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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Soulsbury v Soulsbury [2007] EWCA Civ 969 (10 October 2007) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2007/969.html Cite as: [2008] 1 FLR 90, [2008] Fam Law 13, [2007] 3 FCR 811, [2007] WTLR 1841, [2008] 2 WLR 834, [2008] Fam 1, [2007] EWCA Civ 969 |
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COURT OF APPEAL (CIVIL
DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
HIS HONOUR JUDGE
COWELL
CHY04090
Strand, London, WC2A 2LL | ||
B e f o r e :
THE RT HON. LORD JUSTICE
LONGMORE
and
THE RT HON. LADY JUSTICE
SMITH
____________________
Kathleen Soulsbury |
Appellant | |
- and - |
||
Elizabeth Soulsbury |
Respondent |
____________________
Mr Richard Millett QC and Mark Twomey
(instructed by Anthony Louca) for the respondent
Hearing date: 1st May 2007
____________________
Crown Copyright ©
Lord Justice Ward:
Introduction
The facts
The judgment under appeal
"23. … Bearing that in mind I am nevertheless certain I can accept the evidence of the claimant that the agreement was made as she said."
"35. So it seems to me that on the facts effectively what the parties agreed – and here I am putting it in the words of a lawyer – was that if she, the claimant, should not have enforced or attempted to enforce the court order, as it then was, and should not seek anything from him by court process during the remainder of their joint lives then on his predeceasing her, he would ensure that she would receive on his death £100,000.
36. She did none of those things. That event happened, and indeed but for the remarriage and its unintended consequence, she would have received that sum under the will of 1991 and the consequence in law, in my judgment, is that the deceased's estate is in breach of the agreement and must make it good.
37. It is in my judgment as simple a case as that. Put another way, … the deceased would not make further maintenance payments to the claimant in consideration of a promise that the deceased would leave the claimant £100,000 by will on his death.
38. … whether or not she knew she could return to the Southampton County Court, had she done so, as she might have, that would not have been a breach of the agreement; it would have meant that the event or the condition for the arising of the obligation to be left the £100,000 would not have happened or been fulfilled "
"45. … that neither party had ever sought to oust the jurisdiction of the court."
"My cardinal conclusion is that ordinary contractual principles do not determine the issues in this appeal. This is because of the fundamental distinction that an agreement for the compromise of an ancillary relief application does not give rise to a contract enforceable in law. The parties seeking to uphold a concluded agreement for the compromise of such an application cannot sue for specific performance. The only way of rendering the bargain enforceable whether to ensure that the applicant obtains the agreed transfers and payments or whether to protect the respondent from future claims, is to convert the concluded agreement into an order of the court."
It was a matter of public policy, argued counsel as recorded by the judge:
"that when there is an ancillary relief application that is pending it is important that the court should have some say about whether an agreement ought to be implemented …
46. So in essence Mr Dubbery's argument is that this agreement cannot be made and cannot be enforced except upon its being embodied in a court order."
"49. It seems to me that because there was no application which had been made by either party in 1993 the principle in Xydhias v Xydhias could not have applied to make it of no contractual force until made into a court order. …
50. … There was no application[for a lump sum etc] that was ever made, the claimant could not have been prevented from making an application but she did not make one, and the event which triggered the obligation to pay the £100,000 occurred, or if you like, the non-events occurred entitling her to the £100,000.
56. So, for those reasons, the claimant succeeds and I think the appropriate award is damages measured by that amount"
Discussion
The starting point – contracts relating to wills
"[3.1] General Statement
Although a will is by its nature always revocable, yet a testator may bind himself personally as to the contents of his will and may bind his assets so that his personal representative, whether he dies testate or intestate, must give effect to such agreement at the expense of the beneficiaries under the will or intestacy. There must, however, in any such case, be a binding agreement by the testator to dispose of his property in a certain way, and this involves two certainties. It must be shown that there was an agreement in law and not a mere statement of intention or mere representations. It must also be shown with certainty what the subject matter of the gift by will was to be."
The crucial issue: is the contract unenforceable?
The first consideration: ousting the court's jurisdiction
"... it is sufficient for the decision of the present case to hold, as I do, that the power of the Court to make provision for a wife on the dissolution of her marriage is a necessary incident of the power to decree such a dissolution, conferred not merely in the interests of the wife, but of the public, and the wife cannot by her own covenant preclude herself from invoking the jurisdiction of the court or preclude the court from the exercise of that jurisdiction."
Lord Atkin explained at p. 629:
"In my view no agreement between the spouses can prevent the Court from considering the question whether in the circumstances of the particular case it shall think fit to order the husband to make some reasonable payment to the wife, 'having regard to her fortune, if any, to the ability of her husband and to the conduct of the parties.' The wife's right to future maintenance is a matter of public concern, which she cannot barter away."
"The point here is that the consideration moving from her was a promise not to exercise her right to apply to the court."
That being the sole or main consideration the covenant sought to be enforced by the wife was void and unenforceable.
The next consideration: the Xydhias argument
"I hold, therefore, that an oral separation agreement by which the husband agrees to pay the wife so much a week is legally enforceable. There is ample consideration for such agreement."
Edmund Davies L.J. considered that the agreement in that case was too vague to be enforced but he said this at p. 281E
"There can be no doubt that husband and wife can enter into a contract which binds them in law. Peters (Executors) v. Inland Revenue Commissioners [1941] 2 All E.R. 620 and the recent decision of Stamp J. in Merritt v. Merritt, "The Times," May 15th, 1969, afford examples of this. But it is upon the spouse asserting that such a contract has been entered into to prove the assertion: see the observations of Atkin L.J. in Balfour v. Balfour [1919] 2 K.B. 571, 580 … In the general run of cases the inclination would be against inferring that spouses intended to create a legal relationship: see Lord Hodson in Pettitt v. Pettitt [1969] 2 W.L.R. 966, 983. The evidence establishing such an intention needs, in my judgment, to be clear and convincing."
Megaw L.J. agreed with that judgment.
"In consideration of the fact that you pay all charges in connection with the house … until such time as the mortgage repayment has been completed, when the mortgage has been completed I will agree to transfer the property into your sole ownership."
She paid off the mortgage but he refused to transfer the home to her. She brought an action in Chancery Division for a declaration that the house belonged to her and for an order that he should make the conveyance. Stamp J. made the order but the husband then appealed. The appeal was dismissed. The challenge seems to have been addressed to whether or not the arrangement had been made by the husband with the intention of creating legal relations. That intention was established. No suggestion appears to have been made that the agreement was not enforceable. Specific performance was ordered accordingly.
"In my opinion, if the parties have reached an agreement on all essential matters, then the clause "subject to the approval of the court" does not mean there is no agreement at all. There is an agreement, but the operation of it is suspended until the court approves it. It is the duty of one party or the other to bring the agreement before the court for approval. If the court approves, it is binding on the parties. If the court does not approve, it is not binding. But, pending the application to the court, it remains a binding agreement which neither party can disavow. Orr L.J. has drawn my attention to a useful analogy. Many contracts for the sale of goods are made subject to an export or import licence being obtained. Such a condition does not mean that there is no contract at all. It is the duty of the seller, or the buyer, as the case may be, to take reasonable steps to obtain a licence. If he applies for a licence and gets it, the contract operates. If he takes all reasonable steps to obtain it, and it is refused, he is released from his obligations. If he fails to apply for it or to do what is reasonable to obtain it, he is in breach and liable to damages."
"Matrimonial law has moved on somewhat since Smallman was decided. There is no longer a requirement to obtain the court's approval. What the parties intended to do, in the present case, was to obtain the imprimatur of the court on a clean break agreement, so as to avoid the possibility of return at some later date, such as happened in, for example, Edgar v. Edgar (1981) FLR 19. It cannot therefore be said that the agreement is not effective because it was not considered by the court. Mr Coleridge for the husband accepts this. He also concedes that there is an agreement. His case is that it was vitiated by a change in a fundamental assumption underlying it. His argument is based on the observations of Lord Brandon in Barder v Caluori [1988] AC 20 … "
Scott Baker J. held, however, that the agreement "stands or falls at law". He considered the issue to be whether the agreement could be set aside by reason of mutual mistake or frustration and concluded that the wife's death soon after the agreement was not an event which entitled the court to intervene. The agreement stood accordingly and was enforced.
"… the first conclusion at which I have arrived is that the Chancery proceedings were misconceived. All the issues between the parties related to the 1982 consent order, its implementation, and its possible variation. The fundamental, but not exclusive, consideration for any transfer of the husband's interest in the home was the wife's abandonment of her right to claim periodical payments. The implementation of that fundamental consideration would have involved the dismissal of her claim to periodical payments and her rights to claim under the Inheritance (Provision for Family and Dependants) Act 1975.
It is beyond question that such orders are not made simply upon evidence of the applicant's consent. The court has an overriding duty to survey the sufficiency of the proposed consideration and the overall fairness of the orders proposed. [Emphasis is added as this is the passage referred to in the authorities discussed later]. Accordingly, the wife should have brought the disputed compromise before the Edmonton County Court. …
In my judgment the issue of proceedings in Chancery by the wife's advisors in reaction served only to complicate an already complicated issue, to delay an adjudication from which the parties might hope to look with satisfaction for its fairness and finality, and to increase substantially the costs for a family that is not in a position to afford any waste. Nor could Chancery proceedings ever have achieved any practical advantage for the wife. How could the court order specific performance of one side of the bargain, when the plaintiff was not able to perform her side of the bargain without the concurrence of another court having completed a wide-ranging review?
In my judgment, this is, and always has been, an issue that could only be litigated within the suit. Effective jurisdiction remained exclusively in the Edmonton County Court until the suit was transferred to the Family Division. Accordingly I do not intend to grant any relief to the wife within the Chancery proceedings …"
"… financial arrangements that are agreed upon between the parties for the purpose of receiving the approval and being made the subject of a consent order by the court, once they have been made the subject of the court order no longer depend upon the agreement of the parties as the source from which their legal effect is derived. Their legal effect is derived from the court order; …"
Ormrod L.J. applied that in Thwaite saying at p. 8:
"We respectfully adopt it and believe that it removes much of the confusion about consent orders which has prevailed in this jurisdiction. It does, however, represent a significant departure from the general principle frequently stated in cases arising in other divisions of the High Court, that the force and effect of consent orders derives from the contract between the parties leading to or evidenced by, or incorporated in, the consent order: … A distinction, therefore, has to be made between consent orders made in this and other types of litigation."
"It none the less remains true that:
'The court has an overriding duty to survey the sufficiency of the proposed consideration and the overall fairness of the orders proposed.'
(Peacock v Peacock [1991] 1 FLR 324, 328 per Thorpe J.) "
"Although it is possible for the parties, after the dissolution of their marriage to agree a settlement without recourse to the courts it is a widespread practice to embody the agreement in a court order with the advantages of court enforcement of the provisions of the order if not complied with …"
Mr Millett for the appellant relies on the italicised words and submits that that is wholly in accordance with de Lasala where Lord Diplock said this at p. 560:
"The [Hong Kong] Ordinance and corresponding English legislation recognised two separate ways in which financial provision may lawfully be made for parties to a marriage which has been dissolved. One is by a maintenance agreement entered into between the parties without the intervention of the court; the other is by one party obtaining a court order against the other for periodical payments or for once-and-for-all financial provision. In the event of default, a maintenance agreement is enforceable by action. A court order is enforceable by judgment summons." [The emphasis is added by Mr Millett.]
He submits that the passages he emphasises support the proposition that an agreement without recourse to the court is enforceable. The only consolation Mr Howard Q.C. can gain from those two dicta is that there is a "clear implication … that an agreement without an order of the court lacks the advantage of court enforcement." True it is that an agreement converted into a court order has the advantage of the means of enforcement available to enforce the court's order whereas a party has to sue on the agreement to obtain eventual enforcement. Bit that does not meet Mr Millett's point: settlement without recourse to the courts is nonetheless enforceable. So I prefer the argument of Mr Millett. There is nothing in the decisions which I have recited thus far which suggests that an agreement containing financial arrangements made between spouses and former spouses with the intention of creating legal relations between them and which is not contrary to public policy cannot be enforced in the civil jurisdiction of the courts. Against that background I turn to Xydhias.
"Although [counsel for the husband] had referred to both Peacock v Peacock and Kelley v Corston … in his skeleton, Mr Eccles [Q.C.]did not accept that compromises in ancillary relief were on any different footing to compromises of actions in other divisions."
Mr Horowitz Q.C., for the wife, had not referred to those cases and Thorpe L.J. then noted that:
"… On the first day [he] accepted with little seeming enthusiasm an alternative formulation of his case on the basis that the issue before the district judge was not to be determined by applying the principles regulating the formation of commercial contracts but by exercising a broader discretion to judge if the parties were ad idem as to the extent of the financial redistribution and as to whether the husband had so conducted himself as to forfeit his right to a fully contested trial. On the second day he adopted the alternative formulation more robustly but always tenaciously contending that the appeal should be dismissed upon the application of the Pagnan [SpA v Feed Products Ltd [1987] 2 Lloyds Rep. 601] principles."
Thus the case had shifted under pressure from the court.
"An even more singular feature of the transition from compromise to order in ancillary relief proceedings is that the court does not automatically or invariably grant the application to give the bargain the force of an order. The court conducts an independent assessment to enable it to discharge its statutory function to make such orders as reflect the criteria listed in s. 25 of the Matrimonial Causes Act as amended. The decision of this court in Kelley v Corston has a decisive impact in this appeal, as was pointed out by my Lord, Mummery L.J. (Although the judgments in Kelley v Corston have since been criticised by this Court in the case of Hall & Co v Simons …, the Peacock v Peacock point, with which we are concerned, was again affirmed by the judgment of the court.)"
He then recited the dicta of Pill and Butler-Sloss L.JJ. to which I have referred and continued:
"In consequence, it is clear that an award to an applicant for ancillary relief is always fixed by the court. The payers' liability cannot be ultimately fixed by compromise as can be done in the settlement of claims in other Divisions. Therefore the purpose of negotiation is not finally to determine the liability (that can only be done by the court) but to reduce the length and expense of the process by which the court carries out its functions. If there is a dispute as to whether the negotiations led to an accord, that process should be abbreviated, the court has a discretion in determining whether an accord was reached. In exercising that discretion the court should be astute to discern the antics of a litigant who, having consistently pressed for abbreviation, is seeking to resile and to justify his shift by reliance on some point of detail that was open for determination by the court at its abbreviated hearing. If the court concludes that the parties agreed to settle on terms then it may have to consider whether the terms were vitiated by a factor such as material non-disclosure or tainted by a factor within the parameters set out in Edgar v Edgar. Finally in every case the court must exercise its independent discretionary review applying the s. 25 criteria to the circumstances of the case and to the terms of the accord. This approach particularly applies to accords intended to obviate delivery of briefs for trial. Different considerations may apply to agreements not negotiated in the shadow of an impending fixture." [I have added the emphasis.]
"The principal issue in this appeal is not difficult to decide on the application of the first principle. It is relevant to regard not only the offers and counter offers in their terminology but also the communications with the court and the understanding of those involved. Clearly both counsel understood that they had settled the case. Clearly the solicitors understood that they had no need for advocates. Briefs were not delivered and the court was informed that the case had settled and that the fixture was vacated. Those convictions rested on firm foundation. In ancillary relief litigation a clear distinction has always been drawn between the determination of the liability and the determination of the security for the performance of the obligation. In the years when secured provision orders were common place counsel regularly settled cases on the footing that if the quantum of the annual payment could be agreed the mechanism that would be triggered to secure the recipient in the event of the payer's default would be separately and subsequently put into place either by further agreement or by the determination of the court. I have no doubt that that long-established practice informs and explains the communications between counsel as well as their readiness to regard the detail of the properties to be included within the schedule as ancillary and not precedent to a concluded agreement. Of course if the issue had to be decided on the stricter basis of pure contractual principle then the saga of the developing drafts and the complementary exchanges between solicitors would have to be examined in much greater detail. The ambiguities and the inconsistencies that such an analysis would reveal would all tell against a finding of concluded contract on Pagnan principles. However on the evidence before him I am in no doubt that the district judge rightly held that the parties had concluded a compromise during the week before the hearing. Throughout that week it was the husband who was pressing for a settlement and plainly there came a point at which the wife agreed his terms. All that remained unresolved was either mechanics or trivial."
"It is well-recognised by all experienced practitioners, whether solicitors or counsel, that contested ancillary relief proceedings are expensive and by far the most expensive stage of the process is the trial, preceded by delivery of briefs. There have been innumerable examples over more than the last decade of cases in which the legal costs incurred have been quite disproportionate to the assets available for division. This perception has engendered the Calderbank procedure and more recently the interdisciplinary development of modern procedures designed to excise much of the elaboration and waste that have become the hallmarks of the old procedure. Litigants in ancillary relief proceedings are subjected to great emotional and psychological stresses, particularly as the date of trial approaches. In my opinion there are sound policy reasons supporting the conclusion that the judge is entitled to exercise a broad discretion to determine whether the parties have agreed to settle. The pilot scheme depends on judicial control of the process from start to finish. The court has a clear interest in curbing excessive adversariality and in excluding from trial lists unnecessary litigation. A more legalistic approach, as this case illustrates, only allows the inconsistent or manipulative litigant to repudiate an agreement on the ground that some point of drafting, detail, or implementation had not been clearly resolved. Ordinarily heads of agreement signed by the parties or a clear exchange of solicitors' letters will establish the consensus. Hopefully a case such as this requiring the exercise of the judge's discretion will be a rarity." (I have added the emphasis.)
"The parties seeking to uphold a concluded agreement for the compromise of such an application cannot sue for specific performance,"
yet in Merritt the Court of Appeal allowed specific performance. Can those decisions be reconciled? Merritt was decided before the divorce law reforms had taken effect. I can see an argument that the reforms have changed the approach but, if it has, it must be limited to cases where there is the compromise of an ancillary relief application. I cannot see any justification for denying relief if the spouse or former spouse concludes an agreement which is not part of the settlement of any pending claim for ancillary relief. As I have pointed out, Thorpe J. himself in Peacock refused specific performance more because of a clash of jurisdiction between the Chancery Division and the Family Division than on the basis that the agreement itself was unenforceable. Furthermore, our case concerns the enforcement of a promise to pay a sum of money, or, perhaps more accurately, damages for breach of the promise to pay it. In the judgment of Thorpe L.J. in Xydhias the only way of rendering a bargain to make payment of money enforceable would be to convert the concluded agreement into an order of the court. Stated in those terms, it cannot be correct. It is in conflict with Goodinson and also Gould. It is contrary to what Lord Diplock was saying in de Lasala and it was contrary to the clear understanding of Butler-Sloss in Kelley v Corston.
Conclusion
Lord Justice Longmore:
"The father's promise was a unilateral contract - a promise of the house in return for their act of paying the instalments. It could not be revoked by him once the couple entered on performance of the act, but it would cease to bind him if they left it incomplete and unperformed, which they have not done. If that was the position during the father's lifetime, so it must be after his death"
The present case is stronger than Errington since on Mr Soulsbury's death, Mrs Soulsbury had completed all possible performance of the act required for enforcement of Mr Soulsbury's promise.
Lady Justice Smith: