LKH v TQA AL Z (Interim maintenance and pound for pound costs funding)

This case was previously before me on 19 April 2018 and 1 May 2018. At the hearing on April 2018 I gave a public judgment which has been transcribed and publicly reported on Bailii under [2018] EWHC 1214 (Fam). I will not repeat anything which I said in that judgment, and the present judgment should be regarded as in continuation of it. I regret to say that the facts as presented to me today, just over three months since that judgment and order, reveal a grave picture of non-compliance by the husband with the orders made on 19 April 2018 and earlier orders.

The husband was long ago required to file and serve what is called a Form E giving full disclosure of his financial means by 27 March 2018. By a later order made by me on 1 May 2018 the date for filing and serving that Form E was (by consent) extended to 15 May 2018. We are now over two months on from that date and still the husband has not filed and served any Form E at all. There is a witness statement by him signed today, 24 July 2018, in which he says that he has had various difficulties in assembling the information required to file and serve a Form E and the required disclosure of documents, and says that he will now do so within a further three weeks.

In reliance upon that statement, Mr Charles Hale QC, the leading counsel who has appeared on behalf of the husband at most, if not all, previous hearings, and appears on behalf of him today, frankly accepts the breach, but asks for a further three weeks in which to file and serve the Form E.

The husband was previously represented by a well-known and indeed prestigious firm of London solicitors known as Vardags. On or about 24 June 2018, for reasons unknown to me (and which may well be protected by privilege), the husband ceased to instruct Vardags and instead instructed the no less well-known and prestigious firm of Stewarts. Representatives of that firm are in the court room this morning (although the husband remains firmly in Oman) and they say through Mr Hale that in the last month or so, since Stewarts were first instructed, they have done, and are doing, a great deal of work in preparation of the required Form E.

Frankly, the considerable delay in producing the Form E after two earlier consent orders setting a timetable for its production is not excusable. Realistically, however, I and the wife have to accept that half a loaf is better than no loaf on the renewed promise now (which will be reflected in the order which I make today) that a full and complete Form E and the associated required disclosure will now be produced in just over three weeks’ time. It seems to me that in the meantime I should not take any steps in the direction of enforcement of the long outstanding Form E.

I regret to say that the husband’s defiance does not stop there, however. By the order made on 19 April 2018 the husband undertook to make a range of household payments and other outgoings of the wife and children. With one exception, it does seem that he has substantially discharged his obligations under that undertaking. The exception is that there came a time when he stopped paying, or causing to be paid, the salary of the governess who had historically been employed for these children. The result has been that the employment of the governess has ended, and to that extent the children have now been deprived of a benefit which their parents, including their father, previously thought should be made available for them.

As well as all the outgoings which he undertook to pay, however, the husband was also ordered to pay interim periodical payments to the wife at the rate of £29,500 per month. For reasons which I fully explained in the earlier judgment of 19 April 2018, that £29,500 per month expressly included £3,500 per month for the driver. In summary, the reason was so that the wife could directly employ and pay the driver and thereby avoid the intolerable control which the husband was exerting, and in fact continues to exert, of instructing the driver not to drive the wife in the vehicle if the children are not also present in the vehicle. As I understand it, the husband has continued to pay the driver £3,500 per month. However, he has not paid any other of the £29,500 per month interim periodical payments to the wife. Even if one were to deduct the £3,500 per month which is being paid to the driver, that leaves arrears of £26,000 per month which has now not been paid for four months.

The order of 19 April 2018 did give credit for the sum of £3,000 which had been paid the day before on 18 April. If that deduction is applied, there are, in round figures, arrears of maintenance of the order of £100,000.

Additionally, and extremely importantly, the order of 19 April 2018 required the husband to pay £40,000 per calendar month by way of a costs allowance payable monthly in advance on the 1^st of each month commencing on 1 May 2018 for six months. The husband has not paid one penny under that order either. As of today, there are three months unpaid and outstanding, namely £120,000.

Additionally, the husband was required to make certain costs payments within 14 days totalling about £10,000. So an aggregate of all the arrears that have arisen since 19 April 2018 is £100,000 maintenance, plus £120,000 costs allowance, plus £10,000 in actual costs, namely, £230,000.

The husband says in his statement that he cannot make these payments. He says in his statement that his net wealth is about US $45 million or around £34 million but asserts that those assets are “illiquid and unrealisable.” He says that the family company upon which his own personal wealth is founded has recently suffered a considerable reverse as a result of the well-publicised collapse in this country of the public company Carillion plc. He says, therefore, in summary that he simply has not been able to make any of these payments to, or for, his wife and children.

What he has done, however, is paid £95,000 to Stewarts. He only instructed Stewarts one month ago today, so in the course of the last month, whilst his indebtedness to his former wife has ratcheted up to £230,000, he has found the money, or the means to pay, no less than £95,000 to his own solicitors. I enquired whether that £95,000 had already been expended or whether he was in surplus in his client account with his solicitors. I was told by Mr Hale that he is already now in deficit, so the actual amount of costs that he has chosen to run up exceeds £95,000, although I have not been informed as to the amount of deficit.

It will be recalled from my judgment of 19 April 2018 that as of that date the wife owed her solicitors, Payne Hicks Beach, about £200,000. Inevitably, her debt to them now will be substantially more in view of all the work that they will have to have done between then and now. I said in my judgment of 19 April 2018 at paragraphs 28 and 29 that:

“But for the time being, the solicitors, having made a decision to extend that credit, must, I am afraid, live with it.”

But I immediately continued at paragraph 30 by saying:

“Future costs, however, is a very different matter. This wife already owes her solicitors over £200,000. Quite frankly, there is absolutely no reason whatsoever to suppose or presume that they would be willing to allow such great credit to be increased yet further.”

So far, to their credit, Payne Hicks Beach clearly have permitted the credit to be extended further, but there must inevitably come a time when even that prestigious firm has to say, “Enough is enough.”

My attention has been drawn today to the judgment and decision of Bodey J in the case of Mubarak v Mubarik [2007] 1 FLR 722 in which he made what he called a “pound for pound” order. I understand that since that decision pound for pound orders have not infrequently been made, although I personally do not recall ever being asked to exercise or in fact exercising the jurisdiction. Today, Mr Simon Webster, who appears on behalf of the wife, has asked me to make a “pound for pound” order, but in the sum of £100 payable to the wife for every £1 paid to the husband’s own solicitors and lawyers. I am not willing to do that.

I stress that the husband remains under the full obligation under my order of 19 April 2018 to pay the full amounts there ordered. There has been no appeal from that order. There has to date been no application to vary that order on the grounds of some alleged change of circumstances since the order was made, so the arrears exist and remain as I have described. I require and expect the husband promptly to pay all the arrears in full and to pay the current amounts ordered. Any so-called pound for pound order in no way derogates from the underlying liability upon the husband under the underlying substantive order, but in the particular circumstances of this case I am now willing to back up the underlying substantive order with a form of pound for pound order.

The rationale of such an order must be that of an equal or level playing field, and it does not seem to me that the Mubarak jurisdiction can properly be applied to require a payer (usually the husband) to pay substantially more to the other party than to his own solicitors. So, in my view, the jurisdiction should correctly be regarded as a pound for pound one, so that from now on in, with every pound that he chooses to pay to his own lawyers, he must pay an equal pound to the wife’s lawyers up to, of course, the overall ceiling ordered by the order of 19 April 2018.

Mr Webster produced a draft order for today which at paragraph 7 provided that:

“The respondent shall be debarred from being heard on the applicant’s application for financial relief unless for every £1 paid to the respondent’s solicitors in respect of ongoing financial and children proceedings, £100 is paid to the applicant’s solicitors pending the discharge of the arrears that have accrued ...”

I am not inclined to make a debarring order in those terms even if that is the way in which an order was made in Mubarak and subsequent cases. I do not wish to create a situation in which this husband is debarred from being heard, whether in the financial proceedings or the Children Act proceedings. Far from it. A court always wishes to give maximum encouragement to both parties being fully engaged and heard so that the court has the maximum opportunity of arriving at the correct and fair overall outcome.

Further, it is, in my view, an especially strong thing for any court to debar a litigant even from being heard in defence of an application made against him. It is one thing under the Hadkinson jurisdiction to prevent a party who is in contumacious breach of orders from making some further application himself or herself. That may in appropriate cases be appropriate and permissible. But it is, in my view, a very different, and indeed very extreme, course for a court altogether to debar somebody from being heard. In the process, the court in fact denies to itself the opportunity of being as fully informed as it would wish to be on the issues in question. So I will not make a debarring order in the terms and language suggested by Mr Webster.

In my view, however, there is an alternative approach which is clearly available to me. I will injunct the husband from paying any further money (whether for their profit costs or disbursements) to any firm of solicitors practising in England and Wales instructed by him (or any counsel instructed by him on a Direct Access basis) unless he pays an equal amount (i.e. pound for pound) to the wife’s solicitors towards satisfaction and discharge of the arrears and current instalments of legal services funding under paragraph 8(b) of the order of 19 April 2018.

Mr Hale objected that such an order and approach was denying to the husband the means of obtaining legal advice, which he submitted is contrary to principle and is impermissible. I wish to stress very clearly indeed that it is not intended to deny, nor is it denying, him the means of obtaining legal advice. As far as I am concerned, he can go straight out and pay £100,000 to Stewarts Law for further legal advice, the only condition is that he also pays pound for pound £100,000 to the wife’s solicitors.

It is, frankly, intolerable and an affront to justice that in the last month this man paid £95,000 to his new solicitors at the very time when he was already in arrears and getting further into arrears with his wife and her very patient and long-suffering solicitors in the amounts I have described. The rationale behind the Mubarak decision must be to try and achieve an equal or level playing field and that is all I seek to do by this order. It is perfectly correct that the standard form of freezing order always contains within it an exception that the person injuncted may pay up to a certain specified amount (usually quite small) in obtaining legal advice; but, I repeat, the terms of the order which I make today do not place any ceiling whatsoever on the husband making payments to his own legal advisers.

I am quite satisfied that the order which I propose to make is well within the jurisdiction of the High Court and well within my discretion and that the facts and circumstances of this case now require and justify such an order. The precise terms of it will now be drafted by counsel.

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