Cathcart v Owens: Husband's application to have financial orders set aside for fraud unravels

Image by Elena Έλενα Kontogianni Κοντογιάννη from Pixabay 

As any law student will know, Lord Denning famously said that fraud unravels everything. However, as Mostyn J points out in his judgment in Carthcart v Owens, that is only true up to a point: "It only unravels an advantage which has been obtained by that very fraud. Further, the fraud has to be distinctly pleaded, and distinctly proved, by the person alleging it."

This was yet another of those awful unremitting litigation cases, in this instance lasting some 20 years (leading Mostyn J to comment: "It is difficult to understand the psychological processes that drive such furious, hostile, embittered conduct over such a prolonged period."). The relevant background was as follows:

1. The parties were married between 1997 and 2001.

2. "The wife was anxious to have children and, by agreement, in April 2000 she engaged in IVF treatment at a Fertility Clinic in California. The agreement was that the husband would provide sperm, which would be used to fertilise a donor egg. This would then be transferred to the wife's uterus. Conception was successful in July 2000, and this resulted in the birth of their first child ("M"), in March 2001."

3. The parties separated and divorce proceedings ensued. Financial matters were agreed and in 2002 a consent order was made, providing for the wife to have about £2.236 million, which represented just under 20% of the assets.

4. In 2004 the husband and the wife entered into an agreement to have a second child. In what Mostyn J described as "a morally repugnant compact", the husband consented to provide his sperm for IVF treatment in exchange for a promise by the wife that she would never child maintenance for the child. The wife agreed to these terms and the husband provided a sperm sample. As a result, a second child ("N") was born, in November 2005.

5. Further consent orders were subsequently made in 2011, 2019 and 2020, relating to financial provision for the children.

6. In April this year the husband applied to have all 4 consent orders set aside for fraud.

The husband made 3 allegations:

1. As Mostyn J explains: "After the separation, and during the [first] proceedings, the wife had taken preparatory steps with the Fertility Clinic to have a further child. In July 2001, the wife paid the Fertility Clinic to store the unused frozen embryos created with the husband's sperm as described above. Two months prior to the 2002 Order, the wife commenced taking hormones with the view of having another round of IVF treatment. But after a month of this, she stopped taking the hormones. The husband asserts that he had no knowledge of these preparatory steps and that they should have been disclosed prior to the 2002 Order. He alleges that the wife's failure to disclose these preparatory steps amounts to a fraudulent non-disclosure ("the first allegation"), and, for good measure, he alleges that her conduct was an offence under the Fraud Act 2011."

2. Mostyn J again: "Following the making of the order the wife attempted once again to have another child - a sibling to M. She used one or more of the frozen embryos referred to above in an attempt to conceive. This process was initially successful but the wife miscarried in July 2004. Again, the husband asserts that this should been disclosed to him in the proceedings that occurred later in 2011, 2019 and 2020. He alleges that the wife's failure to do so was a fraudulent non-disclosure ("the second allegation"), and again he alleges that her conduct was an offence under the Fraud Act 2011."

3. Lastly, in relation to the conception of the second child: "A 14-page agreement with the Clinic for the proposed conception was signed in February 2005. However, the husband disputes ever signing the document and alleges fraud in that regard as well. This is a somewhat ambitious submission made by counsel for the husband, which is difficult to understand in circumstances where the husband accepts that he made an agreement to this effect with the wife and that pursuant to its terms he received and retained £100,000 ("the third allegation")."

Mostyn J disposed of the 3 allegations as follows:

1. The wife was under no legal obligation to disclose those very preparatory, paused, steps to the husband - she did not cross the line between preparatory steps and deception proper, and therefore her actions did not amount to fraudulent conduct. Even if he was wrong about that, Mostyn J found that: "Had the wife revealed the preparatory, but paused, steps a reasonable person would not have withdrawn his consent, because he would have recognised that it would make no difference to the outcome."

2. As to the second allegation: "The husband's case is that the order made in 2011 by Holman J would have been substantially different had the court known that in 2004 the wife miscarried having unilaterally used one of the frozen embryos. This is, I have to say, patently absurd in circumstances where, in that same year, the parties entered into the agreement referred to ... above for the wife to be impregnated with an embryo inseminated by the husband, which duly occurred and led to the birth of a child in November 2005. My clear finding is that had this information been known by Holman J his decision would not have been altered one whit."

3. Lastly: "As for the third allegation, it is in my judgment an abuse of the court's process for the husband to seek to raise the wife's alleged forgery of his signature on the formal agreement with the Clinic in circumstances where he accepts that he fully freely entered into, and acted on, the agreement set out ... above, which led to the birth of N."

For these reasons the husband's application was dismissed "as being totally without merit".