Introduction
- This
case
concerns
a
final
financial
remedy order made by Recorder Anderson in May 2021 ("the 2021 order"),
which
has not yet been
fully
implemented. In essence, the order provided
for
the applicant ("H") to exit the marriage
with
three rental properties (properties "A", "B" and "
C")
and
for
the respondent ("
W")
to retain the
former
family
home. Both parties agree that the aim of the
court
should be to uphold, as
far
as possible, the intention behind that order.
- H is seeking
compensation
for
what
he says are
deliberate
attempts by
W
to
frustrate
the order and
delay
its implementation. He says these attempts have
caused
him significant
financial
loss by reducing the value of the properties he is
due
to receive.
W
disputes
that.
With
one exception, she says that any reduction in the amount H
will
ultimately receive under the order, once it is
finally
implemented, is the result of natural
fluctuations
in the value of the assets
for
which
she is not responsible.
- The applications that have been issued by the parties in order to achieve their aims are as
follows.
a. H has issued:
i. an application under the Thwaite[1] jurisdiction
for
a
further
lump sum payment, to
compensate
him
for
the losses he says he has suffered;
ii. an application
for
enforcement of an implementation order made by Recorder Anderson in August 2022 ("the 2022 order"); this order provided
for
W
to account to H, by
way
of periodical payments,
for
rental income received by her on the properties
which
had been
due
to pass to H under the terms of the 2021 order. H also asks the
court
to
consider
prospectively enforcing, by
way
of a
charging
order over the property
W
occupies or an order
for
sale of that property, any lump sum order I make under the Thwaite jurisdiction;
iii. an application
for
committal
for
breach of
W's
undertaking, given
when
the 2021 order
was
made, not to borrow against any of the rental properties pending transfer to H.
W
accepts the breach, but this application has been stayed by
consent
pending my
decision
on the other applications.
b.
W
has issued:
i. an application to set aside the 2022 order;
ii. an application to strike out H's Thwaite application pursuant to
FPR
2010, r.4.4. As this hearing is intended as a
final
hearing on all applications save the
committal
application,
W
accepts that the
court
does
not need to give separate
consideration
to her strike-out application.
When
this hearing
was
listed, at a
directions
hearing before me in January 2023, it
was
contemplated
that I might hear oral evidence. At that stage
W
was
in person and had not yet
filed
any evidence, so it
was
not
clear
to
what
extent the
factual
background
was
disputed.
At this hearing both parties have been represented by
counsel,
who
both agreed that oral evidence
was
not necessary. The
dispute
is not about the
facts:
there is almost total agreement as to
what
has happened since the 2021 order
was
made. The issues between the parties are how each party's
conduct
should be
characterised;
whether
W's
conduct
has
caused
H to suffer loss or
detriment;
and if so,
what
remedy (if any) should be granted.
Background
- H is aged 64.
W
is 65. They
cohabited
from
1996, married in 2014 and separated in 2016. They have one
daughter,
who
is aged 25.
For
today's purposes, the starting point is the 2021 order. However it is
worth
observing that behind that order is a long history of litigation stretching back to 2016 (
when
H issued his
Form
A), including a
contested
preliminary
fact-finding
hearing on the extent of the parties'
cohabitation
prior to the marriage. By the time of the
final
hearing, three
costs
orders had been made against
W.
During
their relationship the parties had jointly run a property lettings business
which
at its height had a turnover of about £1m per year. All of the properties, including the parties'
family
home,
were
in
W's
sole name. Over the period between the separation in 2016 and the
final
hearing
W
sold several properties and, according to Recorder Anderson, had access to and spent "a huge amount of
capital"
HREF='#note2'>[2]. Over the same period H,
with
nothing in his own name, had to move in
with
his mother and at the time of the
final
hearing
was
reliant on universal
credit.
Neither party
was
in good health: H had had a series of heart attacks, and
W
had suffered
from
poor mental health.
- Given the background it is
completely
understandable that Recorder Anderson
was
anxious to achieve
what
he
described
as a "practical and simple" solution. His order provided
for
the three rental properties to be transferred to H, subject to their existing mortgages.
W
was
to retain the
family
home; her
wish
to
continue
to live there
was
"an aspiration not a need" and the recorder
found
it
difficult
to see how she
would
be able to afford the mortgage payments
without
access to rental income, but observed that that
was
a matter
for
her. There
was
a short-term maintenance order payable by H to
W;
this
was
intended to share the rental income in the short term
while
the parties restructured their
finances,
the recorder observing that both
would
be likely to need to sell assets in order to generate income.
- The
capital
division
brought about by the 2021 order
was
broadly equal (H receiving between 49 and 53% of the total equity in the properties, there being some uncertainty about the value of the
family
home
which
the recorder
did
not
consider
it necessary to resolve).
Events since the 2021 order
- Unfortunately, the "practical and simple" solution
which
Recorder Anderson intended has not yet been implemented.
- The
first
hurdle
faced
by the parties
was
a refusal by each of the mortgage lenders to agree to a transfer of the rental properties into H's name. This
was
probably
foreseeable,
given H's
financial
position and the
fact
that all three properties
were
in
W's
sole name, and
from
that point onwards there
was
no real
dispute
that the only possible outcome
was
that the properties
would
be sold. Indeed, Recorder Anderson had
clearly
anticipated in his judgment that H
would
need to sell some or all of the properties, although the 2021 order
did
not explicitly include a
default
sale provision.
- The
fact
that, two years later, only one of the three properties has sold and the parties have between them spent a
further
£55,000 on legal
costs
requires an explanation and the attribution,
where
appropriate, of responsibility.
- It is important to record at this stage that the parties'
daughter,
P, has suffered some significant and
debilitating
health issues
following
on
from
an injury in 2018. These issues
were
known to the recorder at the 2021 hearing, but sadly the recovery
which
he anticipated has not yet taken place. These issues have absorbed much of
W's
time and attention and have impacted her own health also: her GP has
confirmed
that she has suffered
from
anxiety and stress. I have had this aspect of the background
well
in mind
when
considering
the
chronology
of events since the
final
hearing. In particular I have had regard to a helpful
chronology
prepared on behalf of
W,
where
significant
developments
in P's health are recorded in blue alongside the events
which
are of
direct
relevance to these proceedings.
- In the initial period
following
the 2021 order (June to September 2021) both parties
continued
to be legally represented. I have reviewed the relevant
correspondence
passing between their solicitors in respect of the issues
with
implementation of the order.
- The
first
sticking point
was
who
should have
conduct
of the sales.
W's
case
was
that she should
do
so as the legal owner of the properties, but H
was
not prepared to agree to this in
circumstances
where
W
had no interest in achieving the best possible selling price. H's solicitors' proposal[3] that H should have sole
conduct
of the marketing process and sole
discretion
in respect of accepting offers, but once an offer
was
accepted
W
should have
conduct
of the sale,
was
an obvious
compromise
that should have been accepted immediately and
without
conditions
attached. Indeed by late August it appeared it had been, although the position
was
complicated
by the
fact
that by then
W
had granted a new 12-month tenancy on Property A on the basis that she
could
not pay the mortgage
without
the rental income. This
was
despite
H's offer to give
W
security
for
6 months of mortgage payments[4].
- Thereafter H attempted to progress the sales by instructing
Winkworths
to market the properties. They
contacted
W
twice in early September (
copying
in her solicitors) to arrange access.
W
did
not respond. I note that P underwent surgery on 15 September 2021.
- It appears that
W
then
ceased
to instruct her solicitors. A
further
letter to them in October 2021
went
unanswered.
W
accepts that "matters stalled"; she says that she "
was
not in a position or a state of mind to instruct a new solicitor… to advise me on
what
had become an increasingly
complicated
situation". I observe that by this stage the mechanism
for
selling all three properties
was
agreed. The situation
was
not at all
complicated.
All
W
needed to
do
was
ensure that
Winkworths
were
allowed access to value and then market the properties. In my view,
W's
own evidence
does
not offer any satisfactory explanation
for
her
failure
to
do
so.
Decree
absolute
was
pronounced on 7
February
2022. It is agreed that
from
that
date
the beneficial ownership of all three properties passed to H[5].
- In March 2022 H, by then also acting in person,
wrote
a "Letter Before Action" to
W
notifying her of his intention to apply
for
an order
for
the sale of all three properties.
W
did
not reply. Her
case
now is that
from
this point onwards she "buried her head in the sand". H says that in
fact
W's
actions
demonstrate
a
deliberate
intention to obstruct implementation of the 2021 order. I note that P
was
admitted to hospital the
day
after H's letter, but I observe again that
W
was
not being asked to take on any significant administrative or practical burden. All that
was
required of her
was
an authorisation to
Winkworths
to allow the properties to be marketed.
- On 12 April 2022 H issued an application
for
an order
for
sale. On 11 July 2022 the
court
gave notice of a hearing on 16 August 2022.
- On 15 July 2022
W
granted a new 12-month tenancy on Property B.
- On 27 July 2022
W
applied to the mortgage lender to extend the borrowing secured against Property B by a
further
£20,200. This
was,
as
W
accepts, in breach of an undertaking
contained
in the 2021 order that she
would
not borrow against any of the rental properties pending their transfer to H.
W
did
not attend the hearing on 16 August,
which
took place before Recorder Anderson. The recorder made an order
for
the sale of all three rental properties. He also made the
following
orders:
a.
W
to provide H
with
keys to all the properties, in
default
of
which
H, as beneficial owner, had permission to
change
the locks;
b.
W
to serve notices to quit on the existing tenants, and not to grant any new tenancy;
c.
W
to account to H "as the sole beneficial owner of the [rental] properties"
for
rental income net of mortgage and other
costs
from
September 2021 onwards;
d.
W
to pay H's
costs,
assessed at £29,060.84.
- I note that although the order provided
for
W
to account to H
for
rental income backdated to September 2021, H
did
not in
fact
become the beneficial owner of the properties until
February
2022. However the 2021 order had included a provision
for
periodical payments (
discharged
in the 2022 order)
which
had been intended to share the rental income between the parties. The provision in the 2022 order
could
well
be seen as a variation to the 2021 periodical payments order.
- H's solicitors served
W
with
the order by email the
following
day
(17 August 2022).
- On 18 August 2022 the additional borrowing
which
W
had applied
for
was
received.
- On the same
day
W,
in breach of the August 2022 order[6], entered into a new 12-month tenancy
with
the tenant of Property
C.
This meant that two out of the three properties
were
now subject to recently-granted 12-month tenancies,
creating
a significant impediment to their sale.
- On 20 August 2022 a
friend
of
W's
wrote
to the
court
to say that she had not attended because of health problems, and had
written
to the
court
to give this information.
W's
actions as
described
in the previous paragraphs require an answer.
W's
case
is that she
was
struggling
financially;
she
could
not pay the mortgages
without
the rental income and knew she
would
be liable
for
the mortgages until sale. P
was
hospitalised
from
10 – 18 August, and her own health
was
suffering.
- On 21 July 2022
W's
GP
wrote
a letter "to
whom
it may
concern".
The letter said that
W
was
suffering
from
anxiety and stress; she had been referred
for
counselling
and "is not medically
fit
for
court
on 16 August 2022."
W
says she sent that letter to the RCJ,
where
the hearing
was
due
to take place in one of the East London "overspill"
courts.
It has never reached the
court
file
(
which
is administered
from
East London). H says
W
has not produced satisfactory proof that she sent the letter at all, and if she
did
she must have known she
was
sending it to the
wrong
place.
For
present purposes I am prepared to accept the letter
was
sent to the RCJ. It
was
not, however, sent to H or his solicitors.
- I make the
following
observations in respect of
W's
non-attendance at the August hearing:
a.
W's
case
that she
was
too unwell to attend the hearing (a previous GP letter had suggested that her health "may have impacted her ability to manage her
finances")
is
difficult
to reconcile
with
the proactive steps she
was
taking over the same period to
deal
with
the rental properties, including the re-mortgage of one property and the grant of a new tenancy on two of the properties.
b.
W
did
not at any stage over the relevant period engage
with
H or his solicitors in respect of the upcoming hearing, or, perhaps even more significantly, inform them of the steps she
was
taking in relation to the properties.
c.
Although
W
took some, ineffective steps to
communicate
with
the
court
she
did
not respond to
communications
from
the
court
and H's solicitors, including an email
from
the
court
clerk
on the
day
of the hearing.
d.
W's
case
that she
was
forced
into the actions she took by
financial
pressures relating to the mortgages
does
not take account of the
fact
that as long ago as August 2021 H had offered to
deal
with
this issue by providing her
with
security
for
6 months of mortgage payments. In any event the 2022 order provided that on vacation of any property by the tenants, H
would
be solely liable
for
the mortgage payments and all other
costs.
- In the
weeks
following
the hearing on 16 August 2022,
W
did
correspond
with
the
court
(but not
with
H's solicitors[7]). She indicated her
dissatisfaction
with
the order and a
wish
to set it aside. Indeed it seems that she attempted to make an application to set aside the order, but used the
wrong
form
and so the application
was
rejected by the
court
and never issued.
- It the meantime H made attempts to sell the properties. On 7 September 2022 he arranged
for
the locks to be
changed
in accordance
with
the 2022 order.
W
was
present at one of the properties
with
the tenants
when
the locksmith attended, and refused entry. It required the attendance of the police to implement the order.
- On 14 October 2022 the tenants of Property A (the only rental property not subject to a new 12-month tenancy) left voluntarily. On 18 October
W
surrendered the property to the lender and
ceased
paying the mortgage. H's solicitors
contacted
the lender and asked to take over the mortgage payments, but the lender refused. It agreed to allow H until 24 January 2023 to sell the property, after
which
it
would
be re-possessed. In
December
2022 H accepted an offer to buy the property at about £130,000 below the asking price.
- On 18 October 2022 H applied
for
further
directions
on implementation, and on 16 November 2022
for
enforcement. A
directions
hearing took place before me on 31 January 2023. Both parties attended, H represented by
counsel
and
W
as a litigant in person. H indicated an intention to apply
for
an adjustment to the
capital
division
set out in the 2021 order, pursuant to the Thwaite jurisdiction. I listed all the applications
for
determination
at a hearing on 26 May 2023. The Thwaite application
was
formally
issued on 14
February
2023.
- At the beginning of
February
2023
W
informed H's solicitors that Property
C
was
in "voluntary repossession".
Correspondence
with
the lender indicated that
W
had
ceased
making the mortgage payments. On 9
February
2023 she made a lump sump payment towards the arrears and the surrender
was
cancelled.
- In
February
2023
W
instructed solicitors and on 14 March 2023 she issued her application to set aside the 2022 order.
My
conclusions
as to the parties'
conduct
since the 2021 order
- My review of events since the 2021 order leads me to the
conclusion
that, as H alleges,
W
has acted to
frustrate
its implementation. The key (undisputed) actions on the part of
W
which
have led
directly
to the
current
situation are as
follows:
a. the refusal to authorise the marketing of the properties in September 2021, and the
failure
to respond to
correspondence
for
several months thereafter;
b. the
failure
to respond to H's and his solicitors' attempts to secure her agreement to a sale in early 2022;
c.
the grant of new 12-month tenancies on Property A in July 2021, Property B in July 2022 and Property
C
in August 2022, the latter being in
direct
breach of orders requiring her to serve notice to quit and not to grant a new tenancy;
d.
the additional borrowing against Property B in July 2022, in breach of the undertaking given at the time of the 2021 order;
e. the voluntary surrender of Property A to the mortgage lender in the autumn of 2022.
- All of
W's
dealings
with
the properties
were
concealed
from
H and his solicitors, and
discovered
only after they had
communicated
independently
with
third parties.
- I have taken into account the extenuating
circumstances
put
forward
by
W
to explain her
conduct,
namely her anxiety over the ill-health of her
daughter,
and her own poor mental health. However, once agreement had been reached, as long ago as August 2021, that the properties
would
be sold and there
was
also agreement in respect of the
conduct
of the sales, very little
was
required of
W.
All she needed to
do
was
allow the agents access to the properties, and
following
on
from
that the majority of the "heavy lifting", in terms of negotiating and agreeing the sales,
would
be
done
by H, until the point
where
W's
signature
was
required on the
conveyancing
documents.
In
fact,
W's
attempts to resist implementation have required
far
more effort on her part. In my judgement, the
difficulties
W
has
faced
might act as a shield
for
a party
who
has buried her head in the sand and
done
nothing. A party
who
has been actively engaged in a number of endeavours, all intended to resist an inevitable outcome, is in a very
different
position.
- In
contrast,
I
consider
that
following
the 2021 order H
did
all that he reasonably
could
to implement its underlying intention and purposes.
The law
Applications to set aside
W's
application to set aside the 2022 order, made at the hearing on 16 August 2022
which
she
did
not attend, is brought under
FPR
2010, r.27.5. This rule provides:
27.5
(1)
Where
a party
does
not attend a hearing or
directions
appointment and the
court
gives judgment or makes an order against him, the party
who
failed
to attend may apply
for
the judgment or order to be set aside.
(2) An application under paragraph (1) must be supported by evidence.
(3)
Where
an application is made under paragraph (1), the
court
may grant the application only if the applicant –
(a) acted promptly on
finding
out that the
court
had exercised its power to enter judgment or make an order against the applicant;
(b) had a good reason
for
not attending the hearing or
directions
appointment; and
(
c)
has a reasonable prospect of success at the hearing or
directions
appointment.
- The rule is subject to the overriding objective, in
FPR
2010 r.11, of enabling the
court
to
deal
with
cases
justly, having regard to any
welfare
issues involved.
- There are no reported
cases
on r.27.5. The authorities under the equivalent provision in the
CPR
suggest that the
first
two limbs in particular are
fact-sensitive.
Each limb must be satisfied in order
for
an application to succeed, and
where
they are, it
will
almost inevitably
follow
that the application is granted. However, the overriding objective means that the
court
has a
degree
of
flexibility
in applying the rule. It
would,
for
example, be a
draconian
outcome if "any inappropriate
delay
whatever"
on the part of an applicant
with
a "
compelling"
reason
for
not having attended the hearing, and a "reasonable – perhaps, indeed excellent" prospect of success,
caused
the application to
fail:
Regency Rolls Ltd and another v
Carnall
[2000] EWCA
Civ
379.
The Thwaite jurisdiction
- The very existence of
what
is known as the Thwaite jurisdiction is
controversial.
The
differences
of judicial opinion on this issue have been
fully
canvassed
during
the
course
of this hearing.
- The jurisdiction
was
described
by Ormrod LJ in Thwaite v Thwaite [1981] 2
FLR
280 as
follows:
"
Where
the order is still executory, as in the present
case,
and one of the parties applies to the
court
to enforce the order, the
court
may refuse if, in the
circumstances
prevailing at the time of the applications, it
would
be inequitable to
do
so."
- In Thwaite the
Court
of Appeal upheld the
decision
of the lower
court
not only to
decline
to enforce an unexecuted transfer of property order, in
circumstances
where
the
wife
in
whose
favour
the order had been made had moved
with
the
children
to Australia, but to exercise its
discretion
to make a
fresh
order providing
for
sale of the property and
division
of the proceeds.
- Thwaite has been
followed
in a series of
first
instance
decisions.
The point has not returned to the
Court
of Appeal, save in Bezeliansky v Belianskaya [2016] EWCA
Civ
76,
which
was
a permission to appeal
decision
for
which
permission to
cite
was
not granted. Notwithstanding this, Lieven J in Kicinski v Pardi [2021] EWHC 499 (
Fam)
observed that as a
decision
of three members of the
Court
of Appeal, including the
current
President, Bezeliansky
was
a
decision
that "
carries
the very greatest
weight".
- The rationale of the
decision
in Bezeliansky
was
articulated by McFarlane LJ (as he then
was)
as
follows:
"
With
respect to
cases
where
there is an undertaking or an order that is still executory the approach to
determining
whether
or not to set aside or vary the order is, as the appellant submits, based upon it being inequitable to hold to the terms of the original order in the light of a significant
change
of
circumstances.
Given that this is a
case
about an executory order, it is not necessary to engage any
further
with
the Appellant's
wider
submission regarding the test
where
the jurisdiction may arise in other
circumstances."
- The
challenge
to the existence of the jurisdiction has been led by Mostyn J and is articulated most
forcefully
in BT v
CU
[2022] 1
WLR
1349. This
was
a "pandemic"
case
where
the husband sought to revisit a
final
but executory order made in October 2019, on the basis that his business had suffered as a result of the (unforeseen and unforeseeable)
Covid-19
lockdowns. Mostyn J refused the application, applying the principles in Barder [1988] AC 20 (also an executory order).
Considering
whether
the husband had an alternative remedy available to him under Thwaite, he held that this
decision
had not survived Barder:
"It must be strongly emphasised that in Barder itself, Lord Brandon observed at page 10 that the order under appeal
was
executory. Yet,
fully
aware of the
decision
in Thwaite, the
Committee
did
not
decide
the
case
by reference to that
doctrine.
I agree
with
Ms Kisser that the
Committee
must be taken as having impliedly rejected this route as a legitimate source of relief."
- Mostyn J's
conclusion,
in essence,
was
that
where
the
court
is
dealing
with
an unexpected
change
in
circumstances
since the order
was
made, the stringent test in Barder should not be replaced by a
different,
potentially less stringent test, simply because the order is still executory:
"There is nothing
within
the terms of s. 31 of the Matrimonial
Causes
Act 1973 to suggest that its strict
curtailment
of the power of variation and
discharge
is
confined
only to orders
which
have been performed. An application to set aside an executory order under the Barder
doctrine
is explicable as an exercise of appellate powers, now replaced by a specific rule permitting the power to be exercised at
first
instance. An application to set aside an executory order based on
fraud,
or mistake,
can
be explained as a separate
cause
of action. These are surely the only legitimate exceptions to the statutory prohibition on variation of the amount of
capital
settlements.
In the nature of things, the variation powers in s. 31
will
apply predominantly to unexecuted orders. Some are variable; most are not. It is a
carefully
devised
scheme
which
was
proposed by the Law
Commission
(see below) and
democratically
enacted by Parliament. The Thwaite exception, as
developed
in L v L and the later
cases,
in my opinion
drives
a
coach
and horses through the statutory scheme.
If this route
were
available, then it means that many Barder
cases,
including Barder itself,
will
have been tried, and in most
cases
dismissed,
applying a set of principles
far
more rigorous than those required under the executory order
doctrine.
This is because most Barder
cases,
including Barder itself,
concern
orders
which
are executory. It
would
therefore seem, if the proponents of the executory order
doctrine
are
correct,
that the entire litigation in Barder itself, all the
way
to the House of Lords,
was
conducted
on a
completely
wrong
footing.
The uncertainty surrounding the availability of this relief leads me to
conclude
that it is not realistically available to the husband
for
the purposes of the
fifth
Barder
condition"
[the requirement, added in a series of
cases
subsequent to Barder, that the
claimant
should show there is no alternative mainstream relief available to them].
- Mr Stirling,
for
H, points out that one significant
difference
between BT and the
cases
in
which
the Thwaite jurisdiction has been exercised is that
for
the most part, the latter
cases
involve
circumstances
where
(as is alleged here), there has been an element of
deliberate
frustration
of the implementation of an unexecuted order by the actions of a party (Bezeliansky) or third parties (Kicinski). It seems to me that one answer to Mostyn J's argument in BT is that many "
deliberate
frustration"
cases
might
well
fail
the
first
limb of Barder on the basis that the events in question
were
foreseeable,
especially if the responsible party has a history of obstructive behaviour. As Lieven J observed in Kicinski, "it might
well
on the
facts
have been not
wholly
unexpected that Mrs Thwaite or Mr Bezeliansky
would
have reneged on part of their respective agreements".
- It
would
be strange if the
Family
Court
offered no remedy
for
the
disadvantaged
spouse in
cases
in that
category.
During
the
course
of submissions I asked Mr Tait,
for
W,
what
other remedy
would
be available
where,
prior to implementation, one spouse has
culpably
and
foreseeably
reduced the value of an asset that is
within
their
control
but is
due
to pass to the other spouse on implementation. Mr Tait suggested that if an undertaking has been given, the other spouse
could
apply
for
committal
for
breach; or that, if the asset in question is real property, there might be a remedy in a
different
court
under TLATA 1996. But those remedies are
cumbersome
and uncertain (
committal
does
not of
course
provide a
financial
remedy at all), and their availability is
contingent
on the nature of the asset and the terms of the order.
- BT
was
a paradigm Barder
case
(notwithstanding that the application
failed).
The
fact
that the order remained executory
was
incidental. The impact of the
Covid-19
school
closures
on the husband's school meals business had nothing to
do
with
the
wife.
I
would
agree
with
Mostyn J that in such a
case
an applicant should not be able to
fall
back on the "less stringent" Thwaite jurisdiction as an alternative remedy to Barder, simply because the order happens to remain executory.
- In
contrast,
in the Thwaite
cases
(particularly Bezeliansky, the
facts
of
which
are similar to the
facts
of the present
case,
albeit played out on a bigger stage) there is usually a
close
link between the executory nature of the order and the
disaffected
spouse's ability to
frustrate
it. This is particularly obvious in property sale or transfer
cases,
where,
however tightly-
drafted
the order, the owner of the property is likely to have a number of opportunities to obstruct and
delay
the sale or transfer, or otherwise to
diminish
the value of the asset, in the pre-implementation period. The Thwaite jurisdiction
would
appear to be the only remedy available in such
cases,
where
the
change
in
circumstances
has been brought about by a
foreseeably
disaffected
spouse, rather than an unforeseeable event.
For
these reasons it is my view that the Thwaite jurisdiction
does
exist as a separate remedy to Barder. I
would
suggest that its use may be particularly apt
where:
a. The respondent has
culpably
acted in such a
way
as to
diminish
the value of an asset, or otherwise to
frustrate
the intention behind the order;
b. There is a link between the executory nature of the order and the
change
in
circumstances:
ie, it is the
fact
that the order remains executory that has provided the respondent
with
the opportunity to
frustrate
it; and
c.
The applicant might
well
fail
the
first
limb of the Barder test because the respondent's
conduct
was
foreseeable.
- The essence of the Thwaite jurisdiction is
fairness.
However in exercising the jurisdiction the
court
is not approaching the situation
with
fresh
eyes. Thwaite itself, Bezeliansky and L v L [2008] 1
FLR
13 all refer to making an adjustment
from
the terms of the
final
order not because it is
fair
to
do
so, but because in the light of events since the order it
would
be inequitable not to
do
so. There is a subtle but important
distinction.
In L v L Munby J (as he then
was)
said:
"Merely because an order is still executory the
court
does
not have, any more than it has in relation to an undertaking, any general and unfettered power to adjust a
final
order – let alone a
final
consent
order – merely because it thinks it just to
do
so. The essence of the jurisdiction is that it is just to
do
so – it
would
be inequitable not to
do
so – because of or in the light of some significant
change
in the
circumstances
since the order
was
made." [original emphasis]
- In Kicinski Lieven J rejected the suggestion[8] that the use of the Thwaite jurisdiction involved a requirement that the
court
should adopt a "
cautious"
or "
careful"
approach:
"The
first
question in
deciding
whether
to exercise the Thwaite jurisdiction is
whether
there has been a significant (and necessarily relevant)
change
of
circumstances
since the order
was
entered into; and the second question is
whether,
if there has been such a
change,
it
would
be inequitable not to vary the order.
For
myself, I
do
not
find
the
words
"
cautious"
and "
careful"
particularly helpful. There are two requirements to the use of the jurisdiction and their application
will
ensure that the Thwaite jurisdiction is used
with
care.
There is no additional test or hurdle set out by the
Court
of Appeal in Bezeliansky
which
is the
case
that binds me."
Enforcement
- The
court's
power to make a
charging
order over property to secure a judgment
debt
is
contained
in s1 of the
Charging
Orders Act 1979. The ordinary route is that an interim order is made, often on a
without-notice
basis,
followed
by a
final
order at a hearing at
which
the respondent may make representations as to the
continuation
of the order. It is agreed that Green v Adams [2017] 2
FLR
1413 is authority
for
the proposition that the
court
may proceed
directly
to an absolute (
final)
charging
order at a
first
hearing; and that, if the
court
considers
a
charging
order to be necessary in the
circumstances
of this
case,
there is no reason
why
it should not be made on a
final
basis at this hearing.
- There is a
dispute
between the parties as to
whether
or not the
court
can
or should make an immediate order
for
sale, in
circumstances
where
a judgment
debt
has
fallen
due,
before
first
making a
charging
order. Mr Stirling suggests that because this
course
of action is not prohibited by the
Family
Procedure Rules, the power exists and may be exercised in an appropriate
case.
Mr Tait argues that the provisions of
CPR
1998 r.73.10C (and the notes on that provision in the Red Book) make it very
clear
that a
charging
order is a necessary
first
step before a separate application
for
an order
for
sale
can
be made, and that a
creditor
with
the benefit of a
charging
order is not entitled to an order
for
sale as of right. I agree
with
Mr Tait on this point.
- It is, however, accepted that if I
were
to make a
further
lump sum order under H's Thwaite application, that order
could,
in principle, be secured by making an order
for
sale of
W's
home in
default
of payment, under MCA 1973, s24A.
Discussion
and outcome
W's
application to set aside the 2022 order
- I have
considered
W's
reasons
for
not attending the hearing on 16 August 2022 in some
detail
during
the
course
of my review of the history earlier in this judgment, and have reached the
conclusion
that these are unsatisfactory. In my view it is rare that it
will
be open to a litigant to avoid attending
court
on the basis that she is too unwell to participate in a
court
hearing,
while
at the same time taking active steps to
frustrate
the purposes
for
which
that hearing has been sought.
- In those
circumstances
W's
application
faces
profound
difficulties.
For
completeness,
however, I
will
deal
with
the other limbs of the test.
- In the period after the hearing
W
did
seek to engage
with
the
court
to express her
dissatisfaction
with
the order. The
fact
that a litigant has attempted to make an application to set the order aside, but used the
wrong
form,
would
ordinarily
carry
some
weight
in the
determination
of
whether
she has acted promptly.
W's
correspondence
with
the
court
in August to October 2022 suggests that she
was
perhaps not given the assistance that in ideal
circumstances
one might hope a litigant in person
would
receive.
- However it is also relevant that over this period:
a.
W
continued
her efforts to
frustrate
not only those aspects of the order that she now seeks to set aside (the provisions requiring her to account to H
for
net rental income) but also the various orders to
do
with
the sale of the properties,
which
should have been (and, on
W's
current
case,
are)
wholly
uncontroversial.
b.
W
did
not
communicate
with
H's solicitors to set out her objections to the 2022 order, keep them informed of her attempts to set it aside or
copy
them in to her
correspondence
with
the
court.
Nor
did
she engage
with
H's solicitors in any
way
to progress implementation of the 2021 order.
- Those
features
of
W's
conduct,
in my judgement,
weigh
quite heavily in the balance
when
considering
whether
W
acted promptly. There must surely be an expectation that a party seeking to set aside an order of the
court
will
not only take the necessary steps to make a
formal
application, but also engage
with
the other party to set out her position and to inform him of any relevant steps that are being taken on the ground. In
fact,
not only
did
W
fail
to inform H's solicitors
directly
of her intention to apply to set the order aside, but she
did
not tell them about the steps she
was
taking to
frustrate
it.
Finally
in respect of
delay,
even taking into account the
confusion
about how the application should be made, the
fact
that
W
was
unrepresented until
February
2023, and then that her new solicitors needed some time to read in to the
case,
I am of the view that a
delay
of eight months between the order and the application to set it aside is at the very outer range of
what
might be
considered
promptness.
- As to the merits of
W's
case
and
whether
she has a reasonable prospect of obtaining a
different
order,
W
now seeks to set aside only the income accounting provisions of the 2022 order, and the
costs
order made against her. It is accepted by Mr Stirling on behalf of H (although he
does
not accept that this issue
could
amount to a ground to set aside the order) that there may be some merit in the argument that in ordering
W
to account to H
for
rental income back to September 2021, Recorder Anderson may not have
focused
on the
fact
that the order became enforceable, and the beneficial interest in the properties passed to H, only in
February
2022
when
decree
absolute
was
pronounced. Otherwise
W's
complaints
in respect of the accounting provisions are that:
a. she had no
formal
notice that these provisions
would
be sought;
b. the 2021 order anticipated that H
would
receive the rental income
from
the properties only
from
transfer of the legal title;
c.
the 2021 order mandated a sharing of the net rental income as between H and
W
for
a period of 12 months post transfer;
why
then in 2022 should H receive the entirety of the net income?
- I have
considered
W's
arguments but they are, in my view, heavily outweighed by the obvious
fact
that the purpose of the hearing in August 2022
was
to achieve the implementation of the 2021 order, the significant
delays
to
which
were
placing H under
considerable
and ongoing
financial
disadvantage.
If this order is seen (as I
consider
it should be) as a variation to the original periodical payments order, justified by the unexpected and significant
delays
in implementation and intended to go some
way
to
compensate
H
for
the loss of income he had suffered as a result, then in my judgement
W's
objections, including the objection to the September 2021 backdating,
fall
away.
W's
final
argument on the merits of the 2022 order
concerns
the recorder's approach to the assessment of
costs.
These
were
assessed on a summary basis, as one
would
expect, and taxed
down
to approximately 80% of the
claimed
figure.
W
says that a more
conventional
assessment
would
have awarded 70%. Given the
wide
discretion
afforded to a judge
carrying
out a summary assessment of
costs,
I
cannot
see there is any realistic prospect of
W
securing a
different
order.
For
these reasons
W's
application to set aside the 2022 order is refused.
H's Thwaite application
- It is relevant, in my judgement, that by implication
W
has already accepted that there must be an adjustment to the terms of the 2021 order, in that once the properties are sold she should indemnify H in respect of her additional borrowing against Property B. Basic
fairness
requires it. I
cannot
see how this outcome
could
be achieved, other than via the Thwaite jurisdiction. Mr Tait suggested that it
does
not matter
what
the legal basis is
for
that indemnity, because
W
has offered it and so the
court
does
not need to order it. That leaves open an obvious and in my view unanswerable question:
where
would
the
court
be if she had not?
- In my view, the
door
to the exercise of the Thwaite jurisdiction is
wide
open in this
case.
The
dispute
centres
around
whether
it is appropriate to extend the exercise of the jurisdiction to
compensate
H
for
what
he says is a
diminution
in the value, attributable to
W's
conduct,
of the properties he is
due
to receive.
- I have
found,
and it is not seriously
disputed,
that
W
is responsible
for
the
fact
that the 2021 order remains executory. It
was
not her
fault
that the mortgage lenders
would
not agree to the property transfers; that, I accept,
was
a shared mistake. However there has always been a very obvious and straightforward remedy
for
that mistake. H has never suggested otherwise, and has
done
everything he
could
to implement the purposes behind the order, but
W's
actions at least
from
September 2021 onwards if not before have
frustrated
his attempts. As a result H has still not had access to the assets he
was
due
to receive.
- The
further
borrowing by
W
against Property B in July 2022 resulted in in a
clear
and quantifiable
detriment
to H.
W
accepts that he should be
compensated;
as I have explained, such
compensation
can
only be achieved by
way
of the Thwaite jurisdiction.
- The quantification of the
further
losses
claimed
by H
within
his Thwaite application is evidentially more problematic.
- H says that overall the equity in the three properties has been reduced by about £170,000 as a result of
W's
actions since the 2021 order
was
made. He
calculates
that
figure
with
reference to UK House Prices Index
for
the relevant area over the period between the 2021 order and this hearing. The evidence in respect of this
was
set out only in his
counsel's
position statement; as
far
as I am aware, no prior notice of this argument
was
given to
W.
- H says,
further,
that there is
concrete
evidence to support his
case
that Property A sold
for
far
less than its true value because he
was
forced
by
W's
actions (in
ceasing
to pay the mortgage, and surrendering the property to the lender) into a
fire
sale. His evidence is that he
was
so anxious to ensure the property sold
within
the stipulated timeframe that he reduced the asking price several times, sometimes against the agents' advice. The original asking price, in line
with
advice,
was
£795,000; this
was
reduced
down
in stages to £675,000, and an offer of £662,000
was
accepted; this
was
then negotiated
down
to £652,500 by the buyer as a result of
damp
issues.
- H puts
forward
some arguments in relation to the
current
condition
of the properties and the removal by
W
of some pieces of
furniture.
W
makes the point that the properties had been tenanted
for
some time and a
degree
of
wear
and tear
was
to be expected.
With
respect to H, I
consider
these to be makeweight arguments that
can
safely be put to one side.
- H's suggested outcome, as per his most recent
witness
statement,
was
that all
four
properties (the rental properties, plus the
family
home) should be sold and he should receive the higher of £650,000[9], or 53% of the total equity. At the hearing his
case
was
that the
court
should
compensate
him
directly,
by
way
of a lump sum order against
W,
for
the £170,000 loss that he says he has suffered as a result of the reduction in equity of the properties, and enforce that by
way
of a
charging
order and/ or an order
for
the sale of the
family
home.
W
argues that in
fact
H has suffered no
detriment
at all. Her
case
is simple: overall, the equity in the three rental properties (once one adjusts
for
the additional unauthorised borrowing) has not reduced at all but increased by £21,000 since the 2021 order
was
made. Given the variability of house prices, this
figure
she says is
within
the expected range and there is in
fact
no evidence that the assets
due
to pass to H
when
the 2021 order is implemented have reduced in value at all.
- I am not satisfied that the evidence adduced (via H's
counsel's
position statement
for
this hearing) in respect of the UK House Prices Index is sufficiently robust
for
me to make a
finding
that the value of H's interest in the properties as a
whole
has reduced. As
was
pointed out on behalf of
W,
the HPI is a rough and ready tool, and there may be any number of explanations
for
the
fluctuation
in the value of an individual property over a particular period.
- However, I am also not attracted by
W's
argument that overall H is £21,000 up on the
figure
he expected to receive in 2021.
For
similar reasons, that tells me very little about any
consequences,
in terms of the value of the assets, of
W's
actions over the relevant period.
- The evidence in respect of Property A is
different.
H's unchallenged evidence, as set out in his
witness
statement, is that the agents' advice
was
to market the property, in November 2022, at a selling price of £795,000. The actual selling price, just a month later,
was
£652,500: a
difference
of £142,500. That is a significant reduction and in my view the only reasonable explanation is the one given by H: that is that he
was
forced,
by the need to sell very quickly, into accepting an offer below the true market value of the property.
- Ignoring the
final
negotiations relating to
damp,
and taking account of the likelihood that the original asking price
was
right at the top of the bracket of
what
the agents thought the property
was
likely to achieve, it seems to me that the evidence supports a
finding
that in having to sell Property A
within
the very short timeframe stipulated by the lender, H suffered a loss of at least £100,000.
- In the
case
of Property A, unlike the other properties, there is a
direct
correlation
between
W's
actions and H's loss. As a starting point therefore it must be right that he should be
compensated.
It is necessary also, however, to ensure that the outcome remains
fair,
and is as
faithful
as possible to the purposes of the original order.
W
remains liable
for
CGT
on the transfer of the rental properties to H[10]. At the time of the 2021 order she had (non-
CGT)
tax and other liabilities of £126,000; I
do
not know
whether
these have now been paid but
for
present purposes I
will
work
on the basis that they have not been. In order to pay H a
further
£120,200[11] (£100,000 plus the indemnity in respect of the increased borrowing against Property B)
W
may have to sell her home. This is an outcome
which
was
viewed as very likely, if not inevitable, by Recorder Anderson in 2021 and may be the outcome regardless of the
decision
I make at this hearing.
- The sum of £120,200 represents, on a
fairly
rough
calculation,
about 9% of the total equity in all
four
properties[12]. A payment of that amount
from
W
to H
will
therefore shift the
division
of
capital
between the parties
from
a 51/49 split[13] to something
closer
to 60/40 in H's
favour.
- In
considering
the impact and
fairness
of a
further
lump sum order I ignore
W's
liability under the 2022 order,
which
is made up of (a) arrears on periodical payments, owed to H out of rental income received by
W,
and (b) a relatively modest
costs
award. These are not sums
which
should be taken into account
when
considering
the
capital
division.
- In my judgment, the
compelling
feature
of this
case
is the
fact
that the
current
situation is the
direct
result of the several actions taken by
W
over the period between September 2021 and October 2022 that prevented implementation of the 2021 order. The
departure
from
equality therefore
flows
directly
from
the increased borrowing against Property B and the reduction in value of Property A, and is the minimum necessary to
compensate
H
for
what
W's
actions have
cost
him.
- A lump sum of payable by
W
to H of £100,000, plus the amount outstanding under the additional Property B borrowing, achieves a
fair
outcome that preserves, so
far
as is reasonably possible, the intention behind the original order.
Enforcement
- H asks me to:
a. Enforce the sums outstanding under the 2022 order, including the
costs
order and any sums outstanding under my own periodical payments order of 31 January 2022, by
way
of a
final
charging
order on
W's
home and, simultaneously and on the grounds of limiting the prospects of
future
litigation, an order
for
sale;
b. Prospectively enforce any lump sum order I make today, either using the same mechanism or alternatively by exercising the power under MCA 1973, s24A to make an order
for
sale in
default
of payment.
- I have
considered
W's
argument that I know relatively little about her
current
financial
position, and therefore am unable to
carry
out a
full
assessment of the impact of the orders sought by H. I
do
not accept that argument.
W
has known
for
several months that she is
facing
an enforcement application, and has had the opportunity to
file
any evidence she
considers
to be relevant. She has in
fact
dealt
with
her
financial
position, in outline, in her
witness
statement.
- In any event, the parties'
capital
is still, as it
was
at the time of the 2021 order, tied up in the
four
properties they own. I have up to
date
information about the equity in the three rental properties. H has estimated that the
current
value of the
FMH
is around £2m;
W
is silent on that in her evidence (although she
complains
about the steps H took to obtain the valuation), but the value in 2021
was
taken as a minimum of £1.5m and Recorder Anderson noted that both parties hoped the property
was
worth
significantly more, perhaps in excess of £2m.
W's
evidence is that the mortgage on that property is
currently
in the region of £600,000.
- I am satisfied that I know enough about
W's
financial
position to make
decisions
about enforcement. I remind myself that it
was
explicitly envisaged by Recorder Anderson that
W
might have to sell her home, and that it exceeded her needs.
- As I have explained, I
do
not think I have power to make an immediate order
for
sale of
W's
home to enforce payment of the sums
due
under the 2022 order, and even if I am
wrong
about that I
do
not think such an outcome
would
be
fair.
It is only at this hearing that
W's
application to set aside that order has been refused, and such an order
would
deprive
W
of the opportunity to show that she
can
raise the sums otherwise than by
way
of a sale.
W
does
not seek to argue that a
final
charging
order is inappropriate in the
circumstances
of this
case.
I
will
make that order to secure the sums
due
under the 2022 order.
- As to the Thwaite lump sum order, it seems to me that in the
circumstances
of this
case
W
cannot
realistically argue against a
default
order
for
sale under s24A.
What
that means, of
course,
is that if the property is sold under the
default
sale provision H
will
also receive the additional sums
due
under the
charging
order (if they remain unpaid)
without
the need
for
a separate application.
W
needs to be given time to raise the sum
due
before the order
for
sale is triggered. In my view, a reasonable period is three months
from
the
date
of this order.
- H's
committal
application
was
stayed pending the outcome of this hearing. In an email after this judgment
was
sent to
counsel
in
draft
Mr Stirling suggested that the
committal
application should be adjourned generally
with
liberty to restore, to be
deemed
withdrawn
upon payment of all sums
due
to H. As I understand it
W
does
not object, and this
would
seem a sensible
way
of
dealing
with
that application.
Costs
- This judgment
was
provided to
counsel
in
draft
form
on 26 June 2023. Thereafter it
was
agreed that I
would
deal
with
issues of
costs
on the basis of
written
submissions. Submissions
were
exchanged on 7 July 2023.
- None of the applications before the
court
fall
within
the scope of the general rule in
FPR
28.3(5) that there should be no order as to
costs.
Therefore this is a "
clean
sheet"
case:
Baker v Rowe [2010] 1
FLR
781, and the starting point or (
displaceable)
presumption is that
costs
should
follow
the event: Solomon v Solomon [2015] EWHC 1652. The
court
will
have regard to the
factors
in
CPR
r.44.2(4)
which
include (as relevant
for
present purposes) the
conduct
of the parties, and
whether
a party has succeeded on part of its
case
even if not the
whole.
- H seeks an award of his
costs,
to be assessed on the indemnity basis. His
costs
total £42,937.30 including VAT.
W
accepts the likelihood that a
costs
order
will
be made against her. She argues that:
a. H should not recover his
costs
in
full,
because he has not achieved everything he sought. The lump sum he has been awarded is less than he
was
seeking, and his argument based on the House Prices Index
was
rejected. Although the
court
has made an order
for
the sale of
W's
property this order has been
deferred
(H
was
seeking an immediate sale);
b. There are no grounds
for
awarding
costs
on the indemnity basis;
c.
H's
costs
are
disproportionate
(
for
comparison,
W's
are £20,414);
d.
The
court
must
consider
the impact on
W
of a
costs
order: the higher the order, the greater the likelihood that
W
will
have to sell her home.
- In my view, there is little scope in this
case
for
making anything other than an order that
W
should pay H's
costs
in
full
(subject to assessment). Pursuant to
CPR
44.2(5) the
court
is entitled to, and should, have regard to the parties'
conduct
not just
during
the proceedings but in the period leading up to them. H issued these proceedings as a last resort in April 2022, after a 9-month period
during
which
W
had every opportunity to
cooperate
with
his attempts to implement the 2021 order. Since the proceedings
were
issued
W
has
continued
her efforts to
frustrate
implementation both in and out of
court,
by obstructing the sale of the properties and by issuing an unsuccessful application to set aside the 2022 order.
- H may have achieved less than the amount he
was
seeking in
compensation,
but (aside
from
the inevitable
concession
that she should indemnify H
for
the additional Property B borrowing)
W
has not at any stage accepted that her actions have
caused
H
financial
loss, or made any proposal that might go some
way
towards
compensating
him
for
that loss.
- On the basis of my broad-brush analysis of the parties' respective
financial
positions (paragraphs 88-92 above) it
does
not seem likely that a
costs
order
will
make a significant
difference
to
W's
overall
financial
position or have an impact on her ability to meet her needs.
- In my view, the appropriate basis
for
assessment is the standard basis. I
find
it quite
difficult
to know
where
the line should be
drawn
between indemnity and standard
costs,
in
cases
where
the
conduct
of the paying party is already a significant
factor
in the
decision
to make an award of
costs
in the
first
place. The
court
has to make a judgement
call.
In this
case,
I
do
not think that
W's
culpability
is so egregious (the authorities variously employ
descriptions
such as "abysmal" and "appalling") as to justify the additional sanction of an indemnity assessment.
- I have
considered
H's
costs
schedules
with
an eye to
W's
costs,
which
are lower but of
course
relate to a shorter period. There is always some scope
for
a reduction. On a very broad-brush assessment I assess H's
costs,
including VAT, in the sum of £30,000.