Jersey Unreported Judgments

[2010]JRC082A

royal court

(Samedi Division)

26^th April 2010

Before     :

V. J. Obbard, Registrar, sitting alone.

 

IN THE MATTER OF L

Obligation for disclosure up to the date of hearing despite lapse of time and existence of Trust

Advocate M. H. Temple for the Petitioner.

Advocate M. P. Renouf for the Respondent.

judgment

the Registrar:

1.        A difficulty has arisen in relation to what disclosure is still required from the respondent (husband) in relation to the re-hearing of the petitioner's (wife's) application for ancillary relief. 

2.        The case is unusual.  On 14^th January, 2002, the Registrar made a final order on ancillary matters, based on the parties' financial disclosure at that time, for the husband to continue to make spousal maintenance payments to the wife and child maintenance for their children, but no payment of any lump sum.  Although it was clear he enjoyed an affluent lifestyle derived from high earnings as an accountant, it was not clear that the husband was in a position to provide her with any capital sum.  He insisted that he was only a salaried partner in his firm and that the equity partners would not allow disclosure of the accounts. 

3.        The wife applied on 5^th May, 2009, to the Inferior Number of the Royal Court to set aside the judgment of the Registrar on the grounds of material non-disclosure.  Quoting from the findings of the Court:-

"The respondent gave evidence that he was a salaried partner of a firm known as LN and that he had no equity interest therein.  The respondent did not mention that he was a full partner in the partnership, that he had entered into a partnership agreement in the year 2000, that he had access to the accounts of the partnership or that any alleged restriction effecting his interest on the "goodwill" of that business was due to come to an end within six months of the date of the hearing.  The respondent did not disclose any accounts in relation to the partnership or its underlying businesses, despite an order having been made for he disclosure of certain accounting information, and did not disclose a copy of the partnership agreement which document only came within the possession of the respondent in April 2008.  The respondent still declines to disclose the relevant accounts."

4.        Moreover, quoting from the conclusion of the Bailiff's written judgment:-

"We have to decide whether the material non-disclosure by the husband should lead us to set aside the order of 14^th January, 2002, and direct that the matter be re-heard. 

We have no hesitation in concluding that it should.  As we have already pointed out, the case was decided by the Registrar on the basis of the total capital available to the parties being in the region of £100,000, reflecting the equity in the flat.  In fact, unknown to the wife and the Registrar (but known to the husband) the strong likelihood was that within the near future he would become entitled to a one-fifth interest in the capital value (goodwill as it was described) of the business.  The H Agreement clearly envisages that this would most probably occur on 30^th June, 2002, although there was power to postpone it with the agreement of the partners and there was a remote possibility of the husband being asked to leave the partnership without any goodwill.  However, N's health was poor and the clear intention, even on the husband's interpretation, was that he and O would acquire their share in the goodwill when Mr N retired.  In fact, the events duly came to pass in January 2003, rather than June 2002.  At that stage the husband became entitled to a capital asset which, on the limited information available to him, Mr R has valued at approximately £1.3 million.  We accept that this was not an easily realisable asset in that it represented a minority interest in the business from which the husband earned his livelihood.  Nevertheless, we regard it as inconceivable that the Registrar would have made exactly the order which he did had he known of the strong likelihood of this substantial capital asset becoming available to the husband within the foreseeable future."

5.        Again, quoting from the judgment, this is what happened next:-

"Following an approach in March 2005, H Trustees was sold to X Limited in September 2005.  At that stage the husband had a one-fifth share of the business and the amount received for that share was £2.342m.  In June 2005, the husband settled his interest on trust for his then partner[S] and their daughter.  He asserts that he created this settlement because, once he was aware that the trust company might be sold, he expected that the wife would try to obtain additional monies for herself.  The husband emphasises - although no figures have been produced - that the business had grown considerably between 2002 and 2005 and that accordingly, its value in January 2002, would have been very much less." 

6.        Since the judgment was written, an Order of Justice, filed by the wife and signed by the Bailiff (whose judgment I have just quoted) placed an injunction on the husband, restraining him from disposing of the assets held by him personally or in which he has a direct interest, including assets held in his capacity as purported sole trustee of the trust.  The order goes on to require disclosure from the trust, including details of all monies paid into the trust and distributed from it since its establishment (including provision of copies of bank statements, assets, schedules, financial statements and accounts since its purported establishment. 

7.        In fact the husband's relationship with his partner S ended in 2007.  S commenced her own proceedings (under Court file 2007/48) against the trust. 

8.        On 15^th September, 2009, the husband applied to the Registrar for directions for the re-hearing of the petitioner's application for ancillary relief.  On 10^th February, 2010, the parties agreed that certain preliminary issues should be determined by the Registrar.  These were:-

(i)        What is the appropriate date for determining the value of the assets of the parties? 

(ii)       What is the period and what are the assets for which the parties are required to give full disclosure? 

9.        According to Advocate Renouf for the husband, the Court must choose a date upon which the parties must arrange to value the parties' assets.  Whatever the value of assets at that chosen time, a secondary revaluation can take place to update the value as at today's date.  Either the chosen date must be the date of the original hearing (14^th January, 2002,) or a year later when the husband actually became entitled to the shares in his business (January 2003), or now, or any chosen date in between.  However, if the Court imposes a date after the creation of the Rozel trust which would require the disclosure of the confidential trust records of the Rozel Trust, it is said that this will set loose an "enormous case" which will involve the lawyers acting for the beneficiaries of the trust.  Advocate Renouf argues that, if this is so, the legal costs will be "huge", the requirement for disclosure will be disproportionate and it will not do anyone any good.  8 years have already elapsed since the original hearing and any order must be "proportionate". 

10.      However, according to Advocate Temple for the wife, relevant disclosure will be necessary up to the date of retrial, but will not be oppressive. The essential disclosure required from the husband will be:-

(i) "Documentary evidence of what assets were purportedly settled in the Rozel Trust and the terms of settlement (including the Trust Deed).

(ii) Documentary evidence of the total consideration received for the respondent's business assets, which were purportedly settled in the Rozel Trust, including the Sale Agreement (or any such similar document) for sale of his business to Capita and documentary evidence of the total consideration ultimately paid (and if more than the £2.432m that respondent says was put into the Rozel Trust, documentary evidence of where this has gone).

(iii) Confirmation that all such consideration mentioned in paragraph 2, above was notionally paid into the Trust and how it was held.

(iv) Documentary evidence of how the assets of the Rozel Trust have been applied since receipt and where they are now (bank statements/accounts).

(v) Documentary Evidence to enable it to be established that the respondent has not diverted assets to himself from the Rozel Trust or otherwise personally benefited from it.

(vi) Disclosure regarding the £885,429 payment away on 28^th March, 2007 (account n: 31442918).

(vii) The usual ancillary relief disclosure of the personal assets of the respondent."

This disclosure, it is argued by the wife, is essential in order to do justice between the parties. 

11.      None of the cases cited by either of the parties' advocates deal specifically with the issue of disclosure and how far is it necessary to trace a party's finances since separation.  All cases cited were those in which the Court was dealing with the resolution of ancillary matters after disclosure had already been achieved.  In this case I have to deal with this basic principle; Is it right that the husband has to reveal exactly what he has done with the capital interest he had (but did not disclose) in January 2002?

The husband's cases

12.      In support of his case, Advocate Renouf referred to the case of P-S-v-C [2007] JRC 153 para 4 and he maintained that the Court, on that occasion, dealt with exactly the issue I am asked to decide in this case.  He cites the judgment at paragraph 4:-

"Disagreement has arisen between the parties as to the date at which the husband's assets should be valued.  Mr Robinson for the wife contended that the valuation should take place as at the date of the original trial in respect of which the material non-disclosure took place, i.e. April 2003.  Mr O'Connell for the husband contended that the assets should be valued as at the present time or, more specifically, at a current date to be determined by me at a subsequent directions hearing."

And at paragraphs 6-8:-

"6. Counsel for the husband submitted that it was the established and invariable position in this type of case that the Court sought to assess the value of assets at the current time.  Counsel drew my attention to paragraph 18.48 of Rayden and Jackson on Divorce and Family Matters, 18^th edition, Volume 1 which states -

"If the order is set aside, in deciding what order to make in its stead, the court has to reconsider the matter afresh in the light of the facts known at the date of the reassessment and having regard to all the criteria in s25(2) of the MCA 1973".  

This passage does not seem to me, in the context of this summons, to advance the matter one way or another.  Clearly the Court must "reconsider the matter afresh".  What is in issue, however, is whether the assets are to be valued at the date of the original trial or at the current time. 

7. All the cases to which reference is made in a footnote to that passage from Rayden and Jackson concern a "supervening event" type of case.  A supervening event type of case is where one of the parties dies shortly after judgment, or some other new event occurs which materially affects the basis upon which the judgment was given.  A case of fraudulent non-disclosure, as is the case here, is entirely different.  In a supervening event type of case, the Court will usually consider all the facts then current, and apply its discretion to those new circumstances.  Even there, however, caution is required.  As Thorpe LJ stated in Williams-v-Lindley [2005] 2 FLR 710 -

"In supervening event cases the law is clear, thanks to the speech of Lord Brandon of Oakbrook in Barder-v-Caluori [1988] AC 20 [1987] 1 FLR 480 and the subsequent decision of this court in Smith-v-Smith (Smith and Other Intervening) [1992] Fam 69, [1991] 2 FLR 432.  However, how the court undertakes the determinations required by those two cases should not be too rigidly prescribed.  Great flexibility is necessary to accommodate the widely differing facts and circumstances that inevitably arise.  Much will depend upon the impact of the supervening event.  The case of Smith-v-Smith (Smith and Others Intervening) illustrates a seismic impact (the suicide of the wife 6 months after the order).  Much will depend upon the lapse of time between the order invalidated and the reassessment."

8. Even in supervening event cases, the Court will sometimes reconsider the matter as at the time of the original order, but taking into account the new factor or factors..."  

13.      The Bailiff, it seems to me, is making the point in this judgement, that, if it is sought to set aside an order and replace it with a new one, on the grounds that there has been a "supervening event" of such magnitude that the original order is unfair, the asset value relied upon will usually be the value at the time of the second hearing.  But, even then, circumstances may dictate otherwise. 

14.      P-S-v-C was not a supervening event type of case, so the Bailiff felt free of any constraint and he chose to value assets at the time of the original hearing.  Indeed, he goes on to say, quoting Thorpe L J in Williams-v-Lindley [2005] 2 FLR 710, that:-

"great flexibility is necessary to accommodate the widely differing facts and circumstances that inevitably arise."

15.      It is true that both in P-S-v-C and in this case, a wife has applied for a reassessment of her case on the grounds that her husband had either misrepresented the truth, or failed to give appropriate disclosure of relevant facts.  But there the similarity ends.  In my judgement, the differences are more striking.  In P-S-v-C, the husband wanted to value his assets at the time of the second hearing, because they had suffered a decline.  In this case, the husband's fortunes have greatly increased, so, for the second hearing, he wants to give as little disclosure of his present circumstances as are judged to be strictly relevant to the reassessment of the order made in 2002.  In P-S-v-C the Bailiff rejected the husband's argument.  It does not follow that I should accept it here. 

16.      Advocate Renouf does not want to accept any concept of flexibility and, on the contrary, writes in his skeleton argument:-

"What is, however, clear is that fundamentally there is one date at which the Court has to decide the assets are to be re-assessed, and not two dates or (worse still) an ambulatory period of a decade over which such an enquiry might range."  

17.      In support of this contention, he cites the report in note form of Crichton-v-Parker-Smith in JLR [2008] N13 (Vaughn, Jones and NcNeill JJA). The passage reads:-

"Whether the re-determination of the lump sum to be awarded to the wife should be conducted on the basis of the valuation of the husband's assets at the date of the original trial or at the date of the re-determination was a case management decision and not a decision and not a decision on a question of law.  Good case management was important in ancillary relief cases and, in identifying issues in such cases, the courts were involved in case management rather than the determination of pure issues of law (Crossley-v-Crossley, [2008] 1 FCR 323, applied)."  (His emphasis added.)" 

18.      The Court is saying that there is no legal duty upon the Court to take either date - the matter is a case management issue.  The only duty upon the Court is to manage such issues prior to trial.  So, whereas Advocate Renouf is suggesting that, in all cases, the Court must decide upon a date when asset values must be crystallised, I disagree. 

19.      The report of the Crichton case (above) refers to the case of Crossley-v-Crossley.  The head note of the report of that case at 2008 1 FLR 1467, reads:-

"The FPR 1991 were not intended to be a straitjacket precluding sensible case management.  Applying the overriding objective in r.2.51D, it was very important that judicial case management should seek to save expense, should seek to deal with the case in way proportionate to the financial position of the parties, should allot to each case an appropriate share of the Courts resources, and should identify the issues at an early date, in particular regulating the extent of the disclosure of documents and expert evidence so that they were proportionate to the issues in question.  The case management in the instant case had been an admirable illustration of judicial initiative and good sense."

20.      The facts of the Crossley case were that the judge at first instance, (the application for ancillary relief having been transferred immediately to the High Court) gave directions for a preliminary issue to be determined before the completion of full affidavits of means.  This resulted in an immediate appeal to the Court of Appeal.  There was no issue at all about valuation dates. 

21.      Advocate Renouf's insistence on a valuation date strikes me as out of touch with another passage (paragraph 11) in the same judgement in P-S-v-C which he cites as if it is in his favour:-

"In my judgement, there is no hard and fast rule as to how to approach cases where there has been a material non-disclosure and the original order has been set aside.  Each case should be decided on its own facts.  The overriding imperative is to do justice between the parties, and to seek fairness in arriving at an award."

22.      However, the condensed report of the same case in JLR [2007] Note 51 alters the Bailiff's words to:-

"There is no hard and fast rule as to whether the spouses assets should be valued as at the date of the original trial (when the material non-disclosure was made) or at the current time and each case should be decided on its own facts (T-v-T (Consent order: Procedure to set aside), [1996] 2FLR 640, considered; Manley-v-Bell [2007] JLR N 9, considered)."

Needless to say, I prefer the original version. 

23.      Thus, to summarise, the effect of the Bailiff's judgement and the judgement in note form of the Jersey Court of Appeal in the same case is this:-

(i)        There is no hard and fast rule as to how to approach cases where there has been a material non-disclosure and the original order has been set aside;

(ii)       If there has been a "supervening event" it is more likely that an asset value will be preferred at the time of the second trial;

(iii)      If, on the contrary, there has not been a supervening event, the Court is free to choose asset values as may be just to fit the justice of the case;

(iv)      The exercise of preferring one date rather than another to value assets is not a matter of law and so is not a requirement in every case.  Rather, it is a case management issue, to be dealt with on a judge's initiative upon a case by case basis. 

The wife's cases

24.      The wife relies on a number of English cases:-

(i)        Charman-v-Charman (No.4) [2007] 1 FLR 1246:-

"The inquiry is always in two stages namely computation and distribution; logically the former precedes the letter."

(ii)       N-v-N (Financial Provision: Sale of Company) [2001] 2 FLR 69:-

"Mr. Mostyn urges me to reject this argument completely became, as he rightly points out, traditionally these applications have always been approached on the basis of the values existing at the date when the hearing takes place.

I am quite sure that even now in most cases that is the correct date when valuation should be applied.  But I think the Court must have an eye to the valuation at the date of separation where there has been a very significant change accounted for by more than just inflation or deflation."

(iii)      Cowan-v-Cowan [2001] 2 FLR 192:-

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

(iv)      J-v-J [2009] EWHC 2645 FAM:-

"323    The date at which the assets to be taken into account are to be assessed and valued.  In other words what is to be identified as the property that is the subject of distribution applying s. 25 MCA.  This identifies the extent and value of the assets to be considered, and thus the starting point for a departure for good reason (e.g. the existence of pre-acquired or gifted assets) from equality within the application of the sharing principle on a non discriminatory basis.  In my view, some aspects of the questions that arise in respect of such a departure because there are pre-acquired assets overlap with issues that arise in respect of the approach to be taken to post separation properly flagged up in Charman (No 4) as a difficult and future issue (see paragraph 104).

324     In my judgment, the relevant date is the date of the trial and not an earlier cut off point by reference to separation, or some other event.  Those events, and what happened before and after them may be relevant in identifying what award should be made, but that is part of the second stage of the exercise."

25.      Advocate Renouf urged me not to place reliance on the English cases because they do not concern situations, like here, in which an order has been set aside.  However, as I pointed out earlier, none of the cases, including the cases cited by him, in fact deal specifically with the extent of disclosure required before a case comes to a hearing (also the situation here).  Indeed, the learned judges in Crichton-v-Parker Smith indicated that any such dispute was a case management issue, not a matter of law. 

My decision

26.      Whatever the similarities or differences which emerge on a comparison of the cases, it is clear, for practical reasons and in the interest of doing justice between the parties, that there has to be a full assessment of assets in order for the sharing process to be carried out.  Too much reliance on local case law may lead to extreme or unreliable results for the simple reason that with a small number of locally reported cases, there may be a tendency to leap to the wrong conclusion if any case has any superficial similarity to the case before the Court.  It would be artificial to exclude disclosure of any kind after a certain date.  I do not think the Bailiff in P-S-v-C had any such intention.  True, the costs of pursuing assets a long time after separation, might be difficult to justify.  If assets have been lost, it might be difficult to justify a full scale investigation as to why, unless it appears that a party has deliberately lost them in order to frustrate the claim of the other party. 

27.      In this case the husband has, on the contrary, clearly prospered.  He has an estimated total net income from his business for the next 12 months of £352,759.  He will maintain that his prosperity all derives from his efforts since the parties' separation, that he has declared all the cash which he obtained from the sale of his shares in CHP, that this cash was placed on trust for his partner and daughter and that he has declared what is in the trust now. 

28.      However, there remains a dispute as to what disclosure remains to be made before a hearing can take place. 

29.      The wife will argue that she was wrongly deprived of any capital in 2002, with a result that the husband was able to pool all his resources, first in CHP, the Trust and his present business.  She will say that his prosperity is founded on her being starved of her rightful share of assets in 2002. 

30.      The trust is relevant because it is said on the wife's behalf that:-

(i)        the trust is a sham to disguise what in truth are assets managed by the husband in his own name,

(ii)       the transaction setting it up was intended to defeat the wife's claim as a creditor.  As such, she is entitled to an interest in the proceeds of sale of CHP shares to the trust; and

(iii)      she has been deprived of a matrimonial asset, rightly hers, but now invested in the trust fund.  She is entitled to a share in the growth of that asset. 

31.      Some credence may be given to these claims if one just considers the extraordinary transactions of the husband a mere 9 days after the hearing in January 2002, (at which no capital was awarded to the wife, because it was said he had no interest in any capital) when he took out 2 mortgages, each in the sum of £350,000, both of which were secured on properties in the name of his partner. 

32.      It is the clear need of the wife to obtain evidence of what assets were settled in the trust, evidence of the consideration obtained for the shares in CHP, confirmation that the consideration was paid to the trust, and some evidence of how the assets have been applied.  Without such evidence, it is difficult to see how she can obtain the justice she craves. 

33.      Insofar as it is alleged that the trust is a sham, this decision may have consequences in requiring the wife to pursue her claim before the Inferior Number and it may be that trust proceedings may have to be consolidated with matrimonial proceedings.  However, such matters will not be a decision for me. 

34.      Last, but not least, I must set out the beginning of Article 29 of the Matrimonial Causes (Jersey) Law 2005 which reads:-

"Financial provision for party to a marriage in cases of divorce etc.

(1) Where a decree of divorce, nullity of marriage or judicial separation has been made, the court may, having regard to all the circumstances of the case including the conduct of the parties to the marriage insofar as it may be inequitable to disregard it and to their actual and potential financial circumstances, order...." (My emphasis added.)

35.      I deduce from this and from the practical reasons to which I have drawn attention, the answers to the questions posed in paragraphs 8(a) and 8(b) are these:-

(i)        All assets of the parties up to the present day are relevant. Because this includes the assets used to form the Rozel Trust, this decision may result in further proceedings before the Inferior Number.

(ii)       Subject to any specific objections on the grounds of cost or unreasonableness, the respondent must answer the petitioner's questionnaire in full but, in particular, must answer the petitioner's questions set out in paragraph 10 of this order. 

(iii)      There is in no circumstances a requirement for the Court to declare any date after which the respondent to a claim is immune from further enquiry into his financial affairs. 

Authorities

Matrimonial Causes (Jersey) Law 2005.

P-S-v-C [2007] JRC 153.

Williams-v-Lindley [2005] 2 FLR 710.

Crichton-v-Parker-Smith [2008] JLR N 13.

Crossley-v-Crossley, [2008] 1 FCR 323.

P-S-v-C [2007] JLR N 51.

Charman-v-Charman (No.4) [2007] 1 FLR 1246.

N-v-N (Financial Provision: Sale of Company) [2001] 2 FLR 69.

Cowan-v-Cowan [2001] 2 FLR 192.

J-v-J [2009] EWHC 2645.

Matrimonial Causes (Jersey) Law 1949, as amended.