Update: family

Even in an average asset case the costs can be disproportionate to the overall assets, an abnormality which is regularly pointed out to practitioners by their local district judges. So it would be wise for lawyers to review on a regular basis the costs being incurred on behalf of clients as against the value of the assets in dispute.

Disproportionate cost of proceedings

The comments of Mr Justice Munby regarding disproportionate costs in the case of KSO v MJO and Ors [2008] EWHC 3031 are a stark warning to all practitioners dealing with ancillary relief matters, whatever the level of assets involved. Munby J in this case looked at the total costs incurred as a percentage of the value of the assets in dispute.

The proceedings started in 2007, the husband having recently sold a business for almost £1m, subsequently making a loan to his father for the purchase of a property. This transaction led the wife to suspect that the husband might be involved in the transaction to purchase property in a joint venture with his father. When asked about his involvement by way of questionnaire the husband gave insufficient reply. This eventually led to the father being joined as a second respondent in the ancillary relief proceedings. For different reasons the husband's mother then became an intervener. In the course of the proceedings QCs were instructed.

By the time the settlement came to be determined what remained in the asset pool for division amounted to £818,416. By this stage the costs incurred between the parties amounted to £553,460. After other essential payments from the remaining funds were made, only £217,530 remained to be distributed between the parties. This was insufficient either for the mother (who was the primary carer for the children) to re-house herself in suitable accommodation or indeed in the alternative for the children to complete their education in the private sector. The father ultimately petitioned for bankruptcy.

As a result of various conflicting applications the matter was listed for an interim hearing before Munby J at Newcastle-upon-Tyne for three days starting on 17 November. The judge became aware of the matter when he arrived in Newcastle for his circuit sittings on 28 October 2008 and reviewed the file at that stage, becoming increasingly concerned that the parties had seemingly ignored previous efforts to case manage the matter. Munby J made considerable effort to ensure that the parties and their representatives made efforts to comply with previous directions regarding case management, and to focus their minds on the actual issues at hand and the assets at stake.

In his concluding observations Munby J expressed his extreme concern about being faced with ancillary relief litigation conducted at ruinous expense to the parties. Reference was made to earlier cases where similar criticism had been laid regarding the level of costs, for example A v A (Number 2) (Ancillary Relief: Costs) [2007] EWHC 1810 (Fam), at paragraph 269 - a case where some 41.5 per cent of the matrimonial assets (which totalled £2,669,715) had been spent in costs.

In that case he commented, 'It may be that the 'mega' rich can afford to squander grotesque sums in costs'¦ Lesser mortals cannot. Costs in too many so-called 'big money' cases '“ in modern conditions many such cases do not in truth involve 'big' money at all '“ are, as here, grossly disproportionate to either the amounts or the issues at stake'¦'.

Further on, he added: 'Something must be done about the problems highlighted by this and by too many similar cases. We simply cannot go on as we are. The expenditure of costs on the scale exemplified with this and by too many other cases is a scandal which somehow must be brought under control'.

Family practitioners are aware that some clients are openly hostile toward, and distrustful of, their former spouses. They allow little room for negotiation, and can often instruct lawyers to pursue issues contrary to the advice given. In such cases, where children are involved, it is to be hoped that lawyers can all work to remind the parents of the potential victims of their approach to matrimonial litigation. The case of KSO v MJO and Ors is indeed a sobering warning not only to practitioners but to all potential clients intent on maintaining a hostile and potentially misguided approach to their litigation.

Pre- and post-nuptial agreements considered again

The judgment in the case of McLeod v McLeod [2008] UK PC 64, first reported on solicitorsjournal.com/family on 17 December 2008, had been the subject of much discussion and anticipation among lawyers. Many had hoped for a ruling regarding the introduction and enforceability of pre-nuptial agreements in this country. The judgment did not go this far, in fact quite the contrary; it clearly set out that the validity or otherwise of pre-nuptial agreements is a matter for parliament to consider. What was given consideration was post-nuptial agreements and in this particular case the post-nuptial agreement was considered to be enforceable as it was not contrary to public policy.

Both parties were American and had married in 1994. The husband was considerably older than the wife '“ he was 49, she 22 when they married '“ and he was also significantly wealthier than her. A pre-nuptial agreement was entered into on the day of their wedding in Florida.

This pre-nuptial agreement was varied twice, by agreement between the parties, during their marriage, on the last occasion in 2002 at a time when the relationship was already breaking down. The court was concerned with the second post-nuptial agreement, dated 2002, which confirmed the terms of the pre-nuptial agreement while making significant changes to it. The agreements failed however to provide explicitly for the support of the parties' five children, who varied in age between seven and 13.

In the year following their marriage, the parties had moved to the Isle of Man where they remained living since.

The marriage broke down, and the wife made an application for ancillary relief in February 2005, arguing that all of the agreements both pre- and post-nuptial should be disregarded. The Manx Court, which heard the matter at first instance, varied the 2002 post-nuptial agreement, awarding the wife additional sums, although not specifying what monies should be spent on re-housing. On appeal the court found that the agreement did not make suitable provision for the children and that the terms should be determined by the court. The husband then appealed to the Privy Council.

In her judgment, Baroness Hale reviews the law relating to pre- and post-nuptial agreements and the current trends in the courts. She found that the 2002 post-nuptial agreement was enforceable, as such agreements are no longer contrary to public policy. She also found that post-nuptial agreements do remain subject to the court's powers of variation. In this particular case, she concluded that the judge at first instance could only alter the post-nuptial agreement to make proper provision for the children, and that he had failed to do so, and therefore she remitted the matter back to the High Court for an appropriate deed to be drafted.

In her judgment she commented in general terms regarding pre-nuptial agreements as follows: 'The Board takes the view that it is not open to them to reverse the longstanding rule that ante-nuptial agreements are contrary to public policy and thus not valid or binding in the contractual sense'¦ In the Board's view the difficult issue of the validity and effect of ante-nuptial agreements is more appropriate to legislative rather than judicial development'.

We must therefore wait to see what, if any, imminent action will be taken by parliament in relation to the validity and enforceability of pre-nuptial agreements.

The position with regard to post-nuptial agreements is however seen differently and Baroness Hale states: 'Post-nuptial agreements, however, are very different from pre-nuptial agreements. The couple are now married. They have undertaken towards one another the obligations and responsibilities of the married state. A pre-nuptial agreement is no longer the price which one party may extract for his or her willingness to marry. There is nothing to stop a couple entering into contractual financial arrangements governing their life together, as this couple did as part of their 2002 agreement'.

For now then, practitioners must continue to advise clients that pre-nuptial agreements will not be enforced by our courts, although where appropriate they will remain a relevant factor within s.25 provided they are properly entered into.

Solicitors' use of documents

In the case of White v Withers & Anor [2008] EWHC 2821 (QB), Eady J reviewed the case law and practice relating to the use of documents by solicitors in divorce proceedings.

The application was by chef Marco-Pierre White. He sued his wife's solicitors, Withers, over claims that they had encouraged his former wife to intercept confidential documents. He alleged that letters and documents had been intercepted or retained by his former wife and that Withers acting on her behalf had either acquiesced in the interception or had encouraged by their advice the course of action she had taken. Withers denied having given any such advice and maintained that simply receiving documents produced by their client could give no rise to a course of action.

Withers applied for the claim to be struck out for want of a cause of action, and Mr Justice Eady agreed with them, stating that a 'mere receipt of documents from the client'¦ could not give rise to a cause for action'.

In reaching his decision he found that Withers had not refused any demand to return documents in their possession to the claimant and therefore no civil remedy arose; there was no evidence to substantiate that the wife had been encouraged by Withers in her course of action and in these proceedings there was no 'reasonable expectation of privacy'.

The purpose behind the wife producing the documents to her solicitors was purely for use in connection with ongoing court proceedings in relation to the parties' divorce and the protection of her interest in that context. Mr White's claim was therefore struck out, although Mr Justice Eady did not then have to deal with Withers' application for an abuse of process, as the claim had already failed.