E v E (Financial Provision)

JurisdictionEngland & Wales
CourtFamily Division
Judgment Date1989

EWBANK, J

Costs – divorce – application for financial provision – responsibility of legal advisers to form accurate assessments and to inform clients of likely impact of costs – failure to make full and frank disclosure – insistence on unjustified further valuation of property – refusal of offer – effect on order for costs.

Evidence – divorce – application for financial provision – duty of parties to make full and frank disclosure – effect of failure to disclose – court justified in drawing adverse inferences.

Financial provision – objective of order – court no longer required to try and place parties in position they would have been had the marriage not broken down – duty to consider whether financial obligations of spouse should be terminated by clean break.

Financial provision – open offer of lump sum – practice to be encouraged particularly if costs likely to be heavy.

Financial provision – party failing to make full and frank disclosure – inference that party had undisclosed assets would not be drawn if evidence satisfied court there were no such assets.

Post-nuptial settlement – divorce – power of court to vary settlement – settlement including children as beneficiaries – first consideration welfare of children – second consideration court not to interfere with settlement more than necessary.

The parties were married in 1972. There were three minor children of the family. From about 1980 the wife disengaged herself from the family. She was alleged to have had adulterous affairs with two men in 1982 and 1983, but she denied this. In 1986 she began an adulterous relationship with a third man and in 1988 the wife left home to live with him. The children remained with the husband and the wife did not seek custody.

During the marriage the husband worked for his father who was a rich man living in Israel from where he controlled his business activities. The husband ran the London office. He was given a modest salary but he was able to draw as much as he needed from one of the father's companies. When the husband and wife were living together they spent at the rate of £350,000 a year. The father kept a tight control on the purse strings and his affairs were not designed to be open to public view. The parties' first matrimonial home was bought with money provided by the father. That house was put in the husband's name. In 1975 the parties moved to their second matrimonial home. The husband retained ownership of the first matrimonial home. In

[1989] FCR 591 at 592

1979 the parties moved to their last matrimonial home. This was bought by the part-exchange of the house which was the second matrimonial home and a cash payment of £229,000 provided by the father. In 1983 this house was settled on a discretionary trust. The beneficiaries were the husband, the wife, the husband's children and remoter issue by any other wife. The trust contained a protection clause and the father was named as the protector. It was conceded that the trust was a post-nuptial settlement and that consequently it could be varied by the court.

In divorce proceedings, which were begun in 1987, the wife applied for financial relief and property adjustment, including variation of the post-nuptial settlement. She obtained an order for interim periodical payments of £50,000 a year.

In pre-trial negotiations the husband did not make a full and frank disclosure as to his resources. As a result there was a rigorous investigation of his affairs. This revealed that he had failed to disclose his half ownership of plots of land in Israel, a bank account in Switzerland, two deposit boxes in a bank in Switzerland, use of a house in Israel, a power of attorney over some stock, ownership of a dormant company, and a small bank balance. Also the husband had given misleading evidence relating to his involvement in two companies incorporated in Belgium and Panama. As a result of this non-disclosure and the consequent investigation of the husband's affairs the costs of the case had risen to over £300,000. The wife therefore applied for an order that the husband should pay her costs.

During 1988 the husband obtained from a creditable firm a valuation of the last matrimonial home (which was the subject of the post-nuptial settlement). The valuation was £1.25 million. The wife sought a further valuation and another firm also produced a valuation of £1.25 million. The wife insisted that the true value of the property was £3 million. She obtained a third valuation. This produced a valuation of £1.3 million.

The husband said that in Sepember 1988 he went to Israel to try to persuade the father to make £500,000 available so that he could offer that sum as a lump sum payment in settlement of the wife's claim for financial provision. As a result of this visit, the husband said that the father's reaction was hostile, he was deprived of his posts in the father's various companies, and consequently he lost his salary and the supplemental income. The wife stated that this rupture was a facade and that the husband would be taken back when the case was concluded.

On 6 February 1989 the husband made an open offer of £500,000 to the wife. This was on the basis that the post-nuptial settlement be varied, the house sold, and the proceeds divided between the husband and the wife so that the wife should receive £500,000. On 13 February 1989, acting on advice from her legal representatives, the wife refused the offer. As a result of this refusal the husband submitted that there should be no order as to costs. In March 1989 the father made it clear in a letter that as protector of the trust he was strongly opposed to the making of any settlement out of the trust for the wife.

At the time of the hearing, the wife and her cohabitee were living in rented accommodation. She wished to purchase a home and to start a business. Her cohabitee was not in a position to put up any capital. The husband and the children were living in the first matrimonial home and he had set up a business of his own. He had a modest income and said that the father would not now assist him either to meet his own expenses or to meet the claims of the wife.

Held – (1) The husband had failed to disclose his half-ownership of land in Israel, a bank account and deposit boxes in Switzerland and his use of the house in Israel. He also failed to disclose details of the Belgian and Panamanian companies. These failures to make full and frank disclosure by the husband justified the court drawing any inferences which were proper against him: see Desai v Desai (1983) 13 Fam Law 46. However, it would be wrong for the court to draw inferences that the husband had assets which, on an assessment of the evidence, it was satisfied he had not got. In this case, the evidence showed that the land in Israel was unrealizable and of no practical value to the husband at this time; the Swiss bank account was closed in 1986; and the safe deposits were known to both the husband and the wife and

[1989] FCR 591 at 593

contained family jewellery. The rigorous investigation of the husband's affairs had not established any assets of substance which had not been disclosed, other than the technical ownership of the land in Israel and the use of the house in Israel. There had been a lack of frankness on the husband's part, but the court had to decide what had been achieved by the investigation. Although a failure on the part of the wife's legal advisers to investigate everything that needed to be investigated might lead to an action for negligence, a balance had to be struck and the lay client needed to be informed of the dangers of continuing a case in order to investigate matters which in the end might not be relevant. The husband had made an open offer of £500,000. The making of open offers in a case of this sort was a practice to be encouraged, particularly when the costs were going to amount to a figure of £300,000. Legal advisers must form accurate assessments as to costs and what the impact of costs was likely to be and inform the lay client of the probable estimate of the totality of costs so they could fully understand the enormous financial risks they might incur if they insisted on sticking to what they regarded as their own sensible point of view and so refused to make, or accept, an offer involving much compromise on both sides: Singer v Sharegin [1984] FLR 114. In this case the evidence showed that the husband had no land other than his interest in the last matrimonial home (which was the subject of the post-nuptial settlement), and the first matrimonial home. He also had the half-interest in the unrealizable plots of land in Israel.

(2) The evidence showed that the father was determined that none of his assets should go to the wife. He was angry that the post-nuptial settlement was vulnerable in the proceedings. There had been a genuine rupture between the father and the husband, but there was likely to be a restoration of the relationship between them when the wife's claim was disposed of in a way that she was unable to make any further claim. The husband currently had a very modest income and he had been supporting himself and paying the interim maintenance for the wife by selling furniture and other property. There was about £100,000 worth of property to be sold. The wife had jewellery worth about £20,000. The family assets were the last matrimonial home (the subject of the post-nuptial settlement) which was worth £1.25 million, and the first matrimonial home which was worth £280,000.

(3) When considering the wife's application for financial provision, the court had to consider the various matters set out in s 25 of the Matrimonial Causes Act 1973. In this case the relevant matters were (i) the requirement to give first consideration to the welfare of the children of the family, which was particularly important in relation to any variation of the post-nuptial settlement; (ii) the financial resources and the...

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18 cases
  • NG v SG
    • United Kingdom
    • Family Division
    • 9 Diciembre 2011
    ...inferences must be "must be properly drawn and reasonable" per Otton LJ in Baker v Baker [1995] 2 FLR 829, CA. See also E v E (Financial Provision) [1990] 2 FLR 233 at pp241–242 where Ewbank J concluded "it would be wrong to draw inferences that the husband had assets which, ......
  • Ben Hashem v Al Shayif
    • United Kingdom
    • Family Division
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    ...discretion under section 24(1)(c) should be exercised: in addition to Brooks there are Cartwright v Cartwright (1983) 4 FLR 463, E v E (Financial Provision) [1990] 2 FLR 233, C v C (Variation of Post-Nuptial Settlement: Company Shares) [2003] EWHC 1222 (Fam), [2003] 2 FLR 493, and Mubara......
  • Nr (Petitioner) v AB (1St Respondent) Bco Ltd (2Nd Respondent) Mb (3Rd Respondent) Lb (4Th Respondent)
    • United Kingdom
    • Family Division
    • 22 Febrero 2016
    ...be exercised save for five reported cases since 1973: in addition to Brooks there was Cartwright v Cartwright (1983) 4 FLR 463, E v E (Financial Provision) [1990] 2 FLR 233, C v C (Variation of Post-Nuptial Settlement: Company Shares) [2003] EWHC 1222 (Fam), [2003] 2 FLR 493, and Mubarak v......
  • Gillian Christine Hope (aka Lewis, formerly Krejci) (Applicant) Libor Stanislav Karol Krejci (First Respondent) Trustees of the Krejci Family Trust (Second Respondents) Damsonetti Holdings Ltd (Third Respondent)
    • United Kingdom
    • Family Division
    • 29 Junio 2012
    ...of a company has to my knowledge never been argued, let alone found, to be an impediment to making an effective variation. In E v E (Financial Provision) [1990] 2 FLR 233 one of our wisest judges, Ewbank J, was addressed by an array of the most distinguished counsel (as well as myself) in a......
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1 firm's commentaries
  • Full And Frank Disclosure Is The First Commandment…
    • United Kingdom
    • Mondaq UK
    • 10 Noviembre 2016
    ...the husband had assets which, on an assessment of evidence, I am satisfied he had not got.' (Ewbank J in E v E (Financial Provision) [1990] 2 FLR 233 and not to allow this note of caution to give rise to a 'cheat's charter' (Dame Elizabeth Butler-Sloss P in Baker v He proceeded to consider ......

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