A v B [2017] EWFC B9 (3 February 2017)

[2017] EWFC B9

Case Numbers SO09D00545 & SO16P00527

IN THE PORTSMOUTH FAMILY COURT

3^rd February 2017

B E T W E E N:

A Applicant

and

B Respondent

and

C Intervener

This judgment was delivered in private. The judge has given leave for this version of the judgment to be published on condition that (irrespective of what is contained in the judgment) in any published version of the judgment the anonymity of the children and members of their family must be strictly preserved. All persons, including representatives of the media, must ensure that this condition is strictly complied with. Failure to do so will be a contempt of court.

Judgment of His Honour Judge Edward Hess dated 3^rd February 2017

The principal parties in this case are A (the Applicant) and B (the Respondent). They were formerly married to each other and they have been referred to (at the hearing and in this judgment) respectively as “the husband” and “the wife”. I apologise if this convention seems curious to them, because they are long since divorced, indeed both are re-married to other people, but it is convenient to the court as a matter of nomenclature.

The Intervener is C, who is the wife’s second and current husband.

The case proceeded to a final hearing before me on 31^st January 2017 and 1^st February 2017. At the close of evidence and submissions I adjourned the case, indicating that I would produce a written judgment at the earliest opportunity. This I now do.

The representation before me was as follows:-

(i) Mr Simon Lillington (Counsel) instructed by Quality Solicitors Knight Polson (Solicitors) for the husband;

(ii) Mr Oliver Thorne (Counsel) instructed by Newnham & Jordan (Solicitors) for the wife; and

(iii) Mr Mark Elliott (Counsel) instructed by Steele Raymond LLP (Solicitors) for the Intervener.

I am grateful to all Counsel for the helpful and courteous way they have respectively conducted their cases at the final hearing and to all Solicitors for their efficient and cooperative case preparation.

The court was presented with a bundle running to two lever arch files (including Forms E and statements and a selection of other relevant documents) plus a bundle of authorities. I have considered all these documents in analysing the legal and factual issues arising in the case.

I have also heard oral evidence from all the parties.

I have also had the benefit of full submissions from each Counsel in their respective opening notes and their closing oral submissions.

CHRONOLOGY OF EVENTS LEADING UP TO THE HEARING

I shall start my analysis by setting out in some detail a chronology of events leading up to this hearing.

The wife was born in 1971 and is therefore now aged 45.

The husband was also born in 1971 and is therefore also now aged 45.

Both the husband and the wife originate from X (country) and they married in X in 1992. They relocated to England in 1996 and, in due course, acquired United Kingdom nationality and made their family home in Hampshire.

The marriage produced the following children, both born in England, but both having dual X and United Kingdom nationality:-

(i) D (a girl) was born in 2000 and is therefore now aged 16; and

(ii) E (a boy) was born in 2001 and is therefore now aged 15.

14. Unfortunately the marriage broke down and the parties separated on 2^nd March 2009. On separation the children remained living with the wife and, for quite some time, had little or no contact with the husband. This is a subject which, it was apparent to me, still engages the parties on an emotional level, but I have not thought it necessary or appropriate to investigate the issue in the context of these proceedings. It is sufficient for me to record that both parents dearly love both their children and, whatever differences the parents have with each other, they are both concerned for the welfare and happiness of their children. Despite the unsettling events of the separation, divorce and subsequent litigation and accommodation moves of their parents, the children appear to be thriving and enjoying their teenage years.

15. Divorce proceedings were issued on 26^th August 2009. Decree Nisi was ordered on 2^nd October 2009 and Decree Absolute on 21^st January 2011.

16. The financial aspects of the divorce went through the normal stages. Form A was issued on 9^th September 2009. A First Appointment took place on 16^th December 2009. An unsuccessful FDR took place on 24^th February 2010. A final hearing was listed for two days before District Judge Ainsworth in Winchester County Court commencing on 13^th December 2010. At that hearing the wife was represented by Neil Maton (Counsel) instructed by Bastows (Solicitors) and the husband was represented by Oliver Peirson (Counsel) instructed by Blake Lapthorn (Solicitors).

17. I have had the benefit of reading Mr Peirson’s opening note for that hearing and it is immediately apparent from that note that a key issue for discussion at the hearing, from Counsel’s perspective anyway, was the complication that arose in relation to the six real properties owned by the parties, all of which were mortgaged and rented out. The problem was that the husband was personally liable on all six mortgages and there was no available commitment from any of the respective mortgagees to release him from any of the mortgages absent a sale of the respective property. In tabular form the real property position as at December 2010 was as follows:-

Property	Legal Ownership	Value	Outstanding Mortgage	Equity
Property in Leeds	Husband and Wife jointly	£160,000	£122,365	£32,835
Property in Wimbledon	Husband	£458,000	£327,500	£116,760
Property in Ipswich	Husband	£90,000	£98,330	- £11,030
Property in Huddersfield	Husband	£83,000	£69,500	£11,010
Property in Spain	Husband and Wife jointly	£120,000	£187,149	- £70,749
Property in Hampshire	Husband	£184,000	£172,000	£6,480

18. The wife was contending (after an earlier negotiation with the husband) that the first five properties should be transferred to her as a “property portfolio”, which she would manage and from which she hoped in due course to derive an income. In response to this contention Mr Peirson, on behalf of the husband, commented in his note:-

“The financial viability of the portfolio is on a knife-edge. A modest rise in interest rates, or an extended void period on any of the properties, would result in an overall loss. The Spanish property in particular suffers from void periods…what the parties do not seem to have addressed their minds to during their negotiations is how the transfer of the property portfolio to the wife can be achieved without leaving the husband heavily exposed to claims under the mortgages…even using her best endeavours the wife is highly unlikely to be able to release the husband from his covenants under the mortgages…the wife’s ability to manage the property portfolio is untested…the wife may say that the husband is protected by the indemnity…the indemnity is…effectively worthless…this order would leave the husband highly financially exposed…the same division could be achieved, without the indemnity problems…by providing for an orderly winding up of the property portfolio”.

19. Notwithstanding these expressed concerns, a consent order was made by District Judge Ainsworth on the first day of the hearing on 13^th December 2010, the terms of which involved a transfer of the first five properties without any obligation by the wife to sell the properties at any particular time.

20. Amongst the terms included in the consent order were the following:-

(i) The husband was ordered to transfer forthwith to the wife his beneficial interest in the first five properties (paragraph 1).

(ii) The husband was ordered “as soon as is reasonably possible” to transfer the legal title in the first five properties to the wife or (for those held in the husband’s sole name) to transfer the legal title into their joint names pending an eventual transfer to the wife when that was possible (paragraph 2).

(iii) The wife gave an undertaking to the court to use her best endeavours to procure the release of the husband from the respective mortgages on the first five properties, such endeavours to include seeking re-mortgages (recital A).

(iv) The wife gave an indemnity to the husband in relation to any liabilities arising under any of these mortgages or any other property-related costs save for Capital Gains Tax arising out of the transfers (which would be a cost to the husband) (recitals A and B).

21. There was nothing in the order requiring the wife to sell any of the properties at any particular time so the order left the husband exposed to exactly the risk which Mr Peirson had identified. It has not been investigated before me as to how and why this happened (and the reasons are not, in my view, of significance now anyway), but it is clear from the above that the husband entered into the consent order with a knowledge of the risks involved. He could have insisted as part of the bargain, for example, on a back stop forced sale date in the event that the wife did not secure his release from the respective mortgages (and the court might have acceded to such a request on a contested hearing), but the consent order signed up to by the husband did not contain any such provision. The husband retained the family home. The wife gained the property portfolio, but it was never intended that she would live in any of the properties transferred.

22. There were, of course, a number of other provisions in the order and these included the following:-

(i) there was a term-limited non-extendable nominal spousal periodical payments order in favour of the wife to subsist until the youngest surviving child’s 18^th birthday or the wife’s earlier re-marriage;

(ii) there were some recitals which purported to limit the circumstances in which the spousal periodical payments order might be varied upwards;

(iii) there was a child periodical payments order in favour of the wife in the sum of £660 per month (it being common ground at that stage that the children would continue to reside with the wife for the foreseeable future);

(iv) there was an agreed and specified division of the other joint assets and liabilities;

(v) the husband gave an indemnity against any liability arising from any action by HMRC to recover Tax Credit overpayments made prior to 2^nd March 2009;

(vi) there were some detailed provisions governing the handing over of the property portfolio management from the husband to the wife; and

(vii) otherwise all claims were dismissed.

23. Subject to some comments below it is common ground that the respective financial positions immediately after (and assuming the implementation of) the order of 13^th December 2010 were as follows:-

ASSETS/DEBTS

Wife

Property in Leeds [1]	32,835
Property in Wimbledon [2]	116,760
Property in Ipswich [3]	-11,030
Property in Huddersfield [4]	11,010
Property in Spain [5]	-70,749
Bank Accounts in sole name	6,316
Indemnity on joint Lloyds account	-9,838
50% x other joint accounts	1,665
Debts in sole name	-20,551
Lloyds Loan in sole name	-20,000
Outstanding Legal Costs (none indicated in papers)	0
TOTAL	36,418

Husband

Property in Hampshire [6]	6,480
Bank Accounts in sole name	31,405
50% x other joint accounts	1,665
CGT debt on property transfers	-10,354
Indemnity on Tax Credit debt	-15,000
Outstanding Legal Costs (none indicated in papers)	0
TOTAL	14,196

INCOME

Wife

IT Application Developer	£35,000 pag
Child periodical payments due from Husband	£660 pcm
Net rental income from property portfolio	breaking even

Husband

IT Consultant via 100% owned company	£55,000 pag
Child Periodical payments due to Wife	-£660 pcm

24. I have the following further comments on this schedule:-

(i) I have included a figure for Capital Gains Tax arising out of the property transfers at £10,354. This figure arises from a joint expert’s report in the current proceedings which itself makes certain assumptions, which have not been controversial in the hearing before me. First, that as a matter of property law the beneficial interests in all the five properties in the portfolio would automatically have passed to the wife upon the pronouncement of Decree Absolute on 21^st January 2011, notwithstanding the absence of any executed deed. In this respect the parties have agreed before me that the Court of Appeal’s decision in Mountney v Treharne [2002] EWCA Civ 1174 resolves this point in support of this assumption. Secondly, that as a matter of tax law the disposal for Capital Gains Tax purposes also arose on the pronouncement of Decree Absolute. Although the parties have agreed to proceed on the basis that this assumption is correct, it has not been addressed by or approved by HMRC. In fact, it is clear that the husband has not yet made any declarations to the HMRC about these property disposals and so there remains an element of uncertainty as to what the HMRC will say when (and if) he complies with his obligations to do this.

(ii) Amongst the husband’s debts were thought, in 2010, to be a debt to HMRC of c. £15,000 arising from earlier (pre-March 2009) overpayments of Tax Credits. The husband gave an undertaking to the wife to indemnify her against this liability, though it appears that HMRC could choose to pursue either party on a joint and several basis. In fact, the evidence before me is that HMRC have done very little about this debt. Certainly no claim has been issued and the last correspondence on the subject dates back to 2014. Since the debt is now nearly eight years old it may be reasonable to assume that HMRC are not going to pursue it or that, if they do, there may be a limitation point to be taken against them (although Counsel had not researched this point). In the circumstances the appropriateness of the inclusion of this debt in the schedule is debateable. If that £15,000 debt were to be removed from the above schedule it can be seen that the capital outcome of the 2010 order was to leave the parties with not substantially different bottom lines: £36,418 versus £29,196.

(iii) Whatever conclusions are reached about the possible debts to HMRC (of CGT and/or Tax Credits) it is difficult for anybody to conclude that the division of assets in 2010 was manifestly unfair – indeed it was a perfectly fair one. Any unhappiness the husband had about the order arose from the fact that he retained exposure on the mortgages, with no time limit on this, but this was plainly a risk he knowingly took, having had the benefit of legal advice on precisely this subject from Solicitors and Counsel. It was a gamble he was prepared to take to secure the deal incorporated into the consent order.

25. Subsequent to this order, and notwithstanding the absence of any formal deed dealing with the beneficial interests, the wife took over the day to day management of the property portfolio. She has received the rents and paid the mortgages ever since and it is common ground that her management has been successful and the evidence before me was that, over the years since 2010, no doubt with a good deal of time and effort, she has turned a break even (“knife-edge”) situation into a net profit of c. £6,000 per annum gross. It has not been suggested to me that the husband has been called on to make any mortgage payments, nor has there been any difficulty in his obtaining other mortgage finance for himself, so that, thus far anyway, the theoretical exposure to mortgage liabilities has not been an actual problem.

26. In August 2011 the wife was re-married. The residual nominal spousal periodical payments order thus terminated. Her new husband is the Intervener, from Y (country) by origin, and they report a strong and ongoing marriage.

27. In May 2011 the husband relocated to X. In November 2011 the husband was re-married. His new wife is F, who is from X. Sadly the husband told me that this marriage has now broken down and, although the couple continue to share a home, they are in the middle of divorce proceedings and expect to go their different ways in due course. They have not yet made much progress in sorting out their finances.

28. On 19^th July 2012 E moved to X to live with the husband. In November 2012 D indicated that she would follow her brother and on 8^th December 2012 she also moved to X to live with the husband. At this stage it was common ground that the children would now reside with the husband for the foreseeable future, although the children have continued to have contact with the wife.

29. On 20^th February 2013 the wife relocated to Y with the Intervener. They have purchased a property, in which they now reside in Y. This is a town with a commute of about three hours to where the wife works.

30. In the meantime, in the course of 2012, the wife became concerned at the lack of progress in the transferring of the legal titles in the property portfolio into her name and the husband became concerned at the lack of progress in the procuring of his release from the mortgages. By 2012 they had both instructed new Solicitors (Newnham & Jordan for the wife and Brain Chase Coles for the husband). There was some Solicitor to Solicitor correspondence and on 10^th October 2012 the husband’s Solicitors indicated in a telephone conversation that the husband was unhappy about the 2010 order and was consulting their matrimonial department about challenging it and that he was not in any event content to sign transfer documents. The husband in his oral evidence confirmed that, in about December 2012, he did take legal advice on the issue of whether he could challenge the 2010 order. By the time he took that advice it was already a known fact that the children would be residing with him for the foreseeable future.

31. On 24^th October 2012 the wife, frustrated by the lack of progress, issued an application for a District Judge to sign the necessary property transfer documents if the husband would not do so. The application came before District Judge Sparrow in Southampton County Court on 5^th December 2012. He made various orders, plainly with the sensible intention of progressing the dis-entwinement of the parties by identifying what remortgaging could take place to the satisfaction of the respective mortgagees and what mortgagee consents could be obtained to legal title transfers. The application was adjourned with liberty to restore. The application has never been restored and was not before me within these proceedings. As a result of the December 2012 directions order, however, a mortgage adviser (Debbie Boyes) reported on 21^st December 2012 and her investigations concluded that, absent some injections of cash, it was not possible at that time to procure the release of the husband from any of the mortgages. The husband did not seek to challenge her conclusions. It was, however, possible to persuade the relevant mortgagees to consent to the transfer of the legal title of the properties in Wimbledon and Ipswich into the wife’s name (whilst leaving the husband liable on the mortgage in both cases) and the evidence suggests that these transfers were completed in March 2013. Legal title in the other properties remained as they were because the requisite consents from the mortgagees were not forthcoming. The fact that the Wimbledon and Ipswich legal title transfers could take place without any mortgage release made the husband even more unhappy with the December 2010 order, though he took no steps to do anything about it at this stage.

32. As 2013 progressed the husband decided that he wanted to return to live in England with his new wife and D and E. He was troubled by the level of crime in X and felt that the children should not be exposed to it. To progress this plan, he wrote to the wife on 25^th October 2013 asking for her consent to the move and for her to send him the children’s United Kingdom passports to assist the process (being dual nationals they had used their X passports to enter X). The wife was not happy with the plan and by a letter dated 23^rd February 2014 expressly declined to give the husband the requisite consents to the removal of the children from X back to England or to send the children’s United Kingdom passports to him. Frustrated by the lack of progress the husband issued an application in the High Court of X supported by a detailed affidavit dated 18^th March 2014. Amongst the matters stated in this affidavit were the following:-

“In the event that my family and I are able to relocate to England…we shall reside in the former marital home (in Hampshire)…the house is currently rented out…I shall give the tenants the appropriate notice of two months…the home is a freehold terraced house…three bedrooms and two bathrooms…and will allow us all to settle down in comfort, in an area with which the children and me are familiar…I am confident of being able to support my family from my earnings”.

33. In August 2014 the X court gave the husband permission to remove the children to England and, having in the meantime solved the passport problem, in September 2014 the husband relocated to England with F, D and E. In the event they did not move into the retained Hampshire property, but instead the husband purchased another property in the same Hampshire town in his sole name with the assistance of another mortgage. To the present day they all live in the newly purchased property and the original property continues to be rented out. It is unclear at present what will happen when the husband and F go their separate ways.

34. D currently attends a state school in Hampshire and E currently attends a private school in Hampshire. It is common ground between the parties that D is likely to remain living with the husband in Hampshire, attending the same school until the conclusion of her A level examinations in Summer 2018; but may go to University in Y thereafter. It is common ground between the parties that E is likely to remain living with the husband in Hampshire for the time being, but may well relocate to live with the wife in Y in either Summer 2017 or Summer 2018. There remains a degree of fluidity about future arrangements, but given the children’s ages it is to be hoped that their wishes and feelings will, within reason, be respected and that no further litigation on this subject will be necessary.

35. As far as child maintenance is concerned, there has been a good deal of argument and confusion as to what exactly has happened since 2010. It is common ground that the 2010 child periodical payments order has ceased to be effective (and my order in these proceedings should, I think, formally discharge it and any arrears potentially arising under it). I remain rather baffled by the February 2015 documents produced from justices in the Southampton Family Court, but it is common ground that whatever was ordered has also ceased to be effective, or at least has been superseded by what has happened in Y (how, exactly, remains unclear). It is common ground that the equivalent of the Child Maintenance Service in Y is now seized of the maintenance issue (I have seen various documents confirming this to be the case) and that, currently, the husband receives c. £300 per month from this source. At one stage in these proceedings it looked as though I was going to be asked to make orders which went beyond what is currently required of the wife, but in the event neither party has pursued the point so my order can leave things as they are in this respect. Plainly, this status quo could be affected by future moves of residence by the children, and I would urge the parties to be sensible and cooperative if this happens.

36. On 21^st October 2015 the legal titles of the properties in Wimbledon and Ipswich were transferred from the sole name of the wife to the joint names of the wife and the Intervener. Behind these transfers lay, I was told, an agreement between the wife and the Intervener, the details of which are set out in the statement of the Intervener dated 21^st December 2016, the contents of which were agreed by the wife.

37. In essence it is suggested that the wife and the Intervener (who are of course married to each other) have agreed that the wife’s beneficial interest in the property portfolio is held for her and the Intervener jointly and equally (I wasn’t told whether it was as joint tenants or tenants in common and perhaps they should address this issue to avoid future confusion or disagreement between the two of them, but the difference doesn’t make any difference for the purposes of these proceedings). It was contended that the Intervener had earned his share by pooling his own substantial resources with the wife over a period of time, making significant contributions to her by paying off her debt and paying some of her living costs, helping with the management of the portfolio and by being married to her.

38. Although Mr Lillington on behalf of the husband did seek to challenge some of this by cross-examination, asserting it to be a position contrived to assist the wife’s case in these proceedings, and drawing my attention to apparently inconsistent assertions in the body of the wife’s Form E, in the end the husband accepted the position advanced by the wife and the Intervener in this respect. I think the husband was right to make this concession as the evidence, in the end, was compelling in this direction. Although lacking the support of properly executed documentation (save for the Wimbledon and Ipswich transfers) I am satisfied that the wife’s beneficial interest in the property portfolio is held by her for herself and the Intervener equally.

39. In early 2016 the husband sought legal advice (on whether he could challenge the 2010 order) from Quality Solicitors Knight Polson. As a result of this they sent a letter before action on 14^th February 2016 and a perusal of this letter shows clearly what was in the minds of the husband and his Solicitors at this stage. It is clear from this letter that the October 2015 transfers were known about so that the complications arising from the Intervener’s involvement were (or should have been) anticipated. The primary suggestion made is that the move of D and E from the wife to the husband in 2012 represented a change of circumstances sufficient to justify an application under FPR 2010 Rule 4.1(6) for the revocation of paragraph 1 of the order of 13^th December 2010 so that all five properties in the portfolio, instead of continuing to be the wife’s property, should be transferred back to the husband. A “subsidiary” justification for this was said to be that the 2010 order remained executory, thus giving the court additional powers to reverse its provisions.

40. When the wife’s solicitors responded on 18^th February 2016 by vehemently rejecting these contentions the husband quickly resorted to litigation.

41. On 1^st April 2016 he issued an application in which the thoughts set out in the letter of 14^th February 2016 were repeated, this time expressly referring to the decision of Mostyn J in TF v PJ [2014] EWHC 1780. The husband has (with a late modification) continued to pursue this, prima facie bold, case right up to date and I have to deal with this application.

42. On 18^th July 2016 the husband issued another application, this time under Children Act 1989, Schedule 1. This was pursued up to and at the hearing before me. A good deal of disclosure (and accordingly lawyers’ time) followed on from this application which might not have been necessary if the Schedule 1 application had not been extant. At the outset of the submissions stage of the hearing Mr Lillington told me that, as a result of reviewing the oral evidence, the husband was no longer pursuing his Schedule 1 application. Accordingly I do not now have to deal with this application, save in relation to costs.

43. In the course of the proceedings the following documents have been filed:-

(i) a statement from the husband dated 30^th March 2016;

(ii) a statement from the wife dated 25^th July 2016;

(iii) a statement from the Intervener dated 21^st December 2016;

(iv) a Form E by the wife dated 8^th July 2016;

(v) a Form E by the husband dated 18^th July 2016;

(vi) answers to questionnaire by the husband dated 14^th October 2016; and

(vii) answers to questionnaire by the wife dated 21^st October 2016.

44. The FDR held before District Judge Manuel on 7^th December 2016 did not produce an agreed outcome (one reason for that may have been that the wife did not, as she was supposed to, come to England for it and an adverse costs order was appropriately made against her for that failure).

45. On 26^th January 2017 the Intervener formally applied to intervene. This application was not opposed and I allowed it, by consent, at the beginning of the final hearing. The intervention was justified because the husband’s position directly attacked the Intervener’s property interests. The lateness of the intervention was sensible in the context that it was hoped that a settlement of the case would render an intervention unnecessary. It was not suggested that the lateness of the intervention caused any prejudice to the husband.

46. It was possible, in part because of the disclosure resulting from the Schedule 1 aspect of the case, to identify with reasonable accuracy the current financial position of the parties, as follows:-

FINANCIAL POSITION AS AT FEBRUARY 2017

ASSETS/DEBTS

Wife

50% x Property in Leeds [7]	22,420
50% x Property in Wimbledon [8]	224,105
50% x Property in Ipswich [9]	13,900
50% x Property in Huddersfield [10]	14,000
50% x Property in Spain [11]	-13,825
50% x Property in Y [12]	17,752
Bank Accounts in sole name	1,320
Debts in sole name	0
Outstanding Legal Costs (per Form H) [13]	-20,330
CE of Pension (1)	26,048
CE of Pension (2)	7,313
TOTAL	292,703

Husband

Retained Property in Hampshire (1) [14]	37,966
Newly purchased Property in Hampshire[15]	43,866
Bank Accounts in sole name	23,025
Stock Assets in sole name	55,942
Corporation Tax Debt	-10,000
CGT debt	-10,354
Indemnity on Tax Credit debt [16]	-15,000
Outstanding Legal Costs (per Form H) [17]	-21,132
CE of Pension	917
TOTAL	105,230

INCOME

Wife

Employed by company in Y	£34,761 pag (B19)
Wife pays Child Support to Husband	-£300 pcm
Wife receives net rental income from properties	c. £6,000 pag

Husband

IT Consultant via 100% owned company	£54,000 pag (B47)
Husband receives Child Support from Wife	£300 pcm

47. This schedule comes with some caveats:-

(i) I have built into the table that the wife holds only 50% of her real property interests, the other 50% having been expressly shared with the Intervener as set out above.

(ii) The husband has not similarly shared his real property interests with his current wife. She will in all probability have a claim on some of the husband’s assets if they proceed with their divorce, but it is difficult to quantify what that would be at present.

(iii) I have built into the table the husband’s estimated CGT liability, but I refer to the comments I made above about this. What is not included, and hasn’t been calculated, is the wife’s latent CGT liabilities in her property portfolio, in particular in the Wimbledon property. It could be a significant sum.

(iv) As at the time of his Form E in July 2016 the husband had Bank Accounts in his sole name with balances of £23,025, Stock Assets in his sole name worth £55,942 and an income of £54,000 pag and these figures are included in the schedule. I was presented at the outset of the case with documents which suggested that it was agreed that I should work with these figures. In his oral evidence, however, the husband pointed to various reasons why these were no longer the correct figures, but he had no documents to evidence his change in position and he was not wholly convincing in his explanations for these reverses. In the end he indicated that he was content for the court to work with the £55,942 figure, but asserted that the Brexit result had caused a sudden and complete loss of contract work since July 2016, causing him to spend all of his Bank Account balances on living expenses. I am not sure that these asserted changes make very much difference to the case, certainly absent a Schedule 1 application, but I shall assume for the purposes of my analysis that the husband’s explanation about his current ability to attract contracts was broadly correct and so the above schedule overstates his position to that extent. There is no obvious reason (health-based or otherwise) why the husband should not in due course recover his income to the levels in the schedule.

48. The outstanding application by the husband raises some significant issues of law to which I shall now turn.

THE LAW APPLICABLE TO THE HUSBAND’S APPLICATION

49. The legal issues arising here concern the species of cases where a litigant wishes the court to interfere with a final order where no error of the court is alleged.

50. Different considerations of course apply to cases where an error of the court is alleged (which are dealt with as appeals) or cases where a variation can properly be sought, typically of a periodical payments order under Matrimonial Causes Act 1973, Section 31 (for which there are well established procedures). These considerations do not apply in this case.

51. The area of family law arising here has been the subject of numerous analyses over many years and decades. At the heart of these analyses, as was identified by Ward LJ in Harris v Manahan [1997] 1 FLR 205 at p.223, is the tension between two legitimate but sometimes conflicting policy considerations. On the one hand “Ubi Jus Ibi Remedium” (where there is a right there is a remedy). On the other hand “Interest Reipublicae Ut Sit Finis Litium ” (in the interest of society as a whole, litigation must come to an end).

52. These analyses include a good deal of debate, both in relation to the way in which these cases should be procedurally pursued and in relation to the substantive circumstances in which a court should or should not intervene.

53. In relation to the procedural issues it is possible to follow the debate down the years by considering:-

(i) cases such as de Lasala v de Lasala [1980] AC 546, Thwaite v Thwaite [1982] Fam 1, Jenkins v Livesay [1985] AC 424, B-T v B-T [1990] 2 FLR 1, Robinson v Robinson [1982] 1 WLR 786, Re C [1993] 2 FLR 799, Harris v Manahan [1997] 1 FLR 205, L v L [2006] EWHC 956, Cart v Cart [2013] EWCA Civ 1006, TF v PJ [2014] EWHC 1760, CS v ACS [2015] EWHC 1005 and Gohil v Gohil [2015] UKSC 61; and

(ii) the introduction of FPR 2010 Rule 4.1(6), the amendment of Matrimonial and Family Proceedings Act 1984 by Crime and Courts Act 2013 to include section 31F(6) to sit alongside Senior Courts Act 1981, section 17(2), the introduction of FPR 2010 PD30A paragraph 14.1 and the declaration that its second sentence was ultra vires leading to its deletion, the recommendations of the Financial Remedies Working Group, the introduction of a new FPR 2010 Rule 9.9A by The Family Procedure (Amendment No.2) Rules 2016 (2016/ SI No.901) and the introduction of FPR 2010 PD 9A, paragraph 13 to support the new Rule 9.9A.

54. The new FPR 2010 PD 9A, paragraph 13, includes the following guidance:-

“13.4 An application under rule 9.9A is to be dealt with by the same level of judge that dealt with the original application, by virtue of rule 17 of the Family Court (Composition and Distribution of Business) Rules 2014. Where reasonably possible, the application will be dealt with by the same judge that dealt with the original application.

13.5 An application to set aside a financial remedy order should only be made where no error of the court is alleged. If an error of the court is alleged, an application for permission to appeal under Part 30 should be considered. The grounds on which a financial remedy order may be set aside are and will remain a matter for decisions by judges. The grounds include (i) fraud; (ii) material non-disclosure; (iii) certain limited types of mistake; (iv) a subsequent event, unforeseen and unforeseeable at the time the order was made, which invalidates the basis on which the order was made.”

55. On a proper analysis of these sources it seems to me now to be tolerably clear that for all of the species of cases where a litigant seeks to set aside or revoke or rescind or suspend an order, where no error of the court is alleged, the proper procedural route is to make an application under FPR 2010 Rule 9.9A using the FPR Part 18 procedure within the proceedings in which the original order was made and, if possible, to the judge who made the original order or, failing that, to a judge of the same level. This principle applies whether the order was made by a judge (of any level) sitting in the Family Court or by a High Court Judge sitting in the Family Division of the High Court. An application of this nature made to an appellate tribunal should be rejected: see Gohil v Gohil [2015] UKSC 61 at paragraph 18. This principle applies whether or not the order was a consent order or an order made after a contested hearing.

56. Whilst I shall not attempt to identify a comprehensive list of the sub-species of cases making up the species, they seem to me to include the following:-

(i) cases where there has been fraud or mistake: see, for example, de Lasala v de Lasala [1980] AC 546 and Sharland v Sharland [2015] UKSC 60;

(ii) cases where there has been material non-disclosure: see, for example, Jenkins v Livesay [1985] AC 424 and Gohil v Gohil [2015] UKSC 61;

(iii) cases where there has been a new event since the making of the order: see, for example, Barder v Barder (Caluori Intervening) [1987] 2 FLR 480, Smith v Smith [1991] 2 FLR 432, Cornick v Cornick [1994] 2 FLR 530, Myerson v Myerson [2009] 2 FLR 147, Dixon v Marchant [2008] 1 FLR 655 and Nasim v Nasim [2015] EWHC 2620.

(iv) cases where a party seeks a release from an undertaking given to the court: see, for example, Mid-Suffolk District Council v Clarke [2006] EWCA Civ 71;

(v) cases where the order remains executory: see, for example, Thwaite v Thwaite [1982] Fam 1, L v L [2006] EWHC 956 and Benson v Benson [1996] 1 FLR 692

(vi) cases involving a consent order where the consent was not properly given by virtue of the absence of capacity or the presence of undue influence: see, for example, MAP v RAP [2013] EWHC 4784, Jenkins v Livesay [1985] AC 424 and L v L [2006] EWHC 956.

57. It is clear on the authorities that a party cannot use these provisions to seek to set aside a consent order entered into on the basis that he only signed up to it after receiving bad legal advice: see, for example, Harris v Manahan [1997] 1 FLR 205.

58. The sub-species with which I am concerned in the present case are (iii) and (v). They perhaps have some common features, but I shall start by considering sub-species (iii). These applications are sometimes referred to as a Barder application, formerly perhaps a Barder appeal. Typically in these cases an event has occurred which can properly be categorised as a Barder event. The nomenclature, of course, all arises from the House of Lords case of Barder v Barder (Caluori Intervening) [1987] 2 FLR 480. These cases have usually been governed by the words of Lord Brandon in Barder as follows:-

“A court may properly exercise its discretion to grant leave to appeal out of time from an order for financial provision or property transfer made after a divorce on the ground of new events, provided that certain conditions are satisfied. The first condition is that new events have occurred since the making of the order which invalidate the basis, or fundamental assumption, upon which the order was made, so that, if leave to appeal out of time were to be given, the appeal would be certain, or very likely, to succeed. The second condition is that the new events should have occurred within a relatively short time of the order having been made. While the length of time cannot be laid down precisely, I should regard it as extremely unlikely that it could be as much as a year, and that in most cases it will be no more than a few months. The third condition is that the application for leave to appeal out of time should be made reasonably promptly in the circumstances of the case ...fourth condition is that the grant of leave to appeal out of time should not prejudice third parties who have acquired, in good faith and for valuable consideration, interests in property which is the subject matter of the relevant order.”

59. If these cases are now to be dealt with at first instance rather than on appeal then some of Lord Brandon’s terminology requires an adjustment, but it is not difficult to make such an adjustment so that the words perfectly sensibly govern an application to a first instance judge under FPR Rule 9.9A. The only adjustments relate to the leave to appeal process which can easily be disaggregated without affecting the substantive tests laid down by Lord Brandon. Mr Thorne and Mr Elliott say that my task is simply to apply the Lord Brandon tests to the facts of this case.

60. The submissions of Mr Lillington urge me on to a different course. He says that the arrival of FPR 2010 Rule 4.1(6) and Matrimonial and Family Proceedings Act 1984, section 31F(6), and now FPR 2010 Rule 9.9A, have radically changed the nature of these applications. The only test for the court to apply, asserts Mr Lillington, is that there has been “a significant change in circumstances since the order was made”. Once this test is met, he suggests, the court has an unfettered discretion to interfere with an earlier order. He suggests that this rather less stringent test has replaced the tests laid down by Lord Brandon in Barder. In support of this proposition he relies on the decision of Mostyn J in TF v PJ [2014] EWHC 1760 and the decision of Munby P in CS v ACS [2015] EWHC 1005. I have carefully read through these two judgments and have reached the clear conclusion that neither of these decisions carry the interpretation held out for them by Mr Lillington. Mostyn J in TF v PJ was dealing with a Hague Convention case concerning the return of children to Italy and, although he does make a passing reference (in paragraph 21) to the use of FPR 2010 Rule 4.1(6) in ancillary relief proceedings, it is, in my view, in a different context from the one upon which Mr Lillington is addressing me. Likewise Munby P in CS v ACS was focusing upon the validity of PD30A paragraph 14.1 and not, in my view, addressing the issues which Mr Lillington suggests. Neither of these decisions makes any criticism, indeed hardly any mention of, the case of Barder and it seems to me to be inconceivable that they could be intending to doubt the validity of this longstanding and authoritative House of Lords decision. In any event it is my view that the competing policy considerations referred to above are properly and appropriately balanced in Barder. If the law was as suggested by Mr Lillington this balance would be wholly lost and the legitimate and important principle of finality seriously undermined. Further, I note that Holman J in Nasim v Nasim [2015] EWHC 2620, decided in August 2015, readily accepted that he was dealing with a Barder application and applied Lord Brandon’s tests.

61. In so far as it is argued by Mr Lillington that a less stringent test has been imported from the interpretation of CPR 1999 Rule 3.1(7) in some of the civil cases (for example Roult v North West Strategic Health Authority [2009] EWCA Civ 444 and Tibbles v SIG Plc [2012] 4 All ER 259) it is to be noted that Munby P in CS v ACS refers to the views of Hughes LJ in Roult as drawing a distinction between civil and family cases in this context and also refers to the words of Rix LJ in Tibbles when he says in the context of civil cases “The rule is apparently broad and unfettered, but considerations of finality, the undesirability of allowing litigants to have two bites at the cherry, and the need to avoid undermining the concept of appeal, all push towards a principled curtailment of an otherwise apparently open discretion.”

62. For all these reasons I reject Mr Lillington’s submissions and accept the submissions of Mr Thorne and Mr Elliott on this point.

63. I now turn to sub-species (v) – the executory order. To decide what test to apply on this part of the application it is necessary to consider the decisions in Thwaite v Thwaite [1982] Fam 1, L v L [2006] EWHC 956 and Benson v Benson [1996] 1 FLR 692. The analysis of Munby J (as he then was) in L v L covers the area as follows:-

“The general rule was set out by the Court of Appeal in Thwaite v Thwaite [1982] Fam 1, …Ormrod LJ at page 8 said that:

‘Where the order is still executory, as in the present case, and one of the parties applies to the court to enforce the order, the court may refuse if, in the circumstances prevailing at the time of the application, it would be inequitable to do so’…

In Benson v Benson (deceased) [1996] 1 FLR 692 at page 696 Bracewell J described the principle as being that:

‘the judge has an inherent jurisdiction to make a fresh order for ancillary relief where the original order remains executory if the basis upon which it was made has fundamentally altered.’

I respectfully agree.

Merely because an order is still executory the court does not have, any more than it has in relation to an undertaking, any general and unfettered power to adjust a final order – let alone a final consent order – merely because it thinks it just to do so. The essence of the jurisdiction is that it is just to do – it would be inequitable not to do so – because of or in the light of some significant change in the circumstances since the order was made. Whether it is enough that there should have been a “significant change of circumstances”, to adopt the phrase used by Buxton LJ in Mid Suffolk District Council v Clarke [2006] EWCA Civ 71, or whether, as Bracewell J seems to have assumed in Benson v Benson (deceased) [1996] 1 FLR 692, it is necessary to meet the more stringent test in Barder v Caluori [1988] AC 20, namely that there has been a new event since the making of the order which invalidates the basis, or fundamental assumption, upon which the order was made, is a refinement which there is no need for me to explore here”.

64. It is perhaps surprising that in the years since 2006 this issue has not been further visited by any of the higher courts so as to resolve the “refinement” identified by Munby J. In the present case Mr Lillington contends for the lesser test, i.e. “significant change of circumstances” while Mr Elliott and Mr Thorne contend for the higher test, i.e. applying the Barder test. Since the issue has arisen I shall tentatively express the view that the higher test more appropriately provides for a proper balance between the competing policy considerations referred to above. It is important that the policy consideration in favour of finality in litigation is properly respected and that these applications are rare beasts. The devastation to a family caused by having to face the re-opening of once completed litigation should not be underestimated and the gateway to a fresh bout of litigation should be kept as tightly closed as it can be without doing injustice in the opposite direction.

APPLYING THE LAW TO THE FACTS OF THE CASE

65. I now turn back to the facts of this case and attempt to apply the law to these facts.

66. I shall first deal with the husband’s primary application, i.e. that the move of D and E from the wife to the husband in 2012 represented a change of circumstances sufficient to justify an application under FPR 2010 Rule 4.1(6) for the revocation of paragraph 1 of the 2010 order so that all five properties in the portfolio should, instead of continuing to be the wife’s property, should be transferred back to the husband. How does this application score against the Barder tests?

67. In my view the husband’s case manifestly and lamentably fails to leap over the Barder hurdles:-

(i) I agree that the move of home of a child after an order is made could, in the right circumstances, amount to a Barder event. That much is clear from Holman J’s decision in Nasim and Holman J’s decision was plainly correct. This would not be true, however, in every case. In a case where the division of assets was not significantly predicated on the basis that greater capital provision was to be made to provide a home for the children then it is much more difficult to assert that fundamental assumption upon which the order was made has been invalidated. Given the nature of the assets transferred to the wife in this case, and given that the husband retained the family home, it is much more difficult to say in this case than it was in Nasim that the fundamental assumption of the order has been invalidated by the children’s change of residence. In fact the husband has been able to provide a home for the children since 2012 without great difficulty and he still owns two properties, including the old family home, the adequacy of which he described in positive terms in his 2014 affidavit.

(ii) Further, in this case the change of residence of the two children took place respectively in July and December 2012, 19 months and 24 months respectively after the order was made. These timescales fall well outside Lord Brandon’s outside maximum of 12 months.

(iii) Further, in this case the husband failed to act reasonably promptly once the children moved to him. He waited from December 2012 to April 2016 to make his application. It is difficult to see how this could possibly meet the “reasonable promptitude” test discussed by Thorpe LJ in Shaw v Shaw [2002] EWCA Civ 1298. The explanations for the delay given by the husband (that he was impecunious, that he was in X and that he wanted to concentrate his financial and emotional resources in securing a return to England for the children) really don’t stand up to scrutiny. He did have resources, indeed used them to pursue litigation in X in 2014. He did engage in litigation in England, and had English Solicitors working for him in 2012 and 2013, despite being in X and he did take advice from family lawyers in England in December 2012 on the very subject of this application. The campaign to return to England began in October 2013, some 10 months after the children had moved to live with him.

(iv) Further, a third party, namely the Intervener, has acquired, in good faith and for valuable consideration, interests in the property which is the subject matter of the order. The husband’s application, as formulated in February 2016 and April 2016, sought directly to cut across the Intervener’s interests, notwithstanding that the husband knew about them before he issued his application. The husband’s position at the start of the final hearing was that all the properties in the property portfolio should be sold and the proceeds divided equally between the wife and the husband also disregarded the Intervener’s interests. Even the husband’s ameliorated final position in closing submissions (seeking a lump sum of £100,000 plus a sale of all the properties in the portfolio) fails to respect the interests of the Intervener in not having his property forcibly sold.

(v) It seems to me that the husband fails on each and every one of Lord Brandon’s four conditions.

68. I shall conclude my comments on this part of the application by saying these two things:-

(i) Even if Mr Lillington had persuaded me that the legal test for this sort of application was as low as “a significant change in circumstances since the order was made”, and assuming for these purposes that the “principled curtailment” on such an application was a low one such as “the interests of justice required it” then I would still have refused this application. The fact that there was an agreement on proper legal advice in 2010, the fact that the division of assets was not (overall) particularly unequal, the fact that the property portfolio carried risks which the wife was prepared to take on, the fact of the delay, the fact of the third party interests, the fact that the husband was able to house the children in appropriate owned accommodation in England and X all point strongly against there being any justice in setting aside the 2010 order or any injustice in holding the husband to it.

(ii) It seems to me that one important reason this case is before the court is because the value of the Wimbledon property has gone up since 2010, proportionately and actually, by a much larger amount than the other assets in the case, creating an obvious target. I think Mr Thorne was correct in his suggestion that a court should be very slow indeed to be affected by post-order asset value changes, whether up or down. He was right to remind the court that to allow this to have a significant impact on outcome is very dangerous territory: see, for example, Cornick v Cornick [1994] 2 FLR 530 and Myerson v Myerson [2009] 2 FLR 147.

69. I now turn to the husband’s secondary or “subsidiary” application, i.e. that the 2010 order remains executory, thus giving the court additional powers to reverse its provisions. How does this application score against the tests referred to above?

70. In my view the husband’s case equally manifestly and lamentably fails to leap over the executory order remedy hurdles:-

(i) I agree that the order is executory, i.e. that it has not yet been fully implemented; but this is really the only positive thing that can be said about this application.

(ii) There is not before me an application by the wife to enforce the order (nor any other enforcement application). The enforcement application was pursued as far as it could be by the wife in 2012, and may yet be pursued further in the future, but there is currently no enforcement application being pursued. The existence of such an application is an essential part of these executory order cases. Ironically, the husband did not seek to run his executory order point when there was an enforcement application before the court.

(iii) Further, even if the wife had brought an application to enforce the order, for all the reasons already discussed above, it is very difficult to see that a court could possibly reach the conclusion that it would be inequitable to enforce it in the circumstances of this case. It would be no more than her fair and just right. Indeed in my view it would be inequitable not to enforce it. This case is a very long way, on its facts, from the facts in the successful reported executory order cases such as Thwaite v Thwaite [1982] Fam 1, Benson v Benson [1996] 1 FLR 692 or Potter v Potter [1990] 2 FLR 27.

(iv) Further, whether the final limb test is “significant change of circumstances” or (my preference) the more stringent test that “there has been a new event since the making of the order which invalidates the basis, or fundamental assumption, upon which the order was made”, it seems to me that the husband’s case fails for the reasons set out above. If the movement of the children really was a significant change of circumstances in the context of the 2010 order it surely would have been raised in the course of the December 2012 hearing or certainly long before April 2016.

71. Accordingly I shall dismiss the husband’s set aside application of 1^st April 2016 and (at his invitation) I shall also dismiss the husband’s Schedule 1 application of 18^th July 2016.

BEST ENDEAVOURS CLAUSE

72. In his closing submissions Mr Lillington surprised the other parties and the court by seeking to argue a different and previously un-pleaded additional case, which was that the wife was in breach of her 2010 best endeavours undertaking in that she had not made sufficient efforts to obtain the husband’s release from the mortgages. This contention had been made in the 2012 litigation and, on analysis of the evidence, the husband’s then Solicitors had at that stage accepted that the wife had complied with her undertaking (see the letter from Brain Chase Coles dated 11^th January 2013).

73. Whilst the wife’s obligations in this respect are of course ongoing, no further application was made by the husband on this point and the matter was not pursued in any formal sense in this litigation. For example, the wife was not at any stage required to provide written evidence of post-2013 efforts to obtain the husband’s release from the mortgages. It is correct to note that Mr Lillington did ask some questions on this subject in his cross-examination of the wife; but her oral answers seemed to meet the point and establish that the wife had continued to do her best since 2013 and Mr Lillington did not seem (to me anyway) to challenge what she said and he has certainly not produced any evidence to bolster a positive case on this point. I think it was inappropriate for this issue to be raised in the way it was, but (even if I were minded to permit the husband to pursue it) on the evidence presented the husband simply did not make out his case on this point. I encourage the wife to continue to try and sort out these difficulties, and express the view that it would be desirable for the 2010 order to be fully implemented as soon as possible, but I am unable to find that the wife is in breach of her best endeavours undertaking at the moment.

COSTS

74. With a view to avoiding a further live hearing I took submissions on costs from all Counsel on the basis of alternative scenarios as to what I might conclude. I was assured by all Counsel that there would be no without prejudice offers which would be revealed post-judgment to affect the costs issues, whatever was the outcome. It was common ground that this is a “clean sheet” case in costs terms (see Baker v Rowe [2010] 1 FLR 761), but also that the first thing to be written on the clean sheet would be that the unsuccessful party should pay the costs of the successful party (see KS v ND [2013] EWHC 464). Given my conclusions about the case these considerations would point strongly to an inter partes costs order against the husband in favour of both the wife and the Intervener. Mr Lillington did not really attempt to raise any opposition to the costs application on the scenario that the husband lost the case (which is plainly the outcome I have found). There were two matters which I raised for consideration. First, whether the wife should be penalised for not attending the FDR. In the end Mr Thorne has persuaded me that the adverse costs order already made had dealt with that issue, though I deprecate her failure to attend and she should certainly not be entitled to recover any costs of hers of and arising out of the FDR. Secondly, that I should be concerned about the husband’s ability to meet a costs order and the extent to which meeting the costs order might affect his ability to look after the children. I do have a concern about this and it would be most unfortunate if the enforcement of a costs order had the effect of causing D and/or E to lose their accommodation.

75. Accordingly my decision on costs is that the husband should pay the costs of the wife and the Intervener, save that they shall not be entitled to enforce the costs orders until 1^st October 2019. I have selected this date because it comes a short while after E’s 18^th birthday. The costs order will be subjected to a detailed assessment on the standard basis if the quantum is not agreed (deductions should take into account, for example, that the Forms H include figures for a third court day, which was not in the event necessary and the FDR costs need to be excised). For avoidance of doubt interest will not start to run on the debt until 1^st October 2019, but the quantum of the debt can be established in the meantime.

ORDER AND JUDGMENT

76. I will formally be handing down this judgment at a listed hearing at Portsmouth Family Court on 3^rd February 2017. I am not expecting any attendance at this hearing because it has been agreed that the judgment will be sent out by email to all interested parties; but I intend to send out these emails on 3^rd February 2017 and the time period for appealing this order will accordingly begin on 3^rd February 2017. I am prepared to receive any applications for permission to appeal by email (provided all other parties are copied in to the email).

77. My order should include:-

(i) the formal discharge of the 2010 child periodical payments order with a waiver of any arrears which may exist under that order;

(ii) a recital that the child support is currently being dealt with by the equivalent of the Child Maintenance Service in Y;

(iii) a dismissal of the husband’s applications; and

(iv) inter partes costs orders in the terms set out above.

78. I would be grateful if Counsel could agree a draft order in these terms and return it to me for formal approval as soon as possible.

His Honour Judge Edward Hess

Portsmouth Family Court

3^rd February 2017

	[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales Family Court Decisions (other Judges)
You are here: BAILII >> Databases >> England and Wales Family Court Decisions (other Judges) >> A v B [2017] EWFC B9 (3 February 2017) URL: http://www.bailii.org/ew/cases/EWFC/OJ/2017/B9.html Cite as: [2017] EWFC B9

England and Wales Family Court Decisions (other Judges)

Wife

TOTAL

TOTAL

Wife

TOTAL

TOTAL