Financial Remedies
July 2023

This was an appeal by the Wife (‘W’) against a decision of DJ Solomon dated 9 September 2020 to not set aside an order of DJ Parry made at a final hearing in September/October 2019. Mrs Justice Lieven heard the permission to appeal and the substantive appeal together.

The parties had started living together in 1991 and separated in 2018. They have two children. At the time they were both professionals with salaries of over £100,000. W was a solicitor. Their principal asset was the FMH which had equity of £570,000.

Financial remedy proceedings commenced in 2018. In March 2019, W provided a witness statement alleging domestic abuse and a GP report setting out the impact that the alleged domestic abuse had had upon her. There was nothing on the face of them which raised issues about W’s mental capacity to conduct litigation nor to support any application for participatory directions in the proceedings.

At the FDR, on 4 April 2019, the Court made an order preventing either party relying on ‘conduct’ issues.

The final hearing was before DJ Parry on 10 September 2019. W represented herself at that hearing and the Husband (‘H’) was represented. W had to cross-examine H and herself be cross-examined. There were no special measures put in place. It was accepted by W that she did not request any special measures.

At the conclusion of this hearing, DJ Parry gave an ex-tempore judgment setting out his conclusions as to the division of the FMH and when it should be sold. There was a further hearing on 24 October 2019 to finalise the terms of the order. This was necessary because the terms of the order could not be agreed. There were certain matters which were by agreement but the sale of the FMH was not ‘by agreement’.

W was represented at this hearing. The order was signed by both parties and their legal representatives.

W applied for leave to appeal that order. It was believed that this appeal related to alleged material non-disclosure by H. Permission to appeal was refused on 24 January 2020.

W applied to set aside the final order of DJ Parry at the beginning of September 2020. This was a few days before a hearing concerning an application by H to enforce the order. On 29 August 2020, a clinical psychologist, produced a report concerning W and her mental capacity at the time of the hearing on 24 October 2019. This concluded by saying that they were of the view that W was suffering from an abnormality of mind at the material time and that her signature probably did not represent the end product of a decision underpinned by mental capacity.

Mrs Justice Lieven noted that this report did not deal with the hearing on 10 September 2019 which is the date where DJ Parry made the critical decisions and heard the evidence. Also that having a mental disorder does not on its own mean a person does not have mental capacity (see sections 2 and 3 of the MCA 2005).

On 9 September 2020, the application to set aside came before DJ Solomon. W was represented and the argument advanced was that W did not have capacity in the hearings before DJ Parry. W’s counsel raised a concern whether W had capacity at the time of this hearing. DJ Solomon suggested that if she did not have capacity then she should report this issue to the SRA. W then told DJ Solomon that the capacity issue only related to the specific date in October 2019 by reason of the stress she was under.

The application to set aside the order was refused.

On 20 March 2022, W applied for permission to appeal this decision out of time. Permission was given to file the notice out of time and the matter came before Mrs Justice Lieven on 22 June 2023. W’s grounds of appeal were that she lacked capacity at the time of the final hearings in 2019 and there were no participatory directions/special measures for W at any of the hearings. Permission to appeal was granted because of compelling reasons rather than a real prospect of success.

Mrs Justice Lieven helpfully sets out the differences between setting aside an order and appealing at paragraphs 28-34 and also the law on participation directions and decisions which have been overturned as a result of a judge failing to make participatory directions and special measures at paragraphs 39-48.

W’s appeal was refused for the following reasons:

• The appeal was at least 16 months out of time. The decision under challenge was made on 9 September 2020 and the application to appeal made in March 2022. The delay was both serious and significant as the FMH has been sold and H had moved on with his financial affairs. W’s reasons for the delay were not considered a good reason for any delay. Even where there is an alleged breach of natural justice, the Court can impose time limits and require them to be abided by.
• The issue of W’s capacity can and should have been raised on the appeal from DJ Parry’s final order. It would fall under the right of appeal rather than the power to set aside. This ground was dismissed but in any event Mrs Justice Lieven considered that the substantive ground did not have merit. The medical report only dealt with the hearing on 24 October 2019 and not the substantive hearing on 10 September 2019. It was also highly relevant that DJ Parry did not have concerns as to whether W had capacity and any experienced District Judge will have been well aware to consider whether a litigant, particularly a litigant in person, might not have capacity. Also the fact that W was continuing to work as a solicitor during this period is relevant as to whether she had mental capacity. There is a presumption in favour of capacity and very many people with mental disorders still have mental capacity. DJ Solomon was not in error in not considering there was any evidence to find that presumption was rebutted before DJ Parry.
• The issue of special measures is an issue which can and should have been raised on appeal rather than in an application to set aside.
• Given W herself and her representative did not raise that W needed special measures indicates that it was not obvious W needed such measures. When considering whether a decision should be overturned on this basis, the legal question must be whether the failure to do so amounted to a breach of natural justice. Much depends on the context of the case. There was nothing to suggest in this case that there was an unjust outcome, or the lack of special measures would have had any impact on the outcome. This was in the context of a fairly standard financial remedies dispute and the final order was a very standard and expected outcome. The cases relied on by W were all cases where the allegations of domestic abuse were central to the issues that the judges had to decide. It had already been determined that neither party could rely on conduct and the allegations were, at best, tangential to the issues DJ Parry had to decide. It is only if the lack of special measures led to a breach of natural justice, which itself impacted on the outcome of the case, that a decision might be set aside. 

The Appellant (‘A’) is 46 years of age and the Respondent (‘R’) is 40 years of age. The parties were married on 30 September 2016. The FMH was in Kent and the parties owned two other properties in London.

The parties have one child, K, who is five years old. He was born in the US following a surrogacy arrangement and a parental order was made in favour of both fathers in February 2019.

At around the same time as the parental order, the marriage broke down and the parties separated.

On 20 May 2019, A abducted K to the US and a summary return order was made on 21 May 2019 and R collected K the following day. An order was made for A to have contact six days out of every fourteen but A was now living in China so he could not take up all of this contact and A had seen K for around one week per month in blocks of contact.

R issued the application for financial remedies on 23 May 2019. In A’s Form E he deposed a net income of £11,613 per month. The parties reached an agreement which was made into a consent order on 14 July 2020. In the statement of information, A said his net income was £9,855 per month.

The consent order provided for the FMH and a further property to be sold with R receiving the vast majority of proceeds of sale to allow him to rehouse himself and K. A retained the third property, a flat in Canada Water. There was an interim order as to maintenance pending the sale of the properties. Thereafter, A was to pay R £2,900 per month until K finished Year 2, then £2,400 per month until K commenced Year 7. Thereafter he would pay £1,900 per month. There was a nominal spousal periodical payments order in the sum of £1 to increase if a CMS assessment was obtained in a lower figure than the maintenance.

A applied to vary and remit arrears in Autumn of 2020. A sought that the payments be halved on the basis that his income had fallen to £6,030 per month in May 2020. The court noting that the statement of information for the consent order (which was dated a month later than May 2020) gave the figure for A’s income at £9,866 per month.

By 12 January 2021, A was saying he was only working part time due to the effect of Covid-19 and his health. He stated his income had further reduced to £4,011 per month. A had been paying periodical payments of £500 per month instead of the £2,900 pursuant to the order. R made an application to enforce the order.

The application was heard over two days on 7 and 8 June 2021 by HHJ Gibbons. HHJ Gibbons refused the application by A and was very critical of A. The Judge found A had sought to mislead the Court and R as to his financial circumstances. She made many findings of facts and drew adverse inferences. HHJ Gibbons was not satisfied A was working part-time but, if she was wrong about that, he was not maximising his earning capacity. There was no sworn evidence from the HR Director of A’s employer. She therefore found no change in his income but there was a small reduction downwards because R’s income had risen modestly but the arrears were payable at £1,500 per month. HHJ Gibbons commented that the costs were wholly disproportionate, A’s costs being £103,000 and R’s £36,000. HHJ Gibbons ended her judgment noting the last thing needed was further litigation. HHJ Gibbons made a costs order against A. A did not seek permission to appeal.

On 21 February 2022, R applied to enforce the maintenance arrears, A then applied to vary the order. At a directions hearing, the Court recorded that the sole ground for a variation was the birth of X, a child born of A on 14 February 2022. Despite this, in A’s evidence A had also sought to rely on a reduction in his income and that R’s financial position had improved.

The matter came before Recorder Chandler KC for two days and at paragraphs 23-26 the judgment sets out the law in relation to applications to vary, the interplay with appeals and abuse of process arguments.

Recorder Chandler KC reached similar conclusions to HHJ Gibbons as to A’s credibility and that the documentation remained unpersuasive. A was seeking to relitigate the matter and this had no merit. A’s application so shortly after the first one was little short of vexatious. Recorder Chandler KC adopted the same income figure as HHJ Gibbons of £9,866 per month. The variation application was dismissed and R withdrew his enforcement application on the basis of A paying the arrears and A was to pay the costs of the variation application on a monthly basis. A had produced a statement from his HR manager which said he was a part-time employee, but this was not admitted as there were no directions for such and Recorder Chandler KC did not consider it was fair or acceptable to introduce a new witness in the case at the eleventh hour.

Recorder Chandler KC rejected the assertion that the nominal maintenance order in favour of R was void in reliance on Dorney-Kingdom as the parties had agreed the structure of global maintenance so the purpose was different to that in a Segal order.

A filed a notice of appeal in relation to the order of HHJ Gibbons and Recorder Chandler KC. Permission to appeal out of time from the order of HHJ Gibbons was refused. Permission was granted on 4 of A’s 6 grounds in relation to the order of Recorder Chandler KC.

The appeal was heard by Mr Justice Moor. He expressed his sympathy to R and the litigation he has been put through and the costs he has spent of £130,000 which would be relevant to the costs of the appeal.

Mr Justice Moor stated that given the evidence it is hard to see how a Court can come to any conclusion other than A’s income being £4,300 net per month. On this basis the appeal was allowed. Given the decision on the first ground, the ground of whether it was wrong to refuse permission to admit the evidence of the HR manager was otiose but Mr Justice Moor did consider that unless Recorder Chandler KC intended to strike out A's claim, he should have admitted this evidence. The appeal was allowed on this ground as well.

A’s ground that it was wrong not to allow a payor of a maintenance order to fill an evidential void was not permitted. The case relied upon for this ground was solely directed to interim applications and therefore this submission was completely wrong. The last appropriate time to fill those gaps would be a final hearing. The court is resolute in upholding the need for finality in litigation.

Mr Justice Moor did not consider there any merit in A’s arguments against the nominal spousal maintenance given there is a substantial ingredient of spousal support for R in the figure for maintenance with a reduction based on R’s increased ability to work. In any event, the parties had agreed it and it would be wrong to discharge that in light of the agreement.

Mr Justice Moor was clear that he would not return this case for a further hearing at first instance and a permanent solution must be found and the litigation come to an end.

Mr Justice Moor calculated A’s income if he was working full time at £7,166 per month. If the Canada Water property was rented out as well the Judge estimated this increased A’s income to £7,500 per month net. Applying the same percentage to the income figure of HHJ Gibbon’s decision (22.1%) this was applied to the new calculation of A’s income so that maintenance should be £1,650 per month reducing by £100 by the end of K’s Year 2 and that will continue until further order. The submission that the birth of X makes any difference was rejected. X’s birth postdates A’s known obligations to K and R, and A is living in China and judicial notice was taken of the fact that cost of living in China is considerably less than London. The internet suggesting 60% cheaper.

The correct date for the lower figure was the hearing before Recorder Chandler KC in September 2022. The arrears and costs ordered by HHJ Gibbons stands. The further arrears to be paid at £1,500 per month.

Mr Justice Moor was clear that A had been guilty of litigation misconduct which will be factored into an eventual costs order, and he urged the parties to come to a sensible agreement as to costs but in any event listed the matter for a half day time estimate to deal with costs and any other outstanding matters.

The Husband (‘H’) is aged 64, the Wife (‘W’) aged 65. They cohabited from 1996, married in 2014 and separated in 2016.

The application before the Court concerned a final financial remedy order from May 2021 which had not yet been fully implemented. The order provided for H to exit the marriage with three rental properties (and their mortgages) which were in W’s sole name and W to retain the FMH (as was W’s wish although the Recorder found it difficult to see how she would be able to afford the mortgage payments but observed that was a matter for her). There was to be a short-term maintenance payment by H to W to share the rental income whilst the parties restructured their finances. The parties agreed that the aim of the Court should be to uphold as far as possible the intention behind the order. This order provided a broadly equal capital division between the parties.

Following the hearing, the mortgage lenders refused to agree to a transfer of the rental properties to H and therefore the only possible outcome was for them to be sold. H attempted to progress this but there was non-engagement and obstacles placed by W. The matter came before the Court in August 2022 where, of note, the Court ordered the sale of the three rental properties and W to account to H, by way of periodical payments, for the rental income on the properties. W was not in attendance at this hearing.

At the time of this hearing before HHJ Reardon KC, only one had been sold. W failed to engage in the sale of the properties.

H’s application was for compensation for what he says were attempts by W to frustrate the order and delay its implementation. He says this has caused him significant financial loss by reducing the value of the properties he was due to receive. W disputed that and said any reduction in value is the result of natural fluctuations in the value of the assets.

H’s application consisted of an application under the Thwaite jurisdiction for a further lump sum as compensation, enforcement of the implementation order made in August 2022, a charging order over the FMH or an order for sale and an application for committal for breach of W’s undertaking that she gave not to borrow against any of the rental properties pending transfer to H. W accepted breach of the undertaking but the application for committal was stayed pending the Court’s decision on the other applications.

W issued an application to set aside the implementation order and to strike out H’s Thwaite application.

Following a review of events since 2021, HHJ Reardon KC concluded that W had acted to frustrate implementation of the final order. She lists the undisputed actions by W which led to the current situation and that W’s dealings with the properties were concealed from H and his solicitors. W puts forward extenuating circumstances to explain her conduct, but the Court found that W’s attempts to resist implementation have required far more effort on her part than compliance would have.

The Judgment sets out the law on applications to set aside and the Thwaite jurisdiction at paragraphs 43-62.

W’s applications to set aside the August 2022 order were refused. HHJ Reardon KC considered the reasons for W’s non-attendance to be unsatisfactory. Also she had delayed for 8 months before applying to set it aside. In any event she did not consider W’s application had merits where the August 2022 hearing was to achieve implementation of the 2021 order which, due to W’s actions, were putting H under considerable and ongoing financial disadvantage.

In relation to H’s application, W has already accepted there must be an adjustment to the 2021 order which is that she would indemnify H in respect of her additional borrowing against the property. This could only be achieved by the Thwaite jurisdiction. The Court’s view was that the Thwaite jurisdiction was applicable in this case. The additional borrowing by W was a clear and quantifiable detriment to H. The further losses put forward by H were more problematic as it related to the reduction in property values, being forced to sell one for less than its true value because the mortgage lender had threatened possession proceedings and in relation to the condition of the properties.

H’s proposal was that all the rental properties and the FMH be sold, he should receive the higher of £650,000 or 53% of the total equity and that W should compensate him by way of a lump sum for the £170,000 loss he has sustained as set out above.

The Court found that H’s loss should only be considered in relation to the property which was sold below the asking price and this loss should be £100,000 as well as the £20,200 from W’s additional borrowing against one of the properties. This should be paid as a lump sum to H in addition to the properties he was to receive under the final order. This lump sum provides for a shift in the capital from a 51/49 split to a 60/40 split in H’s favour. HHJ Reardon KC considered this to be the minimum necessary to compensate H for what W’s actions have cost him.

The Judge made a final charging order on the FMH to secure the sums due under the 2022 order (arrears of periodical payments owed to H from rental income received and the costs orders).

As to the Thwaite lump sum order, the Court determined that there should be a default order for sale of the FMH under s24A. This would mean that if the property is sold under the default provision, H would also receive the additional sums due from the charging order (if they remain unpaid) without the need for a separate application. W was given three months from the date of this order to pay the lump sum before a sale is triggered.

Following the hearing, it was confirmed that H’s position in relation to the committal application was that it should be adjourned generally with liberty to restore to be deemed withdrawn upon payment of all sums due to H. W did not object and the Court considered this a sensible way to deal with the application.

In relation to costs, the Judge felt there was little scope in making anything other than an order that W should pay H’s costs in full (subject to assessment) on the standard basis. This figure was for £30,000.