BY v GC (No 4: Indemnities) [2026] EWFC 173

Judgment date: 30 June 2026

https://caselaw.nationalarchives.gov.uk/ewfc/2026/173

Mr Nicholas Allen KC (sitting as a deputy High Court judge). Dispute about whether W’s responsibility to indemnify H extended to indemnifying a company.

Previous judgments

Mr Allen KC had previously handed down judgments:

• refusing GC’s Daniels v Walker application: BY v GC [2025] EWFC 226, [2025] 4 WLR 111;
• following the final hearing in financial remedy proceedings: BY v GC (No 2) [2025] EWFC 397; and
• regarding costs: BY v GC (No 3: Costs) [2026] EWFC 50.

Introduction

W had previously been ordered to transfer her interest in ‘Company P’ to H. Paragraph 38(iv) of the sealed order stated that W would be ‘solely responsible for any tax that may fall due in respect of [Company P] prior to the transfer on the date 7 days from the date of receipt of the sealed order’ and that she would indemnify H in accordance with undertakings and an agreed tax covenant; [8]. W had accepted her responsibility to indemnify H accordingly; [20].

The draft tax covenant of the relevant draft Share Purchase Agreement referred to ‘the Company and/ or the Buyer’; [17]. This was contentious because it made W responsible for indemnifying Company P, which W argued was beyond the scope of paragraph 38(iv) of the order and beyond the court’s jurisdiction; [18], [20], [21].

H’s arguments regarding the scope of paragraph 38(iv)

H disagreed with W’s suggestion that the drafting of the tax covenant went beyond the Family Court’s jurisdiction, or that it enlarged W’s obligations, instead arguing that because the previous order had already allocated responsibility for the pre-transfer tax liabilities, the SPA was merely effecting the order; [24].

H stated that as paragraph 38(iv) ordered that the tax liability ‘may fall due in respect of’ Company P, such liabilities were liabilities of Company P and whilst H would not be the primary taxpayer if any pre-transfer tax liability arose, he would indirectly suffer any consequent reduction in the company’s value; [16]. H argued that whether recovery was sought by H or by Company P, the economic responsibility on W would remain the same; [23]. H argued that the previous order had not restricted any indemnity to H; [24].

W’s arguments regarding the scope of paragraph 38(iv)

W argued that the wording of the draft covenant required her to indemnify Company P in addition to H and went beyond the scope of the previous judgment; [17]–[20]. She also argued that an order extending W’s responsibility to indemnify a company went beyond the court’s jurisdiction; [21]. Mr Allen KC had previously directed that the terms of the transfer of W’s interest in Company P should mirror the order in relation to two other companies: following this, W pointed out that the draft tax covenant concerning the other companies only related to indemnities between W and H; [6], [22].

Determination

Mr Allen KC concluded that the Family Court may not order one party to indemnify a non-party; [26].

In drawing this conclusion, he considered CH v WH (Power to Order Indemnity) [2018] 1 FLR 495 at [5], [8], [9], which referred to the July 2014 report by the Financial Remedies Working Group and confirmed that the Family Court has the power to indemnify the other against liability; [28]. He also considered [15] of the President’s Guidance Jurisdiction of the Family Court: Allocation of Cases within the Family Court to High Court Judge Level and transfer of cases from the Family Court to the High Court (February 2018, updated May 2021), which discusses s 31E(1)(a) of the Matrimonial and Family Proceedings Act 1984. Mr Allen KC noted that the conclusion in CH v WH was adopted in AP v ALP & Ors [2018] EWHC 2758 (Fam) at [140], Loggie v Loggie [2022] EWFC 2, Re K (Children) (Powers of the Family Courts) [2024] 1 FLR 1261, Re A and B (Schedule 1: Arbitral Award: Appeal) [2024] 2 FLR 807 and Hersman v De Verchere [2024] 2 FLR 1011; [31]–[35].

Referring to [8] of Prest v Petrodel Resources Limited & Ors [2013] 2 FLR 732, in which Lord Sumption confirmed that ‘subject to very limited exceptions … a company is a legal entity distinct from its shareholders’, Mr Allen KC concluded that ‘the court therefore has no jurisdiction to order one party to a marriage to indemnify a non-party to the proceedings’, and, particularly, has no jurisdiction to indemnify a company with a distinct legal personality; [38].

Mr Allen KC noted that MCA 1973 s 23(1)(c) restricts the court’s ability to order a lump sum payable by one party ‘to the other’, and that he could not order W to pay a contingent lump sum to a third party; [40]. This had been confirmed in Wodehouse v Wodehouse [2018] EWCA Civ 3009; [40].

H’s potential avenues

Mr Allen KC noted that, pursuant to FPR 9.26B(1), the court can direct that a ‘person or body’ be added as a party to proceedings for a financial remedy, and that, pursuant to FPR 9.26B(4), the power can be exercised on the court’s initiative or on the application of existing or prospective parties; [42].

Mr Allen KC observed that even if there was a jurisdictional route available to make the order sought by H, an application could be meritless; [45]. He noted that he had no evidence as to the quantum of the tax liability, by whom it had been incurred, and whether it was inevitable or avoidable; [46].

Conclusion

In the absence of such material information, Mr Allen KC required W to indemnify H but concluded that he did not have the jurisdiction to require W to indemnify Company P; [48]. He preferred W’s wording of the tax covenant; [49].