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Miller-Smith v Miller-Smith [2009] EWCA Civ 1297

Appeal by wife against an order to sell the matrimonial home with vacant possession made under TOLATA proceedings. Appeal dismissed.

The couple had separated but owned a house valued at not less than £10m as tenants in common in equal shares, with mortgage debt of £7m. The husband had applied for the order for sale as he claimed that economic circumstances made it impossible to maintain the house and payments to the wife. The recorder made the order for sale in the knowledge that the defended divorce was due to be heard two months later and that the husband only disclosed a one-off commission payment of £1.2m shortly before the hearing.

In this appeal, counsel for the wife argued, among other things, that i) the recorder had acted prematurely in making the order for sale before the divorce hearing; ii) that the direction to hear the TOLATA applications had been made before the disclosure of the commission payment and iii) TOLATA proceedings were unsuitable for resolution of issues between a divorcing couple. In rejecting these arguments Wilson LJ first stated that in principle it is more desirable that the issue should be resolved in ancillary relief proceedings. However in this case the couple had been separated for 18 months, the wife's decision to defend the divorce had already delayed the decree nisi and it was highly unlikely that that the wife would secure a transfer to her sole name or a life interest as a result of ancillary relief. Furthermore, the purpose of the ownership of the house, to provide a home for both parties, no longer existed. He also rejected the wife's submission that the recorder could only have made the order if he had also made an occupation order.

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Neutral Citation Number: [2009] EWCA Civ 1297

Case No: B4/2009/1813
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE PRINCIPAL
REGISTRY OF THE FAMILY DIVISION
MR RECORDER SAPSFORD QC
LOWER COURT NOS: FD 08F 01214, FD 08F 01215, FD 08F 01216

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 02/12/2009
Before:

SIR MARK POTTER, PRESIDENT OF THE FAMILY DIVISION
LORD JUSTICE WILSON
and
LORD JUSTICE RIMER
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Between:

DEBJANI JASH MILLER SMITH (Appellant)

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CHARLES MILLER SMITH (Respondent)

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Mr John Wilson (instructed by Mischon de Reya) appeared for the Appellant wife.
Mr James Turner QC and Mr Deepak Nagpal (instructed by Stowe Family Law LLP) appeared for the Respondent husband.

Hearing date: 4 November 2009
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Approved Judgment

Lord Justice Wilson:
A: INTRODUCTION
1. A wife appeals against an order made in unusual circumstances on the application of her husband by Mr Recorder Sapsford QC in the Principal Registry of the Family Division on 31 July 2009. His order, made two months prior to the hearing of a defended suit for divorce brought by the husband against the wife, was that, as joint owners of the matrimonial home at 23 Egerton Terrace, Knightsbridge, London SW3, in which the wife continued to reside, they should forthwith sell it with vacant possession. The order was made under s.14 of the Trusts of Land and Appointment of Trustees Act 1996 (“TOLATA”).

2. The parties hold the home in their joint names as trustees for themselves as tenants in common in equal shares. Its value is hard to identify. The recorder took it to be “not less than £10 million”. But it might be as high as £14 million. For convenience I will take it as £12 million. Two years ago its value was significantly higher. The mortgage debt referable to it now stands at £7 million. The mortgage was placed into a basket of major currencies and this year, while the pound has weakened against other major currencies, its size, when expressed in sterling, has significantly increased. The amount of the instalments payable in respect of the mortgage varies greatly. In October 2008, when the husband issued his application under TOLATA, they were £22,250 per month (or £267,000 per year). By June 2009 they had decreased to £14,200 per month (or £170,000 per year). Other expenses referable to the home, in particular the cost of the housekeeper and the gardener and of utilities, then amounted, according to the husband, to £58,000 per year but, according to the wife, somewhat less. Thus, on 5 June 2009, when the recorder conducted the hearing of the application, regular expenditure on the home, borne by the husband, amounted – on the husband’s figures, which the recorder seems to have accepted – to £228,000 per year. Additionally the husband was making an allowance to the wife of £18,000 per year and meeting other expenses on her behalf. In respect of the husband’s own accommodation in Belgravia and Oxfordshire, the rent alone was running at £100,000 per year.

3. The husband’s usual net income from all sources is about £350,000 per year. So, when he issued his application, the basis of his case was that the home should be sold because it was impossible for him to continue to maintain it. A week before the hearing the wife appeared to be about to concede the inevitability of a sale on that basis. Three days before the hearing, however, the husband disclosed that, weeks previously, he had been paid an exceptional commission of £1.2 million gross (or £720,000 net) on a corporate deal made in March 2009 in relation to which he had given advice; in his oral evidence to the recorder he described it as a once-in-a-lifetime payment. So the basis of his case became not that it was impossible to continue to maintain the home, at any rate in the short term, but that it was unreasonable to expect him to do so. In response to that revised basis the wife made no analogous concession. She actively contested the application for an order for sale, mainly on the ground that, in the light of the pendency of the defended suit, in which she was disputing that the marriage had irretrievably broken down, the application was premature and should be dismissed.

4. In the event the recorder decided to order a sale because the home was “far larger than could objectively be justified by reference to [the wife’s] reasonable housing need” and because “the purpose for which the property was acquired was to provide a home for both of them while they lived together [and] that purpose can no longer be achieved”. He ordered that the home be marketed forthwith; that completion should not take place until after three months (i.e. not before 31 October 2009); that on completion the wife should give vacant possession of the home; and that “without prejudice to the question of the ultimate apportionment and distribution thereof” the net proceeds of sale should be divided into two equal sums, be placed on deposit and be not distributed to either party without the other’s written consent or further order of the court.

5. The recorder was told that the hearing of the defended suit was fixed to begin on 22 September 2009. In the event it did not begin until 5 October 2009. We are told that, at its conclusion on 9 October 2009, the judge held that the wife had behaved in such a way that the husband could not reasonably be expected to live with her and that their marriage had broken down irretrievably; and that he therefore granted the husband a decree nisi of divorce.

B: THE HISTORY
6. The wife is aged 44 and the husband is aged 70. They began to cohabit in 2003. The husband’s first wife had died in 1999 and he had been Chairman of ICI until 2001. The wife, who had not previously been married, had been its Company Secretary until just prior to their cohabitation. They were married in June 2004.

7. The parties bought a long lease of the home in August 2005 and they bought its freehold in January 2006. The long lease cost about £4 million and the freehold cost about £2 million. The size of the home is 3,800 sq ft; it is on five floors and has substantial gardens both back and front. They embarked on elaborate works of renovation. Builders, decorators and others worked on it from January 2006 until April 2007. The parties so reconfigured it as to reduce the bedrooms to four. The husband took a considerable interest in the works; but the wife directed them. Her energy and flair were major contributors to its ultimate style and beauty. Inclusive of the renovation costs and the incidental costs of the purchases, the cost of the home was £7.4 million, of which £5.5 million was borrowed under the mortgage. Of the balance, the husband contributed just over £1.5 million; and the wife contributed just under £0.4 million, which represented the net proceeds of her flat in Hampstead and which, apart from a policy worth £40,000, was in effect her only capital.

8. The parties moved into the home in April 2007. But by then they were in receipt of marriage counselling. The husband left the wife in August 2007. He returned to live with her there in November 2007 but finally left her in January 2008. So they occupied the home together only for six months in all. The husband filed his petition for divorce in May 2008; sadly the main subject of his petition, and therefore of the wife’s answer filed in July 2008, surrounded responsibility for difficulties in her relationship with his three adult children. The breakdown of the marriage was a source of intense pain for both parties; and, obviously, the wife was slow in becoming able to accept the fact of it.

9. By letter dated 30 June 2008, aware that the wife intended to defend his petition, the husband’s solicitors informed her solicitors that a sale of the home was urgent and inevitable. But, by her solicitors, the wife disagreed. When, in October 2008, he issued his application under TOLATA, the husband also issued applications for a sale of the home under s.17 Married Women’s Property Act 1882 and for an occupation order, prohibiting her exercise of her right to occupy the home, under s.33(3)(d) of the Family Law Act 1996. On 6 May 2009 a circuit judge directed that all three applications should be listed for hearing on 5 June 2009 and, in doing so, he rejected a submission on behalf of the wife that they should be listed to be heard only after, albeit perhaps immediately after, the hearing of the suit. On 5 June 2009 Mr Turner QC, on behalf of the husband, informed the recorder that his principal application was that under TOLATA and that the other two applications were only by way of “belt and braces”.

C: DISCUSSION
10. Mr Wilson’s broad, primary, submission to us on behalf of the wife is that it was premature for the recorder to order a sale of the home in advance of any decree of divorce; that the circuit judge’s direction for the preliminary hearing of the husband’s application under TOLATA was made prior to the substantial, exceptional, payment to the husband and thus at a time when he was credibly contending that he could not afford to maintain the home; that at the hearing of the suit for divorce, which the recorder knew to be imminent, the wife would not only deny that she had behaved in such a way that the husband could not reasonably be expected to live with her but would also aver that, even if she had so behaved, the marriage had not broken down irretrievably; that, by finding that the purpose for which the home had been acquired, namely as a home in which the parties might live together, was a purpose which could no longer be achieved, the recorder impermissibly pre-empted that second stage of the enquiry to be conducted by the judge who heard the suit; that TOLATA was an inappropriate vehicle for the resolution of issues between husband and wife; and that therefore the recorder should either have dismissed the husband’s application or at least have adjourned it.

11. In support of his assertion that TOLATA was an inappropriate vehicle for the resolution of issues between husband and wife Mr Wilson presses upon us the decisions of this court in Tee v. Tee and Hillman [1999] 2 FLR 613 and, by way of analogy, its predecessor, namely Fielding v. Fielding [1977] 1 WLR 1146.

12. In Fielding the wife, following divorce, applied for a lump sum order to be made against the husband but then she added a claim under s.17 of the Act of 1882 for a declaration that she had an interest, for which the husband should account to her, in the assets of two public houses which together they had managed. This court held that the registrar and, on first appeal, the circuit judge had been wrong to concentrate – at great length – on the claim under the Act of 1882 referable to strict property rights; that (per Ormrod LJ at 1148A) it was “of very little value to proceed under the [Act of] 1882 after divorce” (my emphasis); and that (at 1148D) the Matrimonial Causes Act 1973 “provides an elastic method of deciding what is a fair order”.

13. In Tee the wife and her second husband occupied a property in the joint names of herself and of her first husband, who, following their divorce, had applied under the Act of 1973 for a lump sum order reflective of his equal beneficial interest in it to be made against her. Following her remarriage the wife countered with an application under TOLATA for the interest of her first husband in the property to be transferred to herself against a small payment to be made by her to him reflective of the value of what she contended to be only his minor beneficial interest in it. Following a direction that her application under TOLATA be considered at a preliminary stage, a district judge devoted eight days to the enquiry under TOLATA and thereafter one further day to enquiry into the husband’s application under the Act of 1973, whereupon the district judge concluded that £230,000 should be paid to the first husband in respect of his interest in the property, whether by the wife or, in default, out of the proceeds of its sale. On appeal, after three days of argument, the circuit judge reduced the size of the requisite payment to £188,000. In refusing permission to the wife to appeal this court held that, although the wife had remarried and was therefore unable to claim a transfer of the husband’s interest in the property, the husband’s application for a lump sum order provided ample power for the court to fix the sum fairly to be paid by the wife to him in consideration of his transfer to her of his interest in it; that (per Thorpe LJ at 619A) the wife’s application under TOLATA had been a “diversionary excursion”; that (at 618H) the litigation history had been “appalling”; and that (at 619B) the power to make capital provision between spouses under the Act of 1973 overrode statutory provisions for the determination of their proprietary interests.

14. It will be noted that, in Fielding and Tee, applications under the Act of 1882 and under TOLATA were held to be inappropriate because applications for capital provision under the Act of 1973 were able to be made and indeed, as it happens, had been made. At the time of the hearing before the recorder, viz. prior to decree nisi, the husband in the present case was unable to secure orders for capital provision under ss. 23 and 24 of the Act of 1973 and, in particular, to secure a collateral order for sale of the home under s.24A thereof. In this different scenario the submissions of both counsel to the recorder were in my view realistic. Mr Wilson did not submit that, in advance of decree, a spouse could never secure an order for sale against the other under TOLATA; nor did Mr Turner submit that, in advance of decree, a spouse could often secure such an order. Both of their submissions were, in effect, that the court should be reluctant to make an order under TOLATA in advance of decree. It was only then that their submissions diverged: in the circumstances of the present case there was (said Mr Wilson) nothing to displace, but by contrast there was (said Mr Turner) everything to displace, the court’s reluctance to make such an order.

15. There is no doubt that Mr Turner was able to expose an inherent inconsistency in Mr Wilson’s argument that the appropriate vehicle for the husband’s application for an order for sale of the home was the Act of 1973 and that the recorder should therefore await the result of the hearing of the defended suit. For, were the wife’s contentions to have prevailed at the hearing of the suit, the husband’s petition would have been dismissed and he would for the indefinite future have remained unable to prosecute claims of a capital nature, and thus collaterally for an order for sale, under the Act of 1973. But perhaps, albeit silently, Mr Wilson was asking the recorder to consider the likelihood that the husband’s petition, albeit defended by his client, would lead to the grant of a decree. Our society in England and Wales now urgently demands a second attempt by Parliament, better than in the ill-fated Part II of the Act of 1996, to reform the five ancient bases of divorce; meanwhile, in default, the courts have set the unreasonableness of the behaviour required to secure the success of a petition on the second basis, namely pursuant to s.1(2)(b) of the Act of 1973, even when defended, at an increasingly low level.

16. The husband’s application was brought under s.14 of TOLATA, of which subsection (2) provides that “the court may make any such order … relating to the exercise by the trustees [of land] of any of their functions … as the court thinks fit”. So the court’s power is discretionary. In effect the husband asked the court to make an order relating to the exercise by himself and the wife, as trustees of land, of two of their functions, namely their function to sell the property and their function, expressly provided in s.13 of the Act, to exclude the entitlement of a beneficiary under a trust of land to occupy it. It is important to note that, as Mr Wilson concedes, the conjunction of ss. 13 and 14 of TOLATA enables the court in effect to order that a beneficiary should give vacant possession of land, for example on or for the purposes of a sale; such was the second trustee function which the husband successfully sought to be made the subject of an order against the wife.

17. Section 15 of TOLATA required the recorder to have regard to certain matters in exercising his discretion. In relation to sale, s.15(1) provided that the matters should “include”, at (a), the intentions of the persons who created the trust and, at (b), the purposes for which the trust property was held. In relation to vacant possession, s.15(2) provided that the matters should also “include” the circumstances and wishes of each of the beneficiaries entitled to occupy the land.

18. I am clear that, confronted with an application under TOLATA between separated spouses, the court should embark upon the discretionary exercise by asking itself whether the issue raised by the application can reasonably be left to be resolved within an application for ancillary relief following divorce. It is in principle much more desirable that an issue, as here, about sale of the home should be resolved within an application for ancillary relief. For there the court will undertake a holistic examination of all aspects of the parties’ finances, needs, contributions etc; will devise the fairest set of arrangements for the future housing and finances of each of them; and, to that end, will provide for the transfer of capital, as well perhaps as for payment of future income, from one to the other. By an order under TOLATA, on the other hand, the court lays down only one piece of the jigsaw, namely that the home be sold, without its being able to survey the whole picture by laying down the others. So at this threshold stage of the enquiry into an application under TOLATA between spouses the court will, in particular, have regard to the question whether, within a time-frame tolerable in all the circumstances, the parties will become able to apply for ancillary relief. Furthermore if, at first sight, there appears to the court to be any measurable chance that, on an application for ancillary relief made within that time-frame, the respondent to the application for an order for sale under TOLATA will be able to preserve her or his occupation of the home by securing an outright transfer of ownership of it or a variation of the trust, it is hard to conceive that an order for sale would reflect a proper exercise of discretion.

19. In my view the husband’s application under TOLATA crossed the threshold stage of the enquiry. The parties had separated 18 months prior to the hearing before the recorder and the husband had issued his petition for divorce more than a year previously. The driver behind the wife’s defence of the suit, however unfortunate, may have been less a cynical attempt to obstruct the husband than the beating of a wounded heart; but the fact was that, by taking that unusual step, the wife had already obstructed the grant of a decree nisi for, say, more than six months and that, even if a decree were to be granted at the conclusion of the hearing fixed for September 2009, the applications of the parties for ancillary relief of a capital nature would be unlikely to be determined within a further year. In the interim, unless the home were to be sold, the husband would continue to be required to fund outgoings referable to it, in particular to service a mortgage of £7 million, at the rate of £228,000 per year; and, were the value of the pound to continue to fall against other major currencies, the size of the mortgage debt if expressed in terms of the currency apt to the value of the home, namely sterling, would continue to increase. So the time-frame until possible, indeed perhaps probable, determination of the parties’ applications for ancillary relief did not represent a delay tolerable in all the circumstances. Furthermore, in light of the fact that, apart from his healthy regular income and the exceptional payment recently received, the husband did not appear to have substantial resources other than his interest in the home, there was no measurable chance that, on an application for ancillary relief, the wife would secure transfer into her sole name of, or variation of the trust such as would for example confer on her a life interest in, a property worth £12 million subject to a mortgage of £7 million.

20. So in my view the recorder was right to reject Mr Wilson’s submission that the application was premature and to proceed fully to consider it, by reference in particular to the matters mandated for consideration by s.15(1) and (2) of TOLATA. At this stage of the enquiry matters which had been relevant to the threshold stage were likely again to be relevant and were capable of proving determinative. But it is worthwhile to note both the width inherent in the enquiry into the “circumstances” of each of the parties under s.15(2) and the duty to consider the purposes for which the home was held under s.15(1)(b). The purpose was to provide a home for both parties; and Mr Wilson cannot validly criticise the recorder for concluding, in the discharge of his duty and by reference to the categorical oral evidence of the husband, that such was a purpose which retention of the home could never again serve, even though irretrievability of the breakdown of the marriage would also fall for consideration by the judge who heard the suit.

21. Mr Wilson’s narrow, secondary, submission to us is that the recorder was precluded from making an order under TOLATA unless he was also satisfied that it would have been appropriate to make an occupation order against the wife under s.33(3)(d) of the Act of 1996; and thus that the recorder was required to consider the circumstances specified in s.33(6) thereof. The recorder rejected that submission but added that, were he to have been required to be satisfied that it was appropriate to make an occupation order against the wife, he would have been so satisfied.

22. The basis of Mr Wilson’s secondary submission is the decision of this court in Wicks v Wicks [1998] 1 FLR 470. The decision was that the court had no power, whether under the Act of 1973 or, in the case of the High Court, as part of its inherent jurisdiction, to accede to an application by a wife, in advance of the hearing of her application for ancillary relief, for an interim order for sale of a home vested in her sole name but occupied by the husband. Ward LJ pointed out, obiter, at 483E-F, that in the circumstances of that case the result sought by the wife could have been achieved by application under s.17 of the Act of 1882. He added, however, at 483H – 484C:

“The power [under s.17] to order a sale of the former matrimonial home will not include a power to order possession of it. Nor should it do so during the subsistence of the marriage. To make an order, as the judge did here, for the husband to deliver up vacant possession is to make an order restricting or terminating the rights of occupation which are conferred upon the husband by virtue of s.1 of the Matrimonial Homes Act 1983 … The judge was not asked to consider the [Act of] 1983, but she should have been.  The respondent should not have been required to vacate the matrimonial home save and except where the court has taken into account and balanced the factors set out in s.1(3) of the 1983 Act.”

23. It is not for us to question the observation that the power to order a sale under s.17 of the Act of 1882 does not include a collateral power to order that vacant possession of it be given on or for the purposes of the sale. What is clear, indeed accepted by Mr Wilson, is that under s.13 of TOLATA there is power in effect to order that vacant possession of a property be given, whether on sale or otherwise.  So, to the extent that Wicks is the peg on which Mr Wilson seeks to hang his argument that the husband needs to satisfy the requirements of s.33 of the Act of 1996, being the successor to s.1 of the Act of 1983, the peg cannot hold the argument and breaks from the wall at once. One may say, broadly, that it would be surprising if an order that in effect a spouse should give vacant possession of a matrimonial home under TOLATA were to be made in circumstances in which the applicant could not have secured an occupation order. But I have already stressed the width of the mandatory enquiry under TOLATA; and Mr Wilson’s submission that the recorder was required in law to conclude that an occupation order should be made against the wife is in my view invalid. Nor does Mr Wilson wrestle convincingly with the recorder’s further observation that, had such a conclusion been requisite, it would have been apt.

24. When, rightly or wrongly, I granted permission on paper for the wife to bring this appeal, I highlighted a point raised only indirectly in the grounds of appeal, namely their reference to the circumstances specified in s.33(6) of the Act of 1996, of which the first is the housing needs of each of the parties.  In my view their housing needs are in principle equally relevant as part of their circumstances within the meaning of s.15(2) of TOLATA. To where, I wrote rhetorically, did the recorder expect the wife to move on completion of the sale?

25. The ostensibly curious position in this regard is as follows:

(a) In the form by which he issued his application under TOLATA the husband sought an order that the net proceeds of sale of the home be held in a joint account in the names of the respective solicitors, not to be withdrawn save by consent or further order of the court.

(b) When, a week prior to the hearing before the recorder, the wife was close to conceding sale, her solicitors submitted draft minutes of order in which they provided that the net proceeds be equally divided into two accounts but thereupon be frozen as the husband had suggested.

(c) In opening the application to the recorder Mr Turner went out of his way to stress that there was no issue but that, if a sale was ordered, the net proceeds should be frozen in that way.

(d) Indeed Mr Turner sought to bolster the need for all the net proceeds to be frozen by saying that, although the wife had an existing beneficial interest in one half of the net proceeds, the husband might wish, in the event of divorce, to claim some of it from her by way of lump sum.

(e) The transcript of the proceedings before the recorder shows that Mr Turner is mistaken in telling us that he expressly conceded that, subject to that possible future claim, it was open to the wife meanwhile to use her one half of the net proceeds.

(f) At no stage of that hearing did Mr Wilson challenge the proposition that, in the event of sale, the net proceeds should be frozen and be not distributed save by consent or pursuant to further order.

(g) There was no discussion before the recorder about distribution to the parties even of the income, modest at current rates, which was likely to be generated upon the frozen funds.

(h) Mr Wilson never submitted to the recorder that, before making any order for sale, he should consider whether the husband had made satisfactory or indeed any proposals which would enable the wife to buy or rent suitable alternative accommodation and to be maintained therein at an appropriate level.

26. When we asked Mr Wilson about his strategy for achieving service of the wife’s future housing and maintenance needs in the event of sale, he responded that he anticipated a process of negotiation between the solicitors and, as a fall-back, the possibility of issuing applications to the court for distribution to the wife of the half of the net proceeds reflective of her interest in them and/or for maintenance pending suit (albeit that, in one way or another, the suit was unlikely to remain pending for long) or interim periodical payments (in the event only of the grant to the husband of a decree). One might wonder whether such a strategy would be likely to prove as satisfactory for the wife as a submission to the recorder that no order under TOLATA should be made until the husband had made satisfactory proposals for these two allied aspects of her needs.  But, although had I been in the recorder’s shoes, I would myself have invited submissions in these respects, he cannot fairly be criticised for not having done so and thus for not having in any way addressed the wife’s needs following sale.

27. Equally, in this court, there must be a narrow limit upon our taking points, even in matrimonial cases, on behalf of a party when, for whatever reason, they have not appealed to that party’s advisers. In Mr Julius, of Mishcon de Reya, the wife has a solicitor high in profile and repute; and in Mr Wilson she has counsel who specialises in matrimonial finance. They will carefully have appraised her interests; and their insight into the optimum presentation of her case in the light of her instructions is likely to be greater than that of this court.  At all events, at the end of the hearing of the appeal, the husband through Mr Turner accepted that, subject to one caveat, the half of the net proceeds reflective of the wife’s existing interest in them should, at her election, forthwith be distributed to her.  Even after allowing for the incidental costs of sale, her half is likely to amount to more than £2 million. The caveat was that the husband might wish to apply to the court to freeze such property as the wife purchased, or such other investment as she made, with her share of the proceeds pending determination of his threatened application against her for a lump sum order.  If made, the husband’s applications for a freezing order and, substantively, for a lump sum order will have to take their course, along with any cross-application to be made by the wife for ancillary relief.

28. I would dismiss the appeal. The stay of execution on the marketing of the home would thereupon fall away; and the earliest date for completion set by the recorder would need revision.

Lord Justice Rimer:
29. I agree.

Sir Mark Potter, President:
30. I also agree.