Securing Property Situated Outside the Jurisdiction of England and Wales for the Benefit of Minor Children

Published: 13/03/2024 07:00

Readers of the Financial Remedies Journal will, of course, be familiar with the operation of s 23(1)(d)–(f) Matrimonial Causes Act 1973 (financial provision for children in connection with divorce/dissolution of civil partnerships), as well as s 24 of that same Act insofar as it makes available property adjustment and settlement orders for the benefit of children of the marriage. Likewise, they will be familiar with the provisions of s 15 and Sch 1 Children Act 1989 when considering how to make financial provision for children outside proceedings for divorce or dissolution of a marriage or civil partnership. In those matters those with parental responsibility, as defined in ss 2 and 3 Children Act 1989, are expected to act on behalf of the relevant children in their best interests and exercise all the rights, duties, powers, responsibilities and authority which by law a parent of a child has in relation to the child and the child’s property. Likewise, in matters of succession where minor children are beneficiaries of estates, those with parental responsibility are able to manage assets on behalf of their minor children.

Those same readers may not, however, be familiar with an issue that has occasionally troubled both the Business and Property Courts in the Chancery Division and the Family Division of the High Court, that being the exercise of parental responsibility by a parent of a minor child to secure for the child’s benefit property, assets or income to which the child is entitled and which is situated outside the court’s jurisdiction in a foreign land, or otherwise to exercise what are, in effect, trustee or fiduciary powers to deal with that property, assets or income for the benefit of that child. In those instances, the matter comes before the court by way of an application brought by a parent or guardian seeking to exercise their powers under ss 3(2) and (3) Children Act 1989.

In 2020, 2021 and 2022 the issue came before Peel J in the Family Division in Re AC (A Child: Parental Responsibility) [2020] EWFC 90, [2021] 1 FLR 1297; before Master Clark in the Business and Property Courts, Chancery Division in Re Shanavazi [2021] EWHC 1983 (Ch); and before Peel J again in the Family Division in Re B (A Child) [2022] EWFC 7, [2022] 2 FLR 523.

This article now considers the lessons learned from those cases, what is needed in order to secure or to deal with property held abroad on behalf of minor children, and speculates on what might happen where the current case-law does not apply.

Re AC (A Child: Parental Responsibility) [2020] EWFC 90, [2021] 1 FLR 1297

In the triumvirate of cases, Re AC came first. This was a one-sided application by a mother of a child whose father had died intestate in 2017 for a declaration that the mother was authorised by the court to accept on behalf of her child an interest in a property which he had inherited.

The mother and the father had bought a property together in Italy in 2006, they then married in 2007 and had their child in 2009. In May 2018 the mother was granted letters of administration of her late husband’s estate. Part of that estate included the father’s share of the Italian property, half of which interest would pass, pursuant to the provisions of Italian succession law, to his child, and the other half of which would pass to the mother, being the deceased’s spouse.

The case report states, both in its headnote and in the body of the judgment, that ‘at the time of his death the Property was held in equal shares by M and F’. The mother and the father were unmarried at the time of the property’s purchase, and so they would have been taken, under Italian law, to own their share separately from the other. Upon their marriage, as no specific Italian property regime was declared, they would have been taken to have submitted by default to the community of property regime. That would mean that a right equivalent to that arising by the right of survivorship would apply in respect of the mother’s interest in her husband’s estate. Under Italian law,1 however, the parties’ child would retain his entitlement to a 50% share of his father’s Italian estate. According to the provisions of private international law, the lex situs would apply to the Italian property, such that it should pass in accordance with the provisions of Italian law, even where the father’s domicile may have been England (the case report does not deal with this point) and as a result his estate would include the Italian property for inheritance tax purposes.

M brought her claim before Peel J in the Family Division of the High Court seeking a specific issue order under s 8 Children Act 1989 authorising her to accept her child’s inherited part of the Italian property for his benefit. M wanted to sell the property and invest the child’s share on his behalf. A buyer had been found who was willing to pay €220,000, and the child would receive circa €55,000 on the sale.

M required the court’s assistance as Italian law required a formal acceptance of inheritance by the heirs of the relevant estate. It will not recognise Letters of Administration, personal representatives, or fiduciary obligation by a trustee towards a beneficiary. Each heir has to accept their share themselves. The heir would do so by:

(1) instructing a notary or court clerk to draw up an inventory, and then the heir declaring that the inventory is accepted; or

(2) signing a public deed formally accepting their share of the estate.

Peel J noted, at [11] of his judgment, that the mother could do either of those things on her own behalf, being a fully competent adult. Her son, however, as a minor child was not fully competent. Pursuant to Art 2 Codice Civile a minor cannot accept the inheritance under Italian law. Article 320 requires that an adult (usually a parent) would provide that formal acceptance on their behalf, with the acceptance being authorised by a ‘tutelary judge’ who make decisions on behalf of people who lack capacity, including minors.

A minor cannot execute a public act, and so the only method by which a minor can accept their inheritance is by instructing the notary to draw up the inheritance inventory, and the minor accepting that. The tutelary judge has to be satisfied that the authorisation is necessary and in the best interests of the minor. Once all this is done, the child becomes the owner of his inheritance.

The decision of Peel J went onto consider the pre-Brexit provisions of European law which applied in this matter. It was recorded at [13] of the judgment that Italian domestic law defers to the Council Regulation (EC) No 2201/2003 of 27 November 2003 Concerning Jurisdiction and the Recognition and Enforcement of Judgments in Matrimonial Matters and in Matters of Parental Responsibility. That Regulation provides at Art 8(1) that ‘the Courts of a Member State shall have jurisdiction in all matters of parental responsibility over a child who is habitually resident in that Member State at the time the court is seised.’ At the time of the application, England and Wales as part of the United Kingdom was still an EU Member State. As a result of the effect of that Regulation, the Italian court would not make the order the mother sought authorising acceptance on behalf of the child, as it did not have the requisite jurisdiction. England and Wales did as the child was habitually resident in England.

Peel J then went onto consider whether the English law then provided the court with the power to authorise acceptance by the mother of the child’s share of the inheritance. In doing so he considered the provisions of s 3(1)–(3) inclusive, which reads:

‘3. Meaning of “parental responsibility”.

(1) In this Act “parental responsibility” means all the rights, duties, powers, responsibilities and authority which by law a parent of a child has in relation to the child and his property.

(2) It also includes the rights, powers and duties which a guardian of the child’s estate (appointed, before the commencement of section 5, to act generally) would have had in relation to the child and his property.

(3) The rights referred to in subsection (2) include, in particular, the right of the guardian to receive or recover in his own name, for the benefit of the child, property of whatever description and wherever situated which the child is entitled to receive or recover.’

The judge stated that the emphasis in this case was on responsibilities as well as rights. The mother had a responsibility to act in the child’s interests and she had duties to take steps to receive and recover property for that child’s benefit, both for their benefit but belonging to another, and also property that was in the child’s own name.

Penelope Reed KC representing the mother, had uncovered only one case in which a similar application had been made: Hays (A Child Proceeding by her Litigation Friend) v Hays [2015] EWHC 3825 (Ch). In that case Master Matthews (as he then was) was faced with a case in which the mother applied for an order to be appointed as agent for the child in order to enter into a contract for sale of the father’s French apartment following his death. The order was granted on the basis of the operation of private international law enabling the Master to apply French law, but the alternative application brought seeking the authorisation as an exercise of parental responsibility under s 3 Children Act 1989 was refused on the basis that the Master could not see any reference to disposal of property on the minor’s behalf within s 3. He considered that seeking authorisation to dispose of property went well beyond receipt and recovery and he was not satisfied that s 3 conferred power on those exercising parental authority to enter into a contract to sell real property interests on behalf of a minor. He did note that these sort of cases are usually dealt with in the Family Division and that he may have got it wrong through his own lack of knowledge.

Peel J distinguished Master Matthews’ decision, noting that the present case concerned the acceptance of an inheritance, and not at that stage, the disposal of the property contained in that inheritance. His view set out at [21], was that the Master’s interpretation of s 3 was too restrictive. If the mother could not enter into a contract of sale on behalf of her son, then he would not be able to receive or recover his property until he achieved majority. He would hold it, but could not convert it. A contract of sale in those circumstances could be argued as falling within the phrase ‘entitled to receive or recover’. The provisions of s 3(3) Children Act 1989, further, referred to the rights in s 3(2) as ‘including’ the right to receive or recover, and the deployment of that word did not limit the powers available relating to property, which would appear to include disposal.

In his concluding paragraphs, the judge set out the test he applied, namely that he needed to be satisfied that the question which he has to determine is an aspect of parental responsibility and, if so, he must determine the issue having regard to the welfare checklist at s 1(3) Children Act 1989 and to the paramountcy principle, namely that in any exercise of its powers to make an order under s 8 of that Act (child arrangements orders, specific issue orders and prohibited steps orders) the child is the court’s paramount consideration. He stated that the exercise under s 8 Children Act 1989 (for a specific issue order in this case) did not entitle the court to make financial provisions orders for the child, such orders falling within the remit of applications brought under the Matrimonial Causes Act 1973 and/or Sch 1 Children Act 1989.

He found:

(1) He had jurisdiction to make the order sought.

(2) The specific issue order sought to recover the property related to an aspect of parental responsibility.

(3) It was in the child’s interest to make the order, as it is plainly in the child’s interest to have the issue of his inheritance in Italy resolved to his financial benefit.

(4) There were no debts for which the child would become liable.

(5) The application would enable him to receive property to which he was entitled.

(6) The mother had fully and faithfully discharged her parental responsibility in bringing the application.

He made the order sought and reserved the question of any orders specific to the sale of the property, should they have arisen to himself.

Re Shanavazi [2021] EWHC 1983 (Ch)

The matter arose again, this time in the Business and Property Courts of the Chancery Division before Master Clark in an application by Bibi Marium Shanavazi. She was seeking that the High Court authorise her to enter into a contract of sale of a property in Germany and to convey the property to the purchaser on behalf of her minor son, Ilyas Firas Shanavazi (‘Ilyas’). That property had belonged to her late husband, Gohlam Shanavazi, who had died on 23 December 2011 when Ilyas, the youngest of five siblings, was just 7 years old. By the time of the application the other siblings were adults and Ilyas was 16 years old.

This was another case in which the deceased died intestate. The Master applied private international law and recorded that succession to the property was governed by German law, that being the law of the country where the property was situated – as mentioned above, the lex situs.

Some 8 months after Mr Shanavazi’s death, in August 2012, Ilyas and Ms Shanavazi moved to England. The judgment records that they intended to remain here permanently (relevant for issues of domicile and habitual residence, and consequently the court’s jurisdiction).

In that case, the application included witness statements from Mrs Shanavazi, from her daughter Asma, and from her solicitor. Included in that evidence was a legal opinion from a Dr Johannes Weber, a notary public and supplementary emails.

Ilyas had, per German law, a 1/10th interest in his father’s estate, with his mother being entitled to half and each of his siblings being entitled to the other 4/10ths. The family as a whole wished to sell the property, which had previously been let, but which had become a burden. All the heirs, including Ilyas, entered into a contract to sell at a price far greater than an official valuation obtained. Asma confirmed that Ilyas’ share would not bear any debt where the property were sold.

Master Clark went through the legal process to establish jurisdiction carefully and in detail:

(1) Where a deceased leaves several heirs, the estate becomes the joint property of those heirs.2

(2) Those heirs own each asset jointly in undivided shares and to sell they all have to act jointly.3

(3) Minors cannot consent to the to the sale of property.4

(4) A person can be authorised by the family court to consent to the sale of the land on behalf of the minor.

(5) The German land registry would only register a transfer of ownership of land where all the heirs consent.

(6) German law defers to Council Regulation No 2201/2003 to determine where jurisdiction lies in authorising a parent to consent to a sale of jointly held property on behalf of a minor, with that Regulation providing that the courts of a Member State where the child is habitually resident have jurisdiction in matters of parental responsibility. That Regulation does not apply, however, to trusts or succession law.

(7) In this case, Ilyas was habitually resident in England and at the time of the application being brought in late November 2020, the United Kingdom was still a Member State of the EU, although going through the transition period (which ended on 31 December 2020). As the application had been brought before ‘IP Completion Day’ on 31 December 2020, despite the judgment being handed down in July 2021, EU law, the direct effect of Regulations and the relevant EU case-law still applied. The English court therefore had jurisdiction in matters of parental responsibility.

(8) An authorisation by a court to consent to a sale of property on behalf of a minor is a matter of parental responsibility according to that Regulation’s definition (being ‘all rights and duties relating to the person or the property of a child which are given to a natural or legal person by judgment, by operation of law or by an agreement having legal effect’5), per the decision in Re Matouskova.6

(9) Re Matouskova dealt with a case in which an inheritance settlement agreement concluded on behalf of minors by their guardian required the court’s approval. The court accepted the argument that the guardian’s appointment and the exercise of her activity were so closely connected that it would not be appropriate to apply different jurisdictional rules. Even though the approval had been sought in succession proceedings, it was not to be regarded as a matter of succession law. The court’s approval was needed as a protective measure relating to the administration, conservation of disposal of property7 by someone exercising parental responsibility for children who lacked capacity as a result of their age.

(10) Re Matouskova was held by the court to be authority that authorisation to act on behalf of a minor falls within the scope of the EU Regulation.

(11) As far as applicable law is concerned, where an English court takes jurisdiction with respect to children it will apply English law as the law of the forum.8 In Hays v Hays9 Master Matthews was not referred to the EU Regulation and the argument before the Master inferred that the French court would not make the order – there was no evidence to that effect. Master Matthews characterised the issue as a lack of capacity by a minor, rather than one concerning the child’s best interests. Accordingly, he held that the applicable law was the lex situs, in that case being France. Master Matthews’ analysis was inconsistent with Matouskova, which Master Clark preferred.

(12) In cases commenced after 31 December 2020, once the United Kingdom is outside the EU, the 1996 Hague Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-Operation in Respect of Parental Responsibility and Measures for the Protection of Children (‘the Hague Convention’) applies. The child’s habitual residence remains the basis of jurisdiction. The objectives of that Convention included measures directed to protection of the person or property of the child,10 which measures include ‘the administration, conservation or disposal of the child’s property’.11

Having established the jurisdiction of the English Court, both before and after the United Kingdom left the EU, the Master went onto consider s 3 Children Act 1989 and the decisions in Re AC and in Re Hays. She declared Peel J’s reasoning in Re AC ‘compelling’12 and agreed with it. She considered she had power to make the order sought.

In making that order she considered what welfare meant within s 1 Children Act 1989, noting that the welfare of the child is the court’s paramount consideration. At [50] of her judgment she stated ‘Section 1(3) sets out a welfare checklist, which the court is, however, only required to have regard to when a section 8 order is opposed.’ This assertion was striking to the author of this article, since the welfare checklist in s 1(3) is applied in the Family Court as a matter of course when the Family Court is making any decision relating to a child’s welfare, whether it is opposed or not. A re-reading of s 1(4) of the Children Act 1989, to which s 1(3) refers as being the circumstances in which the court has particular regard to the welfare checklist, does indeed state that the court shall have that particular regard only where the court is considering whether to make, vary or discharge a s 8 order, and the making, variation or discharge of the order is opposed by any party to the proceedings, or the court is concerning whether to make, vary or discharge a special guardianship order or a public law order (care/supervision order).

Accordingly, it does not appear that the Master applied the welfare checklist, but instead considered Munby LJ’s guidance in Re G (Education: Religious Upbringing) [2012] EWCA Civ 1233, [2013] 1 FLR 677 (at [26]) as follows:

‘‘‘Welfare”, which in this context is synonymous with “well-being” and “interests” (see Lord Hailsham LC in In re B (A Minor) (Wardship: Sterilisation) [1988] AC 199, 202), extends to and embraces everything that relates to the child’s development as a human being and to the child’s present and future life as a human being. The judge must consider the child’s welfare now, throughout the remainder of the child’s minority and into and through adulthood. The judge will bear in mind the observation of Sir Thomas Bingham MR in Re O (Contact: Imposition of Conditions) [1995] 2 FLR 124, 129, that:

“the court should take a medium-term and long-term view of the child’s development and not accord excessive weight to what appear likely to be short-term or transient problems.”’

The Master then weighed up all the factors in the case, including that where Ilyas’ mother was authorised to enter into the contract of sale and to convey it on Ilyas’ behalf, that would allow the sale to be registered and completed via the German Land Registry; that Ms Shanavazi offered undertakings to apply Ilyas’ share for his education, maintenance and benefit; that it was plainly in Ilyas’ best interest for the property to be sold at a higher price than its asserted value, and there was no disadvantage to him from the sale. Moreover, it was in his best interests for the proceeds to be liquidated and applied as was proposed. She made the order sought.

In closing, the Master noted that she had considered whether Ilyas should have been joined to the claim. For issues of proportionality, bearing in mind the need to appoint a litigation friend, she decided not to, but directed that the judgment and order be served on him, with permission for him to apply to the court to enforce Ms Shanavazi’s undertaking.

Re B (A Child) [2022] EWFC 7, [2022] 2 FLR 523

For the last of the three relevant cases, the issue returned to the Family Division and before Peel J once again.

In that case, the child, B, was 17 years old at the time of the hearing on 16 February 2022. The application had been brought very recently, namely on 4 February 2022, by the issue by B’s mother of a Form C100 seeking a specific issue order authorising her to accept a French inheritance and to enter into a valid contract for sale of a French property, both on B’s behalf. B, who was ‘of an age where his views command profound respect’13 supported the application, as did B’s adult sister, who was a respondent to the application.

B’s father had died intestate in France in 2013. He owned a property there and, according to French succession law in that case, the property passed in equal shares to B and to his sister. B was habitually resident in England and, again, under French law B had to formally accept his inheritance. Were he resident in France, his surviving parent could do so by what was effectively an administrative exercise to a tutelary judge. As he was not resident in France, the French judge declined jurisdiction. This case being brought post-Brexit, in his concise judgment Peel J immediately considered the Hague Convention and recorded at [8] that the English court had jurisdiction.

He then moved swiftly to consider the issues of parental responsibility and property, referring to his decision in Re AC and applying the same reasoning, he authorised B’s mother to accept succession of the French estate on B’s behalf.

He dealt lastly with the application for authorisation to sell. While not expressly distinguishing Re Hays, Peel J decided that he did have the power to authorise the applicant to enter into that sale contract for the following reasons:

(1) his provisional view in Re AC was correct;

(2) Article 3(6) Hague Convention refers to ‘disposal’ of the child’s property, and this reinforced his view that parental responsibility includes the sale of a child’s property;

(3) the sale of property is an aspect of its management, which does not alter the beneficial entitlement, but merely converts it to a more liquid form, per Chief Master Marsh at [42] of South Downs Trustees Ltd (as trustee of the South Downs Employee Benefit Trust) v GH [2018] EWHC 1064 (Ch), [2018] WTLR 673;

(4) Master Clark agreed with Peel J’s view in her judgment in Re Shanavazi.

Peel J then made the orders sought, having gone through the consideration of the facts to carry out the balancing welfare exercise.

The conclusion of his judgment set out a helpful checklist of procedural points to ensure that such cases are properly brought before the correct court. He stated:

(1) Applications of this nature are to be made on Form C100, as it is a s 8 Children Act 1989 specific issue order application.

(2) Notwithstanding the provisions of para 5(b) of that Form stating that a full statement should not be provided, in fact, a statement in support is essential. The application is technical in nature, involves applicable law in foreign jurisdictions, and there is usually a need to avoid delay. The witness statement needs to set out the full circumstances of the matter.

(3) This author also respectfully proposes that the witness statement or evidence should include some expert evidence of the law to be applied or the situation in the relevant jurisdiction, particularly if the case concerns a non-Hague Convention country.

(4) Any person with parental responsibility needs to be joined to the case as a party. The child need not be joined unless they fundamentally object to the application and are of an age where they can validly object. If they are considered Gillick-competent, the child’s views should be sought informally by the applicant and relayed to the court. Those with legal and/or beneficial interests in the property should be notified of the application and be invited to provide confirmation as to whether they do or do not oppose it. They should be reminded that they may make an application to be joined as a party pursuant to FPR 12.3(3).

(5) Peel J considered it would be unlikely that a third party would oppose authorisation to accept an inheritance which is personal to the minor. The court was not making orders for sale, but was authorising the applicant to enable a sale to be effected on behalf of the child. A third party could oppose the sale under the relevant domestic law if they thought fit.

(6) Upon making the application a MIAM exemption should be claimed, although no specific category is required. The author suggests it may be reasonable to cite this decision in Re B as being the reason for the exemption. The court should dispense with the need for a MIAM.

(7) Cases of this type should be dealt with in the Family Court by a District or Circuit Judge. It may be allocated to a High Court Judge if it is particularly complex.

(8) Notwithstanding the cost and burden of proceedings, it is appropriate for there to be a hearing in a case of this sort (rather than dealing with it on paper following the application being made) as it involves the child’s welfare and the court needs to be vigilant that its welfare is not prejudiced. Peel J noted by analogy the use of infant approval hearings for personal injury settlements.

(9) Although there must be a hearing, it should be the first and final disposal hearing.

(10) Specific issue orders of this sort would usually be heard in private by reason of FPR 27.10, unlike the position in the Chancery Court where the children and parties were named.

What should occur where the property lies outside a Hague Convention country?

Where the property concerned is situated in a country which is not a Hague Convention signatory, then the position must be more complicated. The court will have to determine whether it can seise jurisdiction and is likely to consider, as in Hays, the lex situs and may, as in that case, apply the law of that country in deciding whether it can authorise the position. The application is likely to be made to the English court precisely because the foreign court or relevant foreign authority has refused to permit the proposed transaction. In that case it is respectfully proposed that the following would need to occur:

(1) The application would still be made to the Family Court as per the procedure set out in Re B, but the case should be allocated to High Court Judge level.

(2) The evidence of how the law does and would operate in the relevant country should be comprehensive. A formal legal opinion of an expert would be required, which may come with funding issues.

(3) Application of the relevant country’s law should be taken into account in light of the English law and the paramount consideration of the child’s welfare should still apply.

(4) The disposal hearing should allow for all interested parties to participate, remotely where necessary, so that there can be no ambiguity about the outcome and no delay in dealing with the issues that arise.

It is likely that, with so many international families and people owning property in different countries, these applications will be made with more frequency. The above collection of short and clear decisions provides us with a practical guide to making the process as clean and painless as possible.

©2023 Class Legal
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