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Case Study: Neil & Neil - A warning on the implications of dishonesty and deceit in financial proceedings

View profile for Jonathan Whettingsteel
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Case Study: Neil & Neil - A warning on the implications of dishonesty and deceit in financial proceedings

Although an extreme example based on the court’s findings, a recent Judgement delivered by Mr Justice Moor in the case of Neil & Neil [2019] EWHC 3330 (fam) serves as an example as to how the courts will set aside a financial order, even in part which has been made based on the dishonesty and misconduct of one party.

The case

The matter was before the court following an application by the Husband, Terry Neil, to set aside part of a financial order made in divorce proceedings on 8th July 2017. The part of the order that Mr Neil was seeking to set aside required him to make monthly periodical payments to his wife, Mrs Soraya Neil for the sum of £5,500. He was also seeking the court determine the lump sum figure Mrs Neil owes him from the proceeds of sale of the former matrimonial home.

Mrs Neil, who was appearing as a litigant in person, had issued her own cross applications, seeking enforcement of the maintenance arrears she stated Mr Neil owed, as well as variation of the periodical payments. Mrs Neil had also issued an application for Maintenance Pending Suit, however, this was dismissed as the Decree Absolute had already been pronounced and therefore the court did not hold jurisdiction to make this order.

The background

There is a long and complex history to this case, the summary of the background making up 40 of the 90 paragraph Judgement. But in short the key points and agreed background is as follows;

  • Mr Neil is aged 53 and the Chairman of a company, Manage Security Services Ltd (MSS) which supplies security and staff to West End restaurants and clubs;
  • Mrs Neil is aged 52 and, at the time of judgement, was employed and in receipt of Employment support allowance and housing benefit;
  • The parties have no dependant children, but both have children from their past relationships, the Wife’s son giving evidence in this matter;
  • The parties have one child from their marriage, Yasmin (aged 22), who also gave evidence;
  • The parties begin cohabitation in 1992;
  • The parties marry in 2007;
  • The parties separate on 14th January 2014                  

MSS was created in 2002 and Mr Neil is the Chairman, with Mrs Neil dealing with the administrative side of the business, including the company finances during the marriage.

The memorandum of understanding

Following separation, the parties attended mediation and it is confirmed by the parties they reached an agreement and a memorandum of understanding was prepared outlining the terms. This made provisions for the former matrimonial home to be sold, Mrs Neil to receive the first £1 million from the net proceeds to meet the future housing needs of herself and Yasmin with the residue, of approximately £7,700 being split equally. If the £1 million lump sum paid to Mrs Neil was more than 50% of the equity of her future property, the difference would be reflected on a charge over the property in Mr Neil’s favour.

Under the terms of the memorandum of understanding, the parties were to have a ‘clean break’, having no future financial obligation or liability to each other. Mr Neil was receiving a monthly salary of £8,000 from the company, with this also paying his housing costs of £4,500 per month. Mrs Neil’s salary was increased to £12,500 per month net.

Mrs Neil instructed a solicitor to draft a consent order to reflect the terms of the memorandum in December 2014.

In March 2015, a first draft consent order was sent to Mrs Neil for approval, which had a number of questions which required her clarification before a final draft could be prepared. This made provisions for nominal spousal maintenance until Mr Neil’s 65th birthday, Mr Neil’s death, Mrs Neil’s remarriage or further order of the court.

Mrs Neil provided her solicitors with further instructions, requesting a number of amendments to the order, including the removal of nominal spousal maintenance terminating on her remarriage and the obligation to secure a guarantee against her next property in Mr Neil’s favour. Mrs Neil told her solicitors in email correspondence that this had been ‘agreed between us’, suggesting direct discussions with Mr Neil to vary the terms of the order.

Mr Neil was sent a copy of the draft order on 11th May 2015. This included a cover letter, which Mr Justice Moor placed great significance on, stating the order reflected the terms of the agreement the parties had reached at mediation. This made no reference to the subsequent amendments that had been made based on Mrs Neil’s instructions.

Mr Neil was unhappy at receiving the letter from Mrs Neil’s solicitors, contacting her directly to say he would not be responding to the letter and asking Mrs Neil to tell her solicitors not to contact him. Mr Justice Moor was critical of Mr Neil for this in his judgement, describing this as “very foolish” and noting that these issues would have been unlikely to have arisen in the first place if Mr Neil had sought legal advice. He did, however, eventually sign the order following discussions with Mrs Neil, but stated he never properly read it and was unaware of the terms.

The consent order

To meet her future housing needs, Mrs Neil had been arranging a mortgage for a property valued at £1.65 million. Mrs Neil sought an increase to her borrowing figure for the mortgage, seeking an additional £150,000. Mrs Neil sent the lender a draft consent order, which made provisions for monthly periodical payments of £5,500, this having appeared in no previous forms of the consent order. Mrs Neil accepted she had amended this document herself before sending it to the lender.

The lender said the £5,500 monthly payments were “the real key” to being lent the requested £900,000 mortgage, asking for a copy of the order signed by the parties, along with a letter from Mr. Neil confirming he agreed to the terms of the settlement. Mrs Neil told the lender, “the divorce is with the courts.”

Mrs Neil subsequently emailed her solicitors informing them that there had been further developments and she had agreed with Mr Neil that he would make monthly periodical payments of £5,500 until she remarried and asked for the consent order to be amended to reflect this. In a move that the Judge noted as unusual, Mrs Neil’s solicitors retrieved the consent order from the courts, this having already been submitted and made this amendment without any further communications or checking with Mr Neil, with Mrs Neil simply telling her solicitors that she would get Mr Neil to email them to confirm his consent. They did however question this with Mrs Neil, noting her monthly income was higher than Mr Neil’s.

Mrs Neil emailed Mr Neil asking him to contact the mortgage lender to confirm his agreement to pay £5,500 per month in ‘alimony’ after declaration of ‘Decree Nisei’. It was Mr Neil’s case that he never received any such email.

The order was subsequently amended, including the provision for monthly payments and filed with the court. This was not signed by Mrs Neil but was suggested to be signed by Mr Neil. Mr Neil denied he had ever seen or signed any such order.

There was a number of emails sent both to and from Mr Neil’s email including a further email at 15:13 on 15th June 2019 to the mortgage lender stating: “I am in agreement with our financial settlement including a monthly ongoing alimony payment of £5,500 pcm after declaration of the Decree Nisei”. Also at 15:13 on the same date, Mrs Neil emailed her solicitors confirming the amended draft consent order was approved. At 15:18, an email was sent from Mr Neil’s email account to Mrs Neil’s solicitor confirming his agreement to the order, again referring to a ‘Decree Nisei’.

The finances

Following the amended order being submitted and approved, the former matrimonial home was sold for £2,350,000, with net proceeds remaining of £1,348,930. In accordance with the order, Mrs Neil received the first £1 million, however for reasons that were not known or recorded, by agreement the entire proceeds were transferred to Mrs Neil’s account. Mrs Neil then refused to pay any funds to Mr Neil or secure a charge over her new property in his favour.

After this, there are a number of emails exchanged directly between the parties, Mr Justice Moor noting their relevance to his findings. This included one from Mr Neil stating he signed, “a maintenance order i.e. for you to secure your home”, and following an email from Mrs Neil suggesting Mr Neil owed £5,000 in arrears of maintenance further emails stating, “you asked me to sign the papers for you in order to get the loan” and “maintenance order was set up in order for you to borrow £150k wherein you stated it was a paperwork exercise.” It was also noted in the Judgement there was an email from the Mrs Neil stating she was “not claiming maintenance am I. I am letting it roll.”

Based on a number of exchanges between the parties, Mr Justice Moor was satisfied their intention was that Mr Neil agreed to any maintenance payments on the understanding this would not be sought, and to allow Mrs Neil to obtain a mortgage, with Mrs Neil’s communications giving a similar impression.

In August 2016, Mr Neil’s solicitors requested payment from Mrs Neil for his share of the proceeds of sale of the former matrimonial home, totalling £248,931. Mrs Neil’s instructed solicitors responded seeking £82,500 in backdated and unpaid periodical payments.

Following continued requests by Mrs Neil for ever increasing periodical payment arrears and for payments to commence immediately, Mr Neil issued an application to set aside the previous order. Mr Neil suggested the order did not correspondence with the terms agreed at mediation, and also that the order contained provisions for maintenance which he had never agreed to. He did however accept he had obtained no legal advice in relation to the consent order.

The hearing

After an eight day hearing, findings were made that Mrs Neil had served forged witness statements and had lied throughout her evidence, making findings in four of the seven grounds of alleged contempt. Following these findings, the Judge was satisfied the custody threshold had been met and Mrs Neil was sentenced to eight months imprisonment.

Mr Neil stated that following a search of the company computer system he became aware of a number of emails that he had never seen before, nor sent. These included emails to Mrs Neil’s solicitors. Mr Neil’s position was that the first consent order, which he signed did reflect the terms agreed at mediation and following this he had neither seen, nor been engaged in any communications about any changes being made, including the additional of maintenance.

Following a hearing on 12th November 2018, Brooks DDJ found there was a strong enough case of an alleged fraud to pierce legal professional privilege and ordered sight of the communications between Mrs Neil and her solicitors.

Evidence was heard from a number of witnesses, including the party’s daughter, Mrs Neil’s son and staff from the party’s company, as well as IT experts. The witnesses of fact confirmed Mrs Neil had access to Mr Neil’s emails, and that Mrs Neil would deal with the paperwork and administrative issues, with Mr Neil signing whatever he was told to. The IT experts confirmed Mrs Neil could have accessed Mr Neil’s emails, sending and receiving emails and deleting these before Mr Neil was aware of them. One of the experts also noted that emails purporting to be from Mr Neil were found in Mrs Neil’s sent box, which could only have been possible if these were sent by her.

Considering the Judgement

When considering his Judgment, Mr Justice Moor noted the burden of proof to establish any wrongdoing rested on Mr Neil, and it was not for Mrs Neil to prove anything. He also noted that the matter would be determined to a civil standard (on the balance of probabilities) and not the criminal standard (certain or beyond all reasonable doubt).

Paragraphs 49 to 51 of the Judgement provide helpful guidance on the balance and burden when considering an allegation of dishonesty, and also how the court should consider any lie that they find a party has told. This includes looking at why they lied, and whether there is an innocent or honest explanation for this.

In light of the findings already made previously, that Mrs Neil had forged documents and misled the court and solicitors, Mr Justice Moor gave himself a bad character direction, but also emphasised that wrongdoing on one occasion did not automatically mean Mrs Neil had been dishonest and fraudulent on this occasion.

Paragraph 53 of the Judgement provides helpful guidance, referring to the case of Re B (Care: Expert Witnesses) [1996] 1 FLR, and confirming that a Judge cannot substitute their own views for those of an expert, and unless evidence can be provided to the contrary, a Judge must following the expert’s guidance and / or views. 

This case followed the guidance of Gohil v Gohil [2015] UKSC61 and Sharland v Sharland [2015] UKSC 60, being the leading cases on setting aside a financial order. It was distinguished that although these cases dealt with setting aside a financial order due to a lack of full and frank disclosure, they could also apply where one party has committed fraud.

The Judgement

Mr Justice Moor found that Mrs Neil had been fraudulent, and in those circumstances, where fraud was found, the only option was to set aside the previous financial order, especially as the terms of the current order had been made without Mr Neil’s consent.

In paragraph 77 of the judgement, Mr Justice Moor gives a summary of his findings, which included finding:

  • That the letter from Mrs’ Neil’s solicitors sending the consent order, which they suggested matched the terms of the memorandum of understanding prepared following mediation, created an open acknowledgement that the parties had reached an agreement that Mrs Neil wanted to incorporate into a consent order;
  • That Mr Neil had been foolish in his response to Mrs Neil and not seeking legal advice, and had he done so then these issues may well have been avoided;
  • That Mr Neil signed the first consent order without reading it, but thinking it matched the terms agreed at mediation, even though it did not;
  • That Mrs Neil created a falsified consent order to convince them of spousal payments to obtain a mortgage;
  • That Mrs Neil sent fraudulent emails purporting them to be from Mr Neil, including to her solicitors and the lender, and that Mr Neil knew nothing about these;
  • That Mrs Neil had misled her solicitors in suggesting Mr Neil agreed to changes to the order, including the additional of £5,500 month payments;
  • Although not being sure whether Mr Neil had signed the consent order or not, the Judge was satisfied that even if he did know this was contained in the order, he did not know he would be bound by it;
  • That Mr Neil had been naive, but Mrs Neil had been dishonest.

Mr Justice Moor agreed the order should be set aside, however only doing so in part, by removing the provisions for maintenance payments. This was the only variation he sought, alongside clarifying the funds due to him from the sale of the former matrimonial home. Mr Justice Moor ordered a clean break, stating this would have been made long ago if it were not for Mrs Neil’s deceit and dishonesty. Mrs Neil was penalised by ordering Mr Neil should receive the entire proceeds of sale from the former matrimonial home after the initial £1 million payment to Mrs Neil that was agreed. This is despite the previous arrangement being after the initial £1 million payment, the reside would be split.

Mr Justice Moor continued in his judgement at paragraph 86 to make a number of scathing remarks about Mrs Neil’s conduct, and was satisfied that her conduct was to such an extent that Mrs Neil was ordered to pay £250,000 towards Mr Neil’s total costs of just under £300,000.

Conclusion

From a legal practitioner’s perspective, there is some interesting comments about the possible failings in Mrs Neil’s solicitors in not clarifying arrangements with Mr Neil, and acting solely on Mrs Neil’s instructions, including in paragraph 77.

Although an extreme example of dishonesty, fraud and conduct, the guidance provided serves as a reminder that parties should be open and honest in financial proceedings, and the possible implications of failing to do so or trying to mislead the court.

This also shows the importance of getting legal advice if you are ever unsure about a document. As noted by the Judge, Mr Neil’s £293,000 legal bill could have potentially been avoided if he had obtained legal advice, as a solicitor would have been likely to notice the consent order did not match the terms agreed at mediation, avoiding the lengthy and costly dispute and court proceedings in trying to undo Mrs Neil’s fraudulent transactions.


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Case Study: Neil & Neil - A warning on the implications of dishonesty and deceit in financial proceedings

View profile for Jonathan Whettingsteel
  • Posted
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Case Study: Neil & Neil - A warning on the implications of dishonesty and deceit in financial proceedings