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S v S [2008] EWHC 1925 (Admin)

Judgment in ancillary relief proceedings where the husband had been found guilty of tax evasion and the issue arose of whether the wife’s claim for ancillary relief should be settled before the confiscation order under the Proceeds of Crime Act has been decided.

The couple had married in 1993 and had one child of their own (11) and also adopted the wife’s other child born before the marriage. The husband was an art dealer who was eventually found guilty of several tax offences and was faced with a confiscation order of £900,000. The marriage ended in 2003. The wife was seeking to pursue her ancillary relief claim and argued that there were hidden assets that could provide a surplus. Counsel for the wife also argued that provision for a modest home for the wife should take priority given the need to house the younger child. Further he argued that the matrimonial home was to some extent “untainted” and so should be available to the wife.

Holman J first reviews the case regarding confiscation and ancillary relief. He finds, following Customs & Excise v A, that neither statute takes priority and that the judge is free to exercise discretion. He then goes on to reject the wife’s contention of untainted assets as it was clear that the family had become heavily reliant on the tax evasion to fund their lifestyle, though the wife was unaware of the husband’s actions. He then reviews the s25 factors before concluding that the confiscation order must be satisfied before any ancillary relief claims are met and citing the case of Richards where the Court of Appeal stated that “the court cannot protect every child from every consequence of their parents' behaviour.” 

and EX 05 D 00552
Neutral Citation Number: [2008] EWHC 1925 (Admin)
Royal Courts of Justice
London WC2A 2LL

Date: Friday, 18 July 2008
B e f o r e:

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S v S
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Mr Richard Hickmet appeared on behalf of the wife
Mr Nkumbe Ekaney appeared on behalf of the Defendant/husband
Mr Mark Whitehall appeared on behalf of the child's guardian 
Miss Anna McKenna appeared on behalf of the Third Respondent,  FS
Miss Sheena Cassidy appeared on behalf of the RCPO First Intervenor
Mr Martin Evans (counsel) and Mr Warren Foot (solicitor) appeared on behalf of the Receiver
Mr Rupert Jones (counsel) and Mr Navinder Grover (solicitor) appeared on behalf of the Second Intervenor, SJ
(In Chambers)
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1. MR JUSTICE HOLMAN:  This is a complex and also an unusual case.  I have thus been especially grateful to all the many advocates for their very great help.  The financial part of the case is most polarised between the RCPO and the wife and so I have been particularly grateful to Miss Sheena Cassidy, on behalf of the RCPO, and Mr Richard Hickmet, on behalf of the wife, for their sustained and powerful arguments.  I also particularly thank two solicitors, Mr Warren Foot for the receiver and Mr Navinder Grover for an intervenor (SJ).  They both attended at short notice as advocates and gave me considerable help on a discrete aspect of the case and hearing. 

2. The issue which I now have to decide is whether to permit a full hearing of a wife's claims for ancillary relief in the relatively near future and before assets are applied to satisfying a criminal confiscation order made against her husband; or whether I should adjourn those claims on the basis that they can only be restored once the confiscation order has been satisfied in full.

The Essential Facts
3. I will call CS "the husband" or "father", and JS "the wife" or "mother".  The husband is English and now aged 59.  The wife is Brazilian and now aged 38.  All his adult life the husband has worked as a dealer in paintings and other works of art,  and for many years he has been self employed in his own business. 

4. The parties first met in Germany in 1993.  The wife was living there at the time and the husband was there on a business trip.  They lived together in England from late 1993 or early 1994, and later married in November 1997.  The wife already had a son, FS, from an earlier relationship in Brazil.  FS is now aged 20.  During their marriage the parties jointly adopted FS as their own son.  In all psychological as well as legal respects he is a full member of this family.  The parties also have their own joint child, RS.  He was born on 21 August 1997, and will be 11 next month. 

5. Long before the parties met the husband had owned a piece of land in Torquay upon which he later built a house called La Maison.  There is some dispute by the RCPO as to when exactly the construction of that house was finally completed.  But it was clearly the family home throughout the whole period of cohabitation and marriage. 

6. The method of the husband's art dealing essentially took two forms.  Sometimes he himself bought paintings and works of art which he hoped to   and did   later sell at a profit.  Sometimes he acquired paintings and works of art from other dealers, essentially on a "sale or return" or "on approval" basis.  He would agree with the dealer that if the painting was not returned the price would be so and so.  Meanwhile he would supply the painting to one of a number of clients, still "on approval", and hope that that client would purchase the painting for a greater amount.  His profit was the difference between the two prices.  I have seen mark up figures which might astonish some of the clients.  But all these activities are of course entrepreneurial and completely legal.  I have little doubt that the husband is highly knowledgeable and skilled at his trade, which makes the later developments so tragic.

7. Unfortunately, the husband failed to declare to the Inland Revenue the full extent of his dealing activities and the profits that he was making.  He generated untrue accounts and accounting documents and kept a number of his deals "off record".  As a result, he fraudulently evaded paying income tax by what the sentencing judge, His Honour Judge Crowther QC, the Honorary Recorder of Bristol, later described as "protracted, persistent dishonesty in relation to [his] tax affairs". 

8. The husband first became under suspicion and investigation by the Inland Revenue in 2003.  He was given an opportunity to make a clean breast of it and make a certificate of full disclosure.  Very unfortunately indeed,  even that statement turned out to be untrue and failed to disclose certain bank accounts abroad in which the husband had secreted undisclosed earnings.  The subsequent Inland Revenue investigation persisted for several years before he was formally charged in August 2006.

9. Meantime the marriage had broken down in the Spring of 2003.  The wife petitioned for divorce in May 2003 and claimed all forms of ancillary relief in the normal way.  Mr Hickmet fairly stresses the point that it is now over five years later and those claims have still not been adjudicated upon.

10. There was a decree nisi in July 2004.  Both parties continued to live at La Maison, but in May 2005 the wife was ordered to leave the house and she has not lived there since.  Ever since then she has lived in rented property in the Torquay area.  Broadly, the time of RS was evenly divided  on an alternate weekly basis between living with his father in La Maison and with his mother in her rented home.  The decree was made absolute in December 2005.

11. On 10 August 2006 a restraint order was first made in the Administrative Court.  On 12 August the husband was charged with a number of offences of   in plain language   fraudulent tax evasion.  However he remained on bail.  He continued to trade.  He continued to live in La Maison, alternating the care of RS.

12. In June 2007 the husband pleaded guilty to nine counts of making false statements with intent to defraud.  It became increasingly predictable that he would be imprisoned.  This raised in very acute form what would happen to RS, as evidence had been assembled which tended to indicate that his mother may not be suitable to care for him full time on her own.
13. On 4 September 2007 the husband was indeed sentenced to three years' imprisonment.
14. After a vigorously contested hearing over two days in Truro, Mr Recorder Scarratt decided and ordered in October 2007 that RS should reside until further order (by way of a formal residence order) with FS at La Maison, and should spend weekends (by way of contact) with his mother. 

15. I mention that this whole, desperately sad, story has resulted in very considerable sacrifice by FS.  He took a whole year out from his degree course at Cardiff University  and has spent the whole of the year from September 2007 until September 2008 as the primary carer of his brother.  At the beginning of that period he was still only 19.  They have lived together, alone, at La Maison and FS has assumed the main responsibility for his brother's care, nurture, schooling, homework and recreation; and even taking him on visits to see their father in prison in Gloucestershire.
16. The RCPO applied for a criminal confiscation order pursuant to Part VI of the Criminal Justice Act 1988 (that being the relevant Act for the period of the offending).  On 20 November 2007 in the Bristol Crown Court Mr Recorder  Parish assessed the benefit from the crimes at £900,453.  It was agreed at that time that the realisable assets exceeded that amount, and accordingly a confiscation order was made in the sum of £900,453.  From a careful reading of the ruling of Mr Recorder Parish side by side with the indictment and other materials, it is quite clear that the total period of benefit (i.e. evaded tax) to which the confiscation order relates is from 1988 until the tax year ending in April 2001.  The benefit was calculated as the total of tax which should have been paid but was evaded and not paid, plus interest, plus penalties.  The actual estimated tax due but not paid was £531,716.  The interest and penalties total £368,736.  The combined total is the amount of the confiscation order (rounded with various pence which I ignore). 

17. The confiscation order must be satisfied by 20 November 2008.  The default term is three years' imprisonment.  Not a penny has yet been paid.  (Miss Cassidy has pointed out that with effect from 20 November 2008 interest will begin to accumulate at, currently, 8 per cent on all amounts unpaid;  and that if the amount of the confiscation order outstanding plus any accrued interest thereon later exceeds £1 million the default term is liable to be increased to over five years' imprisonment.)

18. Meanwhile the husband is expected to be released on licence from his sentence of imprisonment on 21 October 2008 and to have some short periods of pre release home leave during September and early October.  FS must return to  Cardiff University and resume his studies there around the weekend of 27/28 September.  The whole question of with whom RS will then live is again very highly contentious.  The mother would like him primarily to live with her.  The father (during any periods of home leave and then after his release on 21 October) would like him to live with him.  La Maison is about to be marketed (for inevitably it must be sold) but until completion of any sale the father proposes that RS should remain seamlessly at La Maison and that he, the father, would care for him there. 

19. RS has a rule 9.5 guardian in these proceedings, Mr Stephen Williams.  It is plain that Mr Williams continues to have very great reservations and concerns about the current suitability of the mother to be the primary carer for RS.  Much simplified, those concerns relate ultimately to the personality of the mother and how it may affect her relationships and behaviour.  (I interpose at this point that I have read the preceding sentences exactly as I drafted them nearly a week ago.  I have not altered them in any way to take account of a letter which I received this morning from the guardian to which I will refer below.)

20. For a significant period Children Act proceedings in relation to RS proceeded locally in Devon and Cornwall in the county court.  Ancillary relief and other financial issues have been conjoined with proceedings under the Criminal Justice Act, and heard in London before judges of the Family Division who are nominated also as judges of the Administrative Court, and specifically before Mr Justice Munby and Mr Justice Charles.  Initially, Mr Justice Munby continued a policy of keeping the Children Act issues and all financial issues separated from each other; but by an order made on 16 April 2008 Mr Justice Charles effectively brought them together and fixed a so called final hearing of all issues, which was listed for five days before myself last week.  I say "so called" because the very order which fixes and refers to "the final hearing" plainly contemplates that it may not in fact prove to be the final hearing: see paragraph 7 which says "notwithstanding the fact that the court may not be able to make a final order, the parties'  respective applications for orders under the Children Act be listed for final hearing before Holman J on 7 July 2008".

21. There is a note but no verbatim transcript of the judgment of Mr Justice Charles.  Mr Hickmet (who was present at that hearing) strongly says and submits that Mr Justice Charles considered that both Children Act and financial matters should necessarily be heard and determined at a composite hearing.  But my impression, gleaned from paragraph 14 of the note, is that what mainly motivated Mr Justice Charles to list all matters before the court in July was the need, if possible, to achieve some resolution before the start of FS's university term in September: " ..... the issue of where RS will be living needs to be determined so FS can go back to university in September 2008". 
22. As Mr Justice Charles foresaw as a distinct possibility, it has indeed proved impossible to make any medium, let alone long, term decisions about RS at this hearing.  In brief summary of a far more complex situation, assessments of the mother's suitability are incomplete, for therapeutic and other parenting work needs to be undertaken by her which is only just beginning to be made available.  The guardian and also an independent social worker, Mrs Jacqueline Spragg, who was instructed to assess the mother on behalf of the guardian,  both remain very guarded indeed whether the mother can appropriately care for RS; but they do not rule her out if she successfully undertakes the proposed therapy and other work.

23. (Since drafting those sentences I have received in the post this morning a letter dated 15 July 2008 from the guardian and sent to me personally.  I have given copies to all parties.  Patently, the contents of that letter serve only to greatly heighten the guardian's worries and concerns.  But I have already decided to adjourn all short as well as long term matters concerning RS to a hearing in mid September.  I do not alter any part of the present judgment and decisions in the light of that letter.  If I had been required to make any very short term decisions covering the next six to eight weeks I would have done so separately after this judgment.  In the event, neither parent nor the guardian nor FS are present here today, nor indeed are several of the solicitors.  For that reason it is quite clear that I should not and cannot make any positive orders in relation to RS even of a very short term nature, despite the letter.)

24. The guardian is also currently unclear whether the father, whose parenting suitability has not recently been  assessed, can appropriately care for RS after his release.  The upshot is that at the outset of the hearing last week both parents and the guardian, with the support also of Mrs Spragg (who was the only person to give any oral evidence last week), all united in asking me to adjourn the Children Act proceedings and all consideration of with whom RS should live either long term or even short term.  At their joint request, all issues with regard to residence of, and contact with, RS will be adjourned.  Until the end of September he will continue to reside at La Maison with his very loyal and supportive brother, FS.  The mother will begin to undergo the therapy and other work.

25. At a one day hearing in mid September a court will decide (if still disputed) the immediate arrangements for RS for the next few months after FS returns to university and  after his father is at continuous liberty after 21 October.   That decision will take into account, amongst other matters,  the progress of the mother's therapy and work between now and mid September.  In the period from mid October until about the end of the year, further assessments of the mother and an assessment of the father (all by Mrs Spragg as well as by the guardian himself) will take place. 

26. In the early Spring of 2009 a court will, it is hoped,  make much longer term decisions as to the residence of RS in the light of those assessments. 

27. I wish to make crystal clear that for all purposes connected with the present judgment I personally have a completely open mind as to whether RS will live in the long term primarily with his mother or with his father.  I do not pre judge in any way at all assessments or further assessments which have yet to take place.  There is also the possibility, although I sincerely hope it does not materialise, that the assessments so rule out either parent as a main primary carer, that RS might have to live mainly with a foster family or in some similar setting.  (That comment, too, is exactly as I had drafted it before receiving the  guardian's letter.)  Although I do not pre judge anything, I will however, as I will make clear, later make an assumption that RS lives long term with his mother. 

28. The question that now arises and which this judgment addresses is what should happen to the wife's claims for ancillary relief and whether they, like the child matters, should simply be adjourned to a composite hearing early next year. 

29. This many faceted litigation (including the connected but very distinct resolution of the claim of SJ to which I will later refer) has already occupied a considerable amount of court time and many hearings, and all at very considerable cost.  I have been told that the total costs to date of all parties, of all aspects of the litigation, is roughly as follows.  The RCPO has incurred about £43,500 (excluding the costs of the Juffali litigation).  The wife has incurred about £130,000.  The husband has incurred about £66,300 (excluding the costs of the Juffali litigation).  The guardian has incurred about £25,400.  And FS, who has necessarily been separately represented, has incurred about £12,800.  Those figures total £278,000.  The additional costs of the husband, specifically in relation to the Juffali  litigation, are about £20,000.  I have not been given a figure for the costs of the RCPO or receiver in the Juffali  litigation, but assume that they may be similar.  (They could hardly be less).  Thus the combined costs to date are already well over £300,000. 
30. All these costs have been funded either directly out of public funds or (in part) out of the assets frozen by the restraint order and required to satisfy the confiscation order   which is itself paid into public funds.

The Rival Positions
31. On behalf of the RCPO, Miss Cassidy has very strongly submitted, in essence, as follows.  On all the known facts of this case and even making assumptions most favourable to the wife/mother on unknown or uncertain facts of the case, there is no realistic prospect of any court making any order for ancillary relief in favour of the wife/mother until the  confiscation order has been satisfied in full.  On all the currently available and predictable figures there are already less assets than the amount of the confiscation order.  On all the facts and in all the circumstances of this case,  satisfaction of the confiscation order must take priority over any provision for the wife/mother.  Accordingly I should decide, rule and order now that the wife's claims for ancillary relief must be adjourned generally and only capable of being restored if and after the confiscation order has first been satisfied in full.

32. Miss Cassidy submits that to adjourn the ancillary relief application to a further composite hearing with the Children  Act matters early next year (a) is futile because it is already clear now that no order should be made until the  confiscation order has been satisfied in full; and (b) locks the RCPO into continuing expensive involvement in these now futile claims and would keep them involved (as they were last week) in proceedings concerning the residence of RS which have nothing whatsoever to do with the RCPO; and (c) will simply add to the length of the next hearing, the costs to public funds and the continual eroding of the assets available to satisfy the confiscation order.
33. Mr Hickmet, on the other hand, does not accept that there are already insufficient assets to meet the confiscation order.  He very strongly argues that in any event reasonable provision for the wife (in particular for a modest home) should take priority over satisfaction of the confiscation order out of the currently identified assets.  He submits more generally (but no less cogently) that the wife has already been waiting five years for trial of her claims for ancillary relief; that she is entitled to a fair trial of them; and that I cannot or should not adjourn them save after a full hearing and not after the limited hearing (with no relevant oral evidence) that has taken place last week.  His overarching submission is that there are still hidden assets.  If the court does make provision for the wife out of the identified frozen assets before the confiscation order has been satisfied, the husband will then reveal the hidden assets so as to avoid serving a default term.  If it does not do so, he argues, the confiscation order will become satisfied out of the identified assets (with or without a possible certificate of inadequacy); all the pressure will be taken off the husband; and, he predicts, the wife will never get a penny. 

34. On behalf of the husband/father, Mr Nkumbe Ekaney made submissions which were both measured and skilled.  He and his client of course know very well that the husband must be seen to take a course of neutrality and to evince a desire to satisfy as soon as he can the demands of the confiscation order.  Mr Ekaney said that his clear instructions are that the husband wishes to satisfy the confiscation order in full.  He knows that he must pay the tax, interest and penalties which the confiscation order represents.  He is adamant that there are absolutely no hidden assets than those known to the RCPO and all parties to these proceedings.  There is now already a shortfall.  There is accordingly simply nothing out of which ancillary relief can be paid to the wife.  Any further consideration of it is a waste of time and money and exposes him to a continuing risk of serving the default term.  Mr Ekaney closed by saying that it is the clear instructions of the husband that he wishes to satisfy the confiscation order in full as soon as possible and in priority to all else. 

35. These competing arguments bring into play a range of powers and duties upon the court and a range of different discretions, namely under Part VI of the Criminal Justice Act 1988; under sections 23 to 25 of the Matrimonial Causes Act 1973; and under the case management powers and duties of the court.  There has been much discussion also of the possibility of the court exercising discrete powers and duties in relation to RS under Schedule 1 to the Children Act 1989. 

The Key Question at this Hearing
36. I propose to consider, first, the following question: on all the known facts and making the most favourable assumptions in favour of the wife/mother, might a court make an order for ancillary relief in her favour before, and in priority to satisfaction of, the confiscation order?

The Assets and Finances
37. I take the worth of the wife as nil.  She apparently has some land in Brazil which may be worth the equivalent of £3,000, but I ignore it.  The known assets of the husband (all now subject to the restraint order and in the hands of the receiver) are as follows.  

38. In June 2008 the well known West Country estate agents, Stags valued La Maison at £925,000.  It is about to be marketed by Savills with an asking price of "offers in excess of £1 million".  In the current state of the market the actual sale price, and indeed date when any sale may be achieved, is obviously difficult to predict.  I will assume a sale is achieved at, at any rate, £925,000.  There is a first mortgage to the Cheltenham & Gloucester Building Society in the sum of about £410,000 and a second charge to Barclays Bank in the sum of about £427,000.  The husband also owns a flat in London at 261 Brompton Park Crescent.  This may be close to sale with estimated net proceeds of about £328,000.  The debt to Barclays Bank is charged also upon this flat.  The upshot is that the combined net equity in the two properties after all costs of sale and redemption of all charges may be of the order of £390,000.  Within that sum there is an uncalculated inherent liability to some capital gains tax on the flat in Brompton Park Crescent.

Bank Accounts
39. Excluding the £250,000 in a separate account and now earmarked for SJ (see below), there appear to be currently about £27,000 in bank accounts.

Pensions and Policies
40. There is a range of pensions and policies having a surrender value or CETV totalling about £124,000 (these include a policy with Standard Life which is also assigned to Barclays Bank; but if their debt is repaid from the property sales, that policy will of course be freed up).

Other Sundry Assets
41. A Porsche car and number plate, chattels at La Maison and some shares in Standard Life total in all about £42,000.

Paintings, art work and SJ
42. The husband currently owns in his own right (but as part of his business stock) a quantity of paintings and works of art actually now deposited with Christie's.  It is intended that they will all be sold at suitable auctions over the next six to nine months.  Inevitably the net price achievable is speculative, but Christie's estimates indicate a bracket of about £110,000 to £160,000, from which I assume costs of sale will be deducted.  One painting has very recently been sold for £40,000, net of commission. 

43. Quite separately, there is a quantity of paintings and art work currently in the possession of SJ, partly in London, partly at his house in Devon and partly at his pallazzo in Venice.  When the husband delivered these paintings to SJ he paid to the husband the sum of £250,000 as a returnable "deposit" which is now in a separately identified interest bearing account.  The High Court has recently determined and declared that the husband holds that £250,000 plus interest thereon on trust for SJ and it must therefore be excluded from the husband's assets.  It may yet be that SJ will wish to buy all or some of the paintings and art work, and the receiver and SJ are in negotiation as to price through their respective solicitors, Mr Foot and Mr Grover. 

44. The actual cost price of these paintings and art work to the husband from the dealers if they are not returned totals about £94,000.  The husband had rendered pro forma invoices to SJ in a total sum of several hundreds of thousands of pounds, no doubt hoping to make a considerable profit on the turn.  (The financial investigator, Miss Michaela Woodhouse, referred in paragraph 9.19 of her statement to the Crown Court to an average mark up of 227 per cent).

45. The dilemma now is that, as a result of these and associated proceedings, SJ and his advisers know the invoiced cost to the husband of each painting and work of art, and the negotiating position of the receiver is weak.  Mr Hickmet very confidently submits that SJ will buy everything and nothing will be returned.  That may well prove to be the case, but price is a very different matter.  The whole position is potentially very complex and hugely time consuming.  There are about 50 paintings and works of art in three locations, and 12 different third party dealers/owners who must be paid or to whom their respective paintings must be returned.  Any paintings which are returned by SJ to the receiver will have to be returned in turn to the various dealers.  Packing, transit and insurance costs will be incurred.  There may be a range of disputes as to the condition of any given painting and if there has been damage by whom the damage was done. 

46. During the hearing (and much assisted by Mr Foot and Mr Grover) I made an order designed to give some focus and a timetable to final resolution of the position in relation to the paintings held by SJ.  At the moment the outcome is very speculative.  But for the purpose of this part of this judgment I am going to assume that they are sold to SJ at £200,000, a mark up of a little over 100 per cent, and that after payment to all the dealers a gross profit is retained in the hands of the receiver of about £100,000.  

Total known Assets and Expenses
47. A total of all the above figures is thus:  

Properties net but ignoring CGT   £390,000
Bank Accounts                          £27,000
Pensions and Policies                £124,000
Sundry Assets                           £42,000
Art at Christie's                          maximum  £160,000
Picture recently sold                   net   £40,000
Profit from Juffali art                    £100,000
Total                                         £883,000

48. From the above figure the receiver must pay, under orders already made, £51,700 (inclusive of provision for VAT) to the wife's solicitors to fund their costs in a period when she is not legally aided (see below); and £17,625 (inclusive of VAT) to the husband's solicitors towards their costs of the hearing in relation to the claim of SJ. 

49. In addition, there are the continuing costs of the receivership which in this complex situation are unlikely to be cheap.  In short, unless there are hidden assets or unless the price of the art at Christie's or the profits on the Juffali deal turn out to be significantly greater than the above figures, there will be a considerable shortfall between the amount of the confiscation order (just over £900,000) and the net realised assets which are now already probably under £800,000 (after costs deductions) and continue to be eroded. 

50. I mention that the husband has considerable other debts.  These include credit card debts of about £26,000; acosts debt now to SJ, not yet assessed but estimated at £85,000; and an estimate of further tax owed to HM Revenue & Customs (not the subject of the charges or the calculation of benefit) which may be as high as about £350,000.  However, none of these take priority over satisfaction of the confiscation order.  I will make the assumption in favour of the wife (which may be highly favourable to her) that they would not take any priority over her claims to ancillary relief. 

51. I said earlier that at the time when the confiscation order was made it was agreed that the realisable assets exceeded the amount of the benefit.  The most significant reason for the change is that at that stage the £250,000 received from SJ was counted in as an asset of the husband.  In the light of the later judgment and declaration it must now be excluded. 

52. Additionally, a number of values have fallen (La Maison was, for instance, valued in October 2007 at £970,000); I have assumed a 100 per cent rather than a 227 per cent mark up on any sale to SJ (since SJ now knows the sums payable to the dealers); and the receiver has already incurred considerable expenditure or liabilities, including the costs funding figures payable to the solicitors for the wife and the husband.  Of course, actual prices obtained for any of the properties or other assets may be more or less than any one or more of the figures assumed above.  But even making the most favourable assumptions for the wife, it seems highly unlikely that realisation of all the known and identified assets will leave a net figure in excess of about £800,000 and certainly not enough to satisfy the confiscation order in the sum of about £900,000. 

The Authorities and Approach
53. My attention has of course been drawn to the well known authorities of the Court of Appeal in this field of Customs & Excise Commissioners v A and another AvA [2003] Fam 55 and CPS v Richards and Richards [2006] EWCA Civ 849.  In my view the only true point of law which these authorities establish is, as stated by Lord Justice Schiemann in paragraph 43 of A, that nothing in the relevant provisions of either the Criminal Justice Act 1988 or the Matrimonial Causes Act 1973 requires the court to hold that either statute takes priority over the other.  Both statutes confer discretions on the court and the court has to weigh its discretions under both statutes before deciding what orders to make.  As Lord Justice Schiemann said at paragraph 44, "Each case must depend upon its facts" and in my experience the outcome in cases such as this is  highly fact specific. 

54. But even if they do not establish any other proposition of substantive law, the cases of A and Richards of course give very considerable and authoritative guidance as to the impact upon discretion of various factual circumstances.  The difficulty for the judge at first instance is that A and Richards respectively were at the extreme opposite ends of a factual spectrum.  This case, like many cases, falls somewhere in the middle. 

55. In A, the wife already had her own interest in the matrimonial home which was already slightly greater than half (see paragraph 27) and she was still in occupation of it.  It is unclear when the offending began but it may even have been only after separation (see paragraphs 28 and 29: separation in November 1996; earliest known evidence of drug trafficking 12 December 1996).  No part of the equity in either the house or the policies (the two assets against which the wife was claiming) was acquired with the proceeds of drug trafficking (see paragraphs 36 and 37).  There was "no victim" and "no creditor" (see Lord Justice Judge at paragraph 97).  In the view of Lord Justice Judge, the circumstances of that case were "exceptional and an exceptional order was appropriate" (see paragraph 97).  So the Court of Appeal did not interfere with the judge's discretionary decision to transfer to the wife the husband's interest in the house (which was already less than a half of it) and the policies. 

56. It should perhaps also be noted that in A the actual amount of the confiscation order still outstanding was £29,360.  At paragraph 48 Lord Justice Schiemann commented that it was not a proportionate outcome to garner such a relatively modest sum at the cost of "a substantial injustice" to the wife.  Further, weight was attached to the right of the wife to continue to enjoy her property in specie (see proposition (ii) in paragraph 41, read with paragraphs 50 and 85). 

57. In Richards, on the other hand, all the family assets (other than a gift from the wife's parents) were the proceeds of drug trafficking and the wife knew that "from the word go" (see paragraph 9).  In those circumstances, notwithstanding the needs of a 5 year old son who was living with the wife, the Court of Appeal set aside all discretionary provision for the wife.  The Court of Appeal said that the "inevitable consequence" of the finding that all the assets were tainted was that no discretionary award could be made in priority to satisfying the confiscation order.  The court observed at paragraph 27 the sad "fact that the court cannot protect children from every consequence of their parents' behaviour." 

58. As well as those authorities, Miss Cassidy kindly showed me the judgment handed down only last Thursday by the Court of Appeal (Criminal Division) in SFO v Lexi Holdings PLC (in Administration) and M [2008] EWCA Crim 1443.  I have, as asked, read that judgment; but it does not seem to me to add anything to the above authorities in the matrimonial field.  It concerned variation of a restraint order made under the 2002 Act to enable payment to be made to a judgment creditor in advance of any confiscation order being made, or indeed  before any criminal charges had even been preferred.  In the last sentence of paragraph 73 the Court of Appeal (Criminal Division) said in terms that cases such as Webber (and the  present case) are dealing with a special situation.

This Case
59. In the present case it is conceded, and I accept completely and without reservation, that from first to last the wife was utterly unaware of the tax evasion and the frauds.  She was and is wholly innocent, and indeed all my sympathy is with her.  There is a faint suggestion that some money from a secret foreign account passed briefly through an account in her name.  But I accept or, at any rate, unreservedly assume that that was machinations by the husband of which   or at any rate the purpose and implications of which   the wife was completely unaware.  In this respect the wife is as innocent as was the wife in A, and to that extent the cases are on all fours with each other.  But, in contrast  with the wife in A, the wife in this case has not got and cannot assert any existing legal or beneficial interest in any of the assets to which she has financially contributed nothing.  And, unlike that wife, this wife is not occupying her own property in specie. 

60. Further, the crimes in this case cannot be viewed as crimes with "no victim" or "no creditors".  Many cases concern drug dealing.  Although all society suffers grievously from the evils of drug dealing, there is usually no identifiable victim.  The dealers in the chain make their profits.  The ultimate users get the drugs they want at a price they are willing to pay. 

61. In the case of Revenue fraud there is a victim, namely the state.  In this regard it is worth quoting the statement of offence in each of the nine counts in the indictment:

"Making false statements tending to prejudice Her Majesty the Queen and the Public Revenue with intent to defraud Her Majesty the Queen, contrary to common law."

There is no greater or more general personification of the  state than Her Majesty the Queen in her role as head of the state.  It may be that in cases where there is truly a crime with no victim, the purpose and effect of a confiscation order can be no other and no greater than to deprive the criminal of the fruits of his crime and to take the fruits of crime out of public circulation.  But in the case of these crimes the making of a confiscation order does have a dual effect.  I appreciate that the Treasury has different budgets and accounts and that the proceeds of the confiscation order will not, or may not, be directly credited to HM Customs & Revenue.  But it will go into what Lord Justice Schiemann described in paragraph 48 of A as "the coffers of the state" or to "Her Majesty the Queen and the Public Revenue" in the broadest meaning of that phrase.

62.. Mr Hickmet has submitted that I should not confuse or blur in this way the generality of a criminal confiscation order under the 1988 Act with the recovery of tax.  He said that the Inland Revenue might, alternatively, have made tax assessments and, ultimately, bankrupted the husband to recover the tax as tax.  He agrees that if they had done so, the wife could not have pursued claims for ancillary relief until the debt was satisfied or the bankruptcy discharged.  But he submits that the Inland Revenue chose to prosecute and chose to seek a criminal confiscation order, thereby exposing themselves to the discretions of the court under Part VI of the Criminal Justice Act 1988 and the parallel discretions under the Matrimonial Causes Act 1973. 

63. I agree and accept that these discretions do indeed arise and must be exercised.  I consider that in exercising them the court is not only entitled, but bound, to take into account, as one of the circumstances of the case, that the crimes in point were defrauding the Revenue; that if the  confiscation order is satisfied, the coffers of the state  will receive money (including interest and penalties) lawfully due to it; and that the existence of an identifiable victim, albeit the state, that will be indirectly compensated by means of the confiscation order is a relevant factor in the exercise of my discretions. 

64. There has been much reference in the authorities and in the argument before me to "taint".  Mr Hickmet very strongly submits that as the land on which La Maison is built had been purchased long before the offending, and as (as I will assume  in favour of the wife) the house itself had been entirely constructed before the onset of the offending, it is "untainted".  He submits, further, that as the tax evaded is 40 per cent on any income or profits, any of the assets are only "tainted" as to 40 per cent of their value and are "untainted" as to the balance.  He submits, therefore, that the whole of the equity in La Maison is "untainted" and that all the other realisable assets are "untainted" as to 60 per cent.  So even if the realisable assets are only finally, say, £800,000, he submits that at least £480,000 of that is untainted by the offending and should, consistent with the authorities, be treated as available to satisfy the wife's claims in priority to the confiscation order. 

65. I cannot accept these arguments.  "Taint" and the concept of "taint" can be readily considered in the case of crimes which generate proceeds: the profits from drug dealing, the product of fraudulent transactions, or simply stolen cash.  In each case there are   at least notionally   identifiable proceeds of the criminal act itself and it is, or may be, possible by a process akin to tracing to say whether those proceeds did or did not fund the acquisition of a given asset.  In A the purchase of the house was clearly untainted.  In Richards every asset was clearly tainted. 

66. In the case of tax evasion, however, the situation is rather different.  All the activities of the husband were legal and the profits lawful.  Everything he earned and everything he now owns was the proceeds of his lawful trade as an art dealer.  The crime is the fraudulent evasion of income tax.  Income tax is a tax on profits and earnings but (except in the case where tax is deducted at source) is not required to be paid out of any specified asset or piece of income.  If the husband had made true tax returns and been assessed to the full amount of tax due, he could have paid that tax out of any asset of his choice, including, if he chose, by selling his house and paying it out of the proceeds.  He did not do so.  He continued to meet a range of expenditure, including paying the mortgage and all the outgoings on the matrimonial home La Maison, until the whole of his and his family's economy (for the wife has no assets or income of her own) became pervaded by the fraud. 

67. The fraud covered a period from 1988 until 2001, well over 10 years.  The total tax evaded (even excluding penalties and interest) was about £530,000, which was a very significant sum indeed in proportion to the wealth of this family. 

68. It cannot be said in this case, as it could in A (at paragraph 47), that "the property in which she lives ..... is untainted".  Indeed, the very fact that the assessed tax, interest and penalties is about £900,000 and that the  husband's net assets (before any deductions are made for costs and the costs of the receivership) are little different merely serves to underline how deeply dependent the whole family economy had become on the evaded tax. 

69. Insofar as I am exercising powers and discretions under sections 77 to 81 in Part VI of the Criminal Justice Act 1988, I must of course bear in mind the provisions of section 82 and the "legislative steer" in section 82(2), viz

"Subject to the following provisions of this section, the powers shall be exercised with a view to making available for satisfying the confiscation order ..... the value for the time being of realisable property held by any person by the realisation of such property."

The authorities make plain, however, that this is indeed no more than "a steer" and they stress the degree of "elasticity" inherent in the phrase "with a view to"   see most recently paragraphs 69, 72 and 80 of SFO v Lexi

70. I must also, however, exercise discretions under sections 23 and 24 of the Matrimonial Causes Act 1973 and consider the duties under section 25.  Section 25 (2) requires the court to have regard in particular to the matters then listed in paragraphs (a) to (h).  It is possible to address some, though not all, of these even at this stage of the proceedings.  I have already described the known property and other financial resources which each party currently has.  Neither currently has any income.  The husband is in prison.  The wife's income is minimal.  The income which they are likely to have in the foreseeable future is speculative and may be affected by which of them is the primary carer for RS. 

71. Mr Hickmet strongly submits that upon release the husband only needs to do one or two good deals along the lines of the intended deal with SJ and he will again rapidly earn substantial sums of money.  Mr Ekaney submits that the suggestion that the husband will "re emerge from prison" and earn the sort of sums he has earned in the past is "fantastic".  He submits that the husband is now a broken man; aged almost 60; and his reputation throughout the art world tarnished, if not ruined, by dishonesty and imprisonment. 

72. Some of the financial needs, obligations and responsibilities of each of the parties are tolerably clear.  Each ideally needs a reasonable, if modest, home and each has obligations and responsibilities towards RS. 

73. The standard of living enjoyed by the parties before the breakdown was very comfortable.  They lived in a very nice house in Torquay.  The husband drove a Porsche.  They lived well.  But it would not have been possible if he was fully paying his taxes.  They are aged 59 and 38.  The total period of cohabitation and marriage was about 10 years from first cohabitation until petition.  That is a very significant period.  There are no significant physical or mental disabilities, although concerns have been raised about the personalities of each of them.  Each has contributed to caring for FS, while a minor, and for RS.  The wife played her part to the full as wife and mother and in looking after the home.  The husband was of course the breadwinner,  and although he defrauded the Revenue he worked hard and with skill to earn all that he did earn.  The contributions which each is likely to make in the foreseeable future are not fully predictable because it is not yet known with whom RS will live.  I will unreservedly assume for the purpose of this judgment that RS will live primarily with his mother,  but spend time also staying with his father. 

74. In my view, the fraudulent activities of the husband do constitute conduct which it would be inequitable to disregard within the meaning of paragraph (g).  He has brought shame upon himself, despair to the wife, and destroyed the economy of this family.  The wife and the children have all suffered very greatly indeed as a result.  The wife is indirectly a victim and all my sympathies are with her.  As between the husband and the wife (and ignoring at this point any needs of RS), the reasonable needs of the wife must take priority over any needs of the husband.  If, as between the two of them, they cannot both be reasonably provided for, then it is the guilty husband whose conduct has caused the catastrophe who must suffer and not the innocent wife.  There is no loss to either party of the kind contemplated by paragraph (h). 

75. The overarching duty is, however, in section 25 (1).  The  court must have regard not only to the matters particularised in section 25 (2) but to all the circumstances of the case and must give first consideration to the welfare while a minor of any child, viz, in this case RS. 

76. Insofar as I am applying the Matrimonial Causes Act, Mr Hickmet strongly submits that it is impossible at the moment  properly to give first consideration to the welfare of RS  when it is not even known with whom he will primarily live.  Obviously, if RS lives with his mother that adds to her own need for a suitable home of a size suitable for both herself and RS, and must add weight to her claim.  But I am willing to assume, and do assume for the purpose of this judgment, that RS does live with his mother and, accordingly, that she does have a strong need, if at all achievable, to have a reasonable home of a reasonable size and quality in proportion to La Maison in which RS and she can live. 

77. On the basis of estate agents' particulars within the papers, Mr Hickmet submits that, if the funding is or can be available, at least £300,000 would be required for such a home.  As the family home is worth in the order of £900,000 and in light of the particulars produced, I fully accept that submission. 

78. I return, therefore, to the key question posed at the outset of this section of this judgment: on all the known facts and making the most favourable assumptions in favour of the wife/mother (in which I include an assumption that RS lives with her) might a court make an order for ancillary relief in her favour before, and in priority to satisfaction of, the confiscation order? 

79. After due consideration I am quite clear that the answer to that question is no.  Despite the total innocence of the wife and despite her strong need for an owner occupied home for both herself and RS, I am quite clear that satisfaction of the confiscation order must first prevail in view of the following facts and circumstances: (i) the scale of the offending and the amount of the confiscation order; (ii) the amount of the confiscation order is no greater than the tax, interest and penalties already due; (iii) the state is the victim and the effect of the confiscation order will be not merely to deprive the offender but to reimburse or compensate the state; (iv) the scale of the evaded tax relative to the assets of the family as a whole and the pervading effect on the whole family economy means that it is impossible to carve out any given asset or portion of the assets and regard it as "untainted".  In addition, this case lacks several of the cumulatively important circumstances in A.  In A, the offending began at or after separation.  Here it preceded and persisted throughout the relationship and marriage.  In A, the wife had an existing legal and beneficial interest in the house and remained in occupation.  The present wife does not.  In A, the balance outstanding under the confiscation order was relatively small.  Here it is large.

80. In this case, despite its elasticity, the legislative steer must prevail and, as the Court of Appeal commented in Richards, the court cannot protect every child from every consequence of their parents' behaviour. 

81. I have already expressed my great sympathy for the wife and indeed for RS, but I echo also a comment by Lord Justice Mann in In re Peters [1988] 1 QB 871 at 881 that

"There is, in the light of section 13 (2) [viz the identical legislative steer in an earlier Act] no room for the intrusion of sympathy."

Unless and until the confiscation order has been satisfied in full, both the wife and RS will have to live at the standard and by the means provided by the state out of welfare and other benefits and entitlements. 

Hidden assets
82. I turn to Mr Hickmet's additional argument that there remain hidden assets and that the court should make an order in favour of the wife out of the restrained funds so as to induce the husband, if he does not want the default term to be triggered, to reveal those assets.  Mr Hickmet very strongly submits that there continue to be hidden assets.  He refers, first, to the complete lack of credit which now attaches to anything the husband asserts, in particular in light of count 9 of the indictment and the fraudulent certificate of full disclosure in January 2003.  He says that the husband had other rich foreign clients as well as SJ, and refers to a letter from the husband to SJ (now in bundle D, page 63) which referred to "a second client in the Ukraine, for whom [sic] we have been trying to satisfy.  Our deadline for the last shipment to this address [viz the client in the Ukraine] is September 3 ..... "

83. Mr Hickmet points to the, presumably considered, opinion of the investigator, Michaela Woodhouse, at paragraph 9.24 of her report to the Crown Court, dated 10 October 20007, which says:

"Hidden Assets
9.24 I believe that the defendant has secreted assets overseas and, as a result, that the full extent of his assets cannot be confirmed.  As stated at paragraph 3.6 above, the defendant deposited approximately £5.3 million into undisclosed bank accounts in Switzerland, Gibraltar and at the NatWest Bank in the UK between 1987 and 2003.  The present location of those funds is unknown.  I believe that the defendant has monies in other bank accounts worldwide about which I am unaware.  As stated at paragraph 6.3, the defendant has been the recipient of monies transferred outside of the orthodox banking system from abroad."

84. As to this, however, Miss Cassidy points out that in the "schedule of available realisable assets" actually placed before the Crown Court (now in the RCPO bundle at page 175) the prosecutor quantified the "hidden assets" at £74,000.  On the occasion of sentence itself, counsel for the prosecution  had said (on internal page 4 of the transcript of the sentencing hearing on 4 September 2007) 

 " ..... as to where the money went, ..... let me make it quite clear that there is no suggestion here made by the prosecution that money has been salted away that we do not know about."

85. Miss Cassidy further points out that, as the known assets are already now substantially less in value than the amount of the confiscation order, there is an active and continuing  duty upon the receiver to search so far as he reasonably can for any other assets.  She says that the receiver has followed up any lead or information which the wife has given to him and will continue to do so.  She says that the husband has been under investigation since January 2003; 35 witnesses have been interviewed and statements taken from them, but so far the receiver and the RCPO have no evidence of other hidden assets.
86. Before the existence of hidden assets could decisively affect the above discretionary decision there would have to be enough (a) to bridge the size of the shortfall between the amount of the confiscation order and the known net assets, at least £100,000; and (b) to justify a lump sum in whatever amount is decided.  In other words, even to make a lump sum order in the sum of, say, £150,000 (which might fund a  minimal flat for the wife and RS), the court would have to assume, infer or conclude that there are hidden assets of about £250,000.  At the moment, I have not seen anything which would begin to justify such a conclusion. 

Case Management
87. Insofar as I am considering proceedings in the Administrative Court, the CPR and the overriding objective therein are directly in point.  Insofar as I am considering the Matrimonial Causes Act and ancillary relief, FPR rule 2.51 D applies the overriding objective.  I need to deal with  the case justly.  This includes, so far as practicable, saving expense, dealing with the case in ways which are proportionate, ensuring that the case is dealt with expeditiously and fairly, and allotting to it an appropriate  share of the court's resources.  Active case management includes, amongst other matters, identifying the issues at an early date and fixing a timetable or otherwise controlling the progress of the case. 

88. At this hearing, and by this judgment, I have identified that on the known assets   and even making the most favourable assumptions to the wife, including that RS lives with her   the wife simply will not obtain any ancillary relief unless and until the confiscation order has been paid in full.  To contemplate any further hearing of ancillary relief until that time is simply to contemplate a considerable waste of costs (all of it public money) when so much has already been spent, and an unjustifiable waste of the court's time and resources. 

89. Put bluntly, this application for ancillary relief is currently heading absolutely nowhere and I cannot allow it actively to continue.  I stress, of course, that I do not dismiss any part of it.  If, later, La Maison or paintings sell for more than expected; or if a particularly good bargain is struck with SJ; or if some hidden asset does emerge, such that there is a surplus after satisfying the confiscation order and paying the receivership costs, then of course the wife's claims can be restored as to that surplus. 

A claim by or on behalf of RS
90. At this moment no party has actually made any application for or on behalf of RS himself, whether by reference to the relevant provisions in sections 23 and 24 of the Matrimonial Causes Act 1973 or to Schedule 1 to the Children Act 1989.  It has been suggested that, at the very least, there may be scope in this case for a Mesher order to provide a home for RS until he is aged, say, 18 or perhaps until he has finished any university education.  Mr Hickmet has stressed paragraph 1 (6) of Schedule 1 and the power of the court to make an order under that schedule of its own motion "on making, varying or discharging a residence order ..... "  He submits, therefore, that on making the decision early next year as to with whom RS is to reside, the court may wish to exercise those powers.  He says that it would be positively disadvantageous and uneconomical of costs and court time, and  bad case management, if at that point a further financial hearing had to be set up. 

91. I make quite plain that I am not even adjourning any application by, or on behalf of, RS, since none has ever been made and so none is before me.  I cannot and do not in any way claim or purport to bind any future court which may decide that it should exercise its powers in favour of RS under Schedule 1.  But I currently consider and predict that it is very unlikely indeed that a court will consider that it should exercise those powers unless and until there is a surplus after satisfying the confiscation order, for reasons similar to those already given. 

92. It is true, as Mr Hickmet says, that in paragraph 25 of their judgment in Richards the Court of Appeal adverted to wondering at one stage whether an order could be made in favour of "the untainted child".  On the facts of that particular case they went on to say that 

"that is clearly open to the same objections that no assets available should be distributed where, to the knowledge of the applicant seeking relief, they were derived from drug trafficking."

The reference to "the applicant seeking relief" in that case was to the wife/mother.  So Mr Hickmet strongly submits that the present case is different because the wife/mother in this case had no knowledge of the offending. 

93. The overall facts of the present case are, however,  different.  It does not concern "tainted assets" in the Richards sense.  None of the reasoning which applies in the present case to the wife (who is innocent) applies any the less to the child (who is also innocent). 

94. I note that in Richards the Court of Appeal did not even refer to the alternative possibility of provision for the child via Schedule 1 to the Children Act and by passing the need for an "applicant seeking relief" who had guilty knowledge.  The reason is that resort to Schedule 1 would be an obvious device.  It is not normal in matrimonial cases to make provision for children under Schedule 1, precisely because there is a range of powers to do so within the Matrimonial Causes Act itself.  Although the facts of the present case differ from Richards, the thrust of paragraphs 25 to 27 nevertheless applies.  I do not preclude consideration of Schedule 1 at some later date, but my present view is that it is so unlikely that provision would be made for RS under Schedule 1 that I should not make any provision now for a hearing. 

Other Matters
Costs and Interim Maintenance
95. By paragraph 2 of his order dated 6 June 2008, Mr Justice Charles provided that the receiver was authorised and directed to pay a total (inclusive of VAT) of £51,700 to the wife's solicitors "in relation to her reasonable costs of these proceedings". 

96. The history and reasoning behind that order is complex.  In simplification, the wife was formerly publicly funded by the Legal Services Commission ("LSC").  In January 2008, at the wife's request, Mr Justice Munby increased the level of interim payments that the court directed the receiver to pay to her for her maintenance and support.  Unwittingly, and without either the court or the wife's advisers foreseeing it, the increased level had the effect that her public funding was terminated on a means tested basis.  So in April Mr Justice Charles again reduced the amount of the interim payments to  below the relevant threshold.  But in paragraph 43 of the note (there is no official transcript) of his judgment,  Mr Justice Charles said:

"If the order I have made does not result in a re introduction of legal aid funding, there should be provision from the assets to meet the costs of her litigation.  I put that figure at £40,000 .....   It may be that a decision by the Legal Services Commission not to fund the wife would lead to a judicial review of that decision by the RCPO."

97. As I understand those comments, Mr Justice Charles intended and expected that in the light of the reduced figure for maintenance (which he described in paragraph 42 as " ..... the figure that is the maximum figure which can be received and will enable the wife to obtain funding from the LSC ..... ") public funding would be restored.  But the wife's solicitor, very properly, placed the note of the judgment before the LSC.  The LSC fastened on the judge's indication in paragraph 43, which I have just quoted, and wrote to the solicitor on 24 April 2008 that 

"The fact that the court is prepared to enable your client to use £40,000 of assets in dispute to fund a legal case suggests that Alternative Funding is readily available to your client, and for this reason legal aid will not be granted further, even if the maintenance payments are reduced."

98. With the present hearing so relatively imminent, the wife's solicitor felt unable to challenge that reply or to extricate himself from the trap into which the comments of Mr Justice Charles had unwittingly led him.  So on 6 June Mr Justice Charles agreed to make the order I have indicated, consistent with his earlier indication and so as not to leave the wife bereft of proper representation at the present hearing. 

99. The RCPO are currently seeking permission from the Court of Appeal to appeal from that part of the order of Mr Justice Charles.  As I understand it, they accept that the solicitor  who has now done the work and incurred the liabilities (in particular counsel's fees) in reliance upon the order must be paid.  But they wish to establish "in principle" and, as I understand it, more for future cases than this case, that such an order is wrong in principle and ought not to be made.

100. My own position is as follows.  I am not the Court of Appeal.  As far as I am concerned, that order of Mr Justice Charles has been made and stands in full force and effect even though, for want of liquid funds, the instalments have not been paid by their due dates or, yet, at all.  In any event, I consider it would be an intolerable breach of faith with the solicitor if the court now left him unpaid. 

101. But the circumstances in play on 6 June are no longer in play now.  Then, there was a relatively imminent major (and so called "final") hearing due to start on 7 July.  There will be now no further hearing until a purely interim one day hearing in mid September.  (I note, as I read that sentence,  that in light of the letter from the guardian and other developments this very week, there may possibly be some earlier hearing in relation to RS, but I will address the consequences of that if the need arises.)  The next major hearing will be several months away in or after mid January 2009.  There is ample time to confront the LSC and hopefully persuade them of the wife's restored financial eligibility. 

102. In the light of all the views I have already expressed, I am able to take and do take a much more robust view than did Mr Justice Charles about further payment of costs, maintenance and other outgoings out of the funds.  A series of orders has been made as to interim maintenance and interim costs.  Each has been made on an interim basis and in the expectation that the next hearing would be a "final" hearing.  Each has been made after much shorter hearings than I held last week, and probably with less consideration of all the  facts, of relevant authorities, and of the overall strengths and weaknesses of the wife's financial claims in the face of the confiscation order. 
103. The result has been that the funds needed to satisfy the confiscation order have been ever further reduced by a combination of maintenance payments for the wife and,   separately, FS and RS, and by the provision for her and the husband's costs.  In my view this has simply got to stop.  All members of this family have got to face and bear the reality of what has happened and of the criminal confiscation order and that the available funds cannot continue simply to be drawn down as if from a piggy bank. 

104. For these reasons   whilst I do not in any way interfere with the order as to costs that Mr Justice Charles has already made in paragraph 2 of his order of 6 June 2008   I am not willing to make, and do not make, one penny of further or additional provision for her costs.  I wish to make clear that, notwithstanding paragraph 43 of the note of the judgment of Mr Justice Charles of 17 April 2008, the court no longer considers and no longer indicates that any further provision properly can be, or will be, made for payment of any of the  wife's costs out of the funds held by the receiver.  They are all needed in satisfaction of the criminal confiscation order, and there is now already a shortfall. 

105. Further, I discharge with effect from 31 August 2008 paragraph 3 of the order of 6 June 2008.  That required the receiver to pay to the wife the sum of £1,213 pcm, plus her rent of up to £900 pcm, plus her utility bills with effect from 13 May 2008.  This must stop.  But it would be unfair and disproportionately hard on the wife abruptly to stop those payments upon which she has come to rely.  I intend that the receiver should make one further monthly payment of £1,213 on 13 August 2008; and that he should make, on whatever day he has been accustomed to making it, one further payment of rent during the month of August 2008; and that he pay any further utility bills insofar as they relate to a period up to 31 August 2008.  Thereafter the wife must resort to, and rely upon, all such payments and support as she can obtain from the state.  The funds subject to the restraint order and the receivership are all needed to satisfy the confiscation order and are simply no longer available for her. 

106. Pursuant to paragraph 18 of the order made by Mr Justice Charles on 16 April 2008, the receiver is authorised and directed to make certain payments "in relation to FS for the maintenance of himself and RS".  I discharge sub paragraphs (c) and (d) of that order forthwith.  They contemplate rent, a deposit and other payments on a new rented home following the sale of La Maison.  La Maison has not been sold and manifestly no sale will now be completed before the end of September when FS's responsibility for the care of RS must necessarily end and he returns to university. 

107. I discharge sub paragraph (a), which makes provision for weekly maintenance of £275 per week, with effect immediately after the payment due on Tuesday 30 September 2008.  It would be disproportionate and very unfair on FS to terminate these relatively small payments during the relatively short period during which he continues to care for RS.  It would put on FS the considerable burden of applying for and obtaining alternative state funding for himself and RS.  FS returns to university over the weekend of 26/29 September and will not be caring for RS in the week which actually begins on Monday 29 September.  But one further payment of £275 made on the Tuesday (being the regular day in the week for payment) has a minimal effect on funds available to satisfy the confiscation order, but will fund FS for any outstanding bills and also some of his petrol and travel expenses in returning to help care for RS over the ensuing weekends until his father is finally released on 21 October. 

108. Paragraph 18 (b) relates to payments in respect of the utility bills and other outgoings on La Maison.  The receiver currently desires and needs to continue to meet such bills and outgoings, for La Maison must be kept habitable until sold, so I do not discharge or vary sub paragraph (b).

Future Hearings
109. The effect of all the above decisions is as follows.  The court may need to continue from time to time to give directions as to the receivership.  That remains in the Administrative Court and any necessary applications should continue to be made to a judge of the Family Division who is also a nominated judge of that court.  But that apart, all remaining issues in the foreseeable future relate only to the welfare of RS and residence and contact (and possibly public law proceedings) under the Children Act.  There is absolutely no reason why those should continue to be heard in London or in the High Court, when all parties live (or will live on release) in the area of Torquay.  There may well need to be a series of hearings as disputes continue to arise in relation to contact and, regrettably, the behaviour of one or other parent.  (That sentence is exactly as I drafted it several days ago.  The letter from the guardian does, however, give added force to it.) 

110. I intend, therefore, that all Children Act matters are once again transferred to an appropriate county court where they should be heard by a local circuit judge with, I hope, as much judicial continuity as can possibly be given to this sad and anxious case. 

111. In the event that there is ultimately a surplus and the wife's applications for ancillary relief are later revived, they, too, are entirely suited at that stage to resolution in the county court.  So they, too, should now be transferred (albeit adjourned) to the same court.  It will be necessary to refine the existing draft Children Act order and to draft an order in the proceedings for ancillary relief so as to give effect to all the above.  I will hear submissions from counsel as to its form and drafting.

(Post judgment discussion then followed)
112. Towards the end of the judgment I delivered earlier today, under the heading "Costs and interim maintenance" I gave detailed consideration to certain interim payments that the receiver has been required to make towards both the legal costs of the wife and also her interim maintenance, including rent.  As is clear from all that I said in that judgment, my essential intention was, and is, that all such payments must rapidly come to an end. 

113. Specifically, I intended that from now on the wife should once again apply for and, as I envisaged, obtain legal aid from the Legal Services Commission.  I said in relation to her maintenance and rent that those payments also "must stop.  But it would be unfair and disproportionately hard on the wife abruptly to stop those payments upon which she has come to rely.”  For that reason I indicated this morning, as indeed I had already plainly indicated during the course of argument last Friday, that I would make provision for one further payment of maintenance in August, and for rent to continue up to and including the payment due in respect of August.  Probably the July rent has already been paid, so that also involved one further payment of rent.  I said also that the provision as to payment of utility bills should continue up to, but only up to, the end of August 2008.  I handed down an order which I had already provisionally drafted to give effect to all those rulings. 

114. On behalf of the wife, Mr Hickmet has now pointed out that even although I have firmly ended or withdrawn any earlier "indication" of the court that it might make provision for payment of the wife's legal costs out of the restrained funds, the effect of continuing for another month maintenance at the rate of £1,213 per calendar month and/or rent as high as £900 per calendar month will still be to render the wife ineligible for legal aid until those payments have finally come to an end.  In other words, I have unwittingly apparently continued the trap into which Mr Justice Munby first led the wife by his order as long ago as January 2008. 

115. I do have to say that during the course of argument last week and when the cut off point for any further payments at all to the wife was under discussion, this particular point was not drawn to my attention.  In order to meet the point, Mr Hickmet has now invited me to reduce the level of payments of maintenance and rent to the ceiling below which the wife would not be ineligible for legal aid, but   in compensation   to extend them for one further month. 

116. The actual figures are as follows.  If the order was made in the terms in which I had originally provisionally drafted it, in order to give effect to what I said in the main judgment this morning, then the total amounts that would be still payable and paid to the wife would be about £2,613.  That is, one payment of maintenance at the rate of £1,213; one payment of rent at a rate of £900; and payment for a further six weeks of utility bills which are apparently approximately of the order of £400 per month. 

117. If the alternative scheme proposed by Mr Hickmet is adopted, of lower payments phased over two months, the effect would be that two further payments of £698 would be made for general maintenance; and two further payments of £545 for rent; but any obligation to pay utility bills would come to an end today.  A total of those further payments would therefore be £2,486.  In short, by his application Mr Hickmet is, if anything, inviting me to make provision for slightly less (about £130 less) to be paid in total to the wife, but spread over two months. 

118. Insofar as it concerns and affects the receiver, this could hardly be objectionable.  He is, if anything, required to pay less, not more, and he is given an extra month in which to pay it.  Since he appears at the moment to have considerable problems of liquidity, that can only be a benefit to the receiver.  Insofar as it concerns and affects the husband, the effect is, if anything, very slightly to reduce the further amounts payable out of the restrained  funds.  In other words, it does not act to the erosion of the funds ultimately available with which to satisfy the confiscation order. 

119. It seems to me that I have to consider only the impact upon the Legal Services Commission.  I am well aware that the Legal Services Commission will be reading a transcript of the judgment which I gave this morning.  I intend, indeed, that they should see it, because it is in that judgment that I have made quite clear that the earlier "indication" by Mr Justice Charles no longer obtains.  Inevitably this brief ex  tempore judgment must also be transcribed and must also be shown to the Legal Services Commission. 

120. The question that I have to grapple with is whether I am being invited, now, to resort to a devious device so as to require the Legal Services Commission to reinstate legal aid to the wife earlier than they might otherwise have done.  I am satisfied, after due consideration, that this is not a device.  More than anything else in this case, the most pressing need of this wife is, in fact, as it seems to me, to regain her legal aid.  She desperately needs the continuity of the skilled services and support of her most excellent solicitor, Mr Hartnell, and her most cogent barrister, Mr Hickmet.  It is quite clear from the judgment which I gave this morning that my hope and intention is that her public funding be very rapidly restored. 

121. So if I now adjust the figures in the way that Mr Hickmet seeks I would merely be doing so consistently with my intention when drafting the principal judgment that she should once again be eligible for legal aid.  The question of the date to which she should continue to receive any payments from the receiver, and also the amount of those payments,  inevitably involves discretions and also some balancing of the duration of payments against the amount of them.  Quite frankly, if the point that has now been made to me had been made to me last Friday (as it should have been) I would very readily have reflected it in the primary judgment and made an order accordingly. 

122. As the level of funding for the wife is plainly going to reduce drastically, a respectable argument can indeed be mounted for tapering it off by some immediate reductions now but continuing it for two rather than one month.  So it seems to me that there is, ultimately, no device involved here.  The wife has just as good a case to receive payments at a lesser level for two months before final termination, as to continue to receive them at their previous and current level merely for one further month. 

123. So for those reasons I am satisfied that it is proper and appropriate of me to adjust the figures and the duration of them in the way that Mr Hickmet seeks.  If there are two routes whereby the same overall result may be achieved, then it is generally permissible to so select those routes and organise that result as to restore or maintain a person's entitlement to legal aid. 

124. For those reasons, stressing as I do that the overall result is marginally to reduce and certainly not to increase the total amounts payable to the wife, I propose to adjust the draft order in the terms that have already been discussed and in which they will now appear in the sealed order. 

125. I direct that a transcript will have to be made of the judgment which I have just given by the same shorthand writer who transcribes the principal judgment this morning.  That deals with that point.

(Further post judgment discussion)