ABX v SBX
| Jurisdiction | England & Wales |
| Judge | FRANCIS J |
| Judgment Date | 31 July 2018 |
| Court | Family Court |
Financial remedies – Valuing deferred compensation from former employers – Whether appropriate to order lump sum payments prior to actual receipt of specific sum.
The husband and wife lived together for five years, initially in mainland Europe and then in London. The wife was diagnosed in 2009 with a disabling disease. In October 2010 the couple married, going on to have three children together.
On 5 January 2016, the wife received a letter from the husband's solicitors, stating that in his view the marriage had broken down irretrievably; the letter enclosed draft particulars of unreasonable behaviour and a draft divorce petition. It later emerged that the husband was engaged in an affair.
On 26 May 2016, the husband's solicitors wrote to the wife's solicitors asking for confirmation that the wife would not make any application to the court prior to 1 June, so that they could try to resolve finances through a voluntary process. The following day, the wife's solicitors confirmed that the wife would not take any steps to issue a Form A before receiving the husband's response (by 1 June) about a timetable for voluntary disclosure. However, the husband then unilaterally issued Form A on 31 May, informing the wife that he had done so on 1 June.
In July 2016 the husband made early repayment of a debt he owed to his father in respect of a contribution to the purchase of the matrimonial home, paying £344,542 (the principal plus interest, as set out in the relevant loan agreement).
The wife issued occupation proceedings as, although the husband was spending the majority of time with his new partner, he was still returning to the home. On 20 July 2016 her solicitors informed the husband's solicitors that the wife's health had deteriorated, requiring her to attend hospital on 11 July, where she was prescribed medication. In spite of this, the husband's solicitors replied indicating that the wife's application for an occupation order 'will be robustly defended'. An occupation order was made in September 2016 and the husband was ordered to pay the wife's costs. The district judge found that 'the husband has litigated in an inflexible and controlling way'. The total costs of the occupation proceedings were £100,000. The husband thereafter lived with his new partner, who had two homes.
In early 2017 the husband resigned from his financial services firm, where his earnings had consisted of a mix of a relatively low salary and substantial bonus, including deferred rewards, and moved to work for a new company, of which he was the sole shareholder. He was now on a salary equivalent to £357,000 net pa, guaranteed until January 2021. This decision involved the loss of some of his deferred rewards from his old firm but he still held a continuing interest in one venture run by his old firm and some deferred equity in the old firm.
In June 2017, the husband made open proposals, but the wife failed to respond. Instead, she applied, pursuant to s 37 of the Matrimonial Causes Act 1973, for an order setting aside the husband's payment to his father. The husband's father was joined to the litigation and explained that he had wanted the money in order to help another of his children to purchase a home, not wanting to liquidate other funds. In February 2018, the husband made a second open proposal; the wife responded in March 2018.
By the final hearing the couple had incurred costs of almost £1.1 million. The family's net assets were about £2 million, with outstanding business and personal liabilities of £500,000, leaving close to £1.5 million, of which significant elements were currently illiquid and some might never be realised. According to the single joint expert the family home was worth slightly less than it originally cost, about £2.87 million. Neither the husband nor the wife had contributed to the original purchase price, which had been raised by a mixture of mortgage and the contributions from the husband's parents, recorded in loan agreements, and from funds held for the three children. The mortgage was currently over £2 million; the mortgagees had recently valued the property at £3.25 million and had agreed to extend the mortgage for five years on an interest only basis. The wife very much wanted to retain the property; the husband argued that she should downsize in three to five years' time.
The wife was working only 70 per cent of the time because of her health and was earning £60,100 net pa, plus a bonus of between 30 per cent and 50 per cent of her salary. However, having taken substantial unpaid leave of absence to deal with the stress of the final hearing, she had been told to look for other employment by her employers. She was arguing for an annual budget of £225,519, including the nanny.
The wife was also arguing for add back of £762,572 made up of various items, including the costs of various aspects of the litigation, the husband's loan repayments to his father and a related tax payment, a skiing holiday, and £145,562 which the husband had spent in excess of his Form E budget (the wife had prepared a schedule herself, identifying 1212 separate 'excess' items of expenditure, the majority less than £100).
Held – (1) Whilst costs of this level were not at all uncommon in the 'very big money' cases, in this case the costs were obviously wholly disproportionate to the size of the assets. If the Calderbank provisions had still been applicable, the parties might have been forced to take a very different attitude, because a party who turned down an offer that they failed to beat, under that regime, could have been facing a substantial costs order. Recognising the pitfalls associated with the Calderbank principles, it seemed there were cases where litigants now felt able to continue without the sanction of costs, save in cases of serious litigation misconduct (see [2], below).
(2) It would rarely be appropriate to send a draft petition at the same time as informing a surprised recipient of the news of the divorce; such action would sometimes be necessary, for example to secure a jurisdictional advantage, but had not been in this case. It would have been easy for the husband, and the right thing to do, to invite the wife to petition the husband on the grounds of his adultery (see [7], [8], below).
(3) If solicitors had a client who insisted on issuing a Form A when the other side had agreed not to do so, then, at the very least, the court would expect the solicitors to contact the other side and explain that, contrary to what had been said earlier, they were on instructions to act in a particular way. There was sometimes a perception by advocates that there was an advantage in being the applicant, as this meant both opening the case and making the last closing submission. However, the applicant should (absent special circumstances) be the person actually seeking an order in his or her favour, not the person who was in every respect the natural respondent but who happened to have stolen a march by issuing first. At an earlier directions hearing, when the husband conceded that it was not conceivable, in any circumstances, that he would be seeking a transfer of assets from the wife to him or a periodical payments order from the wife, the court had therefore ruled that the wife would henceforth be treated as the applicant (see [10], [11], below).
(4) The court could not find any justification for the way that the husband's solicitors had behaved. While not conduct that it would be inequitable to disregard, the conduct of the husband's solicitors had been likely to exacerbate the difficulties between the husband and the wife, contrary to the duties of solicitors in such cases, particularly having regard to this firm of solicitors' membership of Resolution, whose code of practice stated that Resolution members would 'reduce or manage any conflict and confrontation; for example, by not using inflammatory language'. The solicitors' conduct had significantly contributed to the couple becoming locked in contested litigation from the outset, with any possibility of trust removed (see [11], [13], below).
(5) The costs of the occupation order litigation had been an egregious waste of money and the husband's approach demonstrated at best a severe lack of judgment, at worst, a callous and bullying attitude. The court could not understand why, in cases when there was sufficient money, one of the parties did not move out of the matrimonial home. Sometimes it might be because there would be a perceived advantage or disadvantage in relation to occupation long-term of a property. In other cases there would be some perceived advantage or disadvantage in relation to contested issues relating to where, or with whom, the children might live. However, here, the husband had effectively moved out to live with his new partner but had wanted to reserve to himself the right to come into the home when it suited him (see [13], [14], below).
(6) The s 37 application had occupied days of court time and far more money had been spent on the issue than the value of the relevant transaction. It was plainly absurd to spend more on an issue than the monetary value of what was at issue (perhaps unless some fundamental principle was at stake). The wife had fallen well short of satisfying the court that the repayment had been made for any reason other than that put forward by the husband's father. The court was not prepared to rely on the presumption in s 37(5) of the MCA 1973, as at the time the early repayment had been made, it could not have had the effect of defeating the wife's claims. The debt to the husband's mother should similarly be treated as a genuine obligation to repay under a valid loan agreement, although it was a 'soft' debt and the need to repay it was less pressing than the needs of the wife and children (see [3], [32]–[34], below).
(7) The proper way to deal with the dispute about when proceeds would be received by the husband was for the wife to...
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