Expansion on the law on abuse of process

This article is part of a series documenting the legal proceedings in which MGB has been acting on behalf of the Husband, a private equity fund founder and partner (V fund), in his divorce. 

Following A v M (No.1) wherein Mostyn J issued the original financial remedy order in January 2022 which dealt with how to treat carried interest entitlements in private equity (the ‘Mostyn order’), we successfully opposed the Wife’s application in A v M (No.2) wherein she sought to ascertain the construction of Mostyn’s J final order and thereby claim a share of a continuation fund in July 2024.

The matter shortly returned to court, under A v M (No.3), when H issued an application to strike out W’s application to set aside Mostyn J’s final remedy order on grounds of H’s alleged misrepresentation.

FACTUAL BACKGROUND

The alleged misrepresentation came about as follows: 

1. During the marriage, H established private equity funds with another founding partner. In A v M (No 1), Mostyn J granted W an interest in two private equity funds, having methodologically divided H’s interest in private equity funds, and consolidated W’s interest into one fund (‘Fund 1’) to limit Wells sharing. It was submitted that Fund 1 was established in October 2016, that its first close was in March 2017 and that the term of the fund was 8 years from the first close. Mostyn J tackled the division of the parties’ marital interest on the basis that the closure of Fund 1 would be in 2025, unless extended. 
2. Following the hearing in Oct 2021 of the original financial remedies application, and after closure of Fund 1, H paid W what was calculated to be W’s share according to the formula adopted by Mostyn J. 
3. Subsequently, for sound commercial reasons V fund sold two of Fund 1’s assets, two companies, into a Continuation Fund. W wished her interest to be rolled over into the Continuation Fund rather than her being “cashed out” of Fund 1 in accordance with the Mostyn order. Accordingly, W issued a “construction application” on this narrow point the judgment of which transpired into A v M (No.2). 
4. In the course of the construction application, it was accepted that H’s evidence on the term of Fund 1 was wrong, H said inadvertently, W said deliberately misleadingly, but which in any event affected the formula Mostyn J adopted.  Rather than to proceed with a set aside  application (Set Aside Application) within the construction application, W opted to pursue a claim for her interest to be rolled over into the Continuation Fund. 
5. The construction application was dismissed by Cohen J. On 7 August 2024, following this W issued an application to set aside Mostyn J’s order on the basis of H’s admittedly incorrect wrong evidence on the term of Fund 1 notwithstanding she had declined the opportunity to do so during the Construction application.  As a result, H issued a counter application in which he sought to strike out the Set Aside application on the basis such was an abuse of process. Cohen J dismissed H’s application.  

THE DEVELOPMENT OF THE LAW ON ABUSE OF PROCESS 

H’s application was based on (i) W’s failure to comply with what he contended was an unless order in relation to making the Set Aside application (ii) that she had not sought relief from sanctions in relation to same, and (iii) that her Set Application was, as a result, an abuse of process of the court; and (iv) W’s application had no real prospect of success and/or disclosed no reasonable grounds as she had not submitted evidence as to H’s dishonesty in his evidence and was “fishing” for same.

All these arguments were rejected by Cohen J
See full High Court Judgment here for full reasoning A v M (No3). (opens into a PDF)

H’s argument that W’s application is an abuse of process of the court is central to Cohen J’s decision. In this regard, Cohen J noted that:

1. Although W could and should have brought the set aside application earlier, her award was smaller than it would have been, had H not provided false information to the court, irrespective of whether it was made deliberately or inadvertently. 
2. H was required under the Mostyn J’s order to disclose information of fund activities to allow W and her advisors to ascertain the steps taken and timing of the closure and consequent distributions, particularly regarding Fund 1. H failed to so do. 
3. Although there were documents which gave the 2023 closing date within the documents produced by H in the original proceedings, disclosed as far back as January 2019, H’s evidence at the final financial remedies hearing before Mostyn J in 2021 was that 2025 was the correct term date for Fund 1. This was patently incorrect. H should know his business and cannot expect W to discover his error, given there were many other documents produced by H which gave the erroneous closing date of 2025. To hold W responsible for Hs own failing in respect of his own business would be perverse.

In light of the above, there was a need to balance the prejudice that W’s inaction had caused with the prejudice that would be caused to W by striking out of her Set Aside application. On balance, Cohen J decided justice dictated the Set Aside application should prevail notwithstanding the delay and finality in litigation arguments, and that insofar as there had been an avoidable duplication of costs, this could be dealt with at a later stage.

It is apparent from A v M (No.3) that the law of abuse of process and the court’s power to strike out cases on that ground operate with a degree of flexibility unconfined by narrow rules. In this regard, A v M (No.3) is a fine example of the court’s balancing exercise, done in consideration of the specific circumstances at hand, which seeks to uphold in parallel the private interest in finality of litigation and the public interest in the proper administration of justice. H’s application for permission to Appeal was refused by Cohen J.  It is open to H to seek such permission from the Court of Appeal.