Was it worth the Thwaite?: Kicinski v Pardi  EWHC 499 (Fam)
- Ms Kicinski ("W") and Mr Pardi ("H") married in 1991 and had two adult children. W was a German national, and H had dual Italian and US nationality.
- A significant part of this protracted piece of financial remedies litigation concerned approximately €8m in cash and securities in four Swiss bank accounts held in W’s sole name. These funds had been transferred to W during the course of the marriage by H’s uncle and aunt ("U&A"). U&A executed notarised deeds of gift and gift declarations when donating the funds to W. There had been various tax problems regarding these funds, both in Italy and in the UK, but W eventually reached a settlement with HMRC.
- In December 2018 W was served with a notice of claim instituted by U&A in Italy for her to return the Swiss funds to them. U&A instructed an Italian lawyer in those proceedings. W instructed Withers Solicitors in Italy, and Withers were also acting for her at that stage in the English proceedings.
- The final hearing of the parties’ financial remedies proceedings was listed for four days in October 2019 in front of Recorder Allen QC ("the Judge"). However, on the morning of the fourth day the parties reached an agreement. Heads of Terms were agreed, and the Judge made a Rose order setting out, in brief, that;
- There would be a tripartite binding agreement between H, W and U&A.
- H, W and U&A agreed a full and final settlement of U&A’s claims against H and W in any jurisdiction.
- U&A would withdraw the Italian proceedings against W.
- H, W and U&A would enter into a deed in Switzerland and in Italy in which H and U&A would undertake not to commence, pursue or entertain any further proceedings against W or Withers.
- W would retain c. £1.6m of the monies in the Swiss accounts, and the rest of the balances would be transferred to H.
- After the Judge made the Roseorder, the drafting became contentious with draft orders going back and forth between the parties' lawyers. In February 2020 W made an application, pursuant to the Thwaite jurisdiction, for H to indemnify W and Withers against any liability arising from U&A commencing, pursuing or entertaining any further proceedings of any nature against W or Withers.
- In deciding whether the Thwaitejurisdiction should be applied, the Judge concluded that:
- The Roseorder remained executory because elements of the order had not been complied with. For example, W had not transferred the Swiss funds to H.
- The fact that the two tripartite agreements had not been executed did not represent a change in circumstances, and nor did the fact that U&A had not withdrawn the claim against W in Italy.
- It would not be inequitable to hold W to the terms of the Rose order.
- Therefore, the Judge refused to grant the indemnity sought, and refused W’s application for costs of the hearing.
- W appealed the order. Cohen J granted permission to appeal. When seeking permission to appeal W argued that the Judge should have indemnified Withers, but she did not pursue this argument at this hearing. Instead she argued only that an indemnity should have been provided to her in order to cover any liability if the U&A sued Withers and Withers then pursued her.
- The deeds between H and W had been signed, but the draft deed between W and U&A had not been finalised. The Italian proceedings brought by the U&A were rejected by the Italian court and the time for appeal had expired. The U&A had not agreed not to start proceedings against Withers, but they did offer to waive any claims against W in the Italian proceedings.
- Lieven J had to decide whether or not to exercise the Thwaite
- Lieven J considered that there were two relevant questions:
- Whether there had been a significant change of circumstance; and
- Whether, given that change, it would be inequitable not to vary the order.
- Considering the first question, Lieven J found that W was in a materially different position to what she had bargained for. When W agreed the Heads of Terms, she believed that she was accepting a capital payment and releasing the Swiss funds on the basis that this would be a complete end to proceedings concerning the financial position between her and H; it would be a clean and complete break with no outstanding contingent liabilities.
- Lieven J held that it was ‘wholly reasonable’ for W to have placed full reliance on U&A abiding by what W and H had agreed given that H fully supported this belief . It is not part of the Thwaite tests that the significant change must be ‘wholly unforeseen’ .
- Whilst she conceded that it was not possible for her to determine the likelihood of whether U&A would sue Withers, Lieven J found that the risk perceived by W could not be considered fanciful.
- Considering the second question, Lieven J found that it would be inequitable to leave W exposed to a contingent liability when she had entered into a clean break settlement. It was appropriate to take into account the ‘closely intertwined financial relationship’ between H and U&A when determining whether it was equitable to require H to give the indemnity. In fact, Lieven J noted, ‘it may be that the very fact of the Husband giving the indemnity reduces the prospect of the U&A pursuing Withers’ .
- For these reasons Lieven J held that it was inequitable not to vary the order as sought, and that the Judge had been wrong to find otherwise.