What happens to pension sharing if a couple divorces overseas?

Divorce|March 14th 2011

This post focuses upon pension sharing, couples with overseas links, three recent Court of Appeal judgements and Part III of the Matrimonial and Family Proceedings Act 1984. It has been written for the law students who read this blog. I hope, however, that general readers who have an interest in this subject and are not averse to an analysis of case law may also find it useful.

We are going to examine the interaction of three recently published cases:

We will also be looking at the Supreme Court’s decision in Agbaje v Agbaje. And if that isn’t enough, we’ll throw in CG v IF, a High Court case involving a divorce in Switzerland, for good measure!

Overseas courts and English pensions: Schofield v Schofield

From little acorns, big oak trees grow. Thus it happened in Schofield v Schofield, which recently made it to the Court of Appeal and was reported at the weekend. I do not doubt that this relatively small money case will have a substantial impact on the outcome of many transnational cases, which will probably involve assets of far greater value. I also believe that it has set out fundamental principles for lawyers to consider when dealing with English pensions, all over the world.

Schofield v Schofield has been reported at the same time as two other Court of Appeal cases, Traversa v Freddi and Chandler v Chandler, and I think it is fair to say that those two cases have contributed to its impact.

On the face of it, Schofield v Schofield involved relatively little in terms of assets or principles. A British Army soldier, serving in Germany, divorced in Germany. He had been married to a German woman, and the couple had three teenage children. The only capital the parties had, some £87,000, was divided equally in Germany. The German court had power only to order an equal capital split.

The wife worked in a chemist shop, earning a modest income. The husband was left with his own income, his share of the capital plus… his Army pension. This had a fund value of £280,000, but the German court acknowledged that it had no legal power to deal with it.

Overseas courts do not generally have jurisdiction over English pensions. This is a big problem for anyone divorcing abroad, where one of the assets is an English pension and potentially the most valuable asset of all, as in this case. It is one of the considerations to take into account when deciding whether to divorce abroad or in England or Wales. Equally it is a problem when the divorce is taking place in England and the pension is elsewhere, so it needs considering very carefully.

In Germany, the husband had thus managed to hold onto his pension. The wife didn’t give up – as the German court clearly intended she should not. However she had to come here to England for her remedy.

At first instance in this country, when the wife applied for leave to proceed for a pension share, her application was unsuccessful.

In another case, CG v IF (2010), Mr Justice Mostyn had already stated that in order for leave to be granted, an application had to be shown likely to succeed:

“In my opinion a solid/substantial ground will be shown where the court can confidently say that the probability is greater than or equal to 50 per cent that the applicant will achieve a substantive order were the matter to be tried.”

In Schofield v Schofield, Mr Justice Mostyn took the view that the income produced if a pension share occurred would be “paltry” and  was unlikely to have affected the original overall settlement in Germany. Accordingly he dismissed the wife’s application for leave to proceed in England, under Part III of the Matrimonial and Family Proceedings Act 1984.

Was Mr Justice Mostyn right? Er… no!

It is worth reading the law in Part III because it sets out, in chronological order, who can apply for a “second bite of the cherry” in England following foreign matrimonial proceedings.

Here is the procedure. Leave of the court is first required and is given ex parte without the other side knowing or being present. In giving leave, the judge must be satisfied that there is a substantial ground for the making of the application for the order. Let’s take a look at how it works in practice.

More than a “good arguable case”: Agbaje v Agbaje

Agbaje v Agbaje is a case about which I have written previously. Heard in the Supreme Court in 2010, it involved a husband and wife who were married for 38 years. They both had British and Nigerian citizenship, and the wife had lived in London since 1999. The couple divorced in Nigeria in 2005 and, out of assets of about £700,000 the wife was awarded about £21,000 and a property in Lagos.  She sought a “second bite of the cherry” in England, and the Supreme Court ruled in her favour.

When Agbaje v Agbaje was heard in the Supreme Court, Lord Justice Collins set out the threshold to be crossed before leave to proceed is granted:

“The principal object of the filter mechanism is to prevent wholly unmeritorious claims being pursued to oppress or blackmail a partner. The threshold is not high, but is higher than ‘serious issue to be tried’ or ‘good arguable case’ found in other contexts. It is perhaps best expressed by saying that in this context ‘substantial’ means ‘solid’.

Note that he made no reference to a “50 per cent” probability of success.

Assuming there is a “solid” claim, the Statute then sets out jurisdictional requirements to be considered, which means that the proposed applicant needs to satisfy the court that the court has jurisdiction based on domicile, or habitual residence or because there is a former matrimonial home in the jurisdiction. Then there is the duty of the court to consider whether England and Wales is indeed the appropriate venue. Section 16 (2) of the Matrimonial and Family Proceedings Act 1984 sets out the considerations for the court to take into account.

If all is well, leave is granted, the case goes to a hearing and the available remedies are those available to divorcing parties in this country.

Once granted, it is very difficult to set aside unless, in the words of Lord Justice Collins, a “knockout blow can be delivered”. In all other cases, an application to set aside will be heard at the same time as the full hearing.

(NB. Important warning to any would-be applicants: don’t remarry before you proceed or you won’t be able to do so!)

Part III is brief and isn’t difficult to understand. If you read it, however, you will not find Mr Justice Mostyn’s approach there. This omission was noted by their eagle-eyed Lordships in the Court of Appeal, led by Lord Justice Thorpe, who cross-compared Mr Justice Mostyn’s approach with the higher authority of Lord Justice Collins and declared it a no contest. So in the case of Schofield v Schofield, leave was granted.

Leave refused, then granted: Traversa v Freddi

The Court of Appeal, again led by Lord Justice Thorpe but sitting with Lord Justice Munby, was coincidentally giving judgement in another, very similar case at the time. Traversa v Freddi was a case involving a wealthy woman and a restaurateur from a relatively modest background who signed a prenuptial agreement in Italy, married there and divided their time between Italy and England. The marriage ended after 20 years and the couple divorced in Italy.  After the husband was ordered by an Italian court to pay his former wife maintenance and vacate the family home in London, he applied to the court in England for leave to vary the settlement.

When the case came before Mr Justice Bodey, he refused leave to the Italian husband to proceed in this country after the Italian case had been decided, even though it involved the husband’s home in England. Mr Justice Bodey did so because the Supreme Court had not yet handed down its judgement in Agbaye v Agbaje. He therefore applied the law as it was, not as it now is.

The Court of Appeal allowed the appeal in Traversa v Freddi and spent a good deal of time rebuking Mr Justice Mostyn for his approach in CG v IF. Lord Justice Munby described that approach as “doubly wrong”.

The Court of Appeal does not mince its words! Instead, in proper English fashion, it delivers caustic rebukes in elegant style! In Schofield v Schofield the Court of Appeal referred to Mr Justice Mostyn’s “gloss” and “trenchantly rejected” his interpretation of the requirements of the law.


Schofield v Schofield: a return and reversal

The Court of Appeal’s reversal of the decision in Traversa v Freddi provided one immediate reason to reverse the decision in Schofield v Schofield. The Court of Appeal also took the view that when compared with the £87,000 capital, the pension was in fact very significant.

So despite Mr Justice Mostyn’s conclusion, Schofield v Schofield eventually passed Lord Justice Collins’ test of “solidity”.

Perhaps more importantly for lawyers who followed the case with interest, Lord Justice Thorpe also made it clear that the case raises an important policy point:

“It does seem to me very important that, where a pension is rooted and funded within jurisdiction A and where the divorce is to be pronounced in jurisdiction B, with all ancillary issues decided according to the law of state B, it is very important that there should be judicial collaboration to ensure that the applicant in state B is not deprived of her entitlement to share in the pension rooted and funded in state A.  This case is a good example of one in which the German court has sought international collaboration and has implicitly called upon the English court to determine any issue of pension equalisation.”

This, it seems to me, is exactly what Lord Justice Thorpe has done throughout his career, particularly as head of the Family Justice Council. He has worked extremely hard to forge relations across the world with other judges and courts so that seemingly barred doors have been opened to obtain swift and, where appropriate, reciprocal justice for litigants.

The limits of cooperation: Chandler v Chandler

In Schofield v Schofield the German courts were looking to the English court for assistance, and we cooperated and provided that assistance. But let’s not get carried away. Cooperation has judicial limits. It does not mean we will ever go so far as to apply another country’s own law and perhaps save everyone the (extremely expensive) need to have two sets of court proceedings in two countries. In England and Wales we are committed to applying only the lex fori: the law of the country in which the case is heard.

The third of our recently published cases is Chandler v Chandler. In this case Lord Justice Thorpe, sitting alone, upheld the decision of Mrs Justice Baron and firmly declined to apply the law of Gibraltar to a divorce case:

“It is a very important feature of our relationship with the developing family law of Europe that we tenaciously uphold our principle that only the lex fori applies in the courts of England and Wales.  We have exercised our right to abstain from developing European family law that would require us to apply the law of some other jurisdiction.”

So Germany applies its law and we will apply ours. England and Wales will cooperate and we expect other courts to cooperate with us. That is as good as it gets. Unlike certain other countries, we do not routinely apply others’ laws to cases heard here. But is this right? That is a question for another post…

 

Author: Stowe Family Law

Comment(1)

  1. Mr Justice Mostyn does not deserve this - Marilyn Stowe Blog says:

    […] going to the Bench. He retains the same dry, wicked sense of humour, and a brilliant intellect. I don’t always agree with his judgments, but they are always carefully crafted.  For students of family law, they are […]

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