A failure to engage meaningfully: J v J (MFPA 1984 - Interim Provision) [2021] EWFC 78

The judge had granted W leave to apply under Part III but had declined at that hearing to consider W’s applications for interim maintenance under s.14 MFPA and for a costs allowance under the inherent jurisdiction, since the husband (‘H’) had not had an opportunity to put evidence formally in reply.

H was then given an opportunity to file a statement with evidence in response to W’s applications. The judge noted that he did not provide such evidence, save that he emailed the judge’s clerk to say that he had £1,460 in a Chinese bank account and £23,900 in an overseas bank account.

W was represented by counsel and H did not attend and was not represented. H continued to assert that China was the proper forum for any such application and that any English order would not be recognised. In terms of evidence as to the parties’ finances, the judge had a great deal of disclosure from W from the earlier proceedings. However, H’s financial circumstances were only evidenced by his email to the clerk, by a brief statement dated July 2021, and by his Form E dated May 2020.

Background

W is 34 and of Polish origin. H is 45 and of Chinese origin. They met in 2016, started cohabiting and married in 2017. Where they lived during the marriage is in dispute: W says they lived in the UK and H says that they lived in China. The judge considered that W had made out her case on this, prima facie, based on various receipts, payslips and other evidence.

W’s Form E described an opulent standard of living. A driver of this appears to have been a business (one in a larger group structure of companies) which the parties had co-founded and in which W served as Chief Scientific Officer. W’s case was that she had played a vital role in the success of the business.

W produced evidence from a Vice-President of the business to support two elements of her case. Firstly, she argued H had agreed during the marriage to transfer to her 50% of the shares in the business in recognition of her contribution; a promise he did not keep. Secondly, W claimed that H had transferred his controlling share in the only UK-based company within the group structure to a nominee and had then stripped the company’s assets in order to avoid a significant UK tax liability. The consequence of this was that neither H nor W had any remaining assets of substantial value in the jurisdiction.

W also accused H of personal violence against her, including rape, as well as violence against others in furtherance of his business interests. Understandably the judge did not feel able to reach any conclusions on these allegations.

The parties separated in 2019, ending a marriage of some two years. They did not have any children. W was dismissed from her role as Chief Scientific Officer and successfully brought an Employment Tribunal claim for which she was awarded £103,000 in damages (albeit she had not yet received the sum).

Post-separation, H appeared to have initially supported W generously. She had access to a joint bank account, moved to London and rented a flat for £51,000 pa. In October 2019 H cut off her access to that bank account (which had £1.4m in it as at closure). Since then, W had not worked and had had no financial support from H. She also suffered from a number of health issues.

W’s divorce suit in England

W issued a divorce petition in England in May 2019. H had left the UK and attempted to evade service of this. W applied to have service effected by email. H later admitted to the judge that he had in fact seen the petition in early 2020.

Eventually the court at Bury St Edmunds (‘BSE’) confirmed deemed service, recorded that H had not filed an Acknowledgement of Service and authorised W to apply for directions for trial as an undefended cause. W applied in September 2020 for the divorce to proceed through the undefended list.

Unluckily for W the court at BSE, of its own motion, transferred the suit to the CFC in order that it could be heard with the financial remedy proceedings. The file was then transferred to the High Court to follow the financial remedy claim. The upshot of this was that no steps were taken on W’s undefended divorce application, despite W’s attempts to chase it.

H’s divorce suit in China

H managed to steal a march on W in spite of filing his divorce suit in China months after her in October 2019. He obtained a final decree in December 2020. In a previous hearing the judge had decided that there were no grounds on which to not recognise this overseas divorce. The marriage was thus dissolved overseas and W had to apply under Part III for a financial remedy in the UK.

The parties’ financial situations

W’s finances were in a poor way. She had liabilities of £600,000, consisting of credit card debt and money owed to lawyers. She was also in arrears on her rented flat to the tune of £85,000. She did not work and was in receipt of Universal Credit and PIP.

By contrast with this relatively simple picture, H’s financial circumstances were much harder to understand. The judge described his Form E as “unacceptably bereft of detail” with one of the few assets being the family home in China which he valued at £756,136 (albeit he did not provide any detail about the property). At the hearing H revised this, saying that the property was a flat with net equity of $2m.

H’s Form E did not list any bank accounts or investments. He identified his ownership of the companies but provided no value for his interest in them. He also did not say anything about his income. The judge decided that he was entitled to draw inferences from this lack of information as to H’s resources, should W be able to advance a prima facie case as to them.

In H’s statement of July 2021 H said that he received two modest salaries in the sum of £19,300 pa and £25,500 pa. He added that he used a loan on the family home to fund his business. The judge noted that these were the sum total of the information one could usefully draw from the statement, and that there was none of the documentation which one would expect to see appended to a Form E.

The judge decided that W had amply satisfied him that H was a man of “considerable wealth”, worth millions of pounds. The judge had been persuaded of this by the following pieces of evidence produced by W:

• a valuation for the group of companies which put their value at £42m;
• a consolidated group profit and loss account for 2019 showing turnover of USD86m and profit before tax of USD15m;
• 2019 accounts for one of the companies - D Ltd - showing profit of USD1m, a balance sheet of USD6m and confirming H as ultimate owner;
• the joint bank account closure balance of £1.4m; and
• evidence of dividends transferred to H from the businesses (USD2m in 2018).

Further, H had given some clues as to his wealth in his disclosure, noting in his Form E that he had supported W during the marriage with £900,000pa for her personal spending. Similarly, in trying to play up his hardship during the marriage, he admitted (somewhat convolutedly), that he had made large sums available to her at various points whilst they were together.

The judge concluded that W’s disclosure, together with H’s lack thereof, gave an impression of a man who “wishes to conceal the scale of his wealth”. This impression was compounded by audio recordings produced by W which showed H saying that he would not give her any money.

The law

The judge first set out the law on interim orders for legal costs (also known as LSPOs) noting that such applications were brought under common law in Part III claims, since there was no statutory equivalent to s.22ZA-B of the 1973 Act. Indeed, the same is true where Schedule 1 of 1975 Act claims are concerned, since they also do not have an equivalent provision to s.22ZA-B.

The judge set out the “seminal decision” on LSPOs - Rubin v Rubin [2014] EWHC 611 (Fam), a decision of Mostyn J. In that decision Mostyn J held that the same principles applicable to 1973 Act cases ought to apply to the common law approach to Schedule 1, 1975 Act and Part III cases.

The judge was satisfied that the court could make a legal funding order in respect of future costs but considered in greater detail whether this was also true of costs already incurred at the date of the application, concluding that the answer would depend on how closely those costs related to the existing proceedings.

In Rubin Mostyn J had not made provision for past costs where they related to separate divorce and child abduction proceedings which had concluded. By contrast Cobb J in BC v DE [2016] EWHC 1806 (Fam) did make such an award because they related to the ongoing financial remedy proceedings.

The judge then considered other interim provision (also known as MPS) and the case of Rattan v Kuwad [2021] EWCA Civ 1, in which Moylan LJ set out the relevant principles.

Conclusions

The judge decided that he was entitled to draw inferences from H’s:

• failure to respond to W’s application for interim financial relief with narrative evidence;
• “thoroughly deficient” Form E;
• cutting off of W from financial support;
• standard of living during the marriage;
• failure to pay the Employment Tribunal award; and
• asset-stripping of the UK business.

Accordingly, the judge felt safe in his conclusion that H had access to a great deal of money which he was attempting to conceal from W and the court.

The judge then considered W’s budget of £317,875pa, including sums for eating out (£54,750pa), alcohol and cigars (£16,000pa) and golf (£7,560pa), which the judge considered ripe for trimming down.

The judge reminded himself of the dicta of Thorpe LJ in Purba v Purba [1999] EWCA Civ 1730, who considered that judges faced with a budget should not go through line by line but should instead take a broad approach of deciding what proportion of the paying party’s funds should be used to support the payee.

The judge decided that the appropriate amount of interim provision would be £200,000pa, backdated to the granting of leave and payable monthly.

The judge did not make additional provision for W’s rent arrears of £85,000, considering, inter alia, that there was no evidence that she was on the point of eviction.

As to legal costs provision, the judge was satisfied that the essential prerequisites were made out, in that:

• W had been refused litigation loans; and
• her solicitors were unwilling to act absent funding and would not accept a Sears Tooth deed arrangement.

The judge considered it appropriate to make an order and went on to consider the costs budget put forward by W’s solicitors:

• unpaid costs of £73,919;
• costs to the FDA of £104,090;
• costs to the FDR of £335,547 (including £180,000 on expert evidence).

The judge was concerned that these costs were calculated on the premise that H would fully engage with proceedings; not at all a given. On the other hand, the judge also considered that the expert evidence budget was too high.

The judge therefore decided to award £62,831 in respect of unpaid costs (applying a c. 15% reduction) and then £20,000 pm thereafter until the FDR.

The judge then considered the costs of the hearing itself, noting that it was a clean sheet case. He determined that W was plainly entitled to her costs, since H had failed to engage meaningfully in the proceedings at all. However, the judge sought to avoid double-counting, and decided that this costs order would be subsumed into the order for past legal fees and would not be satisfied with an additional sum.

Henry Pritchard, Pupil, One Hare Court