In the recent case of RM and TM [2020] EWFC 41, Robert Peel QC, sitting as a Deputy High Court Judge said that the parties had embarked on “ruinous and recriminatory financial remedy proceedings”. The case did nevertheless clarify two areas of law in relation to financial proceedings. Associate Ellie Hampson-Jones and Partner Matthew Humphries look at what impact the decision has for other family cases.
These are, firstly, “conduct” and how it should be considered in the context of section 25(2)(g) of the Matrimonial Causes Act 1973. Section 25(2)(g) states that one of the factors the court shall take into account in determining financial proceedings is “the conduct of each of the parties if that conduct is such that it would in the opinion of the court be inequitable to disregard it”. Secondly, the judgment clarifies the evidence a court should consider when looking at whether wider financial support from a spouse’s family should be taken into account when determining a party’s financial remedy claims.
Background
This was a long marriage of some 22 years. The husband and wife were in their early fifties. They had three children, only one of whom remained under the age of 16
The parties separated in 2018. Prior to the separation, the husband had a career in banking before taking on the role of managing director of “B Ltd”. “A Ltd” and B Ltd were companies founded by the wife’s parents in the early 1970s and late 1980s respectively. The wife’s parents were the majority shareholders of both companies and the wife, together with her brother, held a 24% interest in each company. During the marriage, the wife’s family had helped support the family financially.
In 2018, the husband resigned from B Ltd. An inquiry by the company revealed a number of alleged “serious concerns” about the husband’s conduct while at the helm of the company. This culminated in October 2018 in the husband’s arrest, and at the time of the hearing a police enquiry was ongoing, but the husband had not been charged.
The wife set out her concerns about the husband’s conduct. This related both to the misappropriation of monies belonging to their children and the fact that the husband had committed fraud at B Ltd and was likely to face civil and criminal proceedings. The court directed the wife to set our precisely the husband’s conduct she asserted would impact the outcome of the financial proceedings.
By the time of the final hearing in September 2019, the husband argued the wife’s interests in A Ltd and B Ltd were matrimonial assets that should be shared. The wife’s counter-argument was that if this was the husband’s position, then the court should take into account his conduct. The September hearing overran and was adjourned. Pending resumption of the hearing the judge directed that the parties file further evidence in relation to the husband’s conduct regarding B Ltd. The husband appealed that decision.
The husband’s appeal was allowed by Mr Justice Moor for the following reasons:
- There is no place for conduct to feature merely as one of the general circumstances; and
- If conduct is to be pursued, it must be specifically pleaded with each party having the opportunity to deal with the allegations in narrative evidence.
Mr Justice Moor observed that if this approach is not adopted in litigation, then there is the risk that “parties will be encouraged to introduce acts or omissions through the back door which they are not permitted to introduce through the front door”.
The husband’s position at the subsequent final hearing was that the wife’s family, who had historically provided personal financial support to the family, should be “judiciously encouraged” to enable the wife to extract funds from A Ltd and B Ltd. The judge considered this argument and reached the following conclusion.
There are two main categories of cases that fall under the umbrella of “wider family support”, which the court may inquire into:
- Thomas v Thomas cases. This is where the spouse has an interest in an asset together with other family members, but the court frames its order so as to judiciously encourage the other family members to assist the spouse in extracting the value of their interest; and
- Where the spouse has no legal or beneficial interest in the asset and the wider family member has no obligation to offer support but are willing to make funds available by gift or loan to the relevant spouse.
The judge concluded on the facts of this case that the support from the wife’s family did not fall into the first category. He was persuaded that the family were not willing to adopt this approach and that in any event there was not the liquidity available to do so.
The judge found, however, that the wife’s family would be willing to assist the wife financially from their personal wealth, rather than the assets of the businesses, and factored this into his determination. He said the court should not place pressure on a third party who is perfectly entitled to decline to provide support. But, where the evidence shows, to the requisite standard of proof, that third party family members will likely provide financial support to one or other of the spouses, then that constitutes a resource that a court is entitled to take into account.
Helpfully, the judge then went on to set out the sort of evidence that a court will evaluate when deciding on the likelihood of future family assistance. He set out the following key principles:
- Whether bounty has been provided in the past and whether there is evidence of a pattern;
- Whether there were specific offers of long-term future financial support made to a spouse before or after the breakdown of the marriage; and
- Absent clear evidence establishing (i) a track record of historic payment and/or (ii) reliable representations of future payments, the court will be hard-pressed to be satisfied that wider family support could be classed as a “resource”.
In contrast, the judge made clear that “offers of interim provision to tide the spouse over with assistance towards legal fees and income needs during the period of litigation will be of very limited evidential relevance to the question of whether long-term support will be forthcoming”. He concluded that these kinds of payments were usually transitory in nature, designed to assist the recipient spouse with the demands of the litigation.
Matthew Humphries, a partner in the Divorce and Family department, comments:
“This case makes clear that spouses cannot raise allegations of ‘conduct’ in the hope of somehow persuading a judge to take against their spouse/or colour the judge’s views, a presentation which is becoming depressingly more common and hopefully will now cease. If one party raises the issue of conduct, they need to be prepared to articulate their case properly and allow the respondent to respond.
“It also serves a reminder to parents and/or wider family members to consider carefully whether they intend that the support they are providing to their loved one is simply a ‘one-off’ to get them through the turmoil of litigation, or whether they are sending a wider message about their ability to support that spouse in the future once the marriage has come to an end.”
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