Tue, 06 Apr 2021
No5 Barrister Giles Pengelly recently appeared for the appellant (wife) in Souza v Souza  EWHC 199 (Fam) (“Souza”); the case demonstrates the difficulties in applying familiar legal principles within the challenging economic circumstances created by the Covid-19 pandemic.
The parties married in 2007 and separated in 2016; they had a daughter (“the child”), who was nine years old at the time of the appeal - she lived with the wife. Both the wife and the husband had worked in the hospitality industry - a sector ravaged by the pandemic. Prior to the pandemic some parts of the industry were already struggling - the wife had been made redundant a number of times.
The matter progressed to a final hearing before a Deputy District Judge in 2019; the husband successfully appealed that decision. On a re-hearing before a Recorder in 2020, the Court drew adverse inferences against the wife’s non-disclosure in respect of certain assets she held in Poland; the Recorder proceeded to divide the only substantial marital asset, the former matrimonial home (“FMH”), equally, and to direct certain modest periodical payments in favour of the wife for a period of two years. The Recorder gave the wife 12 months to effect a sale of the FMH, during which time the husband would pay the mortgage.
On appeal to the High Court (Cohen J), the wife argued that the Recorder was wrong to draw inferences against her and make certain factual findings in relation to assets in Poland; if she was successful on that point, then her argument was that the Recorder’s capital distribution was wrong as it did not leave her with sufficient capital to adequately rehouse. The wife’s argument, in any event, was that the house should not be sold in the short term: first, because it is was a property that was particularly well-suited to her and the child’s needs; and, second, because she needed further time to find alternative employment and could not adequately rehouse until she had. As a result, the wife sought a Mesher order (an order that the husband transfer the property to the wife subject to a charge in favour of the husband) or, otherwise, a deferred order for sale.
After the presentation of the wife’s oral argument in the appeal, which included reference to certain documents not before the Recorder, the husband conceded that the Recorder’s findings about assets in Poland were wrong. In consequence, the husband conceded that the equal division of the equity was also unsustainable – he agreed to a 70:30 division of the equity in favour of the wife.
The only matter for the Court to decide was whether there should be a Mesher order or, in the alternative, a deferred order for sale for a long period. The Court decided to defer the sale of the property for an additional 12 months, bringing the total period of deferment – from the date of the Recorder’s order - to two years; the husband would pay the mortgage in the meantime and pay the aforementioned periodical payments.
This article will consider two aspects of the decision:
1. Fresh Evidence on Appeal
First, for the purpose of deciding whether the Recorder was wrong in some of his factual findings, the Court determined that certain ‘fresh’ evidence be provisionally admitted so that the Court could hear submissions about its probative value in the course of the hearing (see - of the Judgment).
In considering whether to admit the evidence, the Court did not feel that it was necessary to establish the precise reason why that evidence had not been placed before the Recorder; per Cohen J (at ),
“It does the parties no favours if a finding which is shown to be false is allowed to stand. These parties have to continue to work with one another, if only in connection with the arrangements for their daughter, and it would be a lasting sore if this error was not corrected”
The Court also agreed to admit a number of other documents after the husband conceded the Recorder’s factual error about the Polish assets; it followed, since the Court now had to fully re-examine the parties’ positions and, in particular, the wife’s ability to rehouse, that fresh evidence relevant to that should be before the Court (see  of the Judgment).
Cohen J’s decision is not, however, a ‘green light’ for first-instance litigants to ignore the principles of disclosure in the hope that anything that goes against them will be revisited on appeal; the decision turns on its own facts:
- the important fresh evidence in the appeal consisted of a single side of A4;
- the Recorder’s error arose from a lack of clarity in respect of the totality of the documents filed before the final hearing and the evidence at that hearing;
- the error was of central importance to the Recorder’s approach on a number of important issues, including the housing situation for a child.
2. Decisions in the Face of Great Uncertainty
After the argument about the fresh evidence and the husband’s acceptance that the Recorder’s finding was wrong, Cohen J was able to disturb the Recorder’s substantive decision; Cohen J had to exercise his discretion in the face of great uncertainty caused by:
- the poor performance of the hospitality industry in the pandemic;
- the wife’s inability to find alternative employment notwithstanding her motivation to do so;
- fresh evidence of the considerable difficulties the wife would face rehousing given her only income was derived from welfare benefits (see next paragraph);
There were a number of arguments on behalf of the wife that there should be a Mesher order or a lengthy deferral of the sale as she could not adequately rehouse otherwise: (1) the Court should be alive to the effect of any order for spousal maintenance on the wife’s claim for universal credit; (2) the Court should not assume the wife had an entitlement to housing benefit (or, more precisely, a housing element of a claim for universal credit); even where that was the case, her argument was that the Court should be alive to the way that that entitlement is calculated; and (3) the Court should be alive to the widespread discrimination experienced by those renting privately whose incomes are derived from welfare benefits and, also, to the terms of any tenancies offered by landlords to potential tenants in those circumstances.
Ultimately, the Court declined to make a Mesher order, or defer the sale for a lengthy period, for two main reasons:
- the husband’s financial position was not strong enough sustain significant deficits for many years to come; and
- the prospect of the wife being able to ‘buy him out’, or take over the mortgage, was assessed as low.
The Court also recognised, however, that an immediate sale, or sale deferred for a short period, would be insufficient time for the wife to find alternative employment or put herself in a position to either privately rent or take out her own mortgage (see  and  of the Judgment) The child lived with the mother and, of course, the child is the Court’s first consideration.
The Court gave her two years in total to ‘get herself back on her feet’; as is often the way in family law, the Court had to choose the ‘least worst’ of a series of bad options.
Souza is a recent illustration of the procedure for the reception of fresh evidence in financial remedies appeals where there has been an important factual error at first instance. It is also an illustration of the difficulties encountered by first-instance judges hearing ‘needs’ cases who have to exercise their discretion in the face of the many and varied uncertainties created by the present pandemic.