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Do We Really Need To Know Any Law? The relevance of civil law and procedure in ancillary relief.

Alexander Chandler, barrister at 1 King's Bench Walk considers the relevance of civil law and procedure in ancillary relief

Alexander Chandler, Barrister, 1 King's Bench Walk

In ancillary relief, we do things differently: the FDR, the duty of full and frank disclosure, the relaxed approach to rules of evidence, and the presumption of no order as to costs. With a handful of exceptions (e.g. CPR Part 35 on experts), civil procedure has no direct impact on ancillary relief claims. The court's function is also different:

"[22]…the outcome of ancillary relief cases depends upon the exercise of a singularly broad judgment that obviates the need for the investigation of minute detail and equally the need to make findings on minor issues in dispute. The judicial task is very different from the task of the judge in the civil justice system whose obligation is to make findings on all issues in dispute relevant to outcome. The quasi-inquisitorial role of the judge in ancillary relief litigation obliges him to investigate issues which he considers relevant to outcome even if not advanced by either party. Equally, he is not bound to adopt a conclusion upon which the parties have agreed. But this independence must be matched by an obligation to eschew over-elaboration and to endeavour to paint the canvas of his judgment with a broad brush rather than with a fine sable. Judgments in this field need to be simple in structure and simply explained." Parra v Parra [2002] EWCA Civ 1886; [2003] 1 FLR 942, per Thorpe LJ

But for all of its perceived difference, ancillary relief is not an island, separate from developments in the wider legal word, but a part of the main (apologies to J. Donne). The recent Court of Appeal decision in Imerman v Tchenguiz [2010] EWCA Civ 908, in which the Hildebrand rule was so comprehensively disapproved, is only the latest decision in which the higher courts have held that "…there is no basis for any special rule" in the family courts (Imerman, [137]).

This article summarises a number of other examples where hitherto settled family law procedure has been found wanting, and has been brought into line with the other Divisions.

In Mubarak v Mubarak [2001] 1 FLR 698, the Court of Appeal declared that the traditional (and highly effective) judgment summons procedure ("the old Court 51 procedure" where a debtor was compelled to produce evidence of their means) was incompatible with Article 6 rights, leading to revised and restrictive FPR rule 7.4; also see Corbett v Corbett [2003] EWCA Civ 559; [2003] 2 FLR 385;

In Cordle v Cordle [2001] EWCA Civ 1791; [2002] 1 FLR 207, the Court of Appeal declared that the previous approach to appeals in ancillary relief (the 'rehearing' rule: Marsh v Marsh [1993] 1 FLR 467) was incorrect and incompatible with s 55 of the Access to Justice Act 1999, which required the original decision to be 'plainly wrong' (G v G (Minors: Custody Appeal) [1985] 1 WLR 647).

Reporting duties to NCIS
In Bowman v Fels [2005] EWCA Civ 226; [2005] 2 FLR 247, a judgment that represented something of a low-point for the Family Division,  the Court of Appeal disapproved of the peculiar interpretation of NCIS reporting obligations by Butler Sloss P in P v P (Ancillary Relief: Proceeds of Crime) [2003] EWHC 2260 (Fam); [2004] 1 FLR 193. In P v P, Butler Sloss P held that legal advisers were duty-bound to inform on their own clients (as well as the adverse party) if there was any suggestion of financial impropriety, or that that he had made less than full disclosure or honestly declared all income to the Inland Revenue. If they did not do so, legal advisers might be 'concerned in an [criminal] arrangement'. Brooke LJ held that, as a matter of basic statutory interpretation, the Proceeds of Crime Act 2002 was not intended to criminalise lawyers who did not report their own clients, and that no such duties existed.

Ex parte hearings and freezing orders
The specific duties on an application who seeks relief without notice to the other party are (or should be) well known, and were set out by Munby J in Re S (Ex Parte Orders) [2001] 1 FLR 308 including the often-overlooked obligation on an applicant to put all relevant matters before the court – including those which might be adverse to the applicant, and to disclose to the respondent all material put before the court (including a note of the hearing). More recently in FZ v SZ and Another [2010] EWHC 1630, Mostyn J commented at [32]

"It is an absolutely elementary tenet of English law that save in an emergency a court should hear both sides before giving a ruling. The only recognised exception to this rule (apart from those instances where an ex parte procedure is specifically authorised by statute) is where there is a well founded belief that the giving of notice would lead to irretrievable prejudice being caused to the applicant for relief. I have the distinct impression that a sort of lazy laissez-faire practice or syndrome has grown up which says that provided that the return date is soon, and provided that the court is satisfied that no material prejudice will be caused to the respondent, then there is no harm in making the order ex parte. In my opinion this is absolutely wrong and turns principle on its head."

It is also worth recalling that an application for a freezing order (or a restraining order under MCA s 37) should not extend beyond those assets necessary to make a party judgment-proof. The court has no business freezing a party's entire asset base:

"…there was no reason why the court in matrimonial proceedings should grant a Mareva injunction covering all the assets of the other party, since the purpose of a Mareva injunction was to safeguard the plaintiff or petitioner from a situation in which the assets of the opposing party were run down with the intention of making that party judgment-proof, and in matrimonial proceedings no petitioner was ever likely to get the whole of the respondent's fortune" (Ghoth v Ghoth [1992] 2 FLR 300, headnote)

In TL v ML and Others (Ancillary Relief: Claim Against Assets Of Extended Family) [2005] EWHC 2860 (Fam); [2006] 1 FLR 1263, Nicholas Mostyn QC (as he then was, sitting as a Deputy High Court Judge) gave a timely (and well-known) reminder of the procedure affecting third party intervenors in ancillary relief:

"[36]   In my opinion, it is essential in every instance where a dispute arises about the ownership of property in ancillary relief proceedings between a spouse and a third party, that the following things should ordinarily happen: 

(i) The third party should be joined to the proceedings at the earliest opportunity
(ii) Directions should be given for the issue to be fully pleaded by points of claim and points of defence;
(iii) Separate witness statements should be directed in relation to the dispute; and
(iv) The dispute should be directed to be heard separately as a preliminary issue, before the financial dispute resolution (FDR).

[37]   In this way, the parties will know at an early stage whether or not the property in question falls within the dispositive powers of the court and a meaningful FDR can take place. It also means that the expensive attendance of the third party for the entire duration of the trial can be avoided. It is a great pity that none of these steps took place in this case. Had they happened, I believe that a great deal of the costs would have been saved.

Allegations of sham/ fraud
In A v A (St. George Trustees Ltd Intervening) [2007] EWHC 99 (Fam); [2007] 2 FLR 67, Munby J (as he then was) held that even in the Family Division, a spouse who sought to extend a claim over assets held by a third party needed to identify, by reference to established principle, some proper basis for doing so, and for the case to be properly set out. It is not enough to assert a situation looks 'dodgy'.

"[19] …this does not mean… the court can simply ride roughshod over established principle, least of all where there are, or appear to be, third party interests involved"

"[21]…what it is important to appreciate (and too often, I fear, is not appreciated at least in this division) is that the relevant legal principles which have to be applied are precisely the same in this division as in the other two divisions. There is not one law of "sham" in the Chancery Division and another law of "sham" in the Family Division. There is only one law of "sham", to be applied equally in all three Divisions of the High Court, just as there is but one set of principles, again equally applicable in all three divisions, determining whether or not it is appropriate to "pierce the corporate veil".'

Awareness of company law
The comprehensive judgments of Charles J in A v A [2004] EWHC 2818 (Fam) [2006] 2 FLR 115 and D v D and B Ltd [2007] EWHC 278 (Fam) [2007] 2 FLR 653 are essential reading for any case in which the main asset is the shareholding in a private company. In A v A at [60], Charles J commented:

"…it seems to me that in ancillary relief proceedings it is important for the parties and their advisers to look at issues concerning private companies through the eyes of both: (a) persons with experience in and of matrimonial litigation; and (b) persons with experience in and of business and business litigation. For example, if this is done it may quickly become apparent: (a) that there is a wide bracket of valuation; and (b) that there may be a viable and pragmatic business solution which would avoid either or both of the uncertainties and difficulties of valuation and the raising of finance, albeit that it may not involve a clean break"

In D v D and B Ltd at [46] and [47], Charles J made the following observation of the acrimony that often exists in contested ancillary relief litigation:

"[46] To my mind this places an obligation on the advisers of the parties to take a dispassionate and cool stance and thereby to focus on the essential points and seek to avoid their clients and themselves becoming embroiled in tit for that allegations based on deep rooted personal hostility within the family"

[47] I pause to add that

(i) It is not only in this type of litigation that deep seated acrimony and hostility exists. It can also exist for example in partnership and company disputes. In those situations it may be easier to focus on the commercial and core issues relating to money but in my view all too often when asserting correctly in ancillary relief proceedings that the dispute between spouses is about money practitioners in the field of ancillary relief fail to remind themselves of this in the way in which they conduct ancillary relief proceedings and correspondence.

(ii) I accept that at times it is easier to state the goal of concentrating on the financial issues than it is to achieve it."

The last word – and the emphatic endorsement of the need for an awareness of civil law and procedure – belongs to Munby J. In Whig v Whig [2007] EWHC 1856 (Fam) [2008] 1 FLR 453, Munby J (as he then was) commented:

"[58]…the illusion that there is some special inspiration of common sense infusing the family judges and which is lacking in our brethren in the Chancery Division – an illusion no doubt fostered by our inveterate practice of sitting in private – seems to be as prevalent today as ever. It cannot be stressed too much that there is simply no basis for this illusion"

[60] The Family Division applies precisely the same principles, and in precisely the same way, as the Chancery Division, or for that matter the Queen's Bench Division. A creditor is not to be prejudiced because a wife's application to annul the bankruptcy order on which he depends is heard by a Family Division judge (more properly, as Vaisey J explained, a judge of the High Court who is assigned for the time being to the Family Division) any more than a wife is to be prejudiced because her application is heard by a Chancery judge."