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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> H M Customs & Excise & Anr v MCA & Anr [2002] EWCA Civ 1039 (22 July 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/1039.html Cite as: [2003] 1 FLR 164, [2002] 3 FCR 481, [2003] Fam Law 85, [2003] Fam 55, [2003] 2 All ER 736, [2003] 2 WLR 210, [2002] EWCA Civ 1039

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(Administrative Court and Divisional Court)

		Royal Courts of Justice Strand, London, WC2A 2LL
		22nd July, 2002

 


Lord Justice Schiemann :

The issue

1. The question raised by this appeal by H.M Customs & Excise is whether or not the court is precluded from making a property adjustment order under section 24 of the Matrimonial Causes Act 1973 (MCA 1973), when the property in question (Mr A’s interest in the former matrimonial home owned jointly by himself and Mrs. A, and two life insurance policies securing the mortgage on the property) is also the subject of proceedings by HM Customs & Excise to enforce a criminal confiscation order made against Mr. A in proceedings under the Drug Trafficking Act 1994 (DTA 1994), following his conviction and imprisonment for drug trafficking offences.
2. In a reserved judgment handed down on 18 April 2002, Munby J, in conjoined proceedings under MCA 1973 and the DTA 1994 held that he was not so precluded and made a property adjustment order under section 24 MCA 1973 in favour of Mrs. A, transferring to her Mr. A’s interest in the former matrimonial home and the two policies. At the same time, he discharged a restraint order (the equivalent of a Mareva injunction) made by Toulson J on 26 September 1997 under section 26 DTA 1994 in relation to Mr. A’s assets. He also discharged the Receiver appointed under section 29(2) DTA 1994 and dismissed an application by HM Customs & Excise for Mr. A’s interest in the property and the policies to be included in the realisable property over which the Receiver had been appointed.
3. In dealing with the issues in this case, I have been assisted by a very helpful concession made (and in my judgment correctly made) on behalf of the Appellant, that if the judge did have the power to make an order under section 24 MCA in the circumstances of this case, no criticism can be made of the manner in which he exercised that discretion. I am, accordingly, able to focus exclusively on the issue which I have identified at paragraph 1 above.
4. I have also been greatly assisted by the arguments of counsel, and would like to pay particular tribute to Mr. Bird, who has conducted the Appellant’s case throughout with both ability and conspicuous fairness.

The Statutory Framework

5. Before turning to the facts, I need to set out the relevant provisions of MCA 1973 and DTA 1994. I turn firstly to MCA 1973.
6. The provisions relating to financial relief for the parties to a marriage and their children are contained in Part II of MCA 1973. As the judge pointed out, Part II enables the court to make a wide range of orders, including financial provision orders (that is, orders for periodical payments and lump sums) as well as property adjustment orders, designed, on divorce, to regulate the financial positions of the parties to the marriage. In the instant case, we are concerned only with two sections of MCA 1973; firstly sections 24, sub-sections (1)(a) and (3) of which, where material, read:

“(1) On granting a decree of divorce ... or at any time thereafter (whether ... before or after the decree is made absolute), the court may make any one or more of the following orders, that is to say -

(a) an order that a party to the marriage shall transfer to the other party ... such property as may be so specified, being property to which the first-mentioned party is entitled, either in possession or reversion…….

(3) ... where an order is made under this section on or after granting a decree of divorce ... neither the order nor any settlement made in pursuance of the order shall take effect unless the decree has been made absolute.”

7. The basis upon which the court exercises its discretion to make financial provision and property adjustment orders is set out in section 25 MCA 1973 which provides, where material, as follows: -

“(1) It shall be the duty of the court in deciding whether to exercise its powers under section 23 [or] 24, ... above and, if so, in what manner, to have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen.

(2) As regards the exercise of the powers of the court under section 23(1)(a), (b) or (c) [or] 24 ... above in relation to a party to the marriage, the court shall in particular have regard to the following matters -

(a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;

(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

(c) the standard of living enjoyed by the family before the breakdown of the marriage;

(d) the age of each party to the marriage and the duration of the marriage;

(e) any physical or mental disability of either of the parties to the marriage;

(f) the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;

(g) the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it;

(h) ... the value to each of the parties to the marriage of any benefit which, by reason of the dissolution .. of the marriage, that party will lose the chance of acquiring.”

Aspects of MCA 1973 of particular relevance to the instant appeal

8. In cases of divorce, Part II of MCA 1973 gives the parties to a marriage an unfettered right to apply to the court for financial provision and property adjustment orders. That right is only excluded by re-marriage. MCA 1973, section 28(3) provides that: -

If after the grant of a decree dissolving or annulling a marriage either party to that marriage remarries …. that party shall not be entitled to apply, by reference to the grant of that decree, for a financial provision or for a property adjustment order, against the other party to that marriage.

9. Even here, provided an application for ancillary relief has been made prior to the decree absolute dissolving the marriage (for example, by a Petitioner in the petition for divorce) the jurisdiction to entertain the application remains open: - see Jackson v Jackson [1973] Fam. 99. However, the right to apply, and the application itself, do not of themselves confer any property rights on the party making the application. Thus Mrs. A’s application under MCA 1973 in the instant case, whilst a pending action which gives her the right to apply to the court to prevent premature disposal of Mr. A’s interest in the house and the policies, remains, in effect, an invitation to the court to exercise its discretion at some future time to make a property adjustment order under section 24 in her favour: see Harris v Goddard [1983] 1 WLR 1203, 1209D-E per Lawton LJ.
10. Given both the breadth of the discretion available to the court under section 25 MCA, and the correspondingly wide variety of financial relationships within marriage, it is not surprising that Part II of the MCA 1973 has generated a substantial jurisprudence. We are not, concerned with that jurisprudence in this case. Two points are, however, clear from the provisions of MCA 1973. The first is that since the statute itself identifies remarriage as the only bar to the exercise of the jurisdiction under Part II in cases of divorce, it follows that – to take two examples relevant to this case, neither moral obloquy nor serious criminal convictions represent jurisdictional bars to the exercise of the jurisdiction.
11. It follows, as Judge LJ points out in paragraph 90 below, that the court plainly has jurisdiction to entertain applications for ancillary relief by drug dealers and the spouses or former spouses of drug dealers. Whether the court exercises its discretion so as to make orders in such cases, is, of course, another matter. However, the primary contention of the Appellant is that the exercise of the jurisdiction under MCA 1973 is effectively ousted by and must take second place to proceedings to enforce orders made under DTA 1994. To establish this proposition, the Appellant must, in my judgment, either demonstrate that it is sound as a matter of statutory construction of DTA 1994, or that it is necessary as a matter of public policy, or that there is authority binding on this court which requires us to give effect to it.
12. As to the exercise of the jurisdiction to make an order under Part II MCA in a case involving assets acquired by or derived from criminal activities, I would extract the following propositions from section 25 MCA, namely:

(1) the court is not obliged to exercise its powers under section 23 or 24: section 25(1) gives it a discretion to do so;

(2) the fact that one or both of the parties to the marriage had been engaged in or convicted of trafficking in drugs is plainly a material circumstance of the case within section 25(1); and drug trafficking is almost certainly conduct which it would be inequitable to ignore.

(3) the court would plainly be bound to have regard to any drug trafficking confiscation order and the financial obligation which one or both of the parties had under such an order;

(4) the court equally plainly must have regard to the extent to which the assets of the parties were the product of drug trafficking; and the extent to which their standard of living and respective financial contributions to the marriage derived from drug trafficking.

13. In short, in deciding whether to exercise its powers to make a property adjustment order under section 24 MC A 1973, the court would be bound fully to take into account any order made under DTA 1994 and to decide whether or not, in all the circumstances of the case it was appropriate to exercise the discretion under section 25 MCA to make a property adjustment order under section 24 MCA, or whether it was appropriate to decline to make such an order and to allow the DTA order to be enforced. It is not difficult to envisage cases in which the latter would be the correct course – an obvious example being where the matrimonial assets were the fruits of drug dealing in which both parties were engaged or complicit. That, however, is a wholly different question from whether the terms of DTA 1994 prevent the court exercising its MCA 1973 jurisdiction at all.

The Drug Trafficking Act 1994 (DTA 1994)

14. The judge summarised the purpose and the provisions of the DTA 1994 with care. He pointed out that the Act of 1994 replaced the very similar Drug Trafficking Offences Act 1986 (DTOA 1986), under the terms of which a number of the relevant cases have been decided. He cited a passage from the judgment of Lord Donaldson of Lymington MR in Re Peters [1988] QB 871, at p 874D which explained the purpose of the DTOA 1986, and which applies equally to DTA 1994:

“The Act itself is terminologically complex, but the legislative intention and the broad scheme whereby that intention is to be achieved are reasonably clear. The intention is that no one convicted of drug trafficking offences shall be allowed to retain any part of the proceeds of his crime. The broad scheme involves the making of confiscation orders at the time of sentencing and of prior protective orders. The latter are designed to prevent an accused rendering a confiscation order inappropriate or nugatory by disposing of his assets between the time when an information is about to be laid against him and the making of a confiscation order in the event of conviction.”

15. As the judge observed, the key concept in the 1994 Act for present purposes is that of “realisable property”, which is defined very widely in section 62(1) as “money and all other property, real or personal, heritable or moveable, including things in action and other intangible or incorporeal property”. Thus, not merely is Mr. A’s interest in the house “realisable property”; the house itself is “realisable property”. Mr. A “holds an interest” in the house within the meaning of section 62(5)(a), with the consequence that the house itself is “held” by him within the meaning of section 6(2)(a). The same applies in the case of the policies.
16. Sections 2, 4, 5 and 6 of the Act provide for the amount by which the defendant has been found to have benefited from drug trafficking to be specified in a confiscation certificate and for a confiscation order to be made in that amount or, if less, an amount calculated in accordance with sections 5(3) and 6(1) by reference to the value of the realisable property held by the defendant.
17. The Act confers various powers on the High Court, some which were exercised in this case. Section 26(1) empowers the High Court to make a restraint order prohibiting any person from dealing with any realisable property. This was described by Lord Donaldson of Lymington MR in Re Peters ([1988] QB 871, as the equivalent of a “drugs Act Mareva ”. Section 26(7) empowers the High Court, where it has made a restraint order, to appoint a receiver to take possession of any realisable property and to manage or otherwise deal with it as directed by the court.
18. Section 27(1) DTA 1994 empowers the High Court to make a charging order on any interest in realisable property held beneficially by the defendant. Furthermore, by virtue of section 27(3)(a) such an order

“may be made subject to such conditions as the court thinks fit, including, without prejudice to the generality of this paragraph, such conditions as it thinks fit as to the time when the charge is to become effect.”

19. Section 28(2) DTA 1994 provides that the Land Charges Act 1972 and the Land Registration Act 1925 shall apply in relation to charging orders as they apply in relation to orders or writs made or issued for the purpose of enforcing judgments, and section 29(3) provides that subject to any provision made under section 29 of this Act or by rules of court, a charge imposed by a charging order shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the person holding the beneficial interest or, as the case may be, the trustees by writing under their hand.
20. The power to make a charging order over Mr. A’s property was not used in this case. It nonetheless, in my judgment has a relevance to which I will return later in this judgment.
21. Throughout his consideration of section 29 DTA 1994 the judge used the word “empower”. Thus he says that section 29(1) “empowers” the High Court, where a confiscation order has been made and is not satisfied, to exercise a variety of powers, which he then sets out. The use of the word “empower” is in no sense, of course, incorrect. Nonetheless, it needs to be pointed out that the word used throughout section 29 is “may”, and that the process of empowerment involves both choice as to the method used and the discretion not to exercise the power that it given. Speaking for myself, therefore, I would prefer to say that section 29 gives the court a discretion, where a confiscation order has been made and is not satisfied, to exercise (or to decline to exercise) a number of powers. These the judge summarised as:

under section 29(2) appointing a receiver in respect of realisable property

under section 29(3)(b) empowering the receiver “in relation to any realisable property ... to take possession of the property subject to such conditions or exceptions as may be specified by the court”

under section 29(4) ordering “any person having possession of realisable property to give possession of it to” the receiver

under section 29(5) empowering the receiver “to realise any realisable property in such manner as the court may direct”

under section 29(6) ordering “any person holding an interest in realisable property to make to the receiver such payment as it may direct in respect of any beneficial interest held by the defendant”, whereupon the court may “by order transfer, grant or extinguish any interest in the property”.

22. It is to be noted that the word “shall” is only used in section DTA section 29 to prevent the exercise of the powers under DTA sections 29(3)(a), (5) or (6) unless “a reasonable opportunity has been given for persons holding any interest in the property to make representations to the court.”
23. Section 31 of the Act of 1994, which, as the judge stated, lies at the heart of the matters he had to decide, governs the powers conferred on the High Court by sections 26 to 30 or on a receiver appointed by section 26 or 29 of the Act. So far as material it provides as follows:

“(2) Subject to the following provisions of this section, the powers shall be exercised with a view to making available for satisfying the confiscation order or, as the case may be, any confiscation order that may be made in the defendant’s case, the value for the time being of realisable property held by any person, by means of the realisation of such property……

(4) The powers shall be exercised with a view to allowing any person other than the defendant ... to retain or recover the value of any property held by him.

(5) In exercising the powers, no account shall be taken of any obligations of the defendant ... which conflict with the obligation to satisfy the confiscation order.”

The “value” of property is defined for this purpose by section 7(1) which provides that:

“the value of property ... in relation to any person holding the property is the market value of the property, except that, where any other person holds an interest in the property, the value is -

(a) the market value of the first-mentioned person’s beneficial interest in the property, less

(b) the amount required to discharge any encumbrance (other than a charging order) on that interest.”

24. As Judge LJ points out in paragraph 1 of his judgment in this case, DTA 1994, and its predecessor, DTOA 1986 have been described as “draconian” in their application. Whilst I agree with this description, it should not, I think, be applied indiscriminately. DTA 1994 clearly provides that (leaving on one side gifts from the drug dealer) genuine property rights of third parties are to be respected. This is demonstrated in a number of ways: - see, for example, sections 29(6) and 34(4), the latter being at the heart of this case. A further example is the discretion whether or not to make a charging order under section 27(1).

The facts

25. I take these from the judgment of the judge, although for the purposes of this judgment it is unnecessary to set out them out in the same degree of detail. Mr. and Mrs. A married on 29 March 1986. She was born in 1958, he in 1955. There are no children of the marriage, although Mrs. A had a child by a previous marriage who is now adult. They separated in November 1996, and the marriage was dissolved by decree absolute on Mrs. A’s petition on 28 May 1999.
26. The matrimonial home with which we are concerned (the second owned by the parties) was acquired in July 1989 for £115,000, of which £63,000 was raised on mortgage. It was subsequently re-mortgaged to the Halifax Building Society with the support of the two endowment policies, which also are the subject of the proceedings. By these means they raised an additional £26,000 which was, according to Mrs. A, intended to assist Mr. A in his business.
27. On 7 May 1991 Mr. A and Mrs. A executed a deed of trust declaring that they held the house upon trust for sale as to one-tenth of the gross sale price of the house for Mrs. A and as to the balance of the net proceeds of sale equally. At no stage was it suggested that this was anything other than an accurate reflection of their respective beneficial interests in the property, the imbalance reflecting the contribution Mrs. A had made to the deposit on the first property.
28. By 1994 the marriage was in difficulties and according to Mrs. A she and her husband were leading separate lives. They finally separated in November 1996 when Mr. A left the house. He left Mrs. A about £4,000 in cash to tide her over, telling her to use it to meet her living expenses. In February 1997 he started paying her maintenance of £1,000 per month.
29. If not already by November 1996 then very shortly afterwards Mr. A became involved in drug trafficking. The earliest evidence of his drug trafficking known to Customs & Excise is an incident on 12 December 1996 when he was stopped at Gatwick Airport, although nothing which appeared at that stage to be incriminating was found on him.
30. On 3 April 1997 Mrs. A filed her petition for divorce in the Kingston-upon-Thames County Court. Included in the prayer of the petition was a claim for all heads of financial ancillary relief. The proceedings were undefended and a decree nisi was granted on 20 June 1997. She filed her Form E in support of her application for ancillary relief on 3 December 1998, and on 22 October 2001 that application was transferred to the High Court to be heard together with the proceedings under DTA 1994.
31. On 2 September 1997 Mr. A was arrested for drug trafficking. This followed the interception at Stansted Airport on 28 August 1997 of a large consignment of cannabis, though Customs & Excise believe that he had previously been involved in the importation of cannabis in May 1997. On 9 July 1998 he was convicted at the Crown Court at Leeds of being knowingly concerned in the fraudulent evasion of the prohibition on importation of a controlled drug – the cannabis intercepted at Stansted Airport. He was sentenced to five years’ imprisonment.
32. The judge sets out in detail the various orders made under DTA 1994 in his judgment. Prior to conviction there was a restraint order made by Toulson J on 26 September 1997. A receiver was appointed by Hidden J on 24 March 1998. On 4 December 1998, the day following his conviction, the Crown Court issued a confiscation certificate certifying that the value of the husband’s proceeds of drug trafficking was £197,639.94. The amount which might be realised was set at £47,868.22. On the same day the Crown Court made a confiscation order ordering the husband to pay £47,868.22 by 5 November 1999 and set the term of custody he might be liable to serve in default of payment at 21 months’ imprisonment consecutive to his other sentence.
33. On 12 October 1999 Hooper J made an order discharging the earlier management receivership order made by Hidden J on 24 March 1998 and appointing Mr Long as receiver over all the husband’s assets, save for the house and the surrender value of the policies, to enforce the confiscation order made against the husband by the Crown Court. The order conferred on the receiver power, inter alia, to sell the husband’s assets, apart from the house and the policies, and to apply the net proceeds of sale towards satisfaction of the confiscation order.
34. On 20 July 2000, the Receiver applied for an order that the order made by Hooper J on 12 October 1999 be varied so that the house and the husband’s interest in the surrender value of the policies be included in the realisable property over which the receiver was appointed and the receiver be empowered to take possession of and sell the house “for the purpose of realising the [husband’s] interest in the net proceeds of sale”. This application formed the basis of the DTA proceedings before the judge.
35. On 15 August 2000 Owen J directed that the extent of the husband’s interest in the house and the policies was to be determined as a preliminary point. On 11 July 2001 Hooper J made an order declaring and valuing, according to formulae set out in schedules to the order, the husband’s beneficial interest in the house and his beneficial interest in the policies. The order further provided that the question of whether or not the house and/or the policies should be the subject of a receivership order was to be heard in October 2001 by Hooper J. On 4 October 2001 Hooper J made an order (sealed on 10 October 2001) in the DTA proceedings directing the hearing by Munby J of both the DTA 1994 proceedings and the ancillary relief proceedings under MCA 1973
36. A finding of fact made by Hooper J in the proceedings under DTA 1994 and confirmed by Munby J is recorded in paragraph 41 of the latter’s judgment in these terms: -

41. The wife’s evidence is that she had no knowledge of the husband’s criminal activities, that she never saw anything to alert her to what he was doing and that it all came as an incredible shock to her when he was arrested. Very fairly and properly Customs & Excise, both before Hooper J on 4 October 2001 (see Re A [2001] EWHC Admin 773 para [10]) and again before me, accepted that no part of the equity in either the house or the policies was acquired with the proceeds of drug trafficking and that the couple had separated before the husband had started his drug trafficking activities. Indeed, says Mr Bird, the wife went so far as to assist the authorities by giving the prosecution a statement, though in the event she was not called at the trial. As Hooper J said, the wife:

“is not only innocent of any involvement in drug trafficking, but she also lives in a house and enjoys the benefit of policies all untainted by drug trafficking.”

37. I regard this finding as being of critical importance.

The sums of money involved

38. As set out in paragraph 32 above, the amount which might be realised from the £197,639 covered by the confiscation certificate was £47,868.22. By the time the matter came before the judge, the receiver had been able to realise £21,348 from other assets owned by Mr. A with the result that £29,360 plus interest was outstanding. On the other side of the equation, the house had an agreed value of £220,000, and the net proceeds of sale after deduction of the mortgage and the sale costs was assessed by the judge at £114,256. Of this, Mr. A’s interest amounted to £28,732 and Mrs. A’s to £85,524.
39. The surrender values of the policies securing the mortgage amounted to £22,227, of which Mr A’s interest was £6,558 and Mrs. A’s £15,669. The total assets of the couple, therefore, including the £21,348 realised by the receiver, amounted to £161,654, of which Mr. A’s remaining share (£35,290) was sufficient to meet the outstanding balance of the confiscation order, although the only way in which that could be done was by means of a sale of the property, in which he was no longer living.
40. One can contrast Mrs. A’s remaining assets, which consisted of the property to be sold, and which would be insufficient to enable her to purchase alternative accommodation. She was in employment as a sales assistant, earning a very modest wage. She was managing to get by, with the assistance of income from a lodger, but the judge suspected that it was a constant struggle for her, and that her fragile domestic economy would collapse were she no longer able to work.

The issue

41. The critical issue identified by the judge was the true meaning and interactive effect of sections 31(2) and 31(4) of the Act of 1994. After an exhaustive discussion of the authorities, the judge summarised his conclusions in the following seven propositions: -

i) Section 31(2) of the 1994 Act takes effect subject to section 31(4). Accordingly, in the case of conflict the effect of the 1994 Act is to protect the claims of those whose rights are safeguarded by section 31(4) against the operation of the confiscatory regime. Section 31(2) does not make satisfaction of the confiscation order the overriding objective.

ii) In principle section 31(4) safeguards the right of a third party to continue to enjoy his property in specie.

iii) A third party will bring himself within section 31(4) if he has either an “interest” or a “right” “in” or “in relation to” the relevant property. It is not necessary for a third party to have an “interest” in the relevant property; a “right” will suffice. But whatever the origin of the right it will not fall within the protection of section 31(4) unless it is something that can properly be said to be a right “in” or “in relation to” the property.

iv) The rights of a co-owner of property are in principle safeguarded by section 31(4). Save where the defendant is bankrupt the protection includes that conferred by section 15 of the 1996 Act. The conflicting claims of the co-owner and the prosecutor are to be determined in accordance with section 15, in the light of the principles referred to in Bank of Ireland Home Mortgages Ltd v Bell [2001] 2 FLR 809 and having regard to Convention principles.

v) A wife’s claims under section 24 of the 1973 Act can amount to rights in or in relation to property within the meaning of section 31(4) of the 1994 Act. The wife’s claim to relief must be evaluated having regard to the provisions of section 25 of the 1973 Act. Conflicting claims of the wife and the prosecutor are to be considered having regard to the principles contained in the European Convention on Human Rights and Fundamental Freedoms. The court must have regard to the possible penal consequences for the defendant if because of the court’s order he is unable to pay the amount to be confiscated.

vi) The court must exercise its powers, whether under the 1994 Act or the 1996 Act, in a way which is compatible with the Convention and having regard to a number of potentially conflicting rights and interests: the wife’s right to respect for her private life and her home under Article 8 (Article 1 of the Protocol adds nothing to the protections already afforded to her under domestic law); the husband’s right to liberty under Article 5 and his right under Article 1 of the Protocol (recognised by Article 8(2)) to use his assets to discharge his liabilities; and the interests of the prosecutor, representing the public’s interest (also recognised by Article 8(2)) in the prevention of crime, the protection of health and the protection of the rights and freedoms of potential victims of drug traffickers.

vii) The court has to strike a proper balance between the competing interests of the prosecutor, the husband and the wife. The conflict has to be resolved according to the general Convention principles of necessity and proportionality, balancing the competing rights and interests in a manner which is consistent with the true intention of the Convention taken as a whole.

The argument

42. Mr. Bird’s first ground of appeal is that the judge should have held that, both in terms of statutory construction and for reasons of public policy, the confiscation proceedings under DTA 1996 took priority over the proceedings for ancillary relief under MCA 1973 between Mr. and Mrs. A. Secondly, he submitted that the judge was wrong to construe section 31(4) as conferring on Mrs. A a right to enjoy the property in specie as opposed to protecting only the monetary value of her beneficial interest. Thirdly, he submitted that the judge was wrong to describe Mrs. A’s pending claim under the MCA 1973 as either a “right” to property or an “interest” in property (and thus protected by section 31(4) of DTA 1994.

Priority between MCA 1973 and DTA 1994

43. In my judgment, there is nothing in the provisions of either MCA 1973 or DTA 1994 which requires the court to hold that either statute takes priority over the other when the provisions of each are invoked in relation to the same property. Both statutes confer discretion on the court, which the court may or may not choose to exercise, to make orders. The terms of those orders will depend on the facts of the individual case. Each statute gives the court mandatory guidance as to how the powers are to be exercised. Section 25 MCA requires the court to take into account all the circumstances of the case and, in particular, the various factors set out in section 25(2) when deciding whether, an if so in what manner, to exercise its powers under sections 23 and 24. Section 31 DTA provides mandatory criteria for the exercise of the discretionary powers given by sections 26 to 31.
44. Equally, it does not seem to me to be axiomatic that it is more in the public interest to enforce an order under section 31 DTA 1994 than to make a property adjustment order under section 24 MCA 1973. If the former has the effect of forcing a spouse to sell her home and become dependent on the state for housing and financial support in order to meet a confiscation order in relation to property which was not acquired by the profits of crimes; if the wife has made a substantial financial or other contribution to the acquisition of that property; if the crime involved is one of which she was ignorant and by which she is untainted, it seems to me that the public policy argument may well go the other way. Each case must depend on its facts.
45. Accordingly, the fact that section 31(2) to (6) DTA 1994 require the court’s powers for the realisation of property to be exercised in a particular way in enforcement proceedings under that Act does not, in my judgment, mean by necessary implication that those sub-sections either exclude or take priority over the powers of the court under MCA 1973 section 24. Unlike bankruptcy proceedings, the property which is subject to the confiscation order does not vest in the Receiver appointed under section 26 or 29 DTA 1994. It remains the property of the defendant drug trafficker, and is thus capable of being transferred to the defendant’s former spouse under MCA section 24.
46. Furthermore, a transfer of property order under MCA 1973 does not relieve the defendant drug trafficker of the obligation to satisfy the compensation order, and the object of DTA 1994 is not defeated because, in default of payment, the defendant becomes liable to serve an additional period in prison.
47. Above all, in my judgment, the assumption that the provisions of DTA 1994 exclude the operation of section 24 MCA 1973 is capable of leading to an injustice which parity between the statutes would prevent. It is for this reason that I regard the facts set out in paragraph 36 above as being so important. Mrs. A is entirely innocent of any drug trafficking. The property in which she lives was not purchased with the proceeds of drug trafficking and is untainted. Her beneficial interest is entirely genuine. She is not in good health and has only modest employment. If the Appellant is right, and DTA 1994 excludes MCA section 24, Mrs. A will lose her home, and she is likely to be dependent on the public sector for housing. If, as is likely, her health is affected (she suffers from agoraphobia which she has managed to overcome) by the loss of her home, she will become dependent on state benefits.
48. In short, if the Appellant is right, a substantial injustice will be done to Mrs. A in order to garner the sum of £29,360 into the coffers of the State. I cannot regard that, on the facts of this case, as a proportionate outcome, or one which is in the public interest.
49. In reaching this conclusion, I mean, of course, no criticism of or disrespect towards the Appellant, which is pursuing what it conceives to be its statutory duty and in relation to which it believes it has no discretion.

The construction of section 31(4)

50. In his seven conclusions, which I have set out at paragraph 41 above, the judge concluded that in principle, section 31(4) safeguarded the right of a third party to continue to enjoy his property in specie (conclusion (ii)). He also decided, in conclusion (v) that a wife’s claims under section 24 MCA 1973 can amount to rights in or relation to property within the meaning of section 31(4) DTA 1994.
51. Munby J achieved his conclusion (ii) by reading the words “to retain or recover the value of any property held by him” in section 31(4) DTA 1994 disjunctively, so that the word “retain” applies to the word “property” and “recover” to “value”. On this interpretation, the sub-section enables the party to retain property held by him in specie, or recover its value in money.
52. Some time was spent in argument discussing the interpretation of this sub-section in relation to chattels. If, for example, a valuable painting had been partly purchased with the proceeds of drug dealing by the husband and partly by untainted funds provided by the wife, the sub-section would be apt, if the court ordered a sale, to enable the wife to recover the monetary value of her share in the painting. Mr. Bird argued that if the wife in this example was able to retain the painting in specie, this would defeat the terms of the sub-section and the policy of DTA 1994.
53. In my judgment, the answer to this is that if the wife in the example given wished to retain the painting in specie, the court would in all probability invoke section 29(6) DTA 1994 which, whilst somewhat curiously placed in the structure of the Act nonetheless enables the court to order any person holding an interest in realisable property in effect to buy out the defendant’s interest in it.
54. So far as chattels are concerned, therefore, it may be that Mr. Bird’s inclusive, conjunctive construction of section 31(4) DTA more easily fits the likely situations in which it will be invoked. However, the terms of section 29(6) DTA mean that a disjunctive interpretation of section 31(4) does not prejudice its operation in relation to chattels, and in relation to a matrimonial home or former matrimonial home allows DTA 1994 to give full weight to a wife or former wife’s right to retain it. A postponed charging order registered against a husband’s interest in a matrimonial home under section 27 DTA 1994 would also allow a former wife to “retain” the property in specie for as long as the charge lasted.

The Status of a Wife’s claims under Section 24 MCA 1973

55. Munby J found, in his conclusion (v), that a wife’s claims under section 24 MCA 1973 can amount to rights in or in relation to property within the meaning of section 31(4) of DTA 1994. If, by this conclusion, he meant that the application for an order under section 24 MCA 1973 itself amounted to such rights I would not agree with him: - see the judgment of Lawton LJ in Harris v Goddard cited in paragraph 9 above. In any event, in my judgment, the first sentence of his conclusion (v) is unnecessary to support the remainder of that particular conclusion which can stand on its own.
56. It is, in my judgment, sufficient to say that MCA 1973 gives a wife who has not remarried, as a consequence of her status as wife or former wife, an unfettered right to apply for ancillary relief. During the subsistence of the marriage, Part IV of the Family Law Act 1996 protects the rights of spouses to occupy matrimonial homes, and whilst the judge rightly pointed out that none of the Part IV rights availed Mrs. A because the marriage had been dissolved, I do not think that, in the overall structure of things, those rights can be discounted quite so easily.
57. The Family Law Act 1996 Part IV rights protect a wife’s occupation of property, and are a charge on the matrimonial home for as long as the marriage subsists. So the wife is protected during the subsistence of the marriage. A property adjustment order cannot take effect unless and until there has been a decree absolute: - see section 24(4) MCA 1973. A wife’s application for an order under section 24 is capable of registration as a pending action against the property, and remains in place until such time as the application is heard and an order made.
58. In these circumstances, once it is accepted that neither MCA 1973 not DTA 1994 has priority over the other, any need to identify a claim under section 24 MCA 1973 as a right in or in relation to property becomes unnecessary. What matters is that the wife’s rights in relation to the property should be preserved until such time as the court can adjudicate upon them under section 24 MCA 1973.

The authorities

59. If my interpretation of MCA 1973 and DTA 1994 is correct, and if my view that the result for which the Appellant contends is not required by public policy, then one asks whether it is compelled by an authority or authorities binding on this court. Mr. Bird referred us to a number of cases in support of his argument that the overwhelming weight of authority supported his case. It is, accordingly, to those authorities that I now turn.
60. He started with the decision of this court in Re Peters [1988] QB 871, to which reference has already been made. He submitted that the only other relevant decision of this court on the point, that of the majority in Ahmad v Ahmad [1999] 1 FLR 317, was inconsistent with Re Peters and with the authorities which had followed it. He invited us to follow the dissenting judgment of Hobhouse LJ in the latter, and to restrict the views of the majority (Lord Woolf MR and Thorpe LJ) to the limited facts of the case. I will, return to Ahmad v Ahmad later.
61. The issue for this court in Re Peters was whether or not the judge had been right to vary a restraint order made under the DTOA 1986 so as to give effect to a consent order made by Mr Registrar Guest in ancillary relief proceedings whereby the defendant agreed to pay a lump sum of £25,000 for his son’s future education in final settlement of his son’s claims under the 1973 Act. Nolan J had earlier varied the restraint order so as to permit payment of the son’s school fees each term. All the orders had been made at an interim stage and prior to the defendant’s conviction. The Court of Appeal held that the judge had been wrong to vary the restraint order to give effect to the divorce court’s order.
62. I do not think this case assists Mr. Bird’s argument. It does not decide that, when an application is made to enforce a confiscation order, that application takes priority over an application by one spouse against the other under the MCA 1973. It is authority for the proposition that where a court is making a restraint order, it should exercise its discretion in such a way as to preserve as much of the assets pending the criminal trial as is reconcilable with the preservation of normal outgoings. In such circumstances, the capitalisation of normal outgoings is impermissible. Re Peters does not go any further than that.
63. Before coming to Ahmad v Ahmad Mr. Bird relied on a number of decisions at first instance, only one of which was directly on the point. The first was the decision of Henry J (as he then was) in the unreported case of In re B (13 May 1991). For present purposes, however, the case is of no assistance, since, as the judge noted, the point at issue in this case went by concession.
64. A case which supports the proposition for which Mr. Bird contends is the unreported decision of Mr. Michael Horowitz QC sitting as a Deputy High Court Judge of the Family Division in James v James (15 March 1995). The Deputy Judge considered In re Peters. He said (Transcript p 14, l 20):

“It is abundantly plain, in my judgment, that the principle exemplified in Re Peters is established and not new and that it cannot be appropriate for this Division to steal a march on the 1986 Act structure and take assets away that are otherwise available to satisfy the draconian powers granted by Parliament to punish those concerned in drug trafficking.”

65. For the reasons given in paragraph 62, I consider that the Deputy Judge was wrong to hold that Re Peters established the principle that proceedings for enforcement under the Drug Trafficking Acts take priority over proceedings under Part II of the MCA 1973.
66. Munby J also considered three further decisions at first instance. The first in time is the decision of Otton J in Re K (Restraint Order) [1990] 2 QB 298. The second is the decision of Buckley J in Re W, reported only in the Times for November 15, 1990. The third decision is that of Latham J in Re K (unreported, 27 May 1999). None of these three cases constitute even persuasive authority in favour of the proposition which Mr. Bird seeks to establish.
67. I turn, accordingly, to the case of Ahmad v Ahmad. In this case, the husband owned a number of properties. After the breakdown of the marriage but before the institution of divorce proceedings, the husband was charged with serious VAT offences. Restraint and charging orders were made under sections 77 and 78 of the Criminal Justice Act 1988 in relation to his properties. In the divorce proceedings issued subsequently, the husband and wife agreed that property adjustment orders would be made in relation to three of the properties. The wife then applied, following the husband’s conviction, to vary the charging orders in order to release to her the properties which it had been agreed between her and the husband she should have. The judge dismissed that application, and the wife appealed.
68. By the time the case reached this court, the outcome was academic, because the husband had reached agreement with the VAT authorities for payment of his liability which was to be met from sources other than those which it was agreed the wife should have. There was, accordingly, no basis on which HM Customs & Excise could object to the agreement between the husband and the wife being translated into an order of the court under MCA 1973. The only live issue related to costs.
69. However, the majority of the court (Lord Woolf MR and Thorpe LJ) took the view that the judge should have adjourned the wife’s application to vary the restraint and charging orders rather than dismissing them. Explaining why he took that view, Thorpe LJ said:

Can the order of Johnson J, dismissing the application of 11 April stand? In my opinion it cannot. First the wife was entitled to have the charging order varied to remove from its sphere her separate property. Section 78(3) provides that a charging order may be made subject to such conditions as the court thinks fit. Subsection (4) provides that:

"....a charge may be imposed by a charging order only on-

(a) any interest in realisable property being held beneficially by the defendant...."

Plainly there was scope for the wife to ask for the clear definition of what was the husband's beneficial property and what was her beneficial property. Second, she was entitled to seek a determination of her share of the family assets upon the application of the criteria in s 25 of the Matrimonial Causes Act 1973. As between herself and her husband the extent of that share had been compromised in proceedings to which the Customs and Excise had not been joined as intervenors in order to enable them to protect their legitimate interest; that is, to ensure that the bargain was bona fide and not a device to extract assets out of the confiscatory regime to the advantage of the former wife and children.

Mr Mitchell also relies on the case of Re Peters [1988] QB 871, [1988] 3 All ER

That authority directly prioritises the confiscatory regime above the anticipatory discharge of future maintenance liabilities. Here the wife's claim rested on the past and not on the future. She relied on 22 years of very hard work in a quasi partnership endeavour that ended for her three years before the husband commenced his criminal activities.

Third, a sensible and cooperative arrangement had been set up by interlocutory orders both in the Queen's Bench Division and in the Family Division to enable the determination to be made by a Family Division judge. However, there was little profit in the expense of a trial of the extent of her separate property and of her claim to transfer of property orders if there was the prospect of the husband satisfying the confiscation order from other sources. By 15 August 1997 the husband had been convicted and confiscation proceedings were in train. We do not know when negotiations between the husband and the Customs and Excise commenced. We only know that agreement was reached in principle prior to 1 July 1998.

Clearly the sensible course in August 1997 would have been to adjourn both applications generally with liberty to restore once the Customs and Excise knew where they stood.

70. Mr. Bird invited us to prefer the dissenting judgment of Hobhouse LJ. But in my judgment, (a) it is not open to us to do so and (b) in any event, Hobhouse LJ’s judgment does not help him. As I read his judgment, Hobhouse LJ did not dissent from the proposition advanced by Thorpe LJ that “the wife was entitled to seek a determination of her share of the family assets upon the application of the criteria in s 25 of the Matrimonial Causes Act 1973”. He dissented because he took the view that before the wife was entitled to an order varying the restraining order it was necessary for her to establish what her property rights were. Since she was not apparently willing to do that (she was simply asking that effect be given to the agreement she had made with the husband) she was not entitled to apply for a variation, and the judge was right to dismiss the application.
71. Thorpe LJ plainly did not think an application to establish property rights under the Criminal Justice Act was required as a pre-requisite to either variation of the agreement or adjudication under section 24 MCA 1973 was necessary: he says so in terms. That, it seems to me is the difference of opinion. It does not, in my judgment, affect the issue in this case. Hobhouse LJ is not saying that the court would not have jurisdiction to entertain an application under section 24 as and when the wife’s property rights were established: he was simply saying that a determination of her property rights was required before there could be a variation of the restraint order.
72. In these circumstances, I respectfully agree with Judge LJ that Ahmad v Ahmad is binding on us, and supports the proposition that the court’s jurisdiction under Part II MCA 1973 is not ousted when the property which is the subject matter of an application in those proceedings is also the subject of an application to enforce a confiscation order under DTA 1994.

Harman v Glencross [1986] Fam. 81

73. Before leaving the case, there are three further points which I should address. The first is the jurisdiction under section 27 DTA 1994 which enables the High Court to make charging orders on realisable property to secure the payment of confiscation orders, which I set out in paragraphs 18 to 20 of this judgment. The leading case on charging orders relating to matrimonial property is the decision of this court in Harman v Glencross, from which Munby J quoted extensively in his judgment. It is, however, important to note that in that case this court upheld Ewbank J’s decision to transfer the husband’s interest in the matrimonial home (which was the subject of the charging order) to the wife, thereby depriving the husband’s judgment creditor of the benefit of the charging order. One of the factors which plainly influenced Ewbank J was that the wife in that case had no knowledge of the proceedings in which judgment had been given against the husband, and no notice of the making of the charging order. A sale of the property to meet the charging order would have rendered her and the children of the family homeless.
74. In my judgment, the facts of Harman v Glencross are analogous to the facts of the instant case, and the jurisdiction given to the court under sections 27 and 28 of DTA 1994 very similar. If a charge against a matrimonial home in favour of a judgment creditor can be defeated in a proper case by an order under section 24 MCA 1973, I see no reason in either law or on public policy grounds why a confiscation order under DTA 1994 should not be similarly vulnerable.

Timing

75. The second point relates to the timing of the respective applications. Mr. Bird, with the characteristic fairness to which I have already referred, was minded to concede that if an order under section 24 MCA 1973 and the consequent transfer pre-dated an application to enforce a confiscation order under DTA 1994 (whether by restraint or otherwise), the former would be unassailable and DTA 1994 would not bite.
76. Speaking for myself, I do not think that any such concession should be made, nor do I think the proposition advanced by Mr. Bird sound in law. Firstly, it would give open season to collusive agreements resulting in court orders under MCA 1973 and would mean that the court could be misled with impunity by dishonest former spouses seeking to make a pre-emptive strike before the DTA 1994 provisions kicked in. Secondly, where such a collusive agreement resulting in an order had been made, there is, in my judgment, nothing in the Family Proceedings Rules 1991 to prevent HM Customs and Excise applying to set aside the court’s order under MCA 1973 on the ground (to give but two of several which would be available) that the court had not been given full disclosure by the parties, or had not been told that the assets transferred had been the profits of drug trafficking.
77. In addition, to make the date of the application or the order the determining factor could well lead to an unseemly jurisdictional race, as well as collusive petitions for divorce in cases where the marriage had not in truth broken down, but in which the parties wishes to engage the jurisdiction to distribute assets on divorce in order to avoid the penal sanction of an order under DTA 1994.
78. An application by a third party to set aside a property adjustment order is not a new animal. It is, for example, specially catered for in section 39 MCA 1973, which provides that the fact that a settlement or transfer of property had to be made in order to comply with a property adjustment order shall not prevent that settlement or transfer being a transaction in respect of which an order may be made under section 339 or 340 of the Insolvency Act 1986 (transfers at an undervalue and preferences). It is readily available in cases of serious non-disclosure, or fraud.
79. In this area, therefore, as in the area of the exercise of the jurisdiction itself, the court’s approach should be dictated by the facts of the case, and the respective merits of the two applications.

The length of Munby J’s judgment

80. The third matter which perturbed me at the outset of this appeal is the length of the judgement of Munby J. I add these words to explain why I have not found it necessary to express my views on every matter canvassed in the judgment and because it is becoming common for judgments to become longer and longer.
81. The judgment under appeal runs to some 223 paragraphs and contains a comprehensive analysis of the jurisdiction of the courts to assess and protect the interests of wives and former wives in matrimonial property. The judge’s industry and erudition is manifest and in many ways compels admiration. However it seemed to us that the judgment was too long because it dealt at length with a number of matters which the judge rightly held were not central to the decision. I decided that it would be wrong myself to spend the public’s time and money whilst I examined the correctness or otherwise of these peripheral matters.
82. A judge’s task is not easy. One does often have to spend time absorbing arguments advanced by the parties which in the event turn out not to be central to the decision making process. Moreover the experienced judge commonly has thoughts about avenues which it might be crucial to explore but which the parties have not themselves examined. It may be his duty to explore these privately in order to satisfy himself whether they are relevant. Having done the intellectual work there is an understandable temptation to which many of us occasionally succumb to record our thoughts for posterity in the judgment or to refrain from shortening a long first draft.
83. However, judges should bear in mind that the primary function of a first instance judgment is to find facts and identify the crucial legal points and to advance reasons for deciding them in a particular way. The longer a judgment is and the more issues with which it deals the greater the likelihood that

i) The losing party, the Court of Appeal and any future readers of the judgment will not be able to identify the crucial matters which swayed the judge;

ii) The judgement will contain something with which the unsuccessful party can legitimately take issue and attempt to launch an appeal;

iii) Citation of the judgment in future cases will lengthen the hearing of those future cases because time will be taken sorting out the precise status of the judicial observation in question;

iv) Reading the judgment will occupy a considerable amount of the time of legal advisers to other parties in future cases who again will have to sort out the status of the judicial observation in question. All this adds to the cost of obtaining legal advice.

84. Our system of full judgments has many advantages but one must also be conscious of the disadvantages.

Conclusion

85. For all these reasons, I would dismiss this appeal, and with the exception of the first sentence of conclusion (v) I would endorse the seven summarised conclusions reached by the judge. I have not, in this judgment, addressed the wife’s submissions on the application of the European Convention on Human Rights and Fundamental Freedoms to the exercise of a judicial discretion under section 24 MCA 1973. In the light of the absence of any criticism of the manner in which the judge exercised his discretion in this case, I do not disagree with any aspect of that part of the judge’s judgment.

Lord Justice Judge:

86. In R v Dickens (1990) 2 QB 104, when considering the provisions of the Drug Trafficking Offences Act 1986, Lord Lane CJ observed:-

“It is plain that the object of the Act is to ensure, so far as is possible, that the convicted drug trafficker is parted from the proceeds of any drug trafficking which he has carried out. The provisions are intentionally Draconian.”

87. The provisions of the Drug Trafficking Act 1994 are yet more Draconian, but the purpose is unchanged. That objective has been fully achieved by Munby J’s decision currently under appeal. Nevertheless it is argued on behalf of HM Customs and Excise that it is wrong. On analysis it comes to this: the enforcement of the confiscation order should take priority over any proceedings under the Matrimonial Causes Act 1973, notwithstanding that the purpose of the confiscation order has been achieved, when no creditor has been disadvantaged, and HM Customs and Excise has suffered no direct loss.
88. The property with which we are concerned was Mr and Mr Adcock’s former matrimonial home. They are now divorced. For convenience I shall refer to them as husband and wife. Their interests in the matrimonial home were acquired long before the husband became involved in drug dealing. The starting point in the argument on behalf of H.M.Customs and Excise is that under the statutory framework property innocently acquired by the offender is not exempt from the confiscation process. I agree. However, the wife enjoyed an interest in the matrimonial home, independently of and greater than her husband, acquired from her own sources, without involvement in drug or criminal activity, and before her husband’s criminality began. Moreover, in her proceedings under the Matrimonial Causes Act 1973, she was not seeking collusively to protect his interests in the matrimonial home. To the contrary, she was looking for “a clean break” from him, so that as part of the arrangements on the ending of their marriage, her financial links to him would be severed, and he excluded from enjoying any benefit from his original interest in the property.
89. It is generally understood that the application of Draconian provisions to the property of those who deal in drugs is justified (R v Benjafield: R v Rezvi (2002) 2 WLR 235). The determination to deprive drug dealers of their profits does not, however, carry with it the corollary that property belonging to third parties ought to be considered as part of “realisable property” for the purposes of the 1994 Act. As Lord Hobhouse explained in Re Norris (2001) 1 WLR 1388:-

“…the (confiscation) order does not override or confiscate the interests of others in the value of that property…this would be implicit even in the absence of an express provision since the confiscation order only applies to the convicted defendant and, indirectly through such defendant, donees caught by the Act. To apply it so as to confiscate the property of innocent third parties would be not only exorbitant but also outside the purpose of the Act. Any such confiscation would now also raise human rights issues.”

The House of Lords was considering the Drug Trafficking Offences Act 1986: Lord Hobhouse’s observations apply with equal force to the 1994 Act.

90. It was submitted, however, that the wife would be guaranteed her full share of the proceeds of sale of the former matrimonial home. She would not lose a penny of the value of her interest in it. Accordingly her rights would be preserved. This submission overlooks two critical and linked considerations. First, a Portia-like distribution of the proceeds of sale of the property would not preserve Mrs Adcock’s home for her, or if she had dependant children, for them. She would be forced to leave it, and in effect start again. In this context, half or even three-quarters of the proceeds of sale would represent a substantial loss. Second, however the provisions of the 1994 Act may apply in the context of property jointly owned by a criminal and someone other than his spouse, the marriage, and the dissolution of the marriage, and the consequent rights of the innocent spouse are not subsumed by the 1994 Act. “Innocent” in this context is not a reference to the circumstances in which the marriage broke down, but underlines that the acquisition of the home was untainted by criminality by either party to the marriage, and that the wife herself enjoyed no personal benefit, direct or indirect, from her husband’s drug dealing. The purpose of the 1973 Act is to ensure, among other considerations, an equitable adjustment of the property rights of both spouses at the end of the marriage. The court is empowered, if appropriate, to extinguish some or all of the rights of one spouse and transfer the benefits of those rights to the other. All marriages are subject to the provisions of the 1973 Act: the marriages of criminals and drug dealers are not excluded. Moreover, the powers under the Act are wide enough to enable the court to look into and disapply any collusive agreement designed to enable the drug dealing spouse to find a safe haven for the profits of crime, or to refuse to transfer property rights from one spouse to the other, if they represent the proceeds of crime.
91. The question therefore is whether Munby J was prohibited by the 1994 Act from exercising his powers under the 1973 Act, on the basis that once a confiscation order has been made, the 1994 Act overrides and excludes the operation of the 1973 Act.
92. In argument there was some argument about “priorities”: to some extent this was a semantic discussion, about whether in the context of the present appeal the confiscation order had a prior claim or an exclusive entitlement to consideration. Looking at the matter generally, the outcome should not depend on whether an order made under the 1973 Act had been concluded in the wife’s favour before the confiscation order was made against her husband. Carried to its logical conclusion that would offer a material advantage to a spouse who rushed into divorce and ancillary relief proceedings as soon as she discovered the slightest grounds for suspicion that her husband was involved in drug dealing, and a corresponding disadvantage if she delayed. Yet, some wives, faced with this situation, would prefer to try and keep the marriage intact, and some indeed would work to persuade their husbands to keep away from drugs or crime, and on occasions they do so, successfully. For them to be penalised in consequence would seem to me to be contrary to public policy. A further consequence would be an unseemly competition between the prosecution in the Crown Court, where the wife would not be heard, and the solicitors acting for the wife in ancillary proceedings, from which the prosecution would be absent. First come, first served, would be unlikely to produce a just result. These are persuasive arguments for the view that, notwithstanding any perceived “priority”, the decision of the court should not be confined to enforcement of a confiscation order first and exclusively, but that even where a confiscation order has been made, provided the circumstances justify it (for example, as here, where a wholly innocent spouse and property untarnished by drug dealing or its profits are involved) the enforcement process should at least acknowledge the existence of the 1973 Act, and the power of the court to exercise its discretion by taking account of the interests of the innocent spouse as well as the criminal defendant.
93. We were not asked to consider the circumstances in which the present confiscation order was made in the absence of the wife, nor indeed whether the Crown Court making the confiscation order was alerted to or took account of the principles relating to the matrimonial home explained in the context of the legislation then under consideration in Taigel (1998) 1CAR(S) 328 and Lee (1996) 1 CAR(S) 135. Like the judge, our consideration is limited to the enforcement process relating to an unsatisfied confiscation order.
94. I must now examine whether, notwithstanding public policy considerations, the order sought by the wife is prohibited by statute. The power to and methods of enforcing an unsatisfied confiscation order are provided by ss29-36. The language of s29 is discretionary. For example, the court “may”, not “shall”, make orders to produce the realisation of sufficient funds to enable it to be satisfied. Moreover the court’s control over implementation of any such order is maintained. Thus, under s29(4), when a receiver is appointed, the court “may”, not “shall”, order an individual in possession of realisable property to give up possession of it. Similarly, under s29 (6) a third party may be ordered to buy out the interest of the offender in property which is jointly owned, at a price determined by the court. These discretionary powers are subject to the overriding discretion to make, or not make, an order for realisation. Naturally, it is to be expected that a realisation will normally be ordered. That is consistent both with the purpose of the legislation, and the principle that orders made by the Crown Court should be obeyed, and if disobeyed, enforced. Mr Bird further suggested that s29 creates alternative discretionary methods of enforcement rather than discretionary powers which stand alone. Looked at in isolation, I doubt whether s29 has that effect, but taken with s31, I agree that the discretion under s29 is qualified by what has been described as the “legislative steer” (to use the description first used in argument by counsel in Re Peters (1988) QB 871 and followed ever since). S31(2) imposes a requirement on the court to exercise the power to ensure that the confiscation order is satisfied, if necessary, by the realisation of property. That said, notwithstanding the “legislative steer”, subsections (3) and (4) clearly protect the position of innocent third parties, including those who have a joint property interest with the offender. The exercise of the power to realise such property must allow for the right of the innocent third party to “retain or recover the value of any property held by him”. Subsection (5) further defines the position of third parties by excluding any “obligations” owed by the offender which conflict with his obligation to satisfy the confiscation order.
95. Subsections (4) and (5), taken together, therefore distinguish between the property rights of the innocent third party and the obligations owed to him or her by the offender. So the wife here has an absolute entitlement to retain her rights in the matrimonial home or, if it is sold, to recover her full share of its value. I share Munby J’s view that “retained” in context implies something different and additional to the recovery of the value. These are true discretionary alternatives, consistent with the powers in s29(5) that the court may direct a receiver, if appointed, how the property may be realised, and therefore, as it seems to me, how it may not. What is more, without reference to the 1973 Act, the court is also empowered to order the wife to pay the receiver and extinguish her husband’s interest in the property. Although the appropriate sum would no doubt represent the true value of the property, I note that the “payment” referred to in s29(6)(a) is not expressly linked with the value of the offender’s share. In any event, if this wife could afford to pay out her husband’s interests from other sources of her own, the question of an obligatory sale of the matrimonial home would not arise. In these circumstances, it would be strange if the discretion to make a property adjustment between this husband and wife under the 1973 Act, transferring his share in the matrimonial home to her, were automatically and irretrievably ousted by the confiscation order made against him under the 1994 Act. In my judgment, examining the “legislative steer” in its statutory context, it was not.
96. The discretionary elements in the enforcement provisions under the 1994 Act are confirmed by the decision of this court in Ahmad v Ahmad that the wife’s summons to vary restraint and charging orders should not have been dismissed, but rather that should be heard when the compromise agreement between husband and wife under the Married Women’s Property Act 1882 or the 1973 Act could be examined. Such an order would not have been made if the wife’s rights under the 1973 Act, at any rate in relation to property issues such as those which arise in the present appeal, had been extinguished. In Ahmad the wife had not established her rights: what she established was her entitlement to have her rights considered. We are not entitled to “consign” Ahmad “to oblivion”. It binds us. Nothing in Re Peters undermines Ahmad. This was an anticipatory attempt by the father to reduce his assets by the capitalisation of future expenditure. The case was concerned exclusively with future arrangements for the later support of the child rather than, as here, with an analysis of the history of the marriage and its effect on the property arrangements which should follow its ending.
97. For these reasons, as well as those given in the judgment of Schiemann LJ, I have concluded that Munby J was vested with the discretionary powers which he exercised to extinguish the husband’s rights in the matrimonial home and transfer them to the wife. The exercise of this discretion was not impugned. Nor could it be: this was a just outcome. The husband has been deprived of his property. His wife can continue to live in her home. No victim has suffered. No creditor has been deprived. The husband may apply to the court for a certificate that he had less “realisable” property than was believed at the time when the order was made, and that he had not himself procured its reduced value. The circumstances are exceptional, and an exceptional order was appropriate.
98. I would therefore both dismiss this appeal, and simultaneously expressly associate myself with the concerns expressed by Schiemann LJ about the increasing length of judgments in general, and the length of the present judgment in particular.

Mr Justice Wall

99. I have had the opportunity of reading in draft the judgments of both Schiemann and Judge LJJ. I agree with them that this appeal should be dismissed, and wish to add only four points of my own, one procedural and the remainder more substantive.
100. Procedurally, the course adopted in this case whereby both applications under MCA 1973 and DTA 1994 were listed together before a Family Division judge of the High Court was, I am sure, correct and should in my judgment be the procedure whenever a conflict or potential conflict arises between the two jurisdictions. The judges of the High Court are used to dealing with difficult ancillary relief claims, and many have direct experience in crime, either as trial judges or from sitting in the Court of Appeal Criminal Division.
101. Substantively, I agree entirely with Judge LJ’s judgment and am strongly of the opinion that the judges of the Family Division in dealing with future applications of the type exemplified by this case will be astute to balance the public interest represented by DTA 1994 with the public interest in the protection of the rights of spouses under Part II of MCA 1973. There can be no question of MCA 1973 being used as a means to circumvent the provisions of DTA 1994, and I am confident that the judges will be acutely alert to ensure this is not the case.
102. It is for this reason that I part company from Mr. Bird in what I regard as his over generous concession to the effect that an order made under section 24 MCA would “trump” any application for enforcement under DTA 1994 if the transfer pursuant to the former were first in time. Full, frank and clear disclosure by both parties is the hallmark of proceedings under section 24 MCA 1973, and any order which had been obtained without disclosure that drug dealing was the source of the funds used to acquire matrimonial assets would immediately render the order liable to be set aside on an application by HM Customs and Excise.
103. Furthermore, as Judge LJ rightly points out, any idea of a first past the post system has wider public policy implications, and in addition to collusive applications to the court for ancillary relief, might lead parties who did not believe their marriage had broken down into filing untrue or premature petitions for divorce.
104. Fourthly, I would like to say a few words about the only first instance decision which supported Mr. Bird’s argument, and to which Schiemann LJ has referred, namely the unreported decision of Mr. Michael Horowitz QC sitting as a Deputy High Court Judge of the Family Division in James v James (15 March 1995). As the effect of our decision to dismiss this appeal is to overrule James v James, I think it right to examine the Deputy Judge’s careful reasoning in that case to a greater extent than occurred in the court below.
105. In James v James a confiscation order had been made under the DTOA 1986 on 30 March 1990, followed on 25 May 1990 by a restraint order. On 9 July 1990, after the confiscation order had been made, the defendant’s wife petitioned for divorce. On 7 February 1991 a receiver was appointed. The receiver accepted that she had a 50% beneficial interest in the matrimonial home but in the ancillary relief proceedings the wife sought a transfer outright of the property to her. The receiver sought an order for realisation of the property. The proceedings were ordered to be consolidated and tried in the Family Division. The question for the Deputy Judge (see Transcript pp 10-11) was whether he should determine the wife’s ancillary relief proceedings first, postponing the DTOA 1986 proceedings in the meantime, or whether he should proceed with the receiver’s application.
106. Having referred briefly to Henry J’s judgment in Re B, which he treated (see Transcript p 13, l 3) as not saying anything about priorities as between DTOA 1986 and the exercise of the ancillary relief jurisdiction under the MCA 1973, the Deputy Judge turned to consider Re Peters, which was, of course, binding on him. He continued (Transcript p 14, l 20):

“…… it cannot be appropriate for this Division to steal a march on the 1986 Act structure and take assets away that are otherwise available to satisfy the draconian powers granted by Parliament to punish those concerned in drug trafficking.”

107. Having then referred to the exercise mandated by section 25(2)(a) MCA 1973, that is, the duty of the court to have regard to the defendant’s income, earning capacity, property and other financial resources, the Deputy Judge continued (Transcript p 15, l 6):

“If that exercise is to be performed objectively and [not] artificially, in having a look at what the resources are one has to look at the negative resources. This husband would come before any court dealing with ancillary relief with a negative resource of his vulnerability to further implementation of the confiscation order. It is wholly artificial first to exercise the jurisdiction to delete a debt and then to consider adjustment of assets. So it is abundantly plain on authority and on principle that the Drug Trafficking Offences Act exercise must logically, as a matter of law, come first.

One has a degree of sympathy with the wife. ... What in truth she has lost is the loss of an illusory claim against the greatly expanded assets of the husband that were the proceeds of crime. If he had remained nothing more than a panel beater and paint sprayer, I apprehend that there would not have been more to look at than the matrimonial home and perhaps some small savings; and in any such claim, absent criminal proceedings, the husband would have made a plausible claim to have recovered either half or some substantial share of the matrimonial home to re-house himself. Thus it is not immediately and ineluctably true that the wife has lost the prospect of some larger compensation. It is the shadow of such larger compensation represented by sums derived, it would appear, entirely from criminal offences and either confiscated or spent.”

Accordingly the Deputy Judge dismissed the wife’s application to adjourn the DTOA 1986 proceedings and directed a sale of the property.

108. As Munby J pointed out, there are obvious factual differences between the instant case and James v James. In the latter, the confiscation and restraint orders preceded the divorce petition whereas in the instant case the petition preceded the orders. Furthermore, in that case the assets appear to have been the proceeds of crime whereas in this it is accepted they are untainted.
109. For the reasons given by Schiemann LJ, I agree that the Deputy Judge was wrong to hold that Re Peters established the principle that proceedings for enforcement under the Drug Trafficking Acts take priority over proceedings under Part II of the MCA 1973, although it is entirely understandable why he did so. In my judgment, however, the Deputy Judge was also in error in his approach to the assessment of the parties’ resources under section 25 of the Matrimonial Causes Act 1973. His conclusion that the confiscation order took priority inevitably led him to deduct that sum from the husband’s assets and to conclude that, since the husband had no assets, there was nothing which could be transferred. Whilst the logic of that analysis is unassailable, I do not think, with respect, that this was the right approach.
110. It is a commonplace of family law for parties’ liabilities to exceed their assets. A husband may have substantial debts to third parties which he wishes to clear by using his share of the prospective proceeds of sale of the matrimonial home. Exercising its jurisdiction under sections 24 and 25 MCA 1973 in such a case, the court may well transfer the husband’s interest in the property to the wife, thereby leaving him to meet his liabilities from other sources. The only difference here is the perceived statutory imperative. In a case such as the present, the court does not artificially delete Mr. A’s debts and then consider the adjustment of assets. If the court has jurisdiction to make orders under section 24 MCA 1973 in these circumstances, what it does, in simple terms, is to decide whether, in all the circumstances of the case, and applying the section 25 criteria (which themselves include the fact that Mr. A’s share of the house and the policies are the subject of a confiscation order under DTA 1994), the house and the policies should be transferred from Mr. A to Mrs. A thereby leaving Mr. A with a continuing liability under the confiscation order.
111. In fairness to the Deputy Judge in James v James, not only did he regard himself as bound by Re Peters, but had he held the jurisdiction open to him, he may well not have exercised it. The result, accordingly, might well have been the same. Furthermore, his judgment is a good example of how acute the judges of the Division are likely to be to ensure that the public policy issues underpinning DTA 1994 are given due weight.
112. In my judgment, Munby J plainly reached the right result, for all the reasons my Lords have given, and like them, I would dismiss this appeal.
Order: Appeal dismissed; appellants do pay second respondent’s costs; such costs to be subject of a detailed assessment if not agreed; detailed assessment the second respondent’s publicly funded costs. (Order does not form part of the approved judgment)