X v Y  EWFC 95 ‘Dishonest and unreliable’: Doctored documents and adverse inferences
28th September 2022
- In this case HHJ Hess (‘the judge’) dealt with a final hearing in financial remedies proceedings arising out of the divorce of the Husband (‘H’) and the Wife (‘W’). The judge was keen to have this judgment published to draw wider attention to the ability of dishonest parties to manufacture bank statements and other documents. In an unusual outcome, the judge left W’s capital claims open for 10 years to allow her to return to Court should H’s assets materialise.
- H (50) was from an overseas country and spoke the language of that country as his first language (although the judge noted he also spoke good English). He had, at times, had a successful career as a ‘tech entrepreneur’ in the computer games industry and was described as ‘plainly intelligent’.
- W (40) was from a different overseas country. She spoke both H’s mother tongue and English proficiently.
- The parties met in November 2001. By February 2022, the parties were engaged and began cohabiting two months later when W moved to H’s home country to facilitate this. The parties married on 20 June 2002.
- The parties had two children, aged 19 and 12. Both children suffered in recent years with Chronic Fatigue Syndrome (M.E.) which the stresses of the divorce seemed to have either caused or made worse. The eldest child was largely housebound and required significant amounts of care from W. The youngest child had less serious problems but did not attend school at the time. The judge considered it appropriate to regard W as the children’s primary carer for the foreseeable future, at a level which was likely to make employment very challenging or impossible for W.
- The parties lived in H’s home country from April 2002 to January 2015. They always lived in rented accommodation but lived a reasonably high standard of living.
- In January 2015, the family relocated to London. The standard of living continued, including c.£10k per month on rent for a property in Wimbledon village, good holidays and private education for the children.
- In March 2018, the parties separated. H vacated the family home and W and children left shortly after, unable to pay the rent which H had stopped paying. H also stopped paying the children’s school fees, causing the children to be excluded in May 2019.
- W petitioned on 6 December 2018 and Decree Nisi was pronounced on 7 February 2020.
- On 19 December 2019, W issued her Form A. The First Appointment was adjourned several times due to H’s failure to file a Form E. H eventually filed his Form E two days before the fourth First Appointment date and the hearing was ‘fairly ineffective in terms of disclosure’.
- An FDR was listed for 31 March 2021 but was ineffective due to H’s defective engagement. A further FDR on 7 July 2021 was ineffective due to H’s failure to comply with orders. At the further listing on 27th October 2021, H failed to attend at all and made no efforts to be represented in his absence. Recorder Alexis Campbell QC accordingly dispensed with the FDR and listed for a two-day final hearing on 7 and 8 April 2022.
- At the final hearing, Hess J determined that it was clear some third-party disclosure from banks associated with H’s businesses was necessary and adjourned the case part heard to 18th and 20th of July 2022.
- The judge set out the relevant factors of ss.25 and 25A, Matrimonial Causes Act 1973 and the relevant case law. In particular, the judge referred to the fact that first consideration must be given to the welfare of any minor child of the family who has not attained the age of 18. The 12-year-old came directly into that category, although the needs of the 19-year-old were also considered to be a relevant circumstance, given W’s reasonable obligations to care for them and the restrictions those obligations placed on her earning capacity.
- The judge’s overall assessment of W was that she had told the truth and was overwhelmingly clear and reliable in her presentation and disclosure. The judge considered W was honest that she was not in remunerative employment and lived largely on state benefits.
- The judge could not conclude the same for H. His general impression was that H was both evasive and obstructive in his presentation. His written statements dealt with irrelevant points and in oral evidence he would avoid answering and go off on tangents.
- The ‘pivotal moment’ for the family occurred in 2014. At that time, H was running and was the substantial owner of a company which, as shown by contemporaneous internet presentations, showed considerable success. H wished to relocate the family to London from H’s home country, where W wished to remain. To persuade W to relocate, H asserted that the family would be financially successful and showed a document which appeared to be a legitimate draft sale contract for H’s company for £80m. H also produced to W a bank statement showing a down payment of £8m on this contract. W duly resigned her employment and the family relocated to London in January 2015.
- In evidence, H maintained that the bank statement and sale contract were genuine. However, direct disclosure from the bank showing a genuine bank statement for the same period did not show the £8m payment in. The judge was satisfied that H dishonestly and falsely manufactured the statement. He was not able to make a definite finding on the sale contract due to the late disclosure of the genuine bank statements.
- W’s financial position was straightforward and limited. She had virtually no assets (a few hundred pounds in bank accounts and pension entitlement of less than £30,000) and substantial debts of just over £300,000. W relied almost entirely on UK state benefits, including universal credit (including a rent element), carer’s allowance and child benefit.
- H’s financial position was more difficult to establish. H stated he had no income at all, had no assets and debts of c. £2m. He asserted that he had formally declared bankruptcy in his home country and that he either lived at his mother’s home abroad or on the streets.
- H stated that the deal to sell his company fell apart when the purchaser company carried out their due diligence and the £8m down payment had to be returned to them. H explained that after the purchaser pulled out, the company ‘became worth nothing’ and ‘just collapsed’. H additionally asserted that as the sale included an earnout clause to H worth £40m, H’s native tax authorities were able to raise an advance tax bill of near £1m. He claimed that this liability subsisted even though the earnout clause was subsequently cancelled (which the judge regarded as highly implausible). H provided a document purporting to come from his native tax authorities, though the judge expressed doubts given his conclusion on the bank statement.
- H had similar presentations for the other businesses he was involved in, stating in oral evidence that one of the businesses provided virtually no earnings for him and was worthless. Internet posts by H in 2020 asserted that H had grown the company turnover to £2m annually.
- H’s bank statements and internet posts revealed H engaged in expensive activities, including sending money to his girlfriend, flying in a private plane, and a trip to the Monaco Grand Prix. H asserted these photos were photoshopped and that nothing should be read into them.
- As to income, H asserted he had been looking for a job as a Chief Technical Officer earning c.£90,000 per annum. W’s evidence suggested that job might reasonably expect a salary more like £300,000 per annum.
- W’s initial position was that H had sufficient assets to fund a lump sum to W of £6,881,000 to meet W’s housing and other capital needs and capitalised maintenance. The emergence of the genuine bank statements caused a change in W’s position. W’s position was subsequently that in view of the complete failure of H to be transparent in proceedings, that W’s capital cases be adjourned and that they may well be required to be restored in the future.
- The Judge noted that in normal practice the court should make a decision at final hearing on a balance of probabilities as to the computation of assets and make a division of capital once and for all (Minton v Minton  AC 593). Earlier case law suggested this may only be departed from where there was a real possibility of capital from a specific source becoming available in the near future (MT v MT  1 FLR 362).
- W’s position was that the facts of this case required an exception to normal practice. In particular, W’s counsel referred to recent authorities which widened MT v MT (see AW v AW  EWFC 22, Quan v Bray & Others  EWHC 3558 and Joy v Joy-Marancho and Others (No 3)  EWHC 2507). The justification was that whilst capital claims should not be left indeterminately unresolved, there were hard cases where fairness and justice must prevail over the desirability of finality of litigation. If a litigant engages in conduct which may include full or partial non-disclosure, leading the court to conclude that a once-off division of capital was likely to cause unfairness and injustice, then it may decide that the desirability of finality should be overridden.
- The judge considered the present case to meet this test. He adjourned the case for a 10-year period, allowing W liberty to restore these proceedings by an application to be issued before 3 August 2032.
- W sought spousal periodical payments of £7,000 per month for an extendable term of 10 years (half by reference to housing and the other half to living costs and meeting W’s debts). This was to subsume any separate claim for child periodical payments, although the court did not have power to make a child periodical payments order as H was not resident in this jurisdiction.
- The judge considered these figures reasonable in the context of the standard of living during the marriage, but his final figure was to reflect that the financial situation is less good than it was during the marriage – at £5,000 per month. The judge formed the impression that H was downplaying his earning capacity. He fixed a nine-month period to allow H to get back into remunerative employment, enabling to earn a salary more like £300,000, to then make the £5,000 per month contribution. This was to be an extendable term order for 10 years starting on 1st May 2023, subject to CPI on each anniversary.