Author: Charlotte Lanning

One of the factors set out under section 25 of the Matrimonial Causes Act 1973 that the Court must consider when deciding on financial settlement matters is the duration of the marriage. In the recent case of E v L [2021] EWFC 60, The Hon. Mr Justice Mostyn considered an application for financial remedies in a short marriage where the parties had no children. The matrimonial property was valued at around £9.2 million.

Background to the decision

The husband and wife were both in their early 60s. They had begun their relationship in 2015, married in 2017, and separated in 2019. The husband was a highly successful production manager for live music events and had an interest in six businesses. The wife looked after the home and received income from her London buy-to-let property. A dispute arose regarding the value of one of the husband’s companies. The wife sought a financial settlement of £5.5 million.

Her husband offered £600,000.

The husband argued that because the marriage was of short duration and there were no children, there was no case for the equal sharing principle.

The Judge’s decision

When setting out his decision, Mr Justice Mostyn made it clear, childlessness was irrelevant to whether there should be a departure from the application of the equal sharing principle.

He put it to the husband’s Counsel:

“The sharing principle looks at the value accrued during the span of the marital relationship and, deeming the parties’ incommensurable contributions to that accrual to be of equal worth, divides that value equally. Why should the presence of a child make a difference?”

The husband responded that the “having of children denotes a completely different category of commitment.”

Mr Justice Mostyn stated that he “fundamentally disagreed” with the above reasoning and then stated:

“In applying the sharing principle it is not merely invidious, but extremely dangerous, for the court to attempt an evaluation of the quality of a marriage or of the arrangements made within it, as to do so will almost inevitably trigger subconscious discriminatory practices. It is for this reason that the doctrine of special contribution has to all intents and purposes been consigned to history.”

This judgment (thankfully) reinforces that it is not the court’s place to delve into the minutiae of a divorcing couple’s private life. Not only would this be contrary to public policy but the sheer time it would take to address such matters would overwhelm a system that is already bursting at the seams. The choice to have children is highly personal and sometimes beyond a person’s control for medical reasons or otherwise. Given the huge fertility struggles that many couples face, it would be entirely unfair to compound that struggle by deeming a marriage somewhat ‘lesser’ in the event of a divorce. That aside, in the present case, children were presumably not something that would have been on the horizon given the parties ages and thus is of little relevance to their supposed commitment to one another.

It may be the case that a ‘childless’ marriage leads to the application of the sharing principle because there are sufficient resources to meet the parties’ individual needs. However, as is often the case, the presence of dependent children will often transform the case into a needs one.

Therefore, the court does make an indirect consideration of whether there are children (albeit only dependent ones) when deciding which of the principles from White v White is to be applied.
Regarding the short duration of the marriage, Mr Justice Mostyn concluded that the short-marriage exception was only likely to apply where both parties were financially active and independently so. There was no logical reason to draw a distinction between accrual of assets over a short period and an accrual over a long period.

“For my part I would say (as I have said before when talking about the rarity of sharing of non-matrimonial property) that a case where there can be a legitimate non-discriminatory unequal sharing of matrimonial property earned in a short marriage will be as rare as a white leopard. “

Mr Justice Mostyn explained that the reason for the rarity was making any exception in relation to money earned during the marriage means placing a higher value on financial contributions than those of other contributions. This would result in discrimination and go against the key decisions of White v White [2001] 1 A,C. 596 and Miller v Miller McFarlane v McFarlane [2006] UKHL 24 which established that the concept of equal sharing was the starting point in financial settlement cases irrespective of one party’s role as the breadwinner and the other party’s role as the homemaker.

What does this case mean for wealthy divorcing couples?

This case provides clarification for two issues relating to the marriage of short duration consideration under

section 25 of the Matrimonial Causes Act 1973:

a) The fact that the marriage was childless has no bearing whatsoever on the parties’ commitment to the marriage and should not be included in the Court’s considerations, and

b) The Court should not distinguish between wealth accrued over a short time and that over a long period.

It is important to note that the Court may still choose to depart from the equal sharing principle when considering property and assets accrued before the nuptials in the case of a short marriage.

The wife in E v L eventually received £1.5 million which equalled half of the equity value of the husband’s business during the period between January 2016 to the date of trial). This was significantly less than the £5.5 originally sought but clearly an improvement on the husbands offer. The husband still walked away with 79% of the £9.2 million disclosed at trial.

Edwards Family Law is a niche London-based firm specialising in high-net-worth divorce and international family law. To find out more about financial orders on divorce, please phone +44 (0)20 3983 1818 or email contact@edwardsfamilylaw.co.uk. All enquiries are treated in the strictest confidence.

Akhmedova v Akhmedov & Ors. [2021] EWHC 545

When a judgement opens with the following line from Leo Tolstoy’s novel ‘Anna Karenina’: “All happy families are alike, each unhappy family is unhappy in its own way”, it is fair to assume that the particular dispute is particularly bitter. In Akhmedova v Akhmedov & Ors, Mrs Justice Knowles remarked that while the family before her had access to wealth of which most can only dream, it was one of the unhappiest families to have ever appeared in her courtroom. The judgment tells of a wife fighting to enforce a Financial Order made by a London Court and a Russian oligarch who “would rather have seen the money burnt than for the Wife to receive a penny of it.” Whilst the English family law system provided a kinder outcome for Ms Akhmedova than Tolstoy did for his heroine it was not easy or straightforward with her embarking on a five-year fight that spanned multiple jurisdictions.

The highest settlement awarded by an English Court

In 2013, Ms Akhmedova petitioned an English Court for a financial settlement. Her husband, a Russian oligarch provided a schedule of assets to the Court which totalled £1,092,334,626. In December 2016, Mr Akhmedov was ordered to pay over £450 million to his wife, an amount which represented over 41.5% of his assets. The Order also set aside transactions that had shifted assets into trusts as these allocations were found by the court to have been designed to deprive Ms Akhmedova of the resources. Shortly after, a worldwide freezing order against Mr Akhmedov was applied and he was told to pay a lump sum of £350 million and certain property to his ex-wife.

Mr Akhmedov failed to comply with the Order, thus setting the stage for a multi-jurisdictional battle aimed at piercing various corporate veils to see behind offshore intermediaries that he and his associates used to ensure his wife was never paid her settlement.

Particular focus fell on a superyacht named ‘Luna’. Officially owned by a Liechtenstein company, an English Court later determined that it was beneficially owned by Mr Akhmedov. In February 2018, Ms Akhmedova obtained a freezing injunction in the Dubai International Financial Centre against Mr Akhmedov and a related company named Straight, to stop them from disposing of or dealing with Luna.

Granting relief

Ms Akhmedova sought relief under section 423 of the Insolvency Act 1986 and/or under section 37 of the Matrimonial Causes Act 1973. Specifically, she asked the Court to set aside the transfers her husband had made

to the other Respondents and a Court Order stating that assets must be returned to her or alternatively, the other Respondents must pay her compensation to reflect the value of the assets transferred to them. After examining both forms of relief, the Court found that Mr Akhmedov, along with his son, had deliberately arranged matters to ensure Ms Akhmedova could never access any of the funds she was awarded. This was done by moving assets into trusts and corporate entities beyond the reach of the Financial Order laid down by the English Court in 2016.

Mrs Justice Knowles also admonished the parties’ son for repeatedly lying to the Court and called him his “father’s lieutenant”. She went on to say:

“I find that he is a dishonest individual who will do anything to assist his father, no doubt because he is utterly dependent on his father for financial support.”

Ms Akhmedova was granted relief with various Respondents being ordered to pay sums to the value of the assets they had received.

Whilst it might seem that this should be the end of the story, not long after this judgement it was reported that Ms Akhmedova accepted a settlement from the husband of £150m. Many would question why but after 5 years chasing the settlement around different jurisdictions the adage “a bird in the hand is worth two in the bush” comes to mind. Whilst £150m is still a huge sum of money, Ms Akhemdova also had to pay Burford Capital, her financial backers funding the litigation a hefty success fee.

Comment

This case illustrates the practical and flexible approach of the English Court system and its ability to freeze assets worldwide to ensure the enforcement of a Financial Order. The decision also shows that the English Family Courts will not hesitate in piercing corporate veils when it is clear that one party to a divorce has deliberately moved assets into offshore trusts and companies to deprive their ex-spouse of a fair financial settlement. However, it also demonstrates that despite the plethora of powers available, enforcement is still laced with difficulty when particularly obstructive individuals and jurisdictions are involved.

Edwards Family Law is a niche London-based firm specialising in high-net-worth divorce and international family law. To find out more about divorce and financial settlements, please phone +44 (0)20 3 983 1818 or email contact@edwardsfamilylaw.co.uk. All enquiries are treated in the strictest confidence.

This year has brought more change to our lives than any of us could have ever anticipated. Previously stable industries like travel and hospitality have almost collapsed whilst other businesses have seen record levels of profit amidst increased demand for their services. If you have ongoing financial obligations to your ex and have suffered financially as a result of the pandemic then you may wonder if there is anything that you can do to alleviate the pressure in these times. If you want to discuss this with one of our lawyers, please get in touch today.

If you previously reached a clean break with your former spouse then in all likelihood there is very little that you can do to change the agreement that was reached. However, if an element of that agreement involves spousal maintenance, it is open to you to make an application to the court for this to be varied downwards to reflect the change in your financial circumstances.

This is not a step to be taken lightly and there is no guarantee that you will be successful just because your income has dropped. The court will consider all the circumstances of the case, including both parties’ financial circumstances and needs. Therefore, if your ex has also been impacted financially by the pandemic, this will be taken into account. The court’s first consideration will be for the welfare of any child who is under 18.

It is of course always best to avoid litigation if at all possible and therefore parties should try to come to an agreement directly. However, it should always be borne in mind that if an agreement cannot be reached then court proceedings may be necessary. There are a number of things that you can and should do to protect your position from the outset;

Communicate and keep a record (but keep it cordial)

Whilst direct communication can be fraught, and even impossible in some circumstances, it is important to try and start a dialogue directly if you can. This can help avoid the need to make a court application and incur the costs associated with this. However, if you are met with a wall of silence, the existence of this correspondence (and the lack of any response) evidences a willingness on your part to try to resolve matters at the earliest juncture. This may be of assistance if you are forced to issue proceedings. Judges are slowly becoming more willing to recognise parties acting in an unreasonable manner and making costs awards that reflect this.

However, if you want to show that you have been cooperative, ensure that your correspondence is polite. If you produce correspondence to the judge that is littered with petty comments and profanities, any good favour that you may have gained will likely disappear. A good rule to live by is to imagine that a judge is reading your email

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back to you in the cold light of the court room, if the thought makes you cringe, it’s probably best not to hit send.

It may be that you are able to come to a compromise and if so, you should ensure that there is a written record of this, whether that be in a letter signed by both parties or a side agreement. Get in touch today if you would like us to assist you with this.

Provide evidence

If you are the paying party and have been made redundant or suffered a pay cut then it makes sense to provide your ex-partner with the documentation in support as soon as possible. If they can see the drop in your income in black and white, the change of circumstances should be obvious. This will help to speed up the process if they chose to obtain legal advice because these are the first documents that their lawyer will request.

If things progress to court, you will be required to provide your recent payslips and P60 so there is no harm in producing this at the earliest opportunity to set out your position to contrast against your financial circumstances within the original proceedings.

Be flexible

The regulations and therefore, the associated government support, are changing frequently. Businesses will be responding to changes as and when they are implemented and so if your hours are increased or your pay is reinstated, you should be prepared for maintenance to increase in line with that.

Equally, if you are the payee, whilst you are under no obligation to agree to a reduction in your maintenance, it is much better to take a constructive approach, particularly if the difference in maintenance is likely to cost you less than the associated legal proceedings.

Get legal advice

If you are not able to progress matters by communicating directly, then it is sensible to get some initial advice on the prospects of success of a variation application. It may be that sending a letter from a solicitor forces the other party to take matters more seriously. However, instructing lawyers does not have to mean fully contested court proceedings but sometimes is the necessary catalyst to encourage sensible and constructive discussion. Get in touch today to speak to us.

Do not stop payments

Finally, it is important to note that your initial court order remains in effect until either an agreement to vary is reached, or the court makes a determination. Therefore, if you do not make payments in line with the order you will be in breach and your ex could choose to commence enforcement proceedings. You must comply with the order but if this is impossible because your income has reduced so considerably, then you should raise this issue

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with your ex at the earliest opportunity so that they do not get a surprise when they check their bank account… The court can order that you pay these arrears so it is not as simple as saying that you cannot afford payments and that is the end of the matter, you will need to be able to demonstrate this.

Whether you would like some initial advice, assistance with a court application or formalising an agreement to vary an existing order we can help – get in touch to set up an initial, no obligation, consultation today.

Every January, the press take great pleasure in writing about Divorce Day i.e. the most popular day for divorce petitions to be filed with the court. 2020 has provided even greater fodder for publications that wish to sound the death knell for relationships and one could argue that 2020 was in fact ‘Divorce Year’. The retailer Poundland clearly seems to think so given that they are launching their first ‘divorce celebration’ range to help the newly single toast their separation.

Whilst it may be easy to joke about your partner driving you up the wall whilst you try to juggle work, home schooling and all the rest, it is not a laughing matter. Domestic violence rates have surged during lockdown and people’s mental health has been impacted significantly. Whilst this January, the column inches have been dominated by the imposition of a new national lockdown and the roll out of the vaccine, there are still a smattering of articles on this subject peppered among the various other COVID and Brexit headlines featuring on the daily doomscroll.

The vast majority of relationships will have been tested in one way or another since March and you may feel that you need to do something about this without taking the plunge or acting rashly.

There will of course be cases where there is little that can be done to save a relationship, particularly where there is a history of domestic abuse (and in these circumstances you should seek immediate advice and assistance, from the police if necessary). However, if you are looking for a way to salvage your relationship or get some reassurance then there are a number of things that you can do.

Marriage counselling and therapy

Divorce lawyers can get a bad reputation as the architects and enablers of misery (again, thanks to the press) but the vast majority of us want to help our clients in any way that we can. If that means helping to facilitate a reconciliation then that is what we will do. At Edwards Family Law our number one priority is the happiness and wellbeing of our clients. We have connections with a number of counsellors and therapists that we can refer you to. It may be that your mental health is suffering and you need a way to explore these issues privately or you may wish to attend counselling as a couple to bottom out your issues. Even if this is not successful, sometimes knowing that you have explored all of the avenues to keep your marriage afloat can be comforting if divorce turns out to be inevitable.

Initial advice

Taking legal advice does not need to lead to separation or divorce, but arming yourself with the information so that you can prepare yourself for this eventuality can be empowering, whatever way you decide to go, knowledge is power after all. Click the following links for a brief overview of divorce, financial proceedings and children proceedings or get in touch for a no obligation, initial call today.

Mediation

Mediation is becoming increasingly popular and being informed of it is an option is a prerequisite to issuing financial proceedings or children proceedings (subject to some limited exceptions). A mediator will act as a neutral third party to guide discussions between you and your spouse and it may well be that this forum helps you face the issues before you and come to a solution without needing to separate. If not, it is a cost effective and amicable way of attempting to reach a settlement. We know a number of excellent mediators that we can refer you to. Get in touch today for a free discussion about this.

Post-nuptial agreement

A pre-nuptial agreement is entered into in anticipation of a marriage and sets out the financial arrangements upon divorce in a bid to protect assets and limit future litigation. Whilst a staple in many European countries for some time, they have only started to increase in popularity in England and Wales since the seminal 2010 case of Radmacher v Granatino. In this case, the Supreme Court confirmed that pre-nuptial agreements held substantial weight if a number of criteria were met. Saying this, a number of couples who may now be facing separation will not have a pre-nuptial agreement because it was not en vogue at the time of their marriage. There is a solution to this in the form of a post-nuptial agreement. The clue is in the name, the agreement is entered into after the parties are married and again, sets out the financial arrangements in the event of divorce. This can be particularly useful if you are in the dark about the matrimonial finances but do not wish to divorce. Sometimes, getting a clear picture and a guarantee of security in the event of divorce can help to save a marriage if financial worries are putting pressure on the relationship.

The process will involve disclosure and each party receiving independent legal advice. Obviously, this will require the cooperation of both parties which will not necessarily be forthcoming if one partner wishes to keep the other out of the financial picture but it can be an effective tool in the right circumstances. Get in touch today for some initial advice or read our summary of pre-nups & post-nups here.

Financial consent orders

Many couples manage to reach an agreement regarding the division of their assets between themselves, particularly where their finances are relatively straightforward. This of course has the benefit of dealing with matters swiftly and avoids the court process and associated legal fees.

However, parties should always ensure that any agreement is recorded in a consent order and sealed by the court. Without taking this step, the agreement can be rendered meaningless and leaves the parties exposed in a number of ways.

If you think you might need a consent order, and want to discuss this, get in touch today or call 0203 983 1818.

What is a consent order?

A consent order is a document that sets out the financial arrangements agreed between parties upon divorce. Such an order will deal with the division of all of the assets and liabilities, including property, pensions and personal possessions. Where appropriate, it will set out the level and duration of any child and spousal maintenance as well as provision for other expenses such as school fees, medical insurance and life insurance.

In the event of a clean break (where all financial ties are severed), a consent order sets out the division of property and includes clauses that bring the financial relationship to an end. When it is necessary for the parties to have an ongoing financial relationship (for example, due to the need for spousal maintenance to be paid), the order sets out the mechanism for this going forward as well as the date or event upon which this financial relationship will conclude.

Why should I obtain a consent order?

There are two main issues that can arise without a sealed consent order.

Firstly, either party is open to pursue further financial claims later down the line. This was demonstrated by the Supreme Court’s 2015 decision in Vince v Wyatt:-

The parties married in 1981 and were of modest means during the course of their relationship. They had one child together and Ms Wyatt’s daughter from a previous relationship was treated as a child of the family. The parties separated in 1984 and eventually divorced in 1992. During this 8 year period, Ms Wyatt had limited financial assistance from Mr Vince. Whilst the court was unable to obtain records dating back this far, it had no reason to believe that Ms Wyatt’s claims against Mr Vince had been dismissed (as they would be within any consent order providing for a clean break). Mr Vince went on to develop a very successful green energy business during the 1990s and subsequently became a multi millionaire. Ms Wyatt brought a claim for financial relief in 2011 and after many hearings and appeals, the Supreme Court determined that her claim could proceed. Ms Wyatt was eventually awarded a lump sum of £300,000 plus a total of £325,000 towards her legal costs.

It is worth noting that in addition to these sums, Mr Vince will have borne his own legal costs as well as the the stress of five years of litigation against someone he had divorced over 20 years prior. Therefore, failing to obtain a consent order can lead to litigation many years, or even decades, after parties have divorced.

The above illustrates that even if parties are of limited means at the time of divorce or if an order is very simple and merely involves them retaining their own assets, it is still important that an order is obtained to incorporate the necessary clauses that prevent further claims from being brought.

Secondly, if one party seeks to renege on the agreement, there is little redress open to the other party by way of enforcement. For example, if a party stops paying spousal maintenance and there is no order to back up this arrangement then options are limited. Parties can effectively find themselves back to square one, needing to issue financial remedy proceedings to obtain an order setting out their respective obligations, taking both time and money.

As such, it is best to get matters finalised at the earliest opportunity to avoid, or at least limit, the possibility of future litigation.

How do I obtain a consent order?

Once an agreement is reached, this will need to be drawn up into an order by a specialist family law solicitor. It is highly recommended that both parties obtain independent legal advice on the content of the order. Once signed by both parties and their legal advisors, the order can be submitted to the court, along with a short disclosure statement in form D81. This includes details of both parties assets, liabilities and income, but does not require documentary evidence in support as would be the case within financial remedy proceedings.

Once submitted to the court, a judge will consider this snapshot of the parties’ financial position alongside the agreement reached, and assuming that they deem it to be fair, the order will be sealed. However, there is no guarantee that the court will deem an agreement fair simply because both parties consent to it. Above all, the agreement must meet the needs of the parties, with priority given to the needs of any minor children of the family. This reinforces the importance of obtaining legal advice on the order before it is submitted to the court as a solicitor will be able to advise whether the agreement is within the parameters of what a judge will consider to be fair.

If you think you might need a consent order, and want to discuss this, get in touch today.

No turning back…

Once a consent order has been sealed it is final and will become legally binding and enforceable upon the grant of decree absolute (see below). The importance of a properly drafted consent order coupled with independent legal advice therefore cannot be overstated. Parties need to be comfortable with what they are signing and satisfied that they can comply with any ongoing obligations. The benefit of this finality is that it ensures that neither spouse can renege on the agreement reached but naturally, this cuts both ways.

It is worth noting that provision for spousal maintenance always remains variable (by way of court application if changes cannot be agreed) and thus, either party can seek to vary maintenance, upwards or downwards, if there has been a change of circumstances (for example, a drop in the paying party’s income).

The 2018 Supreme Court case of Mills v Mills does however demonstrate that such an application cannot be used as a tool to reopen capital claims under the guise of a need for higher spousal maintenance.

The parties had divorced in 2002 and reached a financial agreement by consent. The wife received a £230,000 lump sum which would enable her to purchase a mortgage free property, thereby providing her with a home for life. The husband also agreed to pay annual maintenance of £13,200 per annum. The wife in fact utilised a mortgage to buy a more expensive property and over the course of the following 7 years sold and purchased a series of different properties. With each purchase the amount which she borrowed increased. In addition, she did not appear to reinvest the entirety of the sale proceeds from one property into the next. She sold her final property and moved into rented accommodation in 2009. Her capital continued to deplete over time, so much so that by April 2015 she had no capital and debts of £42,000. Due to the need to pay rent from income alone, the wife found herself with a shortfall between her income and outgoings. As such, she applied to vary her maintenance upwards, requesting that the husband discharge her monthly rental costs. The husband cross applied to vary the maintenance downwards. The first instance decision was that the maintenance should stay at the level as per the original the order. This was overturned by the Court of Appeal, however, the husband subsequently appealed to the Supreme Court who reinstated the initial decision. This was on the basis that the original order made provision for the wife’s housing need and therefore the husband should not have to make further provision for this.

Parties should take heed of the lessons from Mills v Mills when entering into a consent order, namely that once capital provision has been agreed and set out in a consent order there is very little scope for altering this via any means. As such, parties should think carefully before reaching an agreement and consider whether it is something that they are willing and able to stick to long into the future and factor this into their financial decisions going forward.

Practical considerations – divorce

A consent order cannot be submitted to the court until a divorce petition has been issued and the decree nisi has been granted. Therefore, it is important to get this separate process underway as soon as possible so that the consent order can be sealed at the earliest opportunity.

It is advisable to refrain from applying for decree absolute (the final stage of the divorce that legally dissolves the marriage) until the financial consent order has been sealed by a judge. This prevents a lacuna arising which would see parties no longer married but without financial arrangements in place. This is particularly important if one of the parties passes away before the consent order has been sealed. As set out above, the decree absolute is the final stage of the process as this means that the consent order is legally binding.

If you have any questions regarding the issues discussed in this post, it is essential you get specialist legal advice. Book your appointment with us today