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Solomon v Solomon and Others [2013] EWCA Civ 1095

Application for permission to appeal a costs order in the context of a s.37 application

The Husband and Wife divorced and extensive financial remedy litigation took place. Two properties were, amongst others, subject to litigation. The properties had been owned by a company which the Husband asserted he was the 100 % owner whilst the Wife stated that she owned 1 % of it. One of these properties had been transferred into the parties' joint names. The second property had been transferred into the joint names of the parties' three children. A District judge in an interim judgment was satisfied that documents purporting to bear the Husband's signature transferring the properties had not been signed by the Husband. The District Judge invited the Husband to make an application for orders under s.37 MCA 1973 to set aside the transfers. 

The Wife submitted that s.37 did not permit the court to set aside a disposition which had not been made by either the Husband or the Wife. This issue was transferred to the High Court with the intention of returning the financial remedy application to the District Judge upon decision of this question. At an initial hearing Baron J advised that it was unlikely that a s.37 application would succeed. The matter was adjourned to a hearing before Sir Peter Singer sitting as a High Court Judge. His preliminary view was that a s.37 was not an appropriate vehicle for the Husband to use to set aside the disposition. The Husband ignored the Judge's initial comments and the hearing was adjourned to a hearing before Mostyn J when the Husband pursued his s.37 application whilst the Wife pursued her application to strike it out.

Before Mostyn J, the parties came to an understanding that the Husband's s.37 application would not be proceeded with, but that he would pursue an application for declaratory relief which he subsequently made. He was asked whether the s.37 application could be disposed of on the basis that a declaratory relief application was contemplated. He replied that if this was in his favour he would agree and accordingly it was. Mostyn J made a costs order against the Husband, on the basis that the s.37 costs had been largely wasted.

The Husband appealed against the setting aside of the s.37 application and against the costs order. At the appeal hearing he did not pursue the appeal in relation to the s.37 application but did pursue the appeal against the costs order. Lord Justice Ryder agreed with Mostyn J that the s.37 costs had largely been wasted given each High Court judge made observations about the application which the Husband ignored and the Husband's eventual acceptance of the point. Lord Justice Ryder agreed with Mostyn J that any congruence between the preparation of the Wife's case for the s.37 application and for the declaratory relief proceedings could be taken into account by the costs judge on detailed assessment.

Accordingly the Husband's application for permission to appeal the costs order was refused.

Summary by Laura McMullan  barrister, Coram Chambers




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B6/2012/2206
Neutral Citation Number: [2013] EWCA Civ 1095

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE PRINCIPAL REGISTRY
FAMILY DIVISION
(MR JUSTICE MOSTYN)

Royal Courts of Justice
Strand
London WC2A 2LL
Tuesday, 30 July 2013

B e f o r e:

LORD JUSTICE MAURICE KAY

LORD JUSTICE SULLIVAN

LORD JUSTICE RYDER

Between:

SOLOMON Applicant

v

SOLOMON AND OTHERS Respondent 

(DAR Transcript of WordWave International Limited
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The Applicant appeared in person  
Mr Simon Calhaem (instructed by Hodge Jones & Allen) appeared on behalf of the Respondent

J U D G M E N T
(As Approved)
Crown copyright©

LORD JUSTICE RYDER: 
1. This is an application for permission to appeal, and if permission is granted, for the appeal to follow on, for an extension of time and for a stay of execution,.  The order complained of was made by Mostyn J in the Family Division of the High Court on 10 May 2012, whereby the appellant's application for an order under section 37 of the Matrimonial Causes Act 1973 (the MCA 1973) was ordered to be struck out.  The appellant was ordered to pay the respondent's costs.

2. The appellant is Dr Anthony Solomon, who represents himself in this court as he did in the court below, and the respondent is Mrs Nivia Solomon, who is represented by counsel Mr Calhaem instructed by Hodge Jones and Allen LLP.  I shall, without any disrespect intended, refer to the appellant and the respondent as the husband and wife where appropriate.

3. One aspect of the dispute between these two parties concerns an application made by the husband under section 37 of the MCA 1973 for (1) an order setting aside the conveyance of a property in London at 49 Huntsmore House to the parties' children; (2) an order cancelling the mortgages which had been advanced on the security of that property, (3) an order setting aside the transfer of a second property in Esher; and (4) an order directed to the Land Registry to rectify the register.

4. Before us this afternoon, the husband has not pursued his appeal against the striking out of the section 37 application.  It is, however, necessary to explain how that application came to be dealt with in the court below in order to come to a conclusion on the appeal against the costs order that relates to the same.

5. I shall take the factual background between these parties as briefly as I can.  The husband and wife were married in 1979 and separated in 2007 orearly 2008.  The wife issued her petition for divorce on 5 September 2008 and decree nisi was pronounced on 9 July 2009. 

6. The parties have three adult children, who are all respondents or interveners in their parents' legal disputes.  The husband and wife are both of Lebanese origin, although the husband has lived all his life in Nigeria.  The children were educated in England and the wife spent most of her time in this jurisdiction.  The husband has homes in Esher in the joint names of the parties, but in respect of which the husband alleges his signature was forged; a flat in London in the joint names of the parties but subsequently transferred into the names of the children; and in Lagos, Nigeria.

7. There is an extensive history of litigation between the parties.  The substantive proceedings before the court relate to the wife's applications for various forms of financial remedy, and the husband's cross applications following the breakdown of their marriage.  On 17 January 2011 a District Judge in the Principal Registry of the Family Division, District Judge Malik, heard the financial remedy applications and delivered an interim judgment which was handed down on 31 March 2011.  The main assets with which the judge was concerned were the Esher property and the London property.  Both properties were said to be of significant value and had been owned by a company named Bamber Limited (the company).  The company was incorporated in Jersey and had 100 issued shares which were fully paid up.  The husband asserted that he was the 100 per cent owner of the company; however it was the wife's case that it was owned as to 1 per cent by her and 99 per cent by him.  The company has subsequently been wound up and dissolved.

8. In his interim judgment District Judge Malik stated that he was satisfied that the documents purportedly bearing the husband's signature which transferred the Esher property and the London property from the name of the company to the joint names of the husband and the wife and as regards the London property into names of the parties' three children had not in fact been signed by the husband.  The judge invited the husband to launch further proceedings and specifically to make an application for orders under section 37 MCA 1973 to set aside the transfers of the two properties.

9. At a hearing on 9 May 2011, counsel for the wife submitted that section 37 did not permit the court to set aside a disposition which had not been made by either the husband or the wife, since section 37(2)(b) provides:

"Where proceedings for financial relief are brought by one person against another, the court may, on the application of the first-mentioned person

(b) if it is satisfied that the other party has, with that intention, made a reviewable disposition and that if the disposition were set aside financial relief or different financial relief would be granted to the applicant, make an order setting aside the disposition"

10. The jurisdiction of the court under section 37 MCA 1973 having been raised, the matter was transferred to the High Court by District Judge Malik for the question to be answered:  whether the court could use section 37 to set aside the disposition.

11. Baron J considered the scenario that the company remained in dissolution and considered the general dispositive powers of the court should the court find that one or other party of the marriage had orchestrated a transfer, that is had been involved in the allegedly fraudulent transfers.  On that limited basis she postulated a continuing use of section 37, but immediately apprehended that if she was wrong, the High Court's powers in its inherent jurisdiction may be needed.  Accordingly, she answered the District Judge's request by holding that a District Judge, even of the Principal Registry of the Family Division, that is a District Judge of the High Court, should not deal with this sort of application.  Baron J identified the issue in the financial remedy proceedings which was to be determined by a judge of the High Court, and joined the children of the family as parties.  She envisaged that once the discrete issue of ownership had been decided, the financial remedy proceedings would return to the District Judge to complete his determination, which, it should be recollected, had stalled at an interim stage and were part heard, a fact that is unusual in itself.

12. On 22 August 2011 a hearing took place before Sir Peter Singer, sitting as a judge of the High Court.  He did not have the benefit of Baron J's judgment which had not been transcribed for him.  For preliminary reasons which he expressed and which amount to the very problem Baron J highlighted, he took the view that section 37 MCA 1973 was not an appropriate vehicle for the husband to use to set aside the disposition relating to the London property.  In any event, by the time that hearing came on, the wife had issued an application to strike out the husband's section 37 application.  It is clear from the transcript of this hearing that Sir Peter Singer repeatedly explained to the husband that it was highly likely, in his view, that the section 37 application would fail for want of jurisdiction.  In just one passage from the transcript he said this:

"I have just explained to you the court deals with the applications that are before it.  I have no general power to wave a wand in relation to fraud.  I have a specific statutory power under section 37 of the Matrimonial Causes Act which you have invoked.  I can only exercise that power if the circumstances fall within it.  As I have said and tried to indicate why in very brief terms, and I know it may be quite confusing, my own view is that there is very serious doubt as to whether the court could properly exercise a jurisdiction under section 37 in view of a number of factors which I have briefly outlined.  If the court cannot do it under section 37, in due course the application will be dismissed and you will either have to commence proceedings about it somewhere else, or, as Mr Calhaem suggests may be appropriate, and I express no view, leave it to the District Judge to take it into account if he makes the appropriate findings of fraud as one of the factors which helps him in deciding the ultimate result of the ancillary relief application between husband and wife, not between Barclays bank and your children and not between some debtor."

13. The husband was apparently unmoved and the cross applications before Sir Peter Singer were adjourned.  There was a further adjournment of those applications in October 2011 before one gets to the hearing which is the subject of this appeal on 10 May 2012 before Mostyn J.

14. It is plain that the husband pursued his section 37 application before the judge, and equally plain that the wife pursued her application to strike it out.  Mostyn J accurately records the fact that, despite Baron J's advice and Sir Peter Singer's preliminary views, the husband had not at any stage invoked the High Court's additional powers.  He identified that by May 2012 what the husband was seeking to achieve was a declaration from the court pursuant to its powers to grant declaratory relief that the conveyances were nullities because they were fraudulently obtained.  By the time of the hearing before Mostyn J, the husband had rejected overtures from the wife's lawyers to dispose of the section 37 proceedings.  Indeed, he rejected them in less than temperate terms.

15. Despite this, Mostyn J sets out in his judgment what he describes as an "uneasy understanding" that had arisen between the parties during the hearing as regards the London property; that is that the husband's section 37 application would not be proceeded with, but rather that the husband would pursue an application for declaratory relief.  The understanding had reached the point where the directions asked by the parties from the judge were largely agreed.  A perusal of the transcript of the hearing demonstrates that the judge had asked the husband whether he accepted that section 37 was an inappropriate vehicle for the orders sought and that the husband had agreed.  He also asked the husband whether the section 37 application could be disposed of on the footing that a declaratory relief application was contemplated.  The husband remarked that if that was in his favour, he would agree.  Such a step was in the husband's favour for all the reasons given by each High Court Judge over the preceding year.  The step was what the financial proceedings cried out for, namely a declaration as to ownership, on which basis the dispositive powers of the court could be based.

16. Time was provided for an application to be made by the husband so that a decision could be made before the financial remedy hearing resumed in June 2012.  It should be noted that the husband made the application for a declaration in respect of the London property, as envisaged by Mostyn J, and the parties' children issued cross applications, inter alia, relating to that property.  Mostyn J's broad intention to obtain a resolution of the disputed issues and the financial remedy proceedings has sadly been frustrated because, prior to the hearing of the declaratory relief question, the District Judge concluded his part heard process without waiting for the declaratory relief to be determined.  That has generated an application by the wife for permission to appeal against the decision of the District Judge, which has been granted, and there are now outstanding other disputes between the parties that are not the subject of this appeal.

17. I am in no doubt that an application for a declaration that the conveyance of the London property was a nullity, or that the husband is a beneficial owner of the property, is and was the most appropriate application to be made in all the circumstances.  The application has been made by the husband and he very properly has not pursued an appeal against the setting aside of the section 37 application before us today.  That remains the case regardless of the fresh problems that have arisen in the litigation which is yet to be concluded.  In my judgment, Mostyn J was right to facilitate an understanding that led to the solution that occurred, and without doubt the husband agreed to it and acted upon it. 

18. For my part, therefore, I can see no merit in the husband's argument before this court that the section 37 application would have achieved either a similar, the same, or a better result, although in fairness to Dr Solomon those submissions were made only in writing and not pursued orally before us this afternoon.  The likelihood is that the pursuit of the section 37 application, without engagement of the High Court's additional powers, would have led to the application being dismissed without the resolution of the ownership question that the husband needed.  I have isolated out the issues relating to the section 37 application because the husband's grounds of appeal are discursive and in order to understand his position in relation to costs, it is necessary to describe how one gets to this hearing today.

19. Turning then to the judge's costs decision.  The judge considered whether the application upon which he had ruled was "financial remedy proceedings" within the meaning of the Family Procedure Rules 2010.  FPR 28.3(5) states the general rule in financial remedy proceedings as follows:

"(5) Subject to paragraph (6), the general rule in financial remedy proceedings is that the court will not make an order requiring one party to pay the costs of another party."

20. The definition of financial remedy proceedings is set out at FPR 28.3(4)(b):

"Financial remedy proceedings means proceedings for (1) a Financial orders, except an order for maintenance pending suit, order for maintenance pending the outcome of proceedings, an interim periodical payments order, or any other form of interim order for the purposes of rule 9.7(1)(a), (b), (c) and (e)."

21. The definition of an interim order is at FPR 9.7(1):

"A party may apply at any stage in the proceedings for (e) any other form of interim order."

22. The judge correctly stated the general rule did not relate to the interim applications he had decided.  Costs were then in the discretion of the court, and the principles set out in CPR Part 44 applied.  The starting point for what are described as "clean sheet" cases is that costs follow the event.  To find that principle one need look no further than Gojkovic v Gojkovic (No 2) [1991] 2 FLR 233 (CA) where Butler Sloss LJ (as she then was) said:

"there still remains the necessity for some starting-point. That starting-point, in my judgment, is that costs prima facie follow the event … but may be displaced much more easily than, and in circumstances which would not apply, in other Divisions of the High Court."

23. The judge considered the history, the misconceived nature of the section 37 application, the submissions of the wife about that from the very earliest stages of the litigation, the observations of each of the judges and eventually the husband's acceptance of the point before him.  The judge concluded that the section 37 costs had been largely wasted.  I agree.

24. The husband did not sensibly engage with the solution to the section 37 question until all the costs had been expended.  In so far as there is what is described as a congruence between the preparation of the wife's case for the section 37 application and for the declaratory relief proceedings, the judge identified that fact and, in my judgment, appropriately concluded that was a fact which could be taken into account by the costs judge on detailed assessment.  Again, I agree.  Dr Solomon can pursue that possibility with the costs judge to ensure that there is no double recovery of costs as between the section 37 proceedings and any other part of this extensive litigation. 

25. The costs order was accordingly within the discretion of the first instance judge and, in my judgment, he was right to make it.  There is no basis upon which an appeal can succeed before this court.  I would refuse permission to appeal the costs order and would dismiss the appeal against same.

LORD JUSTICE SULLIVAN: 
26. I agree.

LORD JUSTICE MAURICE KAY: 
27. I also agree.

Order: Application refused