Cross Border Disputes and How The Jurisdiction of the Family Courts in England Could Affect You

One World, but Many Jurisdictions by James Turner QC

Introduction

1. In the modern day and age we have the wonderful ability to engage in international travel and communication. People from all countries, races and religions meet, marry (or just cohabit), and have children together; they may also travel and acquire homes and other investments in various countries. That’s all well and good until the particular relationship breaks down and the parties no longer want to live together, particularly when they no longer wish to live in the same country as each other.

 

2. Sometimes the wish by one party to move to a different country after a relationship breakdown is driven by career prospects in the other country, sometimes by a relationship with a new partner in the other country, and sometimes simply out of a wish to “go home” to a country of origin – those are all valid and understandable reasons, but they can nevertheless give rise to difficult issues with international dimensions when children and/or money are involved.

 

3. There are also those cases in which such issues arise where the reason for the wish of one party to move to a different country is to make it difficult for the other parent to have a continuing relationship with their children (whether that be a conscious or a subconscious wish) and/or to try to avoid financial responsibilities, or because that party perceives that he or she will find a more sympathetic legal forum in the other jurisdiction in relation to the sharing of financial resources or the arrangements relating to children (“forum shopping”).

 

4. There are many topics that could be identified and discussed in relation to such issues. However, bearing in mind the limited time available at the Seminar on 27 November 2014, the present paper will concentrate on financial issues in the context of family breakdown, although the author will be happy to discuss also the way in which the family law courts in England (and Wales) deal with international issues concerning children. (It should be borne in mind that the law in other parts of the UK is not the same as that which applies in England and Wales.)

 

5. The judges in the family courts in England have acquired a reputation over recent years for being very generous with other people’s money in the context of cases arising from family breakdown. As a result, there is an understandable desire for the financially weaker party in such breakdowns to want to try to have any financial issues dealt with in England, if possible, while the financially stronger party may well prefer to have those issues dealt with in some other country. In order to advise clients on a properly informed basis in this regard, the lawyer in Malaysia will need to have an understanding of (i) whether the substantive outcome would in fact be likely to be better for his/her client in England than in Malaysia; and (ii) the sort of situations in which the English courts will have jurisdiction, and whether those courts would be likely to exercise that jurisdiction in the particular situation that is under consideration. In some cases, a measure of precautionary planning, to guard against the possibility of a relationship breakdown that has the potential for international issues, may be a wise precaution.

 

6. On the assumption that the lawyer in Malaysia will be able to make an informed assessment of what the substantive outcome would be if the relevant issues were to be determined in Malaysia, how is he/she to make an assessment (for the purpose of comparison) of what outcome would be likely in the particular case if the English courts were to have and exercise jurisdiction on the same facts? The self-interested response of the author of the present paper is to suggest that the opinion of an English lawyer be sought in each case. However, the following points may give some help, although they are of necessity set out fairly summarily. The outcome of any particular case will also depend on its individual facts.

 

Financial relief within divorce, nullity and judicial separation proceedings in England

 

7. The power to redistribute financial resources in the context of divorce proceedings in England and Wales is conferred on the courts in that jurisdiction by Part II of the Matrimonial Causes Act The relevant powers are very extensive, and include powers to make lump sum orders, transfer of property orders (which includes transfers of shareholdings in companies), settlement of property orders (i.e. the creation of trusts), variation of settlement orders, periodical payment orders, secured periodical payment orders, and pension sharing orders. Such orders can be made in favour of an ex-spouse and/or children of the family, but the power to make them under the 1973 Act only exists in the context of the dissolution or annulment of a marriage (or the granting of legal separation) by the courts in England, so the question of who can obtain a divorce, or an annulment or a legal separation in England is of crucial importance (and will be dealt with below).

 

8. Where the requisite type of proceedings are in progress in England, the English courts also have the power under the 1973 Act to make orders for interim provision, pending the outcome of the proceedings, including a power to require one party to make provision for the ongoing legal costs of the other party. These interim powers can be exercised even when there is an ongoing and unresolved dispute about the jurisdiction of the English court to deal with the particular case; indeed, they can be exercised for the purpose of funding the costs of that very dispute. However, the apparent strength of any outstanding jurisdictional challenge will be a factor that will be borne in mind in deciding whether to exercise the interim financial powers and, if so, to what extent. The principle behind the power to make interim provision for the payment of ongoing legal costs is the concept of the fair trial and a measure of “equality of arms” in that regard (although it doesn’t mean that expenditure over and above that which is objectively necessary will be facilitated by way of the exercise of this power just because the other party may be spending more on his/her costs than is objectively necessary).

 

9. Although the 1973 Act confers extensive substantive powers it sets out no aim, or objective that is to be achieved by the exercise of them. All that is said is that:

 

25.-(1) It shall be the duty of the court in deciding whether to exercise its powers under section 23, 24, 24A, 24B or 24E above and, if so, in what manner, to have regard to all the circumstances of the case, first consideration being given to the welfare while a minor or any child of the family who has not attained the age of eighteen.

 

10. In further sub-sections of section 25 of the 1973 Act are set out particular matters that the court is required to have regard to when exercising its powers, and considering “all the circumstances of the case”. Such particular matters include (but are by no means limited to) the financial resources of each party (both present and prospective); the financial needs, obligations and responsibilities of each party; the age of each party; the standard of living enjoyed before the breakdown of the marriage; the duration of the marriage; the contribution which each party has made, or is likely to make in the future, to the welfare of the family (including by looking after the home or providing care); the value of any benefit that a party will lose the chance of acquiring by reason of the dissolution or annulment; and “the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it”.

 

11. The 1973 Act also contains provisions designed to encourage the imposition of a financial “clean break” between former spouses.

 

12. Over the years the courts came to apply the financial powers under the 1973 Act in such a way as to result in a grant to the Applicant (usually the wife) of such financial relief as was judged to be necessary to satisfy her “reasonable requirements”, leaving the other party with the remainder of any financial resources that were held in his name, even if they exceeded his reasonable requirements and even if those resources had been built up by joint efforts during the marriage. The assessment of “reasonable requirements” was often a fairly unprincipled, subjective and arbitrary process.

 

13. The courts would also, in those days, often achieve a “clean break” by assessing the wife’s perceived future income needs and applying a capitalisation process (known as a “Duxbury” calculation) to those needs, then make an award to the wife that covered her housing and other needs for capital, plus a further capital sum by way of capitalisation of future income needs. Of course, the older the wife the shorter her life expectancy would be, which would depress the size of the Duxbury fund that she would receive, which fund was itself often paid out of capital that had been built up by joint efforts during a long marriage. Thus, the wife in a long marriage might end up with a lesser share of the financial fruits of that marriage than the wife in a shorter marriage, who would have a longer life expectancy.

 

14. A significant change in approach resulted from the decision of the House of Lords in a case called White v. White [2001] 1 A.C. 596. In that case the court held that the objective of the exercise of the relevant powers must be to produce a result that is “fair” in the particular circumstances of the individual situation and that fairness does not permit of an approach that will have the result of gender discrimination, or of discrimination against a home-maker in favour of a bread-winner. Their Lordships held that marriage is, in effect, a partnership of equals and that any outcome which does not leave the parties in a financial position of equality must be justified by rational and principled considerations, and must be explained. Therefore, any preliminary decision as to outcome must be tested against the “yardstick of equality”. Although the court distinguished this approach from a “starting point of equality”, later decisions of the courts have adopted a “starting point of equality”. This distinction should not make a difference to outcome, provided that the principles as to when there should be a departure from equality are properly applied and the position of each party is tested by reference to the same criteria (in some cases the Applicant may, on the facts, be entitled to a less than equal share of the financial resources, and in some cases a greater than equal share).

 

15. Whilst stating that “fairness” must be the objective of the outcome of the exercise carried out under section 25 of the 1973 Act, the House of Lords in White acknowledged that fairness, like beauty, may be in the eye of the beholder, in that the search for it involves subjective assessments as to what is fair in the individual circumstances, albeit by reference to the principles laid down in the White

 

16. The House of Lords gave further guidance in a subsequent decision, in the conjoined cases of Miller v. Miller; McFarlane v. McFarlane [2006] 2 A.C. 618, as to circumstances in which, and the procedure by which, a redistribution of financial resources might achieve a fair outcome:

 

(i)      An ascertainment and equal overall sharing of the financial resources (including pension resources) that have in reality been built up by the joint endeavours of the parties during their relationship (including during any period of cohabitation that led seamlessly into marriage and irrespective of the length of time involved), referred to as “matrimonial property”, or the “marital acquest”. This reflects the principle that marriage is a relationship of equals, irrespective of precisely what role each party plays during that relationship and it means that an investigation of precisely what was contributed by whom will seldom be necessary (and likewise with investigation of “conduct”, which is in a sense the other side of the coin of “contribution”). It also acknowledges that financial resources acquired by a party before the commencement of the relationship, or after the termination of the relationship, or by way of gift or inheritance at any time, owe nothing to the marital endeavour or support of the other party and should therefore be treated differently.

 

(ii)     Consideration of compensation for any relationship-generated financial disadvantage that either party has sustained by reason of the relationship between them. The most common situation that comes within this strand of reasoning is where one party is prejudiced in relation his or her future earning capacity by reason of having played the role of home-maker at the expense of a career, and/or the limitations placed on future earning capacity by continuing child care obligations. There will often be an overlap between this strand of justification for redistribution of financial resources and the first strand (i.e. the sharing of marital acquest) and the sharing of the marital acquest may in itself satisfy the compensation strand.

 

(iii)    Finally, a cross-check by reference to the reasonable financial needs of each party, which will sometimes outweigh all other considerations, particularly in a case where the financial resources are modest. The question of what asserted financial needs are “reasonable” in a given case will itself be informed by reference to all of the circumstances of the particular cases (such as the lifestyle during the marriage, the length of the marriage, the extent of the available resources and the origins of those resources) and it will, inevitably necessitate subjective assessments. The impact of an assessment of “reasonable needs” may justify a distribution of the marital acquest that does not produce equality, and it may justify and necessitate an invasion of inherited or pre-marital wealth. It may also justify outcomes that involve features such as temporary use of a resource, or a charge-back, or reversionary or deferred interests, and may necessitate imaginative structuring. The general desirability of a “clean break” will not justify an outcome that conflicts with an application of these principles.

 

17. The subsequent ongoing stream of reported cases demonstrates how these principles have been interpreted and applied by the lower courts in the particular circumstances of individual cases. Areas in which issues of principle are still not wholly resolved include (but are not limited to):

 

(i)      The question of whether any form of so-called “stellar contribution” can in itself properly justify a departure from the principle of the equal sharing of the marital acquest. Certain authorities suggest that it can, but the better view may be that such an approach is improperly discriminatory and involves inappropriate and arbitrary assessments.

 

(ii)     The unfairness of imposing a clean-break by reference to the supposed lifetime financial needs of a party who may subsequently re-marry and who will then have benefitted from what is, in effect, the capitalisation of a period of maintenance that would not have been justified if payable as periodical payments.

 

(iii)    The assessment of the marital acquest value that should be attributed to an asset that was acquired before the relationship, or by way of gift or inheritance, but which has increased in value during the relationship. The approach may depend on whether the increase in value was “passive”, or whether it was the result, in whole or in part, of marital endeavour.

 

(iv)    The account properly to be taken of the value of an earning capacity built up during a marriage. There are authorities to the effect that the existence of this financial resource is only relevant to a “needs” assessment and it does not fall to be considered as part of the marital acquest that is to be shared. This will be of importance if the concept of needs is given a restrictive meaning. However, it must be borne in mind that the three strands of justification for redistribution of financial resources that were identified in the Miller/McFarlane case are not a statutory or exclusive test and that the objective is a fair outcome in the particular circumstances of the individual case.

 

18. Unhappily, despite the helpful principles that have been identified by the House of Lords, the proper application of the relevant law in an individual case and the likely outcome of that case will often be difficult to predict, even by the most skilled of advisers. This can result in very costly, time-consuming and emotionally draining litigation. In this area, it is difficult for the legislators and judges to strike a happy balance between the desirability of predictability, on the one hand, and the desirability of a bespoke and fair outcome on the individual facts, on the other hand.

 

19. The existence of the “sharing” principle, and the requirement to judge “needs” in the context of the financial resources that are available (or which should be available) the first step in the financial ancillary relief process is to ascertain the worldwide financial resources of each party and to evaluate those resources, before the distributive part of the process can take place. Detailed procedures exist for that purpose, but the investigations in that regard can often be a tortuous process, because of the complexity of the financial affairs of some parties and because of the tendency of some parties to try to hide or dispose of their financial resources. It is sometimes necessary for the courts to grant injunctions prohibiting dissipation and/or setting aside attempted disposals of resources, and it is sometimes necessary for assistance to be sought from overseas jurisdictions in the investigative process (e.g. by way of the letters of request procedure).

 

20. It is also important to note that the general principles outlined above have now been tempered and supplemented by the approach towards “nuptial agreements” that has been adopted by the Supreme Court (the successor court to the House of Lords) in its decision in Granatino v. Radmacher (formerly Granatino) [2011] 1 A.C. 534. The concept of “nuptial agreement” encompasses (i) pre-nuptial agreements; (ii) financial agreements entered into during the course of a marriage; and (iii) agreements entered into after the breakdown of a marriage, if the agreement purports to make provision as to how the financial resources of the parties should be dealt with in the event of divorce.

 

21. The essence of the judgment of seven of the nine members of the court (with which Lord Mance also agreed in a separate judgment) is to be found in paragraphs [75] and [76] of the decision:

[75]   White v White and Miller v Miller establish that the overriding criterion to be applied in ancillary relief proceedings is that of fairness and identify the three strands of need, compensation and sharing that are relevant to the question of what is fair. If an ante-nuptial agreement deals with those matters in a way that the court might adopt absent such an agreement, there is no problem about giving effect to the agreement. The problem arises where the agreement makes provisions that conflict with what the court would otherwise consider to be the requirements of fairness. The fact of the agreement is capable of altering what is fair. It is an important factor to be weighed in the balance. We would advance the following proposition, to be applied in the case of both ante and post-nuptial agreements, in preference to that suggested by the Board in MacLeod: ‘The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement.’

[76]   That leaves outstanding the difficult question of the circumstances in which it will not be fair to hold the parties to their agreement. This will necessarily depend upon the facts of the particular case, and it would not be desirable to lay down rules that would fetter the flexibility that the court requires to reach a fair result. There is, however, some guidance that we believe that it is safe to give directed to the situation where there are no tainting circumstances attending the conclusion of the agreement.

22. The ninth member of the court (Baroness Hale), whilst agreeing that in a given case the existence of a nuptial agreement may be the most important consideration, took the view that it was not for the court to create an extra-statutory (but rebuttable) presumption that a nuptial agreement should be binding, which is, in effect, the consequence of the decision of the majority of the members of the court. Her Ladyship’s valuable and thought-provoking views in this regard will be found at paragraphs [133] to [138], and [169] to [178] of the judgment.

 

23. It is clear from the decisions of all the members of the court in Radmacher that there are two points in time that must be considered in relation to the question of whether a nuptial agreement should be given effect, namely: (i) the time when the agreement is entered into; and (ii) the time when enforcement is sought.

The time when the agreement is entered into

24. As to the first of those points in time, by reason of the test set out in paragraph [75] one must start by deciding whether the nuptial agreement was “freely entered into by each party” and whether each party entered into it “with a full appreciation of its implications”. The first of those points may involve not only considerations of “the standard vitiating factors, duress, fraud or misrepresentation”, which “will negate any effect the agreement might otherwise have had”, but also wider considerations – “unconscionable conduct such as undue pressure (falling short of duress) will also be likely to eliminate the weight to be attached to the agreement, and other unworthy conduct, such as exploitation of a dominant position to secure an unfair advantage would reduce or eliminate it”. Indeed, “all the circumstances as they affect each of two human beings must be considered in the complex relationship of marriage” (para. [71]). That should provide plenty of scope for dispute and litigation, both as to the relevant facts and as to the consequences. Also, the circumstances surrounding an ante-nuptial agreement may be very different from those surrounding a post-nuptial agreement (para. [61]).

 

25. The requirement for each party to have, in relation to the agreement, “a full appreciation of its implications” might provide the scope for even more dispute and litigation.
26. In relation to both of these two considerations: “The court may take into account a party’s emotional state, and what pressures he or she was under to agree”. This is qualified by a requirement to consider what would have happened had the pressures not existed and to bear in mind the maturity and experience of the parties, and the fact that what may be foreseeable for mature couples may be unforeseeable for less mature couples. “Another important factor may well be whether the marriage would have gone ahead without an agreement, or without the terms which had been agreed. This may cut either way.” (paras [72] & [174]) All very helpful stuff!!!!!!!!!!
27. In ascertaining the intentions of the parties and their appreciation of the implications of what they were doing, it may be necessary to consider any foreign element to the agreement (per Baroness Hale, at para. [182]), but the majority did not seem to think that such considerations would be relevant in respect of agreements entered into recently, or in respect of agreements entered into after their judgments, because “the question of whether the parties intended their agreement to take effect is unlikely to be in issue” (para. [74] and see [70]). However, it is difficult to see why that should be the case, particularly when the nuptial agreement was entered into in an overseas jurisdiction and/or where the perceived purpose of the agreement is in issue.
28. There are a variety of other factors which their Lordships identified as having the potential to affect any issue as to whether the parties each freely entered into the agreement and had a full appreciation of its implications, but the significance (or lack of significance) of each such factor will depend on the particular facts of the individual case and there are no absolute requirements in respect of such factors, even though their presence is desirable (and it would clearly be sensible to ensure that they are addressed at the time when a nuptial agreement is entered into and recorded in that agreement): see para. [69]. For example:

(i)   legal advice (although incorrect legal advice may serve to positively undermine a nuptial agreement);

(ii)   disclosure of existing financial resources, although any failure in that regard may be a complete irrelevance in certain situations – disclosure must be “material” if its absence, or any default in its provision, is to have an undermining effect;

• a “cooling off” period.

29. Finally, if the substantive terms of the agreement are unfair from the outset (whatever unfairness may mean), “this will reduce its weight, although this question will be subsumed in practice in the question of whether the agreement operates unfairly having regard to the circumstances prevailing at the time of the breakdown of the marriage” (para. [73]).

The time when the marriage has broken down and enforcement is sought

30. Subject to considerations of invalidity or reduced weight by reason of factors that existed at the time when the nuptial agreement was entered into, the court will give effect to it “unless in the circumstances prevailing it would not be fair to hold the parties to it” (para. [75]). N.B. The question is not whether it would at that point be fair to hold the parties to the agreement – this is the subtle rebuttable presumption in favour of nuptial agreements that caused concern to Baroness Hale.
31. As with all questions of “fairness”, what is fair is a very subjective question – as Lord Nichols said in White “fairness like beauty is in the eye of the beholder”. Indeed, in Radmacher it was held that the assessment of whether it would be fair to hold the parties to any given nuptial agreement “will necessarily depend on the facts of the particular case, and it would not be desirable to lay down rules that would fetter the flexibility that the court requires to reach a fair result” (paras [76] & [171]). The court must avoid a paternalistic and patronizing “the court knows best” approach (para. [78]). Their Lordships nevertheless gave some guidance as to how the question of fairness is to be approached in this context (paras [77] to [83] & [175] to [180]).
32. Some of the factors which may affect the extent of the effectiveness of the nuptial agreement at this stage are:

(i)      The length of time that has elapsed, and the foreseeability of relevant events that have occurred during that period (paras [80] and [175] to [177]). An agreement is more likely to be upheld if it addresses “existing circumstances and not merely the contingencies of an uncertain future” (para. [78]).

(ii)     There is nothing inherently unfair in an agreement that excludes one party from a share of property that does not form part of the marital acquest (or matrimonial property) (para. [79]).

(iii)    A consequence that excludes a party from a share of wealth that he or she has played an equal part in creating may be unfair (para. [80]).

• However, of the three strands of justification for redistribution of wealth identified in Miller/McFarlane it is the “needs” and “compensation” strands which can most readily render it unfair to hold parties to a nuptial agreement (paras [81] & [82]). This seems to hark back to the obiter dictum of Lord Mance in Miller/McFarlane that is quoted above, but it may involve a degree of confusion about the “sharing” strand insofar as sharing relates to the sharing of wealth built up during a marriage by joint endeavour, as paragraph [80] and the final sentence of paragraph [81] seem to acknowledge that it may be unfair to deprive a party who has helped acquire such wealth from a share, whether the help be direct or indirect.
• The reference to “need” in paragraph [81] is further explained as being “real need”. Presumably, this is distinguishable from “reasonable need generously assessed” which might otherwise justify an invasion of wealth that does not form part of the marital acquest, but it may be that different considerations might apply if a party was left “below the breadline” or dependent on the State (para. [190]). See also the more extensive analysis by Baroness Hale of the concepts of “need” and “compensation” (paras [186] to [188]).
• Conduct – it was said that these are deep waters (para. [180], and see further below). The nature of certain conditions in a nuptial agreement may in themselves be abhorrent to a court or impractical for a court to implement.
• Children of the family – the agreement must not be allowed to operate to the detriment of the children of the family (para. [77]), which was why the husband in the Radmacher case, despite the nuptial agreement, was in the event given the sort of award that would have been appropriate under Schedule 1 of the Children Act However, Baroness Hale made some important comments about the wider interests of children and the impact of such interest on the extent to which nuptial agreements will be upheld (paras [190] to [192]).

33. These matters should be borne in mind by those who advise upon and draft nuptial agreements, about which more will be said below. As a matter of practice, trial judges in England do still seem to have a reluctance to hold parties to nuptial agreements.
34. Another matter to note is that the growing move towards Alternative Dispute Resolution mechanisms in England (mediation and arbitration) may give rise to an enforceable nuptial agreement in a case in which the courts in England have jurisdiction.

Jurisdiction of the court in England to entertain divorce, nullity and judicial separation proceedings

 

35. As already explained, the courts in England can only exercise their financial relief powers under the Matrimonial Causes Act 1973 as an exercise that is ancillary to the substantive divorce, nullity and legal separation process in those courts. Therefore, if the English court has no jurisdiction to grant the substantive relief it will have no jurisdiction under the 1973 Act to grant financial relief that is ancillary to that substantive relief, other than on an interim basis. Furthermore, once a marriage has been terminated overseas in a way that is recognised by the English courts, those courts will have no power at all to grant financial relief under the 1973 Act, because there will then be no existing marriage that could be the subject of proceedings under that Act (although such powers may exist under other English legislation, as to which see below).

 

36. The jurisdiction to bring proceedings in England under the Matrimonial Causes Act 1973 is governed by the Domicile and Matrimonial Proceedings Act Sections 5(2) and 5(3) of that Act provide that:

 

5.-(2) The court shall have jurisdiction to entertain proceedings for divorce or judicial separation if (and only if)-

(a)  the court has jurisdiction under the Council Regulation; or

(b)  no court of a Contracting State has jurisdiction under the Council Regulation and either of the parties to the marriage is domiciled in England and Wales on the date when the proceedings are begun.

(3) The court shall have jurisdiction to entertain proceedings for nullity of marriage if (and only if)—

(a) the court has jurisdiction under the Council Regulation; or

(b) no court of a Contracting State has jurisdiction under the Council Regulation and either of the parties to the marriage—

(i) is domiciled in England and Wales on the date when the proceedings are begun; or

(ii)died before that date and either was at death domiciled in England and Wales or had been habitually resident in England and Wales throughout the period of one year ending with the date of death.

37. The Council Regulation that is referred to in the 1973 Act is Council Regulation (EC) No. 2201/2003 (better known as the “Brussels II (Revised) Regulation”, or “BIIR”. EC Regulations have automatic force of law in England by reason of section 2 of the European Communities Act

 

38. England is part of a BIIR Contracting State. Therefore, the courts in England will have jurisdiction in matters of divorce, nullity or judicial separation if (and only if) they have jurisdiction under BIIR, or, failing that, if the fall-back jurisdiction in sections 5(2)(b) or 5(3)(b) are available. If the courts of England have jurisdiction under BIIR it does not matter that the country where any competing jurisdiction may lie (e.g. Malaysia) is not a BIIR Contracting State.

 

39. Article 3 of BIIR provides as follows:
40. In matters relating to divorce, legal separation or marriage annulment, jurisdiction shall lie with the courts of the Member State

(a) in whose territory:

— the spouses are habitually resident, or

— the spouses were last habitually resident, insofar as one of them still resides there, or

— the respondent is habitually resident, or

— in the event of a joint application, either of the spouses is habitually resident, or

— the applicant is habitually resident if he or she resided there for at least a year immediately before the application was made, or

— the applicant is habitually resident if he or she resided there for at least six months immediately before the application was made and is either a national of the Member State in question or, in the case of the United Kingdom and Ireland, has his or her ‘domicile’ there;

(b) of the nationality of both spouses or, in the case of the United Kingdom and Ireland, of the ‘domicile’ of both spouses.

2. For the purpose of this Regulation, ‘domicile’ shall have the same meaning as it has under the legal systems of the United Kingdom and Ireland.

 

40. The importance of the concept of “habitual residence” as a jurisdictional link should be noted. It is a concept that has been increasingly used in many fields in the domestic legislation of England, as well as in European Community Regulations and other international instruments. Over the years, the construction of that concept by the Court of Justice of the European Union, in relation to its autonomous use in European Community Regulations, has been subtly different from the construction given to it under wholly domestic English law. However, in recent decisions relating to international child abduction the Supreme Court in England has said that the CJEU construction should now be used in all contexts, if possible (although in most situations the two tests would be likely to produce the same outcome): see v. A. and another (Children: Habitual Residence) (Reunite International Child Abduction Centre and others intervening) [2014] A.C. 1; and Re L.C. (Children) (International Abduction: Child’s Objections to Return) [2014] A.C. 1038.

 

41. Issues in relation to the construction of the concept of “habitual residence”, and the application of that concept to particular facts, that have given rise to much litigation in England in relation to Article 3 of BIIR. In Marinos v. Marinos [2007] 2 F.L.R. 1018, Munby J explained the concept, by reference to decisions of the CJEU in other fields, as meaning the centre of interests of a person at a particular time, in the context of the particular topic under consideration; therefore, a person might be habitually resident in one country for the purposes of employment law regulations, but at the same time habitually resident in England for the purposes of family law regulations.

 

42. In the decisions of the Supreme Court referred to above, the court said that the test adopted by the CJEU in relation to the meaning of “habitual residence” in the context of the use of that concept in Articles 8 and 10 of BIIR (i.e. jurisdiction in relation to matters of parental responsibility over a child who is habitually resident in a particular Member State at the relevant time, and jurisdiction in cases where a child has been abducted from a Member State where it was habitually resident to another Member State) is that the question of where a child is habitually resident is a question of fact and that (quoting from the CJEU decisions):

 

In addition to the physical presence of the child in a member state, other factors must be chosen which are capable of showing that the presence is not in any way temporary or intermittent and that the residence of the child reflects some degree of integration in a social and family environment. …

 

To that end, in particular the duration, regularity, conditions and reasons for the stay on the territory of a member state and the family’s move to that state, the child’s nationality, the place and conditions of attendance at school, linguistic knowledge and the family and social relationships of the child in that state must be taken into consideration. It is for the national court to establish the habitual residence of the child, taking account of all the circumstances specific to each individual case.

 

43. It would seem likely that this approach, with necessary adaptations, will apply equally to questions of where an adult is habitually resident at any particular time, but it provides enormous scope for uncertainty and litigation in certain situations, particularly where there are “international” aspects to the lifestyle of an individual.

 

44. The problem under various of the indents of Article 3.1(a) of BIIR is not just the question of where an individual is habitually resident at one given point in time, but the nature of the residence of that individual over the period of time specified in the particular indent and the question of whether the reference to “resided” in those indents means something different from “habitually resided”. In the Marinos case it was opined that in this context “resided” refers to a less intensive form of residence than “habitual residence”, with the consequence that “habitual residence” in England is only required at the time of the presentation of the institution of the proceedings in England, with a specified period of previous residence of a lesser intensity, in order to found jurisdiction. That view has been followed in certain other cases, but it has also been rejected in other cases. The point was considered by the Court of Appeal in Tan v. Choy [2014] EWCA Civ 251 (19 March 2014), where the court said that it would be necessary for the CJEU to give guidance on the point in an appropriate case in the future, but that the resolution of the point was not necessary in the case then under consideration because the judge at first instance had been justified in concluding that the husband petitioner had in fact been habitually resident in England for the whole of the period required by the fifth indent of paragraph 1(a) of Article 3 of BIIR.

 

45. The actual facts of Tan v. Choy concerned a divorcing couple who were Malaysian nationals. The husband, who was the financially weaker party, had instigated divorce proceedings in England. The wife instigated competing proceedings in Malaysia, and she had sought to challenge the existence of jurisdiction in England. The family had lived a relatively “international lifestyle” and the parties had properties and other interests in various countries. During a period of marital difficulty the husband had chosen to spend time in England, where he was supervising works that were being done to an apartment owned by the wife and which had suffered from a burst pipe. His state of mind vis-a-vis the marriage during that time was in issue in the case. However, it was common ground that during the relevant period the wife had remained in Hong Kong, where she was working and where the main home base of the parties and their children had been for some time. Furthermore, the husband had, during the relevant time, continued to join the wife and children on holidays. Nevertheless, the English court held that it had jurisdiction in divorce proceedings.

 

46. Issues as to assertions of domicile may also arise in cases where “domicile” is relied upon to found jurisdiction. The concept of domicile will not be addressed in the present paper, but is well-known that the application of the relevant principles in that regard to the facts of a particular case can give rise to enormous difficulty.

 

47. The facts of Tan v. Choy demonstrate the relative ease with which one party can acquire a connection with England that is sufficient to found the jurisdiction for divorce proceedings in England and, by that route, secure access to the jurisdiction of the English courts in relation to financial ancillary relief (although the jurisdiction of the English courts to make provision for maintenance, in the extended sense of that concept used in EU law, will also depend on the jurisdictional requirements of Article 3 of the Council Regulation (EC) No. 4/2009 (better known as the “EC Maintenance Regulation”), but that will not usually present any additional jurisdictional problems once the divorce jurisdiction of the English court is established.

 

48. Of course, the party who brings divorce proceedings in England will also have to prove the existence of the substantive grounds for an English divorce, but that is seldom a real problem. As explained above, the English court will have no jurisdiction within divorce proceedings once the parties have been validly divorced or their marriage annulled in another country, provided that the particular divorce or annulment is recognised pursuant to the provisions of Part II of the Family Law Act 1986 (a topic that is beyond the scope present paper).

 

The position when there are competing jurisdictions

 

49. It is frequently the position that more than one country will have jurisdiction in relation to divorce or nullity proceedings in a given situation, under the particular domestic jurisdictional rules applied the relevant countries (which was the position in Tan v. Choy). The potential benefits of obtaining the divorce or annulment in one country rather than another have been explained above.

 

50. The first matter that any competent adviser will wish to consider is whether there is any basis on which the jurisdiction of the country that does not best serve his/her client’s interests can be challenged. As the case of Tan v. Choy also demonstrates, there are mechanisms that can be utilised in England to bring a challenge to the existence of the jurisdiction of the English courts. However, the English court will be alive to the risk of the delay that results from the need to deal with any jurisdictional challenge being used to progress divorce proceedings in another jurisdiction in the meantime and in that way to achieve an unfair tactical advantage. Therefore, as a condition of hearing any jurisdictional challenge (or any challenge to the exercise of jurisdiction, as to which see below) the English court will usually seek an undertaking that overseas proceedings will not be pursued in the meantime, or make an order to that effect, pursuant to principles explained in a line of cases beginning with Hemain v. Hemain [1988] 2 F.L.R. 388.

 

51. In some cases each party may seek to challenge the existence, or exercise, of jurisdiction in the country favoured by the other party in the courts of that country.

 

52. Even if it is concluded that the English courts do have jurisdiction in a particular case, the question may arise as to whether the exercise of that jurisdiction should be stayed pending the outcome of proceedings in another country that also has (or may have) jurisdiction. If the other country is a European country in which BIIR also applies, the position will be regulated by specific provisions of BIIR, which give precedence to proceedings in the country which is first seised of the relevant proceedings.

 

53. However, the position in England in respect of the actual or potential existence of jurisdiction in a country that is not itself governed by BIIR is dealt with pursuant to the common law principles of “forum non conveniens” and/or pursuant to the Domicile and Matrimonial Proceedings Act 1973 (which is, in effect, a statutory manifestation of the “forum non conveniens” principles).

 

54. Sub-sections 5(6) and 5(6A) of the Domicile and Matrimonial Proceedings Act 1973 applies where there are actually concurrent proceedings in existence in another country:

 

5.-(6) Schedule 1 to this Act shall have effect as to the cases in which matrimonial proceedings in England and Wales are to be, or may be, stayed by the court where there are concurrent proceedings elsewhere in respect of the same marriage, and as to the other matters dealt with in that Schedule; but nothing in the Schedule-

(a)  requires or authorises a stay of proceedings that are pending when this section comes into force; or

(b)  prejudices any power to stay proceedings which is exercisable by the court apart from the Schedule.

 

(6A) Subsection (6) and Schedule 1, and any power as mentioned in subsection 6(b), are subject to Article 19 of the Council Regulation [i.e. the lis pendens provisions that apply as between Member States].

55. One is thus taken to Schedule 1 to the Domicile and Matrimonial Proceedings Act 1973, the crucial part of which, for present purposes, is paragraph 9(1), which provides as follows:

9.-(1) Where before the beginning of the trial or first trial in any matrimonial proceedings, other than proceedings governed by the Council Regulation, which are continuing in the court it appears to the court-

(a) that any proceedings in respect of the marriage in question, or capable of affecting its validity or subsistence, are continuing in another jurisdiction; and

(b) that the balance of fairness (including convenience) as between the parties to the marriage is such that it is appropriate for the proceedings in that jurisdiction to be disposed of before further steps are taken in the proceedings in the court or in those proceedings so far as they consist of a particular kind of matrimonial proceedings,

the court may then, if it thinks fit, order that the proceedings in the court be stayed or, as the case may be, that those proceedings be stayed so far as they consist of proceedings of that kind.

 

56. There are many reported cases as to the application of these principles to particular factual situations, the most well-known of which is the decision of the House of Lords in De Dampierre v. De Dampierre [1988] A.C. 92, applying in matrimonial proceedings the principles explained in Spiliada Maritime Corporation v. Cansulex Ltd [1987] A.C. 460. The ultimate focus will be on the concept of “fairness”, but, as has been said in another context (above), fairness, like beauty, may be in the eye of the beholder. Clearly, this broad discretion provides enormous scope for litigation. The experience of the author of the present paper is that English judges are keen to assert jurisdiction and reluctant to ever cede it. The scope for appeal in such situations is extremely limited, as to which see paragraph [38] of the judgment in Tan v. Choy.

 

57. A clash between the jurisdictions of Malaysia and England has also arisen in the much-publicised litigation (in both countries) between Pauline Chai Siew Phin and Khoo Kay Peng. The essential background facts of that matter are understood to be as follows (although others who will be present on 27 November 2014 will be far more familiar with the detail than the author of the present paper):

 

(i)      Both parties were born in Malaysia. They married in Malaysia and then moved their home base to Australia, albeit the husband continued to travel back and forth to Malaysia, where his business activities were based. They had five children (now all adults), three of whom were born in Malaysia and two in Australia. The parties subsequently moved their main home base to Canada, but the husband continued to spend time in Malaysia. One of the husband’s Malaysian-based businesses then acquired a stake in an English company. Both parties thereafter spent periods of time in England and one of the husband’s companies (registered in the BVI) purchased a residential property in England, for the parties to occupy when they were in England and as an investment. The parties visited England in October 2012. The husband left England after a week, but the wife has remained living in England ever since.

 

(ii)     The wife initiated divorce proceedings in England. The husband sought to challenge both the existence of jurisdiction in England and the exercise of any such jurisdiction as might exist. The wife sought permission to initiate a second petition in England, presumably in an attempt to try to avoid any jurisdictional issues that might arise from the first. That was also challenged by the husband.

 

(iii)    The husband sought permission to issue divorce proceedings in Malaysia without the necessity for prior reference to a conciliatory body. The wife sought a stay from the court in Malaysia of that application and, in any event, indicated a challenge to the substantive jurisdiction of the courts of Malaysia.

 

(iv)    The judge at first instance in Malaysia refused the stay that was sought by the wife and granted the permission sought by the husband (essentially on the basis that reference to a conciliatory body was pointless in the light of the background history of attempted conciliation and the wife’s acknowledgement that the marriage was over). It seems that the judge also accepted that the court in Malaysia had substantive jurisdiction, although no substantive hearing had been conducted in relation to issues that had been raised in that regard.

 

(v)     The decision by the judge at first instance in Malaysia was appealed. The appellate court engaged in an interesting discussion as to the correct approach to forum non conveniens doctrine. In that regard it considered two subtly different approaches, one being based in effect on the question of whether the disputed forum is the most appropriate forum and the other being as to whether it could be said that the disputed forum is clearly inappropriate (notwithstanding that another forum may be more appropriate). The analysis by the court of the Australian authorities on the point is well worth reading. In the event, the appellate court concluded that where the situation is (as it then was in the instant case) that the actual existence of the jurisdiction of the competing courts had still not been established the correct approach is to grant a stay only where the disputed forum is clearly inappropriate, reserving the other test to the situation where there are competing established jurisdictions. Therefore, the refusal of the judge at first instance to grant a stay of the proceedings in Malaysia was upheld.

 

(vi)    However, the appellate court in Malaysia concluded that the judge at first instance had erred in purporting to decide that the courts in Malaysia had substantive jurisdiction without first conducting a full hearing of the issues that arose in that regard in respect of matters such as domicile, so that matter was remitted for a full trial. The consequence was that the issues in both countries as to the existence of jurisdiction, and as to the exercise of any jurisdiction that might exist, remained then to be resolved by first instance judges in both jurisdictions. At a subsequent directions hearing before Holman J in England, in May 2014, it was said that each party intended to seek to appeal further to the Federal Court in Malaysia [2014] EWHC 1519 (Fam) – the applications in that regard were refused in August 2014. His Lordship deprecated the tactical manoeuvrings that he perceived to be taking place and encouraged the parties to reach some sort of compromise in relation to the financial consequences of the breakdown of their marriage.

 

• The English side of the jurisdiction issues then came before Bodey J for substantive resolution. His Lordship gave two judgments in the matter on 17 October 2014 ([2014] EWHC 3519 (Fam), and [2014] EWHC 3518 (Fam)). The first of those judgments addressed some rather esoteric, but fascinating, claims of issue estoppel. In particular, it rejected the contention on behalf of the husband that the decision of the court in Malaysia had conclusively determined the issue of forum non conveniens which was then before the English court. As his Lordship pointed out, the forum non conveniens claim which was before him was not identical to that which had previously been determined by the court in Malaysia.

 

• In the second judgment given on 17 October 2014, Bodey J went on to find that (as in Tan v. Choy) the particular facts of the case satisfied the jurisdictional requirements of the fifth indent of paragraph 1(a) of Article 3 of BIIR. The real issue as to whether the wife had been habitually resident in England at the relevant times had been as to her motivation for being there, in the context of the analysis of her true “permanent or habitual centre of interests”. It had been asserted that she was in fact only temporarily in England, for the purpose of the divorce proceedings, as a mere forum shopper. Having concluded that the English court did have jurisdiction, Bodey J then addressed the husband’s application for a stay of the English proceedings, pursuant to the statutory forum non conveniens powers, rejecting the asserted common law gloss that a stay should only be imposed when a competing forum is clearly or distinctly more appropriate than the English forum, as opposed to being “on balance more appropriate”. Again, his Lordship emphasised the importance of the individual facts of a particular case in the exercise of the available discretion and set out a discussion of the particular factors relied upon one way and the other. In conclusion his Lordship said:

 

In the result … I am not persuaded that the husband has shown Malaysia [upon whom the burden of proof rested] to be clearly or distinctly the appropriate jurisdiction. Nor am I satisfied that he has persuaded me on the simple balance referred to in the 1973 Act. The connecting factors to each jurisdiction pan out fairly equally, with a small bias in the wife’s favour … it can probably be stated that either jurisdiction would be ‘appropriate’ for dealing with the divorce and, more importantly, with the parties’ finances. That is not however sufficient to get the husband’s stay application home.

 

• The consideration by the courts in Malaysia of the jurisdiction issue in that country was due to take place in early November 2014. At the time of the preparation of the present paper the author has not discovered whether that hearing took place or, if it did, what issues were argued (e.g. issue estoppel) or what the outcome was. Similarly, the author of the present paper does not know whether any appeal is being pursued in England against the decisions of Bodey J, in default of which the proceedings in England will continue until they either reach a final conclusion or the parties are divorced in Malaysia in the meantime.

 

58. If the courts in neither of the competing jurisdictions in such cases is prepared to find that it has no jurisdiction, or that the exercise its jurisdiction should be stayed, the consequence may be that there will be a race in the two jurisdictions to secure a substantive divorce or annulment.

 

Other relevant powers of the English courts

 

59. Even if the substantive divorce or nullity proceedings between particular parties take place in a country outside the UK, thereby depriving the courts in England of their wide financial powers under the Matrimonial Causes Act 1973, the courts in England nevertheless have jurisdiction in certain circumstances to make financial orders in favour of a former spouse and/or for the benefit of a child. Those powers are conferred by:

 

(i)      Part III of the Matrimonial and Family Proceedings Act 1984; and

 

(ii)     Section 15 of, and Schedule 1 to, the Children Act 1989.

 

60. Those powers will be addressed in a relatively summary way in the present paper.

 

Part III of the Matrimonial and Family Proceedings Act 1984

 

61. The most significant provisions of the 1984 Act are the following:

12.— Applications for financial relief after overseas divorce etc.

(1) Where—

(a) a marriage has been dissolved or annulled, or the parties to a marriage have been legally separated, by means of judicial or other proceedings in an overseas country, and

(b) the divorce, annulment or legal separation is entitled to be recognised as valid in England and Wales,

either party to the marriage may apply to the court in the manner prescribed by rules of court for an order for financial relief under this Part of this Act.

 

(2) If after a marriage has been dissolved or annulled in an overseas country one of the parties to the marriage forms a subsequent marriage or civil partnership, that party shall not be entitled to make an application in relation to that marriage.

 

(3) The reference in subsection (2) above to the forming of a subsequent marriage or civil partnership includes a reference to the forming of a marriage or civil partnership which is by law void or voidable.

 

(4) In this Part of this Act except sections 19, 23, and 24“order for financial relief” means an order under section 17 or 22 below of a description referred to in that section.

 

13.— Leave of the court required for applications for financial relief.

(1) No application for an order for financial relief shall be made under this Part of this Act unless the leave of the court has been obtained in accordance with rules of court; and the court shall not grant leave unless it considers that there is substantial ground for the making of an application for such an order.

 

(2) The court may grant leave under this section notwithstanding that an order has been made by a court in a country outside England and Wales requiring the other party to the marriage to make any payment or transfer any property to the applicant or a child of the family.

 

(3) Leave under this section may be granted subject to such conditions as the court thinks fit.

 

14.— Interim orders for maintenance.

(1) Where leave is granted under section 13 above for the making of an application for an order for financial relief and it appears to the court that the applicant or any child of the family is in immediate need of financial assistance, the court may make an interim order for maintenance, that is to say, an order requiring the other party to the marriage to make to the applicant or to the child such periodical payments, and for such term, being a term beginning not earlier than the date of the grant of leave and ending with the date of the determination of the application for an order for financial relief, as the court thinks reasonable.

 

(2) If it appears to the court that the court has jurisdiction to entertain the application for an order for financial relief by reason only of paragraph (c) of section 15(1) below the court shall not make an interim order under this section.

 

(3) An interim order under subsection (1) above may be made subject to such conditions as the court thinks fit.

 

15.— Jurisdiction of the court.

(1) Subject to [subsections (1A) and (2)] ¹ below, the court shall have jurisdiction to entertain an application for an order for financial relief if any of the following jurisdictional requirements are satisfied, that is to say—

(a) either of the parties to the marriage was domiciled in England and Wales on the date of the application for leave under section 13 above or was so domiciled on the date on which the divorce, annulment or legal separation obtained in the overseas country took effect in that country; or

(b) either of the parties to the marriage was habitually resident in England and Wales throughout the period of one year ending with the date of the application for leave or was so resident throughout the period of one year ending with the date on which the divorce, annulment or legal separation obtained in the overseas country took effect in that country; or

(c) either or both of the parties to the marriage had at the date of the application for leave a beneficial interest in possession in a dwelling-house situated in England or Wales which was at some time during the marriage a matrimonial home of the parties to the marriage.

 

(1A) If an application or part of an application relates to a matter where jurisdiction falls to be determined by reference to the jurisdictional requirements of the Maintenance Regulation and Schedule 6 to the Civil Jurisdiction and Judgments (Maintenance) Regulations 2011, those requirements are to determine whether the court has jurisdiction to entertain the application or that part of it.

 

(2) & (3) …

 

16.— Duty of the court to consider whether England and Wales is appropriate venue for application.

(1) Subject to subsection (3), before making an order for financial relief the court shall consider whether in all the circumstances of the case it would be appropriate for such an order to be made by a court in England and Wales, and if the court is not satisfied that it would be appropriate, the court shall dismiss the application.

 

(2) The court shall in particular have regard to the following matters—

(a) the connection which the parties to the marriage have with England and Wales;

(b) the connection which those parties have with the country in which the marriage was dissolved or annulled or in which they were legally separated;

(c) the connection which those parties have with any other country outside England and Wales;

(d) any financial benefit which the applicant or a child of the family has received, or is likely to receive, in consequence of the divorce, annulment or legal separation, by virtue of any agreement or the operation of the law of a country outside England and Wales;

(e) in a case where an order has been made by a court in a country outside England and Wales requiring the other party to the marriage to make any payment or transfer any property for the benefit of the applicant or a child of the family, the financial relief given by the order and the extent to which the order has been complied with or is likely to be complied with;

(f) any right which the applicant has, or has had, to apply for financial relief from the other party to the marriage under the law of any country outside England and Wales and if the applicant has omitted to exercise that right the reason for that omission;

(g) the availability in England and Wales of any property in respect of which an order under this Part of this Act in favour of the applicant could be made;

(h) the extent to which any order made under this Part of this Act is likely to be enforceable;

(i) the length of time which has elapsed since the date of the divorce, annulment or legal separation.

 

(3) If the court has jurisdiction in relation to the application or part of it by virtue of the Maintenance Regulation and Schedule 6 to the Civil Jurisdiction and Judgments (Maintenance) Regulations 2011, the court may not dismiss the application or that part of it on the ground mentioned in subsection (1) if to do so would be inconsistent with the jurisdictional requirements of that Regulation and that Schedule.

 

(4) In this section, “the Maintenance Regulation” means Council Regulation (EC) No 4/2009 including as applied in relation to Denmark by virtue of the Agreement made on 19th October 2005 between the European Community and the Kingdom of Denmark.

 

17.— Orders for financial provision and property adjustment.

(1) Subject to section 20 below, on an application by a party to a marriage for an order for financial relief under this section, the court may—

(a) make any one or more of the orders which it could make under Part II of the 1973 Act if a decree of divorce, a decree of nullity of marriage or a decree of judicial separation in respect of the marriage had been granted in England and Wales, that is to say—

(i) any order mentioned in section 23(1) of the 1973 Act (financial provision orders); and

(ii) any order mentioned in section 24(1) of that Act (property adjustment orders);

(b) if the marriage has been dissolved or annulled, make one or more orders each of which would, within the meaning of that Part of that Act, be a pension sharing order in relation to the marriage; and

(c) if the marriage has been dissolved or annulled, make an order which would, within the meaning of that Part of that Act, be a pension compensation sharing order in relation to the marriage.

 

(2) Subject to section 20 below, where the court makes a secured periodical payments order, an order for the payment of a lump sum or a property adjustment order under subsection (1) above, then, on making that order or at any time thereafter, the court may make any order mentioned in section 24A(1) of the 1973 Act (orders for sale of property) which the court would have power to make if the order under subsection (1) above had been made under Part II of the 1973 Act.

 

18.— Matters to which the court is to have regard in exercising its powers under s. 17.

(1) In deciding whether to exercise its powers under section 17 above and, if so, in what manner the court shall act in accordance with this section.

 

(2) The court shall have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen.

 

(3) As regards the exercise of those powers in relation to a party to the marriage, the court shall in particular have regard to the matters mentioned in section 25(2)(a) to (h) of the 1973 Act and shall be under duties corresponding with those imposed by section 25A(1) and (2) of the 1973 Act where it decides to exercise under section 17 above powers corresponding with the powers referred to in those subsections.

 

(3A)-(7) … [includes considerations in respect of orders in favour of a child]

 

20.— Restriction of powers of court where jurisdiction depends on matrimonial home in England or Wales.

(1) Where the court has jurisdiction to entertain an application for an order for financial relief by reason only of the situation in England and Wales of a dwelling-house which was a matrimonial home of the parties, the court may make under section 17 above any one or more of the following orders (but no other)—

(a) an order that either party to the marriage shall pay to the other such lump sum as may be specified in the order;

(b) an order that a party to the marriage shall pay to such person as may be so specified for the benefit of a child of the family, or to such a child, such lump sum as may be so specified;

(c) an order that a party to the marriage shall transfer to the other party, to any child of the family or to such person as may be so specified for the benefit of such a child, the interest of the first-mentioned party in the dwelling-house, or such part of that interest as may be so specified;

(d) an order that a settlement of the interest of a party to the marriage in the dwelling-house, or such part of that interest as may be so specified, be made to the satisfaction of the court for the benefit of the other party to the marriage and of the children of the family or either or any of them;

(e) an order varying for the benefit of the parties to the marriage and of the children of the family or either or any of them any ante-nuptial or post-nuptial settlement (including such a settlement made by will or codicil) made on the parties to the marriage so far as that settlement relates to an interest in the dwelling-house;

(f) an order extinguishing or reducing the interest of either of the parties to the marriage under any such settlement so far as that interest is an interest in the dwelling-house;

(g) an order for the sale of the interest of a party to the marriage in the dwelling-house.

 

(2) Where, in the circumstances mentioned in subsection (1) above, the court makes an order for the payment of a lump sum by a party to the marriage, the amount of the lump sum shall not exceed, or where more than one such order is made the total amount of the lump sums shall not exceed in aggregate, the following amount, that is to say—

(a) if the interest of that party in the dwelling-house is sold in pursuance of an order made under subsection (1)(g) above, the amount of the proceeds of the sale of that interest after deducting therefrom any costs incurred in the sale thereof;

(b) if the interest of that party is not so sold, the amount which in the opinion of the court represents the value of that interest.

 

(3) Where the interest of a party to the marriage in the dwelling-house is held jointly or in common with any other person or persons—

(a) the reference in subsection (1)(g) above to the interest of a party to the marriage shall be construed as including a reference to the interest of that other person, or the interest of those other persons, in the dwelling-house, and

(b) the reference in subsection (2)(a) above to the amount of the proceeds of a sale ordered under subsection (1)(g) above shall be construed as a reference to that part of those proceeds which is attributable to the interest of that party to the marriage in the dwelling-house.

62. There are other miscellaneous provisions set out in Part III of the 1984 Act. As will be seen from the provisions set out above, the powers under that Act may be exercised in favour of a party to overseas proceedings who satisfies the specified jurisdictional requirements under section 15 at the time when an application is made under that Act, irrespective of whether those jurisdictional requirements would have been satisfied at the time of the overseas proceedings.

 

63. The scheme of Part III of the 1984 Act and the proper application and purpose of that scheme was discussed in detail by the Court of Appeal, then the Supreme Court, in Agbaje v. Agbaje [2010] 1 A.C. 628, including discussion of the relevance of the doctrines of forum non conveniens and comity in that context. The conclusions as to the proper approach were set out in the following way:

The proper approach

[71] To take up some of the points made in the preceding paragraphs, the proper approach to Part III simply depends on a careful application of sections 16, 17 and 18 in the light of the legislative purpose, which was the alleviation of the adverse consequences of no, or no adequate, financial provision being made by a foreign court in a situation where there were substantial connections with England. There are two, interrelated, duties of the court before making an order under Part III. The first is to consider whether England and Wales is the appropriate venue for the application: 16(1). The second is to consider whether an order should be made under section 17 having regard to the matters in section 18. There are two reasons why the duties are interrelated. First, neither section 16(2) nor section 18(2)(3) refers to an exhaustive list of matters to be taken into account. Section 16(1) directs the court to have regard to “all the circumstances of the case” and section 16(2) refers the court to certain matters “in particular”. Second, some of the matters to be considered under section 16 may be relevant under section 18, and vice versa. An obvious example would be that section 16(2)(e) refers the court to the financial provision which has been made by the foreign court. Plainly that would be relevant under section 18. So also the direction in section 18(6) to the court, in considering the financial resources of a party, to have regard to whether an order of a foreign court has been complied with would plainly be relevant in considering whether England is the appropriate venue.

 

[72] It is not the purpose of Part III to allow a spouse(usually, in current conditions, the wife) with some English connections to make an application in England to take advantage of what may well be the more generous approach in England to financial provision, particularly in so-called big-money cases. There is no condition of exceptionality for the purposes of section 16, but it will not usually be a case for an order under Part III where the wife had a right to apply for financial relief under the foreign law, and an award was made in the foreign country. In such cases mere disparity between that award and what would be awarded on an English divorce will certainly be insufficient to trigger the application of Part III. Nor is hardship or injustice (much less serious injustice) a condition of the exercise of the jurisdiction, but if either factor is present, it may make it appropriate, in the light of all the circumstances, for an order to be made, and may affect the nature of the provision ordered. Of course, the court will not lightly characterise foreign law, or the order of a foreign court, as unjust.

 

[73] The amount of financial provision will depend on all the circumstances of the case and there is no rule that it should be the minimum amount required to overcome injustice. The following general principles should be applied. First, primary consideration must be given to the welfare of any children of the marriage. This can cut both ways as the children may be being supported by the foreign spouse. Second, it will never be appropriate to make an order which gives the claimant more than she or he would have been awarded had all proceedings taken place within this jurisdiction. Third, where possible the order should have the result that provision is made for the reasonable needs of each spouse. Subject to these principles, the court has a broad discretion. The reasons why it was appropriate for an order to be made in England are among the circumstances to be taken into account in deciding what order should be made. Where the English connections of the case are very strong there may be no reason why the application should not be treated as if it were made in purely English proceedings. The full procedure for granting ancillary relief after an English divorce does not apply in Part III cases. The conditions which can be attached to leave, together with the court’s case management powers, can be used to define the issues and to limit the evidence to be filed, as was done by Munby J in this case. This enables the jurisdiction to be tailored to the needs of the individual case, so that the grant of leave does not inevitably trigger a full blown claim for all forms of ancillary relief.

Section 15 of, and Schedule 1 to, the Children Act 1989

 

64. Section 15 of the Children Act 1989 refers to, and gives effect to, the provisions set out in Schedule 1 to that Act. Those provisions confer power on the English courts to make orders for the financial benefit of a child against a parent of that child. The power exists irrespective of whether the child is legitimate or illegitimate.

 

65. The type of orders that can be made are, in effect, the same as those which can be made for the benefit of a child under the Matrimonial Causes Act 1973, but in practice the court does not usually make substantial provision by way of capital under this scheme and although it will make provision for the housing of a child, if necessary, it will only do that by way of an arrangement under which the capital value of the property reverts to the payer when the child reaches its majority or completes its education or training. This also ensures that no separate benefit accrues to the custodial parent by a side-wind.

 

66. However, the courts will, in an appropriate case, include a “carer’s allowance” in the provision made for the child, to cover outgoings of the custodial parent, and that can be substantial in quantum in some cases: see Re P (Child: Financial Provision) [2003] 2 F.L.R. 865, CA.

 

67. When considering what, if any, order to make pursuant to Schedule 1, the court is required, as in proceedings under Part II of the Matrimonial Causes Act 1973, to take account of all the circumstances of the individual case, including in particular certain specified matters, such as the financial resources of the parties.

 

68. As to jurisdiction, the provisions of Article 3 of the EC Maintenance Regulation apply where what is sought by way of a claim under Schedule 1 to the 1989 Act is “maintenance” (in the extended sense explained by the CJEU in Van den Boogard v. Laumen [1997] Q.B. 759, and which will usually be the case in such applications). Article 3 of the Maintenance Regulation provides as follows:
69. In matters relating to maintenance obligations in Member States, jurisdiction shall lie with:

(a) the court for the place where the defendant is habitually resident, or

(b) the court for the place where the creditor is habitually resident, or

(c) the court which, according to its own law, has jurisdiction to entertain proceedings concerning the status of a person if the matter relating to maintenance is ancillary to those proceedings, unless that jurisdiction is based solely on the nationality of one of the parties, or

(d) the court which, according to its own law, has jurisdiction to entertain proceedings concerning parental responsibility if the matter relating to maintenance is ancillary to those proceedings, unless that jurisdiction is based solely on the nationality of one of the parties.

 

Miscellaneous considerations as to the avoidance of the effects of the exercise of the English jurisdiction

 

69. The question of the identification and value of the financial resources that are available for redistribution will arise in relation to the exercise by the English courts of each of the powers that are referred to above. Financial resources that have been settled on trusts in respect of which the Respondent party has no beneficial entitlement will not be treated as a financial resource of that party, even if he/she has provided the funding for the trusts, unless the trust is a “sham” (in the true legal sense of that word), or the disposition to the trust has been made with the intention of defeating a claim by the other party (in which case the court’s powers to set aside any disposition made with such an intent may be utilised). However, depending on the particular circumstances, even funding for a genuine trust may be treated notionally as if it were still available to the funding party.

 

70. It should also be borne in mind that a trust which is nuptial in character can be varied under the “variation of nuptial settlement” powers of the court, even if it is an offshore trust (although separate issues as to enforcement may arise in that regard). Furthermore, even the potential for the receipt by a party of discretionary benefits from a trust can be treated by the court as a financial resource if that accords with the underlying reality of the position.

 

71. The courts will also, where appropriate, examine closely the question of whether particular assets held by trusts are in reality held on a resulting trust for the benefit of a party who has provided that asset or the funding for it.

 

72. A company is a separate legal entity from a party, but the value of a shareholding by a party in a company will be taken into account as a financial resource and the court has the power to order the transfer of such shareholdings within its powers to order the transfer of any sort of property, although it does not have the power to order the transfer of assets that are beneficially owned by a company (because the company is a separate legal entity from those who own it).

 

73. The mere ordering of the transfer of shares in an offshore company may be pointless if there is no way of enforcing that order, but in Prest v. Petrodel Resources Ltd and others [2013] 2 A.C. 415, the Supreme Court concluded that, on the facts of the particular case, the court was entitled to presume that certain properties held in the names of offshore companies were in fact held on trust for the husband in the case and could thus be the proper subject of transfer of property orders; and insofar as those properties were physically located in England it was possible to enforce such orders. The same practical result could not be achieved in relation to property located offshore (absent the availability of assistance from the legal system in the relevant offshore jurisdiction) or in respect of property in respect of which it could be demonstrated that the beneficial interest was truly held by a company, even though funded initially by a party to the matrimonial proceedings.

 

74. It will be seen that if there are no assets located in England it may be difficult to achieve practical enforcement of any financial order made by the English courts, although the power to imprison under the Judgment Summons procedure, a defaulter who is within the jurisdiction should be borne in mind.

 

75. Finally, as explained above, the English courts will in certain circumstances hold a party to a nuptial agreement, so the making of a nuptial agreement may be a way to achieve a measure of predictability of outcome and to limit financial liability (or, from the perspective of the other party, to specify at least a minimum award) in the event of future divorce proceedings in England. However, in that regard, the factors identified above as being capable of affecting the validity and/or enforceability of such an agreement should be taken into account when negotiating and drafting the relevant instrument.

 

76. As to whether it will it be desirable for a party to have a nuptial agreement (whether pre-nuptial or post-nuptial) also depends on which spouse it is that is considering the question. The problem is that is often/usually difficult to know how things will turn out in the future and whether a nuptial agreement (or particular terms) will be advantageous or disadvantageous for a particular client. However, the most obvious situation where such an agreement is likely to be of value is if a party wishes to protect wealth that is brought into a marriage at the outset, or wealth that is acquired subsequently and to which the other party has made no contribution, whether direct or indirect. The Miller/McFarlane principles, and subsequent authorities, go some way towards protecting such wealth, but a nuptial agreement may well give additional protection in that situation.

 

77. Advising parties on nuptial agreements may also present the practical difficulty that the client finds it difficult in the circumstances to focus on the issues in the way that a person might who is entering into a commercial business agreement.

 

78. It is certainly essential to advise clients of the sort of difficulties that a nuptial agreement may create or give rise to, AND that the effectiveness of any given agreement will be uncertain, AND that the relevant law may change in the future.

 

79. Those who advise on and/or draft nuptial agreements should also ensure that they have adequate and appropriate professional indemnity insurance, in what may prove to be a high risk area.

 

80. The draftsman of a nuptial agreement should create an individual bespoke agreement to address the particular circumstances of an individual situation. Precedents are available, and are useful, but they should never be adopted willy-nilly. Of course, it may not be in the interests of one party to have a well-drawn document, because that party may wish to have an “escape route”. That situation will create difficult ethical problems.

 

81. In crafting a nuptial agreement, the draftsman should aim to address, inter alia, all of the potential undermining factors that are identified in the Radmacher decision, and should ensure that practical steps are taken to minimise the risks of the agreement being undermined (e.g. by ensuring that both parties have good quality independent advice, that there is full disclosure, and that there is an appropriate “cooling off” period.

 

82. The draftsman should also consider the possibilities of a need for multi-jurisdiction provisions and for provisions that are applicable during the subsistence of the marriage and/or applicable during separation without divorce, and/or on death before divorce.

 

83. A nuptial agreement may, of course contain all manner of individual and esoteric provisions, such as time limits on the effectiveness of the agreement, or the effects of the passage of specified periods of time (e.g. increasing provision year by year), or even as to the consequences of specified behaviour (e.g. no financial provision in the event of adultery, or provision that is conditional on adequate performance of “matrimonial duties”!), but some such provisions may be regarded as intrinsically unfair or abhorrent by the courts, and the courts are unlikely to be any more prepared to investigate disputed issues of conduct in the context of a nuptial agreement than they are generally in matrimonial finance cases (see paras [179] and [180] in Radmacher).

 

84. A nuptial agreement is certainly unromantic; it will have importance in any financial dispute on divorce, but it cannot be guaranteed to provide the ultimate answer, or avoid litigation in any given case – far from it. But does such an agreement undermine, or does it support, the institution of marriage? In that regard, Baroness Hale said: “Marriage still counts for something in the law of this country and long may it continue to do so” (para. [195] in Radmacher).

 

 

 

1 King’s Bench Walk,                                                                       James Turner QC

Temple,                                                                                              jturner@1kbw.co.uk

London EC4Y 7DB.                                                                          November 2014