Update: family law

It is relativelY rare in family proceedings for an order which has been made by consent between the parties to return before the courts on the grounds that the order should be set aside due to non-disclosure. In the case of I v I [2008] EWHC1167 (Fam) the wife (W) made an application to set aside an order for ancillary relief made by the district judge at a financial dispute resolution appointment on this basis. In addition she also argued a supervening event had occurred, although counsel subsequently did not pursue the latter argument at the hearing. The case also raised the interesting question of whether a potential conflict of interest arises when a solicitor represents the applicant at both hearings.

The husband (H) was an investment banker and the wife (W) was the homemaker and primary carer of the children. The parties met at university and lived together from 1992 until they married in 1996. At the time of the marriage neither party had any significant resources. The parties separated in 1995 after a relationship of 13 years' duration. There were two children aged 8 and 10 years.

No earning capacity

At the financial dispute resolution (FDR) appointment the district judge approved the terms of an agreement reached between H and W. It was accepted by the parties at the FDR hearing that all their wealth had been built up during the relationship and that W effectively had no earning capacity. It was also agreed that there were insufficient assets for a clean break.

The issue in question was how future income and savings (and thus capital) derived from it should be approached, shared and taken into account, having regard to the fact that first the money was earned after the end of the relationship and second, periodical payments should be set at a level that reflected among other things the level of lifestyle enjoyed during the marriage.

The order for ancillary relief provided for W to retain the FMH and receive 70 percent of the net value of the property worth £507,000. She was awarded a total income award for herself and the children of £75,000 per annum (plus school fees and extras.) H was earning a net salary of around £260,000. H's salary had however historically increased year-on-year.

W specifically argued that H's bonus would continue to rise exponentially in the future and rejected H's proposal that she should receive a varying per cent of his income depending on his level of earnings. Instead she opted for a fixed figure so as not to jeopardise a future variation of maintenance claim. H also received RSU's which would vest in the future.

The majority of H's capital award was comprised of illiquid assets (including a 24 per cent gross charge-back on the FMH), his anticipated bonus payment and current and future RSUs.

Non-disclosure of negotiations for new employment

However, less than two weeks after the agreement was reached, H resigned from his job and agreed contracts with a new employer. This came to W's attention in August. H commenced his new employment in September and in October W issued her application to set the order aside.

W's counsel stated in her opening note that H was 'engaged in negotiations for a new position; had agreed terms of employment and was in consequence materially financially better off (both as to capital and income) than under his old employment contract'.

W's case was that had she known of this new contract of employment she would never have agreed the charge on the property or the level of maintenance for herself. H argued that although he did not disclose the existence of negotiations at the FDR, they were at a preliminary stage, nothing was set in stone and he was under no duty to disclose the discussions as they may or may not have come to fruition.

Furthermore, even if he was under a duty to disclose the negotiations, it would not have resulted in the court making a substantially different order.

The judge therefore had two questions to address at the hearing; does a party have a duty to disclose job negotiations and if so, was non-disclosure of the negotiations a material fact which would result in an order being set aside?

Duty to disclose

The leading and longstanding authority on the duty of full and frank disclosure and the consequences of its breach when a consent order has been approved is Jenkins v Livesey [1985] 1AC 424. Both H and W referred to and relied upon this judgment.

The judge held, having heard lengthy oral evidence about the husband's employment position at the FDR, that when the FDR took place it was not conclusive that:-

 H was about to resign and sign a new contract;

 H had agreed terms which left him in a materially better financial position; and

 The new position was a done deal.

It was clear that on 20 July when H attended the FDR that he was not in a position to resign from his current position as fundamental points were unresolved regarding his new employment and consequently there was uncertainty.

However, this was balanced with a finding that H suspected an offer would be forthcoming and he had played down the true position. Furthermore, although Charles J did not accept aspects of H's oral evidence, he found that H had been less than candid in his disclosure and had not disclosed something W may have been interested to know.

Materiality of the breach

Charles J found that there was 'a duty to provide information that would set the other side on a line of enquiry or thought process on matters to which the court must have regard under the MCA 1973 s.25'. This included in his view any offers of employment if they impacted on income.

Applying Jenkins v Livesey Charles J found that, having established that H had clearly breached this duty, the crucial question was whether the court would have made a substantially different order if such disclosure had take place.

He held that this was not the case. The court could not have concluded that H would successfully negotiate all the terms he had requested in his employment contract; uncertainty would have remained and, in any event, the difference in income between his old and new job was not sufficient to make the agreement unfair.

Charles J gave little weight to W's claim that she would have asked for the FDR to be adjourned so that clarity could be achieved regarding H's employment on the basis that the court cannot reach conclusions on the subjective thinking of the parties or on what would have occurred subjectively, had the negotiations been disclosed.

Potential conflict of interest

Finally Charles J expressed concern that there could potentially be a conflict of interest where W was applying to set aside an order using the same legal team that represented her at the previous hearing.

Charles J concerns arose as he was first uncertain whether W was arguing a subjective test relating to what she was thinking at the hearing and thus the advice she was given and secondly submissions which seemed to imply W's advisers had proceeded on the basis of the previous years income and did not take into account or expect an increase.

Ultimately Charles J was satisfied no conflict existed as (1) W confirmed the test was an objective one, (2) at the second stage of that test alternatives were not advanced on the basis that the degree of certainty that there would be a move, might be found to be less than being asserted by the wife and (3) the FDR material clearly illustrated that W was proceeding on the basis there would be an exponential rise in H's income n the future.

Charles J however commented that in his view, advisers should give careful consideration as to whether they should act on a claim to set an order aside that they previously negotiated. This concern should clearly be borne in mind by a practitioner faced with such a delicate situation.