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Read v. Panzone & Anor [2019] EWCA Civ 1662

A court should be wary of making findings/orders on alternate bases ‘just in case’, as this can over-complicate matters which should be kept simple. In this instance, the court’s making of an order setting aside a disposition under s37 MCA 1973, when no application had been made and no submissions on that basis heard, and when in any event the husband had been found to hold the beneficial interest in the relevant property. The court therefore allowed the appeal on two grounds but this did not cause any alteration of the final order made in financial remedy proceedings, and did not require the setting aside of that order in its totality as sought by the appellant and the husband.

The Parties & Background
This was the second appeal in financial remedy proceedings.

Mrs Read, the husband's mother, was the appellant in this appeal, and had been the 2nd respondent at first instance.

The Wife ('W'), was the applicant at first instance, and the first respondent in this appeal.

The Husband ('H'), was the first respondent at first instance and appeared as the second respondent in the appeal.

H and W married in 2002 and separated in 2014. The two children of the marriage were aged 13 and 9 at the time of this appeal.

King LJ, who gave the leading judgment, noted that 'This is yet another case where a highly educated couple with young children has engaged in lengthy, destructive and disproportionate legal proceedings… The costs to date are in excess of £500,000. The only substantial asset in the case, a flat in Panama ("The Panama property"), has a net value of only £298,377' [1].

The Panama Property
In September 2007, H signed a contract for the purchase of an off-plan Panama Property. He paid a number of instalments towards the purchase price between 2007 and 2010.

In 2010, Kensington Realty Co S.A. ("The Company") was incorporated. All 100 shares were issued to Mrs Read, reflected in a share certificate dated 28 May 2010 [13 & 17].

On 24 June 2010, the Panama Property was conveyed from the developers directly to The Company, H having paid the final instalment of the purchase price [21].

H produced various key documents for the first time during the course of the final hearing. This included three documents, all dated 26 February 2010. Each was in identical terms and recorded '"Board Resolutions" which:

(i) Authorise the issue of all the one hundred shares in the Company to Mrs Read;

(ii) Appoint the husband, wife and Mrs Read as corporate officers; and

(iii) Authorise the Company to acquire the Panama Property and the husband to "take delivery of the above property and sign the deed and other associated paperwork"' [13].

The DJ was very surprised at the timing of disclosure, stating 'I find it extremely curious that these important and relevant documents were only disclosed in the way they were' [18].

The Resolutions appeared to be signed by all three parties, and although W first accepted the validity of the share certificate, she later had second thoughts and expressed her 'grave reservations' as to the authenticity of the documents produced by H [19 & 20].

W maintained that at no time had there been any suggestion that the property would be a gift to Mrs Read, and in any event the parties were not in a position to make such a gift. [25]. W claimed that the beneficial ownership was held jointly between H and herself.

H's case was that Mrs Read (through The Company) held the beneficial ownership. H claimed that he had given his mother, as a gift, the funds used to buy the Panama property, although the funds had not actually been transferred to her in advance of the property [31]. H had taken responsibility or everything to do with the property, and during the hearing it was clear that H had not given Mrs Read any money at any time and the entire transaction, including payment, had been conducted by him…' [33].

First Instance
A trial at first instance began on 18 July 2016, with both H and W appearing in person. Mrs Read was represented and attended on 18 and 19 July 2016, but was told on 20 July 2016 that her attendance was not necessary and she left the court building [34]. Oral judgment was given on 29 November 2016. After the judgment, no submissions were made by the parties, either about the judgment or any consequential orders that flowed from it [36]. Mrs Read did not attend the handing down of judgment. She was unwell and filed a medical certificate, her request to adjourn the hearing was declined [36]. A further hearing was listed on 06 January 2017 to work out the final order [36]. Mrs Read was not present on 06 January 2017.

The Final Hearing in July 2016, was, in essence, focussed on the single issue of who owned the beneficial interest in the Panama Property [38].

Findings at First Instance
The Judge at first instance preferred the evidence of W. He was 'absolutely clear that the wife was completely genuine when she said, with some force, that she had no conception that the flat, through the company, was in the name of Mrs Read…' [40].

He went on to make the following findings:

(a) 'On balance I prefer the evidence of the wife. I accept she was not aware of any gift to Mrs Read in 2007 or 2010 or subsequently. I think that the evidence to the contrary of Mrs Read is so thin as to have little weight and I reject the evidence of the husband that he made it clear all along.

(b) There is no evidence of an intention to make this gift in 2007. No contemporary record at all. I think there would have been and I think that when he initially purchased the property he did so in his own name for himself.

(c) There is the evidence of the company records and the board meetings said to have taken place on 26 February 2010, supported by the email on 02 March 2010. I find that the wife's signatures were scanned in and do not show that she was aware of the transaction on that day. I am astonished that such important documents were only provided in the way they are if they are genuine. Mr Read must have been aware of the relevance of the fundamental issue of ownership.

(d) There is no evidence, however, that the husband held the property on behalf of himself and the wife jointly. At most it is his property which is subject to the exercise of my powers under Section 23 of the Matrimonial Causes Act.

(e) Either the husband and Mrs Read are making up, or backdating a contemporary intention that the property should be held by Mrs Read, or the husband was gifting matrimonial assets to his mother without the knowledge of his wife at some time since 2010.

The test is the civil balance of probability. I do not think that the board meeting in 2010 actually happened or that the wife was aware of it. However, I do find that this was his property and it is at least possible that he subsequently formed the intention to give it to his mother and caused this to be entered into the share register. It may well be, in fact I think it is the case, that he prefers his mother to have it than for his wife to have a share. If so he has behaved in an underhand way' [45].

King LJ observed that the findings above may have been enough for the judge at first instance to dispose of the matter. However, the District Judge went on to comment that:

'There is no application before me under section 37 of the MCA but if there were, this would be a case for the avoidance of the disposition. I think that the test in section of 37(2)(b) of the MCA is made out… whether I need to deem an application to be made, or an application is made at this stage, my intention is that this disposition should be set aside so that the property shall be treated as being in the ownership of Mr Read' [46].

At the hearing on 06 January 2017, H sought clarification as to whether the DJ had or had not intended to make a finding that, either on 26 June 2010 or a later date, H after buying the property for himself had disposed of it to Mrs Read by way of a gift [47].

In clarification the judge said:

'…I will make it clear that as far as I am concerned it is any transaction during the relevant period that is intended to have this effect. My judgment, I think, is quite clear as to what I think (a) about the beneficial interest and in so far as the beneficial interest was subsequently transferred at any point by gift, then it should be set aside…

… my point is that, and I make it very clear, so that [H] can understand, my view is that this was his property, that the company was used as a means of holding it, that beneficially, whether it was in the company's name or otherwise it was owned by [H]. Insofar as he at some point formed an intention to give it to his mother, that is the transaction that is set aside, if he did so. Does that make it clear?' [50-51].

The Order
The Order then read:

'Avoidance of Disposition Order

The purported transfer by the First Respondent (H) to the Company dated on or about 26 June 2010 is hereby set aside; if some other disposition of the Panama property to the Second Respondent (Mrs Read) occurred after 26 June 2010 that disposition is hereby set aside.

Lump Sum Order

By no later than 4pm on 06 June 2017, the First Respondent shall pay or cause to be paid to the Applicant, a lump sum of £150,000.'

First Appeal
H and Mrs Read both appealed. Parker J heard the appeal on 02 February 2018. The order was not drawn up or sealed until 25 November 2018.

Parker J dismissed the appeal. She concluded that the judge at first instance had been entitled to make an order under s37(2) MCA and the court had the power to do this without an application having been made.

Mrs Read then filed her notice of appeal. King LJ gave permission to appeal.

Appeal to the Court of Appeal
Grounds of Appeal
Mrs Read's three grounds of appeal were:

1. The judge was wrong in law to find that the decision of the District Judge was not unjust because of serious procedural irregularity in the proceedings.

2. The judge was wrong in law to find that the order made by the District Judge declaring that the husband is and was at all material times the sole beneficial owner of the Panama property was one he was entitled to make.

3. The judge was wrong in law to find that the avoidance of disposition order made by the District Judge was one he was entitled to make [67].

Ground 1
King LJ allowed the first ground of appeal.

Neither H or Mrs Read had the opportunity to address the court regarding the making an Avoidance of Disposition Order. The issue was not before the court, and occurred to the court only during the writing of judgment and was not raised previously.

The absence of an application is not, in itself, inevitably fatal. The court may, in appropriate circumstances, allow an oral application or deem an application to have been made [73].

King LJ held that:

'For my part, I am in no doubt that the way in which the avoidance of disposition order came to be made, amounted to a serious procedural irregularity. Not only was there no application at any stage, but the issue was not raised at trial and through no fault of her own, Mrs Read was not present when judgment was deliver not, crucially, was she present at the hearing on 06 January' [78].

She was clear that this procedural irregularity led to an unjust outcome [80]:

'As a consequence of the failure to raise the matter during the course of the trial, not only was there no focus on each of the elements which must be satisfied prior to the making of a section 37 order, but no evidence was led as to the essential ingredients in respect of the husband's intention at the date of any transfer, whenever that may have been' [81].

Ground 3
Ground 3 was also allowed by the Court of Appeal.

The judge at first instance found on a proper evidential basis that H had retained the beneficial interest of the property at all times [86]. At no time had H held the legal interest, as this was transferred directly from the developers to the Company [86]. There had therefore been no disposal, of either legal or beneficial interest, that was capable of being set aside [86].

Ground 2
King LJ here stepped back to ask where this left the court, once the Avoidance of Disposition Order was set aside? Counsel for H and Mrs Read argued that the totality of the order should now be set aside.

King LJ disagreed and refused this ground of appeal, concluding that there was still a basis upon which the court could order H to pay the lump sum to W. This was due to the judicial finding at first instance that H was and still remained the beneficial owner of the Panama property [92].

'… In my judgment, the judge's "belt and braces" addition of an avoidance of disposition order "just in case" has, unhappily, served significantly to muddy the waters in this case but has not, in any way, undermined the District Judge's fundamental and, it may be thought, completely predictable finding on the evidence, that the husband has at all times held the beneficial interest in the Panama property' [107].

'… It follows from the rejection of Ground 2, that the lump sum order in favour of the wife remains and it is now a matter for the husband whether he requires the legal owner, his mother Mrs Read, to sell the property in order to raise the money with which to satisfy the order, or whether he chooses to raise it in some other way' [111].

Summary by Bethany Scarsbrook, barrister, St John's Chambers

You can read the full judgment of Read v. Panzone & Anor [2019] EWCA Civ 1662 on BAILII