HHJ Hess. Application brought by H to set aside on the basis of a ‘mutual mistake’ of the parties which presented the court with inaccurate computational figures.

The 2023 proceedings

Proceedings concluded on 21 July 2023 when HHJ Hess (‘the judge’) provided a written judgment and made final orders: XX v XY [2023] EWFC 334 (B).

In those proceedings, the judge ordered that W retain the family home, and H pay £1,089,489 to W, to create an equal division of the assets (albeit H was given the opportunity to opt for a pension sharing order which reduced the lump sum payable to £422,886, which he did). H was also ordered to make a contribution to W’s costs. Neither the lump sum nor contribution to W’s costs had been paid by the time of the set aside application.

W made an application for enforcement. H then made an application on 28 March 2024 to set aside the final order on the basis of ‘mistake’. It was said a mutual mistake resulted in the judge failing to include in his computations any Capital Gains Tax (CGT), which it was now asserted would arise in England upon disposal of overseas assets which the judge found to be H’s.

The set aside application survived an application to peremptorily strike it out and was listed for a full hearing.

The law

As above, the application alleged no error of the court within the meaning of FPR 9.9A(2) and FPR PD 9A, para 13.5. The judge explored the grounds upon which a set aside application can be brought, but H ‘nailed his colours to the mast of one of the traditional grounds’, that of ‘mistake’.

The judge identified at [25] the following six applicable principles:

1. There is a strong public policy of respecting the finality of sealed orders.
2. It is incumbent on a litigant to bring to the first instance court hearing the material to be relied upon relevant to the issues before the court.
3. The court is likely to be slow to come to the aid of a litigant where a mistake has occurred which is the fault of the person seeking to rely upon it to justify re-opening the order and that that person could, with reasonable diligence, have ensured that the court was not presented with mistaken information at the trial.
4. A party seeking to set aside an order must act reasonably promptly in all the circumstances when the material justifying a set aside is known.
5. The remedy will not be granted if the complainant can obtain alternative mainstream relief which has the effect of broadly remedying the injustice caused by the absence of the true facts.
6. The application if granted should not prejudice third parties who have, in good faith and for valuable consideration, acquired interests in property which is the subject matter of the relevant order.

The third through sixth of the aforementioned principles have their clearest articulation in the words of Mostyn J in DB v DLJ [2016] 2 FLR 1308. Counsel for H submitted that parts of Mostyn J’s judgment in DB v DLJ were inaccurate statements of the law, but this was not accepted by HHJ Hess. HHJ Hess also stated the ‘obvious’ that it is the party contending for the existence of an obligation (normally the person who will be or may be subject to the liability) that has the ‘primary obligation’ to establish its existence.

Facts relevant to the set aside application

In his Form E, H had not disclosed any potential CGT liabilities upon disposal of any of his property. H stated in his s 25 statement that he had been advised that CGT was not payable upon sale/transfer of property in Dubai and further gave the impression in other parts of his evidence that there were no CGT issues arising from his interests. H was found at the final hearing to be a particularly unsatisfactory witness. He was found to have been deliberately dishonest in failing to disclose his ownership of a company called Property Holdco Ltd which owned three valuable properties in Dubai worth a total of £2,288,072. Because of H’s late disclosure and denial of ownership, no directions were sought by H or ordered by the court for a tax expert. W had sought such directions on her own behalf and as a result her liabilities were agreed by the parties upon receipt of advice from her accountant.

The judge explored the exchanges which took place with counsel at the outset of the final hearing, during the hearing of evidence, and in their submissions in closing. The proper construction of those exchanges and submissions was found to be that it was never contended by or on behalf of H that a CGT liability would arise upon realisation of the assets of Property Holdco Ltd, or a second company LT Ltd which had been valued at £870,000. Equally there was never an attempt to postpone the final decision pending the commissioning of a tax expert report.

Held

The application to set aside was dismissed.

In the context of a proper weighing of the six principles discussed above, the judge at [58] attached weight to the following matters:

(i) The strong public policy of respecting the finality of sealed orders should carry significant weight in this case, particularly where W had to spend significant sums to identify H’s dishonesty.

(ii) It was primarily the responsibility of H to raise these issues at first instance which he failed to do so.

(iii) The fault for the mistake lay solely with the husband who, especially with the assistance of an experienced and expert legal team at his disposal, could and should have exercised the reasonable diligence to explore these matters before the final hearing. The reason the facts were not brought to the court’s attention appeared to be because H was distracted by running a different and in the end dishonestly unsuccessful case. As such, the court should be slow to come to his aid.

(iv) Whilst H did not act with very much promptitude, the judge would not have refused the application solely or even partially on the basis of the seven-month delay.

(v) H may have recourse against his legal advisers – however the judge was unable to say so and did not attach very much weight to this factor.

(vi) There are no third parties who would be prejudiced by a decision in favour of either party, so this was a non-factor.

The judge indicated his provisional view that H pay W’s costs of and relating to this application to be assessed if not agreed on the standard basis.