3 months ago

IB April 2018


LEGAL UPDATE A v A [2018] EWHC 340 (Fam) Appeal brought by the Husband [H] following a first instance decision to release the Wife [W] from an undertaking provided in reaching a consent order. The appeal was granted in limited terms by Mr Justice Cohen on 13th February 2018. Backgound: The parties separated in 2009 following a 26 year marriage and divorced in 2011. W had remained at home to care for their 5 children whilst H set up a successful construction business which had allowed the family to enjoy a high standard of living. A lengthy consent order was finalised on 15th September 2011. Original Order: The order contained the usual recital in respect of the terms of the order being accepted in full and final satisfaction of all claims for income, etc. Provision was given for the sale of the FMH for “not less than £8.5 million without agreement of the parties or further order of the court”. The sale of the property in Spain was set out with the same term with a sale price of £3.75 million. It is noted by Cohen J that the values were somewhat optimistic given the FMH had been valued at £7.5 million and £7-8 million, but the parties were advised it could achieve £10 million. It is unclear how the value for the Spanish property was established. At the time of the order the parties were living together unhappily thus W wished to purchase a property. The agreement was predicated on the basis that H would pay for the purchase of a £2.6 million property by paying the £260,000 deposit and taking out a mortgage which he would continue to service. He would also continue to pay W £12,000 per month. This would initially serve as maintenance and would run to the earliest event between sale of the FMH or 16.02.12, anything that he continued to pay beyond 12.02.12 would be considered a loan to W. Therefore upon the sale of the FMH W was to repay H: 1. The £260,000 deposit for her property [BL]; 2. The interest payments he had made on the BL mortgage; and 3. The amount accrued under the BL load of £12,000 per month from 16.02.12. When the FMH was sold the proceeds were to be divided equally save that H would pay a lump sum of £1.3 from the sale of FMH and £700,000 from the sale of the Spanish property. Thus W would receive £4 million more than H from the sales of their properties, this was justified to Cohen J as compensating W for H retaining his construction companies. The H’s provisions for payment were dealt with as an agreement whereas W undertook that she would reimburse H as set out above. H also agreed to transfer the entirety of his pension valued at £1.2 million and 13% of a further pension. It was agreed that the current undrawn value of W’s pension pot is not less than £2 million. The First Instance hearing: By the time the matter came before HHJ Hughes QC in March 2017 for directions the FMH had only attracted one offer of £6 million, which the parties agreed to reject. The Spanish property had attracted an offer of £2 million, which was rejected and a subsequent offer of £1.75 million fell through. Judgment was handed down on 22.09.17 followed by a supplementary written judgment on 16.10.17. The parties both accepted that the 6-7 years had been extremely unfortunate for W given she would be living in BL unencumbered with liquid capital in the region of £3-4.5 million if the properties had sold at their expected prices. HHJ considered the offers that had been received and that at those valuations, after repayment to H and the remainder of BL W would be left with £819,000 (in August 2017, £700,000 by the time of the appeal) to be contrasted with a figure of £3 million plus. In addition the judge emphasised that the properties may not achieve their reduced prices in which case W would have less. Her debt to H would increase by £216,000 per annum while the properties were not sold with her funds therefore being eliminated within 3-4 years. In contrast H’s businesses which had been at a loss in 2011 were prospering and H had a substantial income. The judge dealt with the matter in terms of releasing W from the undertaking not a variation of the maintenance agreement. The judge: 1. Released W from her undertaking to repay H the mortgage interest payments and loan payments of £12,000 per month. This was done on the condition that W gave a revised undertaking to the effect hat if she received from her share of the two properties £1.74 million or more she would use the surplus to reimburse H the sums not otherwise due under the repayment of the mortgage interest and loan payments. 2. W was not released from the obligation to reimburse H £260,000 for the BL deposit. The judge had reached this conclusion on the basis that the properties would need to achieve in excess of £3.48 million total for W to receive £1.74 million. The figure of £1.74 million arose from the judge concluding that W’s intended income (excluding pensions) was £2 million (the minimum agreed in judge’s view), she deducted from that figure the £260,000 deposit for BL. Although it does not affect the outcome of the appeal Cohen J highlighted that the agreement being for W’s income fund was a misapprehension, the error stemmed from reference to the £2 million as “a Duxbury” within submissions made on behalf of W. The £2 million was never intended to represent such a fund but instead was instead the equalising payment to W from the proceeds of sale of the two properties. The Judge set out 7 reasons for her decision including: 1. Each party had been reasonable in their efforts to sell the properties. 2. The judge was “quite sure” W would not have agreed to pay her own maintenance and mortgage interest as a loan if she knew how long it would go on for. 3. The failure to sell was a major and significant change. The judge also referred herself to Birch v Birch [2017] UKSC 53 concluding that the court had power to release a person from undertakings given to the court if just to do so or conditionally release if the person was to give a different, fairer, undertaking in substitution. The fact in the case that allowed her to release the W was the delay in selling the properties and that W would have been unlikely to have her maintenance claim dismissed and instead make repayments had she known. Following judgment, after H’s enquiry, the judge confirmed that W could not pay her bills without the assistance of H and it would not be unjust for him to continue making the mortgage and monthly payments. Arguments on Appeal H’s case was argued through 12 points, which are not set out in their entirety here: 1. The consent order was carefully negotiated and crafted over months of negotiation to reach a clean break. 8 In Brief

LEGAL UPDATE 2. The judge paid lip service at most the principle that the parties’ agreement is a matter of utmost importance and should, unless there is a very good reason otherwise, be respected. Reference was made to Radmacher v Granatino [2011] 1 AC 534. 3. The order would not have been set aside if the Barder v Caluori [1988] AC 20 or Myerson v Myerson [2009] 2 FLR 147 principles were applied. What happened was foreseeable and the parties took a punt on the value of the properties. 4. There was no minimum figure in the agreement that W was to receive. 5. It is a matter of chance that W can make an application to vary an undertaking, if the order had been drafted so that the sum was a reverse lump sum it would not be variable. 6. W could have applied for an order for sale. W set out 7 points, again which are not set out in their entirety here: 1. The case deals with specific circumstances. W agreed to what would have provided her with a fund of at least £3 million outside her new home and pension. 2. She would never have agreed to monthly payments as a loan to generate such huge debt if it was anticipated to go on for so long. 3. Unless she is given relief there will be no income fund at all, the sum will be depleted in 3.5 years. 4. If the gateway to release from the undertaking is a change there couldn’t be a more dramatic change. Mr Justice Cohen’s comments: − No sympathy was found for H’s argument that W could have crystallised the situation earlier by applying for an order for sale. HHJ Hughes made a finding that neither party had acted unreasonably in the sale of the properties and Cohen J highlighted that he should not go behind that. He also noted that he could not assume that had the price been lowered that the properties were bound to be sold. − The argument under Barder was also rejected given the case does not involve an appeal against a consent order and there is nothing in Birch to suggestion the power to release from an undertaking is so constrained. − However, Cohen J was satisfied that the judge had failed to give sufficient regard to the agreement, in so far as there was to be change it should be kept to a minimum. − If the court is contemplating the discharge of an undertaking in these circumstances consideration should be given to replacement undertakings and to limit the release. Mr Justice Cohen’s conclusions: − HHJ Hughes had found that there was a significant change in circumstances namely W not receiving a significant sum over and above her property and pension fund. Cohen J agreed this was a significant change in circumstances. − Yet this does not lead, inevitably, to the release from an undertaking, it simply opens the gateway. There are other relevant factors the most significant of which are: o o o The parties came to an agreement intended to be a clean break. The order and in a number of respects been put into effect. H had honoured the agreement and paid substantial sums on the basis they would be repaid. − All of these factors are powerful and militate strongly in favour of replacement undertakings if the principle to repay was to be discharged. − The judge was entitled to exercise her jurisdiction to conclude that W should be discharged from her undertakings, but fairness to H requires replacement undertakings to be put in place. − Cohen J felt he did not have enough information to finalise the terms of the replacement undertakings. The appeal was therefore allowed but not the extent that H wished. − He noted that W may wish to offer replacement undertakings. In respect of such replacement undertakings he commented as follows: o o o Ashley Singh St Johns Buildings In a few years W will be entitled to take 25% as a lump sum from her pension, he would require persuasion that she should not pay that or a significant element of it to H in repayment. Consideration as to whether W’s property should carry a mortgage to release funds to H. He would need persuasion that it was just for H to continue paying the mortgage and monthly payments. Expert Witness Portal The new Expert Witness Portal has just gone live at We are populating the site while working on our search engine optimisation, so you will need to type the address into your browser to find it and there aren’t many experts on the database just yet. In the coming months we will increase the number of experts, fix glitches and gradually increase our ranking in the search results. EWP will look familiar – it’s built on a similar framework to the direct access portal. We developed DAP because we could see that whilst there were other ‘barrister directory’ web sites, most seemed to be little more than a means of taking agency fees from barristers. There was a Bar Council directory but it was not very user friendly, even if you could find it. Direct access is not for everyone but there can be no doubt that it’s here to stay and there are some areas of work where it is a good option for clients. It increases choice and fills gaps in counsel’s diaries. The Bar Council liked that DAP was developed from grass roots, and outside London, so DAP became the official Bar Council direct access portal. EWP is our response to the barristers’ perennial question: which expert to use? We noticed the many emails circulating amongst members of Chambers asking colleagues for recommendations. We started by creating a simple address book which could be shared within Chambers but have now developed an open directory for anyone to use (the address book is still available if any Chambers would like to use it). There are other expert directories of course. Some are based on the agency model; they profess to be able to find any expert in any specialism but in practice they just sell leads. EWP will be free to all users. The database can be searched by category, geographical area and/or keyword. It allows experts to register and seek ‘legal endorsement’ from barristers, solicitors or the judiciary which will then show in their listing in the search results. The capacity to download CVs will follow soon and we will then add the capability for users to log in and create their own ‘favourites’. Presently, there is no charge for experts to join but we will need to introduce a subscription in due course to fund the planned developments. EWP, like DAP, is very much home grown on the Northern Circuit. The key to making EWP a useful resource is our ability to meet the needs of the profession, so please do take a look and share with colleagues and experts. We would welcome your feedback. Pru Beever, St Johns Buildings Mike Whyatt, 15 Winckley Square In Brief 9