The Myth of a General Equitable Jurisdiction to Reconsider Financial Remedy Orders

I agree with Nick Allen KC that the uncertainty in the jurisprudence concerning the so-called Thwaite jurisdiction should be resolved by the Court of Appeal.

If it exists, the doctrine should only need to be invoked in exceptionally rare cases. Ordinarily, careful drafting of a non-variable property adjustment order should provide for future contingencies, however remote or unlikely. Alternatively, the transferor’s property adjustment and/or lump sum claims could be left open for a specified period. Those claims would be capable of being pursued only if subsequent events arose within that period showing that the original transfer was materially unsuitable and unfair.

However, some orders are not drafted with that possibility in mind. Even so, I have found it difficult to identify a case in which the unfairness caused by subsequent events could not have been addressed by means other than the so-called Thwaite doctrine.

For example, in Bezeliansky v Bezelianskaya [2016] EWCA Civ 76, a consent order provided for valid, non-variable property adjustment orders in favour of the wife, transferring to her properties in Moscow and Monaco. Subsequent events demonstrated that those orders, which had not been implemented and were therefore ‘executory’, were unfair and inappropriate.

It was suggested that a fairer outcome would have left those properties in the husband’s name while transferring a different property in Paris to the wife. Mr Justice Moor achieved that result by discharging the original property adjustment orders and making a new order in relation to the Paris property in their place. He relied on the Thwaite jurisdiction and was satisfied that it existed, although he did not explain its basis or source. In the Court of Appeal, Lord Justice McFarlane, when refusing permission to appeal, agreed with that approach but similarly did not identify the relevant power or its source.

In my view, the same result could have been achieved using established statutory and common law mechanisms. Property adjustment orders could have been made against the wife requiring her to transfer back to the husband the rights she had acquired in relation to the Monaco and Moscow properties under the original orders, on the husband’s undertaking to transfer the Paris property to her.

Similarly, in WZ v HZ [2024] EWFC 407 (B), the equity in the former matrimonial home had originally been estimated at £500,000 and was considered sufficient to meet the wife’s housing needs. Accordingly, the husband was ordered to transfer his beneficial interest in the property to the wife, and an order was made for its sale. Because of deliberate obstruction by the wife, the sale was delayed. Three years later, following a rise in the housing market, the equity was worth nearly £700,000.

District Judge Doman ruled that the original property adjustment order was executory. In my view, it was not; the order for sale was executory, but that order was variable in any event. Relying on the Thwaite jurisdiction, the judge set aside the original order and replaced it with an alternative order under which any equity above a specified amount would be retained by the husband.

In my view, the same result could have been achieved through the conventional mechanism of a lump sum order in favour of the husband against the wife in respect of the surplus value, assuming that such a claim had not previously been dismissed. It was therefore unnecessary to invoke the Thwaite jurisdiction.

I accept, however, that there may be orders in which no residual, unresolved claims remain available to address unfairness caused by subsequent events, and in which such unfairness could be addressed only by relying on the so-called Thwaite jurisdiction.

I do not believe that such a power exists for the reasons that follow.

In his numbered statements of the law, Nick Allen states at paragraph (2) that Thwaite confirms the availability of an equitable jurisdiction to refuse to enforce an executory order if, in the circumstances prevailing at the time of the application, enforcement would be inequitable. I can accept that proposition.

However, at paragraph (4), he states that there is, or should be, an equitable jurisdiction to vary an executory order where the respondent has failed to comply with its terms or has otherwise acted to frustrate its purpose, whether or not those circumstances were unforeseen.

I accept that paragraph (4) reflects dicta in a number of cases, two of which I have mentioned above. However, those dicta do not identify what equitable powers in fact exist to meet the unfairness in question.

In my opinion, a focused analysis is required of the equitable powers that are available to the Family Court when it is asked to reconsider a financial remedy order.

Equity developed approximately 700 years ago, and was later administered through the Chancellor, to mitigate the hardship that could result from a strict application of the common law.

In so doing, equity has never sought to set aside or rewrite the common law. Rather, it acts in personam against a litigant seeking unfairly to enforce rights at common law. It could only act proactively (as a sword), rather than reactively (as a shield), where the common law provided no remedy for a particular wrong, and where the subject matter was not regulated by legislation.

It is a fundamental principle that equity cannot be used to override the terms of an Act of Parliament. If legislation prescribes a specific rule, such as a limitation period, equity cannot extend that period to relieve hardship unless the statute itself recognises, expressly or by implication, an equitable exception. Fraud is a classic example.

Similarly, the Law of Property Act 1925, s 53(1), reiterating the Statute of Frauds 1677, required contracts for the sale and purchase of land to be in writing. Section 53(2), however, recognised constructive trusts, allowing equity to prevent unconscionable reliance on the writing requirement.

In this way, by acting in personam against a litigant who is behaving unconscionably, equity gives effect to the well-worn maxim that it will not permit a statute to be an instrument of fraud.

The Divorce Court was created by Parliament in 1857, and its powers were entirely statutory. In 1873, under s 16 of the Judicature Act, the Divorce Court and other courts, including the High Court of Chancery, were incorporated into the new High Court of Justice.

Section 24 of the 1873 Act provided that, in every civil cause or matter, law and equity were to be administered by the new High Court of Justice according to specified rules.

Those rules provided that: (a) a plaintiff could be granted only such equitable relief as could previously have been granted by a court of equity; and (b) a defendant was entitled, in respect of every pleaded equitable defence, to the same relief as the Court of Chancery would have granted had the defence been relied on in proceedings before that court.

Subject to those rules the new High Court of Justice was required to recognise and give effect to all legal claims, rights, obligations, and liabilities existing by the common law or created by any statute, in the same manner as they would have been recognised if the Act had not been passed.

These fundamental rules did not give the new High Court of Justice authority to create new equitable doctrines that had not previously existed. That principle has been reiterated in later statutes. The operative provision is now s 49(2) of the Senior Courts Act 1981, which provides:

‘Every … court shall give the same effect as hitherto—
 
(a) to all equitable estates, titles, rights, reliefs, defences and counterclaims, and to all equitable duties and liabilities; and
 
(b) subject thereto, to all legal claims and demands and all estates, titles, rights, duties, obligations and liabilities existing by the common law or by any custom or created by any statute.’

The Family Court was created by the Crime and Courts Act 2013. Schedule 10 provides that:

‘In any proceedings in the family court, the court may make any order … which could be made by the High Court if the proceedings were in the High Court.’

It is debatable whether this provision transposes s 49 of the Senior Courts Act 1981 into the Family Court’s powers. For present purposes, I assume that it does.

Over time, equity has developed various forms of relief to prevent unconscionable reliance on common law or statutory rights. Specific performance, injunctions, rectification and equitable compensation are familiar examples. However, I am not aware of any equitable power that permits a court to disregard primary legislation entirely and grant relief that is both materially different from the original order and not authorised by the relevant statute.

My challenge to proponents of an equitable doctrine in the terms of Nick Allen’s paragraph (4) is this: identify the equitable right or relief, existing before 1981, that permits a final order to be rewritten otherwise than by appeal or by variation under s 31 of the Matrimonial Causes Act 1973. I am not aware of such a right or relief and, with respect to my distinguished colleagues, I do not consider that one exists.