Simon v Simon: All on the Level

Image: Public Domain, via Piqsels

The extraordinary case of Simon v Simon, as we now know it, raises a point of great importance: can a party in receipt of a litigation loan surrender a lump sum claim, and thereby prevent the lender from recovering the sum due under the loan agreement?

We are yet to find out the answer to that question, but Nicholas Cusworth QC's judgment of the 21st March at least makes the background a little clearer.

For the benefit of the uninitiated, the case concerned 'bitterly contested financial remedy proceedings', to quote counsel for the husband, which have been ongoing since 2016. A final order was made in 2018, under which the wife would have received some £3 million, but that order was set aside on appeal. A second set of proceedings were initiated, and a private FDR took place on 12 February 2021.

Before I come to that, I should explain that the wife had very little in her own name, and therefore sought to fund the proceedings from a litigation lender, 'Level', to whom she now owes nearly £1 million, including interest.

On the day of the private FDR things were suddenly not so bitterly contested after all. The wife dispensed with the services of her lawyers, and then entered into an agreement with the husband, under which she compromised all of her financial claims in return for receiving the right to reside in a property owned by the husband's trust, for the rest of her life. She was thus left with no capital to repay the loan.

When Level found out about this they wrote to the court on 15 February, copying in both the wife and the husband's solicitors, requesting to be joined, and that no order giving effect to the agreement be sealed.

'Selective communications'

The events thereafter are particularly noteworthy. I quote from Mr Cusworth QC's judgment (my numbering):

1. Two days later, on 17 February, the husband's solicitor wrote to my clerk, copying the wife but not the Court, attaching a consent order reflecting the parties' agreement at the FDR, and a Statement of Information and Schedule of Assets. The asset schedule included the loan to Level, but otherwise the communication made no reference to the letter received from them just 2 days earlier. Level were not notified that this had been done.

2. On the next day, 18th February 2021, Level's solicitor wrote to the Court attaching an application notice seeking to join them to the proceedings ... The application was put before Mr Justice Newton, who indicated on a view of the papers that same day that he would make the order sought. The wife, the husband and his solicitor were notified.

3. This prompted a reply from the husband's solicitor to the Court on 19th February, copying Level's solicitor and the wife, asking why the order was made ex parte, and seeking the inclusion into it of provision for liberty to apply and a return date. He indicated that the husband would be asking for Mr Justice Newton's order to be set aside, and that his order should be stayed pending the hearing of that application. He did not notify me or my clerk of these developments, nor did he inform the Court that the order had been sent to me seeking my approval.

4. He did write on the same day to Level's solicitor, taking issue with disclosure requests which they had made, and seeking their agreement that Mr Justice Newton's order should be stayed pending the return date. That letter finished by threatening to seek costs against Level on the indemnity basis in respect of their application, but again made no mention of the fact that a consent order had been submitted to me for approval.

5. On 22 February, Level's solicitor replied, again copying the wife, making it clear that a stay of the joinder order was not agreed. She continued:

My client is deeply concerned that your client and Ms Simon entered into a collusive agreement (seeking to exclude our client's interests) against which you might seek court approval without further notification to them. You have now been prevented from taking that step...

6. On the same day, the Court notified both solicitors and the wife that Mr Justice Newton had amended his order, making it clear that he had dealt with leave only, and providing liberty to apply and an on notice hearing on the first open date after 11 March 2021. When Level's leading counsel's clerk sought to fix the date for this hearing, the clerk to the husband's counsel was only able to offer some time in the week of 26 July.

7. On 26 February, Level's solicitor wrote to the husband's solicitor and to the wife as follows:

I am deeply concerned that notwithstanding the order made joining my client as party to proceedings you refuse to confirm the status of the proceedings, whether you have had any communications with the court since the private FDR or provide a draft order which I presume to be in existence. Please do so by return.

8. There was no substantive reply from either husband or wife to this request, nor was I notified of it. However, on 2 March, 4 days later, my clerk notified me that he had received 'a very polite enquiry/chaser' in respect of my approval of the draft order which had been sent to me a fortnight earlier, I understand from the husband's solicitor. Neither my clerk nor I had been notified of the correspondence which had passed between the solicitors and the Court, nor of the order that had been made by Mr Justice Newton, during the intervening period. Without that information, I approved the draft an hour or so later.

9. On 5 March 2021, 7 days since their letter of 26 February and still without a response, Level's solicitor issued a further application notice, seeking some disclosure from the husband and wife, and further, that 'the matter be listed for a case management hearing on a date to be fixed prior to 14 May 2021', and that 'no substantive orders in relation to the proceedings shall be made prior to the hearing listed above'.

10. On the same day, the husband's solicitor finally responded to Level's, indicating that his client's draft application and statement in support was with leading counsel, and seeking to agree a July listing for the return date. He said that he would take his client's instructions in respect of the latest application. He provided no substantive response.

11. On 10 March, the application was put before Mr Justice Holman who identified that an urgent oral interim hearing was (correctly) being sought by Level's solicitor, and also indicated that it should be arranged with the clerk of the rules. He offered to deal with an urgent oral hearing. Level's solicitor invited the husband's solicitor and the wife to agree to such a hearing. The husband's solicitor responded (not this time copying in the wife) asking Level's solicitor to identify what relief Level were seeking, but still not notifying her that a draft order had been submitted for approval. He still sought to arrange a later remote hearing.

12. After a further email from Level's solicitor indicating amongst other things that they could not identify the substantive order that they were seeking until the disclosure issue was resolved, the husband's solicitor replied again, now on 11 March, once more not copying in the wife, confirming that Level's intervention was opposed, that the case should be fixed for counsel's convenience, but stating, for the first time, that 'the matter has now concluded'.

13. On 12 March, Level's solicitor pointed out that 7 days had now passed since they had been told that the husband's statement in reply was with his leading counsel. They also asked whether, in light of the previous letter, the husband had 'succeeded in attaining an approved consent order notwithstanding our join(d)er to the proceedings'. The husband was invited to undertake not to apply without at least 14 days' notice for the approval of any consent order.

14. A further 3 days later, on 15 March, the husband's solicitor finally responded that it was his understanding that the order had already been sealed. In the husband's statement signed on the same day he stated of the terms of his agreement with the wife that: 'Those have been reduced to a consent order which should have been sealed by the Court, by now.'

15. On 16 March 2021, the draft order was in fact sealed by the court. On 17 March, the matter came before Mr Justice Holman, after I had provided to him the communications which I had had from the husband's solicitors; the Court and Level for the first time became aware of the full chain of events. Mr Justice Holman ordered a temporary stay of the consent order.

It will be noted that the wife played no part in the above drama. Her position is quite simple - she seeks to take no further part in the proceedings, and has indicated that she does not intend to pursue any further claim against the husband.

Five points

Level applied to have the order set aside. After initially opposing the application the husband’s solicitors agreed to the order being set aside “to enable Level to make representations as to why it should not be sealed.” Despite this, the husband continued to object to Level being joined. Counsel for the husband raised five points:

a. That the husband and wife cannot be compelled to litigate their financial remedy claim if they don't want to;

b. That Level retain their civil rights and remedies against the wife, and that those are unaffected by the sealing of the order;

c. That there is no valid reason given why the order should not now be resealed;

d. That no public policy considerations demand Level's intervention; and

e. That the case does not fit within FPR Rule 9.26B, which sets out the conditions for adding or removing parties, in that the issue between Level and the wife was not connected to the matters in dispute in the proceedings.

Cusworth QC (is that the correct way to refer to a QC sitting as a Deputy High Court judge? - apologies if not) was having none of it. Using the same paragraph lettering:

a. As to the first point he said: ", the arrangement between the wife and Level was predicated upon her choice to pursue her claim under the Matrimonial Causes Act 1973 against the husband, and indeed the costs of her having already done so form a significant part of the debt in issue. It must therefore be doubtful whether the wife, although conspicuously absent from this hearing, can properly place herself into the category of reluctant litigant in these proceedings."

b. He responded: "...I note that such a claim, if the agreement is converted into an order, would be almost inevitably worthless. [Counsel for the husband] argues that Level's rights will be completely unaffected by the resealing of the order which reflects the agreement of his client and the wife. If they had wanted more security, he says, they should have obtained it before lending the money. Yet in this situation, it must have been the natural consequence of their agreement that if Level were to seek to enforce any part of the debt owed by the wife, it would only ever have been possible through the medium of the Court's enquiry in the financial remedy proceedings. That enquiry is discretionary, so any recovery is by no means guaranteed, but just as the loans enabled the wife to participate in the earlier stages of the proceedings, so their recovery was always going to dependent upon the outcome of the proceedings. If those proceedings have been brought to an end collusively, as [Counsel for Level] asserts, and the court has now to re-exercise its function to approve any proposed outcome, then a proper understanding of those circumstances will very likely be crucial in determining whether to give such approval."

c. Unsurprisingly, Cusworth QC found that: "Clearly, Level would be directly affected by the prospective final order within the meaning of CPR 40.9 in the sense that that order is 'capable of materially and adversely affecting its legal interest'."

d. Here, Cusworth QC agreed with Mrs Justice Roberts' analysis in the earlier judgment in this case, where she explained the obvious desirability of access to litigation funding and, in particular, the interrelationship with s.22ZA, where a litigant generally has to show that he or she has been refused lending by "two commercial lenders of repute".

e. Cusworth QC's response to this point was surely also unsurprising. He said: "I remind myself that the debt which the wife owes them is one which was incurred by her to meet the costs of these proceedings, and the Children Act application which ran concurrently between the parties. So, this debt is not on any view entirely independent of these proceedings. The court in the financial remedy claim could legitimately have made provision for the wife which would have enabled her to meet those costs either out of any substantive award made against the husband, or (at least as to the financial remedy proceedings) by a costs order."

And there was one last point:

"Finally, [Counsel for the husband] says of Level in his written argument that: 'They have not successfully intervened for the purposes of setting aside the order. We have consented to this in order to avoid this arid dispute.' I cannot currently accept this assertion. But for Level's intervention, the extraordinary series of selective communications set out at the outset of this judgement [and by me in full in paragraphs numbered 1 to 15 above] would never have been revealed to the Court. No explanation for what happened has yet been offered, and the husband's consent to the set-aside has deferred the occasion when such an explanation will be required. I should therefore express no view today about why the husband has consented, but I am very clear that that explanation will be required before any consideration can be given to re-sealing the consent order."

In the circumstances Cusworth QC was satisfied that Level's joinder to the proceedings by Mr Justice Newton "was entirely appropriate, in accordance with the provisions of FPR Rule 9.26B (1) (b), and that it was desirable that they should remain a party so that the clearly connected issues between Level and the wife, and between the wife and the husband, can be fairly and expeditiously resolved."

My two cents

So what will be the ultimate outcome? My view, for what little it’s worth, is simply that the court should not leave the wife in the position of being saddled with such a massive debt, even if she seems happy with that outcome, when there clearly seem to be assets available to clear the debt. The fact that, if the agreement is approved by the court, she could go through the rest of her life not paying the debt is neither here nor there. She could, after all, come into money at some point in the future, and find herself having to pay the debt. And that is to say nothing about the obvious adverse consequences, and possible consequences, of being in debt.

And then of course there are the public policy considerations. Who would lend money to a litigant in future, if repayment of the loan can be so easily avoided?

Those are just my two cents. Whether they turn out to be worth even that princely sum, we will have to wait and see.