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Maintenance Pending Suit after Rattan v Kuwad [2021] EWCA Civ 1

Facts

Like all good cases, the essential facts of Rattan v Kuwad can be stated briefly:

  • Within her claim for financial remedies, the Wife issued a claim for interim maintenance (i.e. ‘maintenance pending suit’ or ‘MPS’), seeking £3,250 pm;
  • At a hearing on 1 October 2019, DDJ Morris awarded W £2,850 pm;
  • H appealed. He contended that the DDJ had misapplied the law, failed to critically analyse W’s budget and included items that were not required for the short-term;
  • On 6 January 2020, H’s appeal was allowed by HHJ Oliver, who concluded that the DDJ had indeed erred. An application for MPS ‘…should deal with immediate expenditure needs which have to be critically examined’, which the DDJ had failed to do. HHJ Oliver accepted W was in need of maintenance but concluded that he could not determine the figure;
  • W was granted permission to appeal HHJ Oliver’s order, thereby presenting the Court of Appeal with a rare opportunity, this being a second appeal pursuant to CPR 52.7, to review an interim order, in what has always been a difficult area of practice;
  • The Court of Appeal sat on 2 December 2020, and handed down its judgment on 11 January 2021, allowing W’s appeal (quite a feat, given that W had acted in person in the CA) and restoring the order of DDJ Morris.

Judgment of Moylan LJ

The lead judgment was handed down by Moylan LJ, with whom Macur LJ and Asplin LJ agreed. The law is reviewed from §§ 31 to 40, and the determination is between §§ 47 and 56.

It should be underlined that Rattan does not overrule earlier authority, or purport to lay down new guidance which applies to all cases. Rather, it restores a more discretionary approach to MPS applications, and dilutes the guidance contained in such cases as TL v ML [2006] 1 FLR 1263, to the effect that guidance which may apply in complex big money litigation need not be applied with equal force to more straightforward applications.

Practice Points

The following practice points can be noted:

  1. Broad assessment

This was a straightforward case (‘not unduly complex’ § 47), which ‘did not require any extensive analysis but was an application which could be determined justly with a succinct summary and consideration of the relevant factors’

2. Separate MPS budget

The guidance that in every MPS application an application must present a ‘specific MPS budget which excludes capital or long-term expenditure’ (TL v ML [124(iii)] does not apply to every application. At § 51, Moylan LJ comments: “This case also demonstrates that it is not necessary for an applicant for maintenance pending suit to provide a list of income needs distinct from that set out in the Form E. As the wife submitted, she was seeking no more than her basic needs which she had set out in her Form E”

3. Forensic analysis of budget

W’s Form E budget was described as ‘…the type of budget which will be very familiar to judges determining financial claims and which they are well placed to decide on a broad assessment’. Per Moylan LJ at § 48 ‘The court was not required to undertake any greater ‘critical’ analysis of a schedule of income needs than is required of any other aspect of the case. The court is required to undertake such analysis as is sufficient to be satisfied that the ultimate award is ‘reasonable’. In some cases this might require a detailed examination… in others, such as the present case, it will be immediately apparent whether the listed items represent a fair guid to the applicant’s income needs’. In other words, the time-honoured guidance that an MPS budget should be ‘examined critically in every case to exclude forensic exaggeration’ (see Thorpe J in F v F [1995] 2 FLR 45 and Nicholas Mostyn QC (DHCJ) in TL v ML [2006] 1 FLR 1263 at [124(iii)]) does not have to apply in every case, including more straightforward cases

4. ‘Immediate’ needs

Per Moylan LJ at § 49, when the court is dealing with ‘immediate’ needs on an MPS application, it is dealing with those needs that might arise pending the final determination of the order. “The word “immediate”, in this context, does no more than reflect the fact that the court is concerned with an order for maintenance pending the final resolution of the financial dispute between the parties. However, the use of this word does not mean that the court should embark on the type of exercise undertaken by the Judge in this case. The fact that some items of expenditure are not incurred every month does not mean they should be excluded for the purposes of determining what maintenance is reasonable

5. Proportionality and sufficiency

In words that will chime with anyone who has conducted (or responded to) an MPS application within a time estimate of 1 or 2 hours, Moylan LJ concludes that on the facts of the case, the DDJ’s approach (which did not involve a forensic analysis) was sufficient. At § 54,

“… it is clear to me that the DDJ undertook a sufficient analysis of the relevant factors to support her decision. As referred to above, she plainly accepted that the wife’s listed needs were reasonable. She was entitled to include the amount sought for school fees. She took into account the wife’s likely income. It is also clear that she analysed the husband’s budget and the parties’ respective cases as to the husband’s resources and determined that the husband had sufficient resources to meet the wife’s income needs as well as his own needs. Accordingly, considered the relevant factors and reached a fair decision as to what level of maintenance would be reasonable. In those circumstances, there was no basis on which the Judge could properly interfere with the DDJ’s decision”.

Concluding thoughts

Several years ago, I wrote an article which suggested there are two forces at play in financial remedies: the mathematical and the discretionary. I described the first school of thought as the boffins, the second as the gurus. The boffins seek to identify the relevant factors whereby the outcome of a case might ultimately be calculated according to an Excel formula. The gurus represented a more old school approach, stepping back from the detail and reaching an outcome which in all the circumstances felt right. I posed the question:

“are we meant to be gurus, ruminating on the facts and handing down our ‘gut instincts’ on the likely outcome, or boffins, preparing spreadsheets calculating apt values based on concepts of passive growth?”

While it would be a mistake to view Rattan as re-writing the law concerning MPS, it marks a shift – a decisive one in more straightforward cases – away from an adherence to the principles set out in TL v ML, towards a more broad brush and discretionary – and less rule bound – approach to applications of this nature.

Alexander Chandler

25 January 2021

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Privacy, Litigation and Arbitration

Or, how not to wash your dirty laundry in public

Adele is by all accounts a very private person. She is, if the tabloids are to be believed, ‘publicity shy’ or even ‘super shy’, to the point of being ‘reclusive’.

The news in 2019 of the breakdown of her marriage to Simon Konecki broke with a flurry of headlines speculating about the financial terms of their divorce. According to The Times (“Adele’s Husband Will be Rolling In It After Divorce”, 21 April 2019), Adele “…could be forced to hand half of her £140m fortune to her husband”.

That, admittedly, is not a view likely to be shared by anyone with (a) actual knowledge of the case, or (b) even a passing acquaintance with Family Law 101. However, in fairness to the Times, the article wasn’t written by its Legal Editor, but an Entertainment Correspondent. This tells you everything you need to know about the news values that apply to celebrity divorce stories, where the emphasis is firmly on ‘celebrity’. 

The risks of going to court

Advising a celebrity who is about to go to court in a family case, or indeed anyone who wants to keep their private business private, brings the question of publicity into focus. Will the press actually be there? If they do attend, will the hearing be in private, with restrictions on what can be published, or is there a possibility that the hearing will be conducted in open court?

The applicable rules can be summarised as follows:

  1. Family hearings are normally heard in private (Family Procedure Rules 2010 (“FPR”), r. 27.10); 
  2. Accredited members of the media may attend private hearings (FPR r.27.11(2)(f)), as may legal bloggers, in accordance with a Pilot Scheme at FPR PD 36J. An exception to this rule arises where a hearing is conducted for the purpose of judicially assisted conciliation or negotiation, such as a Financial Dispute Resolution appointment, where neither media nor legal bloggers can attend (FPR r. 27.11(1));
  3. What the media can actually report at a private hearing will generally be extremely limited to whether the parties actually attended, the nature of the hearing and the identity of the lawyers etc. (reminiscent of the convention that prisoners of war only give name, rank and serial number). In practice, this may not prevent some news organisations, such as the Mail Online from publishing endless photographs of the parties taken outside the court building, with the dubious hook of the news story being that the parties’ attended court;
  4. The court has a discretion to exclude the media completely, such as where the interests of a child require, (FPR r. 27.11(3), although in practice this is difficult to achieve;
  5. Equally, the court has a discretion to conduct the hearing in open court (FPR r. 27.10), which in practice has been sparingly used, most commonly in cases heard by Mr Justice Holman.

The decision to hold a hearing in open court can have significant consequences. Most famously, in Spencer v Spencer, the Earl settled for an additional £1m after Mr Justice Munby (as he then was) decided that the hearing would be in open court. According to the Guardian, the Earl subsequently sought to recover the additional sum from his advisers, who he contended had not warned him of the possibility of the hearing not being in chambers.

An added complication is that for several years in the Family Division of the High Court, one judge, Mr Justice Holman has generally exercised the discretion in favour of hearings in open, while most other judges invariably resolve the issue the other way and sit in chambers (in private). Anyone who doubts the insatiable newspaper appetite for family law should consider the case of Fields v Fields[2015] EWHC 1670. After Holman J directed that the case should be heard in open court, the details of the parties’ claims and their high legal costs made the front page of the Telegraph, despite neither party previously having any public profile, and the case being of limited legal interest. In Fields, the parties had the misfortune of being photogenic enough to merit the front page. 

It used to be the case that the damage from adverse press reports could be short lived: today’s headlines are tomorrow’s fish and chip paper. However, as Aaron Sorkin put it so brilliantly in ‘The Social Network’, thanks to Google etc, this no longer applies: “The internet’s not written in pencil. It’s written in ink”. 

Reputational damage that arises from a bad headline will now last for as long as the information appears on a Google search.

Alternative Dispute Resolution: Arbitration

So, even in the family court, there are risks of publicity. But there are alternatives. There is, for example, mediation, although a mediator’s role is limited: he or she can broker a settlement, but cannot decide an issue where the parties disagree. What options might Adele have if Mr Konecki, fortified by the views of the Times’ Entertainment Correspondent, decides he won’t take a penny less than £70m?

The answer – in terms of a private but also determinative forum – lies in arbitration. Since 2012, divorcing couples have been able to put their disputes to a privately instructed arbitrator, accredited by the Institute of Family Law Arbitrators. The application is made on an ‘ARB FS1’ form, jointly signed by both parties, which may nominate the preferred arbitrator.

A key element of any arbitration is privacy: Article 16.1 of the IFLA Arbitration Rules provides “…The general principle is that the arbitration and its outcome are confidential, except insofar as disclosure may be necessary to challenge, implement, enforce or vary an award (see Art.13.3(c)), in relation to applications to the court or as may be compelled by law”.

In other words, the media has no right to attend an arbitration. Nor would they receive any notice of the venue of the arbitration (unlike court lists which are posted in the court building). The only possibility of the confidentiality of an arbitration being breached would be where a court hearing takes place, either to enforce compliance, or where one party seeks to oppose the making of a court order in terms of the final arbitral award (See Haley v Haley [2020] EWCA Civ 1369)

Much has been made of the advantages of arbitration, which is sometimes described as the BUPA option compared with going to court: that the hearing can take place speedily, where the parties control which issue are put to the arbitrator’s decision etc. However, the key advantage for anyone seeking to protect their public profile, and to avoid further washing of dirty laundry, is that arbitration offers far greater privacy.

Alexander Chandler MCIArb

Originally Published by the Transparency Project, 9.5.19, subsequently amended 22.1.21

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Purba! The Income Need Game

Fun for All the Family!

Rules of the Game (5 players)

Players form into two teams, apart for one player who will be the Judge. Each of the teams should comprise one Client and one Advocate.

Prepare your budget

Each team receives a blank sheet of paper and has 14 weeks to think up as many outgoings as possible. Let your imagination run wild (bonus points for savings, depreciation, pocket money for children over 25 etc.). Give monthly figures for some items, annual or weekly figures for others (lose 1 point for consistency). Inflate a dozen figures at random to produce Future Outgoings.

Calculate the total (lose a point if properly calculated), which should be at least 75% of combined incomes, unless the parties are playing Big Money, in which case the sky’s the limit (horse therapy). Team who puts actual outgoings in the budget: lose 5 points.

The teams then play three rounds in front of the Judge

  • First round: Advocate says the other Team should explain why £800 pa is needed for spa treatments or £250 for a dog when they don’t have a dog. Judge should refuse and say “this amounts to cross-examination” (1 point). Round ends when someone says “Sauce for the Goose!”
  • Second round: Point for each time one Advocate says ‘wishlist’ or ‘exaggerated’, or the other Advocate says ‘hair shirt’ or ‘short rations’. The Judge should either nod or raise eyebrows but look studiously non-committal. Round ends when the Judge says “Ultimately, everyone is going to have to cut their cloth accordingly”.
  • Final round: H’s Advocate asks W a series of detailed questions about cleaning products, and puts it to her (1 point) that she reasonably needs £175 not £250 pm for petrol. Client should look bewildered as if she’d never seen the budget before (1 point) and ask the Judge “Do I have to answer that?” (1 point). Bonus point if the Player gives an embarrassing or personal answer (“That’s for my dry skin”). Extra bonus point if Judge can defuse tension by making wry / unfunny observation.
  • The Judge should then ask “Are you going to go through this line by line?”, to which the Advocate can answer “Only selectively” (meaning yes) or “Only if it helps the court” (2 points) to which the judge may say “it’s a matter for you how you put your case” (stalemate).
  • Point to the Advocate for every ten minutes he keeps this going. Point to the Judge if he is not staring at the ceiling or inspecting his fingernails within 30 minutes.
  • Advocate who says “My client has actually calculated the actual outgoings and we have a 14 page spreadsheet attached to my note”: lose game.
  • Game ends when someone says “Purba!”, or “Duxbury” if playing Big Money.
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Navigating Uncharted Waters in Sch 1: DN v UD and the FU Fund

DN v UD (Sch 1 Children Act: Capital Provision) [2020] EWHC 627 (Fam)

When Parliament enacted the Children Act 1989, instead of framing new law relating to financial claims on behalf of children, it chose to consolidate earlier statutes. Section 15 of the CA 1989 explains that

“Schedule 1…consists primarily of the re-enactment with consequential amendments and minor modifications, of provisions of the Guardianship of Minors Acts 1971 and 1973, the Children Act 1975 and of sections 15 and 16 of the Family Law Reform Act 1987”.

And this shows.

If there was a contest for opaque legislative drafting, Schedule 1 would probably ‘medal’. Even basic questions are difficult to answer:

Q. ‘Can a parent bring an application when the ‘child’ is over 18?’

A. The conventional view is no, because…

  • Sch. 1, para 1(1), provides that a parent can bring a claim on behalf of a ‘child’.
  • A ‘child’ is defined at s.105 as being under the age of eighteen, although this is subject to…
  • Sch 1, para 16, which extends the definition to include someone over the age of 18 who is bringing an application for himself pursuant to paragraph 2 or 6, i.e. periodical payments and a lump sum or the variation of an existing order

A contrary view is set out in an excellent article by my colleagues, Richard Harrison QC and Millicent Benson, “Illegitimate Claims? Schedule 1 claims for periodical payments by parents of adult children” in Family Law [2019] 505 – it is argued that Schedule 1 could be interpreted in such a way as to permit such an application on behalf of an adult child, either (1) by way of a purposive interpretation of the statute (cf. Pepper v Hart), or (2) that the prohibition unlawfully discriminate between the children of unmarried couples and divorced couples (where this is possible). Until recently, this had not been tested at court.

Several other clanking provisions of Schedule 1 are difficult to understand or explain. Why does Schedule 1 contain the power for a transfer of property (Sch 1, para 1(2)(e)) where there has never (thus far) been a case where property is settled on anything other than a reversionary basis? What about the provision that an adult child cannot pursue his own application where a maintenance order had been in place prior to his 16th birthday (Sch 1, para 2(3)).

DN v UD casts a searching light into some of the more dusty corners of Schedule 1. It is a decision of Mr Justice Williams who, in terms of the precision and length of his judgments, recalls the approach of Mr Justice Charles (of the 484 paragraph judgment)

And when I say ‘long’, I mean long. The judgment in DN v UD is a little over 42,000 words. By way of comparison, The Great Gatsby is 47,000 words. If DN v UD was published, it would classify as a short novel. If there was ever any doubt that technology leads to longer judgments (where detailed chronologies and passages can be cut and paste into ever longer judgments) DN v UD helps put those doubts to rest.

The brief facts are as follows: the parties are unmarried Russian nationals who have lived in London since 2010. The claim was brought on behalf of three children aged 20, 17 and 12 at the date of application, and 22, 19 and 14 by the date of the final hearing. The father (‘UD’) was wealthy and ran the ‘millionaire’s defence‘ (i.e. I can afford any order the court might reasonably order, so need not disclose my financial position in detail). Extensive findings were made against the father at a fact finding hearing in October 2018.

The case involved judicial consideration of a number of interesting points, and several surprising and groundbreaking decisions:

  1. Could the court make orders on the mother’s application for children over the age of 18

Perhaps unexpectedly, Williams J concludes that provided the application is made before the child turns 18, the court has the power to make orders, even where at the date of the hearing the child is over that age:

[42]. The effect of Sch 1, para 3 which permits the court to backdate a periodical payments order to the date of the application and to extend it beyond the child’s 18th birthday would support the construction that an order for periodical payments can be made for the first time after the child reaches the age of 18 provided that the application was made prior to the child’s 18th birthday… It seems to me that if the court has the power to make a periodical payments order in respect of a ‘child’ who has reached the age of 18 where the application was made prior to the 18th birthday that the court would also retain the jurisdiction to make other species of order under para 1.

Accordingly, on the facts of DN, the court could make orders in favour of the parties’ middle child (17 when application was issued, 20 at trial). However, there was no power to make orders with respect to the elder child who was 20 at the date of application and 22 by final hearing:

[49] (ii). “…I do not consider that it can be read or given effect in a way which allows an application for an order in respect of an adult child“

[49] (iii) “…I am not convinced (although I am not deciding) that the absence of the right of a parent to make an application on behalf of an adult child amounts to discrimination against the child in the substantive article 8 right.”

2. Human Rights Act compliance

The court declined the invitation to rule that the provisions of Schedule 1 relating to the above were incompatible with Convention rights as the procedural requirements (i.e. notice to the Crown) had not been met, and full argument had not been heard.

3. Overview of the law

Between [50] and [71], Williams J conducts a comprehensive review the court’s approach to Schedule 1, with the evolution of the ‘carer’s allowance’ and the (still) leading case of Re P; and between [72] and [85] the court reviews the court’s approach to cases involving children over 18. With respect to the power to make orders that last beyond childhood (including tertiary education) the court concludes

[85] The net effect of all of the authorities is clear. Absent special or exceptional circumstances capital orders which provide a benefit beyond minority or the cessation of tertiary education should not be made. It is equally clear that what can amount to special or exceptional circumstances is restricted. Matters relating to changing societal attitudes, the wealth of a parent, or the like will not suffice. Disability creating an ongoing need for support might. The absence of a parent playing any supporting role for their child might. The appellate courts have recently eschewed glosses upon statutory language. In this case the identification of exceptional or special circumstances warranting the making of outright capital orders for the benefit of children does not seem to me to amount to a gloss but rather is an application of the statutory powers based on principles which emerge from case law. The power to make outright capital transfers exists but will only be deployed in limited circumstances and where the evidence justifies it. It seems to me that what one is focusing on is the child and whether there is something about this child or this child’s situation in particular vis-à-vis that parent that creates a situation which exceptionally (i.e. as an exception to the usual rule) generates a need for the child to be provided with capital which will be of benefit to them as an adult possibly for many years

4. Provision for the adult children: the FU Fund

In its judgment, the court made a series of factual findings that the father’s behaviour, in terms of abusive and financially controlling actions, such as had left the children vulnerable. It should not be overlooked that this was an exceptional case. The court’s solution to this is the innovation of an ‘FU Fund’ which (some readers may be disappointed to find out) does not stand for what one might think, but in fact stands for ‘Financial Ultimatum’:

[162] … It therefore seems to me more probable than not that when the children do reach adulthood and do not willingly return to his fold that they are likely to face some sort of financial ultimatum from their father. At that point they will be peculiarly vulnerable as the maintenance will have come to an end and they will have lost their long-term home in the London Apartment. At that point they will be at their most vulnerable to the exertion of financial control whether directly or indirectly via the mother who will also be vulnerable at that point. I therefore consider that their vulnerability or potential dependency upon their father results in a clear need for financial and emotional protection. This protection can only be provided by giving them a sufficient degree of financial independence from the father to allow them to withstand the sort of pressure that is likely to be brought to bear upon them through some sort of financial ultimatum and which the emotional abuse they have sustained makes them so vulnerable to. That, I am satisfied, amounts to an exceptional circumstance which justifies the making of a capital award which will endure beyond their minority, beyond their dependency whilst in education and into an indeterminate future. Only by giving them the means to say no to their father’s exertion of financial control can they be properly protected and provided for in the future. I’m quite satisfied that this is a legitimate use of the Sch 1 provisions…

I ask myself rhetorically, if this situation does not amount to an exceptional circumstance justifying their deployment what, other than physical disability or clear lack of capacity, would? Thus I consider that they need and that their welfare justifies the provision of a ‘financial ultimatum’ (FU) fund to enable them to deal with this probable scenario.”

The court made no determination as to how this would be drafted (whether as a settlement, lump sum or property adjustment order) but provided that the two younger child should receive an interest in the London apartment (valued at £10m) worth c. £650,000 each. This would match the value of a property earlier gifted by the father to the elder child.

It will be fascinating to see if Williams J’s innovation of the ‘FU fund’ (or indeed the conclusion as to the court’s jurisdiction) proceed to appeal, and if so, herald the extension of the court’s exercise of Schedule 1 powers (albeit in exceptional cases).

Alexander Chandler, 19 June 2020

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A Short Explanation

This website is meant to be two things.

  • Firstly, an online library of the articles I’ve written over the years. These can be found in the menu.
  • Secondly, as a legal blog for financial remedy work. Let’s see how that goes.