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Home > Judgments > 2006 archive

P v P [2006] EWCA Civ 497

This was a second appeal in a case where the appellant husband had issued divorce proceedings in France and the respondent wife responded by issuing proceedings under the Trusts of Land and Appointment of Trustees Act 1996 concerning a portfolio of properties owned by the couple. The husband contended that the French court was first seised of proceedings and so the TOLATA proceedings should be stayed. The appeal was allowed.

In his judgment Thorpe LJ examines the construction of Articles 22, 27 and 28 of Brussels II and the relevant case law including Webb v Webb. He concluded with some general points: 1) it is clear from White v White that issues between a husband and wife are to be determined by reference to the MCA 1973; 2) parallel proceedings would run the risk of disproportionate costs and; 3) the 'whole force' development of European legislation in family law is to impose clear rule to establish the primary jurisdiction and that not to impose a stay on the TOLATA proceedings would be inconsistent with the underlying policy of Brussels II.

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B4/2006/0294

Neutral Citation Number: [2006] EWCA Civ 497

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

FAMILY DIVISION PRINCIPLE REGISTRY

(MRS JUSTICE PAUFFLEY)

Royal Courts of Justice

Strand

London, WC2

Thursday, 16th March 2006

B E F O R E:

LORD JUSTICE THORPE

LORD JUSTICE LAWS

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P CLAIMANT/APPELLANT

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P DEFENDANT/RESPONDENT

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(DAR Transcript of

Smith Bernal Wordwave Limited

190 Fleet Street, London EC4A 2AG

Tel No: 020 7404 1400 Fax No: 020 7831 8838

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MR J COHEN QC and MRS L WHITESMITH (instructed by Messrs Blake Lapthorn Linnell, London WC2B 5DG) appeared on behalf of the Appellant.

MR T SCOTT QC and MR C WAGSTAFFE (instructed by Messrs Gregsons, London SW19 4EX) appeared on behalf of the Respondent.

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J U D G M E N T

(As Approved by the Court)

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Crown copyright©

1. LORD JUSTICE THORPE: The parties to this appeal are husband and wife, and the appeal arises out of Trusts of Land and Appointment of Trustees Act 1996 proceedings issued in London on, I think, 22 March 2005. The parties married in 1981 and lived in this jurisdiction, the final matrimonial home being apparently in Essex. Seemingly during the marriage the parties, or one of them, acquired two flats in Notting Hill. The marriage was in difficulties in 2001 but recovered relatively briefly before its final demise in January 2004, when the wife returned to this jurisdiction. She is English, and I am not clear as to the nationality of the appellant husband, but it is clear that during the marriage, either in 1986 or 1988, the marital home moved from England to France and the Essex property was sold. There is a dispute as to where the husband is habitually resident and domiciled. He says that he is plainly domiciled and habitually resident in France. The wife challenges that contention.

2. What is not in dispute is the husband petitioned for divorce in France in May 2004. The wife's response was to issue divorce proceedings in this jurisdiction shortly thereafter, an impermissible ploy that was controlled and frozen by the application of council regulation No. 2201 of 2003, commonly known as Brussels 2 Revised. Although thwarted on that flank, the wife issued proceedings in this jurisdiction which were not dependent on the existence of a marriage between them. That was the TOLATA proceedings by which she sought a declaration in relation to the two flats at Notting Hill that she was an equal owner in equity. She also sought a tracing order in relation to the proceeds of sale of the Essex property, which had apparently been invested in a property in Switzerland, which in turn was sold leading to re-investment in some other property in Switzerland.

3. Not unnaturally, that issue was challenged. On 26 April, solicitors in this jurisdiction on behalf of the husband applied to the court for an order that the TOLATA proceedings be stayed until the French proceedings had been concluded. The evidence in support was briefly summarised on the following page. Having set out the history, the author continued:

"This court is therefore left with a theoretical discretion. It cannot be right to have two courts in two countries making orders about the same properties and between the same parties."

4. The author then referred to two authorities, to which we have not been referred, which were said to provide that where two member states were seized of the same cause of action between the same parties, the second court so seized should of its own motion stay the proceedings until such time as the first court has determined whether it has jurisdiction or not. The author does not indicate reliance upon any of the provisions of the instrument designed to regulate jurisdiction and enforcement between member states in civil and commercial dispute. That is the regulation which for many years stood as the Lugano Convention, Brussels 1, which was subsequently replaced by Regulation 44 of 2001 ("the Regulation").

5. So on that rather shadowy basis, the case proceeded to a hearing before the district judge. Looking back with the unfair advantage of hindsight, I do not understand why the application of 26 April was not an application for the dismissal of the TOLATA application on the ground that the husband was immune from suit under the general provisions of Article 2 of the Regulation, which provides:

"Subject to this regulation, persons domiciled in a member state shall whatever their nationality be sued in the courts of that member state."

6. Mr Scott has speculated that it must have been fear of a challenge in the resulting trial of the appellant's domicile which dissuaded him from reliance on Article 2. That is no more than speculation and Mr Cohen and his junior are not able to elucidate the decision that drove the application on 26 April, because they are relative newcomers to the case.

7. The wife's response to this challenge was an endeavour to rely upon the terms of Article 22, an exclusive jurisdiction provision which out-trumps the general provisions protection of article 2. The relevant part of Article 22 reads:

"The following court shall have exclusive jurisdiction regardless of domicile:

"1) In proceedings which have as their object rights in rem in immovable property or tenancies of immovable property, the courts of the member state in which the property is situated."

8. That legitimate contention failed in front of the district judge, Deputy District Judge Morris, on 11 July 2005, but succeeded in an appeal which came before Pauffley LJ on 3 February 2006. The husband, as I have already recorded, then applied to this court for permission and on 23 February I made an order for an oral hearing on notice, with appeal to follow if permission granted.

9. I pause to make a preliminary observation. This is a second appeal caught by the terms of section 55 of the Access to Justice Act 1999. We are prohibited from granting permission unless we are satisfied that there is some important point of principle or practice or that there is some other compelling reason for granting permission. In my judgment, that stringent test is satisfied in this case as a result of the unfortunate fact that the proper construction and application of Article 22 of the regulation has been considered by the European Court of Justice in a reported case, and that decision in turn twice considered by reported decisions of this court. None of that material was cited at the hearing before the deputy district judge, nor was it cited at the hearing of the appeal in the Family division. It did not emerge in the appellant's notice of appeal or skeleton argument upon which I directed the oral hearing. It emerged for the first time when Mr Cohen came into the case and filed a supplemental skeleton argument, drawing attention to that authority. Mr Scott, also a newcomer to the case, filed a supplemental skeleton in response.

10. So the need for a second appeal in this case flows directly from the flaws in previous hearings, which are themselves created by the oversight on the part of counsel instructed to cite to the court, either the district judge or the Family division judge, the governing authorities. That is regrettable. The consequence has been waste of resources (judicial resources, court resources and practitioner resources) and there has inevitably been a consequential waste in costs and, equally, additional and unnecessary stress for the litigants. All that is ample justification for our granting permission and inevitably we have treated the hearing today as the hearing of appeal.

11. Now Mr Cohen's task has been a comparatively simple one. He has had only to cite the decision of the European Court of Justice in Webb v Webb, (which is conveniently reported at [1994] QB 696) in order to make good his submission that the London proceedings do not fall within the exclusive jurisdiction provision of Article 22.

12. The reason they do not fall within that provision flows from the reasoning of the European court between paragraphs 12 and 18 of their judgment, commencing at page 716(D) and concluding at 717 between (B) and (C):

"12. The son and the Commission, who consider that the test for applying Article 16(1) is the plaintiff's ultimate purpose and that by his action the father is ultimately seeking to secure ownership of the flat, contend that the main proceedings are covered by Article 16(1).

"13. That argument cannot be accepted.

"14. Article 16 confers exclusive jurisdiction in the matter of rights in rem in immovable property on the courts of the contracting state in which the property is situated. In the light of the court's judgment in Reichert v Dresdner Bank A.G. (Case C-115/88 [1990] ECR I-27, where the court had to rule on the question whether the exclusive jurisdiction prescribed by that Article applied in respect of an action by a creditor to have a disposition of immovable property declared ineffective as against him on the ground that it was made in fraud of his rights by his debtor, it follows that it is not sufficient, for Article 16(1) to apply, that a right in rem in immovable property be involved in the action or that the action have a link with immovable property: the action must be based on a right in rem and not on a right in personam, save in the case of the exception concerning tenancies of immovable property.

"15. The aim of the proceedings before the national court is to obtain a declaration that the son holds the flat for the exclusive benefit of the father and that in that capacity he is under a duty to execute the documents necessary to convey ownership of the flat to the father. The father does not claim that he already enjoys rights directly relating to the property which are enforceable against the whole world, but seeks only to assert rights as against the son. Consequently, his action is not an action in rem within the meaning of Article 16(1) of the Convention but an action in personam.

"16. Nor are the considerations relating to the proper administration of justice underlying Article 16(1) of the Convention applicable in this case.

"17. As the court has held, the conferring of exclusive jurisdiction in the matter of rights in rem in immovable property on the courts of the state in which the property is situated is justified because actions concerning rights in rem in immovable property often involve disputes frequently necessitating checks, inquiries and expert assessments which must be carried out on the spot: see Sanders v van der Putte (Case 73/77) [1977] ECR 2383, 2390-2391, para.13.

"18. As the father and the United Kingdom rightly point out, the immovable nature of the property held in trust and its location are irrelevant to the issues to be determined in the main proceedings which would have been the same if the dispute had concerned a flat situated in the United Kingdom or a yacht."

13. Mr Cohen naturally submits that the present case is factually on all fours. Here, the TOLATA claim cannot conceivably be said to be an action in rem in relation to the long since departed Essex home: in relation to the other two properties all that is really in issue is whether the dealings between the parties result in the creation of an equitable interest. It matters not where the property itself is situated and, accordingly, it matters not where the issues between the parties, the issues of fact, are to be tried out. There is nothing in that dispute that requires any on-the-spot investigations or enquiries.

14. Mr Scott has endeavoured to refute that formidable submission by saying that the decision in Webb has been criticised academically. The subsequent decision of this court in the case of Ashurst v Pollard [2001] Chancery 595 demonstrates that the application of Article 22 is always fact specific. He relies on the holding in the head note, which summarises the judgment of Parker LJ. That paragraph reads:

"Dismissing the appeal that proceedings had as their object rights in rem, for the purposes of Article 16(1) of the convention, if such rights were their principle subject matter, but in considering whether Article 16(1) which was to be construed restrictively applied to a particular case, it was material to have regard to the Article's underlying rationale and consider whether the proceedings involved a factual investigation best carried out by the courts of the state in which the property was situated or raised questions of local law or practice. The proceedings before the court involve no such investigation or any question of foreign law or practice and did not assert any property right against third parties or seek to establish, protect or perfect a property right, but rather raised personal issues between the parties as to the beneficial interests in the villa."

I however take that passage as being strongly supportive of Mr Cohen's submission. I remark only that the Article considered by Parker LJ, Article 16(1), emerges in the current regulation as Article 22.

15. So says Mr Cohen, since his client is not caught in the trap of Article 22, his application is entitled to judgment under Article 27 or Article 28. Those Articles provide as follows:

"Article 27:

"1. Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established.

"2. Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court."

"Article 28:

"1. Where related actions are pending in the courts of different Member States, any court other than the court first seised may stay its proceedings.

"2. Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof.

"3. For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings."

16. Mr Cohen did not shrink from submitting that the wife's application for ancillary relief within the French divorce proceedings and the application in this jurisdiction under TOLATA were the same cause of action and accordingly, the court was obliged of its own motion to stay under Article 27. I agree with Mr Scott that that submission in unsustainable. Although there is no authority that has been cited to us, I accept his submission that it is self-evident that they are not the same causes of action. So we are here considering related actions pending in different member states, and accordingly have the discretion to stay the proceedings.

17. Mr Scott has mounted a valiant argument that Article 28(1) is not engaged because of the provisions of Article 28(3), the deeming provision, which seems to limit the Article 28(1) discretion to actions so closely connected that expediency requires their determination to avoid the risk of irreconcilable judgments. If that is a restriction on the Article 28(1) discretion, I am of the view that it should be narrowly construed in circumstances such as the present.

18. In any event, it seems to me that here there is the risk of irreconcilable judgments, given that the wife's application for financial provision in France is fundamentally focused on the husband's ownership of the London and Swiss properties, and given that the object of the TOLATA application is to achieve an equitable share.

19. Mr Scott has said that since exercise of discretion was fully and carefully conducted by Pauffley LJ, this court should not interfere. I cannot accept that submission. Mr Cohen was right to draw attention to what is, effectively, the definition of the wife's claim for ancillary relief in proceedings before the Tribunal de Grande Instance de Nauterre. It was composed by her French lawyer on 27 September 2005. Towards its conclusion, we see the statement that the two Notting Hill flats are worth, respectively, £395,000 and £495,000, and then that the husband is the owner of a Swiss chalet worth €450,000. The writer continues:

"The English and Swiss matrimonial property of the husband is therefore worth in the order of €1.7 million."

20. The prayer for relief contains, in its third paragraph, this: condemn the husband to pay compensation in the form of capital of £800,000 net of all expenses. That closely relates to 50% of the value of the English and Swiss matrimonial properties.

21. Pauffley LJ is not to be criticised for having arrived at what I believe to be the wrong conclusion in law, given that the relevant authorities were not cited to her. Equally, I would like to observe that insofar as I differ from her in the exercise of the discretion which arises for us, the case that was presented to her was radically different in shape to the case that has been presented to us.

22. Mr Wagstaffe, in what was clearly a very able skeleton argument, had asserted that the English proceedings were plainly complementary to, rather than competitive with, the French divorce suit. That was the basis upon which he invited the judge to exercise her discretion. Mrs Ward, for the husband, presented the other face of the proceedings when she suggested that the wife's London action was little more than an attempt to apply for ancillary relief by the back door.

23. The judge in weighing these conflicting presentations said:

"I disagree with Mrs Ward's submission suggestive that the TOLATA application is little more than a device to secure ancillary relief in this jurisdiction by the back door. A claim to a beneficial interest arising under constructive trusts or to an interest in the proceeds of sale of the property owned by the parties in Essex can only be a discrete issue complementary to rather than in competition with the French divorce proceedings."

24. There were other factors urged by Mr Wagstaffe and responded to by Mrs Ward which the judge went on to consider, largely accepting Mr Wagstaffe's submissions. I do not need to detail those because I am satisfied that the judge erred in her acceptance of Mr Wagstaffe's submission, or characterisation, and her rejection of Mrs Ward's characterisation, which was at the heart of the decision she had to take.

25. There are a number of general points to be made. First, I find it hard to conceive that where a married couple are engaged in contested ancillary relief proceedings, the application of a TOLATA claim by one against the other could possibly be justified. As the decision of the House of Lords in White v White makes plain, issues between a husband and a wife are to be determined within the four corners of the Matrimonial Causes Act and on the application of the statutory criteria there set out. The issue of separate proceedings to establish relatively arcane questions as to equitable entitlement between them is deprecated. I cannot see how that general proposition can be disapplied simply because the ancillary relief proceedings have been instituted in one member state and the parties to the proceedings are not both attached to that jurisdiction. In these situations spouses will always have a strong prejudice for a determination by a judge of their own land.

26. Of course some European jurisdictions will be regarded as a happy land for an applicant or, put the other way, a bad land for a respondent. No doubt this wife would have preferred her financial provision to have been determined by a London judge. No doubt that was the basis of the issue of her competing divorce proceedings in this jurisdiction. But the issue of TOLATA proceedings, once her petition was stopped, is to be characterised in my judgment as plainly strategic and plainly superfluous to the well-established French ancillary relief proceedings.

27. If other reasons were required for my firm conclusion that the discretion must be exercised in favour of a stay, I would point to the risk of substantial waste of costs and the equal risk of unnecessary stress to the litigants if two sets of proceedings are litigated instead of one, and those two sets in different jurisdictions. The proportionality between the costs in ancillary relief proceedings and the amounts in issue are, so far as this jurisdiction is concerned, a matter of continuing concern, certainly to judges and probably to practitioners. It is very important to impose judicial restriction to curtail unnecessary proceedings.

28. My last reason, if further reason be required, is that the whole force of developing European legislation in the family law field is to impose clear and simple rules to establish the primary jurisdiction and to ensure that once that primary jurisdiction is established it is given the fullest support in the discharge of its consequent responsibilities. We have recognised the primacy of the French jurisdiction by the stay imposed upon the divorce proceedings initiated by the wife in this jurisdiction. It would be quite inconsistent with the objectives and underlying policy of the revised Brussels 2 regulation were we now to say in the exercise of the discretion, that it was perfectly in order for the wife to bring civil proceedings in this jurisdiction which only thinly disguise their true competitive objectives.

29. So for all those reasons, I would allow this appeal and impose the stay sought.

30. LORD JUSTICE LAWS: I agree that permission should be granted in this case and that the appeal should be allowed for all the reasons given by my Lord, Lord Justice Thorpe. I wish only to underline my specific agreement with the general observations of Thorpe LJ by which he deprecates the issue of TOLATA proceedings here, against a background where the parties' matrimonial dispute and, especially, matters of financial provision are being litigated elsewhere.

Order: Application granted. Appeal allowed.