Family Affairs article by David Gareth Evans
Small Money, Big Decisions…
Representing clients in modest money cases
Over our strange Covid-Christmas break, and whilst cack-handedly shoving sausage meat under the skin of a poor little chicken (who really deserved better), it occurred to me that the vast majority of Financial Remedy practitioners are like home cooks trying to follow Jamie Oliver’s enthusiastic directions: We don’t have a limitless kitchen garden, huge corn-fed chickens and organic sage on tap…instead, we try to extract the key elements of Jamie’s method and apply them to that poor little chicken from Sainsbury’s. Or at least, that is the theory!
I am referring, of course, to the fact that the vast majority of us deal with cases with only a modest asset base: there is usually a humble FMH (from which, like the miracle of the fishes and the loaves, we have to somehow meet the housing needs of two or more people), sometimes a pension fund worth talking about, and very often plenty of debt.
From this limited larder, we are required to meet the parties’ needs, allow them to become financially independent of each other and (hopefully) achieve an outcome that is globally fair – this is the miracle that we have to perform day in, day out.
From the vast and ever-expanding array of multi-million-pound case law decisions, we are required to distil key principles of universal application, and then to try and make them fit to Mr and Mrs Jones’ small, terraced house in the Rhondda Valley. However, as I am sure you have all experienced, most of the more interesting legal arguments come to a crashing halt against an impenetrable wall of ‘needs’…
That is not to say that clients in modest asset cases are not interested in contributions, non-marital asset or add-back arguments. Far from it, if anything, the lower the asset base, the more likely the client is to be exercised by a perceived accounting injustice. I have found that the key in such cases is to keep the client focused on the bigger picture and the question of meeting needs.
Home is where the heart (of the case) is…
I always start by focusing on the ‘big 3’ needs: accommodation, income and pension, as in most modest asset cases, simply meeting the parties’ basic needs (let alone ‘generously interpreting’ them) will be the start and the end of the case.
When it comes to capital division, providing the parties with their own home is likely to be the key battleground. So, obtaining accurate mortgage capacities and realistic example property particulars will be vital – with a real emphasis on the words ‘accurate’ and ‘realistic’.
Serving a selection of squalid 1-bed flats for the other party, whilst including picture-perfect 3-bed houses for your childless client, helps no one: it makes your client look unreasonable and unrealistic, and more importantly, fails to give the court the information that the judge needs to make the decision.
Equally, filing a mortgage application for a nominal sum (that your client has decided he/she wants from the marital assets as a deposit) is just as unhelpful. The court needs to know (a) how much the parties can borrow and, don’t forget, (b) how much the lending will cost the parties each month. Perhaps think about instructing a single joint expert mortgage capacity report, who can look across the market and provide the information that the court really needs. This becomes doubly important if there is a spousal maintenance claim in the offing…
The Value of Clean Break
Modest asset cases frequently throw up claims for periodical payments, which are either genuinely pursued, or tactically pleaded (as a bargaining chip in negotiations). This element of the case will stand or fall on the dreaded ‘schedule of outgoings’ annexed to the Form E.
As with property particulars above, pleading over the top outgoings does not help your client – it leaves them exposed to the classic eye-rolling cross-examination of “madam, do you expect the learned judge to believe that you need £500 a month for hair-dressing?” A realistic and reasonably priced outgoings schedule, that still demonstrably falls below your client’s income each month, is far more powerful than a budget that could sustain a minor royal.
Since the advent of the PAG report and the oft-quoted case of W v H, the court is now much less willing to entertain any non-marital apportionment in modest asset cases and much more likely to deem the case a ‘needs case’.
As such, the question for modest asset cases is more likely to be around the instruction of a PODE and, frankly, can they afford it? Usually, the question is better phrased as: can they afford not to instruct a PODE? This decision is hardest to determine where the total pension assets fall between £100,000 and £200,000. Each practitioner (and judge) will have a personal ‘threshold’ where an actuary is required, but I would suggest that wherever the total pension fund reaches 6-figures the PODE conversation needs to be broached.
Where the asset base is ‘petite’, there is often a requirement to be more creative in your solutions. This may require you to consider off-setting the pension credit owed by one party to the other in capital. Even with the broadly helpful (and voluminous) commentary on off-setting in the PAG report, it remains something of a dark art.
We are required to consider adjusting the notional pension credit owed, for tax (relatively straight forward) and then to consider whether there ought to be a further adjustment for ‘utility’ (the dark art). This has always troubled me, as the argument runs thus: “this is a needs case and so there ought to be no apportionment – my client needs his/her half-share of the pension to me his/her needs in retirement”…but then, having claimed a half-share on the basis of needs, “my client wants to off-set this pension credit in capital, as he/she needs this capital to re-house him/herself”. Well, which is it? The answer, of course, is “both”, but in modest asset cases your client is highly unlikely to get both – so big decisions need to be made.
Very often there is not enough capital to reach the offset amount you have calculated and so big decisions have to be made, and compromises reached. I have long found that creative solutions usually only exist between the parties; if you leave it to the court, there is much more likely to be a blunt solution – sell the property, share the pension.
In modest asset cases, debt goes with the territory. Very often the court will be asked to determine whether the debts listed by a party are ‘marital’ or ‘non-marital’ debts, usually followed by an argument that any marital debts ought to be discharged as a first call on any capital. In turn, this then produces arguments around ‘need’ and any impact that ongoing debt may have on the parties’ ability to meet their outgoings and/or raise any mortgage.
Although perhaps an obvious solution, the first port of call is to obtain evidence of such debts as at the date of separation (which may produce further argument about when that was…), and then to see if the debt can still be neatly identified. If not, then (in a needs case) the court is unlikely to entertain any ‘add back’ argument for that party having discharged a debt of the parties.
Sadly, in modest asset cases you do have to keep an eye on the risk of bankruptcy, with all of the added complication that this can bring, especially where the FMH is not in joint names. As with spousal maintenance, this issue can often be found as an unattractive litigation tactic, used to place pressure on the solvent spouse to settle. Of course, if the debt-laden spouse does file for bankruptcy, ironically there may be less pressure on the capital assets being needed to discharge insolvent party’s debt.
Your modest asset case is likely to be heard by a busy district judge (or ticketed deputy), who will need to get up to speed quickly with the assets and issues in the case. Time will likely be limited and the judge disinterested in who took £50 from the kitchen dresser in 2003. In your oral submissions focus on the ‘big ticket items’ first – that is what the judge wants to hear about.
Mentioning no names, and certainly without making any personal confession, it may well be that your judge has only read counsel’s helpful case notes before embarking upon the hearing – even for a trial...
As such, I would respectfully suggest that the case note needs to get to the point quickly and clearly. It also needs to be with the judge in good time to allow them to read it before starting their list. Cutting and pasting vast tracts of Miller (you know who you are), or entire sections of the PAG report, are unlikely to assist the judge, or endear you to them. As a local judge once memorably said to me at an early stage of my career, “Mr Evans, a skeleton ought to be skeletal, not a written closing” – and they were absolutely right. Apart from anything else, it helps to leave something for you to say in the hearing!
You are also much more likely to be against a Litigant in Person in a modest asset case, so an accessible case note becomes that much more important. The case note can be a helpful basis for discussions with a LiP, and will mean that the discussions and hearing will run more smoothly, as they will have already had explained to them what you are seeking and why. Well, at least in theory – if they are being deliberately obtuse, the accessible case note can always be used to highlight their willful ignorance.
In terms of the essential asset schedule, it seems that the closer to London you get, the larger the schedule becomes and the more colours are deployed. I confess (and at the risk of sounding like a provincial bumpkin), whilst they look pretty, in a small money, needs case, I find these rainbow-coloured A3 sheets far less accessible than a straight forward, black and white, Word document. This may have something to do with being profoundly colour-blind, but having to constantly track backwards and forwards around a spreadsheet is much more onerous than a simple list. I can already hear the howls of derision echoing over the Severn Bridge, but I speak as I find.
Perhaps obviously, your case note needs to accord with your instructions. Where money is tight, there may be a reluctance to have a pre-hearing conference with counsel, but they are in my view essential for FDR and Final Hearings, if not for FDAs. There is truly nothing more excruciating than robustly setting out your position in your case note, only to have to spend the first 10 minutes of your oral submissions correcting yourself, rather than advancing your client’s case.
Tying It All Together
Where a client of modest means has paid for counsel, they usually expect miracles…or at least a better than average settlement, or perhaps the most dangerous client of all: a settlement at any costs. As such, you can easily find yourself still straining every sinew to reach agreement late on a rainy Friday afternoon. But, always keep the cases of Xydias and Rose at your fingertips, and be careful about reaching a concluded agreement before you have fully considered all the terms of the final order. The devil is in the detail and, in modest asset cases, every pound counts.
It is easy to dismiss small money cases as ‘straight forward’ and ‘not legally complex’, but in needs cases, for those clients, literally every pound counts and can make the difference between buying a house or not, being debt free or not, having enough to live on…or not. Our clients are frequently called upon to make huge decisions about their future financial security, trade-offs which may not have the glamour of the multi-million-pound cases, but have arguably an even greater impact on their lives.
David Gareth Evans
9 Park Place, Cardiff
22nd January 2021