29 July 2020
Mostyn J’s judgment in OG v AG, in which Christopher Sharp QC and Andrew Commins represented the wife, provides a number of important pointers for financial remedy practitioners. It highlights the importance of negotiating reasonably, even in the face of abysmal litigation conduct, late disclosure and s.25(2)(g) conduct, and even when the financial position is not clarified until weeks before trial. It is never too late and if a party fails to do so they will suffer a costs penalty.
Due largely to the way the husband had conducted himself and the litigation (described by the judge as his “abysmal, and let there be no doubt, dishonest, presentation”) the case took two years from H’s Form A, and generated costs in excess of £1 million with two aborted FDRs. W pursued disclosure from H and third parties to uncover H’s financial situation and only, on the judge’s findings, on 12th June 2020, shortly after the PTR, and less than a month before the trial started on 8th July had “the husband made the final round of disclosure which enabled the financial landscape to be viewed with sufficient clarity to enable negotiations to take place reasonably.” The important point for practitioners, however, is that even at that late stage W was ‘required’ to ‘engage in reasonable open negotiations’. The judge, assessing both parties as being ‘difficult and confrontational characters’, took the view that W’s position was unreasonable, that the revised PD 28A paragraph 4.4 (which the judge said is “extremely important”) clearly applied and requires the parties to negotiate openly in a reasonable way. W had not done so and suffered a consequential penalty in costs, by way of a reduction in the award of costs in her favour made against H. The judge observed: “I hope that this decision will serve as a clear warning to all future litigants: if you do not negotiate reasonably you will be penalised in costs.”
Although, as Mostyn J noted, W had been more sinned against than sinning, she too had initially failed to disclose some bank accounts, and although she had remedied this quite early on and the judge characterised this as “minor compared to the delinquency of the husband” nevertheless “it must be reflected, in my judgment.” He set off £10,000 against her costs award. “The message should go out that if you are guilty of deliberate non-disclosure, even if it is relatively minor, you will pay a penalty in costs.”
A third set off related to a s.37 application to freeze assets in Dubai which was deemed unnecessary.
In the event H was ordered to pay indemnity costs (assessed at 90%) amounting to 45% of W’s costs.
The case is also useful as an example of an award reflecting ‘conduct’ pursuant to s.25(2)(g), which is itself comparatively rare.
The parties were in their early 50 and had been married for 25 years. They had two children, one adult and the other ten years of age. W was Polish and H was German but they had met in London and lived all their lives in this country where they had built a business making ducting, which was an industry in which H’s family had been involved. They had worked hard at building the business to the extent that they amassed almost incidentally a great deal of wealth without knowing what to do with it. The company had £10 million of surplus assets and the parties had built up a portfolio of properties in London, Gibraltar and Dubai. After they separated in 2017 relations deteriorated significantly and H had clandestinely dealt with the properties in Dubai, selling them and channelling funds through a Dubai corporation to establish a competitor business in Europe, with which he denied any connection but which the judge found was, although established behind a façade of nominee shareholders and a LLP, plainly his company. It was the exposure of this network of funding and illicit competition which had been the subject of W’s investigations, including the instruction of private investigators whose agent posed as a potential employee of H’s business to provide evidence of its structure and ownership.
W’s case was that H had sought to destroy the UK company by using confidential information, approaching its customers and competing unfairly. He had even gone to the extent of submitting as evidence an email which he had altered to suggest W had agreed to the sale of the UK company when in fact her position was the opposite.
In the event W kept the UK company, a number of undertakings were given to prevent unfair competition, and the value of the UK company (which was to be shared between the parties) was discounted to reflect H’s competition and also the uncertainty arising from Brexit and Covid-19. The discount was set against the trading value of the company rather than its underlying assets.
In his approach to conduct as a s.25 factor (para 34-39 of the judgment) Mostyn J differentiated litigation conduct and the drawing of adverse inferences from a party’s conduct, from ‘gross and obvious personal misconduct’ and, separately, wanton and reckless dissipation of assets which supports the ‘add back’ jurisprudence. The instant case concerned personal conduct which “can extend, obviously, to economic misconduct such as is alleged in this case. If one party economically oppresses the other for selfish or malicious reasons then, provided the high standard of “inequitable to disregard” is met, it may be reflected in the substantive award.”
While there was a time when the court exercised a moral judgment in relation to its discretion in ancillary relief, times have changed. “Conduct should be taken into account not only where it is inequitable to disregard but only where its impact is financially measurable. It is unprincipled for the court to stick a finger in the air and arbitrarily to fine a party for what it regards as immoral conduct.” (para 72: emphasis added). He concluded (para 73): “Therefore I firmly reject the submission that in addition to the competitor discount, which will fall on the husband alone, and the penalty in costs, there should be an additional substantial departure from equality to reflect the court’s indignation at the way the husband has behaved in the course of the litigation.” Therefore, despite W’s strongly held views about H’s conduct, as the House of Lords had made clear in Miller v Miller “conduct would only be reflected where there is a financial consequence to its impact,” and the “conduct in question, although greatly distressing to Mrs Miller, should not find independent reflection in the court’s decision.”
But for the conduct issues the case was plainly one for equal division. In the event H received a little under 45%. In addition the judge attributed to him an income of £200,000 and having jurisdiction to make an order as H was out of the jurisdiction, he ordered a composite child maintenance figure to include a contribution to school fees of £27,000 pa, based on the statutory child support formula (cf CB v KB  EWFC 78).