitted from the approved agreement. The wife subsequently sought the indemnity from the husband on the payment of the SJE’s fees.

Of note, Mostyn J at paragraph 35 says ‘The moral of this unhappy tale is that the parties must ensure that the court is asked, prior to the instruction of a SJE, to place a cap on the expert's costs pursuant to FPR r. 25(12)(5). Prior to the court making an order for the instruction of an SJE, there will have been preliminary enquiries raised with the proposed expert and responses given thereto. By virtue of PD 25D para 3.4, incorporating PD 25B para 8.1(e), the expert will have stated his/her costs, including hourly or other charging rates, and the likely hours to be spent conducting interviews, writing the report and attending court. The court will thereby be fully equipped to be in a position fairly to consider these figures and to impose a cap on the expert's costs. Of course, should circumstances unexpectedly change causing far more work to be done by the expert, then it will be open for the expert to apply for the order imposing the cap to be varied under FPR r 4.1(6)’.