Financial claims years after a divorce

Family analysis: LexisNexis PSL asks, can an applicant make a financial claim many years after divorce when all assets have been made by the other party long afterwards? Sarah Higgins and Suzanne Todd, partner at Withers LLP, comment on a ruling which also raised important privacy issues.

Original news

Wyatt v Vince [2016] EWHC 1368 (Fam), [2016] All ER (D) 53 (Jun)

The Family Division approved the terms of a financial settlement made between a husband and wife over 19 years after a decree absolute was granted and held that the terms of that settlement could be made public in circumstances where, among other things, the parties’ financial details were already in the public domain and where there was a public interest in disseminating the fact that the parties had been able to reach a negotiated settlement without a trial.

What issues did this case raise, and why is the ruling significant?

Sarah Higgins (SH): The issues raised by the case are:

• Should an applicant be able to make a financial claim many years after the end of a marriage when all the assets have been made by the other party long after the divorce?
• If so, how should the claim be approached?

The wife asked for £1.9m on a needs basis and received £300,000 plus the costs of £325,000. Her contribution in bringing up the children broadly on her own was taken into account.

There was a third issue of how costs should be dealt with. The husband had the means to pay his costs, any reasonable settlement to the wife, and her costs. The wife had no means to pay costs. On the face of it, this is a potentially unfair inequality of arms. If, however, the wife received a costs allowance but ultimately failed in her application, there would be no realistic way in which she would have to repay her costs thus making the litigation in effect riskier for the husband in that she would have nothing to lose by pursuing it (unless he made her an offer which she was concerned she might not beat at trial).

In one sense, the significance of Wyatt v Vince is limited because the scenario of a penniless new age traveller becoming a multi-millionaire (as was the situation with the husband in this case) is unlikely. However, it makes it clear that unless the claim is not legally recognisable (eg if a claimant has remarried) a strike out claim will not succeed because the court has to exercise a discretion to make a fair order. It also shows that even a very long delay is not fatal to a financial application succeeding.

The most recent judgment is an example of the English family court’s approach to make a fair order based on the circumstances of the case. While the wife did succeed in her claim in that she received a settlement, we do not know how much she benefited from it—and her delay and the fact that all the money was made after the marriage reduced her award to a very modest amount.

Suzanne Todd (ST): This case raises several points of interest:

• the absence of a limitation period applying to financial claims following divorce or civil partnership dissolution
• the potential significance of delay in pursuing such claims, and
• the issue of privacy in financial remedy proceedings

It also touches on the impact of legal costs associated with any such claim, which may well have a major bearing on any future award.

It is significant because it provides an insight into the practical implications arising from the earlier decision of the Supreme Court (Vince v Wyatt [2015] UKSC 14, [2015] 2 All ER 755). The Supreme Court justices gave the green light to the wife to pursue her financial claims in relation to the two-year marriage between herself and the husband, notwithstanding the fact that the relationship had ended 31 years before, the standard of living during the relationship could not have been lower, and the wife made no contributions whatsoever to the husband’s wealth built up many years after their separation.

How helpful is this judgment in clarifying the law in this area? Are there any remaining grey areas?

ST: The Supreme Court ruling in 2015 underlined the principle that, consistent with the potentially life-long obligations which attend marriage, there is no time-limit for seeking orders for financial provision or property adjustment for the benefit of a spouse following divorce. Any determination of an application by a court which had failed to have regard to the statutory factors, will be unlawful. The Supreme Court clarified that the family courts do not have the power to strike out a spouse’s financial application as an abuse of process, or for having no reasonable prospect of success.

While the Supreme Court acknowledged that the wife might have considerable difficulty in sustaining a case based on any relationship-generated need, she had a much more powerful argument based on her contributions to the welfare of the family, ie by looking after the children.

When the case came before Cobb J this month, he was presented with a negotiated agreement for the husband to pay to the wife a lump sum of £300,000, in full and final settlement of all her claims. This was in addition to the sum of £325,000 he had paid to date in respect of the wife’s legal costs. The judge hailed the settlement as an example of the principle that it is never too late to settle a dispute. He confirmed that the sums were within the bracket conceived by Lord Wilson as ‘comparatively modest success’, and that they represented the amount that the parties had agreed was an appropriate award to the wife in the circumstances of the case.

A number of grey areas remain, first, in relation to quantum. The judgment also records that from the husband’s perspective, far from being an ‘appropriate award’ the payment represented the most cost efficient way of putting an end to the litigation. Second, Cobb J specifically prohibited the publication of details of the wife’s outstanding indebtedness to her lawyers (despite the husband’s application that this information be disclosed). This means we have no way of knowing how much the wife actually received towards purchasing her mortgage-free property.

Other grey areas can be identified, for example, there was no examination of the husband’s financial position, because he was able to mitigate his exposure to disclosure by running the ‘millionaire’s defence’. In a case with more modest assets, a respondent would be required to provide full and frank disclosure of past and current capital resources and income.

The law relating to privacy in financial remedy proceedings is also full of grey areas, largely due to the lack of legal consensus as to whether private financial matters flowing from divorce should remain private or be heard in open court. In this case, Cobb J demonstrated a willingness to grapple with various competing interests in relation to the issue of privacy and set out valuable guidance from recent case law, ie:

• the strong starting point (from DL v SL [2015] EWHC 2621 (Fam), [2015] All ER (D) 114 (Sep)) in financial remedy cases is that they are generally conducted in private
• one of the most compelling reasons for the maintenance of privacy is that evidence produced under compulsion is covered by the implied undertaking (Clibbery v Allen (No2) [2002] EWCA Civ 45, [2002] 1 All ER 865)
• the principal of open justice is a powerful, fundamental, constitutional principle—a well-developed trend towards openness has arisen in recent years urging greater transparency in order to improve public understanding of the family court process and confidence in the court system
• particular regard must be given to the ancient common law right of freedom of expression expressed in article 10 of the European Convention on Human Rights
• it is desirable that reporting of family court proceedings is fair, balanced and accurate, and
• there are some cases where the circumstances mean that the judgment is likely to be published for the public, for example where significant information is already in the public domain (as in McCartney v Mills McCartney [2008] EWHC 401 (Fam), [2008] All ER (D) 269 (Mar) and Blunkett v Quinn [2004] EWHC 2816 (Fam), [2004] All ER (D) 49 (Dec)), or where a party has been dishonest

What does this mean for lawyers and their clients and what should they do next?

SH: One of the features of this case was that the original court file was lost and so it was not clear whether in fact the wife’s claims had been dismissed, although the conclusion was that they had not been. Clearly, even where parties are of modest means it is important for there to be an order dismissing claims. If this had happened, then the wife would have been unable to proceed. This is more likely to be an issue with the increase in litigants in person who may not understand the significance of an order dismissing claims. If claims are not to be dismissed, both parties need to understand the risk to them as potential payers, and the risk of delay as potential applicants. A practical point is to review file retention and destruction policies and at least to ensure that the client has been advised to keep a copy of the order dismissing claims indefinitely.

ST: The high profile publicity surrounding the case, together with disclosure of the quantum (but not the net effect), may result in an increase of enquiries from those who are separated but have never divorced; those who have never finalised finances with their former partner; and perhaps those seeking to revisit pre-existing divorce settlements which had not formerly been ratified by the court.

The exceptional and unusual facts in this case must be borne in mind, but the case will also serve as a further reminder to litigants and practitioners that obtaining a court order to regulate financial matters after divorce or dissolution of civil partnership is an absolute must. The case also highlights the potential impact of legal costs on a settlement/award. It is prudent to query whether in most cases it will be justified for litigants to proceed with this sort of application, given the costs involved. Finally, the case serves as a reminder of the movement towards more openness in family proceedings, and that family lawyers will need to advise their clients accordingly.

How does this fit in with other developments in this area and predictions for future developments?

SH: It could be said that the judgment endorsing the settlement runs counter to recent cases turning away from joint lives maintenance and dependence, but the Supreme Court ruling was on the basis of the wife’s contribution rather than ongoing dependence. It is not possible for an outsider to say whether either party considered the proceedings to be worthwhile. The husband must have paid much more in costs (his own, and the wife’s) than the wife received net, but he could afford to litigate on a matter of principle. As we do not know what the wife received net, it is not possible to say whether it was worth it for her, or whether there were any real alternatives for her but to proceed.

ST: There is a general trend to greater transparency in the courts and this case can be seen as part of the movement towards more openness. In line with Cobb J’s praise for the parties managing to negotiate a settlement, there is a clear and discernible enthusiasm in the family law arena for non-court forms of dispute resolution as an alternative to litigating through the courts. Mediation, collaborative law, private financial dispute resolution hearings and family law arbitration are all becoming increasingly popular and provide the opportunity to secure an outcome without the need for privacy issues to be considered, as they are all conducted in private, away from the public eye.

Interviewed by Nicola Laver.

This article originally appeared in Lexis PSL on 1st July 2016.

For further information please contact Sarah Higgins on +44 (0)20 7203 5102 or via Sarah.Higgins@crsblaw.com.