Ancillary Relief
ANCILLARY RELIEF ORDER AS A TRANSACTION, AND AS CONSIDERATION
District judges—and not a few former spouses —will breath a sigh of relief at the Court of Appeal’s decision in Haines v Hill and another [2007] EWCA Civ 1284 , [2007] All ER (D) 56 (Dec) (see NLJ 4 January 2008, p 27). Mr and Mrs Hill had contested their ancillary relief proceedings and a district judge had transferred their former matrimonial home to Mrs Hill. The result was that ultimately she acquired a benefit on sale of around £120,000, in satisfaction or partial satisfaction of her claims in the proceedings. The husband (H) was adjudged bankrupt a month after the ancillary relief order became effective. H’s trustee applied in insolvency proceedings to have the order set aside as having been for no consideration, or at an undervalue, under the Insolvency Act 1986 (IA1986), s 339(3). H’s creditors should be entitled to the £120, 000. In the insolvency proceedings a district judge refused the trustee’s application, but Judge Peeling QC, sitting as a deputy High Court judge, allowed the trustee’s appeal and granted his application under s 339(3).
By the Matrimonial Causes Act 1973 (MCA 1973), s 39, an order which provides for a “settlement of transfer of property” is a “transaction” for the purposes of IA 1986, s 339. Section 339(2) enables the court to restore the parties to the position preceding the transaction, ie set aside the transaction, or in ancillary relief terms, the order, where, as the chancellor in the Court of Appeal explains in Haines (at [5]), the following conditions apply:
(i) the transferor becomes bankrupt; and where the transaction either;
(ii) gave him no consideration; or
(iii) was at an undervalue. Even if these conditions
are present the court still has a discretion as to whether to make an order (see Re Paramount Airways Ltd [1993] Ch 223, [1992] 3 All ER 1). The court restored the district judge’s decision. In approaching his findings the chancellor conducted a historical review of a variety of authorities, including the following case law.
In Re Pope [1908] 2 KB 169, the transaction was the wife’s agreement “to refrain from taking proceedings in the Divorce Division” in exchange for which she received “a permanent allowance for maintenance”.
In Re Abbott [1983] 1 Ch 45, [1982] 3 All ER 181 the Divisional Court (Chancery) declined to set aside an ancillary relief consent order: it took the view that the wife had provided valuable consideration. Subsequent legislative changes were not sufficient to alter this aspect of the law. In both these cases it was held that the wife had provided valuable consideration for her agreement “even though the consideration provided by [the wife] is not measurable in money” ([14]).
Consideration and the role of Xydhias
A side issue, more important in argument and in the judgment under appeal, than in the reasoning of the Court of Appeal, arose in connection with Xydhias v Xhydias [1999] 1 FLR 683, [1999] 2 All ER 386 where (at 691E) Lord Justice Thorpe had held that “the compromise of an ancillary relief application does not give rise to a contract enforceable in law”. The chancellor (with Thorpe LJ alongside him) concluded that though “the jurisdiction of [the court] cannot be ousted by the agreement of the spouses…equally such an agreement is not devoid of any legal effect” ([31]); but, he said, he did not think it helpful in the s 339 context “to dwell on what the effect of an out of court compromise of ancillary relief proceedings may be”.
Both he and Lord Justice Rix decided the case, not in terms of enforceability, but rather by reference to contractual consideration. Rix LJ decided the appeal in plainly contractual terms. Just as a claim in contract or tort may be difficult “to measure in financial terms, the compromise or release of such a claim is plainly consideration in money’s worth, and measurable as such”. It can “be assessed in monetary value, even if such compromise is itself subject to the supervision and ultimately the imprimatur or not of the court” ([77]).
The concept of consideration must be seen Rix LJ said, in the light of Pope and Abbott; and accordingly “the compromise or release of, or forbearance to press, a valid claim [eg under MCA 1973, s24] can provide good consideration” ([79]); “and it is that right which is compromised and ultimately released in return for the property adjustment order of the court” ([80]). The judge found nothing contrary to this analysis in Xydhias; but asserted the “importance of the parties’ agreement, subject to the court, as restated in Soulsbury” ([81]).
SOULSBURY—AN ANCILLARY RELIEF AGREEMENT?
What do giving up spousal periodical payments, a walk to , and a carbolic smoke ball company have in common? They may all provide material for a unilateral contract and may thus be of relevance, said Lord Justice Longmore in Soulsbury v Soulsbury [2007] EWCA Civ 969, [2007] All ER (D) 132 (Oct). The Court of Appeal was concerned in Soulsbury with a former wife (W) who had agreed to claim no more periodical payments for herself, on the terms that her former husband (H) agreed that he would leave her £100,000 when he died. He made a will with this provision in it; but then, more or less on his deathbed, he remarried. His will was therefore revoked and he did not make another. When the estate repudiated the agreement, on W’s claim the circuit judge dealt with the case as a simple contract: W would make no further periodical payments claims in exchange for H agreeing to pay her the lump sum on death. He gave judgment for W.
The estate relied on the agreement being unenforceable or void as being an agreement to oust the court’s jurisdiction (per Hyman v Hyman [1929] AC 601, [1929] All ER Rep 245). On the Hyman argument Lord Justice Ward held that there had been nothing to stop W enforcing the order while H was alive. Had she done so she would have lost the right to payment of £100,000. On H’s death, however, the agreement crystallised (see [22]). In this context Longmore LJ refers to a “classical unilateral contract” (per Carlill v Carbolic Smoke Ball [1893] 1 QB 256) of the “walk to ” kind. Once the promisee starts the walk, sniffs the balls or foregoes periodical payments then the promisor cannot withdraw. After that there is no obligation on the promisee to walk all the way to , maintain the smoke ball treatment or not claim periodical payments; but if this happens the promised reward cannot be claimed.
Xydhias v Xhydias
Again Xydhias v Xhydias [1999] 1 FLR 683, [1999] 2 All ER 386 had been extensively cited to the court. In dealing with the Xydhias argument ([23] and continuing) Ward LJ reviews a variety of recent case law on spousal agreements. He started just before the present matrimonial causes legislation reached the statute book (see Gould v Gould [1970] 1 QB 275, [1969] 3 All ER 728), and included, for example, Amey v Amey [1992] 2 FLR 89, where an agreement (without court order: W died before the order could be obtained) between H and W was ordered to be enforced. Ward LJ concluded (at [35]) from his review that there is little which “suggests that an agreement containing financial arrangements 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”. In particular he pointed out that in Smallman v Smallman [1972] Fam 25, [1971] 3 All ER 717 (one of the cases he reviewed) the Court of Appeal had held the opposite to Thorpe LJ’s “cardinal conclusion” (quoted above), namely, as summarised by Ward LJ (at [45]): “…even an agreement subject to the approval of the court is binding on the parties to the extent that neither can resile from it.” Ward LJ felt he could not ignore this finding. The court’s conclusion was that Mr and Mrs Soulsbury’s agreement for was not a “compromise of an application for ancillary relief ”. On that basis it was a contract—as the judge had correctly found; and it was therefore enforceable as such without regard to matrimonial law. Much of Ward LJ’s judgment in relation to agreements and ancillary relief proceedings may therefore be said to be obiter; but as a judicial overview of an important subject it contains much to enlighten the practitioner.
REVISITING AN EARLIER COURT ANCILLARY RELIEF ORDER
Wood v Rost [2007] EWHC 1511 (Fam), [2007] All ER (D) 198 (Jun) raises a different question in relation to parties’ agreement: how to resolve the position where the agreed order does not cover a particular eventuality. The judge, Peter Hughes QC, sitting as a High Court judge, (at [73]) explained the question thus: to what extent “can, or should, [the court] intervene to make good the defects in the drafting of the order and to provide for situations that the parties ought to, but have failed to, deal with expressly”.
The parties had been represented by eminent leading counsel when, in November 2001, terms had been agreed, the significant provision of which gave the wife a lump sum and potentially two more tranches, dependent upon H receiving payments from his then employers. He gave up employment before the second of the two further sums were paid, and therefore claimed that no further payment was due to W. A condition providing for rateable payment was included in the order. After four-and-a-half years and £150,000 of litigation the judge held that the wife was entitled to a rateable payment of £81,752, with interest, from November 2002.
Solicitors and counsel must “ensure that consent orders do truly embody beyond any equivocation what the parties are agreed upon” (per Lord Justice Oliver in Sandford v Sandford [1986] 1 FLR 412). But not every eventuality can be foreseen. The judge therefore concluded (at [101- 105]) with some brief words on simplification of procedure to avoid the Jarndyce-esque “twists and turns of this litigation” (his own characterisation of the case at [1]). First might be a reference back to the judge who made the consent order, with consequent mediation or financial dispute resolution as need be.
LEGAL PRINCIPLE: THE SAME IN THE FAMILY DIVISION
Whig v Whig [2007] EWHC 1856 (Fam) provides a sorry tale at great expense to the parties, but to little gain to all. H declared himself bankrupt, and ancillary relief proceedings were adjourned and ultimately dealt with alongside the insolvency proceedings. W applied to annul H’s bankruptcy order. Against a conclusion that a sale of the parties’ former home had always been inevitable—bankruptcy or no—Mr Justice Munby refused annulment, but gave W half the house and the whole of H’s pension—most, probably, to be absorbed by the costs of H’s trustee in bankruptcy (perhaps) or the Legal Services Commission’s statutory charge.
In the context of the cases reviewed above, it is Munby J’s comments on the single High Court of Justice which bear study. He quotes himself (at [59]) in A v A (St George Trustees Ltd) [2007] EWHC 99 (Fam): “The relevant legal principles which have to be applied are precisely the same in [the Family] Division as in the other two divisions.” Principles applicable in bankruptcy apply the same in a family case whether it is tried in the Chancery or the Family Divisions, just as contractual principles apply in whichever division a claim or application is proceeding. Procedural rules may vary between family, civil and insolvency: but the underlying principles of law are the same.
