Three's a crowd?

The House of Lords judgments in Miller v Miller; McFarlane v McFarlane [2006] UKHL 24 found that conduct had to be established within the realm of s 25(2)(g) Matrimonial Causes Act 1973. One case that fell within this requirement, albeit that the judgment predates Miller, was M v M (Financial Misconduct; Subpoena Against Third Party) [2006] 2FCR 555. The case is particularly useful in its examination of how one deals with evidence sought from a third party.

Background

The ancillary relief proceedings between the husband and wife followed, according to Mr Peter Hughes QC, sitting as a deputy High Court judge, 'a long and tortuous and expensive course' over almost four years. This contrasted sharply with the appearance of a subpoena duces tecum a matter of days before the trial. The facts of the case were somewhat convoluted. The couple married in October 1975, and had two adult children. The husband was 56, the wife 52, and they began an advertising agency that became a limited company in which the husband had an 85 per cent shareholding with the wife holding the remaining shares. Unfortunately, this business, 'Company A', lost its major High Street customer. The husband had borrowed heavily from it through his director's loan account and the wife disputed the extent of her responsibility, although she accepted that some had been used jointly. There was another business associated with it, 'Company B', held solely by the husband, earning commission on printing contracts placed by Company A.

The cohabitee

In October 2005, the husband specifically denied in this affidavit directing any funds to his cohabitee, Ms P, who worked for the business, aside from £47,000 paid to her for the benefit of his wife to enable the Portuguese builder of the parties' jointly owned villa to be paid.

On 23 January 2006, permission was given to serve a subpoena duces tecum on the husband's cohabitee, Ms P, who had worked for the business. She subsequently appeared prior to the trial to answer it, represented by her own counsel. Ms P provided a bundle of documents which showed that, between 1 August 2002 and 31 December 2005, she received from the husband or from Company A, in addition to her salary, almost £135,000. The husband was obliged at the trial to admit that, not only was his affidavit evidence misleading but he had breached the terms of the freezing order dated 9 October 2002. However, he maintained that the money was used for the joint benefit of him and his wife and, indeed, he had to do it because of the impact of the freezing order. The wife admitted that she had benefited from some of these monies, as far as they were used towards joint mortgage repayments or paid towards the couple's Portuguese property via Ms P. However, husband's counsel did not dispute that both he and Ms P had seen the benefit of certain monies too. The husband actually admitted that he had asked customers of Company B to make cheques out to Ms P rather than him. The court could not access precisely how much money had been diverted in this way.

The wife's solicitors, in the words of the judge, 'smelled a rat' when the husband apparently produced a buyer offering to purchase the Portuguese property for the amount he stated it was worth, ‚¬860,000, rather than the wife's valuation of ‚¬1.1m.

The subpoena

Ms P's counsel argued that, not only was certain of the information listed in the subpoena oppressive, but Art 8 of the European Convention on Human Rights was engaged.

The subpoena was drawn particularly widely and extended to documents showing the benefits Ms P received from the business and her personal bank statements. In addition, it also sought estate accounts relating to her deceased father and items establishing what settlement, if any, she may have received from her former partner. In particular, her counsel objected to the production of these estate accounts and separate documents and also bank statements unless copies were redacted. It was said that Ms P, who was not a party to the proceedings, was a stranger to the litigation. No claim was being made against her and neither the husband nor the wife sought to call her. Such disclosure, it was argued, would provide a detailed window on her life and lay bare the breakdown of her previous relationship, personal family details and how she ran her life financially. The wife's counsel argued this resulted from husband's own lack of frankness and failure to give full disclosure and, thus, what was sought was wholly proportionate to the issues involved.

The judge then considered the case law. The court had no power to order any third party to file a sworn statement or affidavit: see Wynne v Wynne & Jeffers [1980] 3 All ER 659. Here a wife sought an order against the co-respondent alleged to be financially supporting the husband. The judge also referred to Morgan v Morgan [1977] 2 All ER 515, where a husband issued subpoenas requiring the wife's father to disclose the value of his assets and testamentary dispositions. Although such evidence might be of relevance to the court, Watkins J in that case held that the paramount consideration was the right of the individual. It would be oppressive to force him to reveal that information as he was not a party to the proceedings and his privacy ought not to be invaded in that way.

In Frary v Frary [1993] 2 FLR 696, the production application related to details of the respondent's cohabitee's financial position. Ms Frary had no intention of calling the cohabitee and neither the cohabitee nor Mr Frary had been obstructive or secretive about their financial relations with each other. There was no particular relevance to the precise limits of the cohabitee's resources. It was further held that there was nothing to make it a proper exercise of the court's discretion to order the appellant, a stranger to the proceedings, to attend and be examined at trial and produce documents listed Accordingly, the Court of Appeal held that production would be oppressive and unnecessary.

Hughes also considered D v D (Production Appointment) [1995] 2 FLR 497, a case where disclosure was actually ordered.

In D v D, the husband had been employed by the wife's deceased father, a very rich man with capital scattered in tax havens across the globe. The wife and the family accountant, who had managed the husband's affairs and was his executor, had resisted disclosure. Thorpe J ordered the accountant to make disclosure, rejecting his plea of professional and client privilege. The accountant's own summons for adjournment of the application was made after he had ample time to consider his position and, indeed, amounted to further prevarication in the wife's campaign of evasion. D v D, however, was focused on a party's representative, where disclosure had been circumvented rather than disclosure of personal information against a stranger to litigation.

The judge found that requirement on a non-party to disclose personal financial information is an interference with their right to respect for their privacy and had to be justified as necessary for the protection of the rights of the applicant. Noting the wording of Art 8 against the background of the case law cited, he found that, although the language may have changed, the approach to applications for disclosure by third parties in ancillary proceedings had not materially altered. Article 8 reinforced the principle that an order for disclosure was an intrusion into individual privacy that was both oppressive and unwarranted unless it could be shown to be both necessary and proportionate to the issues in the case. The judge went on to list relevant considerations:

• How important is the information to the issues in the proceedings?
• Has the applicant taken appropriate steps to obtain the information within the proceedings and to enforce orders for disclosure, without success before applying for third party disclosure?
• Would it be sufficient for the court to draw inferences adverse to the respondent from the refusal to supply the information and comply with court orders?
• What is the relationship between the respondent and the third party?
• If disclosure is necessary and proportionate, do the documents contain private information that can be protected by editing?

In M v M, there was a clear history of failure to provide information by the husband and a strong suspicion he was not being frank about the transfer of funds to his cohabitee which suspicion was confirmed by her disclosure. The wife was found to have taken all reasonable steps to gain the relevant information within the proceedings from the husband. The matter could not have adequately been dealt with by the drawing of adverse inferences. In any event, the judge noted that wife's counsel did not press for disclosure of the estate accounts and separation documents.

As far as the redacted, or edited, documents were concerned, the judge asked Ms P's counsel to run a 'spot check' on a few specimen entries to ensure the relevant schedules linked to key entries in the bank statements were accurate. This was a highly practical time saving approach on the part of the judge.

Rule of 34.7 the Civil Procedure Rules 1998 sets out the right of a witness to travelling expenses and compensation for loss of time. In addition to such conduct money, a third party who attends court as a result of a subpoena duces tecum is entitled to their costs: see J H Shannon v Country Casuals Holdings plc (The Times, 16 June 1997). Accordingly, Ms P was entitled to her costs given that she had responded to, and co-operated with, the provision of information under the subpoena. It would be unreasonable were she to be expected to meet her own costs as a stranger to the litigation itself. The judge adjourned the question of who might pay Ms P's costs.

M v M is a useful case as it combines a pragmatic approach to categorisation of assets and the manner they should be split, taking into account varying examples of conduct. The case also includes a quick summary of relevant case law relating to third party disclosure applications. Unfortunately, it was an expensive exercise. The total cost of the parties and the cohabitee exceeded £250,000 '“ a quarter of the available pot.

Practice points if instructed on the part of the witness on a subpoena duces tecum

• Was the recipient of the subpoena or witness summons offered or paid conduct money? If not an application can be made for reasonable costs of travel and compensation.
• How oppressive or unnecessary are the documents sought?
• Is there a practical way of settling the application against the third party, for example redacting or editing documents and/or setting out information in schedule form?
• Given the nature of any such subpoena, the timescale before a hearing is likely to be short and may require detailed preparation. Get the third party organised.
• What is the link of the third party to the parties to the proceedings?
• What is the third party's understanding of the history of disclosure in the proceedings?
• How much of a fishing trip is the subpoena?
• Are any of the items required already in the public domain?
• Consider the impact of overall disclosure on the Art 8 right of the client, taking account the points set out in M v M.
• Third parties are entitled to their costs in complying with the subpoena subject to the discretion of the court.

Copyright & permissions