Up for an Update? Padden v Bevan Ashford rides again!

Diligent readers of the blog will remember me commenting on Padden v. Bevan Ashford Solicitors. You can quickly refresh your memory on the case revolving around the free half hour here:

The end of the half hour free interview?

You’ll never guess what’s back in the courts – 

Padden v. Bevan Ashford

That is correct, the re-trial of Padden v Bevan Ashford has taken place, and back to the Court of Appeal again! 

My gripe with the first Court of Appeal decision was that I considered that it just didn’t have regard to the realities of giving  a half hour free advice.  The course the Appeal Court said should have been followed just doesn’t reflect the realities of day to day life in the High Street.  Reading between the lines of the HHJ Vosper’s decision, which was under appeal, I have a feeling he had at least some sympathy with that view.  He couldn’t go behind the earlier decision of the Court of Appeal, that the newly qualified solicitor (now known to be a Ms. Shinner) had been deficient in her first meeting with Mrs. Padden, but at paragraph 16 we get a different flavour of that first meeting.

The judge notes that the claimant was “evidently distressed and in a rush to be back home as soon as possible”. So quite how much attention Mrs. Padden was giving to what Ms. Shinner had to tell her is doubtful.  Despite this, Ms Shinner took pity and decided to help. A human lawyer!  One who wanted to help a person in distress – not quite conforming to popular stereotype, one might say, but more common than is generally realised.

“Ms Shinner advised the claimant that she was not doing the right thing, and advised her not to sign any documents. Ms Shinner must have based that advice on her appreciation that paying off Mrs Partridge might not stop a criminal prosecution.” So the judge, upon looking with care at what happened at that first meeting realises that Ms. Shinner’s advice was focussed more closely on the key issue than perhaps the Court of Appeal first time round had realised.  If only Mrs. Padden had chosen to follow that advice!  Both she and her solicitors would have been so much better off.

The judge also said, “I find that Ms Shinner told the claimant that she was taking a huge or a big risk, and the risk to which Ms Shinner was referring was the risk that Mr Padden would face criminal charges despite the claimant's giving away her interest in the assets.” I guess this is as close to saying that she wasn’t so very negligent as a judge could reasonably get, given the earlier decision, and I commend this analysis.

Now what happened after Ms. Shinner ended her involvement was rather more of a problem, unfortunately.  A colleague wrote to confirm that “I am satisfied that this signatory understands the nature of this Deed and its meaning and effect and to the best of my knowledge has freely consented to it without undue influence or duress or in reliance upon misrepresentation.” (emphasis added).  It’s the italicised section which really seems problematic.  What’s more, he doesn’t seem to have made a note of that meeting, so he couldn’t remember what happened at it.  This was a very serious certification to have made and the lack of a record of that advice was critical.  The whole episode shows that routine certifications should not be readily available.  A solicitor has to spend serious time finding out what the whole transaction is about.  A serious charge should be made as there are serious consequences for the solicitor who gets it wrong – over £67,000 worth of consequences, actually!  Oh and the other thing?  Free advice?  So many of us now will just say no. 

Blog Disclaimer: Nothing in www.austinkempfamilylaw.blogspot.com blog should be construed as legal advice. If you require legal advice upon any family law related matter then you should instruct a solicitor. Any links to other blogs or web sites are provided for convenience only and Austin Kemp Solicitors cannot accept any responsibility for the contents of such linked blogs/sites.

Is getting engaged detrimental?

I see that my old friends at Baxter Caulfield have recently entertained themselves with a successful visit to the Court of Appeal over a decision of our local County Court in a property dispute between a woman and her fiance.  You can find the judgment here:

Smith v. Bottomley and his company

Now on the face of it, this is, dare I say it, just a routine cohabitant dispute.  The story seems to be that the parties formed an intimate relationship in 1992.  They got engaged and had a child together, who was born in 1994.  In 1995 they broke up and Ms. Smith moved out, never having quite got round to marrying.  In 2001 or 2002, after having re-formed their relationship, they became engaged again but again never quite getting in front of a Registrar.  In 2002, they bought a house together, with a trust deed specifying their respective shares.  Mr. Bottomley got the greater share as he made the greater initial contribution to the purchase.

Now Mr. Bottomley had acquired other property down the years.  In 1985 he had bought The Coach House, where he had lived and where he still carried on his business.  He had bought some land adjoining it in 1995 and in 2000 he bought a property called The Mill.  The Mill was transferred to a company Mr. Bottomley formed in 2002 and later in the same year, the company sold it for a substantial profit.

Ms. Smith claimed "When I agreed to move back in with him again he said he would put everything 50/50. The agreement covered everything. He said he wanted to give me peace of mind. Coach House Properties [the Company] was [Mr Bottomley]. He said everything we have is 50/50; he did not go into detail. The company was Mr Bottomley."

Why is this important?  Well, because they weren't married of course.  Had they been, the legal title of the assets would be relatively academic as the court in divorce proceedings possesses the power to order the transfer of ownership from one spouse to the other, or the sale of property and payment of a lump sum.  They weren't, so it couldn't.  All Ms. Smith would be entitled to would be what she owned as a matter of law.

Once the company had sold The Mill, it bought The Barn.  It still owned this at the time when everything came to an end.  In 2010, the parties separated again, this time for good.  Ms. Smith brought an action claiming a half share of the Barn.  There are two interesting legal points in the Court of Appeal decision.  The first, which they fail to provide an answer for, is about detriment.  A promise, on its own, is not binding against the person who makes it.  For it to be enforceable, the recipient of it needs to show that she did something to her detriment in reliance on the promise.  So what did Ms. Smith do which was detrimental to her?  "she (i) agreed to marry Mr Bottomley and (ii) gave up her independent accommodation, in which she had lived since the end of her first period of co-habitation with Mr Bottomley."  Well, that was her case, anyway.

How can it be argued that agreeing to marry someone amounts to detriment?  If she gave up a promising career to further the engagement, that might make some sense.  If she gave away property of her own in reliance on her new-found joint ownership, that might too.  Just getting engaged - well, I can understand why the judge at first instance seems to have skated straight over it in his judgment.  How anyone seriously thought that could be good enough is something I struggle with. In fact, the judge ignored completely the lengthy submissions from both barristers on the subject of detriment but it is an essential element of the test to decide if Ms. Smith had acquired any ownership of the property.  Frustratingly though, the Court of Appeal ducks this very issue itself, saying,  "It is not necessary in this judgment to consider the distinct question whether, in any event, a promise to marry could in principle constitute sufficient detrimental reliance to found a claim to a constructive trust."  I really don't see that it's so difficult.

Likewise, while they lived apart, Ms. Smith rented a house to live in.  When they reconciled, she gave up the tenancy but in what way was this to her detriment?  Instead of paying rent for accommodation, there is nothing to suggest that Mr. Bottomley was charging her to live in the house he owned.  Surely she was better off, not worse off?  No detriment means no claim and this is well-established law.

The second interesting element was the ownership of The Barn.  It didn't belong to Mr. Bottomley - it belonged to his company.  As we have all recently been reminded, in no uncertain terms, by the Supreme Court no less, (Prest v. Petrodel), the two must be distinguished from each other.  Even on Ms. Smith's account of things, Mr. Bottomley made the promise, not the company.  The Court considered Petrodel and noted that it could not be said that Mr. Bottomley's company simply held The Barn on trust for him.  So for this second reason, the appeal was allowed.  Now it may seem a little too unusual to have wider application, but in recent times, particularly in relation to high value properties, companies have been increasingly used to own real property.  Sale of company shares do not carry stamp duty in the way that property transactions, so it has clear tax advantages.  We may actually see more of these complications cropping up in the future and Prest v. Petrodel being applied in circumstances which weren't envisaged at the time.

P.S. As an aside, I was relieved on a professional level to see the Court of Appeal graciously deciding that Mr. Bottomley's solicitors should not be criticised for failing to point out a deficiency in Ms. Smith's pleading of her case.  It's bad enough making sure your own client's case is properly put without being expected to argue the other side's case too!  After all, we do have an adversarial system of justice and solicitors are obliged to act in the best interests of their client, not their opponent.

P.P.S  Just on reflection, perhaps the most surreal part of this case is where the Court of Appeal considers the issue of agreeing to marry and detriment.  In deciding firmly to sit on the fence, the Court said, " The answer is likely to depend upon the particular factual circumstances: for instance, did acceptance of one offer of marriage preclude acceptance of another, competing offer which foreclosed the offeree from protecting his or her financial position more fully by accepting the competing offer?"  How Jane Austen is that?  I have a vision of a young lady pondering the many offers from her various suitors, comparing their prospects and estates before making up her mind whose is the most appealing!   Was this really happening in the 20th century, still less the early 21st?

Blog Disclaimer: Nothing in www.austinkempfamilylaw.blogspot.com blog should be construed as legal advice. If you require legal advice upon any family law related matter then you should instruct a solicitor. Any links to other blogs or web sites are provided for convenience only and Austin Kemp Solicitors cannot accept any responsibility for the contents of such linked blogs/sites.

Open all hours - Technology has taken over our lives!

A few years back, I was unable to make it to a school parents evening, so I phoned to arrange an appointment to discuss my son’s progress with one of his teachers. I asked to speak to the head teacher but she was too important to speak to me. Instead I was given an appointment with one of the members of the management team. Throughout the meeting I became more and more irritated by the patronising tone which was directed at me. The deputy told me that I was asking for flexibility from the school that lawyers and accountants wouldn’t give to their clients. Now this was the last straw.   Needless to say, the conversation got slightly heated after this. I had to tell him, “Actually, I am a lawyer, and after I leave here (at 8 pm) I will be meeting with a client who cannot meet me during normal working hours - because she is a teacher!” That silenced him. 

I was annoyed by the mere suggestion that the head teacher couldn’t see me because it was out of normal working hours and that a lawyer would be exactly the same. It is simply not true. The days are long gone when lawyers worked from nine till five, five days a week, with six weeks holiday and Friday afternoons on the golf course. Through the giving of mobile numbers and e-mail addresses, lawyers have made themselves much more accessible to their clients at all hours and in all places.  For our clients, if not our families, so much the better! 

But with increased accessibility comes increased liability it seems.  David Hodson reports at this link on a decidedly troubling development.

http://www.familylaw.co.uk/articles/DavidHodson210613-954

This will writing lawyer opened electronic communications from his client over a weekend but because it was a weekend, he did nothing with them.  Basically, he completely ignored the client’s son when he knew that his client was nearing the end of his life. That element of urgency makes the key difference.  I don’t read this case as declaring open season on a lawyer’s weekends and I don’t see it as warranting interruptions to family life without exceptional cause.  However, a lawyer who wants to treat his or her time out of the office as being sacrosanct will have to learn to ignore the insistent, siren calls of the computer and blackberry!

Blog Disclaimer: Nothing in www.austinkempfamilylaw.blogspot.com blog should be construed as legal advice. If you require legal advice upon any family law related matter then you should instruct a solicitor. Any links to other blogs or web sites are provided for convenience only and Austin Kemp Solicitors cannot accept any responsibility for the contents of such linked blogs/sites.

Utopia Ltd - not so much G and S as UKSC

One of the least known of the Gilbert and Sullivan light operas is Utopia Ltd.  You can read a synopsis of the plot here - in fact to make sense of this post, you'll need to!

Utopia Ltd

So, it's all about avoiding legal consequences, you see.  The King of Utopia will be blown up by the constitutionally appointed Public Exploder if the constitutionally designated Tribunal, the Wise Men, instruct him to do so.  How does the King avoid this?  By incorporating himself as a Limited Liability Company, he has made himself immune to the existing powers of the law of his land.  The King can be blown up, but his acts are now no longer his but those of a limited stock company and that can merely be wound up, not blown up.  No more prospect of the law of his land delivering life changing ending consequences.

And so to family law, which is what this blog is about.  We've just had the Supreme Court adjudicate on Prest v. Petrodel.  You can find the judgment here:

Prest v. Petrodel

The facts are set out in paragraphs 11-15.  In essence, the Husband here was alleged to use a number of companies which he controlled as his private piggy bank.  When his marriage unravelled, his wife obtained an order for financial provision in English proceedings.  He failed to comply so she sought to enforce, at least in part, by forcing his companies to transfer to her title to seven valuable properties they owned in England and Wales.

Put it another way - the claim is that the Husband was using limited liability status to avoid having to comply with the orders of an English court.  Not so very different from the newly incorporated Utopians really.  The Matrimonial Causes Act 1973 enables the Court to make orders transferring money and property from one spouse to the other.  As no one marries a company, a sort of virtual personality, only a real person, this excludes the property and money of a company from the court's direct control.  At first instance, the High Court was having none of it.  Moylan J seems to have decided that because the Husband had the power to make the companies part with their assets to satisfy the Court's judgment, he could order him to do exactly that.

Not so, decided the Supreme Court.  The companies owned the assets and they were legal persons in their own right.  They were not parties to the marriage and so the Divorce court had very little power over them.  Right enough, if they had been set up as a device to frustrate the court and nothing more, the Court would not allow that to frustrate the Court's order, but Lord Sumption said,

"there is a limited principle of English law which applies when a person is under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control. The court may then pierce the corporate veil for the purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company's separate legal personality."  (My emphasis.)

When the companies were formed, there was no existing financial order.  The Husband was not engaged in strategy to avoid complying with the court order at the time he formed the companies as they long pre-dated the marriage breakup.  They had been formed apparently to manage tax liabilities or something similar.

"Whatever the husband's reasons for organising things in that way, there is no evidence that he was seeking to avoid any obligation which is relevant in these proceedings."

So where did that leave the Wife?  Well on the face of things, the court could order the Husband simply to transfer the shares in the companies to her, or some of them at least.  This would be a property adjustment order under s.24 of the Matrimonial Causes Act 1973.  However, where companies are incorporated abroad, there is no guarantee that the foreign jurisdiction will enforce such an order against the Husband if he failed to comply.  In this case, it is very clear that compliance with court orders was not a major priority with this Husband!  He had conspicuously failed to comply with court orders to provide disclosure, as had the companies under his control.

However, the Court did find an alternative route to enforce its order.  As the companies acquired property, sold property and paid out money entirely at the Husband's behest, they were deemed to hold their assets on trust for the Husband.  A trustee holding property in England and Wales can be forced to comply with an order imposing an obligation on a beneficiary of the trust.  The companies owned seven properties in the UK, so they can be, and were made to transfer these to the Wife in part satisfaction of the £17.5m odd which she was entitled to under the order.

So what do we learn from this?

1.  You can get a court order against a company in divorce proceedings only where you can show that the only purpose for setting up the company and acquiring property through it was to defeat the court's jurisdiction.  Yes, I did mean to put two "onlys" in that sentence - they both count.
2.  You may still be able to lay your hands on the company's assets even where you can't satisfy 1 if you can show that it has acted effectively as a trustee for your ex, but complications will definitely arise where there are other share holders or creditors as their interests are separate from the ex and must be protected.
3.  Orders of English courts are commonly regarded as far more generous to the economically weaker party than orders from courts abroad, but there is the important matter of enforcement.  If the assets lie abroad, the other jurisdiction may not necessarily enforce the English order.  Half a loaf by consent may ultimately be better than no bread after a fight.
4.  Matrimonial litigation is no different from ordinary civil litigation in one key respect - the first and most essential question is, where's the money?  If you don't have a satisfactory answer to this question, there's no point in even starting court proceedings - they'll only make you poorer.

Blog Disclaimer: Nothing in www.austinkempfamilylaw.blogspot.com blog should be construed as legal advice. If you require legal advice upon any family law related matter then you should instruct a solicitor. Any links to other blogs or web sites are provided for convenience only and Austin Kemp Solicitors cannot accept any responsibility for the contents of such linked blogs/sites.

Legal Aid reforms - fundamentally misguided.

I steer well clear of examining political and legal issues in religious or ethical terms.  These are very much matters of personal conviction and opinions differ in the extreme.  However, I was particularly struck by a post on the renowned blog run by Archbishop Cranmer, which you can read here:

Brother Ivo blogs on Legal Aid

 It's difficult for me to add anything much to what is very eloquently set out here.  The Churches have recently pontificated on welfare spending and cuts in benefits.  I suppose to some modest extent there might be some argument that Holy Writ places a burden on society to provide material support to the destitute and deprived, but this falls well short of prescribing the extent of that support and the manner in which it should be delivered.  However, following Brother Ivo's exposition, I can easily see how the Church can properly have major issues about the withdrawal of legal aid from so many areas of our justice system.

I confess that recently I have been distinctly irritated by a few cases where I have encountered legally aided opponents.  Cases where single issues have been the subject of completely unnecessarily wide ranging enquiry.  Cases where applications of no merit whatsoever have been issued and pursued.  However, irritating and inappropriate as these have been, to react by barring access to legal advice to all but the very well off is entirely disproportionate and is entirely counterproductive.

The truth is that the involvement of good lawyers, especially in family disputes, is of immense value in sorting out otherwise intractable problems.  To leave judges and magistrates without any effective access to other team members, who can set to work outside court to enable parties to see sense and negotiate a route out of their relationship, is not going to save money, it's just going to transfer the cost elsewhere.  The cost will now be incurred in a court system which is already desperately under-resourced and unable to provide a proper service.  In one very prominent court, it is already taking at least three months to secure a one hour hearing.  Justice delayed, I remind you, is justice denied.

This doesn't just apply to the legally aided party, by the way.  As unrepresented parties clog up the courts - and they most certainly will do that - the queue the privately paying parties will find themselves in will be that much longer and slower, and already it's too long and slow.  The person paying top dollar for the best legal representation will find that their cases are every bit as slow moving as everyone else's.  Yes, I am carrying on in the frontline of litigation but I can see that it's going to be even more distressing for my clients than it has been up until now.

P.S.  Just to move from the abstract to the particular, there's this post over at Researching Reform:

What happens when.....

This seems to be a real life example of things getting out of control, with no obvious recourse for the parents to help them identify where to turn for advice and help.

Blog Disclaimer: Nothing in www.austinkempfamilylaw.blogspot.com blog should be construed as legal advice. If you require legal advice upon any family law related matter then you should instruct a solicitor. Any links to other blogs or web sites are provided for convenience only and Austin Kemp Solicitors cannot accept any responsibility for the contents of such linked blogs/sites.

Legal ombudsman gives good advice to divorcing couples - shock horror!

A week or so ago, the Legal Services Ombudsman published a report on complaints against lawyers.  Sadly, family law is a major contributor to his case load.  Am I surprised?  Not greatly.  I encounter a good number of indifferent family lawyers.  I have the privilege of presenting training courses for BPP, one of the leading national training organisations, which gives me the opportunity of discussing and passing on to other family lawyers my main concerns.  As is clear from the report, clients are deeply concerned about costsand this is a major source of complaint.  I believe that is all too often insufficient focus by both solicitor and client on managing cases to keep cost to a minimum.

The great news for professional and client alike is that the Ombudsman has published a highly sensible guide to getting the most out of a professional relationship between solicitor and client.  You can find it at this link:

Using a divorce lawyer - ten helpful tips

So I thought I'd have a look at the tips the Ombudsman gives, one at a time, of course.

Tip one.
Consider what you want from the legal process - AND BE REALISTIC!
Sorry to shout but this is important.  The biggest single dispute in divorce usually concerns money.  Your money.  The more of your money you spend in legal fees, the less you get to keep.  Very often a solicitor will be telling a client something the client doesn't want to hear.  The law does not punish one spouse for being bad, nor does it set out to reward the other for being good.  The purpose which the court sets out to accomplish is simply to enable the couple to live separately from each other.  It's a matter of arithmetic and it's a matter of practicalities.  For those who are deeply hurt, this is not what they want to hear.

And that's where problems can arise.  A client can put a lawyer under severe pressure to try to obtain an outcome which is just not achievable.  When costs get racked up and that outcome is dismissed as unrealistic, the client complains.  Both client and solicitor may have to share the blame.  The client has not been prepared to accept good advice.  The solicitor may have been intimidated by the client and persuaded into presenting a case which is just not viable.  Solicitors must have the courage to withstand pressure and be the bearer of bad news if need be.

Where I become decidedly irritated is when I am faced with a solicitor who is doing work which cannot benefit their client but for which someone - quite often the taxpayer, under a legal aid certificate - is paying.  The classic example for me is the lengthy and purposeless questionnaire.  For instance, if the only asset of a marriage is a house and neither spouse can realistically be ordered to pay maintenance to the other, questions about how either of them spends their income are entirely irrelevant.  You can spend hours crafting such a questionnaire but it has no value to the client.  It can be decidedly embarrassing when a judge looks at your questionnaire and simply dismisses it out of hand.

Fighting for what you can't get is emotionally draining, ultimately devastating and a waste of money.  If that's your position, your solicitor is doing you the biggest and most altruistic favour by telling you early on, before the damage is too great.




Blog Disclaimer: Nothing in www.austinkempfamilylaw.blogspot.com blog should be construed as legal advice. If you require legal advice upon any family law related matter then you should instruct a solicitor. Any links to other blogs or web sites are provided for convenience only and Austin Kemp Solicitors cannot accept any responsibility for the contents of such linked blogs/sites.

They're all after your money!

I had my attention drawn to this article in the Telegraph by John Bolch of Family Lore.

Pensions on divorce

Now I'm sufficiently long in the tooth to remember the first foray into pensions by divorce law in the late nineties.  This took the form of pension earmarking -  a cumbersome and risk laden exercise for any court.  Back then, divorce lawyers were given severe warnings by pensions actuaries that they faced negligence claims from disgruntled clients if they didn't get an expert report (and a very expensive one, I may say) from an actuary, valuing the transfer value of any pensions.

For those of you who don't know, the transfer value is a theoretical figure which is supposed to be what it would cost to buy a given bundle of pension rights on the open market.  It's underpinned by a number of assumptions, such as how long a person is likely to live and what rate of return can be realistically expected on investments pending retirement.  Of course, this becomes relevant only in relation to what are now called defined benefit schemes (final salary or average salary schemes).  This is because these produce a certain set of benefits which then have to be valued.  A defined contribution scheme (money purchase, private pension policy) doesn't need this exercise.  This is because the contributions are used to buy investments which have a value at any given moment in time and this can be disclosed.  The investments are used at retirement to buy whatever benefits can be afforded at that point.

So, anyway, we were all going to be negligent if we didn't use actuarial valuations.  Except we weren't.  The courts very quickly got fed up with reports assigning fabulous values to pension schemes - money that simply wasn't available to the parties until retirement and wasn't available to them to buy a house now, for example.  The only use for such a report was limited to two scenarios:-

1.  Where there was to be a set off - i.e. where one party would keep the pension but concede a greater share of other assets by way of compensation.  For this to be fair, there needs to be a fair value assigned to the pension asset.

2.  Where identical outcomes are being sought from a given pension fund.  Until now, the same pension fund would give different pension benefits to a man compared with a woman.  This was because a woman would be expected to live longer, so an identical sum of money would be spread more thinly.

Now as to the first, I have to say that set off arrangements are pretty rare.  Usually there just isn't enough for one party to be bought off in this way.  What's more, to allow one party to have immediately available money and the other party to have to wait years before actually benefiting is plainly inequitable.  I'm just not seeing this happen often.  And that means that I have very little need of actuarial reports!

As to the second, this is how Liverpool Victoria pithily sum up a fundamental change in how pensions are to be dealt with in the future:-

"From 21 December 2012, new European gender law has meant that men and women are to be treated the same when it comes to annuity rates."

In other words, the fact that women live longer does not mean that they can be paid less.  Instead, men will have to receive less in order to equalise the pensions that women receive.  So there won't be any gender variation to compensate for and there will consequently be no need for a report quantifying the difference! 

The big marketing push by pensions actuaries - and the Telegraph report is nothing more than that - is frankly overstated.  Set off is rare and gender difference is vanishing, so what would the point of a report be, other than to keep reporting actuaries in the style they are accustomed to?

There is one sentence in the report I find particularly puzzling:-

"Solicitors have advised that divorcees could stake a claim up to 12 years after the legal separation has been settled."

How?  If the order has been properly drafted, it just isn't possible to come back at a later date to change it at all.  If it was the result of negligent advice, the limitation period in professional negligence is six years, not twelve.  What am I missing?


Blog Disclaimer: Nothing in www.austinkempfamilylaw.blogspot.com blog should be construed as legal advice. If you require legal advice upon any family law related matter then you should instruct a solicitor. Any links to other blogs or web sites are provided for convenience only and Austin Kemp Solicitors cannot accept any responsibility for the contents of such linked blogs/sites.