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Law

What are matrimonial debts anyway?

Since the watershed of White v White, and the establishment of London as the ‘divorce capital of the world,’ (see Lord Collins in Agbaje at [37])  the leading cases in financial remedies have invariably involved substantial assets, with all of the trappings that come with High Net Individual status: trusts, foreign property, liquidity of shareholdings and tax efficiency etc.

Those who might think this observation is trite (i.e. financial cases that reach the Supreme Court necessarily do involve substantial wealth) might compare and contrast the leading cases in TOLATA, which concern a terraced house in Willesden (Stack v Dowden) and a bungalow just outside Canvey Island (Jones v Kernott). Not that there is anything wrong with living in Willesden or Thundersley, but those disputes inhabit a very different world from the Supreme Court decisions in Miller; McFarlane Prest v Petrodel Ltd and Wyatt v Vince.

The proverbial alien flicking through the financial remedy case law might be surprised to discover that Britain is not a nation of multi-millionaires engaged in sophisticated tax avoidance, and that the vast majority of financial remedy claims that reach the family court involve modest assets and considerable debt. All the more so as we hurtle towards the economic impact of COVID 19 and lockdown.

No law for the rich

As we all know, the legal principles outlined in cases such as White and Miller; McFarlane apply as much to modest asset cases as they do to big money disputes. In A v L Departure from Equality: Needs), Mr Justice Moor confirmed at [49] that:

“The law in relation to financial remedy cases, as set out in the MCA is, of course, exactly the same for everyone, whether rich or poor. Following White v White… , the obligation in all cases is to be fair but, insofar as there is to be a departure from equality, there has to be good reason for so doing”

But the focus in many modest asset cases is not upon assets, and the increasingly ingenious arguments of counsel as to why they should not be divided equally, but debt. And here there are a number of problems.

The problem with debt

Firstly, the court has no power to re-distribute debt between parties. Any ‘property’ in a debt is held by the creditor, who generally speaking will not be a party to the proceedings. The court cannot make a property adjustment order to adjust indebtedness, just as it cannot transfer the burden of a mortgage. In the time-honoured case of Burton v Burton and Another [1986] 2 FLR 419, Butler Sloss J remarked at p.422 that:

“There is no jurisdiction in the court to order one party to pay out of the proceeds of sale of the matrimonial home the debts of that party or of the other party to the marriage”,

Accordingly, the Family Orders Project’s Standard Precedents include provisions for the discharge of liabilities as undertakings (see § 35, 37), but not as orders. One helpful (but still controversial) innovation of the Standard Precedents is the inclusion of an order to indemnify, as opposed to an undertaking to indemnify (as to the legal basis, see Mostyn J in CH v WH [2017] EWHC 2379).

Secondly, there is the widespread but nebulous concept of the ‘matrimonial debt‘. It is remarkable how often this term is bandied about without any clear explanation as to what it actually means. Does it refer to how the debts arose (i.e. were they incurred for the benefit of the family, and if so what does that even mean in practice?) or when they arose. If the latter, does some sort of presumption arise that loans and credit card debts incurred during a marriage are presumptively ‘matrimonial’ unless the contrary is proven?

There is almost no judicial consideration as to what might be encompassed by this definition (‘matrimonial debt’, as opposed, presumably, to ‘non matrimonial debt’), or whether the court’s approach should somehow be connected to the law on matrimonial/ non-matrimonial assets.

There have in the past twenty years (i.e. post-White) been a grand total of three cases in which a reported ancillary relief/ financial remedies judgment has included the term ‘matrimonial debt’. The first is Whig v Whig [2007] EWHC 1856 (Fam), in which Munby J (as he then was) heard ancillary relief and bankruptcy proceedings together. At [81] there is the following passing reference:

I am inclined to agree with Mr Brett that these were indeed matrimonial debts, insofar as they went, in significant part at least, to support the family’s standard of living. (In saying that I do not overlook the distinct possibility that some of the money was being used by the husband alone for his personal pleasures.)

The other two are in the Court of Appeal decisions in Tattershall [2013] EWCA Civ 774 and Matthews [2013] EWCA Civ 1874 both use the term ‘matrimonial debt’ without any consideration of what this term encompasses or excludes.

Thirdly, there is the problem of evidential proof. Unlike bank statements, there is no obligation to exhibit 12 months’ credit card statements to Form E. Where one party asserts that the other’s indebtedness arose because of his own selfish spending on himself, a questionnaire may be raised which seeks several years of credit card statements. This will often arise in a case where the assets do not justify the costs of what can amount to a spending audit, both in terms of poring over the disclosure, but also the prospect of a longer final hearing where evidence in relation to those debts can be challenged. In many cases, the game (in terms of the sums at issue) will not be worth the candle (in terms of the cost of embarking on this exercise).

Fourthly, there is the problem of lack of clarity over (for want of a better expression) burden and standard of proof apply when it comes to ‘matrimonial debts’. Where Mr Smith’s Form E shows that he has £30k of credit card debt, does he have to show that this was the result of expensive family holidays and costs of living, or does Mrs Smith have to show that the husband has been pursuing expensive extra-familial recreational activities? Should the court approach this issue on a straightforward balance of probabilities, or should the court adopt the higher threshold of the add-back?

In Cowan v Cowan [2001] EWCA Civ 679, Thorpe LJ famously stated the following principle [70]

“The assessment of assets must be at the date of trial or appeal. The language of the statute requires that. Exceptions to that rule are rare and probably confined to cases where one party has deliberately or recklessly wasted assets in anticipation of trial.”

The threshold to establish an ‘add back’ is notoriously high: wanton and reckless expenditure. In Vaughan v Vaughan [2007] EWCA Civ 1085, per Wilson LJ (as he then was) summarised the law at [14]

“…Norris v Norris [2002] EWHC 2996 (Fam)… is the last in a line of authority which stretches back to the decision of this court in Martin v Martin [1976] Fam 335 that, in the words of Cairns LJ, at 342H: ‘a spouse cannot be allowed to fritter away the assets by extravagant living or reckless speculation and then to claim as great a share of what was left as he would have been entitled to if he had behaved reasonably.’ The only obvious caveats are that a notional reattribution has to be conducted very cautiously, by reference only to clear evidence of dissipation (in which there is a wanton element)”

Some tentative conclusions

There are no easy answers to this problem. But I hazard the following:

  1. Debts present a problem in financial remedy litigation. The court has no power to order a distribution. The best that can be done (absent agreement and undertaking) is to order an indemnity;
  2. The best (i.e. only) definition of a matrimonial debt is that of Munby J in Whig, that they have been incurred in supporting the family’s standard of living. However, that is merely a passing reference which does not consider in detail what might be considered as a ‘matrimonial debt’ (or indeed its obverse, a ‘non-matrimonial debt’)
  3. In many cases, attempting to prove or disprove that debts have been incurred in this way will be difficult. It may involve seeking disclosure going back several years, which the court may (legitimately) refuse at a First Appointment, bearing in mind the overriding objective and the requirement that litigation is proportionate.
  4. What remains unclear in law is whether the court should approach the issue of whether debts are ‘matrimonial’ as a class of add-back (which is generally very difficult to prove, and involves a high threshold) or, where the facts justify it, a lower threshold.
  5. There is however to the writer’s knowledge no authority which backs up or explains why a lower threshold should be applied.
  6. As a general approach, practitioners would do well to bear in mind the Hippocratic Oath: do not make a case more difficult or intractable by pursuing an issue which, due to a cost/benefit analysis, will unlikely result in any profit for your client.

Alexander Chandler, 13 October 2020

Categories
Law

What is an authority?

To what extent do we apply precedent in financial remedies? Now that cases are routinely ‘reported’ on Bailii, what even counts as precedent? Can a case be cited even though it isn’t in the Official Reports or the Family Law Reports? Is there any difference nowadays between an ‘authority’ and what amounts to no more than an example of a judge’s decision in a given case on different facts?

Precedent and Family Law

As any law student knows, England and Wales has a common law legal system. Central to this is the concept of precedent, under which decisions of the higher courts are binding on the lower courts. In Willers v Joyce (re Gubay) [2016] UKSC 44, Lord Neuberger summarised the doctrine of precedent as follows:

” [4] In a common law system, where the law is in some areas made, and the law is in virtually all areas developed, by judges, the doctrine of precedent, or as it is sometimes known stare decisis, is fundamental. Decisions on points of law by more senior courts have to be accepted by more junior courts. Otherwise, the law becomes anarchic, and it loses coherence clarity and predictability”

To what extent does this apply in family law (and more particularly, financial remedies) where the law is discretionary and a more flexible approach is taken to precedent? In B v B (Ancillary Relief) [2008] EWCA Civ 284, Wall LJ reflected that

[54] … the essence of any judicial discretion lies in its application to particular facts, and since each case requires its own particular resolution, the concept of fairness becomes, essentially a matter of judgment. In this context I am reminded of the wise words of Ormrod LJ, in Martin (BH) v Martin (D) [1978] Fam 12… spoken more than 30 years ago on 10 March 1977, but still, in my judgment, as applicable today as when they were first uttered:

‘…It is the essence of such a discretionary situation that the court should preserve, so far as it can, the utmost elasticity to deal with each case on its own facts. Therefore, it is a matter of trial and error and imagination on the part of those advising clients. It equally means that decisions of this court can never be better than guidelines. They are not precedents in the strict sense of the word. There is bound to be an element of uncertainty in the use of the wide discretionary powers given to the court under the Act of 1973, and no doubt there always will be, because as social circumstances change so the court will have to adapt the ways in which it exercises discretion. If property suddenly became available all over the country many of the rationes decidendi of the past would be quite inappropriate.’

Authorities v Examples

What this often leads to is a Cole Porter approach to the citation of case law: anything goes. Where equal weight is attached to a decision of (say) Mr Justice Mostyn as the Court of Appeal (or higher), or where any decision is relied upon, regardless of whether it is in any way authoritative (i.e. setting out new law or summarising existing principles).

Bailii is a tremendous resource, which freely makes available a huge corpus of case law. However, one downside of the availability of e even mundane High Court decisions (where even a decision to adjourn is ‘reported’) leads us to chaos where law cited in scattergun approach. A distinction is rarely drawn between a case which sets out to develop or condense the law

So, are there any rules? And if so, what are they?

The pyramid

At the risk of what Basil Fawlty would describe as stating the bleeding obvious, at the apex of the judicial pyramid is the Supreme Court, then the Court of Appeal, High Court, circuit judge, district judge and finally magistrates.

Mrs Justice Baron, whose early death was a tragedy as much for the Family Division as it was a personal one, put it best at first instance in Radmacher. (Some would argue that her decision in Radmacher was a good deal fairer than the outcome finally achieved in the Supreme Court, but that falls outside the compass of this blog). In Radmacher (which at first instance was anonymised as NG v KR [2008] EWHC 1532 (Fam), Baron J commented:

[82] At the outset I remind myself that I decide this case in accordance with English Law and tradition. In terms of financial relief upon divorce I am bound by the terms of the Matrimonial Causes Act 1973 (“the Act”) as it has been interpreted in the House of Lords and the Court of Appeal. Decisions of my fellow 1st Instance judges may also be persuasive and/or illuminating. Under statute my first consideration is the two children of the family whilst they are minors. I must also take account of all the circumstances of the case and the factors set out in Section 25 of the Act to produce a result which is fair, just and does not discriminate against either party on the grounds of gender or for any other reason. Although fairness has been stated to be in the “eye of the beholder” and I am conscious that I must apply the Law carefully and clearly.

Accordingly, a High Court judge must yield to the Court of Appeal or Supreme Court (which The House of Lords morphed into on 30 July 2009) unless the decision of the higher court was reached through not being properly appraised of the law (i.e. per incuriam, see Mostyn J in UL v BK [2013] EWHC 1735 (Fam) at § 27-29)

What is citable as an authority?

The key Practice Direction which is often overlooked in the family court is the Practice Direction of 9 April 2001: Citation of Authorities. For reasons best known to the law reports, this appears in the Weekly Law Reports (the enjoyably binary [2001] 1 WLR 1001) but not in the Family Law Reports.

While this is directed to civil cases, there is no question that it also applies to the family court, as made clear in a recent amendment to the FPR Practice Direction 27A (emphasis added)

[4.3A.2] Attention is drawn to paragraph 6 of Practice Direction (Citation of Authorities) [2001] 1 WLR 1001 and to Practice Direction (Citation of Authorities) [2012] 1 WLR 780 (both set out in The Family Court Practice) which must be complied with. The reference to “county court cases” in para 6.1 of the first practice direction should be read as including family court cases decided by a judge other than a judge of High Court judge level. Therefore, a judgment on an application attended by one party only, or on an application for permission to appeal, or that only decides that the application is arguable, or by the county court, or in the family court of a judge other than a judge of High Court judge level, may not be cited or included in the bundle of authorities unless either (i) the judgment clearly indicates that it purports to establish a new principle or to extend the present law or (ii) the court for good reason has specifically directed otherwise.

What cannot be cited:

The key provisions of the 2001 guidance are set out from § 6. In particular, § 6.2 provides that the following cannot be cited as authority “…unless it clearly indicates that it purports to establish a new principle or to extend the present law… that indication must take the form of an express statement to that effect.”

  • “Applications attended by one party only;
  • Applications for permission to appeal;
  • Decisions on applications that only decide that the application is arguable;
  • county court cases [extended to CJ and DJ decisions in the county court] unless: (b) cited in a county court in order to demonstrate current authority at that level on an issue in respect of which no decision at a higher level of authority is available.”

Does the judgment purport to create new law?

7.1 Courts will in future pay particular attention, when it is sought to cite other categories of judgment, to any indication given by the court delivering the judgment that it was seen by that court as only applying decided law to the facts of the particular case; or otherwise as not extending or adding to the existing law.

7.2 Advocates who seek to cite a judgment that contains indications of the type referred to in paragraph 7.1 will be required to justify their decision to cite the case.

State your proposition

[8.1] Advocates will in future be required to state, in respect of each authority that they wish to cite, the proposition of law that the authority demonstrates, and the parts of the judgment that support that proposition. If it is sought to cite more than one authority in support of a given proposition, advocates must state the reason for taking that course.

8.4 The statements referred to in paragraph 8.1 should not materially add to the length of submissions or of skeleton arguments, but should be sufficient to demonstrate, in the context of the advocate’s argument, the relevance of the authority or authorities to that argument and that the citation is necessary for a proper presentation of that argument.

Accordingly, applications for permission to appeal are not citeable. Decisions of a CJ or DJ are not citeable unless they arise in relation to an issue in respect of which no authority of a higher level is available. For the best, most flagrant breach of this Practice Direction, look no further than the “authority” of the “meal ticket for life” case of Wright v Wright [2015] EWCA Civ 201 which in truth was authority for nothing at all.

Alexander Chandler, 28 June 2020

Categories
Law

Where the judge goes too far…

Serafin v Malkiewicz [2020] UKSC 23

It isn’t easy being a judge. It isn’t easy getting to grips with the factual and legal complexities of a case, listening to evidence, weighing up the parties’ cases and reaching findings of fact on credibility. The task is more difficult where a case is badly or incoherently pursued, or where one or more parties acts in person. (Those two categories are not mutually exclusive). Or where a judge is faced with the pressures of an inadequate time estimate for a hearing, additional cases being added into the list or the occurrence of one or more of Sedley’s Law of Bundles.

Judges tempers occasionally snap. They are, after all, human.

However, sometimes it goes well beyond that.

Serafin was a claim for libel arising out of articles published in a Polish language newspaper (Nowy Czas/ New Time) which called into question the claimant’s reputation as a businessman.

The trial took place before Mr Justice Jay in October/ November 2017, best known for his role as leading counsel (as Robert Jay QC, prior to his appointment in 2013) for the Leveson inquiry.

By the time of the trial, the claimant (Jan Serafin) was acting in person; hardly an easy proposition in a libel claim involving considerable legal and factual complexity (the article in dispute was alleged to have had thirteen defamatory meanings/ imputations (titled ‘M1’ to ‘M13’), listed before a High Court judge in the QBD, and where the claimant’s first language was not English.

Once the wheels of justice had finished grinding, the claim was dismissed in its entirety. Mr Serafin (who re-instructed his lawyers) appealed to the Court of Appeal on three main grounds, the last being the judge’s conduct of the trial (i.e. ‘serious procedural or other irregularity’: CPR r.52.51(3)(b))

Court of Appeal

The Court of Appeal (Lewison, McCombe, Haddon-Cave LLJ) allowed the appeal, both on substantive grounds relating to the trial judge’s legal rulings (which fall outside the scope of this blog [a.k.a. defamation is not my area of law]) including that the judge was wrong to find that the statements complained of were already in the public domain. The third ground (judicial unfairness) was addressed by the Court of Appeal in its judgment, in a passage (from §108 to 118) which begins, somewhat portentously:

“[108]…It is a fundamental tenet of the administration of law that all those who appear before our courts are treated fairly and that judges act – and are seen to act – fairly and impartially throughout a trial

The court reminded itself that it is wrong for a judge to descend into the arena and give the impression of acting as advocate (§ 110), before concluding that:

“[114]…It will be immediately apparent from reading these extracts (in particular the passages which we have underlined) that the Judge’s interventions during the Claimant’s evidence were highly unusual and troubling. On numerous occasions, the Judge appears not only to have descended to the arena, cast off the mantle of impartiality and taken up the cudgels of cross-examination, but also to have used language which was threatening, overbearing and, frankly, bullying. One is left with the regrettable impression of a Judge who, if not partisan, developed an animus towards the Claimant.

The CA proceeded to annex extracts from the transcript, demonstrating the judge’s “serious transgressions”.

So far, so bad, from the point of view of Mr Justice Jay. While judges periodically see their decisions overturned on appeal, and on occasion find some (often veiled) criticism of their conduct in a given case, it is vanishingly rare for pages of transcript to appear, appended with criticism to a Court of Appeal judgment.

But in part due to the incoherence of the Court of Appeal’s order, the matter did not end there. On 3 June 2020, the Supreme Court weighed in.

Supreme Court

Law on unfair trials

Between §§ 37 and 46 of the court’s judgment, Lord Wilson reviewed the law relating to unfair trials:

[40] The leading authority on inquiry into the unfairness of a trial remains the judgment of the Court of Appeal, delivered on its behalf by Denning LJ, in Jones v National Coal Board [1957] 2 QB 55. There, unusually, both sides complained that the extent of the judge’s interventions had prevented them from properly putting their cases. The court upheld their complaints. At p 65 it stressed in particular that “interventions should be as infrequent as possible when the witness is under cross-examination” because “the very gist of cross-examination lies in the unbroken sequence of question and answer” and because the cross-examiner is “at a grave disadvantage if he is prevented from following a preconceived line of inquiry”.

41.              In London Borough of Southwark v Kofi-Adu [2006] EWCA Civ 281, Jonathan Parker LJ, giving the judgment of the Court of Appeal, suggested at paras 145 and 146 that trial judges nowadays tended to be much more proactive and interventionist than when the Jones case was decided and that the observations of Denning LJ should be read in that context; but that their interventions during oral evidence (as opposed to during final submissions) continued to generate a risk of their descent into the arena, which should be assessed not by whether it gave rise to an appearance of bias in the eyes of the fair-minded observer but by whether it rendered the trial unfair.

42.              In Michel v The Queen [2009] UKPC 41[2010] 1 WLR 879, it was a criminal conviction which had to be set aside because, by his numerous interventions, a commissioner in Jersey had himself cross-examined the witnesses and made obvious his profound disbelief in the validity of the defence case. Lord Brown of Eaton-under-Heywood, delivering the judgment of the Privy Council, observed at para 31:

“The core principle, that under the adversarial system the judge remains aloof from the fray and neutral during the elicitation of the evidence, applies no less to civil litigation than to criminal trials.”

43.              The distinction, drawn expressly or impliedly in all three of the cases last cited, between interventions during the evidence and those during final submissions was stressed by Hildyard J in para 223 of his judgment in the M & P Enterprises (London) Ltd case, cited in para 38 above. He suggested at para 225 that, upon entry into final submissions, the trial had in effect entered the adjudication stage.

In relation to the previously unexplored question of how the conduct of a trial might be unfair to a litigant in person, Lord Wilson added:

“[46] … Every judge will have experienced difficulty at trial in divining the line between helping the litigant in person to the extent necessary for the adequate articulation of his case, on the one hand, and becoming his advocate, on the other. The Judicial College, charged with providing training for the judges of England and Wales, has issued an Equal Treatment Bench Book. In chapter one of the edition issued in February 2018 and revised in March 2020, the college advises the judges as follows:

“8.       Litigants in person may be stressed and worried: they are operating in an alien environment in what is for them effectively a foreign language. They are trying to grasp concepts of law and procedure about which they may have no knowledge. They may well be experiencing feelings of fear, ignorance, frustration, anger, bewilderment and disadvantage, especially if appearing against a represented party.

59.       The judge is a facilitator of justice and may need to assist the litigant in person in ways that would not be appropriate for a party who has employed skilled legal advisers and an experienced advocate. This may include:

Not interrupting, engaging in dialogue, indicating a preliminary view or cutting short an argument in the same way that might be done with a qualified lawyer.”

Training and experience will generally have equipped the professional advocate to withstand a degree of judicial pressure and, undaunted, to continue within reason to put the case. The judge must not forget that the litigant in person is likely to have no such equipment and that, if the trial is to be fair, he must temper his conduct accordingly.”

Lord Wilson concludes at § 49

[49].              What order should flow from a conclusion that a trial was unfair? In logic the order has to be for a complete retrial. As Denning LJ said in the Jones case, cited in para 40 above, at p 67,

“No cause is lost until the judge has found it so; and he cannot find it without a fair trial, nor can we affirm it.”

Lord Reed observed during the hearing that a judgment which results from an unfair trial is written in water. An appellate court cannot seize even on parts of it and erect legal conclusions upon them. That is why, whatever its precise meaning, it is so hard to understand the Court of Appeal’s unexplained order that all issues of liability had, in one way or another, been concluded. Had the Court of Appeal first addressed the issue of whether the trial had been unfair, it would have been more likely to recognise that the only proper order was for a retrial. It is no doubt highly desirable that, prior to any retrial, the parties should seek to limit the issues. It is possible that, in the light of what has transpired in the litigation to date, the claimant will agree to narrow the ambit of his claim and/or that the defendants will agree to narrow the ambit of their defences. But that is a matter for them. Conscious of how the justice system has failed both sides, this court, with deep regret, must order a full retrial.

As with the Court of Appeal, the Supreme Court’s judgment concludes with several pages of juicy extracts from the transcript, with the Supreme Court’s commentary which is perhaps unique in an English case (“…stops a relevant question”, “…introduces a note of sarcasm”, “… further sarcasm”, etc.)

Conclusion

So, beyond the extraordinary facts of the case, and the (possibly unique) example of a High Court judge being defenestrated in such a public way, what is the interest in the case for a family practitioner?

  1. Serafin contains a helpful precis from the highest court in the land of the expected standards of judicial conduct of trials (§ 37-46)
  2. In Serafin, the court considered to what extent this applied (or might be extended) to litigants in person, by reference to the Judicial College’s Equal Treatment Bench Book.
  3. Most of all, Serafin is a good example of the rule of law and how the adversarial system works in practice. As Lord Denning once said (cited with approval by Lord Wilson in Serafin): “No cause is lost until the judge has found it so; and he cannot find it without a fair trial, nor can we affirm it.”

Alexander Chandler, 3 June 2020