What is the ‘Show Cause’ Regime?

This is a common and widely used concept which is not unknown in the Family Court, for example, in the Adoption Ordinance where persons to be served with proceedings e.g: the natural parent, may attend and ‘show cause’ why an order should not be made: Rule 17, and in the Matrimonial Causes Rules, rule 61, which enables the Secretary of Justice to ‘show cause’ why a decree nisi should not be made absolute.

Ancillary Relief and ‘Show Cause’

Nothing in the Matrimonial Causes Ordinance or Rules provides for a process whereby a party to divorce proceedings may be required to show cause why a pre- or post-nuptial settlement should not govern the orders for ancillary relief.

MCR Rule 6 has been used in support, but it has been held by one of the present Judges that this “does not operate in such a way that if a party was unable to ’show cause’ as to why he/she should not be bound by the agreement or arrangement laid before the court, then he/she would be bound by it”: Own J in CKP v SYK [2021] HKFC 15; FCMC 2441/2007 (27 May 2021), at [15]

The Court is required on all applications for ancillary relief to consider the MPPO section 7 factors.  This is a statutory duty and cannot be ousted by an agreement no matter how powerful its effect may be on the ultimate outcome: Wyatt v Vince [2015] UKSC 14; [2015] 1 WLR 1228, at [27]-[29] (Lord Wilson) and cited with approval by Own J in CKP v SYK.

Understanding the History of ‘Show Cause’ in the Context of Separation Agreements

England & Wales

In Edgar v Edgar [1980] 1 WLR 1410:

  • As a matter of principle, a separation agreement was but one of the factors to be taken into consideration in adjudicating on the Ancillary Reliefclaim;
  • The weight to be given to such factor depends on the circumstances in which the agreement was entered into, including whether the making of the agreement had been vitiated by undue pressure or exploitation of dominant position, inadequate knowledge, poor legal advice, or a material change of circumstances since it was made
  • But (per Ormrod LJ)
    • “Important too is the general proposition that formal agreements, properly and fairly arrived at with competent legal advice, should not be displaced unless there are good and substantial grounds for concluding that an injustice will be done by holding the parties to the terms of their agreement.”
  • Ormrod LJ, citing with approval an earlier decision of Wright v Wright [1970] 1 WLR 1219, decided that that the existence of such an agreement “means that the wife … must offer prima facie evidence of material factors which show that justice requires that she should be relieved from the effects of her covenant in the deed of separation [not to seek any further capital or property award]” (at p1417)

Hong Kong

  • L v C [2007] 3 HKLRD 819
    • [37] (Stock JA) remarked “When parties who were sui juris freely entered upon a bargain for the division of matrimonial assets then, absent fair or unconscionable circumstances surrounding the conclusion of the agreement and absent material and drastic unforeseen circumstances arising thereafter such as to cause manifest prejudice to one of the parties, the courts would uphold the parties to their bargain”
    • Stock JA confirmed a number of factors which might lead the Court to conclude that the agreement should not be upheld. In addition to those already identified above
      • Whether the parties have acted upon the agreement reached
      • Whether judgment of one of the parties was impaired by emotion or fear or misapprehension of the factual or legal position
    • There are significant policy reasons behind the principle. Stock JA again at [38] stated:
      • “[the principle] recognises the considerable trauma that attends prolonged and costly matrimonial disputes, and the obvious advantage in settlement rather than in the litigious cauldron that stirs bitterness, prolongs uncertainty, and is the enemy of the clean break that enures to the advantage of husband, wife and children. Matrimonial law is a flexible tool, precisely because the personal element is at its centre and because personal and family circumstances and needs are complex, varying from setting to setting and from individual to individual.  To this fact the statute gives due recognition by the wife discretion it confers, but the courts have articulated principles within which that discretion is to be exercised, else the certainty and finality that serves the interests of the family and the autonomy that should be accorded to individuals ’to organise their lives as they see fit and to pursue their own sense of what is mutually acceptable in their own individual circumstances’ (Miglin v Miglin) are rendered much more difficult to attain.”

Stock JA acknowledged the “tension” between encouraging settlement and upholding agreements on the one hand, and the retention by the Court of its jurisdiction to ensure fair awards are made.  Such uncertainty “is lessened to an [acceptable] degree if such an agreement is ‘presumptively dispositive’, the burden being on the party seeking to achieve a different disposition to show good and substantial cause why the compact should not be respected.”

Nothing in Edgar nor L v C or any other case suggests that this burden results in a modification of the Court’s duty to consider all factors or the raising of some kind of estoppel: indeed, Ormrod LJ in Edgar explicitly dismissed such a notion (at p1417).

Crossley v Crossley

The Facts

In this case – [2007] EWCA Civ 1491 (UKCA) – both parties were independently wealthy at the time of the marriage. They signed a pre-nuptial agreement and had a short marriage from January 2006 to March 2007. They had no children. The Wife petitioned in August 2007 and issued Form A in September 2007 triggering the Form E Questionnaire process.  She alleged material non-disclosure on the part of the Husband and that he was hiding assets from her. The Husband issued summons seeking an order that the Wife show cause why her claims for ancillary relief should not be resolved in accordance with the pre-nuptial agreement.

The Judgement

First instance Judge (Bennett J) directed Form Es without attachments and for the Wife to explain within her Form E why the pre-nuptial agreement was not a “knockout blow”. The Wife appealed that Bennett J should not have directed that the Husband’s Summons be dealt with as preliminary issue, that the Judge erred in not applying the family procedure rules, which were mandatory, and that the Judge had prevented her from achieving proper disclosure and the testing of her hidden asset theory.

In the Court of Appeal, Thorpe LJ argued that:

  • The Judge had not directed that the Summons be heard as a preliminary issue;
  • The pre-nuptial agreement did not oust the Court’s obligation to apply s. 25; it is but one of the factors;
  • The “quite exceptional” facts of the case gave rise to a “very strong case” that the possible result of the s. 25 exercise was that the Wife would receive no further financial award;
  • The Rules are not intended to be a straitjacket precluding sensible case management proportionate to the financial position of the parties and the issues involved.

The case demonstrated “the discretionary power of the judge to require a party to show cause why a contractual agreement should not rule the outcome of an ancillary relief claim, not just when the contract is made post-separation and in contemplation of an application, but also when the contract has been made prenuptially or postnuptially but before the breakdown of the marriage.”

Crossley Summonses

Absent the very rare “Crossley”-type facts, it is arguably inappropriate to issue application to force the other party to a pre-nuptial agreement to show cause why it should not bind his/her claim.

First, there are ample opportunities for a party to make it known that they will be asking the Court to determine the matter of ancillary relief in accordance with a pre- or post-nuptial agreement:

  • The Petition
  • The Form E

Second, as noted, the Court must still perform its duty under section 7, applying all the principles in LKW v DD, and all authorities on pre- or post-nuptial agreements, including Granatino v Radmacher, SPH v SA etc etc.   Notably, neither Ms. Radmacher nor the Husband in SPH v SA issued a separate “show cause” Summons.

Third, for emphasis, the issuance of a Summons does not ipso facto modify the Court’s procedure. The superficially attractive description of Bennett J in Crossley v Crossley, that the PNA in that case might be shown to be a “knockout blow” should not mislead practitioners into advising clients (or seeking to persuade the Court) that it can consider the weight to be attached to such an agreement is a “preliminary” or “discrete” point.

Absent the rare circumstances in Crossley itself, there are significant risks that the Court will dismiss the application, with the resultant delay and costs implications:

  • V, RHM v V, ES (Crossley Application) [2019] HKFLR 513. Application dismissed.   Not appropriate case.
  • CKP v SYK

Absent such rare cases, it is advisable that the Court should consider a pre-nuptial agreement as part of the determination of ancillary relief in the usual way.

The Court can – per Crossley – modify the procedure, e.g. by limiting disclosure or questionnaires.   Its process has already been significantly modified by the recent changes e.g. to the length of questionnaires.  The Court has such powers and it does not need a Summons to give rise to such directions.

Some Suggestions

It is worth considering no longer calling these applications, “Crossley” Summonses.    It is a show cause process, which can alert the Court to its case management powers and lead to efficient disposal, particularly in the more classical situation where one party is asking another to show cause why a post-separation agreement should not be binding: S v S (Ancillary Relief) [2008] EWHC 2038 (Fam).

Another suggestion is to not issue any Summons, however labeled, with the expectation that the Court’s process can be modified so as to deal with the weight to be attached to such an agreement as a discrete issue without regard to all other section 7 factors.

 

Caroline McNally, Gall

Peter Barnes, Parkside Chambers